Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Financial Information:
Distributions to Shareholders 8
Independent Auditors' Report 9
Statement of Assets and Liabilities 10
Portfolio of Investments in Securities 11
Notes to Portfolio of Investments in Securities 23
Statement of Operations 24
Statements of Changes in Net Assets 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 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 World Growth
Fund, managed by USAA Investment Management Company (IMCO). It may be used as
sales literature only when preceded or accompanied by a current prospectus
which gives further details about the fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(copyright) 1996, 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 33
funds by investment objective as of June 30, 1996. For more complete
information about the mutual funds managed and distributed by USAA IMCO,
including charges and expenses, please call 1-800-531-8181 for a prospectus.
Read it carefully before you invest.
<TABLE>
<CAPTION>
Average Annual Total Return* Yield
Investment Inception Since 7-Day 30-Day(1)
Objective Date 1 yr 5 yrs 10 yrs Inception Simple SEC
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION
Aggressive Growth 10/19/81 54.74 19.89 11.69 - - -
Emerging Markets(2) 11/7/94 13.17 - - 7.33 - -
Gold(2) 8/15/84 7.30 7.62 6.05 - - -
Growth 4/5/71 22.12 15.53 11.13 - - -
Growth & Income 6/1/93 23.95 - - 14.68 - -
International(2) 7/11/88 19.63 14.36 - 10.57 - -
S&P 500 Index(5) 5/1/96 - - - 4.58 - -
World Growth(2) 10/1/92 20.11 - - 13.87 - -
ASSET ALLOCATION
Balanced Strategy 9/1/95 - - - 6.48 - -
Cornerstone Strategy(2) 8/15/84 17.19 12.44 11.56 - - -
Growth and Tax Strategy(3)** 1/11/89 15.43 10.31 - 9.77 - 3.88
Growth Strategy(2) 9/1/95 - - - 23.85 - -
Income Strategy 9/1/95 - - - 4.68 - 5.31
INCOME - TAXABLE
GNMA 2/1/91 4.23 7.63 - 7.36 - 6.98
Income 3/4/74 6.13 8.92 9.42 - - 6.84
Income Stock 5/4/87 19.22 13.77 - 12.26 - -
Short-Term Bond 6/1/93 5.51 - - 5.05 - 6.64
INCOME - TAX EXEMPT
Long-Term(3)** 3/19/82 6.74 7.36 7.74 - - 5.86
Intermediate-Term(3)** 3/19/82 6.19 7.25 7.29 - - 5.40
Short-Term(3)** 3/19/82 5.19 5.18 5.55 - - 4.53
California Bond(3)** 8/1/89 8.36 7.59 - 7.39 - 5.64
Florida Tax-Free Income(3)** 10/1/93 6.48 - - 2.37 - 5.76
New York Bond(3)** 10/15/90 6.19 7.40 - 8.22 - 5.73
Texas Tax-Free Income(3)** 8/1/94 8.20 - - 8.65 - 5.56
Virginia Bond(3)** 10/15/90 6.55 7.65 - 8.00 - 5.60
MONEY MARKET
Money Market(4) 2/2/81 5.43 4.41 5.88 - 5.01 -
Tax Exempt Money Market(3,4)** 2/6/84 3.53 3.16 4.26 - 3.24 -
Treasury Money Market Trust(4) 2/1/91 5.27 4.17 - 4.24 4.86 -
California Money Market(3,4)** 8/1/89 3.45 3.04 - 3.67 3.12 -
Florida Tax-Free Money Market(3,4)** 10/1/93 3.39 - - 2.96 3.18 -
New York Money Market(3,4)** 10/15/90 3.44 2.87 - 3.06 3.11 -
Texas Tax-Free Money Market(3,4)** 8/1/94 3.35 - - 3.34 3.13 -
Virginia Money Market(3,4)** 10/15/90 3.29 2.98 - 3.20 3.06 -
(1) Calculated as prescribed by the Securities and Exchange Commission.
(2) Foreign investing is subject to additional risks, which are discussed in the
funds' prospectuses.
(3) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
(4) An investment in a money market fund is neither insured nor guaranteed by
the U.S. government and there is no assurance that any of the funds will be
able to maintain a stable net asset value of $1 per share.
(5) 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.
* 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 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.
** 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.
</TABLE>
Message from the President
Last August I sent investors a letter which began with a question I was
regularly hearing: "Should I get out of the Market?" My response reiterated
many of our basic beliefs:
* Get your emotions in check.
* Look at history.
* Acknowledge that no one forecasts markets very well.
* Build a portfolio that will help you pursue your goals,
but also allow you to sleep at night.
At that time we knew we were looking at a pretty good year in the market. We
can now look back and see it was better than pretty good; it was excellent.
That has raised a new concern for us. The predominant investor sentiment
seems to have shifted from, "Should I get out of the Market?" to "Should I put
everything in stocks?" I want to comment on this shift.
Financial markets are not bank accounts. No other investor is interested in,
much less willing to insure, your return. While past performance is no guaran-
tee of future results, if you invest in stocks, history tells us that you can
expect a better return than that of any fixed-income instrument, from a long-
term bond to a bank account, over time.(1) The return from stocks comes from
two sources: dividends and price changes. Dividends are the more predictable
of the two. Financial analysis can give a good indication of a company's
ability to pay, or raise, its dividend. However, price change is another
thing. For a stock to appreciate, someone must come along who is willing to
pay more for shares of your stock than you did. Again, history tells us that
if a business is prospering, that will likely happen. But history also tells
us that investors do not always eliminate their emotions. They can become
over-exuberant and bid up the price to the point that the next buyer thinks
the stock is expensive and refuses to pay the higher price. That new buyer
doesn't know and doesn't care what you paid. Then the price will fall. This
is where you must understand why you purchased that stock and not become
overwrought with emotion.
Many people today are mesmerized by the exceptional returns of the recent past.
Our Aggressive Growth Fund is an excellent example. Over the last 18 months
ending June 30, 1996, its return was 84.66%. *Unfortunately the financial
press unceasingly trumpets these kinds of returns until people lose sight
of the fact that they are extraordinary. One statement that makes me quiver
these days is, "So much money is coming into stocks from retirement accounts
that the stock market cannot go down." When the market gets too expensive,
all the retirement money in the world will not hold it up. Things could get
scary for a while.
I have come across only a few people whose tolerance for risk will allow them
to be 100% in stocks. If they could do that for twenty years, I am confident
they would realize exceptional returns. But they would have to endure times
like the 1973-74 market, and that would take exceptional courage.
The better course for most people is to allocate their assets among stocks
and fixed-income investments. The return will be less, but so will the
fluctuations.
I believe that in twenty years, when, my wife, Jutta and I are retired, we
will be happy that our portfolio has held both a large position in stocks, and
also in other investments that have been a counterbalance.
With this in mind, the old bond market adage, "Never stretch for yield," is a
good one for all investors. You are the master of your portfolio. Recognize the
nature of various investments and always invest in ways with which you are
comfortable. Helping you do that is our greatest goal.
One of the ways we can assist is with one of our five Asset Strategy Funds.
Each can be applied to an individual situation, an investment goal and a
tolerance for risk. They combine different asset classes in ways that affect
return and risk, and we do the job of keeping those assets in balance. They
are a way for you to pursue a complex goal with great ease. After speaking
with our sales representatives, we can guide you to a single fund that will
provide an asset allocation that suits your situation well. From there,
we do all the work.
[Photograph of Michael J.C. Roth, CFA, President appears here]
Sincerely,
Michael J.C. Roth, CFA
President
(1)Bank accounts are FDIC insured and provide a fixed-rate of return. The
other investment instruments mentioned do not. Government bonds are backed
by the full faith and credit of the U.S. government. Of these vehicles,
stocks are considered to have the most risk. Government bonds are exempt
from state taxes; otherwise, these vehicles are subject to tax. The
comparisons reflect changing conditions in regard to tax laws, inflationary
trends and general corporate policies and practices. Investors are
encouraged to closely monitor changes in any factor which may affect
their investments.
* Average annual total returns of the USAA Aggressive Growth Fund as of June
30, 1996, are 1 year - 54.74%; 5 years - 19.89%; and 10 years - 11.69%. The
performance data quoted represents past performance; the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
For more complete information about the mutual funds managed and distributed
by USAA IMCO, including charges and expenses, please call for a prospectus.
Read it carefully before you invest.
Investment Review
World Growth Fund
OBJECTIVE: Capital appreciation.
TYPES OF INVESTMENTS: At least 65 percent of the Fund's assets are invested
in common stocks and other equity securities of both foreign and domestic
issuers, including securities which are convertible into common stocks. The
remainder of the Fund's assets may be invested in U.S. government guaranteed
securities which mature in less than one year.
5/31/95 5/31/96
Net Assets $200.7 Million $267.2 Million
Net Asset Value Per Share $12.96 $15.50
Average Annual Total Returns as of 5/31/96
1 Year 22.43%
Since inception on October 1, 1992 14.19%
[A graph is shown here which is a comparison of the change in value of a
$10,000 investment, for the period of 10/01/92 to 05/31/96, with dividends
and capital gains reinvested. The ending value of each item graphed is as
follows: USAA World Growth Fund - $16,303 and the Morgan Stanley Capital
Index - World - $16,820.]
The graph illustrates how the USAA World Growth Fund compares to its
benchmark, the Morgan Stanley Capital Index (MSCI)-World, an unmanaged
index which reflects the movements of world stock markets by representing
a broad selection of domestically listed companies within each market.
The chart compares a $10,000 hypothetical investment in the USAA World
Growth Fund to the Index.
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.
Message from the Managers
[A photo of Portfolio Managers, R. David Ullom (Domestic Stocks)
and David G. Peebles (Foreign Stocks) appears here]
Market Conditions
After lagging throughout 1995, international markets have performed in line
with the U.S. market. Though past performance is no guarantee of future
results, your fund's 22.43% one-year total return for the period ended
May 31, 1996, outperformed the Lipper (1) Global Fund Index return of 19.63%
for the same time period. European stock performance has remained steady while
emerging markets have rebounded strongly. Japan remains underweighted but has
provided positive gains even with the weaker yen.
(1) Lipper Analytical Services is an independent organization that monitors
the performance of mutual funds.
Europe
In spite of weakening European currencies, the European markets have continued
to provide stable returns. Unlike long-term interest rates in the U. S., the
long-term rates in Europe remained stable while short-term rates continued to
decline due to further monetary easing by Germany's central bank. Our holdings
in France, Germany, Switzerland, and the Netherlands made significant
contributions to our European investment performance.
Japan
Although signs of recovery in the economy look promising, more local investor
participation and currency stability are needed for the market to advance
further. Continued concerns about problems within the banking system, a lack
of commitment to corporate restructuring, and political uncertainty confirm
our continued underweighting in Japan.
Emerging Markets
After two rough years, our strategy of overweighting the emerging markets is
paying off. Economic recovery in Latin America, coupled with good economic
growth throughout Asia, Eastern Europe, and Mediterranean countries, has
underpinned healthy stock market activity. Increasing consumer wealth, foreign
direct investment, and international trade mean rapid development even during
periods of moderate global economic growth. For this reason we continue to
overweight these markets.
United States
Over the course of this last fiscal year, we have gradually reduced the
weighting of U.S. stocks in the World Growth Fund from 33.4% as of
May 31, 1995, to 24.5% as of May 31, 1996. As stated in the semiannual report,
the reduction reflects a more positive outlook for foreign stocks and a more
cautious tone toward domestic ones.
Our allocation within the U.S. portfolio continues to place investment
emphasis on industries such as healthcare, aerospace/defense, and technology
(computer software and technology). We believe that companies in these
industries should experience earning growth at above-average rates. Conversely,
we believe that the valuation of these stocks does not adequately reflect the
earnings growth capability.
Outlook
We continue to expect moderate economic growth with low inflation rates to
provide a favorable investment climate internationally. This environment and an
extended run in the U.S. market over the past few years favor an overweighted
position in the international markets.
See page 11 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. Since return on any investment is generally commensurate
with risk, investors should be aware of the potential volatility associated
with foreign markets.
Top 10 Equity Holdings
(% of Net Assets)
Ciba Geigy AG 1.2
Boeing 1.2
Canon 1.1
Heiniken N.V. 1.1
Abb AB 1.1
Telefonica de Espana ADR 1.0
Elf Aquitaine 1.0
Verenigd Besit VNU .9
Nokia ADS .9
Essilor International .9
Top 10 Industries
(% of Net Assets)
Healthcare 8.9
Banks 6.1
Retail 6.0
Oil 5.8
Telecommunications 5.5
Electronics 3.8
Electrical Equipment 2.9
Chemicals 2.8
Automobiles 2.6
Publishing 2.5
[A pie chart is shown here depicting the Asset Allocation as of May 31, 1996
of the USAA World Growth Fund to be: Japan 12.8%, United Kingdom - 4.2%, France
- 4.6%, Netherlands - 4.2%, Sweden - 3.7%, Spain - 2.2%, Canada - 4.3%, United
States - 24.5%, Australia - 2.5%, Germany - 2.6%, Switzerland - 2.2% and
Other - 32.0%. Percentages are of the Net Assets in the Portfolio and may or
may not equal 100%.
Distributions to Shareholders
USAA World Growth Fund completed its fiscal year on May 31, 1996. As
required by Federal Law (Internal Revenue Code of 1986, as amended, and the
Regulations thereunder), the following sets forth per share data concerning
the portions of the dividend distributions which represent domestic dividend
income qualifying for the dividends received deduction, foreign dividend
income, and short-term and long-term capital gains for the year ended
May 31, 1996.
The per share data on this schedule reflects distributions related to earnings
for the fiscal year ended May 31, 1996, including any distributions subsequent
to year end which relate to those earnings. Therefore, the per share data on
this table may not agree with other disclosures concerning distributions which
occurred during the fiscal year.
The World Growth Fund has made the election under Section 853 of the Code to
pass through to its shareholders the right to take a credit or deduction for
foreign taxes paid by the Fund.
Investment income - Domestic :
Dividend income (qualifying) $ .0597
Interest income .0052
Investment income - Foreign:
Gross income .1052
Foreign Tax Paid .0248
---------
Net Foreign .0804
Capital Gain Income :
Short-term (treated as ordinary income) .2021
Long-term .4821
---------
TOTAL DISTRIBUTIONS $ .8295
=========
Independent Auditors' Report
The Shareholders and the Board of Trustees
USAA INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities and
portfolio of investments in securities of the World Growth Fund of USAA
Investment Trust as of May 31, 1996, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights
information presented in note 8 to the financial statements for each of the
periods in the four-year period then ended. 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, 1996, 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 World Growth Fund of USAA Investment Trust as of May
31, 1996, the results of its operations for the year then ended, the changes
in its net assets for each of the years in the two-year period then ended, and
the financial highlights information for each of the periods in the four-year
period then ended, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
July 10, 1996
<TABLE>
<CAPTION>
World Growth Fund
Statement of Assets and Liabilities
(In Thousands)
<S> <C>
May 31, 1996
Assets
Investments in securities, at market value (identified cost of $217,956) $266,578
Cash 132
Cash denominated in foreign currencies (identified cost of $20) 20
Receivables:
Capital shares sold 351
Dividends and interest 664
Securities sold 347
----------
Total assets 268,092
----------
Liabilities
Securities purchased 21
Unrealized depreciation on foreign currency contracts held, at value 3
Capital shares redeemed 564
USAA Investment Management Company 167
USAA Transfer Agency Company 49
Accounts payable and accrued expenses 96
----------
Total liabilities 900
----------
Net assets applicable to capital shares outstanding $267,192
==========
Represented by:
Paid-in capital $209,671
Accumulated undistributed net investment income 1,639
Accumulated net realized gain on investments 7,262
Net unrealized appreciation of investments 48,622
Net unrealized depreciation on foreign currency translations (2)
----------
Net assets applicable to capital shares outstanding $267,192
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 17,240
==========
Net asset value, redemption price, and offering price per share $ 15.50
==========
</TABLE>
See accompanying notes to financial statements.
World Growth Fund
Portfolio of Investments in Securities
May 31, 1996
Market
Number Value
of Shares Security (000)
Foreign Securities (69.4%)
Foreign Common Stocks (65.6%)
Argentina (1.6%)
43,000 Disco S.A. ADS * $ 871
19,008 IRSA Inversiones y Representaciones S.A. GDS 620
56,331 Molinos Rio de la Plata S.A. 642
95,000 Quilmes Industrial (Quinsa) S.A. ADS * 1,164
32,400 Telefonica de Argentina S.A. ADR 944
----------
4,241
----------
Australia (2.0%)
591,600 CSL Ltd. 2,361
919,900 David Jones Ltd. 1,344
162,900 Rothmans Holdings Ltd. 919
245,000 Seven Network Ltd. 739
----------
5,363
----------
Austria (0.9%)
17,800 VA Technologie AG 2,330
----------
Belgium (0.7%)
5,500 Colruyt S.A. 1,833
----------
Canada (4.3%)
51,000 Alliance Forest Products, Inc. * 821
375,000 Beau Canada Exploration Ltd. * 553
67,900 Canadian National Railway Co. 1,256
115,800 Canadian Occidental Petroleum Ltd. 2,025
80,500 Loewen Group, Inc. 2,315
18,000 Potash Corporation Saskatchewan, Inc. 1,197
125,000 Ranger Oil Ltd. 935
45,000 Royal Plastics Group Ltd. * 713
49,000 Suncor, Inc. 1,547
----------
11,362
----------
Chile (0.9%)
20,000 Banco Osorno y La Union S.A. ADR 280
17,100 Madeco S.A. ADS 457
64,000 Maderas y Sinteticos S.A. ADS 1,040
14,300 Sociedad Quimica y Minera de Chile S.A. ADS 740
----------
2,517
----------
China (0.5%)
75,600 China Yuchai International Ltd. 624
360,000 New World Infrastructure Ltd. * 758
----------
1,382
----------
Colombia (0.4%)
110,000 Banco de Colombia GDS 963
----------
Czech Republic (0.5%)
23,000 Komercni Banka, A.S. * 627
6,000 SPT Telecom A.S. * 723
----------
1,350
----------
Denmark (1.1%)
39,000 Carli Gry International A/S * 1,112
7,380 Novo Nordisk A/S "B" 1,014
20,000 Unidanmark A/S 866
----------
2,992
----------
Finland (0.6%)
23,800 Raision Tehtaat 1,445
23,800 Raision Tehtaat Rights * 208
----------
1,653
----------
France (4.6%)
5,000 Chargeurs S.A. 1,427
63,000 Coflexip ADS 1,181
4,000 Ecco S.A. 959
70,000 Elf Aquitaine ADS 2,564
20,000 Eramet Group 1,532
10,000 Essilor International 2,457
9,000 Roussel Uclaf 2,086
----------
12,206
----------
Germany (2.6%)
31,000 Adidas AG 2,327
43,000 Siemens AG 2,411
42,250 Veba AG 2,211
----------
6,949
----------
Hong Kong (1.7%)
1,200,000 Amoy Properties Ltd. 1,489
1,350,000 Cosco Pacific Ltd. 925
4,000,000 Regal Hotels International Holdings 1,034
1,278,000 Singamas Container Holdings Ltd. 130
500,000 Varitronix International Ltd. 1,005
----------
4,583
----------
Hungary (0.3%)
60,000 Mol Magyar Olay Es Gazipari GDS * 714
----------
India (1.1%)
22,000 Hindalco Industries Ltd. GDR 979
35,000 Indian Rayon & Industries Ltd. GDR 525
75,000 Larsen & Toubro Ltd. GDR 1,500
----------
3,004
----------
Indonesia (1.1%)
285,000 PT Asahimas Flat Glass Co., Ltd. 330
1,062,000 PT Bank Dagang Nasional Indonesia 1,047
65,000 PT HM Sampoerna 808
250,000 PT Jaya Real Property 825
----------
3,010
----------
Israel (0.3%)
42,800 Koor Industries Ltd. ADS 770
----------
Italy (1.9%)
110,000 Arnoldo Mondadori Editore 854
290,000 Fiat S.p.A. 1,024
99,000 Fidis Finanziaria di Sviluppo S.p.A. 282
14,500 Mediolanum S.p.A. * 113
1,425,000 Olivetti and C., S.p.A. * 892
30,000 SAES Getters S.p.A. * 570
500,000 STET 1,433
----------
5,168
----------
Japan (12.3%)
58,000 77 Bank Ltd. 553
77,000 Bridgestone Corp. 1,340
155,000 Canon, Inc. 3,042
81,000 Daibiru Corp. 1,095
58,000 Higo Bank 478
150,000 Hitachi Ltd. 1,389
69,000 Honda Motor Co. Ltd. 1,661
37,000 Hoya Corp. 1,189
38,000 Ito-Yokado Co. Ltd. 2,157
18,000 Kyocera Corp. 1,233
75,000 Laox Co. Ltd. 1,604
205,000 Minebea Co. Ltd. 1,706
217,000 Mitsubishi Heavy Industries Ltd. 1,867
166,000 Mitsubishi Paper Mills Ltd. 1,050
5,000 Nippon Television Network 1,417
668,000 NKK Corp. * 1,954
104,000 Nomura Securities Co. Ltd. 1,964
44 NTT Data Communications Systems Corp. 1,357
25,000 Shimamura Co. Ltd. 1,093
122,000 Shiseido Co. Ltd. 1,514
158,000 Terumo Corp. 1,902
41,000 Tostem Corp. 1,200
----------
32,765
----------
Korea (0.8%)
21,000 Korea Electric Power Corp. ADS 926
30,600 LG Chemical Ltd. 579
8,023 Samsung Electronics Co. Ltd. * 702
100 Samsung Electronics Co. Ltd. GDR * 5
----------
2,212
----------
Malaysia (1.3%)
240,000 Resorts World BHD 1,384
286,000 Technology Resources Industries BHD * 951
112,000 Telekom Malaysia BHD 1,023
----------
3,358
----------
Mexico (1.0%)
53,184 Desc, Soceidad de Fomento Industrial, S.A.
de C.V. ADS * 1,137
37,000 Panamerican Beverages, Inc. "A" 1,554
----------
2,691
----------
Netherlands (4.2%)
8,800 DSM N.V. 904
21,000 EVC International N.V. 726
60,300 Forasol-Foramer N. V. * 746
13,125 Heineken N.V. 2,977
28,100 ING Groep N.V. 2,314
11,000 Oce-van der Grinten N.V. 1,076
152,000 Verenigd Besit VNU 2,492
----------
11,235
----------
Norway (1.2%)
690,000 Christiania Bank og Kreditkasse 1,597
45,000 Hafslund ASA 359
68,000 Nycomed ASA * 1,376
----------
3,332
----------
Philippines (1.2%)
1,700,000 Megaworld Properties * 1,607
35,000 Metropolitan Bank and Trust Co. 1,049
1,002,300 Universal Robina Corp. 565
----------
3,221
----------
Poland (0.2%)
105,000 Polifarb-Cieszyn S.A. 544
----------
Portugal (0.4%)
48,700 Portugal Telecom, S.A. ADS 1,181
----------
Singapore (1.2%)
170,000 Jurong Shipyard Ltd. 966
99,000 Keppel Corp. Ltd. 829
190,000 Overseas Union Bank Ltd. 1,349
----------
3,144
----------
South Africa (0.3%)
49,030 Malbak Ltd. 231
46,978 Nedcor Ltd. GDR * 652
2,800 Nedcor Ltd. Warrants * 6
----------
889
----------
Spain (2.1%)
120,000 Autopistas del Mare Nostrum S.A. 1,441
7,550 Corporacion Bancaria de Espana S.A. 316
16,900 Corporacion Bancaria de Espana S.A. ADR 355
12,600 Corporacion Mapfre 621
53,000 Telefonica de Espana S.A. ADR 2,776
----------
5,509
----------
Sweden (3.7%)
28,000 Abb AB 2,896
78,000 Autoliv AB 2,264
73,500 Getinge Industrier AB "B" 1,346
67,500 Nordbanken AB 1,211
85,000 Swedish Match AB * 283
95,000 Volvo AB 2,015
----------
10,015
----------
Switzerland (2.2%)
2,920 Ciba Geigy AG 3,213
600 SGS Group AG 1,352
2,200 Sulzer AG P.C. 1,397
----------
5,962
----------
Taiwan (0.6%)
40,000 Acer, Inc. * 421
28,400 China Steel Corp. ADS 645(a)
25,000 China Steel Corp. GDS 567
----------
1,633
----------
Thailand (0.9%)
315,000 Krung Thai Bank 1,605
200,400 Sahaviriya Steel Industries Public Co., Ltd. * 172
71,500 Sri Thai Superware Co. Ltd. 505
----------
2,282
----------
Turkey (0.4%)
1,010,000 Erciyas Biracilik ve Malt Sanayi A.S. 527
645,000 Olmuksa Mukavva Sanayi Ve Ticaret A.S. 90
14,275,500 Yapi Ve Kredi Bankasi A.S. 345
----------
962
----------
United Kingdom (4.2%)
420,000 Argyll Group plc 2,310
105,000 Comcast UK Cable Partners Ltd. * 1,431
45,000 Harvey Nichols plc * 237
250,000 Northern Ireland Electricity plc 1,604
170,400 Refuge Group plc 1,378
570,000 Tomkins plc 2,257
633,000 WPP Group plc 1,923
----------
11,140
----------
Other Holdings (0.3%)
815,000 Central European Growth Fund plc 796
297,000 Central European Growth Fund plc Warrants * 62
----------
858
----------
Total foreign common stocks (cost: $146,062) 175,323
----------
Foreign Preferred Stocks (3.0%)
Australia (0.5%)
411,500 Village Roadshow Ltd. 1,376
----------
Brazil (1.4%)
53,000,000 Companhia Energetica de Minas Gerais (Cemig) 1,404
10,400,000 Petroleo Brasileiro S.A. 1,255
15,000,000 Telebras PN 970
----------
3,629
----------
Finland (0.9%)
57,000 Nokia Corp. ADS 2,480
----------
Korea (0.2%)
3,511 Samsung Electronics Co. Ltd. GDR * 100
11,650 Samsung Electronics Co. Ltd. GDS 370
----------
470
----------
Total foreign preferred stocks (cost: $6,109) 7,955
----------
Principal
Amount
(000)
Foreign Bonds (0.8%)
Japan (0.5%)
$ 1,450 MBL International Finance (Bermuda) Trust,
Convertible Notes, 3.00%, 11/30/02 1,700
----------
Spain (0.1%)
11,230 Corporacion Mapfre, Convertible Bonds, 8.50%,
2/27/99 88
(par denominated in Spanish pesetas) ----------
Taiwan (0.2%)
500 U-Ming Marine Transport Corp., Convertible
Notes, 1.50%, 2/07/01 421
----------
Total foreign bonds (cost: $2,112) 2,209
----------
Total foreign securities (cost: $154,283) 185,487
----------
Number
of Shares
Domestic Stocks (24.5%)
Aerospace/Defense (2.3%)
40,000 B.F. Goodrich Co. 1,585
37,000 Boeing Co. 3,154
25,000 Rockwell International Corp. 1,460
----------
6,199
----------
Aluminum (0.5%)
22,000 Aluminum Co. of America 1,356
----------
Automobiles (0.7%)
50,000 Ford Motor Co. 1,825
----------
Bank Holding Companies - Money Center (0.5%)
16,800 Bankers Trust New York Corp. 1,262
----------
Beverages - Soft Drink (0.3%)
21,200 PepsiCo, Inc. 705
----------
Biotechnology (0.3%)
15,000 Amgen, Inc. * 892
----------
Chemicals (1.0%)
28,000 Avery Dennison Corp. 1,596
14,000 Dow Chemical Co. 1,171
----------
2,767
----------
Chemicals - Specialty (0.5%)
36,000 Morton International, Inc. 1,368
----------
Communication - Equipment Manufacturers (0.4%)
24,300 Lucent Technologies, Inc. * 923
----------
Computer Software & Service (1.1%)
13,000 Microsoft Corp. * 1,544
32,400 Sterling Commerce Inc. * 1,421
----------
2,965
----------
Containers - Metals & Glass (0.5%)
43,000 Ball Corp. 1,188
----------
Electronics - Semi-Conductors (1.5%)
18,000 Intel Corp. 1,359
25,000 Motorola, Inc. 1,668
59,000 National Semiconductor Corp. * 959
----------
3,986
----------
Entertainment (0.5%)
34,000 Time Warner, Inc. 1,373
----------
Finance - Consumer (0.2%)
14,300 Associates First Capital Corp. * 529
----------
Foods (0.3%)
36,000 Dean Foods Co. 878
----------
Healthcare - Diversified (0.3%)
9,000 Bristol-Myers Squibb Co. 768
----------
Healthcare - Miscellaneous (1.3%)
45,800 COHR, Inc. * 1,214
23,300 Total Renal Care Holdings, Inc. * 961
24,000 United HealthCare Corp. 1,317
----------
3,492
----------
Household Products (0.5%)
16,000 Procter & Gamble Co. 1,406
----------
Insurance - Property/Casualty (0.7%)
19,500 American International Group, Inc. 1,838
----------
Machinery - Diversified (1.0%)
60,000 BW/IP, Inc. 1,185
36,000 Deere & Co. 1,498
----------
2,683
----------
Medical Products & Supplies (0.9%)
38,000 C.R. Bard, Inc. 1,249
33,000 St. Jude Medical, Inc. * 1,254
----------
2,503
----------
Office Equipment & Supplies (0.7%)
11,500 Xerox Corp. 1,810
----------
Oil - Domestic (0.3%)
28,000 Unocal Corp. 910
----------
Oil - Exploration & Production (0.5%)
45,000 Apache Corp. 1,288
----------
Oil Well Equipment & Service (0.6%)
30,000 Halliburton Co. 1,669
----------
Paper & Forest Products (0.6%)
32,000 Weyerhaeuser Co. 1,452
----------
Pollution Control (0.9%)
32,000 Browning-Ferris Industries, Inc. 976
42,000 WMX Technologies, Inc. 1,480
----------
2,456
----------
Publishing (0.8%)
42,000 American Greetings Corp. 1,139
17,000 Dun & Bradstreet Corp. 1,086
----------
2,225
----------
Restaurants (0.4%)
65,000 Brinker International, Inc. * 1,089
----------
Retail - General Merchandising (0.4%)
36,562 Dollar General Corp. 1,015
----------
Retail - Specialty (0.9%)
49,600 Borders Group, Inc. * 1,624
60,000 Phillips-Van Heusen Corp. 803
----------
2,427
----------
Telephones (1.4%)
40,000 360 Communications Co. 925
18,000 AT&T 1,123
37,000 Sprint Corp. 1,568
----------
3,616
----------
Tobacco (1.2%)
20,000 Philip Morris Companies, Inc. 1,987
38,000 RJR Nabisco Holdings Corp. 1,259
----------
3,246
----------
Transportation - Miscellaneous (0.5%)
45,000 American President Companies, Ltd. 1,187
----------
Total domestic stocks (cost: $47,878) 65,296
----------
Principal
Amount
(000)
U.S. Government & Agency Issues (5.9%)
Discount Note (5.9%)
$15,800 Federal Home Loan Mortgage Corp., 5.30%, 6/03/96
(cost: $15,795) 15,795
----------
Total investments (cost: $217,956) $266,578
==========
- -----------------------
*Non-income producing.
World Growth Fund
Portfolio of Investments in Securities (continued)
May 31, 1996
Portfolio Summary By Industry
Healthcare 8.9%
Banks 6.1
Retail 6.0
U.S. Government & Agency Issues 5.9
Oil 5.8
Telecommunications 5.5
Eletronics 3.8
Electrical Equipment 2.9
Chemicals 2.8
Automobiles 2.6
Publishing 2.5
Aerospace/Defense 2.3
Electric Power 2.3
Auto Parts 2.0
Machinery - Diversified 2.0
Tobacco 2.0
Conglomerates 1.9
Beverages - Alcoholic 1.8
Office Equipment & Supplies 1.8
Transportation - Miscellaneous 1.8
Engineering & Construction 1.7
Computer Software & Service 1.6
Building Materials Group 1.5
Real Estate 1.5
Foods 1.4
Manufacturing - Diversified Industries 1.4
Broadcasters 1.3
Steel 1.3
Paper & Forest Products 1.2
Insurance - Multi-Line Companies 1.1
Entertainment 1.0
Other 14.1
-------
99.8%
=======
World Growth Fund
Notes to Portfolio of Investments in Securities
May 31, 1996
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.
Specific Notes
(a) Security is exempt from registration by Rule 144A under the Securities Act
of 1933 and has been determined to be liquid by Management. Any resale of this
security may occur in an exempt transaction in the United States to a qualified
institutional buyer as defined by the Rule.
World Growth Fund
Statement of Operations
(In Thousands)
Year ended May 31, 1996
Net investment income:
Income (net of foreign taxes withheld of $409):
Dividends $ 4,236
Interest 850
---------
Total income 5,086
---------
Expenses:
Management fees 1,708
Transfer agent's fees 654
Custodian's fees 298
Postage 85
Shareholder reporting fees 47
Trustees' fees 3
Registration fees 43
Audit fees 28
Legal fees 5
Other 19
---------
Total expenses 2,890
---------
Net investment income 2,196
---------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 13,086
Foreign currency transactions (16)
Change in net unrealized appreciation/depreciation of:
Investments 31,375
Translation of assets and liabilities in foreign currencies (11)
---------
Net realized and unrealized gain 44,434
---------
Increase in net assets resulting from operations $46,630
=========
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
World Growth Fund
Statements of Changes in Net Assets
(In Thousands)
Years ended May 31,
1996 1995
<S> <C> <C>
From operations:
Net investment income $ 2,196 $ 1,206
Net realized gain (loss) on investments 13,086 (1,152)
Net realized loss on foreign currency transactions (16) (784)
Change in net unrealized appreciation/depreciation of:
Investments 31,375 7,542
Foreign currency translations (11) 256
----------- -----------
Increase in net assets resulting from operations 46,630 7,068
----------- -----------
Distributions to shareholders from:
Net investment income (1,299) -
----------- -----------
Net realized gains (3,705) (3,395)
----------- -----------
From capital share transactions:
Shares sold 70,067 107,156
Shares issued for dividends reinvested 4,957 3,361
Shares redeemed (50,203) (56,812)
---------- -----------
Increase in net assets from capital share transactions 24,821 53,705
---------- -----------
Net increase in net assets 66,447 57,378
Net assets:
Beginning of period 200,745 143,367
---------- -----------
End of period $267,192 $200,745
========== ===========
Undistributed net investment income included in net assets:
Beginning of period $ 573 $ 151
========== ===========
End of period $ 1,639 $ 573
========== ===========
Change in shares outstanding:
Shares sold 4,996 8,524
Shares issued for dividends reinvested 371 268
Shares redeemed (3,613) (4,584)
----------- ------------
Increase in shares outstanding 1,754 4,208
=========== ============
</TABLE>
See accompanying notes to financial statements.
World Growth Fund
Notes to Financial Statements
(In Thousands)
May 31, 1996
(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 eleven separate funds. The
information presented in this annual report pertains only to the World Growth
Fund (the Fund). The Fund's investment objective is capital appreciation.
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. As a result of certain
permanent differences between book and tax basis accounting for investments in
passive foreign investment companies, reclassifications have been made on the
statement of assets and liabilities to increase accumulated undistributed net
investment income by $185 and to decrease accumulated net realized gain on
investments by $185.
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, is
recorded on the ex-dividend date. If the ex-dividend date has passed, certain
dividends from foreign securities are recorded upon notification. Interest
income is recorded on the accrual basis. Discounts and premiums on short-term
securities are amortized over the life of the respective securities.
D. 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 from 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. 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 two joint short-term revolving
loan agreements totaling $850 million through January 14, 1997, one with USAA
Capital Corporation, an affiliate of the Manager ($750 million uncommitted),
and one with an unaffiliated bank ($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 these agreements, the Fund may borrow up to a
maximum of 25% of its total assets at the lending institution's borrowing rate
plus a markup. During the year ended May 31, 1996, the Fund had no borrowings
under either of these agreements.
(3) Distributions
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made in the succeeding fiscal
year. Distributions of net investment income of $.1010 per share, a short-term
capital gain of $.2021 per share, and a long-term capital gain of $.2493
per share, declared and paid in July 1996, are not reflected in the
accompanying financial statements.
(4) Investment Transactions
Purchases and sales of securities, excluding short-term securities, for the
year ended May 31, 1996 were $147,964 and $130,759, respectively.
Gross unrealized appreciation and depreciation of investments as of May 31,
1996 was $53,405 and $4,783, respectively.
(5) 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 giving up the opportunity for potential
profit.
At May 31, 1996, the terms of open foreign currency contracts were as follows:
U.S. Dollar U.S. Dollar
Value Value Unrealized
Exchange Currency to be as of Currency to be as of Appreciation
Date Delivered 5/31/96 Received 5/31/96 (Depreciation)
6/03/96 641 Finnish Markka $136 135 U.S. Dollar $135 $(1)
6/03/96 871 Finnish Markka 185 183 U.S. Dollar 183 (2)
6/03/96 66 Hong Kong Dollar 9 9 U.S. Dollar 9 -
6/03/96 12 Hong Kong Dollar 1 1 U.S. Dollar 1 -
6/04/96 67 Hong Kong Dollar 9 9 U.S. Dollar 9 -
6/04/96 7 Hong Kong Dollar 1 1 U.S. Dollar 1 -
------ ------ -------
$341 $338 $(3)
====== ====== =======
(6) Transactions with Manager
A. Management fees - The investment policies of the Fund and management of
the Fund's portfolio are 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 agreement provides that the Manager will receive no
fee or other remuneration for such services.
(7) 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 May 31, 1996, the Association and its
affiliates owned 1,738 shares (10.1%) of the Fund.
World Growth Fund
Notes to Financial Statements (continued)
May 31, 1996
(8) Financial Highlights
Per share operating performance for a share outstanding throughout each period
is as follows:
Eight-month
Period Ended Year Ended
Year Ended May 31, May 31, September 30,
1996 1995 1994 1993
Net asset value at
beginning of period $ 12.96 $ 12.71 $ 11.80 $ 10.00
Net investment income .12 .07 .04(b) .05
Net realized and
unrealized gain 2.73 .46 .93 1.75
Distributions from net
investment income (.08) - (.01) -
Distributions of realized
capital gains (.23) (.28) (.05) -
------------- ------------ ------------- ------------
Net asset value at
end of period $ 15.50 $ 12.96 $ 12.71 $ 11.80
============= ============ ============== =============
Total return (%) * 22.43 4.26 8.25 18.00
Net assets at end of
period (000) $ 267,192 $ 200,745 $ 143,367 $ 68,818
Ratio of expenses to
average net assets (%) 1.27 1.28 1.28(a) 1.70
Ratio of net investment
income to average net
assets (%) .96 .69 .42(a) .75
Portfolio turnover (%) 60.97 58.88 37.64 45.57
Average commission
rate paid per share $ .0006
* Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
