Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Financial Information:
Distributions to Shareholders 9
Independent Auditors' Report 10
Statement of Assets and Liabilities 11
Portfolio of Investments in Securities 12
Notes to Portfolio of Investments in Securities 37
Statement of Operations 38
Statement of Changes in Net Assets 39
Notes to Financial Statements 40
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)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
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.
5/31/96
Net Assets $87.2 Million
Net Asset Value Per Share $12.74
Average Annual Total Return as of 5/31/96
Since Inception on September 1, 1995 27.76%*
* Total return for periods of less than one year are not annualized.
This nine-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 9/1/95 to 5/31/96, with
dividends and capital gains reinvested. The ending value of each
item graphed is as follows: USAA Growth Strategy - $12,776 and
S&P 500 - $12,117.]
The S&P 500 Index is an unmanaged index representing the average performance
of a group of 500 widely held publicly traded stocks. It is not possible to
invest directly in the S&P 500 index. The chart compares a $10,000 hypothetical
investment in the USAA Growth Strategy Fund to the Index.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested income
dividends and capital gain distributions. The performance data quoted
represent past performance and are not an indication of future results.
Investment return and principal value of an investment will fluctuate, and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
Message from the Managers
[Photograph of David Parsons, Al Sebastian, John Cabell, Paul Lundmark
Pamela K. Bledsoe, and Eric Efron, Portfolio Managers appears here]
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. Instead of the growth investor deciding among
several mutual funds, the Fund does it, lifting the burden of allocation from
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 composed
primarily of out-of-favor (at the 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, gold, semi-
conductors, personal computers, and trucking companies. Over the reporting
period, the energy, tobacco, gold and personal computer companies have
performed well since the time of purchase. On the other hand, the semi-
conductor and trucking companies have performed poorly. Overall, the large
capitalization domestic stock sector contributed positively to performance.
At the end of the period, May 31, 1996, 26.4% of the Fund's assets were
invested in the large capitalization domestic stock component of the Fund.
Small Capitalization Stocks
The small capitalization domestic stock component of the Fund is invested in
the equities of small-to-midsized companies that are experiencing, or are
expected to experience, rapid growth in sales and earnings. Companies that are
initiating, or taking early advantage of, transformations in our society and
economy are viewed as particularly attractive investment opportunities. This
sector of the Fund has made major commitments to the software, telecommunica-
tions, healthcare, and specialty retail industries. Each of these sectors has
performed well over the reporting period. Further, this segment of the Fund
has benefited from the market's current enthusiasm for initial public
offerings, an area in which the small capitalization managers of the Fund have
been very active. At the end of the period, 31.3% of the Fund's assets were
invested in the small capitalization domestic stock component of the Fund.
International Stocks
The international component of the Fund has overweighted the emerging markets
of Eastern Europe and Asia, market weighted Western Europe, and underweighted
Japan. The Fund is emphasizing the emerging markets of Eastern Europe and Asia
because of the prospects of rapid economic growth in those countries. The
Japanese market is underweighted due to structural problems still existent
and not yet addressed. Within Western Europe, the United Kingdom is under-
weighted due to the imminence of a Labor Government, while France, the
Netherlands and Sweden are overweighted due to the compelling valuation
of many companies in those countries. Over the reporting period,
the above tactics have worked well. The emerging markets, the Netherlands,
Sweden and France are performing well. The United Kingdom and Japan, where
the Fund is underweighted, are performing poorly. International stocks
have contributed positively to Fund performance for the period. At the end
of the reporting period, international stocks made up 23.3% of the Fund's
assets.
Bonds
Bonds are included to stabilize returns and provide current income to
shareholders. In order to generate more income, we have purchased intermediate
and long-term bonds. Although we remain committed to this strategy, it has not
worked to the advantage of the Fund over the reporting period. Bonds have lost
value. The fact that the Fund is invested in intermediate and long-term bonds
has been harmful since long maturity instruments have suffered the worst price
deterioration in the current bond bear market. The Fund has suffered little
damage however, since bonds have been kept close to the minimum of their asset
weighting range of 15-25%. At the end of the reporting period, bonds made up
15.6% of the Fund's assets.
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 2.0% of the Fund's assets.
Outlook
Despite the fact that the Fund includes bonds, we have chosen the S&P 500
Index(1) against which we will measure performance. The Fund has outperformed
the index over the reporting period as evidenced by the chart on page 4.
Of the equity components, small capitalization domestic stocks had by far the
best returns. As mentioned earlier, bonds had negative returns. Though past
performance is no guarantee of future results, the managers of the Fund
hope this collection of asset categories and management styles will prove
to be a solid growth instrument with less volatility than the average growth
fund.
(1)The S&P 500 Index is an unmanaged index representing the average
performance of a group of 500 widely held, publicly traded stocks. It is
not possible to invest directly in the S&P 500 Index.
See page 12 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 is generally commensurate
with risk, investors should be aware of the potential volatility
associated with foreign markets.
Top 10 Equity Holdings
(% of Net Assets)
Newmont Mining 1.6
RJR Nabisco Holdings 1.4
Homestake Mining 1.4
UST 1.4
Philip Morris 1.2
Phelps Dodge 1.1
Freeport McMoRan Copper &
Gold .8
Atlantic Richfield .8
Texaco .8
Intel .7
Top 10 Industries
(% of Net Assets)
Healthcare 11.6
Oil 8.9
Electronics 7.0
Retail 5.8
Tobacco 5.3
Computer Software & Services 4.7
Banks 4.1
Telecommunications 4.0
Gold Mining 3.9
Specialized Services 3.5
[A pie chart is shown here depicting the Asset Allocation as of May 31,
1996 for the USAA Growth Strategy Fund to be: Bonds - 15.6%, Foreign
Stocks - 23.3%, Money Market Instruments - 2.0%, Large Cap Stocks - 26.4%
and Small Cap Stocks - 31.3%. Percentages of of the Net Assets in the
Portfolio and may or may not equal 100%.]
Distributions to Shareholders
USAA Growth Strategy Fund completed its fiscal year on May 31, 1996. As
required by Federal Law (Internal Revenue Code of 1986, as amended, and the
Regulations thereunder), the following sets forth per share data concerning
the portions of the dividend distributions which represent domestic dividend
income qualifying for the dividends received deduction, foreign dividend
income, taxable domestic, and short-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.
Dividend income - domestic (qualifying) $ .0375
Dividend income - domestic (nonqualifying) .0002
Dividend income - foreign (net) .0338
Interest income - taxable .0056
Short-term capital gain (treated as ordinary income) .1972
-------
TOTAL DISTRIBUTIONS $ .2743
=======
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 Growth Strategy Fund of USAA
Investment Trust as of May 31, 1996, the related statements of operations
and changes in net assets for the nine-month period then ended, and the
financial highlights information presented in note 8 to the financial
statements for the nine-month 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
audit.
We conducted our audit 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 audit provides 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 Growth Strategy Fund of USAA Investment Trust as of
May 31, 1996, the results of its operations and the changes in its net assets
for the nine-month period then ended, and the financial highlights
information for the nine-month period then ended, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
July 10, 1996
Growth Strategy Fund
Statement of Assets and Liabilities
(In Thousands)
May 31, 1996
Assets
Investments in securities, at market value
(identified cost of $74,989) $ 85,959
Cash 223
Cash denominated in foreign currencies (identified cost of $5) 5
Receivables:
Capital shares sold 392
Dividends and interest 412
Securities sold 1,201
--------
Total assets 88,192
Liabilities --------
Securities purchased 837
Capital shares redeemed 22
USAA Investment Management Company 52
USAA Transfer Agency Company 12
Accounts payable and accrued expenses 81
--------
Total liabilities 1,004
Net assets applicable to capital shares --------
outstanding $ 87,188
Represented by: ========
Paid-in capital $ 74,520
Accumulated undistributed net investment income 338
Accumulated net realized gain on investments 1,360
Net unrealized appreciation of investments 10,970
Net assets applicable to capital shares --------
outstanding $ 87,188
Capital shares outstanding, unlimited number of shares ========
authorized, no par value 6,843
========
Net asset value, redemption price, and offering price
per share $ 12.74
========
See accompanying notes to financial statements.
Growth Strategy Fund
Portfolio of Investments in Securities
May 31, 1996
Market
Number Value
of Shares Security (000)
- --------- -------- -----
Foreign Securities (25.7%)
Foreign Common Stocks (22.7%)
Argentina (0.5%)
5,700 Disco S.A. ADS * $ 115
2,160 IRSA Inversiones y Representaciones S.A. GDS 70
4,472 Molinos Rio de la Plata S.A. 51
11,000 Quilmes Industrial (Quinsa) S.A. ADS * 135
3,700 Telefonica de Argentina S.A. ADR 108
-------
479
-------
Australia (0.5%)
60,000 CSL Ltd. 240
55,000 David Jones Ltd. 80
6,000 Rothmans Holdings Ltd. 34
13,400 Seven Network Ltd. 40
-------
394
-------
Austria (0.3%)
2,250 VA Technologie AG 295
-------
Belgium (0.2%)
620 Colruyt S.A. 207
-------
Bermuda (0.2%)
5,000 Central European Media Enterprises Ltd. * 131
-------
Brazil (0.4%)
7,230,000 Companhia Energetica de Minas Gerais (Cemig) 191
1,200,000 Petroleo Brasileiro S.A. 145
-------
336
-------
Canada (1.9%)
1,500 Alliance Forest Products, Inc. * 24
23,000 Beau Canada Exploration Ltd. * 34
9,200 Canadian National Railway Co. 170
10,000 Canadian Occidental Petroleum Ltd. 175
3,100 Clearnet Communications, Inc. * 63
8,800 Loewen Group, Inc. 253
3,000 PC Docs Group International, Inc. * 68
6,800 Potash Corporation Saskatchewan, Inc. 452
4,000 Qlt Phototherapeutics * 86
10,000 Ranger Oil Ltd. 75
5,000 Royal Plastics Group Ltd. * 79
5,000 SoftQuad International, Inc. * 38
4,000 Suncor, Inc. 127
-------
1,644
-------
Chile (0.3%)
4,000 Banco Osorno y La Union S.A. ADR 56
2,000 Madeco S.A. ADS 53
8,000 Maderas y Sinteticos S.A. ADS 130
900 Sociedad Quimica y Minera de Chile S.A. ADS 47
-------
286
-------
China (0.2%)
5,200 China Yuchai International Ltd. 43
45,000 New World Infrastructure Ltd. * 95
-------
138
-------
Colombia (0.1%)
7,000 Banco de Colombia GDS 61
-------
Czech Republic (0.3%)
5,600 Komercni Banka, A.S. * 153
600 SPT Telecom A.S. * 72
-------
225
-------
Denmark (0.3%)
5,000 Carli Gry International A/S * 142
630 Novo Nordisk A/S "B" 87
600 Unidanmark A/S 26
-------
255
-------
Finland (0.2%)
2,600 Raision Tehtaat 158
2,600 Raision Tehtaat Rights * 23
-------
181
-------
France (1.5%)
430 Chargeurs S.A. 123
7,000 Coflexip ADS 131
9,000 Elf Aquitaine ADS 329
2,400 Eramet Group 184
1,000 Essilor International 246
1,100 Roussel Uclaf 255
-------
1,268
-------
Germany (0.8%)
3,000 Adidas AG 225
5,000 Siemens AG 281
4,440 Veba AG 232
-------
738
-------
Hong Kong (0.5%)
110,000 Amoy Properties Ltd. 136
210,000 Cosco Pacific Ltd. 144
2,000 Gemstar International Group Ltd. * 68
200,000 Regal Hotels International Holdings 52
18,000 Varitronix International Ltd. 36
-------
436
-------
Hungary (0.1%)
6,000 Mol Magyar Olay Es Gazipari GDS * 71
-------
India (0.3%)
2,000 Hindalco Industries Ltd. GDR 89
5,500 Larsen & Toubro Ltd. GDR 110
10,000 The Arvind Mills Ltd. GDS 47
-------
246
-------
Indonesia (0.3%)
20,000 PT Asahimas Flat Glass Co., Ltd. 23
81,000 PT Bank Dagang Nasional Indonesia 80
7,000 PT HM Sampoerna 87
12,000 PT Jaya Real Property 40
13,000 PT Matahari Putra Prima 28
-------
258
-------
Israel (0.5%)
17,500 Electric Fuel Corp. * 114
3,200 ESC Medical Systems Ltd. * 151
6,000 Koor Industries Ltd. ADS 108
4,000 NICE Systems Ltd. ADR * 84
-------
457
-------
Italy (0.6%)
6,500 Arnoldo Mondadori Editore 50
20,000 Fiat S.p.A. 71
7,500 Fidis Finanziaria di Sviluppo S.p.A. 21
1,400 Mediolanum S.p.A. * 11
218,000 Olivetti and C., S.p.A. * 137
6,000 SAES Getters S.p.A. * 114
51,000 STET 146
-------
550
-------
Japan (4.0%)
4,000 77 Bank Ltd. 38
13,000 Bridgestone Corp. 226
13,000 Canon, Inc. 255
11,000 Daibiru Corp. 149
3,000 Higo Bank 25
20,000 Hitachi Ltd. 185
6,000 Honda Motor Co. Ltd. 144
3,000 Hoya Corp. 96
5,000 Ito-Yokado Co. Ltd. 284
4,000 Kyocera Corp. 274
7,000 Laox Co. Ltd. 150
27,000 Minebea Co. Ltd. 225
30,000 Mitsubishi Heavy Industries Ltd. 258
500 Nippon Television Network 142
55,000 NKK Corp. * 161
8,000 Nomura Securities Co. Ltd. 151
4 NTT Data Communications Systems Corp. 123
2,000 Shimamura Co. Ltd. 87
17,000 Shiseido Co. Ltd. 211
16,000 Terumo Corp. 193
3,000 Tostem Corp. 88
-------
3,465
-------
Korea (0.2%)
2,843 Korea Electric Power Corp. ADS 125
841 Samsung Electronics Co. Ltd. * 73
7 Samsung Electronics Co. Ltd. GDR * 1
-------
199
-------
Malaysia (0.2%)
15,000 Resorts World BHD 87
10,000 Technology Resources Industries BHD * 33
9,000 Telekom Malaysia BHD 82
-------
202
-------
Mexico (0.4%)
5,104 Desc, Soceidad de Fomento Industrial, S.A. de
C.V. ADS * 109
8,700 Empresas Ica Sociedad Controladora, S.A. de C.V. ADR 125
2,900 Panamerican Beverages, Inc. "A" 122
-------
356
-------
Netherlands (1.6%)
900 DSM N.V. 92
1,940 EVC International N.V. 67
15,900 Forasol-Foramer N.V. * 197
1,300 Heineken N.V. 295
3,000 ING Groep N.V. 247
2,000 Oce-van der Grinten N.V. 196
19,300 Verenigd Besit VNU 316
-------
1,410
-------
Norway (0.4%)
76,000 Christiania Bank og Kreditkasse 176
4,000 Hafslund ASA 32
6,000 Nycomed ASA * 121
-------
329
-------
Philippines (0.4%)
200,000 Megaworld Properties * 189
4,000 Metropolitan Bank and Trust Co. 120
111,400 Universal Robina Corp. 63
-------
372
-------
Portugal (0.2%)
7,200 Portugal Telecom, S.A. ADS 175
-------
Singapore (0.6%)
14,000 Jurong Shipyard Ltd. 80
200,000 Kay Hian James Capel Holdings 210
11,000 Keppel Corp. Ltd. 92
22,000 Overseas Union Bank Ltd. 156
-------
538
-------
South Africa (0.1%)
6,600 Malbak Ltd. 31
-------
Spain (0.5%)
14,000 Autopistas del Mare Nostrum S.A. 168
1,700 Corporacion Bancaria de Espana S.A. 71
3,800 Corporacion Bancaria de Espana S.A. ADR 80
500 Corporacion Mapfre 25
3,500 Telefonica de Espana S.A. ADR 183
-------
527
-------
Sweden (1.1%)
1,900 Abb AB 197
8,920 Autoliv AB 259
7,500 Getinge Industrier AB "B" 137
9,000 Nordbanken AB 161
6,900 Swedish Match AB * 23
9,900 Volvo AB 210
-------
987
-------
Switzerland (0.6%)
286 Ciba Geigy AG 315
60 SGS Group AG 135
150 Sulzer AG P.C. 95
-------
545
-------
Taiwan (0.2%)
5,500 Acer, Inc. * 58
3,400 China Steel Corp. GDS 77
-------
135
-------
Thailand (0.4%)
25,000 Krung Thai Bank 128
18,900 Sahaviriya Steel Industries Public Co., Ltd. * 16
20,400 Thai Engine Manufacturing 169
-------
313
-------
Turkey (0.2%)
85,000 Erciyas Biracilik ve Malt Sanayi A.S. 44
500,000 Olmuksa Mukavva Sanayi Ve Ticaret A.S. 70
926,900 Yapi Ve Kredi Bankasi A.S. 23
-------
137
-------
United Kingdom (1.4%)
45,000 Argyll Group plc 248
10,000 Comcast UK Cable Partners Ltd. * 136
24,000 Harvey Nichols plc * 127
30,000 Millenium and Copthorne Hotels plc * 159
23,500 Northern Ireland Electricity plc 151
3,000 Refuge Group plc 24
75,000 Tomkins plc 297
60,000 WPP Group plc 182
-------
1,324
-------
Venezuela (0.1%)
20,000 Corimon C.A. S.A.C.A ADS * 15(a)
-------
Other Holdings (0.1%)
90,000 Central European Growth Fund plc 88
-------
Total foreign common stocks (cost: $18,153) 19,804
-------
Foreign Preferred Stocks (0.6%)
Australia (0.1%)
27,787 Village Roadshow Ltd. 93
-------
Brazil (0.1%)
1,300,000 Telebras PN 84
-------
Finland (0.3%)
6,300 Nokia Corp. ADS 274
-------
Korea (0.1%)
241 Samsung Electronics Co. Ltd. GDR * 7
800 Samsung Electronics Co. Ltd. GDS 25
-------
32
-------
Total foreign preferred stocks (cost: $436) 483
-------
Principal
Amount
(000)
-----
Foreign Bonds (2.4%)
Finland (1.0%)
$ 1,000 Merita Bank Ltd., Subordinated Note, 6.50%, 1/15/06 931
-------
Japan (0.3%)
200 MBL International Finance (Bermuda) Trust, Convertible
Notes, 3.00%, 11/30/02 234
-------
Spain (0.1%)
580 Corporacion Mapfre, Convertible Bonds, 8.50%, 2/27/99 5
(par denominated in Spanish pesetas) -------
Venezuela (1.0%)
1,000 Corporacion Andina De Fomento, 7.10%, 2/01/03 966
-------
Total foreign bonds (cost: $2,208) 2,136
-------
Total foreign securities (cost: $20,797) 22,423
-------
Market
Number Value
of Shares Security (000)
--------- -------- -----
Domestic Securities (67.3%)
Small Cap Stocks (31.3%)
Air Freight (0.2%)
3,500 Atlas Air, Inc. * 204
-------
Airlines (0.2%)
3,000 Greenwich Air Services, Inc. "A" * 114
3,000 Greenwich Air Services, Inc. "B" * 97
-------
211
-------
Banks (0.1%)
1,500 Security First Network Bank 60
-------
Beverages - Alcoholic (0.2%)
5,600 Hart Brewing, Inc. 63
3,000 Redhook Ale Brewery, Inc. * 68
1,500 Robert Mondavi Corp. 45
-------
176
-------
Biotechnology (0.8%)
2,000 Agouron Pharmaceuticals, Inc. * 86
5,000 Aronex Pharmaceuticals, Inc. * 33
5,000 Biotransplant, Inc. * 47
2,500 Digene Corporation 27
3,000 Gilead Sciences, Inc. * 104
5,000 Integra LifeSciences Corp. * 63
5,000 Med Immune, Inc. * 93
5,000 Microcide Pharmaceuticals, Inc. * 84
1,100 Millenium Pharmaceuticals, Inc. * 22
2,000 Neose Technologies, Inc. * 46
2,000 Neurocrine Biosciences, Inc. 22
2,000 Onyx Pharmaceuticals, Inc. * 28
2,500 Pharmacopeia, Inc. 58
-------
713
-------
Broadcasters (1.2%)
2,000 American Radio Systems Corp. * 76
2,500 Argyle Television, Inc. * 61
2,000 CellularVision USA, Inc. * 23
2,000 Chancellor Corp. * 51
2,000 Digital Generation Systems, Inc. * 27
2,000 EchoStar Communications Corp. * 69
3,000 Evergreen Media Corp. * 120
1,900 Heritage Media Corp. * 76
3,000 Infinity Broadcasting Corp. 82
5,000 Lodgenet Entertainment Corp. 70
4,100 Outdoor Systems, Inc. * 131
4,400 Sinclair Broadcast Group, Inc. * 167
5,000 Source Media, Inc. 53
1,600 United States Satellite Broadcasting Co., Inc. * 56
-------
1,062
-------
Building Materials (0.3%)
3,500 Barnett, Inc. * 84
5,000 Wilmar Industries, Inc. * 132
-------
216
-------
Chemicals - Specialty (0.2%)
5,000 General Chemical Group, Inc. * 96
5,000 Polymer Group, Inc. * 96
-------
192
-------
Communication - Equipment Manufacturers (1.1%)
1,500 AML Communications, Inc. 43
4,000 Cerion Technologies, Inc. 58
2,000 EIS International, Inc. * 59
7,700 Performance Technologies, Inc. * 121
2,500 Polycom, Inc. * 22
7,500 REMEC, Inc. * 156
2,000 Sawtek, Inc. * 56
2,700 SpectraLink Corp. * 32
3,500 Spectrian Corp. * 69
2,000 Sync Research, Inc. 35
2,200 Tollgrade Communications, Inc. 54
800 Westell Technologies, Inc. 61
2,700 Xylan Corp. * 171
-------
937
-------
Computer Software & Service (4.4%)
2,500 7th Level, Inc. * 31
4,200 Analogy, Inc. * 40
1,000 Arbor Software Corp. * 61
1,200 Aspect Development, Inc. 36
1,600 AXENT Technologies, Inc. * 31
5,000 Carnegie Group, Inc. 49
3,000 Catalyst International, Inc. 36
1,400 Citrix Systems, Inc. 106
1,600 Clarify, Inc. 81
2,500 Cooper & Chyan Technology, Inc. 63
1,600 CyberCash, Inc. * 95
1,500 Cylink Corp. * 29
6,000 DataWorks Corp. 108
2,500 Discreet Logic Inc. * 20
1,200 Documentum, Inc. 52
1,600 Edify Corp. * 67
6,000 Elcom International, Inc. 81
2,000 Engineering Animation, Inc. * 45
2,500 Excite, Inc. * 40
1,100 Forte' Software, Inc. * 71
5,000 Fourth Shift Corp. 44
5,000 Fractal Design Corp. 78
3,500 Gensym Corp. * 81
3,000 GT Interactive Software Corp. 63
1,300 I2 Technologies, Inc. * 52
3,000 Individual, Inc. * 61
2,500 Integrated Systems, Inc. * 85
13,000 Intersolv, Inc. * 154
2,000 ISOCOR * 36
5,000 JDA Software Group, Inc. * 118
5,000 Logal Educational Software and Systems Ltd. * 39
3,000 Logic Works, Inc. * 46
1,500 Lycos, Inc. * 23
1,200 Mechanical Dynamics, Inc. * 21
3,000 Meridian Data, Inc * 52
1,100 Meta-Software, Inc. 18
4,400 MetaTools, Inc. 137
6,000 Microware Systems Corp. * 113
1,000 NETCOM On-Line Communication Services, Inc. * 34
2,500 Novadigm, Inc. * 45
1,000 Objective Systems Integrators, Inc. 45
1,000 Open Market, Inc. 32
2,500 OpenVision Technologies, Inc. * 44
2,500 OrCad, Inc. * 37
1,600 Planning Sciences International Plc * 42
2,500 PowerCerv Corp. * 41
3,500 Premenos Technology Corp. * 70
1,000 Prism Solutions, Inc. 36
1,500 Rational Software Corp. * 93
700 Red Brick Systems, Inc. * 29
500 Sapient Corp. * 25
2,200 Segue Software, Inc. * 76
4,000 Silicon Valley Research, Inc. 35
1,600 SQA, Inc. 55
3,600 Sterling Commerce, Inc. * 158
600 Systemsoft Corp. * 28
5,000 Tecnomatix Technologies Ltd. * 116
3,400 The Indus Group, Inc. * 69
1,800 Verity, Inc. * 71
2,300 Visio Corp. 94
4,600 Voice Control Systems, Inc. * 60
2,000 Walsh International, Inc. * 30
2,600 Workgroup Technology Corp. * 72
3,000 Worldtalk Communications Corp. * 33
-------
3,833
-------
Computer Systems (0.4%)
3,000 Aavid Thermal Technologies, Inc. * 24
2,000 CHS Electronics, Inc. * 28
2,500 IMNET Systems, Inc. * 69
700 Raptor Systems, Inc. * 22
2,800 Trident International, Inc. * 64
1,100 Visioneer, Inc. 13
4,000 Xeikon N V * 99
-------
319
-------
Cosmetics (0.5%)
4,000 Electronic Hair Styling, Inc. 30
7,200 Revlon, Inc. * 226
4,800 The Estee Lauder Companies, Inc. 182
-------
438
-------
Drugs (0.1%)
5,000 Amrion, Inc. * 89
-------
Electrical Equipment (0.1%)
2,000 Charter Power Systems, Inc. 69
-------
Electronics - Instrumentation (1.4%)
2,000 3D Systems Corp. * 46
3,000 ADE Corp. * 59
3,000 Checkpoint Systems, Inc. 117
2,000 Computational Systems, Inc. 43
4,500 ElectroStar, Inc. 57
4,000 Etec Systems, Inc. 140
5,000 HMT Technology Corp. * 120
4,000 Intevac, Inc. 86
5,000 OnTrak Systems, Inc. 114
2,500 Photon Dynamics, Inc. 25
4,000 Speedfam International, Inc. * 82
2,500 Thermo Sentron, Inc. * 38
1,000 ThermoQuest Corp. * 16
4,000 Zygo Corp. 234
-------
1,177
-------
Electronics - Semi-Conductors (0.9%)
2,300 Berg Electronics Corp. * 60
4,000 Centennial Technologies Inc. * 101
3,000 ESS Technology, Inc. 67
7,700 Integrated Packaging Assembly Corp. * 100
2,000 S3, Inc. 28
3,000 Sheldahl, Inc. 78
3,000 Sierra Semiconductor Corp. 44
6,000 Silicon Storage Technology, Inc. 90
5,000 SIPEX Corp. * 91
4,000 SMART Modular Technologies, Inc. 81
4,200 TranSwitch Corp. * 71
-------
811
-------
Entertainment (0.1%)
3,000 Platinum Entertainment, Inc. * 50
6,000 West Coast Entertainment Corp. * 78
-------
128
-------
Finance - Business/Commercial (0.4%)
6,000 Leasing Solutions, Inc. * 99
4,500 Medallion Financial Corp. 57
3,500 Profit Recovery Group International, Inc. * 71
5,000 Sirrom Capital Corp. 138
-------
365
-------
Finance - Consumer (0.9%)
3,400 ACC Consumer Finance Corp. * 141
3,800 Accident Consumer Finance Corp. 31
4,000 Affinity Technology Group, Inc. * 77
3,300 Associates First Capital Corp. * 122
4,350 ContiFinancial Corp. * 137
10,000 RAC Financial Group, Inc. * 290
-------
798
-------
Foods (0.2%)
5,500 Odwalla, Inc. 140
-------
Gaming Companies (0.1%)
2,500 Casino Data Systems * 37
1,000 Trump Hotels & Casino Resorts * 31
-------
68
-------
Healthcare - Diversified (0.2%)
5,500 Physician Support Systems, Inc. * 117
3,000 UroCor, Inc. * 43
-------
160
-------
Healthcare - HMO (0.2%)
3,700 First Commonwealth, Inc. 106
3,000 RTW, Inc. * 80
-------
186
-------
Healthcare - Miscellaneous (2.9%)
2,500 COHR, Inc. * 66
3,300 Endovascular Technologies, Inc. * 46
1,100 Enterprise Systems, Inc. 41
5,200 Health Systems Design Corp. * 98
2,500 Impath, Inc. * 47
3,300 LanVision Systems, Inc. * 57
11,400 Mecon, Inc. 294
5,500 Medquist, Inc. 110
10,000 Oacis Healthcare Holdings Corp. * 165
7,200 Orthodontic Centers of America, Inc. * 267
5,600 PAREXEL International Corp. 304
3,000 Pediatrix Medical Group, Inc. * 189
3,000 Pharmaceutical Product Development, Inc. * 134
6,200 Physicians Resource Group, Inc. * 184
5,000 Renal Care Group, Inc. * 167
2,500 Total Renal Care Holdings, Inc. * 103
6,700 Transition Systems, Inc. * 204
2,000 Vitalcom, Inc. * 44
-------
2,520
-------
Hotel/Motel (0.4%)
2,500 Doubletree Corp. * 89
1,400 Suburban Lodges America, Inc. 34
3,100 Sun International Hotels Ltd. * 156
4,700 Wyndham Hotel Corp. * 105
-------
384
-------
Household Products (0.4%)
7,950 USA Detergents, Inc. * 318
-------
Housing - Manufactured (0.2%)
6,500 Belmont Homes, Inc. * 146
-------
Insurance - Property/Casualty (0.2%)
4,500 HCC Insurance Holdings, Inc. * 97
5,000 Riscorp, Inc. * 113
-------
210
-------
Leisure Time (0.2%)
5,100 Morrow Snowboards, Inc. 57
2,000 Premier Parks, Inc. 40
4,000 Ride, Inc. * 55
-------
152
-------
Manufacturing - Diversified Industries (0.2%)
4,600 United States Filter Corp. * 160
-------
Medical Products & Supplies (2.6%)
1,000 Aksys Ltd. * 17
4,000 ArthroCare Corp. * 92
5,500 Autonomous Technologies Corp. * 41
1,000 Cardiogenesis Corp. 17
3,100 CardioThoracic Systems, Inc. * 68
2,500 Conceptus, Inc. * 46
2,200 CYTYC Corp. * 69
4,000 General Surgical Innovations, Inc. * 80
3,000 Heartport, Inc. * 117
4,100 Henry Schein, Inc. 152
2,600 Hologic, Inc. * 103
3,400 Imagyn Medical, Inc. 59
1,500 Intelligent Medical Imaging, Inc. * 30
10,000 IRIDEX Corp. * 165
3,000 NCS HealthCare, Inc. * 92
2,500 Omnicare, Inc. 139
3,500 Optical Sensors, Inc. * 43
8,500 OrthoLogic Corp. * 376
4,000 Perclose, Inc. 92
2,300 Physiometrix, Inc. * 25
9,200 Serologicals Corp. * 239
3,000 SONUS Pharmaceuticals, Inc. * $ 60
4,500 Urologix, Inc. 65
3,000 Vitalink Pharmacy Services, Inc. * 69
-------
2,256
-------
Nursing Care (0.2%)
3,700 American Homepatient, Inc. 164
-------
Oil - Exploration & Production (0.2%)
5,000 3-D Geophysical, Inc. * 58
3,700 Belco Oil & Gas Corp. * 101
-------
159
-------
Oil & Gas Drilling (0.2%)
6,000 Falcon Drilling Co., Inc. * 145
-------
Oil Well Equipment & Service (0.4%)
5,000 Carbo Ceramics, Inc. * 120
3,700 GeoScience Corp. * 75
4,100 Trico Marine Services, Inc. * 91
5,700 Varco International, Inc. 95
-------
381
-------
Photography - Imaging (0.1%)
4,400 Seattle Filmworks, Inc. * 78
-------
Pollution Control (0.1%)
3,300 Superior Services, Inc. * 56
-------
Publishing (0.1%)
5,500 World Color Press, Inc. * 129
-------
Restaurants (0.4%)
8,300 Casa Ole Restaurants, Inc. * 124
4,300 Cooker Restaurant Corp. 65
1,200 Landry's Seafood Restaurants, Inc. 29
1,000 Lone Star Steakhouse & Saloon, Inc. * 40
1,200 Papa John's International, Inc. * 59
600 Planet Hollywood International, Inc. * 16
-------
333
-------
Retail - Department Stores (0.2%)
4,700 Saks Holdings, Inc. 153
-------
Retail - Drug Stores (0.1%)
4,000 Thrifty Payless Holdings, Inc. * 58
-------
Retail - General Merchandising (0.1%)
2,850 Dollar Tree Stores, Inc. 121
-------
Retail - Specialty (1.7%)
7,500 99 Cents Only Stores 115
3,900 Alrenco, Inc. * 70
4,000 Borders Group, Inc. * 131
6,600 Cost Plus World Market * 180
3,300 Gadzooks, Inc. 111
1,900 Garden Botanika, Inc. 51
2,000 Garden Ridge Corp. * 105
3,500 Just For Feet, Inc. * 188
1,500 Loehmann's Holdings, Inc. * 39
10,000 Marks Bros. Jewelers, Inc. * 235
5,000 Msc Industrial Direct, Inc. 174
1,000 Party City Corp. * 18
3,500 Petco Animal Supplies, Inc. * 100
-------
1,517
-------
Shoes (0.2%)
6,100 Eastbay, Inc. 110
3,200 Vans, Inc. 64
-------
174
-------
Specialized Services (3.4%)
1,600 APAC TeleServices, Inc. * 63
3,000 Apollo Group, Inc. * 142
3,000 Applied Graphics Technologies, Inc. * 44
2,000 Career Horizons, Inc. * 79
2,400 Caribiner International, Inc. * 76
1,100 CKS Group, Inc. 42
2,000 Computer Learning Centers, Inc. * 37
2,000 COREStaff, Inc. 89
5,000 Cotelligent Group, Inc. * 94
2,000 CSG Systems International, Inc. * 64
3,400 Danka Business Systems PLC 168
400 Data Processing Resources Corp. * 10
7,500 Eagle River Interactive, Inc. * 161
3,000 Electronic Fab Technology Corp. * 11
4,000 F.Y.I. Inc. * 86
1,000 First USA Paymentech, Inc. * 46
5,000 Infonautics, Inc. * 63
1,200 IntelliQuest Information Group, Inc. * 39
5,000 Learning Tree International, Inc. 149
5,700 May & Speh, Inc. * 88
2,500 META Group, Inc. 71
5,000 National TechTeam, Inc. * 73
1,500 Nova Corp. * 57
5,000 OzEmail Ltd. 71
10,000 Payment Services, Inc. * 340
5,000 Personnel Group Of America, Inc. * 114
5,500 PIA Merchandising Services, Inc. * 89
2,300 Praegitzer Industries, Inc. * 30
6,500 SCB Computer Technology, Inc. 137
4,000 Strategic Distribution, Inc. * 34
200 Sykes Enterprises, Inc. * 10
10,000 TechForce Corp. 110
7,000 Vanstar Corp. * 101
700 Vincam Group, Inc. * 20
2,600 Wackenhut Corp. 60
500 Whittman-Hart, Inc. * 19
5,000 XeTel Corp. * 43
1,000 Yahoo!, Inc. * 28
-------
2,958
-------
Telecommunications (0.7%)
3,000 Brooks Fiber Properties, Inc. * 101
3,000 Equalnet Holding Corp. * 12
2,000 Excel Communications, Inc. * 65
3,100 IDT Corp. * 38
4,500 Intermedia Communications of Florida, Inc. * 157
3,000 Metrocall, Inc. * 58
1,000 MIDCOM Communications, Inc. * 13
5,000 Telephone Save Holdings, Inc. * 108
4,100 TresCom International, Inc. * 72
-------
624
-------
Telephones (0.9%)
2,000 360 Communications Co. 46
3,000 American Portable Telecom, Inc. * 40
4,500 Brightpoint, Inc. 117
6,000 InterCel, Inc. * 145
3,800 Omnipoint Corp. * 117
3,900 Premiere Technologies, Inc. * 184
3,300 Rural Cellular Corp. * 44
5,000 Western Wireless Corp. 123
-------
816
-------
Textiles (0.8%)
10,000 Cutter & Buck, Inc. 142
8,000 Designer Holdings Ltd. * 246
5,000 Mossimo, Inc. * 245
5,000 Nautica Enterprises, Inc. * 125
-------
758
-------
Transportation - Miscellaneous (0.1%)
5,000 Hub Group, Inc. * 108
-------
Miscellaneous (0.1%)
2,000 Photran Corp. 26
-------
Total small cap stocks (cost: $18,919) 27,256
-------
Large Cap Stocks (26.4%)
Airlines (0.4%)
14,100 Southwest Airlines Co. 386
-------
Aluminum (0.3%)
3,700 Aluminum Co. of America 228
-------
Computer Systems (0.5%)
3,400 Dell Computer Corp. * 188
6,900 Gateway 2000, Inc. * 262
-------
450
-------
Drugs (0.1%)
3,400 ALZA Corp. * 97
-------
Electronics - Instrumentation (0.4%)
5,000 KLA Instruments Corp. * 135
6,000 Lam Research Corp. * 238
-------
373
-------
Electronics - Semi-Conductors (3.4%)
5,700 Analog Devices, Inc. * 157
12,500 Applied Materials, Inc. * 466
8,500 Intel Corp. 642
3,500 LSI Logic Corp. * 109
17,700 Micron Technology, Inc. 571
6,500 Motorola, Inc. 434
3,900 Novellus Systems, Inc. * 191
6,800 Texas Instruments, Inc. 382
-------
2,952
-------
Gaming Companies (0.3%)
15,200 International Game Technology 241
-------
Gold Mining (3.8%)
21,600 Freeport-McMoRan Copper & Gold, Inc. 718
60,300 Homestake Mining Co. 1,244
23,200 Newmont Mining Corp. 1,398
-------
3,360
-------
Healthcare - Diversified (0.6%)
9,600 Warner-Lambert Co. 538
-------
Manufacturing - Diversified Industries (0.5%)
11,700 Hillenbrand Industries, Inc. 439
-------
Medical Products & Supplies (0.9%)
8,100 Bausch & Lomb, Inc. 348
12,300 United States Surgical Corp. 421
-------
769
-------
Metals - Miscellaneous (1.1%)
13,500 Phelps Dodge Corp. 925
-------
Office Equipment & Supplies (0.3%)
5,500 Compaq Computer Corp. 267
-------
Oil - Domestic (2.0%)
4,900 Amerada Hess Corp. 279
6,000 Atlantic Richfield Co. 718
13,600 Occidental Petroleum Corp. 352
4,200 Pennzoil Co. 182
7,700 Unocal Corp. 250
-------
1,781
-------
Oil - Exploration & Production (0.8%)
12,200 Apache Corp. 349
7,100 Burlington Resources, Inc. 270
4,600 Union Texas Petroleum Holdings, Inc. 86
-------
705
-------
Oil - International (1.2%)
6,800 Chevron Corp. 406
7,900 Texaco, Inc. 662
-------
1,068
-------
Oil & Gas Drilling (1.1%)
11,600 Diamond Offshore Drilling, Inc. * 555
35,800 Global Marine, Inc. * 439
-------
994
-------
Oil Well Equipment & Service (1.5%)
12,800 Baker Hughes, Inc. 401
10,300 Halliburton Co. 573
7,100 Tidewater, Inc. 293
-------
1,267
-------
Paper & Forest Products (0.3%)
3,900 Rayonier, Inc. 146
2,400 Weyerhaeuser Co. 109
-------
255
-------
Pollution Control (0.7%)
8,000 Browning-Ferris Industries, Inc. 244
9,300 WMX Technologies, Inc. 328
-------
572
-------
Restaurants (0.1%)
6,900 Brinker International, Inc. * 116
-------
Tobacco (4.1%)
10,500 Philip Morris Companies, Inc. 1,043
38,100 RJR Nabisco Holdings Corp. 1,262
37,300 UST, Inc. 1,231
-------
3,536
-------
Transportation - Miscellaneous (0.5%)
5,300 Federal Express Corp. * 406
-------
Truckers (1.5%)
10,500 Caliber System, Inc. 390
17,200 Consolidated Freightways, Inc. 409
2,000 Roadway Express, Inc. 33
16,800 Ryder System, Inc. 491
-------
1,323
-------
Total large cap stocks (cost: $21,361) 23,048
-------
Principal
Amount Coupon
(000) Rate Maturity
----- ---- --------
Corporate Bonds (9.6%)
$1,000 Caremark International, Inc. 6.88% 8/15/03 934
1,000 Franchise Finance Corp. of America,
Senior Notes 7.00 11/30/00 968
1,000 Giddings & Lewis, Inc. 7.50 10/01/05 963
1,000 Great Atlantic & Pacific Tea, Inc. 7.70 1/15/04 947
1,000 Health Care Property Investors, Inc. 6.50 2/15/06 906
1,000 Kmart Corp. 7.95 2/01/23 782
1,000 Northrop Grumman Corp. 7.75 3/01/16 951(b)
1,000 RJR Nabisco, Inc., Notes 8.00 7/15/01 994
1,000 Time Warner, Inc. 7.48 1/15/08 943
-------
Total corporate bonds (cost: $8,849) 8,388
-------
Total domestic securities (cost: $49,129) 58,692
-------
U.S. Government & Agency Issues (5.6%)
Discount Note (2.0%)
1,715 Federal Home Loan Mortgage Corp. 5.30 6/03/96 1,715
-------
U.S. Treasury (3.6%)
3,500 U.S. Treasury Bonds 6.25 8/15/23 3,129
-------
Total U.S. government & agency issues (cost: $5,063) 4,844
-------
Total investments (cost: $74,989) $85,959
=======
*Non-income producing.
PORTFOLIO SUMMARY BY INDUSTRY
Healthcare 11.6%
Oil 8.9
Electronics 7.0
Retail 5.8
U.S. Government & Agency Issues 5.6
Tobacco 5.3
Computer Software & Service 4.7
Banks 4.1
Telecommunications 4.0
Gold Mining 3.9
Specialized Services 3.5
Real Estate Investment Trusts 2.4
Broadcasters 1.6
Truckers 1.5
Entertainment 1.3
Metals - Miscellaneous 1.3
Computer Systems 1.2
Textiles 1.2
Aerospace/Defense 1.1
Machine - Tools 1.1
Manufacturing - Diversified 1.1
Transportation - Miscellaneous 1.1
Other 19.3
-----
98.6%
=====
Growth Strategy Fund
Notes to Portfolio of Investments in Securities
May 31, 1996
General Notes
Market values of securities are determined by procedures and practices
discussed in note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the
same as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net
assets.
The Large Cap category consists of investments in common stocks of companies
with market capitalizations of $1 billion or more at the time of purchase.
Small Cap stocks have market capitalizations of less than $1 billion at the
time of purchase.
Specific Notes
(a) Illiquid security valued using methods determined by the Manager under
the general supervision of the Board of Trustees. At May 31, 1996, this
security represented .02% of the Fund's net assets.
(b) 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.
Growth Strategy Fund
Statement of Operations
(In Thousands)
Nine-month period ended May 31, 1996*
Net investment income:
Income (net of foreign taxes withheld of $7):
Dividends $ 372
Interest 499
--------
Total income 871
--------
Expenses:
Management fees 220
Transfer agent's fees 66
Custodian's fees 91
Postage 18
Shareholder reporting fees 7
Trustees' fees 3
Registration fees 41
Audit fees 24
Legal fees 6
Other 6
--------
Total expenses 482
--------
Net investment income 389
--------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 1,393
Foreign currency transactions (1)
Change in net unrealized appreciation/depreciation of
investments 10,970
--------
Net realized and unrealized gain 12,362
--------
Increase in net assets resulting from operations $ 12,751
========
* Fund commenced operations September 1, 1995.
See accompanying notes to financial statements.
Growth Strategy Fund
Statement of Changes in Net Assets
(In Thousands)
Nine-month period ended May 31, 1996*
From operations:
Net investment income $ 389
Net realized gain on investments 1,393
Net realized loss on foreign currency transactions (1)
Change in net unrealized appreciation/depreciation
of investments 10,970
--------
Increase in net assets resulting from operations 12,751
--------
Distributions to shareholders from:
Net investment income (83)
--------
From capital share transactions:
Shares sold 77,248
Shares issued for dividends reinvested 53
Shares redeemed (2,781)
--------
Increase in net assets from capital share transactions 74,520
--------
Net increase in net assets 87,188
Net assets:
Beginning of period -
--------
End of period $ 87,188
========
Undistributed net investment income included in net assets:
Beginning of period $ -
========
End of period $ 338
========
Change in shares outstanding:
Shares sold 7,082
Shares issued for dividends reinvested 5
Shares redeemed (244)
--------
Increase in shares outstanding 6,843
========
* Fund commenced operations September 1, 1995.
See accompanying notes to financial statements.
Growth Strategy 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 Growth
Strategy Fund (the Fund), which commenced operations on September 1, 1995. The
Fund's investment objective is to seek a 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. 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 $33 and to decrease accumulated net
realized gain on investments by $33.
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 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.
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 nine-month period 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 $.0476 per share and a
short-term capital gain of $.1972 per share, declared and paid in July 1996,
are not reflected in the accompanying financial statements.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term securities,
for the nine-month period ended May 31, 1996 were $87,031 and $15,152,
respectively.
Gross unrealized appreciation and depreciation of investments as of May 31,
1996 was $12,714 and $1,744, 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)
---- --------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
6/03/96 200 U.S. Dollar $200 282 Singapore Dollar $200 $ -
6/03/96 64 Finnish Markka 14 14 U.S. Dollar 14 -
6/03/96 54 Finnish Markka 11 11 U.S. Dollar 11 -
---- ---- -----
$225 $225 $ -
==== ==== =====
</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 1,000 shares (14.6%) of the Fund.
Growth Strategy Fund
Notes to Financial Statements (continued)
May 31, 1996
(8) Financial Highlights
Per share operating performance for a share outstanding throughout the period
is as follows:
Nine-month
Period Ended
May 31,
1996*
----
Net asset value at
beginning of period $ 10.00
Net investment income .11
Net realized and
unrealized gain 2.66
Distributions from net
investment income (.03)
----------
Net asset value at
end of period $ 12.74
==========
Total return (%) ** 27.76
Net assets at end of
period (000) $ 87,188
Ratio of expenses to
average net assets (%) 1.66(a)
Ratio of net investment
income to average net
assets (%) 1.34(a)
Portfolio turnover (%) 40.21
Average commission rate paid per share $ .0072
* Fund commenced operations September 1, 1995.
** Assumes reinvestment of all dividend income during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months
of operations.
