Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Financial Information:
Statement of Assets and Liabilities 8
Portfolio of Investments in Securities 9
Notes toPortfolio of Investments 23
Statement of Operations 24
Statement 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 Growth
Strategy 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
[Photoghraph of Michael J.C. Roth, CFA, President and Vice
Chairman of the Board appears here]
Even though the new USAA Asset Strategy Funds have only been in
existence since September 1, 1995, our shareholders have invested
over $27 million in them.(1) Given that these funds are not the
embodiment of some exciting investment story, but rather of a
fundamental method of matching risk and potential reward, it certainly
appears that we have tapped into an area of need and interest for our
customers.
These funds are an embodiment of things we believe
about money management:
Your quest for reward must be within your tolerance
for risk
The events of risk will come as surprises
Therefore, your asset allocation is your main "defense"
against and "definition" of risk
With the Asset Strategy Funds, we take care of the asset allocation.
Let me stress here that I realize not everyone agrees with this philosophy,
and that fact truly does not bother me. Such disagreement is necessary if
the stock market is to have the great liquidity that all investors enjoy.
For those of you who are active traders, we have an excellent brokerage
service offering one of the finest Asset Management Accounts available.
In addition, our family of mutual funds covers a very wide spectrum.
Your options for access to our funds and Brokerage Service will soon be
expanded significantly, both by personal computer and telephone.
And for those of you who are comfortable with our philosophy, the Asset
Strategy Funds will prove a great long-term investment vehicle.
"... your asset allocation is your main "defense" against and "definition"
of risk."
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
(1)The Cornerstone Strategy and Growth and Tax Strategy Funds were
formerly known as the Cornerstone Fund (Inception 8/15/84) and the Balanced
Portfolio Fund (Inception 1/11/89), respectively. These two funds make up
approximately $6.4 million of the investments made by shareholders in the
Asset Strategy Funds.
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.
USAA Brokerage Services is a discount brokerage service of USAA
Investment Management Company, a member of the NASD and SIPC.
Investment Review
Growth Strategy Fund
OBJECTIVE: To seek a high total return, with reduced risk over time,
through an asset allocation strategy that emphasizes capital appreciation
and, secondarily, income.
11/30/95
Net Assets $24.6 Million
Net Asset Value Per Share $10.33
Average Annual Total Return as of 11/30/95
September 1, 1995 to November 30, 1995 3.30%#
# Total returns for periods of less than one year are not annualized. This
three-month return is cumulative.
[A pie chart is shown here depicting the Asset Allocation as of November 30,
1995 for the USAA Growth Strategy Fund to be: Domestic Securities - 57.1%,
Foreign Securities - 18.4%, Money Market Instruments - 6.8%, Domestic Bonds -
15.3% and U.S.Government Securities - 4.1%]
Message from the Managers
[Photograph appears here of Portfolio Managers - Eric Thorderson
(Money Market Instruments), David Parsons (Allocation Manager,
Large Cap Stocks), Paul Lundmark (Bonds), Al Sebastian (International
Stocks), Eric Efron (Small Cap Stocks), and John Cabell (Small Cap
Stocks).]
Fund Overview
The Growth Strategy Fund, which began operations on September 1, 1995, was
designed for people who seek a diversified portfolio of primarily growth
stocks and secondarily bonds. Rather than decide among several mutual
funds, the Fund lifts the burden of allocation off the growth investor.
This is accomplished by spreading assets among several major asset
categories. These categories are large capitalization domestic stocks
(25-35%), small capitalization domestic stocks (25-35%), international
stocks (15-25%), bonds (15-25%) and money market instruments (0-10%).
Large Capitalization Stocks
The large capitalization domestic stock component of the Fund is comprised
primarily of out-of-favor (at time of purchase) growth companies and
secondarily of contrarian cyclical stocks. The strategy of this portion of
the Fund is simply to buy growth companies at good prices or cyclical
companies at extremely compelling valuations. Consequently, this section of
the Fund has made major commitments to energy, tobacco, health care,
airline and trucking companies. As of the end of the reporting period,
November 30, 1995, 29% of the Fund's overall assets were consigned to large
capitalization domestic stocks.
Small Capitalization Stocks
The small capitalization domestic stock component of the Fund identifies
probable areas of prolonged and profound secular change in our economy. The
Fund then invests in companies that are likely to benefit from these
trends. Accordingly, this sector of the Fund currently emphasizes
securities in the technology, telecommunication services, health care and
retailing industries. Investments are made, often through initial public
offerings, in small to mid-sized companies that are expected to achieve
rapid growth in sales and earnings over the next several years. Here the
focus is on growth, not value. Consequently, the stocks are very risky.
However, risk is somewhat reduced by the fact that we invest in a large
number of small positions, diversified across a broad range of industries.
As of the end of the reporting period 28.1% of the Fund's assets were
contained in this section.
International Stocks
We are currently emphasizing Europe and various emerging markets while
tempering our exposure to Japan. European stocks, particularly those of
northern Europe, are attractive for the following reasons: political
stability, a favorable interest rate outlook and the steadiness of
currencies. Despite political and economic problems, emerging market
securities are attractive because of their potential for economic and
earnings growth. Our concern regarding Japan centers upon problems in the
banking system and a lack of commitment to corporate restructuring. At the
end of the reporting period, international stocks made up 18.4% of the
Fund's assets.
Bonds
Bonds are included in the Fund to stabilize variability of returns.
Nevertheless, since the overall focus of the Fund is capital appreciation,
we have decided to seek bonds that we believe will provide high relative
total returns. Currently, investments are being made in intermediate- and
long-term BBB rated securities. As of the end of the reporting period,
19.4% of the Fund's assets are invested in bonds.
Money Market Instruments
Since the inception of the Fund, our money market purchases have consisted
of federal agency discount notes. These are the most common short-term
securities issued by the government-sponsored entities and have been
assigned the highest ratings by the rating agencies due to the implied
credit support of the federal government. At the end of the reporting
period, money market instruments comprised 6.8% of the Fund's assets.
Outlook
The managers of the Fund believe this collection of asset categories and
management styles could reward investors over time and diversify the risk
inherent in investing in any one asset class or investment style.
Therefore, we believe the Fund will be a well- diversified growth
investment for the long term.
Foreign investing is subject to additional risks which are discussed in the
Fund's prospectus. Since return 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.
Top 10 Equity Holdings
(% of Net Assets)
Philip Morris 2.5
RJR Nabisco 2.2
UST 2.0
Ryder System 1.1
Texaco 1.1
AMR 1.1
Delta Air Lines 1.0
Atlantic Richfield 1.0
General Motors .9
Warner-Lambert .9
Top 10 Industries
(% of Net Assets)
Retail 11.1
Oil 9.2
Healthcare 8.5
Tobacco 6.9
Computer Software & Svc. 6.8
Banks 5.5
Electronics 4.3
Machine - Tools 4.2
Airlines 3.3
Truckers 2.5
Growth Strategy Fund
Statement of Assets and Liabilities
(In Thousands)
November 30, 1995
(Unaudited)
Assets
Investments in securities, at market value
(identified cost of$24,260) $ 25,016
Cash 119
Cash denominated in foreign currencies
(identified cost of $1) 1
Receivables:
Capital shares sold 94
Dividends and interest 111
Securities sold 301
Foreign currency contracts held, at value 135
-----------
Total assets 25,777
-----------
Liabilities
Securities purchased 997
Foreign currency contracts held, at value 136
USAA Investment Management Company 13
USAA Transfer Agency Company 2
Accounts payable and accrued expenses 34
-----------
Total liabilities 1,182
-----------
Net assets applicable to capital
shares outstanding $ 24,595
===========
Represented by:
Paid-in capital $ 23,814
Accumulated undistributed net investment income 51
Accumulated net realized loss on investments (26)
Net unrealized appreciation of investments 756
-----------
Net assets applicable to capital
shares outstanding $ 24,595
===========
Capital shares outstanding, unlimited number
of shares authorized, no par value 2,382
===========
Net asset value, redemption price, and offering
price per share $ 10.33
===========
See accompanying notes to financial statements.
Growth Strategy Fund
Portfolio of Investments in Securities
November 30, 1995
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------- -------- ------
Foreign Securities (18.4%)
Foreign Common Stocks (18.0%)
Argentina (0.2%)
2,159 IRSA Inversiones y Representaciones S.A. GDS $ 47
-------
Australia (0.8%)
25,000 CSL Ltd. 66
55,000 David Jones Ltd. 82
6,000 Rothmans Holdings Ltd. 23
8,400 Seven Network Ltd. 22
-------
193
-------
Austria (0.3%)
550 VA Technologie AG 63
-------
Belgium (0.4%)
420 Colruyt S.A. 108
-------
Bermuda (0.5%)
5,000 Central European Media Enterprises Ltd. 110
-------
Brazil (0.1%)
2,700 Rhodia-Ster S.A. GDS 27
-------
Canada (0.7%)
1,500 Alliance Forest Products, Inc. * 30
13,000 Beau Canada Exploration Ltd. * 13
1,500 Canadian National Railway Co. * 22
2,000 Canadian Occidental Petroleum Ltd. 70
1,500 Suncor, Inc. 46
---------
181
---------
Chile (0.3%)
4,000 Banco Osorno y La Union S.A. ADR 50
2,000 Maderas y Sinteticos S.A. ADS 33
-------
83
-------
Denmark (0.6%)
330 Novo Nordisk A/S "B" 42
2,500 Tele Danmark A/S ADS 70
600 Unidanmark A/S 29
-------
141
-------
France (0.8%)
2,000 Coflexip ADS 31
2,000 Elf Aquitaine ADS 70
750 Eramet Group 50
230 Essilor International 43
-------
194
-------
Germany (0.9%)
1,400 Adidas AG * 74
1,000 Praktiker Bau - Und Heimwerkermarkte * 31
80 Siemens AG 42
1,540 Veba AG 63
-------
210
-------
Hong Kong (1.2%)
900 China Yuchai International Ltd. 8
60,000 Florens Group Ltd. 35
3,000 Gemstar International Group Ltd. 102
7,000 Hutchison Whampoa Ltd. 40
21,000 New World Infrastructure Ltd. * 36
200,000 Regal Hotels International Holdings 44
18,000 Varitronix International Ltd. 34
-------
299
-------
Hungary (0.2%)
6,000 Mol Magyar Olay Es Gazipari GDS * 50
-------
India (0.3%)
1,500 Hindalco Industries Ltd. GDR 42
2,000 Larsen & Toubro Ltd. GDR 31
-------
73
-------
Indonesia (0.3%)
20,000 PT Asahimas Flat Glass Co. Ltd. * 21
1,000 PT Bank Dagang Nasional Indonesia 1
3,000 PT HM Sampoerna 30
13,000 PT Matahari Putra Prima 24
-------
76
-------
Israel (0.2%)
2,400 Koor Industries Ltd. ADS * 43
-------
Italy (0.5%)
3,500 Arnoldo Mondadori Editore 27
2,500 De Rigo S.p.A. 53
400 Gucci Group N. V. * 14
16,000 STET 32
-------
126
-------
Japan (3.7%)
4,000 77 Bank Ltd. 36
4,000 Bridgestone Corp. 59
3,000 Canon, Inc. 53
3,000 Daibiru Corp. 33
4,000 Higo Bank 30
5,000 Hitachi Ltd. 51
4,000 Honda Motor Co. Ltd. 72
1,000 Hoya Corp. 30
1,000 Ito-Yokado Co. Ltd. 55
1,000 Kyocera Corp. 79
3,000 Laox Co. Ltd. 63
7,000 Minebea Co. Ltd. 58
7,000 Mitsubishi Heavy Industries Ltd. 56
15,000 NKK Corp. 41
3,000 Nomura Securities Co. Ltd. 59
2,000 Shimamura Co. Ltd. 76
2,000 Tostem Corp. 61
-------
912
-------
Malaysia (0.3%)
11,250 Malaysian Assurance Alliance BHD 44
10,000 Technology Resources Industries BHD * 28
-------
72
-------
Mexico (0.6%)
5,000 Desc, Soceidad de Fomento Industrial,
S.A. de C.V. ADS* 66
1,400 Grupo Televisa, S.A. de C.V. ADS 31
1,400 Panamerican Beverages, Inc. "A" 45
-------
142
-------
Netherlands (1.0%)
1,940 EVC International N.V. 52
260 Heineken N.V. 46
1,100 Internationale Nederlanden Groep N.V. 72
1,050 Vendex International N.V. 30
330 Verenigd Bezit VNU 47
-------
247
-------
Norway (0.2%)
20,000 Christiania Bank og Kreditkasse 45
-------
Philippines (0.1%)
3,800 Philippine Commercial International Bank 32
-------
Portugal (0.2%)
3,000 Portugal Telecom, S.A. ADS * 56
-------
Singapore (0.1%)
5,500 Overseas Union Bank Ltd. 35
-------
South Africa (0.1%)
2,370 Murray and Roberts Holdings Ltd. 16
-------
Spain (0.4%)
600 Corporacion Mapfre 34
1,500 Telefonica de Espana, S.A. ADR 62
-------
96
-------
Sweden (0.8%)
450 Asea AB 44
1,160 Autoliv AB 69
3,000 Nordbanken AB* 51
1,900 Volvo AB 39
-------
203
-------
Switzerland (0.6%)
56 Ciba Geigy AG 50
5 SGS Group 9
150 Sulzer AG P.C. 83
-------
142
-------
Taiwan (0.2%)
2,500 Acer, Inc. * 32
1,400 China Steel Corp. GDS 23
-------
55
-------
Thailand (0.1%)
1,800 Finance One Public Co. 11
-------
United Kingdom (1.2%)
14,000 Amstrad plc 57
1,000 British Gas plc 37
5,100 Cadbury Schweppes plc 44
6,500 Northern Ireland Electricity plc 44
3,000 Refuge Group plc 21
20,500 Tomkins plc 83
16,000 WPP Group plc 39
-------
325
-------
Venezuela (0.1%)
4,800 Corimon C A S A C A ADS * 18
-------
Total foreign common stocks (cost: $4,301) 4,431
-------
Foreign Preferred Stocks (0.2%)
Australia (0.1%)
15,000 Village Roadshow Ltd. 48
-------
Finland (0.1%)
300 Nokia Corp. ADS 16
-------
Total foreign preferred stocks (cost: $63) 64
-------
Principal
Amount
(000)
-----
Foreign Bonds (0.2%)
Japan (0.2%)
$ 40 MBL International Finance (Bermuda) Trust,
Convertible Notes, 3.00%,
11/30/02 (cost: $42) 44
-------
Total foreign securities (cost: $4,406) 4,539
-------
Number
of Shares
- ----------
Domestic Securities (72.4%)
Small Cap Stocks (28.1%)
Air Freight (0.2%)
3,500 Atlas Air, Inc. * 53
----------
Airlines (0.5%)
4,000 Midwest Express Holdings, Inc. * 118
----------
Beverages - Alcoholic (0.8%)
3,900 Boston Beer Company, Inc. 100
1,100 Petes Brewing Co. 27
3,000 Redhook Ale Brewery, Inc. * 76
----------
203
----------
Biotechnology (0.3%)
3,200 Neurogen Corp. * 67
----------
Broadcasters (1.6%)
3,100 American Radio Systems Corp. * 71
5,000 Argyle Television, Inc. * 80
3,900 EchoStar Communications Corp. * 59
2,800 Evergreen Media Corp. * 68
2,000 Infinity Broadcasting Corp. 64
2,400 Sinclair Broadcast Group, Inc. * 47
-----------
389
-----------
Chemicals - Specialty (0.2%)
4,000 Zoltek Companies, Inc. * 56
-----------
Communication _ Equipment Manufacturers (0.7%)
1,000 Secure Computing Corp. 57
3,500 Spectrian Corp. * 81
800 Sync Research, Inc. 41
----------
179
----------
Computer Software & Service (6.4%)
3,500 7th Level, Inc. * 61
2,500 Advent Software, Inc. 53
3,300 Applied Microsystems Corp. 30
5,000 Carnegie Group, Inc. 47
5,000 Catalyst International, Inc. 65
1,600 Clarify, Inc. 44
4,000 Computron Software, Inc. 61
5,000 Cooper & Chyan Technology, Inc. 69
5,000 DataWorks Corp. 68
2,000 Fractal Design Corp. 29
1,200 Insignia Solutions plc 24
10,000 Intersolv, Inc. * 109
3,000 Logic Works, Inc. * 44
1,100 Meta-Software, Inc. 19
1,000 Netcom On-line Communication * 73
5,000 Novadigm, Inc. * 115
4,000 Open Environment Corp. * 40
5,000 PLATINUM Technology, Inc. * 84
3,500 Premenos Technology Corp. * 149
4,000 Rational Software Corp. * 70
1,150 Scopus Technology, Inc. 27
6,000 Smith Micro Software, Inc. * 59
5,000 Software 2000, Inc. 46
2,300 Verity, Inc. * 114
2,300 Visio Corp. 62
----------
1,562
----------
Computer Systems (0.4%)
1,500 Network Appliance, Inc. 45
5,000 RadiSys Corp. * 63
---------
108
---------
Cosmetics (0.7%)
4,800 The Estee Lauder Companies, Inc. 175
---------
Electrical Equipment (0.3%)
3,000 Charter Power Systems, Inc. 75
---------
Electronics - Instrumentation (2.2%)
3,700 3D Systems Corp. * 75
5,000 ADE Corp. * 81
3,000 Computational Systems, Inc. 45
5,000 Etec Systems, Inc. 58
15,000 Intevac, Inc. 103
5,000 OnTrak Systems, Inc. 84
2,500 Photon Dynamics, Inc. 24
5,000 Speedfam International, Inc. * 80
---------
550
---------
Electronics - Semi-Conductors (1.9%)
3,000 Ess Technology, Inc. 99
5,000 Sheldahl, Inc. 97
3,000 Sierra Semiconductor Corp. 56
6,000 Silicon Storage Technology, Inc. 81
5,000 SMART Modular Technologies, Inc. 55
5,200 TranSwitch Corp. * 66
---------
454
---------
Entertainment (0.3%)
4,000 Moovies, Inc. * 64
---------
Finance - Business/Commercial (0.4%)
5,000 Sirrom Capital Corp. 88
---------
Foods (0.4%)
5,500 Odwalla, Inc. 105
---------
Healthcare - HMO (0.1%)
700 First Commonwealth, Inc. 15
---------
Healthcare - Miscellaneous (3.2%)
10,000 AHI Healthcare Systems, Inc. * 117
6,000 ARV Assisted Living, Inc. * 61
1,100 Enterprise Systems, Inc. 34
3,500 HPR Inc. * 102
2,300 IDX Systems Corp. 63
3,000 Orthodontic Centers of America, Inc. * 95
700 PAREXEL International Corp. 16
3,000 Pediatrix Medical Group, Inc. * 62
2,000 Physician Reliance Network, Inc. * 71
3,000 Physicians Resource Group, Inc. * 65
3,700 Sterling Healthcare Group Corp. * 41
2,500 Total Renal Care Holdings, Inc. 67
---------
794
---------
Household Products (0.6%)
5,300 USA Detergents, Inc. * 138
---------
Insurance - Property/Casualty (0.3%)
1,800 HCC Insurance Holdings, Inc. * 60
---------
Leisure Time (0.3%)
3,500 Ride, Inc. * 75
---------
Manufacturing - Diversified Industries (0.4%)
4,600 United States Filter Corp. * 101
---------
Medical Products & Supplies (1.1%)
3,100 Henry Schein, Inc. 78
2,500 Omnicare, Inc. 94
5,000 Serologicals Corp. * 88
---------
260
---------
Oil & Gas Drilling (0.3%)
6,000 Falcon Drilling Company, Inc. * 77
---------
Pollution Control (0.2%)
3,000 Continental Waste Industries, Inc. 55
---------
Retail - General Merchandising (0.2%)
1,900 Dollar Tree Stores, Inc. 53
---------
Retail - Specialty (1.1%)
4,000 Borders Group, Inc. * 70
1,900 Creative Computers, Inc. * 51
4,500 Just For Feet, Inc. * 154
---------
275
---------
Shoes (0.5%)
6,100 Eastbay, Inc. 133
---------
Specialized Services (1.4%)
1,300 APAC TeleServices, Inc. * 41
5,600 Computer Learning Centers, Inc. * 50
2,200 COREStaff, Inc. 70
4,500 DST Systems, Inc. 130
5,000 Personnel Group Of America, Inc. * 61
---------
352
---------
Telecommunications (0.5%)
2,200 Metrocall, Inc. * 53
4,000 MIDCOM Communications, Inc. * 71
---------
124
---------
Telephones (0.3%)
4,500 Brightpoint, Inc. 81
---------
Textiles - Apparel Manufacturers (0.3%)
10,000 Cutter & Buck, Inc. 73
---------
Total small cap stocks (cost: $6,286) 6,912
---------
Large Cap Stocks (29.0%)
Airlines (2.8%)
3,500 AMR Corp. * 268
3,300 Delta Air Lines, Inc. 256
6,900 Southwest Airlines Co. 173
---------
697
---------
Automobiles (2.0%)
3,000 Chrysler Corp. 156
3,800 Ford Motor Co. 107
4,800 General Motors Corp. 233
---------
496
---------
Drugs (0.7%)
4,785 Pharmacia & Upjohn, Inc. 172
---------
Finance - Business/Commercial (2.0%)
7,000 Student Loan Marketing Assn. 491
---------
Gaming Companies (0.5%)
800 Harrah's Entertainment, Inc. * 20
6,300 International Game Technology 78
800 Mirage Resorts, Inc. * 27
---------
125
---------
Healthcare - Diversified (0.9%)
2,500 Warner-Lambert Co. 223
---------
Medical Products & Supplies (1.5%)
4,400 Bausch & Lomb, Inc. 159
8,300 United States Surgical Corp. 208
---------
367
---------
Oil - Domestic (2.6%)
2,300 Atlantic Richfield Co. 249
5,000 Occidental Petroleum Corp. 111
3,300 Pennzoil Co. 131
5,000 Unocal Corp. 134
---------
625
---------
Oil - Exploration & Production (1.4%)
4,900 Apache Corp. 131
3,700 Burlington Resources, Inc. 142
4,100 Union Texas Petroleum Holdings, Inc. 79
---------
352
---------
Oil - International (1.6%)
2,500 Chevron Corp. 123
3,700 Texaco, Inc. 274
---------
397
---------
Oil & Gas Drilling (0.9%)
3,800 Diamond Offshore Drilling, Inc. 110
16,200 Global Marine, Inc. * 109
---------
219
---------
Oil Well Equipment & Service (1.3%)
5,000 Halliburton Co. 217
3,100 Tidewater, Inc. 89
---------
306
---------
Pollution Control (0.6%)
5,300 WMX Technologies, Inc. 156
---------
Restaurants (0.4%)
6,000 Brinker International, Inc. * 92
---------
Tobacco (6.7%)
6,900 Philip Morris Companies, Inc. 605
18,400 RJR Nabisco Holdings Corp. 536
15,200 UST, Inc. 496
---------
1,637
---------
Transportation - Miscellaneous (0.6%)
2,100 Federal Express Corp. * 157
---------
Truckers (2.5%)
5,600 Consolidated Freightways, Inc. 147
3,800 Roadway Services, Inc. 191
11,800 Ryder System, Inc. 282
---------
620
---------
Total large cap stocks (cost: $6,925) 7,132
---------
Principal
Amount Coupon
(000) Rate Maturity
Bonds (15.3%)
$1,000 First Tennessee National Corp. 6.75% 11/15/05 1,009
1,000 Giddings + Lewis, Inc. 7.50 10/01/05 1,033
1,000 Great Atlantic & Pacific Tea, Inc. 7.70 1/15/04 1,004
1,000 Kmart Corp. 7.95 2/01/23 707
--------
Total bonds (cost: $3,975) 3,753
--------
Total domestic securities (cost: $17,186) 17,797
--------
U.S. Government & Agency Issues (10.9%)
Discount Note (6.8%)
1,680 Federal Home Loan Mortgage Corp. 5.80 12/01/95 1,680
-------
U.S. Treasury Bonds (4.1%)
1,000 U.S. Treasury Bond 6.25 8/15/23 1,000
-------
Total U.S. government & agency issues (cost:$2,668) 2,680
-------
Total investments (cost: $24,260) $25,016
========
*Non-income producing.
Growth Strategy Fund
Portfolio of Investments in Securities (continued)
November 30, 1995
(Unaudited)
PORTFOLIO SUMMARY BY INDUSTRY
Retail 11.1%
U.S. Government & Agency Issues 10.9
Oil 9.2
Healthcare 8.5
Tobacco 6.9
Computer Software & Service 6.8
Banks 5.5
Electronics 4.3
Machine - Tools 4.2
Airlines 3.3
Truckers 2.5
Automobiles 2.5
Finance - Business/Commercial 2.4
Telecommunications 2.0
Broadcasters 2.0
Specialized Services 1.5
Manufacturing - Diversified Industries 1.0
Beverages - Alcoholic 1.0
Other 16.1
--------
101.7%
=========
Growth Strategy 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.
The Large Cap category consists of investments in common stocks of
companies with market capitalizations of $1 billion or more. Small Cap
stocks have market capitalizations of less than
$1 billion.
See accompanying notes to financial statements.
Growth Strategy Fund
Statement of Operations
(In Thousands)
Three-month period ended November 30, 1995*
(Unaudited)
Net investment income:
Income:
Dividends $ 33
Interest 93
------
Total income 126
------
Expenses:
Management fees 29
Transfer agent's fees 5
Custodian's fees 12
Postage 7
Shareholder reporting fees 2
Trustees' fees 1
Registration fees 8
Audit fees 8
Legal fees 2
Other 1
------
Total expenses 75
------
Net investment income 51
------
Net realized and unrealized gain on investments:
Net realized loss on investments (26)
Change in net unrealized appreciation/depreciation of
investments 756
------
Net realized and unrealized gain 730
------
Increase in net assets resulting from operations $ 781
======
* Fund commenced operations September 1, 1995.
See accompanying notes to financial statements.
<TABLE>
Growth Strategy Fund
Statement of Changes in Net Assets
(In Thousands)
Three-month period ended November 30, 1995*
(Unaudited)
<S> <C>
From operations:
Net investment income $ 51
Net realized loss on investments (26)
Change in net unrealized appreciation/depreciation of investments 756
--------
Increase in net assets resulting from operations 781
--------
From capital share transactions:
Shares sold 24,069
Shares redeemed (255)
---------
Increase in net assets from capital share transactions 23,814
---------
Net increase in net assets 24,595
Net assets:
Beginning of period -
---------
End of period $24,595
=========
Undistributed net investment income included in net assets:
Beginning of period $ -
=========
End of period $ 51
=========
Change in shares outstanding:
Shares sold 2,408
Shares redeemed (26)
---------
Increase in shares outstanding 2,382
=========
</TABLE>
* Fund commenced operations September 1, 1995.
See accompanying notes to financial statements.
Growth Strategy 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 Growth Strategy Fund (the Fund), which commenced operations on
September 1, 1995. The Fund's investment objective is to seek high total
return, with reduced risk over time, through an asset allocation strategy
which emphasizes capital appreciation and gives secondary emphasis to
income.
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. Other debt and government securities are valued each business day by a
pricing service (the Service) approved by the Trust's Board of Trustees.
The Service uses the mean between quoted bid and asked prices or the last
sale price to price securities when, in the Service's judgement, these prices
are readily available and are representative of the securities' market values.
For many securities, such prices are not readily available. The Service
generally prices these securities based on methods which include consideration
of yields or prices of securities of comparable quality, coupon, maturity and
type, indications as to values from dealers in securities, and general market
conditions.
5. Securities which cannot be valued by the methods set forth above, and
all other assets, are valued in good faith at fair value, using methods
determined by the Manager under the general supervision of the Board of
Trustees.
B. Federal taxes - The Fund's policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its income to its shareholders. Therefore,
no federal income or excise tax provision is required.
C. Investments in securities - As is common in the industry, security
transactions are accounted for on the date the securities are purchased or sold
(trade date). Gain or loss from sales of investment securities is computed on
the identified cost basis. Dividend income, less foreign taxes, if any, are
recorded on the ex-dividend date. If the ex-dividend date has passed, certain
dividends from foreign securities are recorded upon notification. Interest
income is recorded on the accrual basis. Discounts and premiums on 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 are 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 three-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/maturities of securities, excluding short-term
securities, for the three-month period ended November 30, 1995 were $25,957
and $3,352, respectively.
Gross unrealized appreciation and depreciation of investments as of
November 30, 1995 was $1,642 and $886, 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 61 U.S. Dollar $ 61 82 Australian Dollar $ 61
12/01/95 10 U.S. Dollar 10 78 Hong Kong Dollar 10
12/04/95 1 U.S. Dollar 1 1,694 Indonesian Rupiah 1
12/06/95 21 U.S. Dollar 21 13 British Pound 21
12/11/95 22 U.S. Dollar 22 227 Austrian Schilling 22
12/12/95 21 U.S. Dollar 21 28 Australian Dollar 20
------ ------
$136 $135
====== ======
(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 .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 November 30, 1995, the Association and
its affiliates owned 1,000 shares (42.0%) of the Fund.
Growth Strategy Fund
Notes to Financial Statements (continued)
November 30, 1995
(Unaudited)
(8) Financial Highlights
Per share operating performance for a share outstanding throughout the
period is as follows:
Three-month
Period Ended
November 30,
1995*
Net asset value at
beginning of period $ 10.00
Net investment income .02
Net realized and
unrealized gain .31
-----------
Net asset value at
end of period $ 10.33
===========
Total return (%) 3.30
Net assets at end of
period (000) $ 24,595
Ratio of expenses to
average net assets (%) 2.01(a)
Ratio of net investment
income to average net
assets (%) 1.33(a)
Portfolio turnover (%) 24.79
Average commission rate paid per share .0287
* Fund commenced operations September 1, 1995.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
