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:
Statement of Assets and Liabilities 8
Portfolio of Investments in Securities 9
Notes to Portfolio of Investments in Securities 15
Statement of Operations 16
Statements of Changes in Net Assets 17
Notes to Financial Statements 18
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 Emerging
Markets 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.
<TABLE>
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 32 funds by investment objective as of December 31,
1995. 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.
Average Annual Total Return*
<CAPTION> 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 50.42 20.44 12.02 - - -
Emerging Markets(2) 11/7/94 3.65 - - (4.26) - -
Gold(2) 8/15/84 4.04 5.60 5.46 - - -
Growth 4/5/71 32.06 15.56 12.47 - - -
Growth & Income 6/1/93 31.57 - - 13.74 - -
International(2) 7/11/88 8.29 11.98 - 9.51 - -
World Growth(2) 10/1/92 12.85 - - 12.06 - -
Asset Allocation
Balanced Strategy 9/1/95 - - - 3.24 - -
Cornerstone Strategy(2)# 8/15/84 18.40 12.37 12.68 - - -
Growth and Tax Strategy(3)**# 1/11/89 22.70 10.33 - 9.81 - 3.61
Growth Strategy(2) 9/1/95 - - - 6.50 - -
Income Strategy 9/1/95 - - - 9.94 - 4.47
Income - Taxable
GNMA 2/1/91 16.76 - - 8.64 - 6.64
Income 3/4/74 24.47 10.91 10.43 - - 6.25
Income Stock 5/4/87 28.62 14.35 - 12.12 - -
Short-Term Bond 6/1/93 11.18 - - 5.33 - 6.43
Income - Tax Exempt
Long-Term(3)** 3/19/82 18.58 8.44 8.62 - - 5.40
Intermediate-Term(3)** 3/19/82 15.07 8.22 7.95 - - 4.93
Short-Term(3)** 3/19/82 8.11 5.59 5.87 - - 4.36
California Bond(3)** 8/1/89 21.85 8.39 - 8.01 - 5.23
Florida Tax-Free Income(3)** 10/1/93 18.90 - - 3.39 - 5.35
New York Bond(3)** 10/15/90 18.07 8.60 - 9.25 - 5.31
Texas Tax-Free Income(3)** 8/1/94 22.22 - - 12.43 - 5.18
Virginia Bond(3)** 10/15/90 17.08 8.42 - 8.79 - 5.22
Money Market
Money Market(4) 2/2/81 5.80 4.54 5.97 - 5.48 -
Tax Exempt Money Market(3),(4)** 2/6/84 3.70 3.32 4.36 - 4.33 -
Treasury Money Market Trust(4) 2/1/91 5.59 - - 4.17 5.26 -
California Money Market(3),(4)** 8/1/89 3.64 3.15 - 3.70 4.14 -
Florida Tax-Free Money
Market(3),(4)** 10/1/93 3.57 - - 2.90 4.28 -
New York Money Market(3),(4)** 10/15/90 3.59 2.98 - 3.04 4.27 -
Texas Tax-Free Money Market(3),(4)** 8/1/94 3.56 - - 3.36 4.08 -
Virginia Money Market(3),(4)** 10/15/90 3.52 3.13 - 3.21 4.07 -
(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.
* 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.
** 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, New York, Virginia,
Florida, and Texas funds available to residents only.
# Formerly known as Cornerstone Fund and Balanced Portfolio Fund,
respectively.
</TABLE>
Message from the President
A few weeks ago I attended a meeting of past presidents of one of San
Antonio's distinguished institutions. We discussed a variety of subjects
that evening, including the investment performance of the organization's
endowment. In such organizations, I usually become chairman of
the investment committee, so I reported that through twelve months our
fund had a total return of about 24%.(1) One of my fellow past presidents
observed about another fund with which he is involved, "Well - we are up
over 35%!" He stopped short of asking, "What's your problem?" This was
not that uncommon an exchange.
I attempted to expand on the subject a bit. The investment committee
which I chair set down a strategy back in 1993. We concurred that the
investment goals and the risk tolerance of our board of trustees could
be accommodated with a portfolio that was 50% in growth stocks and 50%
in long-term fixed-income vehicles. This being a committee and
my having but one vote, I am pleased to say that the USAA Income Fund
was chosen as the fixed income investment. The 50/50 balance
is re-established at the end of each fiscal year so that the risk
profile is maintained.
My colleague referred to a very different kind of investment.
His was a family affair, and their investment decision was 100%
in an aggressive growth stock fund.(2) So, which did better? There is
not a simple answer, so what I'll give is my opinion.
[Photograph of Michael J. C. Roth, CFA, President and Vice Chairman of
the Board, appears here]
I think both of us did just fine. No matter what kind of market we have
been through, you will always be able to find someone who had a higher and
a lower return than you. Is it worthwhile to shift all of your investments
to that higher return? I think not. Investment decisions are, by
necessity, forward looking. In the case of mutual funds you must rely on
two things; the company with which you have chosen to invest and on
yourself. The latter means you have invested in a way with which you are
comfortable. Then you should bear in mind that in any market someone
else is going to have a higher return.
The board of the institution whose investment committee I chair
is delighted with their investment performance, both return and
volatility. I am sure that my colleague's family is also delighted with
theirs. I do not expect that either of us will change our strategy any
time soon.
"No matter what kind of market we have been through, you
will always be able to find someone who had a higher and
a lower return than you."
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
(1) For the 12 months ending December 31, 1995.
Average Annual Total Return: 1 Year 5 Years 10 Years
--------------------------- ------ ------- --------
USAA Income Fund 24.47% 10.91% 10.43%
(2) An aggressive growth fund seeks maximum capital gains as its
investment objective. Current income is not a significant factor.
Some may invest in stocks of businesses that are somewhat out of
the mainstream, such as fledgling companies, new industries,
companies fallen on hard times, or industries temporarily
out of favor. USAA IMCO manages this type of fund.
Total return equals income yield plus share price change and
assumes reinvestment of all dividends and capital gain distributions.
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 any mutual fund managed by USAA
Investment Management Company, including charges and expenses, please
call for a prospectus. Please read the prospectus carefully before you
invest or send money.
Investment Review
Emerging Markets fund
OBJECTIVE: Provide investors with capital appreciation.
TYPES OF INVESTMENTS: At least 65% of the Fund's assets are invested in
common stocks or securities which are convertible into or which carry the
right to buy common stocks of emerging market companies.
5/31/95 11/30/95
Net Assets $22.9 Million $23.7 Million
Net Asset Value Per Share $9.77 $9.06
Average Annual Total Returns as of 11/30/95
May 31, 1995 to November 30, 1995 -4.95%#
1 Year -2.76%
Since inception on November 7, 1994 -6.64%
#Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
[A graph is shown here which is a comparison of the change in value
of a $10,000 investment, for the period of 11/7/94 to 11/30/95, with
dividends and capital gains reinvested. The ending value of each item
graphed is as follows : USAA Emerging Markets Fund - $9,286, the IFC Global
Composite Index - $7,508 and the Lipper Emerging Markets Fund Index -
$7,871.]
The graph illustrates a hypothetical $10,000 investment in the
USAA Emerging Markets Fund compared to the International Financial
Corporation (IFC) Global Composite Index, an unmanaged broad-based
index of emerging markets per the World Bank GNP per capita definition,
and an unmanaged index of emerging markets funds represented by the Lipper
Emerging Markets Fund 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
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.
Message from the Manager
[Photograph of W. Travis Selmier, II, Portfolio Manager appears here]
Fund Overview
Emerging markets have continued to experience very turbulent times over the
last six months. Fund performance for the last six months and calendar
year-to-date was -4.95% and 1.26%, respectively. While your fund has
outperformed the Lipper index for emerging markets funds for the period (as
evidenced by the graph on page 4), this is a small comfort compared with
the stellar performance U.S. stocks have shown over the same period.
Latin American Markets
Economic and political problems in most Latin American markets (excluding
Brazil and Peru) have pushed many of these markets lower. Mexico's pain in
putting its economic house in order, combined with Argentina's recession
and other problems make us somewhat cautious on the region. We have many
stocks which we feel hold value and have continued to emphasize these in
the portfolio.
Asian Markets
Political turmoil surrounding China, concerns about financing several
Southeast Asian countries' ongoing economic growth, and a scandal in Korea
have added jitters to already nervous markets. While recognizing these
concerns, the potential for strong economic growth and an expected rebound
will cause us to maintain a full position in this region.
Other Markets
South Africa, Poland and Turkey were beneficial to us during part of the
year. The markets have come off dramatically since lowering our weightings
in Turkey and Poland this summer and we have now begun to add again in both
countries. We have selectively taken profits in South Africa, but are
continuing to look for other stocks there.
Top 10 Industries
(% of Net Assets)
Banks 10.7
Real Estate 6.8
Telecommunications 4.8
Beverages-alcoholic 4.4
Steel 4.1
Engineering & Construction 4.0
Electric Power 3.9
Metals-Miscellaneous 3.6
Auto Parts 3.5
Building Materials Group 3.0
Outlook
After two rough years, emerging markets valuations across the world have
come down to levels we consider fair to undervalued. Economic growth in many
countries, particularly much of Asia, Brazil, Chile, Poland and others
is strong and should continue to be so. A benign interest rate environment,
less turbulent currency markets and some recovery in global economic
growth should provide the underpinnings for recovery in emerging markets.
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.
See page 9 for a complete listing of the Portfolio of Investments in
Securities.
[A pie chart is shown here depicting the Asset Allocation as of November
30, 1995 of the USAA Emerging Markets Fund to be: South Africa - 4.9%,
Singapore - 4.9%, Poland - 4.5%, Hong Kong - 8.6%, Mexico - 5.6%, Thailand
- - 4.3%, Indonesia - 4.1%, India - 4.2%, Philippines - 4.6%, Brazil - 7.6%,
and Other - 49.0%.]
Shareholder Voting Results
On October 13, 1995, 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 17, 1995 were entitled to vote on each
proposal. The number of votes shown below are shown in the aggregate for
the entire USAA Investment Trust (the Trust).
(1) Proposal to elect a Board of Trustees as follows:
Votes Votes
Trustee For Withheld
Hansford T. Johnson* 112,569,933 2,138,930
Michael J.C. Roth 111,522,559 3,186,304
John W. Saunders, Jr. 112,598,635 2,110,228
George E. Brown 111,259,788 3,449,075
Howard L. Freeman, Jr. 112,481,010 2,227,853
Richard A. Zucker 112,225,587 2,483,276
Barbara B. Dreeben 111,409,531 3,299,332
Mr. C. Dale Briscoe did not stand for re-election to the Board. His term of
office terminated on December 31, 1995.
* On December 4, 1995, Hansford T. Johnson announced his departure from the
Board effective December 31, 1995. The Board elected M. Staser Holcomb to
succeed Mr. Johnson.
Number of Shares Voting
For Against Abstain
--- ------- -------
(2) Proposal to ratify or reject the 107,284,373 2,323,184 5,101,298
selection by the Board of Trustees
of KPMG Peat Marwick LLP as auditors
for the Trust for the fiscal year ending
May 31, 1996.
Emerging Markets Fund
Statement of Assets and Liabilities
(In Thousands)
November 30, 1995
(Unaudited)
Assets
Investments in securities, at market value (identified
cost of $25,072) $ 24,280
Cash 39
Cash denominated in foreign currencies (identified
cost of $64) 64
Receivables:
Capital shares sold 55
Dividends 21
Foreign currency contracts held, at value 347
-----------
Total assets 24,806
-----------
Liabilities
Securities purchased 664
Foreign currency contracts held, at value 353
Capital shares redeemed 7
USAA Investment Management Company 18
USAA Transfer Agency Company 10
Accounts payable and accrued expenses 28
-----------
Total liabilities 1,080
-----------
Net assets applicable to capital shares
outstanding $ 23,726
===========
Represented by:
Paid-in capital $ 24,301
Accumulated net investment loss (74)
Accumulated net realized gain on investments 291
Net unrealized depreciation of investments (792)
-----------
Net assets applicable to capital shares
outstanding $ 23,726
===========
Capital shares outstanding, unlimited number of shares
authorized, no par value 2,620
===========
Net asset value, redemption price, and offering price
per share $ 9.06
===========
See accompanying notes to financial statements.
Emerging Markets Fund
Portfolio of Investments in Securities
November 30, 1995
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------- -------- ------
Common Stocks (82.6%)
Argentina (3.1%)
45,000 Comercial del Plata S.A. * $ 109
80,000 Compania Interamericana de Automobiles S.A. 344
7,710 IRSA Inversiones y Representaciones S.A. GDS 168
6,000 YPF Sociedad Anonima S.A. ADS "D" 117
-------
738
-------
Brazil (0.6%)
14,000 Rhodia-Ster S.A. GDS 138
-------
Chile (3.0%)
29,000 Banco Osorno y La Union S.A. ADR 359
5,400 Madeco S.A. ADS 127
14,000 Maderas y Sinteticos S.A. ADS 233
-------
719
-------
Colombia (0.3%)
12,000 Banco de Colombia GDS 62
-------
Costa Rica (3.7%)
4,260,703 Atlas Electrica, S.A. * 488(a)
2,581,000 Corporacion BCT, S.A. * 381(a)
-------
869
-------
Hong Kong (8.6%)
266,500 Amoy Properties Ltd. 255
28,800 China Yuchai International Ltd. 245
410,000 Florens Group Ltd. 236
38,000 Hutchison Whampoa Ltd. 215
240,000 New World Infrastructure Ltd. * 417
260,000 Peregrine Investments Holdings Ltd. 338
180,000 Varitronix International Ltd. 337
-------
2,043
-------
Hungary (1.1%)
30,000 Mol Magyar Olay Es Gazipari GDS* 251
-------
India (4.2%)
7,000 Hindalco Industries Ltd. GDR 194
10,000 Indian Rayon & Industries Ltd. GDR 115
15,000 Larsen & Toubro Ltd. GDR 235
850 Tata Electric Companies GDR * 263
50,000 The Arvind Mills Ltd. GDS 188
-------
995
-------
Indonesia (4.1%)
200,000 PT Asahimas Flat Glass Co. Ltd. * 210
8,500 PT Bank Dagang Nasional Indonesia 7
127,500 PT Darya-Varia Laboratoria 209
3,000 PT HM Sampoerna 30
110,000 PT Jaya Real Property 270
130,000 PT Matahari Putra Prima 241
-------
967
-------
Israel (1.1%)
14,500 Koor Industries Ltd. ADS * 263
-------
Korea (3.3%)
7,500 Korea Electric Power Corp. ADS 328
8,400 LG Chemical Ltd. * 175
350 Samsung Electronics Co., Ltd. * 66
2,500 Samsung Electronics Co., Ltd. GDR * 149
1,333 Samsung Electronics Co., Ltd. GDR (New) * 71
-------
789
-------
Malaysia (3.1%)
100,000 Hong Leong Bank BHD 258
100,000 IOI Properties BHD 219
30,375 Malaysian Assurance Alliance BHD 120
49,000 Tanjong plc 141
-------
738
-------
Mexico (5.6%)
17,900 Desc, Soceidad de Fomento Industrial,
S.A. de C.V. ADS* 237
800,000 Grupo Financiero Bancomer "B" * 221
25,000 Grupo Simec, S.A. de C.V. ADS * 169
525,000 Grupo Situr S.A. "B" * 169
13,000 Grupo Televisa, S.A. de C.V. ADS 281
7,500 Panamerican Beverages, Inc. "A" 242
-------
1,319
-------
Netherlands (0.5%)
4,200 Ceteco Holding NV 119
-------
Pakistan (1.6%)
5,000 Pakistan Telecommunication Co. Ltd. GDR 390
-------
Peru (2.5%)
33,884 Compania de Minas Buenaventura S.A. 190
390,000 Compania Nacional De Cerveza S.A. * 196
30,000 Minsur S.A. 212
-------
598
-------
Philippines (4.6%)
1,512,000 Filinvest Land, Inc. * 404
239,000 Petron Corp. GDS 110
38,900 Philippine Commercial International Bank 327
576,000 Universal Robina Corp. 242
-------
1,083
-------
Poland (4.5%)
22,000 Debica S.A. 360
75,000 Elektrim S.A. 247
37,300 Polifarb-Cieszyn S.A. 149
38,000 Rafako * 315
-------
1,071
-------
Portugal (1.1%)
3,713 Portugal Telecom, S.A. * 68
11,000 Portugal Telecom, S.A. ADS * 206
-------
274
-------
Russia (1.6%)
40,000 Sun Brewing Ltd. GDR * 380
-------
Singapore (4.9%)
250,000 Genting International plc 410
22,000 Keppel Corp. Ltd. 181
35,000 Overseas Union Bank Ltd. 222
180,000 Wing Tai Holdings, Ltd. 348
-------
1,161
-------
South Africa (4.9%)
127,742 Iscor Ltd. S.A. 115
7,738 Murray and Roberts Holdings Ltd. 51
18,900 Nedcor Ltd. GDR * 307
4,700 Nedcor Ltd. Warrants * 23
50,000 Vaal Reefs Exploration & Mining Ltd. ADR 328
11,000 Western Deep Levels Ltd. ADR 346
-------
1,170
-------
Taiwan (2.5%)
30,000 Acer, Inc. * 390
12,000 China Steel Corp. GDS 195
-------
585
-------
Thailand (4.3%)
13,200 Finance One Public Co. 82
45,000 Property Perfect Plc 233
120,000 Sahaviriya Steel Industries Public Co., Ltd.* 147
130,400 Thai Theparos Food 430
22,000 TPI Polene Public Co., Ltd. 122
-------
1,014
-------
Turkey (2.8%)
300,000 Erciyas Biracilik ve Malt Sanayi A.S. 158
2,000,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 180
86,000 Olmuksa Mukavva Sanayi Ve Ticaret A.S. 21
87,000 Sarkuysan Elektrolitik Bakir S.A. 14
5,000,000 Yapi Ve Kredi Bankasi A.S. 300
-------
673
-------
Venezuela (0.9%)
60,000 Corimon C A S A C A ADS * 225
-------
Zimbabwe (1.9%)
455,000 Reunion Mining plc * 455
-------
Other Holdings (2.2%)
48,000 Foreign & Colonial Emerging Middle East Fund* 516
-------
Total common stocks (cost: $20,540) 19,605
-------
Preferred Stocks (7.0%)
Brazil
8,487,816 Bradesco PN 74
813,793 Brahma (Cia Cervejaria) PN 321
15,040,000 Companhia Energetica de Minas Gerais(Cemig) 333
950,000 Coteminas PN 307
5,000,000 Telebras PN 246
1,260,000 Telesp Telephone Sao Paulo 219
180,000,000 Usinas Siderurgicas de Minas Gerais S.A. 160
-------
Total preferred stocks (cost: $1,517) 1,660
-------
U.S. Government & Agency Issues (12.7%)
Principal
Amount Coupon
(000) Rate Maturity
--------- ------ --------
Discount Note
$ 3,015 Federal Home Loan Mortgage
Corp. (cost:$3,015) 5.80% 12/01/95 3,015
-------
Total investments (cost: $25,072) $24,280
=======
*Non-income producing.
PORTFOLIO SUMMARY BY INDUSTRY
-----------------------------
U.S. Government & Agency Issues 12.7%
Banks 10.7
Real Estate 6.8
Telecommunications 4.8
Beverages - Alcoholic 4.4
Steel 4.1
Engineering & Construction 4.0
Electric Power 3.9
Metals - Miscellaneous 3.6
Auto Parts 3.5
Building Materials Group 3.0
Conglomerates 3.0
Gold Mining 2.8
Foods 2.8
Electronics 2.6
Gaming Companies 2.3
Closed End Funds 2.2
Textiles 2.1
Home Furnishings & Appliances 2.1
Oil 2.0
Homebuilding 1.9
Brokerage Firms 1.8
Transportation - Miscellaneous 1.8
Computer Systems 1.6
Retail 1.5
Automobiles 1.5
Manufacturing - Diversified Industries 1.4
Machinery - Diversified 1.3
Chemicals 1.3
Broadcasters 1.2
Beverages - Soft Drinks 1.0
Other 2.6
-----
102.3%
=====
Emerging Markets Fund
Notes to Portfolio of Investments in Securities
November 30, 1995
(Unaudited)
General Notes
Market values of securities are determined by procedures and practices
discussed in note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the
same as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net
assets.
Specific Notes
(a) Illiquid securities valued using methods determined by the Manager
under the general supervision of the Board of Trustees. At November 30,
1995, these securities represented 3.7% of the Fund's net assets.
See accompanying notes to financial statements.
Emerging Markets Fund
Statement of Operations
(In Thousands)
Six-month period ended November 30, 1995
(Unaudited)
Net investment income:
Income (net of foreign taxes withheld of $10):
Dividends $ 154
Interest 39
--------
Total income 193
--------
Expenses:
Management fees 121
Transfer agent's fees 57
Custodian's fees 50
Postage 5
Shareholder reporting fees 4
Trustees' fees 1
Registration fees 23
Audit fees 14
Legal fees 6
Other 11
--------
Total expenses 292
--------
Net investment loss (99)
--------
Net realized and unrealized loss on investments and foreign
currency:
Net realized gain (loss) on:
Investments 831
Foreign currency transactions (3)
Change in net unrealized appreciation/depreciation of
investments (1,968)
--------
Net realized and unrealized loss (1,140)
--------
Decrease in net assets resulting from operations $ (1,239)
========
See accompanying notes to financial statements.
Emerging Markets Fund
Statements of Changes in Net Assets
(In Thousands)
Six-month period ended November 30, 1995
and Seven-month period ended May 31, 1995*
(Unaudited)
<TABLE>
<CAPTION>
11/30/95 5/31/95
<S> <C> <C>
From operations:
Net investment income (loss) $ (99) $ 43
Net realized gain on investments 831 1
Net realized loss on foreign currency transactions (3) (15)
Change in net unrealized appreciation/depreciation of
investments (1,968) 1,176
------- -------
Increase (decrease) in net assets resulting from
operations (1,239) 1,205
------- -------
Distributions to shareholders from:
Net realized gains (541) _
------- -------
From capital share transactions:
Shares sold 16,138 25,967
Shares issued for dividends reinvested 473 _
Shares redeemed (14,019) (4,258)
------- -------
Increase in net assets from capital share
transactions 2,592 21,709
------- -------
Net increase in net assets 812 22,914
Net assets:
Beginning of period 22,914 _
------- -------
End of period $ 23,726 $ 22,914
======= =======
Accumulated net investment income (loss)
included in net assets:
Beginning of period $ 28 $ _
======= =======
End of period $ (74) $ 28
======= =======
Change in shares outstanding:
Shares sold 1,632 2,812
Shares issued for dividends reinvested 54 _
Shares redeemed (1,410) (468)
------- -------
Increase in shares outstanding 276 2,344
======= =======
* Fund commenced operations November 7, 1994.
See accompanying notes to financial statements.
</TABLE>
Emerging Markets Fund
Notes to Financial Statements
(In Thousands)
November 30, 1995
(Unaudited)
(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 semiannual report pertains only
to the Emerging Markets 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.
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. The Fund concentrates its investments in securities
of companies in emerging market countries and therefore may be exposed to
more risk than portfolios with a broader geographical diversification.
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.
(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 10% of the market value of its assets at the time of such
borrowing. 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 six-month period ended November
30, 1995.
(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.
(4) Investment Transactions
Purchases and sales of securities, excluding short-term securities, for the
six-month period ended November 30, 1995 were $10,602 and $10,561,
respectively.
Gross unrealized appreciation and depreciation of investments as of
November 30, 1995 was $1,601 and $2,393, 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 November 30, 1995, the terms of open foreign currency contracts were as
follows:
U.S. Dollar U.S. Dollar
Value Value
Exchange Currency to be as of Currency to be as of
Date Delivered 11/30/95 Received 11/30/95
12/01/95 21 U.S. Dollar $ 21 1,116,179 Turkish Lira $ 20
12/01/95 14 U.S. Dollar 14 744,341 Turkish Lira 14
12/01/95 250 U.S. Dollar 250 13,518,975 Turkish Lira 246
12/01/95 140,281 Indonesian Rupiah 62 61 U.S. Dollar 61
12/04/95 6 U.S. Dollar 6 14,397 Indonesian Rupiah 6
---- ----
$353 $347
==== ====
(6) 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 1% 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 November 30, 1995, the Association and
its affiliates owned 303 shares (11.6%) of the Fund.
(8) Financial Highlights
Per share operating performance for a share outstanding throughout each
period is as follows:
Six-month Seven-month
Period ended Period ended
November 30, May 31,
1995 1995 *
---- ----
Net asset value at beginning of period $ 9.77 $ 10.00
Net investment income (loss) (.04)(b) .03(b)
Net realized and unrealized loss (.45) (.26)
Distributions of realized capital gains (.22) _
--------- --------
Net asset value at end of period $ 9.06 $ 9.77
========= ========
Total return (%)** (4.95) (2.30)
Net assets at end of period (000) $ 23,726 $ 22,914
Ratio of expenses to average net assets (%) 2.40(a) 2.50(a)(c)
Ratio of net investment income to average
net assets (%) (.81)(a) .53(a)(c)
Portfolio turnover (%) 45.98 34.87
Average commission rate paid per share .0028
* Fund commenced operations November 7, 1994.
** Assumes reinvestment of all 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.
(c) The information contained in the above table is based on actual
expenses for the period, after giving effect to reimbursement of expenses
by the Manager. Absent such reimbursement the Fund's ratios would have
been:
Seven-month
Period ended
May 31,
1995*
----
Ratio of expenses to average net assets (%) 2.60(a)
Ratio of net investment income to average net assets (%) .43(a)
