Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 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 20
Statement of Operations 21
Statements of Changes in Net Assets 22
Notes to Financial Statements 23
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
International 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
International Fund
OBJECTIVE: Primary objective is capital appreciation. Current income is a
secondary objective.
TYPES OF INVESTMENTS: At least 80 percent of the Fund's assets are invested
in common stocks of companies organized and operating outside the United
States. The remainder of the Fund's assets may be invested in U.S. government
securities that mature in less than one year.
____________________________________________________________________________
5/31/95 5/31/96
Net Assets $346.0 Million $418.0 Million
Net Asset Value Per Share $15.78 $18.71
- ----------------------------------------------------------------------------
Average Annual Total Returns as of 5/31/96
1 Year 19.71%
5 Years 13.13%
Since inception on July 11, 1988 10.58%
____________________________________________________________________________
[A graph is shown here which is a comparison of the change in value of
a $10,000 investment, for the period of 7/11/88 to 5/31/96, with
dividends and capital gains reinvested. The ending value of each
item graphed is as follows: USAA International Fund - $22,187 and the
Morgan Stanley Capital Index (MSCI - EAFE) - $16,145.]
The graph illustrates how the USAA International
Fund outperformed its benchmark, the Morgan Stanley
Capital Index (MSCI)-EAFE, an unmanaged index which
reflects the movements of stock markets in Europe,
Australia, and the Far East by representing a broad
selection of domestically listed companies within
each market. The chart compares a $10,000 hypothetical
investment in the USAA International 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 Manager
(A photo of David G. Peebles, Portfolio Manager, appears here)
Market Conditions
After lagging throughout 1995, international markets have performed in line
with the U.S. markets. Though past performance is no guarantee of future
results, your fund's 19.71% one-year total return for the period ended May
31, 1996, outperformed the Lipper(1) International Fund Index return of 15.84%
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.
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.
(1) Lipper Analytical Services is an independent organization that monitors
the performance of mutual funds.
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 have
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.
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. markets 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)
____________________________________
Heineken N.V. 1.7
Essilor International 1.6
Ciba Geigy AG 1.6
Canon 1.5
Verenigd Besit VNU 1.4
WPP Group 1.3
CSL Ltd. 1.3
Telefonica de Espana ADR 1.3
Abb AB 1.3
ING Groep N.V. 1.3
Top 10 Industries
(% of Net Assets)
____________________________________
Healthcare 8.8
Banks 7.6
Retail 6.2
Oil 5.7
Telecommunications 5.1
Electrical Equipment 3.6
Electronics 3.4
Electric Power 3.2
Auto Parts 2.8
Automobiles 2.7
[A pie chart is shown here depicting the Asset Allocation as of May 31, 1996
of the USAA International Fund to be: Japan 17.6%, United Kingdom - 6.3%,
France - 6.5%, Netherlands - 6.3%, Sweden - 5.1%, Canada - 5.6%, Germany -
3.6%, Switzerland - 3.0%, Australia - 3.6% and Other - 41.8%. Percentages
are of the Net Assets in the Portfolio and may or may not equal 100%.]
Distributions to Shareholders
USAA International 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,
foreign dividend income,taxable domestic, 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 International 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 and interest $ .0425
Investment income - Foreign:
Gross income .1952
Foreign Tax Paid .0395
-----
Net Foreign .1557
Capital Gain Income :
Long-term .3448
-------
TOTAL DISTRIBUTIONS $ .5430
========
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 International 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 five-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 International 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 five-year period then ended, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
July 10, 1996
International Fund
Statement of Assets and Liabilities
(In Thousands)
May 31, 1996
<TABLE>
<S> <C>
Assets
Investments in securities, at market value (identified cost of $344,923) $ 415,641
Cash 347
Cash denominated in foreign currencies (identified cost of $51) 50
Receivables:
Capital shares sold 597
Dividends and interest 1,276
Securities sold 801
--------
Total assets 418,712
--------
Liabilities
Securities purchased 46
Unrealized depreciation on foreign currency contracts held, at value 7
Capital shares redeemed 189
USAA Investment Management Company 262
USAA Transfer Agency Company 60
Accounts payable and accrued expenses 153
-------
Total liabilities 717
-------
Net assets applicable to capital shares outstanding $417,995
=========
Represented by:
Paid-in capital $338,540
Accumulated undistributed net investment income 3,646
Accumulated net realized gain on investments 5,100
Net unrealized appreciation of investments 70,718
Net unrealized depreciation on foreign currency translations (9)
----------
Net assets applicable to capital shares outstanding $ 417,995
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 22,339
==========
Net asset value, redemption price, and offering price per share $ 18.71
==========
See accompanying notes to financial statements.
</TABLE>
International Fund
Portfolio of Investments in Securities
May 31, 1996
Market
Number Value
of Shares Security (000)
--------- -------- --------
Common Stocks (90.4%)
Argentina (2.2%)
74,800 Disco S.A. ADS * $ 1,515
45,000 IRSA Inversiones y Representaciones S.A. GDS 1,468
135,315 Molinos Rio de la Plata S.A. 1,543
210,000 Quilmes Industrial (Quinsa) S.A. ADS * 2,572
74,700 Telefonica de Argentina S.A. ADR 2,176
--------
9,274
--------
Australia (2.8%)
1,406,700 CSL Ltd. 5,614
1,700,000 David Jones Ltd. 2,483
388,400 Rothmans Holdings Ltd. 2,191
418,600 Seven Network Ltd. 1,263
--------
11,551
--------
Austria (1.3%)
40,000 VA Technologie AG 5,236
--------
Belgium (1.0%)
12,700 Colruyt S.A. 4,232
--------
Canada (5.6%)
139,000 Alliance Forest Products, Inc. * 2,237
1,000,000 Beau Canada Exploration Ltd. * 1,475
153,600 Canadian National Railway Co. 2,842
235,600 Canadian Occidental Petroleum Ltd. 4,119
160,600 Loewen Group, Inc. 4,617
34,000 Potash Corporation Saskatchewan, Inc. 2,261
225,000 Ranger Oil Ltd. 1,684
65,000 Royal Plastics Group Ltd. * 1,030
95,000 Suncor, Inc. 2,999
-------
23,264
-------
Chile (1.3%)
88,000 Banco Osorno y La Union S.A. ADR 1,232
34,600 Madeco S.A. ADS 926
104,800 Maderas y Sinteticos S.A. ADS 1,703
33,100 Sociedad Quimica y Minera de Chile S.A. ADS 1,713
-------
5,574
-------
China (0.8%)
183,400 China Yuchai International Ltd. 1,513
840,000 New World Infrastructure Ltd. * 1,770
-------
3,283
-------
Colombia (0.5%)
235,000 Banco de Colombia GDS 2,056
-------
Czech Republic (0.7%)
51,700 Komercni Banka, A.S. * 1,409
14,000 SPT Telecom A.S. * 1,687
-------
3,096
-------
Denmark (1.6%)
82,000 Carli Gry International A/S * 2,338
14,870 Novo Nordisk A/S "B" 2,044
50,000 Unidanmark A/S 2,164
-------
6,546
-------
Finland (0.7%)
39,000 Raision Tehtaat 2,368
39,000 Raision Tehtaat Rights * 341
-------
2,709
-------
France (6.5%)
10,030 Chargeurs S.A. 2,862
135,000 Coflexip ADS 2,531
5,000 Ecco S.A. 1,199
135,000 Elf Aquitaine ADS 4,944
57,800 Eramet Group 4,428
28,000 Essilor International 6,879
18,700 Roussel Uclaf 4,334
-------
27,177
Germany (3.6%)
69,000 Adidas AG 5,179
90,200 Siemens AG 5,059
88,960 Veba AG 4,655
-------
14,893
-------
Hong Kong (2.3%)
2,600,000 Amoy Properties Ltd. 3,226
2,800,000 Cosco Pacific Ltd. 1,918
8,200,000 Regal Hotels International Holdings 2,120
2,928,000 Singamas Container Holdings Ltd. 299
1,080,000 Varitronix International Ltd. 2,170
-------
9,733
-------
Hungary (0.4%)
145,000 Mol Magyar Olay Es Gazipari GDS * 1,726
-------
India (1.5%)
40,000 Hindalco Industries Ltd. GDR 1,780
56,000 Indian Rayon & Industries Ltd. GDR 840
185,000 Larsen & Toubro Ltd. GDR 3,700
-------
6,320
-------
Indonesia (1.4%)
2,331,000 PT Bank Dagang Nasional Indonesia 2,298
140,000 PT HM Sampoerna 1,739
590,000 PT Jaya Real Property 1,948
-------
5,985
-------
Israel (0.4%)
90,500 Koor Industries Ltd. ADS 1,629
-------
Italy (2.6%)
245,000 Arnoldo Mondadori Editore 1,902
647,000 Fiat S.p.A. 2,284
221,500 Fidis Finanziaria di Sviluppo S.p.A. 631
32,500 Mediolanum S.p.A. * 253
2,781,250 Olivetti and C., S.p.A. * 1,742
60,000 SAES Getters S.p.A. * 1,140
984,000 STET 2,821
-------
10,773
-------
Japan (16.8%)
150,000 77 Bank Ltd. 1,431
151,000 Bridgestone Corp. 2,629
310,000 Canon, Inc. 6,085
150,000 Daibiru Corp. 2,028
124,000 Higo Bank 1,022
350,000 Hitachi Ltd. 3,241
142,000 Honda Motor Co. Ltd. 3,418
99,000 Hoya Corp. 3,181
76,000 Ito-Yokado Co. Ltd. 4,314
300 Kissei Pharmaceutical Co. Ltd. 9
50,000 Kyocera Corp. 3,426
170,000 Laox Co. Ltd. 3,636
420,000 Minebea Co. Ltd. 3,496
481,000 Mitsubishi Heavy Industries Ltd. 4,137
315,000 Mitsubishi Paper Mills Ltd. 1,992
12,000 Nippon Television Network 3,400
1,297,000 NKK Corp. * 3,795
242,000 Nomura Securities Co. Ltd. 4,571
58 NTT Data Communications Systems Corp. 1,788
57,000 Shimamura Co. Ltd. 2,491
250,000 Shiseido Co. Ltd. 3,102
383,000 Terumo Corp. 4,610
85,000 Tostem Corp. 2,487
------
70,289
-------
Korea (1.4%)
52,820 Korea Electric Power Corp. ADS 2,328
71,000 LG Chemical Ltd. 1,342
10,730 Pohang Iron & Steel Co., Ltd. 930
14,062 Samsung Electronics Co. Ltd. * 1,231
236 Samsung Electronics Co. Ltd. GDR * 12
------
5,843
------
Malaysia (1.7%)
510,000 Resorts World BHD 2,942
684,000 Technology Resources Industries BHD * 2,274
212,000 Telekom Malaysia BHD 1,936
-------
7,152
-------
Mexico (1.4%)
139,135 Desc, Soceidad de Fomento Industrial, S.A.
de C.V. ADS * 2,974
72,000 Panamerican Beverages, Inc. "A" 3,024
-------
5,998
-------
Netherlands (6.3%)
19,200 DSM N.V. 1,972
64,060 EVC International N.V. 2,213
124,800 Forasol-Foramer N. V. * 1,544
31,800 Heineken N.V. 7,213
64,481 ING Groep N.V. 5,310
22,000 Oce-van der Grinten N.V. 2,152
358,700 Verenigd Besit VNU 5,882
-------
26,286
-------
Norway (1.6%)
1,325,000 Christiania Bank og Kreditkasse 3,067
94,000 Hafslund ASA 749
140,000 Nycomed ASA * 2,833
-------
6,649
-------
Philippines (1.5%)
3,200,000 Megaworld Properties * 3,025
77,000 Metropolitan Bank and Trust Co. 2,309
2,004,500 Universal Robina Corp. 1,129
-------
6,463
-------
Poland (0.3%)
230,000 Polifarb-Cieszyn S.A. 1,191
-------
Portugal (0.7%)
115,300 Portugal Telecom, S.A. ADS 2,796
-------
Singapore (1.5%)
380,000 Jurong Shipyard Ltd. 2,158
195,000 Keppel Corp. Ltd. 1,634
375,000 Overseas Union Bank Ltd. 2,662
-------
6,454
-------
South Africa (0.5%)
111,000 Malbak Ltd. 522
122,667 Nedcor Ltd. GDR * 1,702
7,900 Nedcor Ltd. Warrants * 19
-------
2,243
-------
Spain (2.7%)
240,000 Autopistas del Mare Nostrum S.A. 2,882
15,300 Corporacion Bancaria de Espana S.A. 641
34,200 Corporacion Bancaria de Espana S.A. ADR 718
26,500 Corporacion Mapfre 1,306
106,000 Telefonica de Espana S.A. ADR 5,552
--------
11,099
--------
Sweden (5.1%)
51,450 Abb AB 5,323
164,280 Autoliv AB 4,768
174,000 Getinge Industrier AB "B" 3,186
150,000 Nordbanken AB 2,690
223,100 Swedish Match AB * 744
223,100 Volvo AB 4,732
------
21,443
------
Switzerland (3.0%)
6,144 Ciba Geigy AG 6,760
1,200 SGS Group AG 2,704
4,550 Sulzer AG P.C. 2,890
-------
12,354
-------
Taiwan (0.8%)
106,000 Acer, Inc. * 1,116
56,000 China Steel Corp. ADS 1,271(a)
48,600 China Steel Corp. GDS 1,103
-------
3,490
-------
Thailand (0.9%)
420,000 Krung Thai Bank 2,139
378,000 Sahaviriya Steel Industries Public Co., Ltd. * 325
154,500 Sri Thai Superware Co. Ltd. 1,092
-------
3,556
-------
Turkey (0.2%)
1,892,000 Olmuksa Mukavva Sanayi Ve Ticaret A.S. 265
22,289,000 Yapi Ve Kredi Bankasi A.S. 539
-------
804
-------
United Kingdom (6.3%)
784,000 Argyll Group plc 4,313
220,000 Comcast UK Cable Partners Ltd. * 2,997
81,000 Harvey Nichols plc * 427
200,000 Millenium and Copthorne Hotels plc * 1,060
568,500 Northern Ireland Electricity plc 3,647
440,300 Refuge Group plc 3,562
1,189,500 Tomkins plc 4,710
1,856,000 WPP Group plc 5,637
------
26,353
-------
Other Holdings (0.5%)
2,115,000 Central European Growth Fund plc 2,065
793,000 Central European Growth Fund plc Warrants * 166
-------
2,231
-------
Total common stocks (cost: $311,161) 377,751
-------
Preferred Stocks (4.1%)
Australia (0.8%)
1,057,300 Village Roadshow Ltd. 3,536
--------
Brazil (1.8%)
104,000,000 Companhia Energetica de Minas Gerais (Cemig) 2,756
22,730,000 Petroleo Brasileiro S.A. 2,744
31,000,000 Telebras PN 2,004
--------
7,504
--------
Finland (1.2%)
111,430 Nokia Corp. ADS 4,847
--------
Korea (0.3%)
8,296 Samsung Electronics Co. Ltd. GDR * 237
27,527 Samsung Electronics Co. Ltd. GDS 874
--------
1,111
--------
Total preferred stocks (cost: $13,127) 16,998
--------
Principal
Amount
(000)
-----
BONDS (1.1%)
Japan (0.8%)
$ 3,250 MBL International Finance (Bermuda) Trust,
Convertible Notes, 3.00%, 11/30/02 3,811
-------
Spain (0.1%)
25,580 Corporacion Mapfre, Convertible Bonds, 8.50%, 199
2/27/99 (par denominated in Spanish pesetas) -----
Taiwan (0.2%)
1,000 U-Ming Marine Transport Corp., Convertible Notes,
1.50%, 2/07/01 842
-----
Total bonds (cost: $4,595) 4,852
-------
U.S. Government & Agency Issues (3.8%)
Discount Note
16,045 Federal Home Loan Mortgage Corp., 5.30%, 6/03/96
(cost: $16,040) 16,040
--------
Total investments (cost: $344,923) $ 415,641
==========
*Non-income producing.
Portfolio Summary By Industry
-----------------------------
Healthcare 8.8%
Banks 7.6
Retail 6.2
Oil 5.7
Telecommunications 5.1
U.S. Government & Agency Issues 3.8
Electrical Equipment 3.6
Electronics 3.4
Electric Power 3.2
Auto Parts 2.8
Automobiles 2.7
Conglomerates 2.6
Engineering & Construction 2.6
Publishing 2.4
Beverages - Alcoholic 2.3
Real Estate 2.1
Chemicals 1.9
Manufacturing - Diversified Industries 1.9
Broadcasters 1.8
Steel 1.8
Transportation - Miscellaneous 1.7
Insurance - Multi/Line Companies 1.6
Building Materials Group 1.5
Metals - Miscellaneous 1.5
Office Equipment & Supplies 1.5
Machinery - Diversified 1.4
Foods 1.3
Textiles 1.2
Brokerage Firms 1.1
Tobacco 1.1
Computer Systems 1.0
Paper & Forest Products 1.0
Other 11.2
------
99.4%
======
International Fund
Notes to Portfolio of Investments in Securities
May 31, 1996
General Notes
Market value 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.
See accompanying notes to financial statements.
International Fund
Statement of Operations
(In Thousands)
Year ended May 31, 1996
Net investment income:
Income (net of foreign taxes withheld of $934):
Dividends $ 7,197
Interest 907
---------
Total income 8,104
---------
Expenses:
Management fees 2,730
Transfer agent's fees 744
Custodian's fees 553
Postage 116
Shareholder reporting fees 54
Trustees' fees 3
Registration fees 44
Audit fees 28
Legal fees 5
Other 39
---------
Total expenses 4,316
---------
Net investment income 3,788
---------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 12,740
Foreign currency transactions (42)
Change in net unrealized appreciation/depreciation on:
Investments 50,087
Translation of assets and liabilities in foreign currencies (27)
-----------
Net realized and unrealized gain 62,758
-----------
Increase in net assets resulting from operations $ 66,546
===========
See accompanying notes to financial statements.
International Fund
Statements of Changes in Net Assets
(In Thousands)
Years ended May 31,
<TABLE>
<S> <C> <C>
1996 1995
----- ------
From operations:
Net investment income $ 3,788 $ 2,333
Net realized gain (loss) on investments 12,740 (1,134)
Net realized loss on foreign currency transactions (42) (1,438)
Change in net unrealized appreciation/depreciation on:
Investments 50,087 1,844
Foreign currency translations (27) 488
-------- -------
Increase in net assets resulting from operations 66,546 2,093
-------- -------
Distributions to shareholders from:
Net investment income (1,456) -
-------- -------
Net realized gains (1,877) (12,797)
-------- -------
From capital share transactions:
Shares sold 118,613 258,402
Shares issued for dividends reinvested 2,733 12,577
Shares redeemed (112,597) (99,034)
--------- --------
Increase in net assets from capital share transactions 8,749 171,945
--------- --------
Net increase in net assets 71,962 161,241
Net assets:
Beginning of period 346,033 184,792
--------- -------
End of period $ 417,995 $346,033
========= =========
Undistributed net investment income (loss) included in net assets:
Beginning of period $ 526 $ (369)
========= ==========
End of period $ 3,646 $ 526
========= ==========
Change in shares outstanding:
Shares sold 6,946 16,275
Shares issued for dividends reinvested 168 801
Shares redeemed (6,707) (6,439)
--------- ----------
Increase in shares outstanding 407 10,637
========= =========
See accompanying notes to financial statements.
</TABLE>
International 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 International
Fund (the Fund). The Fund's primary investment objective is capital
appreciation. Current income is a secondary objective.
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 $830 and to decrease accumulated net realized gain on
investments by $830.
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 $.1536 per share and a
long-term capital gain of $.2559 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 $260,137 and $245,845, respectively.
Gross unrealized appreciation and depreciation of investments as of May 31,
1996 was $79,224 and $8,506, 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:
<TABLE>
<CAPTION>
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)
---- ----------- -------- -------- -------- --------------
<C> <S> <C> <C> <C> <C>
6/03/96 1,368 Finnish Markka $290 288 U.S. Dollar $288 $(2)
6/03/96 2,123 Finnish Markka 451 447 U.S. Dollar 447 (4)
6/03/96 27 Hong Kong Dollar 3 3 U.S. Dollar 3 -
6/03/96 150 Hong Kong Dollar 20 19 U.S. Dollar 19 (1)
6/04/96 17 Hong Kong Dollar 2 2 U.S. Dollar 2 -
6/04/96 154 Hong Kong Dollar 20 20 U.S. Dollar 20 -
------- ------- ---------
$786 $779 $(7)
======= ======= =========
</TABLE>
(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 5,950 shares (26.6%) of the Fund.
(8) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Eight-month
Period
Year Ended May 31, Ended Year Ended September 30,
------------------ May 31, -------------------------
1996 1995 1994 1993 1992
---- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 15.78 $ 16.36 $ 14.48 $ 12.09 $ 11.57
Net investment income .17 .10 - .07 .10
Net realized and
unrealized gain 2.92 .29 2.23 2.45 .51
Distributions from net
investment income (.07) - - (.13) (.09)
Distributions of realized
capital gains (.09) (.97) (.35) - -
Net asset value at
end of period $ 18.71 $ 15.78 $ 16.36 $ 14.48 $ 12.09
========= ======= ======= ======== =======
Total return (%) * 19.71 2.49 15.67 21.11 5.30
Net assets at end of
period (000) $ 417,995 $346,033 $184,792 $ 88,757 $ 42,868
Ratio of expenses to
average net assets (%) 1.19 1.17 1.31 (a) 1.50 1.69
Ratio of net investment
income to average net
assets (%) 1.04 .81 .04 (a) .72 1.05
Portfolio turnover (%) 70.01 64.30 44.39 52.52 34.27
Average commission
rate paid per share $ .0006
(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>
