Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Independent Auditors' Report 7
Statement of Assets and Liabilities 8
Portfolio of Investments in Securities 9
Notes to Portfolio of Investments 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 now
"streamlined." One copy of each report will be sent to each address,
instead of our previous practice of sending one report 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
Gold 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)1995, USAA. All rights reserved.
USAA Family of Funds Performance Summary
If you own only one or two USAA funds, you may not be aware of the
performance of our other funds. This summary is a snapshot of the
performance of all 29 funds by investment objective as of June 30, 1995.
If you're interested in more information, please call us at
1-800-531-1087 for a prospectus. Please read the prospectus carefully
before investing.
<TABLE>
Average Annual Total Return**
<CAPTION>
Investment Inception Since 7-Day 30-Day ***
Objective Date 1 yr 5 yrs 10 yrs Inception Simple SEC
<S> <C> <C> <C> <C> <C> <C> <C>
CAPTIAL APPRECIATION % % % % % %
Aggressive Growth 10/19/81 39.72 11.12 9.78 - - -
Emerging Markets 11/7/94 - - - (0.50) - -
Gold 8/15/84 6.88 4.66 2.86 - - -
Growth 4/5/71 26.34 12.37 11.75 - - -
Growth & Income 6/1/93 21.19 - - 10.49 - -
International 7/11/88 4.23 7.89 - 9.33 - -
World Growth 10/1/92 7.88 - - 11.71 - -
DIVERSIFIED/BALANCED
Balanced Portfolio 1/11/89 11.09 8.59 - 8.93 - 4.06
Cornerstone 8/15/84 9.25 9.24 12.00 - - -
INCOME - TAXABLE
GNMA 2/1/91 11.00 - - 8.08 - 6.79
Income 3/4/74 15.07 10.00 10.04 - - 6.87
Income Stock 5/4/87 19.52 12.26 - 11.44 - -
Short-Term Bond 6/1/93 8.40 - - 4.83 - 6.77
INCOME - TAX EXEMPT
Long-Term 3/19/82 7.28 7.66 8.60 - - 5.79
Intermediate-Term 3/19/82 7.60 7.71 7.82 - - 5.22
Short-Term 3/19/82 5.23 5.52 5.76 - - 4.36
California Bond* 8/1/89 8.96 7.66 - 7.23 - 5.79
Florida Tax-Free Income* 10/1/93 7.82 - - 0.09 - 5.71
New York Bond* 10/15/90 7.36 - - 8.65 - 5.60
Texas Tax-Free Income* 8/1/94 - - - 8.40 - 5.63
Virginia Bond* 10/15/90 8.79 - - 8.31 - 5.78
MONEY MARKET
Money Market 2/2/81 5.33 4.76 6.06 - 5.75 -
Tax Exempt Money Market 2/6/84 3.34 3.57 4.45 - 3.82 -
Treasury Money Market Trust 2/1/91 5.06 - - 4.01 5.69 -
California Money Market* 8/1/89 3.31 3.36 - 3.71 3.74 -
Florida Tax-Free Money Market* 10/1/93 3.23 - - 2.72 3.74 -
New York Money Market* 10/15/90 3.15 - - 2.98 3.69 -
Texas Tax-Free Money Market* 8/1/94 - - - 3.06 3.72 -
Virginia Money Market* 10/15/90 3.25 - - 3.18 3.61 -
* Shares of the state funds are authorized for sale only to residents of
the states listed above.
** 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 dividends and capital gain distributions. The performance
data quoted represents past performance and is 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.
An investment in any money market fund is neither insured nor guaranteed
by the U.S. government and there is no assurance that any of the funds
will maintain a stable net asset value of $1 per share.
Some tax-exempt income may be subject to state or local taxes or the
federal alternative minimum tax.
Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
*** Calculated as prescribed by the Securities and Exchange Commission.
MESSAGE FROM THE PRESIDENT
(Photo of the President, Michael J.C. Roth appears here)
Most of these messages look back at events. This one looks forward.
On January 29, 1995, my wife and I became grandparents. Karl Joseph
Marbach was born to Alexandra, my wife's daughter, and her husband
Keith Marbach. When my wife learned of the name Alexandra and Keith
had chosen, she smiled. She noted that my middle names are Joseph
Carl, and she said, "I think this kid's college education is secure."
"Secure" may be an exaggeration, but I did decide to practice one
thing I have preached for many years. I told Alexandra to get the little
fellow a social security number, and as soon as she furnished that to me,
(well, almost as soon), I opened an InveStart(registered trademark) account
for Karl Joseph. This account, in the USAA Income Stock Fund, was opened
for $100, and will have $50 per month added to it by an electronic funds
transfer from my checking account.
InveStart is a program that we have offered for many years. For now it is
available for use with the Income Stock Fund, Cornerstone Fund and Money
Market Fund.* That lineup will soon expand. We originally intended it for
young USAA members as a good way to start investing. We found, however,
that many grandparents were using it as I just did.
The effect for Karl Joseph can be quite powerful. It is well documented that
the stock market, as measured by the S&P 500 stock index has produced a total
return of 10% for the last 18 years ended May 31, 1995 (Source: Lipper
Analytical Services, Inc.).
The chart on the next page shows the growth of an account with a $100 initial
investment and $50 subsequent monthly investments for 18 years at an 8% return-
a hypothetical figure based upon and more conservative than historical results.
It is for illustrative purposes only and should not be considered an indication
of fund performance by any of the USAA Family of Funds.
"...I did decide to practice one thing
I have preached for many years."
[A graph is shown here which shows the growth of an account with
a $100 initial investment and $50 subsequent monthly investments
for 18 years at an 8% return - a hypothetical figure based upon
and more conservative than historical results. The horizontal
axis shows the years, and the vertical axis shows the dollar
amount. The beginning value is $100 and the ending value is
$24,209.]
A systematic plan like this doesn't assure a profit or protect against loss in
declining markets. Since such a plan involves continuous investment in
securities regardless of fluctuating price levels of such securities, you
should consider your financial ability to continue purchases through periods
of low and high price levels.
In 18 years, college will cost more than it does now. This sum today would
go a long way toward an education in an in-state public university. In 18
years it will not buy as much education as it does today, but it will be quite
meaningful. If we add to the cash flow on birthdays, or if other relatives
kick in, it will be even more meaningful. And it is relatively painless.
I promise to keep you posted on the progress of Karl Joseph's education fund.
This is not theoretical; it is real.
Sincerely,
Michael Joseph Carl Roth
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
* An investment in a money market fund is neither insured not guaranteed by the
U.S. government, and there can be no assurance that the fund can maintain a stable
net asset value of $1 per share.
INVESTMENT REVIEW
GOLD FUND
OBJECTIVE: Long-term capital appreciation for the purpose of protecting
the purchasing power of capital from inflation. Current income is a
secondary objective.
TYPES OF INVESTMENTS: At least 80 percent of the Fund's assets are
invested in gold stocks. The remainder may be invested in common
stocks of companies engaged in other precious metal and mineral mining.
5/31/95
Net Assets $160.2 Million
Net Asset Value Per Share $9.00
Average Annual Total Return as of 5/31/95
1 Year 2.05%
5 Years 3.20%
10 Years 2.49%
[A graph is shown here which is a comparison of the change in value of
a $10,000 investment, for the period of 5/31/85 to 5/31/95, with dividends
and capital gains reinvested. The ending value of each item graphed is as
follows: S&P 500 - $38,957, Philadelphia Gold & Silver Index (XAU) -
$14,012, USAA Gold Fund - $12,791 and Gold Bullion - London Gold -
$12,239.]
The graph illustrates a hypothetical $10,000 investment in the USAA Gold
Fund; the S&P 500 Index, which is an unmanaged index representing
the 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);
the Philadelphia Gold & Silver Index, representing nine holdings in
the gold & silver sector, typically referred to as the XAU; and London
Gold, a traditional Gold Bullion index that is readily available.
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 represents past performance and is not an
indication of future results. Investment return and principal value
of an investment will fluctuate, and investor's shares, when redeemed,
may be worth more or less than their original cost.
MESSAGE FROM THE MANAGER
Fund Performance
Total return for the USAA Gold Fund for the fiscal
(Photo of the Portfolio year ended May 31, 1995, was an anemic 2.05%.
Manager, Mark W. Johnson, However, according to Lipper Analytical
appears here) Services,(1) an industry benchmark, the average
gold-oriented mutual fund declined 4.84% on a
total return basis for the same time period.
Performance of the USAA Gold Fund during the
year was a result of good stock selection within
the context of a flat-to-down market. Gold itself
began the fiscal year at $387.60 and closed at
$384.30, a decline of .85%. The range during the
Fund's fiscal year was $372.40 to $396.25.
Top performing stocks were Stillwater Mining (72.6%)*, which benefited
from rising platinum and palladium prices; Kinross Gold (66.3%)* on the
back of exploration success at its main mine; and Pioneer Group (31.2%)*
on a proposed corporate restructuring. The laggards were Viceroy
Resources (-30.2%)**, which failed to prove up new reserves at its only
mine; Newcrest Mining (-26.3%)**, which encountered operating problems at two
of its mines; and Rayrock Yellowknife Resources (-25.6%)**, which reported
disappointing earnings.
The longer-term outlook for gold prices is moderately favorable because
of several supply and demand factors. Mine production actually declined
slightly in 1994, the first decline in mine output since 1975. Moreover,
it is likely that production will fall even more in 1995, driven by
labor problems in the South African sector. Meanwhile, fabrication
demand in 1994 was up slightly despite a 6.8% higher average price in
calendar 1994 versus 1993.
Top 10 Holdings
(% of Net Assets)
Barrick Gold 9.8
Placer Dome 9.5
TVX Gold 6.2
Hemlo Gold Mines 5.5
Gold Fields of S. Africa 5.1
Santa Fe Pacific Gold 4.7
Newmont Mining 4.6
Battle Mountain Gold 4.5
Freeport-Mcmoran Cop & Gld 4.5
Newmont Gold 4.4
*Increase in price of the security from dates of purchase.
** Decrease in price from 5/31/94 to 5/31/95.
China has emerged as the second largest consumer of gold jewelry and
may very well pull ahead of the United States in the next few years.
The so-called "global gold gap" (fabrication demand plus bar hoarding
less mine output and scrap supply) rose to 493 metric tons in 1994. In
1992, the year prior to the fabulous 1993 bull market in gold equities,
the global gold gap stood at 700 metric tons. If there is a fly in the
ointment, it is the possibility that the International Monetary Fund
may emerge as a seller of 6% of its gold holdings, effectively eliminating
the global gold gap, thus capping prices at current levels. In the absence
of concerted selling from the official sector, however, we would expect gold
prices to have an upward bias.
(1) Lipper Analytical Services is an independent organization that
monitors the performance of mutual funds.
See page 9 for a complete listing of the Portfolio of Investments in
Securities.
Foreign investing is subject to additional risks, which are discussed in
the Fund's prospectus. Gold mining stocks involve additional risk
because of gold's price volatility.
Independent Auditors' Report
The Shareholders and Board of Trustees
USAA Investment Trust:
We have audited the accompanying statement of assets and liabilities and
portfolio of investments in securities of the Gold Fund of USAA
Investment Trust as of May 31, 1995, the related statement of operations
for the year ended May 31, 1995, the statements of changes in net assets
for the year ended May 31, 1995, and the eight-month period ended May
31, 1994, and the financial highlights information presented in note 6
to the financial statements for each of the periods in the five-year
period ended May 31, 1995. These financial statements and the financial
highlights information are the responsibility of the Trust's management.
Our responsibility is to express an opinion on these financial statements
and the financial highlights information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of May 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
information referred to above present fairly, in all material respects,
the financial position of the Gold Fund of USAA Investment Trust as of
May 31, 1995, the results of its operations for the year ended May 31,
1995, the changes in its net assets for the year ended May 31, 1995, and
the eight-month period ended May 31, 1994, and the financial highlights
information for each of the periods in the five-year period ended May
31, 1995, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
July 7, 1995
Gold Fund
Statement of Assets and Liabilities
(In Thousands)
May 31, 1995
</TABLE>
<TABLE>
<S> <C>
Assets
Investments in securities, at market value (identified cost of $150,353) $ 161,648
Cash 3
Receivables:
Capital shares sold 35
Dividends and interest 177
-------
Total assets 161,863
-------
Liabilities
Securities purchased 1,272
Capital shares redeemed 141
USAA Investment Management Company 101
USAA Transfer Agency Company 30
Accounts payable and accrued expenses 96
-------
Total liabilities 1,640
-------
Net assets applicable to capital shares outstanding $ 160,223
========
Represented by:
Paid-in capital $ 235,535
Accumulated undistributed net investment income 110
Accumulated net realized loss on investments (86,717)
Net unrealized appreciation of investments 11,295
--------
Net assets applicable to capital shares outstanding $ 160,223
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 17,809
========
Net asset value, redemption price, and offering price per share $ 9.00
========
See accompanying notes to financial statements.
</TABLE>
Gold Fund
Portfolio of Investments in Securities
May 31, 1995
Common Stocks (96.0%)
Market
Number value
of Shares Security (000)
--------- -------- --------
African Gold Companies (12.6%)
250,000 Ashanti Goldfields Co. Ltd. GDS $ 5,700
300,000 Gold Fields of South Africa Ltd. 8,175
200,000 Western Deep Levels Ltd. ADR 6,350
--------
20,225
--------
Australian Gold Companies (6.6%)
1,250,000 Acacia Resources * 2,200
1,000,000 Delta Gold N.L. * 1,695
1,750,000 Newcrest Mining Ltd. * 6,687
--------
10,582
--------
North American Gold Companies (73.4%)
275,000 Agnico-Eagle Mines Ltd. 3,575
625,000 Barrick Gold Corp. 15,781
700,000 Battle Mountain Gold Co. 7,175
350,000 Freeport-McMoRan Copper & Gold, Inc. "A" 7,175
240,000 Golden Knight Resources, Inc. 1,577
150,000 Handy & Harman 2,287
750,000 Hemlo Gold Mines, Inc. 8,762
235,000 Homestake Mining Co. 3,966
385,000 Kinross Gold Corp. * 2,776
175,000 Newmont Gold Co. 7,066
175,000 Newmont Mining Corp. 7,306
250,000 Pioneer Group, Inc. 6,719
600,000 Placer Dome, Inc. 15,169
325,000 Prime Resources Group, Inc. * 2,225
340,000 Rayrock Yellowknife Resources, Inc. * 3,537
600,000 Santa Fe Pacific Gold Corp. 7,500
1,300,000 TVX Gold, Inc. * 9,966
540,000 Viceroy Resource Corp. * 2,858
285,000 Wharf Resources Ltd. 2,211
---------
117,631
---------
North American Platinum Companies (3.4%)
240,000 Stillwater Mining Co. * $ 5,385
-----------
Total common stocks (cost:$142,528) 153,823
-----------
U.S. Government & Agency Issues (4.9%)
Principal
Amount Coupon
(000) Rate Maturity
--------- ------ ---------
Discount Note
$ 7,825 Federal Home Loan Mortgage Corp.
(cost: $7,825) 6.10% 6/01/95 7,825
---------
Total investments (cost: $150,353) $161,648
==========
*Non-income producing.
Gold Fund
Notes to Portfolio of Investments
May 31, 1995
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.
See accompanying notes to financial statements.
Gold Fund
Statement of Operations
(In Thousands)
Year ended May 31, 1995
Net investment income:
Income (net of foreign taxes withheld of $155):
Dividends $ 1,841
Interest 407
----------
Total income 2,248
----------
Expenses:
Management fees 1,224
Transfer agent's fees 585
Custodian's fees 91
Postage 61
Shareholder reporting fees 35
Trustees' fees 3
Registration fees 49
Audit fees 25
Legal fees 5
Other 12
---------
Total expenses 2,090
---------
Net investment income 158
---------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 3,626
Foreign currency transactions (4)
Change in net unrealized appreciation/depreciation on investments 806
--------
Net realized and unrealized gain 4,428
--------
Increase in net assets resulting from operations $ 4,586
========
See accompanying notes to financial statements.
Gold Fund
Statements of Changes in Net Assets
(In Thousands)
<TABLE>
Year ended May 31, 1995
and Eight-month period ended May 31, 1994
<CAPTION>
1995 1994
<S> <C> <C>
From operations:
Net investment income $ 158 $ 173
Net realized gain on investments 3,626 9,863
Net realized gain (loss) on foreign currency transactions (4) 20
Change in net unrealized appreciation/depreciation on:
Investments 806 6,772
Foreign currency translations - 1
-------- --------
Increase in net assets resulting from operations 4,586 16,829
-------- --------
Distributions to shareholders from:
Net investment income (197) (191)
-------- --------
From capital share transactions:
Shares sold 115,672 114,499
Shares issued for dividends reinvested 187 178
Shares redeemed (136,552) (105,581)
--------- ---------
Increase (decrease) in net assets from capital share
transactions (20,693) 9,096
--------- ---------
Net increase (decrease) in net assets (16,304) 25,734
Net assets:
Beginning of period 176,527 150,793
--------- ---------
End of period $ 160,223 $ 176,527
========= =======
Undistributed net investment income included in net assets:
Beginning of period $ 153 $ 151
======== =======
End of period $ 110 $ 153
======== =======
Change in shares outstanding:
Shares sold 13,346 12,602
Shares issued for dividends reinvested 23 19
Shares redeemed (15,555) (11,600)
--------- --------
Increase (decrease) in shares outstanding (2,186) 1,021
========= ========
See accompanying notes to financial statements.
</TABLE>
Gold Fund
Notes to Financial Statements
(In Thousands)
May 31, 1995
(1) Summary of Significant Accounting Policies
USAA INVESTMENT TRUST (the Trust), registered under the Investment
Company Act of 1940, is a diversified, open-end management investment
company organized as a Massachusetts business trust consisting of eight
separate funds. The information presented in this annual report pertains
only to the Gold Fund (the Fund).
On November 8, 1993, the Board of Trustees of the Trust voted to change
the Fund's fiscal year end from September 30 to May 31. The financial
information for the eight-month period ended May 31, 1994 reflects this
change.
A. Security valuation - The value of each security is determined (as
of the close of trading on the New York Stock Exchange on each business
day the Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily
on a domestic securities exchange are valued at the last sales price on
that exchange. Portfolio securities traded primarily on foreign
securities exchanges are generally valued at the closing values of such
securities on the exchange where primarily traded. If no sale is
reported, the latest bid price is generally used depending upon local
custom or regulation.
2. Over-the-counter securities are priced at the last sales price
or, if not available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less are
stated at amortized cost which approximates market value.
4. Securities 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 - As is common in the industry,
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, are 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 accrualbasis. Discounts and premiums on short-term securities are
amortized over the life of the respective securities.
D. Foreign currency translations - The assets of the Fund may be
invested in the securities of foreign issuers. Since the accounting
records of the Fund are maintained in U.S. dollars, foreign currency
amounts are translated into U.S. dollars on the following basis:
1. Market value of securities, other assets, and liabilities at the
mean between the bid and asked translation rates of such currencies
against U.S. dollars.
2. Purchases and sales of securities, income, and expenses at the
rate of exchange obtained from an independent pricing service on the
respective dates of such transactions.
Net realized and unrealized foreign currency gains/losses occurring
during the holding period of investments are a component of realized
gain/loss on investments and unrealized appreciation/depreciation on
investments, respectively.
Net realized foreign currency gains/losses arise from sales of foreign
currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and the difference between
amounts of dividends, interest, and foreign withholding taxes recorded
on the Fund's books and the U.S. dollar equivalent of the amounts
received. Net realized foreign currency gains/losses have been
reclassified from accumulated net realized gain/loss to accumulated
undistributed net investment income on the statement of assets and
liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise
from changes in the value of assets and liabilities other than
investments in securities resulting from changes in the exchange rate.
E. Foreign currency contracts - A forward currency contract
(currency contract) is a commitment to purchase or sell a foreign
currency at a specified date, at a negotiated price. The Fund currently
enters into currency contracts only in connection with the purchase or
sale of a security denominated in a foreign currency. These contracts
allow the Fund to "lock in" the U.S. dollar price of the security.
Currency contracts are valued on a daily basis using foreign currency
exchange rates obtained from an independent pricing service. Risks of
entering into currency contracts include the potential inability of the
counterparty to meet the terms of the contract and the Fund foregoing
the opportunity for potential profit.
(2) Line of Credit
The Fund participates with other USAA funds in a joint $150 million
short-term revolving loan agreement (the Agreement) through January 15,
1996, for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely
disposition of securities. Subject to availability under this Agreement,
the Fund may borrow up to 5% of the market value of its assets at the
time of the borrowing, and all borrowings must be repaid before additional
investments are made. Borrowings under this Agreement will bear interest
at .125% over the Federal Funds Rate as published by the Federal Reserve
Bank of New York or at .125% over the London Interbank Offered Rate. The
Fund had no borrowings under this Agreement during the year ended May
31, 1995.
(3) Distributions
Distributions of net investment income are made in the succeeding fiscal
year. Distributions of realized gains from security transactions not
offset by capital losses are made in the succeeding fiscal year. At May
31, 1995, the Fund had capital loss carryovers for federal income tax
purposes of approximately $86,717 which, if not offset by subsequent
capital gains, will expire between 1997-2002. It is unlikely that the
Board of Trustees of the Trust will authorize a distribution of capital
gains realized in the future until the capital loss carryovers have been
utilized or expire.
(4) Investment Transactions
Purchases and sales of securities, excluding short-term securities, for
the year ended May 31, 1995 were $54,183 and $65,608, respectively.
Gross unrealized appreciation and depreciation of investments at May 31,
1995 was $21,624 and $10,329, respectively.
(5) Transactions with Manager
A. Management fees - The investment policy of the Fund and the
management of the Fund's portfolio is carried out by USAA Investment
Management Company (the Manager). 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. Shareholder accounting service fees
are based on an annual charge per shareholder account plus out-of-pocket
expenses.
C. Underwriting agreement - The Trust has an agreement with the
Manager for exclusive underwriting and distribution of the Fund's shares
on a continuing best efforts basis. This agrement provides that the
Manager will receive no fee or other remuneration for such services.
<TABLE>
(6) Financial Highlights
Per share operating performance for a share outstanding throughout each period is as follows:
<CAPTION>
Eight-month
Year ended period ended
May 31, May 31, Year ended September 30,
1995 1994 1993 1992 1991
---------- ------------ ----- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 8.83 $ 7.95 $ 6.53 $ 6.40 $ 8.08
Net investment income .01 .01 .02 .07 .10
Net realized and
unrealized gain (loss) .17 .88 1.44 .14 (1.72)
Distributions from net
investment income (.01) (.01) (.04) (.08) (.06)
------ ------- ------- ------- -------
Net asset value at
end of period $ 9.00 $ 8.83 $ 7.95 $ 6.53 $ 6.40
======= ======= ======= ======= ========
Total return (%) * 2.05 11.19 22.53 3.30 (20.10)
Net assets at end of
period (000) $160,223 $176,527 $150,793 $114,073 $121,204
Ratio of expenses to
average net assets (%) 1.28 1.26 (a) 1.41 1.43 1.45
Ratio of net investment
income to average net
assets (%) .10 .15 (a) .25 1.02 1.55
Portfolio turnover (%) 34.76 34.75 81.08 19.01 13.38
(a) Annualized. The ratio is not necessarily indicative of 12 months of operations.
* Assumes reinvestment of all dividend income and capital gain distributions during the
period.
</TABLE>
