Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Shareholder Voting Results 9
Financial Information:
Statement of Assets and Liabilities 10
Portfolio of Investments in Securities 11
Notes to Portfolio of Investments in Securities 25
Statement of Operations 26
Statements of Changes in Net Assets 27
Notes to Financial Statements 28
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
Cornerstone Strategy Fund (formerly known as the Cornerstone 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.
c1995, 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
Cornerstone Strategy Fund (formerly known as the Cornerstone Fund)
OBJECTIVE: Achieve a positive, inflation-adjusted rate of return and a
reasonably stable value of Fund shares, thereby preserving purchasing power
of shareholders' capital.
5/31/95 11/30/95
Net Assets $874.6 Million $916.5 Million
Net Asset Value Per Share $22.63 $23.60
Average Annual Total Returns as of 11/30/95
May 31, 1995 to November 30, 1995 7.16%*
1 Year 16.94%
5 Years 12.17%
10 Years 12.45%
* Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
[A graph is shown here which is a comparison of the change in value of a
$10,000 investment, for the period of 11/30/85 to 11/30/95, with dividends
and capital gains reinvested. The ending value of each item graphed is as
follows: S&P 500 - $41,096 and the USAA Cornerstone Strategy Fund - $32,325.]
The graph depicts how the USAA Cornerstone Strategy Fund compares to the
S&P 500 Index. 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 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
dividends and capital gain distributions. The performance data quoted
represents past performance and is not an indication of future results.
Investment return and principal value of an investment will fluctuate, and
an investor's shares, when redeemed, may be worth more or less than their
original cost.
Message from the Managers
[A photo of John W. Saunders, Jr., U.S. Govt. Securities; Harry W. Miller,
Allocation Manager - Basic Value Stocks; Mark W. Johnson, Gold and Real
Estate Stocks; David G. Peebles, Foreign Stocks]
The USAA Cornerstone Strategy Fund's objective is to achieve a positive,
inflation-adjusted rate of return and a reasonably stable value of fund
shares, thereby preserving purchasing power of shareholders' capital.
This is a widely-diversified portfolio with investments in the following
sectors: Basic Value Stocks (22-28% of the Fund's net assets), Foreign
Stocks (22-28%), Government Bonds (22-28%), Real Estate Stocks (22-28%)
and Gold Stocks (0-10%).
Basic Value Category
1995 has been a surprisingly good year for the U.S. stock market. This
category benefited accordingly since our last report of May 31, 1995.
Profitability has been very good for U.S. companies, although it appears
to be slowing down. Also, we have benefited from low inflation and lower
interest rates. All of these factors have resulted in strong performance.
Those industries that were particularly strong were Aerospace/Defense
(B.F. Goodrich and Boeing), Healthcare (American Home Products and
Bristol-Myers Squibb), Insurance (Aetna), Telephone (GTE and NYNEX) and
Chemicals (Monsanto and Union Carbide). Holdings in retailing (K-Mart*
and J.C. Penney) were disappointing. However Sears, Roebuck did very well
with its spin-off of Allstate.
*Sold prior to end of reporting period.
Gold Category
Gold traded in a narrow range of $379.40 to $391.30 during the six months
ended November 30, 1995. This continues the trend of the past two years
during which the price has been stuck at about $383 plus or minus $13. We
remain optimistic that eventually there will be a sustained move above $400.
This optimism is based on the fact that end user demand continues to outstrip
new supply. To date supply shortfalls have been met with selling by private
holders, central banks, and hedgers and speculators who sell borrowed gold.
However, the willingness of these entities to continue selling in the face
of a widening demand gap is questionable.
[A pie chart is shown here depicting the Asset Allocation as of November
30, 1995 for the USAA Cornerstone Strategy Fund to be: Foreign - 22.9%,
U.S. Government Securities - 24.7%, Basic Value - 25.6%, Gold - 4.3%
and Real Estate - 23.7%.]
Real Estate Category
Real estate securities performed poorly during the six months ended
November 30, 1995. Shares of Real Estate Investment Trusts (REITs), as
measured by the National Association of Real Estate Investment Trusts
(NAREIT) equity index, rose only 5.05% on a total return basis. This was
well below the 14.87% return of the S&P 500 and the 7.16% 10-year Treasury
bond return. As a result, the "yield gap" (the average REIT dividend yield
less the 10-year Treasury bond yield) now stands at a five-year high of 200
basis points.
The dynamic that seems to be at work here is simply that while real estate
may be a solid business with improving fundamentals, it lacks the exciting
stories that are driving other markets to much higher levels. Once the stock
market slows, we expect REITs to begin to improve.
During the reporting period our exposure to hotels (including REITs that
own hotels) was almost doubled. Our hotel holdings are entirely at the
full-service end of the spectrum where the supply and demand factors are
especially favorable. We further boosted the already over-weighted position
in self-storage facilities. The self-storage business is going through a
consolidation phase during which acquisitions can be made on favorable
terms. The retail exposure also was increased, though we remain
underweighted. The apartment, health care, mobile home and industrial
sectors were all trimmed back slightly. We sold the last of several
diversified REITs once held by the Fund. All current holdings in the Fund
are in companies with demonstrated expertise in a specific property type
and generally within a specific region.
International Category
We are currently emphasizing Europe and various emerging markets while
tempering our exposure to Japan. European stocks, particularly those of
northern Europe, are attractive because of 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.
U.S. Government Category
As we indicated in the May 31, 1995 annual report, we have maintained a
portfolio structure for this category to take advantage of further declines
in long-term interest rates. Following a brief rise from late July to late
August, long-term interest rates resumed a strong downward trend to new
lows for this year. The portfolio is slightly over 50% in long-term
Treasury bonds with the remainder in GNMA mortgage pass-through securities,
half of which are discount coupons.
Inflation, the scourge of interest rates, has been 3% or lower for the past
four years. Real interest rates (net of inflation) are still high and can
continue to move lower in an economic environment which is beginning to
show signs of slowing. We will continue to maintain our current portfolio
structure in this environment.
Fund Summary
The Fund is accomplishing its investment objective as stated in the
introductory paragraph. The positive inflation-adjusted rate of return has
been far exceeded and the net asset value (price of the shares) has been
reasonably stable. The Fund has not kept up with the booming stock market,
as expected, because of the countervailing forces of diversification in the
five sectors. However, as you know, the sectors will rotate and the current
out-of-favor sectors may become the new driving force, giving your Fund the
long-term stability for which you purchased the USAA Cornerstone Strategy
Fund.
Foreign investing is subject to additional risks which are discussed in the
Fund's prospectus. Gold mining stocks involve additional risk because of
gold's price volatility. Since return is generally commensurate with risk,
investors should be aware of the potential volatility associated with
foreign markets.
See page 11 for a complete listing of the Portfolio of Investments in
Securities.
Top 10 Industries
(% of Net Assets)
Real Estate Invest. Trusts 21.4
Oil 4.5
Gold Mining 4.3
Aerospace/Defense 3.7
Chemicals 3.6
Telecommunications 3.3
Healthcare 3.2
Retail 2.7
Tobacco 2.6
Paper & Forest Products 2.2
Top 3 Holdings in Each Sector
(% of Net Assets)
GOLD
- -----
Newmont Mining .42
Barrick Gold .40
Placer Dome .38
FOREIGN
- -------
VA Technologie AG .55
Internationale Nederlanden .43
Verenigd Bezit Vnu .39
REAL ESTATE
- ------------
Developers Diversified .92
Kimco Realty .87
Highwood Properties .86
U.S. GOVERNMENT
- ---------------
U.S. Treasury Bond @ 7.875% 6.57
U.S. Treasury Bond @ 7.625% 6.49
GNMA Pool #348947 @ 7.00% 1.49
BASIC VALUE STOCKS
- -------------------
Boeing 1.27
Monsanto 1.25
B.F. Goodrich 1.15
SHAREHOLDER VOTING RESULTS
On October 13, 1995, a special meeting of shareholders was held to vote on
the following proposals. All proposals were approved by the shareholders.
All shareholders of record on August 17, 1995 were entitled to vote on each
proposal. The number of votes shown below are shown for the Cornerstone
Strategy Fund only for proposal (2) and in the aggregate for the entire
USAA Investment Trust (the Trust) for proposals (1) and (3).
(1) Proposal to elect a Board of Trustees as follows:
Votes Votes
Trustee For Withheld
--------- -------- ----------
Hansford T. Johnson* 112,569,933 2,138,930
Michael J.C. Roth 111,522,559 3,186,304
John W. Saunders, Jr. 112,598,635 2,110,228
George E. Brown 111,259,788 3,449,075
Howard L. Freeman, Jr. 112,481,010 2,227,853
Richard A. Zucker 112,225,587 2,483,276
Barbara B. Dreeben 111,409,531 3,299,332
Mr. C. Dale Briscoe did not stand for re-election to the Board. His term of
office terminated on December 31, 1995.
* On December 4, 1995, Hansford T. Johnson announced his departure from the
Board effective December 31, 1995. The Board elected M. Staser Holcomb to
succeed Mr. Johnson.
<TABLE>
(2) Proposals to amend certain investment restrictions as follows:
<CAPTION>
Number of Shares Voting
For Against Abstain
<S> <C> <C> <C>
Proposal to amend the 5% and 10% issuer 17,835,252 1,454,310 929,873
diversification restrictions to apply to 75%
of a Fund's total assets rather than 100%.
Proposal to amend the restriction relating 16,774,808 2,316,534 1,128,093
to borrowing to allow a Fund to borrow an
amount not exceeding 33 1/3% of its total
assets (including the amount borrowed)
less liabilities (other than borrowings) for
temporary or emergency purposes.
Proposal to amend the restriction relating 16,805,918 2,282,807 1,130,711
to lending portfolio securities to permit a
Fund to lend up to 1/3 of its total assets to
other parties.
(3) Proposal to ratify or reject the selection 107,284,373 2,323,184 5,101,298
by the Board of Trustees of KPMG Peat
Marwick LLP as auditors for the Trust for
the fiscal year ending May 31, 1996.
</TABLE>
<TABLE>
<CAPTION>
Cornerstone Strategy Fund
Statement of Assets and Liabilities
(In Thousands)
November 30, 1995
(Unaudited)
<S> <C>
Assets
Investments in securities, at market value (identified cost of $801,232) $927,131
Cash 209
Cash denominated in foreign currencies (identified cost of $127) 127
Receivables:
Capital shares sold 170
Dividends and interest 4,256
Securities sold 2,549
Foreign currency contracts held, at value 8,412
----------
Total assets 942,854
----------
Liabilities
Securities purchased 15,504
Foreign currency contracts held, at value 8,470
Capital shares redeemed 1,365
USAA Investment Management Company 555
USAA Transfer Agency Company 213
Accounts payable and accrued expenses 278
-----------
Total liabilities 26,385
-----------
Net assets applicable to capital shares outstanding $916,469
===========
Represented by:
Paid-in capital $776,909
Accumulated undistributed net investment income 14,417
Accumulated net realized loss on investments (761)
Net unrealized appreciation of investments 125,899
Net unrealized appreciation on foreign currency translations 5
----------
Net assets applicable to capital shares outstanding $916,469
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 38,829
==========
Net asset value, redemption price, and offering price per share $ 23.60
==========
</TABLE>
See accompanying notes to financial statements.
Cornerstone Strategy Fund
Portfolio of Investments in Securities
November 30, 1995
(Unaudited)
Market
Number Value
of Shares Security (000)
Gold Stocks (4.3%)
African Gold Companies (0.6%)
85,000 Ashanti Goldfields Co. Ltd. GDS $ 1,583
85,000 Gold Fields of South Africa Ltd. ADR 2,412
55,000 Western Deep Levels Ltd. ADR 1,732
-----------
5,727
-----------
Australian Gold Companies (0.5%)
500,000 Acacia Resources Ltd. * 865
180,000 Delta Gold N.L. * 441
500,000 Newcrest Mining Ltd. 2,252
125,000 Plutonic Resources Ltd. 595
-----------
4,153
-----------
North American Gold Companies (3.1%)
130,000 Agnico-Eagle Mines Ltd. 1,625
140,000 Barrick Gold Corp. 3,692
175,000 Battle Mountain Gold Co. 1,553
35,000 FirstMiss Gold, Inc. * 687
100,000 Freeport-McMoRan Copper & Gold, Inc. "A" 2,700
60,000 Golden Knight Resources, Inc. 315
190,000 Hemlo Gold Mines, Inc. 1,783
90,000 Newmont Mining Corp. 3,881
70,000 Pioneer Group, Inc. 1,855
140,000 Placer Dome, Inc. 3,452
85,000 Prime Resources Group, Inc. * 610
85,000 Rayrock Yellowknife Resources, Inc. * 626
170,000 Santa Fe Pacific Gold Corp. 2,040
330,000 TVX Gold, Inc. * 2,186
115,000 Viceroy Resource Corp. * 434
70,000 Wharf Resources Ltd. 477
-----------
27,916
-----------
North American Platinum Companies (0.1%)
65,000 Stillwater Mining Co. * 1,113
-----------
Total gold stocks (cost: $37,977) 38,909
-----------
Foreign Securities (22.9%)
Foreign Common Stocks (21.5%)
Argentina (0.2%)
290,133 Compania Interamericana de Automobiles S.A.* $ 1,248
54,200 YPF Sociedad Anonima S.A. ADS "D" 1,057
-----------
2,305
----------
Australia (0.7%)
995,000 CSL Ltd. 2,651
1,800,000 David Jones Ltd. 2,672
25,000 TABCORP Holdings Ltd. ADS 714(a)
----------
6,037
----------
Austria (0.6%)
44,000 VA Technologie AG 5,077
-----------
Belgium (0.3%)
11,580 Colruyt S.A. 2,980
-----------
Canada (1.0%)
69,000 Alliance Forest Products, Inc. * 1,359
585,000 Beau Canada Exploration Ltd. * 599
98,500 Canadian National Railway Co. * 1,477
70,000 Canadian Occidental Petroleum Ltd. 2,448
94,000 Suncor, Inc. 2,880
----------
8,763
----------
Chile (0.2%)
19,400 Madeco S.A. ADS 459
57,100 Maderas y Sinteticos S.A. ADS 949
-----------
1,408
-----------
Colombia (0.1%)
200,000 Banco de Colombia GDS 1,025
-----------
Denmark (0.8%)
600 Nordtank Energy Group A/S * 39
20,000 Novo Nordisk A/S "B" 2,517
115,000 Tele Danmark A/S ADS 3,205
25,000 Unidanmark A/S 1,223
----------
6,984
----------
France (1.0%)
55,000 Coflexip ADS 846
100,000 Elf Aquitaine ADS 3,500
25,000 Eramet Group 1,653
15,000 Essilor International 2,825
----------
8,824
----------
Germany (0.9%)
26,000 Adidas AG * 1,386
4,500 BASF AG 986
5,870 Siemens AG 3,066
65,000 Veba AG 2,652
----------
8,090
-----------
Hong Kong (0.7%)
1,198,500 Amoy Properties Ltd. 1,147
78,700 China Yuchai International Ltd. 669
1,400,000 Florens Group Ltd. 805
229,000 Hutchison Whampoa Ltd. 1,294
4,000,000 Regal Hotels International Holdings 884
1,100,000 Varitronix International Ltd. 2,062
---------
6,861
---------
Hungary (0.1%)
123,000 Mol Magyar Olay Es Gazipari GDS * 1,030
---------
India (0.3%)
27,000 Hindalco Industries Ltd. GDR 749
60,000 Indian Rayon & Industries Ltd. GDR 690
88,000 Larsen & Toubro Ltd. GDR 1,377
---------
2,816
---------
Indonesia (0.2%)
17,500 PT Bank Dagang Nasional Indonesia 14
80,000 PT HM Sampoerna 802
527,500 PT Jaya Real Property 1,294
---------
2,110
---------
Israel (0.1%)
34,000 Koor Industries Ltd. ADS * 616
---------
Italy (0.6%)
253,500 Arnoldo Mondadori Editore 1,986
1,022,500 Olivetti and C., S.p.A. 678
522,500 Olivetti and C., S.p.A. Rights * 30
1,500,000 STET 2,950
---------
5,644
---------
Japan (4.5%)
140,000 77 Bank Ltd. 1,269
135,000 Bridgestone Corp. 1,990
161,000 Canon, Inc. 2,832
95,000 Daibiru Corp. 1,046
180,000 Higo Bank 1,352
250,000 Hitachi Ltd. 2,531
120,000 Honda Motor Co. Ltd. 2,170
60,000 Hoya Corp. 1,787
50,000 Ito-Yokado Co. Ltd. 2,762
39,000 Kissei Pharmaceutical Co., Ltd. 1,069
28,000 Kyocera Corp. 2,215
115,000 Laox Co. Ltd. 2,407
14,000 Mabuchi Motor Co. 867
270,000 Minebea Co. Ltd. 2,245
303,000 Mitsubishi Heavy Industries Ltd. 2,415
295,000 Mitsubishi Paper Mills, Ltd. 1,818
816,000 NKK Corp. 2,245
146,000 Nomura Securities Co. Ltd. 2,870
74,000 Shimamura Co. Ltd. 2,800
80,000 Tostem Corp. 2,437
---------
41,127
---------
Korea (0.5%)
33,000 Korea Electric Power Corp. ADS 1,441
54,000 LG Chemical Ltd. * 1,125
5,100 Samsung Electronics Co., Ltd. * 960
13,600 Samsung Electronics Co., Ltd. GDR * 809
4,274 Samsung Electronics Co., Ltd. GDR (New) * 229
---------
4,564
---------
Malaysia (0.4%)
292,500 Malaysian Assurance Alliance BHD 1,153
169,000 Tanjong plc 486
575,000 Technology Resources Industries BHD * 1,609
---------
3,248
---------
Mexico (0.6%)
34,800 Bufete Industrial, S.A. de C.V. ADS 509
89,200 Desc, Soceidad de Fomento Industrial, S.A. de C.V. ADS* 1,182
113,300 Grupo Simec, S.A. de C.V. ADS * 765
78,600 Grupo Televisa, S.A. de C.V. ADS 1,699
43,000 Panamerican Beverages, Inc. "A" 1,387
---------
5,542
---------
Netherlands (1.6%)
13,000 DSM N.V. 1,036
35,000 EVC International N.V. 944
19,625 Heineken N.V. 3,439
60,412 Internationale Nederlanden Groep N.V. 3,955
57,000 Vendex International N.V. 1,651
25,300 Verenigd Bezit VNU 3,570
---------
14,595
---------
Norway (0.1%)
400,000 Christiania Bank og Kreditkasse 898
---------
Philippines (0.3%)
5,153,000 Filinvest Land, Inc. * 1,378
1,567,300 Petron Corp. GDS 718
105,000 Philippine Commercial International Bank 882
---------
2,978
---------
Portugal (0.3%)
15,553 Portugal Telecom, S.A. * 284
127,100 Portugal Telecom, S.A. ADS * 2,383
----------
2,667
---------
Singapore (0.2%)
141,500 Keppel Corp. Ltd 1,163
144,000 Overseas Union Bank Ltd. 914
---------
2,077
---------
South Africa (0.3%)
654,953 Iscor Ltd. S.A. 588
68,506 Murray and Roberts Holdings Ltd. 453
112,000 Nedcor Ltd. GDR * 1,820
28,000 Nedcor Ltd. Warrants * 136
---------
2,997
---------
Spain (0.5%)
27,400 Corporacion Mapfre 1,543
84,800 Telefonica de Espana, S.A. ADR 3,519
---------
5,062
---------
Sweden (1.0%)
20,000 Asea AB 1,940
45,000 Autoliv AB 2,663
40,000 Getinge Industrier AB "B" 1,648
140,000 Volvo AB 2,905
---------
9,156
---------
Switzerland (0.9%)
2,000 BBC Brown, Boveri & Co. Ltd. "A" 2,297
3,400 Ciba Geigy AG 3,031
500 SGS Group 940
3,750 Sulzer AG P.C. 2,074
---------
8,342
---------
Taiwan (0.1%)
60,000 China Steel Corp. ADS 975(a)
---------
Thailand (0.2%)
71,500 Finance One Public Co. 446
750,000 Sahaviriya Steel Industries Public Co., Ltd.* 917
103,100 Sri Thai Superware Co. Ltd. 684
---------
2,047
---------
Turkey (0.1%)
129,000 Olmuksa Mukavva Sanayi Ve Ticaret A.S. 32
144,000 Sarkuysan Elektrolitik Bakir S.A. 22
---------
54
---------
United Kingdom (1.9%)
293,000 Amstrad plc 1,187
350,000 Argyll Group plc 1,667
40,000 British Gas plc 1,490
355,829 Cadbury Schweppes plc 3,034
400,000 Northern Ireland Electricity plc 2,737
274,000 Refuge Group plc 1,942
573,500 Tomkins plc 2,318
170,833 Welsh Water plc 1,801
988,000 WPP Group plc 2,397
---------
18,573
---------
Other Holdings (0.2%)
2,406,000 Central European Growth Fund plc 1,437
480,000 Central European Growth Fund plc Warrants * 44
--------
1,481
---------
Total foreign common stocks (cost: $176,699) 196,953
---------
Foreign Preferred Stocks (0.9%)
Australia (0.3%)
725,000 Village Roadshow Ltd. 2,297
------
Brazil (0.5%)
42,449,080 Bradesco PN 367
46,990,000 Companhia Energetica de Minas Gerais (Cemig) 1,041
36,000,000 Telebras PN 1,773
1,750,000,000 Usinas Siderurgicas de Minas Gerais S.A. 1,558
--------
4,739
--------
Finland (0.1%)
19,000 Nokia Corp. ADS 1,031
------
Total foreign preferred stocks (cost: $7,129) 8,067
------
Principal
Amount
(000)
Foreign Bonds (0.5%)
Japan (0.2%)
$ 2,100 MBL International Finance (Bermuda) Trust,
Convertible Notes, 3.00%, 11/30/02 2,331
Taiwan (0.3%)
1,000 U-Ming Marine Transport Corp.,
Convertible Notes, 1.50%, 2/07/01 888
1,368 Yangming Marine Transport Corp.,
Convertible Notes, 2.00%, 10/06/01 1,501
----------
2,389
----------
Total foreign bonds (cost: $4,606) 4,720
----------
Total foreign securities (cost: $188,434) 209,740
----------
Number
of Shares
Real Estate Stocks (23.7%)
Hotel/Motel (1.4%)
100,000 Hilton Hotels Corp. 6,462
500,000 Host Marriott Corp. * 6,438
-----------
12,900
-----------
Paper & Forest Products (0.9%)
100,000 Rayonier, Inc. 3,825
100,000 Weyerhaeuser Co. 4,525
----------
8,350
----------
Real Estate Investment Trusts (21.4%)
250,000 American Health Properties, Inc. 4,969
300,000 Beacon Properties Corp. 6,150
250,000 Bradley Real Estate, Inc. 3,469
250,000 Cali Realty Corp. 4,937
300,000 Camden Property Trust 6,187
300,000 CBL & Associates Properties, Inc. 6,150
200,000 Charles E. Smith Residential Realty, Inc. 4,600
250,000 Chelsea GCA Realty, Inc. 6,969
250,000 Columbus Realty Trust 4,719
300,000 Developers Diversified Realty Corp. 8,475
250,000 Excel Realty Trust, Inc. 4,875
300,000 Gables Residential Trust 6,600
350,000 Glimcher Realty Trust 6,125
300,000 HGI Realty, Inc. 6,675
300,000 Highwoods Properties, Inc. 7,912
250,000 JDN Realty Corp. 5,125
200,000 Kimco Realty Corp. 8,000
350,000 Merry Land & Investment Co. 7,744
250,000 Paragon Group, Inc. 4,188
256,400 Patriot American Hospitality, Inc. * 6,089
200,000 Post Properties, Inc. 6,050
400,000 Public Storage, Inc. 7,200
225,000 Reckson Associates Realty Corp. 6,272
300,000 ROC Communities, Inc. 6,712
250,000 Shurgard Storage Centers, Inc. 6,406
550,000 South West Property Trust, Inc. 6,875
250,000 Starwood Lodging Trust 6,906
250,000 Storage USA, Inc. 7,594
350,000 Summit Properties, Inc. 6,650
300,000 United Dominion Realty Trust, Inc. 4,238
150,000 Weeks Corp. 3,413
100,000 Weingarten Realty Investors, Inc. 3,425
200,000 Wellsford Residential Property Trust 4,175
----------
195,874
----------
Total real estate stocks (cost: $207,993) 217,124
----------
Basic Value Stocks (25.6%)
Aerospace/Defense (3.7%)
150,000 B.F. Goodrich Co. 10,519
160,000 Boeing Co. 11,660
300,000 EG & G, Inc. 5,775
115,000 Rockwell International Corp. 5,635
----------
33,589
----------
Auto Parts (0.2%)
124,400 Arvin Industries, Inc. 2,193
----------
Bank Holding Companies - Money Center (0.4%)
53,000 Bankers Trust New York Corp. 3,438
----------
Chemicals (3.2%)
100,000 Dow Chemical Co. 7,087
100,000 Monsanto Co. 11,450
61,300 Olin Corp. 4,659
150,000 Union Carbide Corp. 5,944
-----------
29,140
-----------
Containers - Metals & Glass (0.4%)
135,000 Ball Corp. 3,864
----------
Distribution & Pipelines (0.3%)
120,000 NICOR, Inc. 3,045
----------
Drugs (0.4%)
94,250 Pharmacia & Upjohn, Inc. 3,381
----------
Electric Power (1.0%)
95,000 Houston Industries, Inc. 4,346
120,000 Texas Utilities Co. 4,620
----------
8,966
----------
Finance - Business/Commercial (0.3%)
38,723 Travelers Corp. 2,304
----------
Healthcare - Diversified (1.3%)
70,000 American Home Products Corp. 6,387
70,000 Bristol-Myers Squibb Co. 5,618
----------
12,005
----------
Insurance - Multi-Line Companies (0.6%)
70,000 Aetna Life & Casualty Co. 5,136
----------
Insurance - Property/Casualty (1.0%)
150,000 Allstate Corp. 6,150
68,000 Hartford Steam Boiler Inspection & Insurance Co. 3,136
----------
9,286
Machinery - Diversified (1.5%)
70,000 Caterpillar, Inc. 4,296
300,000 Deere & Co. 9,863
-----------
14,159
-----------
Manufacturing - Diversified Industries (0.7%)
100,000 Minnesota Mining & Manufacturing Co. 6,550
-----------
Office Equipment & Supplies (0.7%)
44,000 Xerox Corp. 6,034
-----------
Oil - Domestic (1.2%)
60,000 Amerada Hess Corp. 2,850
250,000 Occidental Petroleum Corp. 5,531
65,000 Pennzoil Co. 2,576
-----------
10,957
Oil - International (1.9%)
70,000 Chevron Corp. 3,456
60,000 Mobil Corp. 6,263
100,000 Texaco, Inc. 7,400
-----------
17,119
-----------
Paper & Forest Products (0.9%)
275,000 James River Corp. 8,663
------------
Railroads (0.7%)
85,000 Norfolk Southern Corp. 6,694
------------
Retail - General Merchandising (0.8%)
90,000 J.C. Penney Company, Inc. 4,219
90,000 Sears, Roebuck & Co. 3,544
------------
7,763
------------
Telephones (1.5%)
120,000 GTE Corp. 5,115
167,000 NYNEX Corp. 8,287
-----------
13,402
-----------
Tobacco (2.5%)
140,000 American Brands, Inc. 5,845
80,000 Philip Morris Companies, Inc. 7,020
180,000 RJR Nabisco Holdings Corp. 5,242
220,000 Universal Corp. 5,225
----------
23,332
----------
Transportation - Miscellaneous (0.4%)
150,000 American President Companies, Ltd. 3,750
----------
Total basic value stocks (cost: $161,355) 234,770
----------
U.S. Government & Agency Issues (24.7%)
Discount Note (2.9%)
26,690 Federal Home Loan Mortgage Corp., 5.80%, 12/01/95 $ 26,690
Government National Mortgage Assoc. (8.7%)
37,958 6.50%, 5/15/23 - 4/15/24 37,397
22,686 7.00%, 8/15/23 22,800
3,580 7.50%, 3/15/17 3,676
3,324 8.00%, 6/15/16 - 3/15/17 3,460
4,716 8.50%, 9/15/09 - 2/15/17 4,965
379 9.00%, 6/15/16 - 10/15/16 403
5,987 9.50%, 6/15/09 - 8/15/17 6,442
907 10.00%, 11/15/09 - 4/15/16 992
6 11.00%, 9/15/15 7
69 11.50%, 3/15/13 79
5 12.50%, 8/15/14 5
----------
80,226
----------
U.S. Treasury Bonds (13.1%)
50,000 7.63 %, 2/15/25 59,484
50,000 7.88 %, 2/15/21 60,188
----------
119,672
----------
Total U.S. government & agency issues (cost:$205,473) 226,588
----------
Total investments (cost: $801,232) $ 927,131
===========
*Non-income producing.
PORTFOLIO SUMMARY BY INDUSTRY
U.S. Government & Agency Issues 24.7%
Real Estate Investment Trusts 21.4
Oil 4.5
Gold Mining 4.1
Aerospace / Defense 3.7
Chemicals 3.6
Telecommunications 3.3
Healthcare 3.2
Retail 2.7
Tobacco 2.6
Paper & Forest Products 2.2
Electric Power 1.8
Machinery - Diversified 1.8
Banks 1.7
Hotel - Motel 1.5
Manufacturing - Diversified Industries 1.3
Insurance - Multi / Line Companies 1.2
Insurance - Property / Casualty 1.1
Electronics 1.0
Electrical Equipment 1.0
Office Equipment & Supplies 1.0
Other 11.8
----------
101.2%
==========
Cornerstone 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.
Specific Notes
(a) Securities which are exempt from registration by Rule 144A under the
Securities Act of 1933 and when purchased were determined to be liquid.
Any resale of these securities 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.
Cornerstone Strategy Fund
Statement of Operations
(in Thousands)
Six-month period ended November 30, 1995
(Unaudited)
Net investment income:
Income (net of foreign taxes withheld of $262):
Dividends $ 12,869
Interest 7,363
---------
Total income 20,232
---------
Expenses:
Management fees 3,365
Transfer agent's fees 1,263
Custodian's fees 250
Postage 208
Shareholder reporting fees 82
Trustees' fees 1
Registration fees 35
Audit fees 14
Legal fees 3
Other 17
----------
Total expenses 5,238
----------
Net investment income 14,994
----------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 5,532
Foreign currency transactions (12)
Change in net unrealized appreciation/depreciation on:
Investments 41,375
Translation of assets and liabilities in foreign currencies (11)
----------
Net realized and unrealized gain 46,884
----------
Increase in net assets resulting from operations $ 61,878
==========
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
Cornerstone Strategy Fund
Statements of Changes in Net Assets
(In Thousands)
Six-month period ended November 30, 1995
and Year ended May 31, 1995
(Unaudited)
11/30/95 5/31/95
<S> <C> <C>
From operations:
Net investment income $ 14,994 $ 26,403
Net realized gain on investments 5,532 18,898
Net realized loss on foreign currency transactions (12) (1,997)
Change in net unrealized appreciation/depreciation on:
Investments 41,375 8,699
Foreign currency translations (11) 680
------------- ------------
Increase in net assets resulting from operations 61,878 52,683
------------- -------------
Distributions to shareholders from:
Net investment income (11,498) (21,675)
------------- -------------
Net realized gains (12,787) (49,764)
------------- -------------
From capital share transactions:
Shares sold 61,205 158,794
Shares issued for dividends reinvested 23,779 70,063
Shares redeemed (80,695) (150,383)
------------- -------------
Increase in net assets from capital share transactions 4,289 78,474
------------- -------------
Net increase in net assets 41,882 59,718
Net assets:
Beginning of period 874,587 814,869
------------- -------------
End of period $ 916,469 $ 874,587
============= =============
Undistributed net investment income included in net assets:
Beginning of period $ 10,933 $ 8,202
============= =============
End of period $ 14,417 $ 10,933
============= =============
Change in shares outstanding:
Shares sold 2,643 7,272
Shares issued for dividends reinvested 1,031 3,250
Shares redeemed (3,486) (6,938)
------------- -------------
Increase in shares outstanding 188 3,584
============= ==============
</TABLE>
See accompanying notes to financial statements.
Cornerstone 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 Cornerstone Strategy Fund (the Fund). The Fund's investment objective
is to achieve a positive, inflation-adjusted rate of return and a
reasonably stable value of Fund shares, thereby preserving the purchasing
power of shareholders' capital. On July 12, 1995, the Board of Trustees
approved changing the name of the Fund from the Cornerstone Fund to the
Cornerstone Strategy Fund.
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 short-term securities are amortized over the life of the respective
securities. Amortization of market discounts on long-term securities is
recognized as interest income upon disposition of the security to the extent
there is a gain on disposition.
D. Foreign currency translations - The assets of the Fund may be invested
in the securities of foreign issuers. Since the accounting records of the
Fund are maintained in U.S. dollars, foreign currency amounts are
translated into U.S. dollars on the following basis:
1. Market value of securities, other assets, and liabilities at the mean
between the bid and asked translation rates of such currencies against U.S.
dollars.
2. Purchases and sales of securities, income, and expenses at the rate of
exchange obtained from an independent pricing service on the respective
dates of such transactions.
Net realized and unrealized foreign currency gains/losses occurring during
the holding period of investments are a component of realized gain/loss on
investments and unrealized appreciation/depreciation on investments,
respectively.
Net realized foreign currency gains/losses arise from sales of foreign
currency, currency gains/losses realized between the trade and settlement
dates on security transactions, and from the difference between amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts received. Net realized
foreign currency gains/losses have been reclassified from accumulated net
realized gain/loss to accumulated undistributed net investment income on
the statement of assets and liabilities as such amounts are treated as
ordinary income/loss for tax purposes. Net unrealized foreign currency
exchange gains/losses arise from changes in the value of assets and
liabilities other than investments in securities resulting from changes in
the exchange rate.
(2) Line of Credit
The Fund participates with other USAA funds in a joint $150 million
short-term revolving loan agreement (the Agreement) through January 15,
1996, for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition
of securities. Subject to availability under this Agreement, the Fund may
borrow up to 5% of the market value of its assets at the time of the
borrowing. Borrowings under this Agreement will bear interest at .125% over
the Federal Funds Rate as published by the Federal Reserve Bank of New York
or at .125% over the London Interbank Offered Rate. The Fund had no
borrowings under this Agreement during the six-month period ended November
30, 1995.
(3) Distributions
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made in the succeeding fiscal
year.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term
securities, for the six-month period ended November 30, 1995 were $146,741
and $144,473, respectively.
Gross unrealized appreciation and depreciation of investments as of
November 30, 1995 was $151,932 and $26,033, 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:
<TABLE>
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
<C> <S> <C> <S> <C>
12/01/95 2,680 U.S. Dollar $ 2,680 3,600 Australian Dollar $ 2,672
12/01/95 31 U.S. Dollar 31 1,674,268 Turkish Lira 31
12/01/95 23 U.S. Dollar 23 1,232,013 Turkish Lira 23
12/01/95 201 U.S. Dollar 201 1,558 Hong Kong Dollar 201
12/04/95 340 U.S. Dollar 340 2,149 Norwegian Krone 338
12/04/95 13 U.S. Dollar 13 29,641 Indonesian Rupiah 13
12/05/95 301 U.S. Dollar 301 347 Swiss Franc 295
12/05/95 536 U.S. Dollar 536 768 Deutsche Mark 531
12/05/95 472 U.S. Dollar 472 305 British Pound 467
12/06/95 131 U.S. Dollar 131 174 Australian Dollar 129
12/06/95 117 U.S. Dollar 117 157 Australian Dollar 116
12/11/95 2,479 U.S. Dollar 2,479 24,964 Austrian Schilling 2,453
12/29/95 334 U.S. Dollar 334 531,521 Italian Lira 332
12/29/95 812 U.S. Dollar 812 1,296,875 Italian Lira 811
-------- ---------
$ 8,470 $ 8,412
======== ==========
</TABLE>
(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.
Cornerstone Strategy Fund
Notes to Financial Statements (continued)
November 30, 1995
(Unaudited)
(7) Financial Highlights
<TABLE>
<CAPTION>
Per share operating performance for a share outstanding throughout each
period is as follows:
Six-month Year Eight-month
Period ended ended Period ended
November 30, May 31, May 31, Year ended September 30,
1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 22.63 $ 23.24 $ 23.43 $ 19.94 $ 18.62 $ 17.19
Net investment income .39 .68 .40 .60 .65 .65
Net realized and
unrealized gain 1.21 .67 .29 3.52 1.26 1.43
Distributions from net
investment income (.30) (.58) (.59) (.63) (.59) (.65)
Distributions of realized
capital gains (.33) (1.38) (.29) - - -
------------ -------------- ----------- ------------ ----------- ---------
Net asset value at
end of period $ 23.60 $ 22.63 $ 23.24 $ 23.43 $ 19.94 $ 18.62
============ ============== =========== ============== ============ ==========
Total return (%) * 7.16 6.43 3.00 21.35 10.53 12.61
Net assets at
end of period (000) $916,469 $ 874,587 $814,869 $ 707,795 $567,212 $580,088
Ratio of expenses to
average net assets (%) 1.17(a) 1.13 1.11(a) 1.18 1.18 1.18
Ratio of net investment
income to average net
assets (%) 3.34(a) 3.16 2.68(a) 2.92 3.25 3.58
Portfolio turnover (%) 16.45 33.17 30.87 45.18 32.71 28.02
Average commission
rate paid per share .0039
</TABLE>
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Assumes reinvestment of all dividend income and capital gains
distributions during the period.
