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 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 "streamlined." One copy
of each report is sent to each address, rather than 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)1997, 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 33
funds by investment objective as of June 30, 1997.
<CAPTION>
Average Annual Total Return(%)*
Investment Inception Since
Objective Date 1 yr 5 yrs 10 yrs Inception
--------- ---- ---- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Capital Appreciation
====================
Aggressive Growth 10/19/81 -1.72 18.38 10.88 -
Emerging Markets(1) 11/7/94 15.35 - - 10.25
Gold(1) 8/15/84 -22.26 3.54 -4.75 -
Growth 4/5/71 21.60 16.94 11.97 -
Growth & Income 6/1/93 31.29 - - 18.53
International(1) 7/11/88 21.81 15.39 - 11.77
S&P 500 Index(4)(+) 5/1/96 34.59 - - 33.24
World Growth(1) 10/1/92 21.85 - - 15.50
Asset Allocation
=================
Balanced Strategy(1) 9/1/95 22.38 - - 15.48
Cornerstone Strategy(1) 8/15/84 20.45 14.33 9.22 -
Growth and Tax Strategy(2)** 1/11/89 15.72 11.23 - 10.45
Growth Strategy(1) 9/1/95 15.37 - - 21.37
Income Strategy 9/1/95 14.48 - - 10.36
Income - Taxable
================
GNMA 2/1/91 9.37 6.85 - 7.67
Income 3/4/74 8.21 7.44 9.45 -
Income Stock 5/4/87 20.77 14.21 12.89 -
Short-Term Bond 6/1/93 7.71 - - 5.69
Income - Tax Exempt
===================
Long-Term(2)** 3/19/82 9.22 6.71 8.09 -
Intermediate-Term(2)** 3/19/82 8.20 6.76 7.54 -
Short-Term(2)** 3/19/82 5.50 4.80 5.59 -
California Bond(2)** 8/1/89 8.90 7.13 - 7.58
Florida Tax-Free Income(2)** 10/1/93 9.79 - - 4.29
New York Bond(2)** 10/15/90 8.86 6.46 - 8.31
Texas Tax-Free Income(2)** 8/1/94 10.37 - - 9.24
Virginia Bond(2)** 10/15/90 8.50 6.93 - 8.08
Money Market
============
Money Market(3) 2/2/81 5.28 4.48 5.80 -
Tax Exempt Money Market(2),(3)** 2/6/84 3.36 3.04 4.15 -
Treasury Money Market Trust(3) 2/1/91 5.13 4.28 - 4.38
California Money Market(2),(3)** 8/1/89 3.29 2.94 - 3.62
Florida Tax-Free Money Market(2),(3)** 10/1/93 3.26 - - 3.04
New York Money Market(2),(3)** 10/15/90 3.21 2.82 - 3.08
Texas Tax-Free Money Market(2),(3)** 8/1/94 3.31 - - 3.33
Virginia Money Market(2),(3)** 10/15/90 3.22 2.87 - 3.20
</TABLE>
Non-deposit investment products offered by USAA Investment Management Company
are not insured by the FDIC, are not deposits or other obligations of, or
guaranteed by, USAA Federal Savings Bank, and are subject to investment risks,
including possible loss of the principal amount invested.
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.
1 Foreign investing is subject to additional risks, which are discussed in the
funds' prospectuses.
2 Some income may be subject to state or local taxes or the federal
alternative minimum tax.
3 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.
4 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 return 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.
+ Includes account maintenance fee through December 31, 1996.
MESSAGE FROM THE PRESIDENT
I HAVE A FEELING
THAT WE WILL REMEMBER 1997
[Photograph of President, Michael J.C. Roth appears here]
The year began with an atmosphere of looking over your shoulder. The market had
risen about 61% in two years and all history told us that was unusual. Then it
advanced another 10% in January and February, before it encountered a loss of
confidence. By April it had lost all of the advance for this year(1) and it felt
so shaky that I sent shareholders a letter encouraging them to remember how
important we think asset allocation is in establishing your level of risk. But
by the time that letter arrived in early May the market was again setting record
highs. Indeed, one shareholder wrote me asking, "Why did you send this letter?"
The market has now driven upward to a return of 20% for the year, but
as I write this, it has fallen 192 points on the Dow; its second worst one-day
decline in points.
It would not be unusual if the market were to finish 1997 with a return well
below that of '95 and '96. We believe that the long-term return on the stock
market is around 10% to 12%.(2) Years such as '95 and '96 are necessary to
achieve such a long-term record, but by themselves they are exceptional. It is
important that investors have a position in stocks, but the risk that such a
position carries should, for most people, be offset by holding some different
assets including fixed income securities. Most of the funds in the USAA
Investment Trust are structured like that.
The Roth family will remember 1997 for another reason. We have a new
granddaughter, Katharine Sophia Broyles, who was born on January 3. She now has
an InveStart(Registered Trademark) account in the Cornerstone Strategy Fund, our
oldest asset strategy fund. I am confident that our monthly additions to that
account has the potential to build a meaningful college fund for her, regardless
of what 1997 serves up.
Sincerely,
Michael J.C. Roth
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
Past performance is no guarantee of future results.
A systematic plan, such as InveStart, does not assure a profit or protect
against loss in declining markets. Since such a plan involves continuous
investment in securities regardless of fluctuating price levels, you should
consider your financial ability to continue purchases through periods of low and
high price levels.
(1) 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.
(2) Source: (Copyright) Computed using data from Stocks, Bonds, Bills &
Inflation 1997 Yearbook(TM), Ibbotson Associates, Chicago (annually updates
work by Roger G. Ibbotson and Rex Sinquefield). Used with permission. All rights
reserved.
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.
5/31/97 5/31/96
Net Assets................................ $193.9 MILLION $87.2 MILLION
Net Asset Value Per Share................. $13.10 $12.74
AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/97
1 Year............................................................ 7.73%
Since inception on September 1, 1995..............................19.82%
[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 5/31/97, with dividends and capital
gains reinvested. The ending value of each item graphed is as follows: USAA
Growth Strategy Fund - $13,763 and the S&P 500 Index - $15,684.]
The graph illustrates how a $10,000 hypothetical investment in the
USAA Growth Strategy Fund compares to the S&P 500 Index, 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.
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 PORTFOLIO MANAGERS APPEARS HERE:
Seated L to R: David G. Parsons, CFA (Allocation Manager, Large Cap Stocks), W.
Travis Selmier, II, CFA (International Stocks), David G. Peebles, CFA
(International Stocks); Standing L to R: Albert C. Sebastian, CFA (International
Stocks), Eric M. Efron, CFA (Small Cap Stocks), Pamela K. Bledsoe, CFA (Money
Market Instruments), Paul H. Lundmark, CFA (Bonds), and John K. Cabell, Jr., CFA
(Small Cap Stocks).
FUND OVERVIEW
Through an asset allocation strategy encompassing domestic and international
stocks as well as bonds, the Growth Strategy Fund seeks to remove the growth
investor's asset allocation burden.
LARGE CAPITALIZATION STOCKS
The large capitalization sector of the Fund is essentially an out-of-favor
growth portfolio. We primarily buy growth companies that have been sacked by the
market due to temporary problems. Consequently, over the course of the fiscal
year, we have made substantial commitments to companies within the
semiconductor, semiconductor capital equipment, computer networking,
biotechnology, and medical device industries. Each company was purchased when it
was unpopular and we consider all of them to be growth instruments. In part, we
funded the above purchases by halving our energy positions, reducing tobacco,
and eliminating gold. For the year, technology stocks generally outperformed the
market; tobacco and energy slightly underperformed; healthcare significantly
underperformed and gold was down. Large capitalization stocks comprised 32% of
the Fund's net assets on May 31, 1997.
SMALL CAPITALIZATION STOCKS
The small capitalization sector of the Fund continues to invest primarily in
rapidly growing companies with market capitalizations of less than $1 billion.
Prime investment opportunities include companies that take advantage of
significant long-term social and economic trends. Forward-looking,
small-to-midsize companies tend to be less bureaucratic and tradition-bound than
their larger counterparts, putting them in a superior position to respond to
change and to innovate. In order to take early advantage of these investment
opportunities, the small capitalization sector participates actively in initial
public offerings (IPOs). Major areas of concentration remain in the software,
healthcare, specialty retail, telecommunications, and energy-related industries.
Over the fiscal year that ended on May 31, this sector was down, reflecting a
hostile investment climate for small capitalization stocks in general.
High-growth, high price-to- earnings, small capitalization equities, in which
the sector concentrates its holdings, were hit particularly hard during this
period. This followed outstanding performance in the preceding year. In April
and May of 1997, the small stocks began to perform better, which may indicate a
change in sentiment is underway. At the end of the reporting period, the small
capitalization sector accounted for 29% of the Fund's net assets.
INTERNATIONAL STOCKS
The international equity sector of the Fund produced a very good return versus
international indices, but below that of the S&P 500 Index.(1) We increased our
exposure to European stocks, which began to benefit from stronger, export led
economic growth, and corporate restructurings. In Japan, some political
stability has returned and the economy has improved. However, problems in the
banking system, rising interest rates, and equity valuations above levels in
other developed markets have caused us to maintain an underweighted position.
Emerging markets have shown some rebound since the beginning of the year, with
Latin American and Eastern European markets showing strong performance against
mixed Asian Markets. International stocks comprised 20% of the Fund's net assets
on May 31, 1997.
BONDS
The bond component of the Fund is included to lower volatility and provide
current income. Our philosophy toward buying bonds is as follows: no one can
consistently predict whether interest rates are heading up or down over time. As
a result, you will not see us dramatically change the maturity of the portfolio
from one reporting period to the next. Instead, we earn our management fee by
constantly looking for bonds that represent good value in terms of income and
total return no matter where interest rates are headed. At the present time, our
bond holdings consist primarily of mortgage-backed securities and BBB-rated
corporates.
Within the Fund's bond portion, the best performing holdings were: First USA,(2)
Kmart, Caremark,(2) and Great Atlantic & Pacific. Our investments in treasuries
had a detrimental impact on performance and have subsequently been eliminated
from the portfolio.
We wish we had a crystal ball to foretell where interest rates were headed.
Since we don't, the best way we can provide value to you is by continuing with
our strategy of buying securities that will provide attractive yields and
returns over a long time horizon. Bonds comprised 19% of the Fund's assets on
May 31, 1997.
MONEY MARKET INSTRUMENTS
With the Fund's emphasis on growth, this investment category is used for the
temporary investment of cash prior to transitioning into more permanent
investments in stocks and bonds. It can also serve as a liquidity reserve when
needed. Investments are made in the highest quality money market instruments,
usually U.S. Government Agencies' obligations. Money market instruments
constituted less than 1% of the Fund's net assets on May 31, 1997.
PERFORMANCE
During the 12 months ended May 31, 1997, the Fund returned 7.73%. This lagged
the performance of the S&P 500 Index. The main problems were in the small
capitalization sector which was down, the large capitalization sector which
underperformed the S&P 500 Index, and bonds which chronically fall short of
stocks in bull markets. Nevertheless, the managers of the Fund believe that over
the course of a market cycle this collection of management styles and assets
will provide a vehicle with competitive returns and 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.
(2) Sold out prior to end of the reporting period.
TOP 10 EQUITY HOLDINGS
(% OF NET ASSETS)
PHARMACIA & UPJOHN 2.5
PHILIP MORRIS 1.6
RJR NABISCO HOLDINGS 1.6
MICRON TECHNOLOGY 1.4
CISCO SYSTEMS 1.2
MOTOROLA 1.1
3COM 1.0
CASCADE COMMUNICATIONS 1.0
CNF TRANSPORTATION 1.0
U. S. SURGICAL 1.0
TOP 10 INDUSTRIES
(% OF NET ASSETS)
HEALTHCARE RELATED 12.0
ELECTRONICS RELATED 11.4
TELECOMMUNICATIONS RELATED 8.7
OIL RELATED 7.9
BANK RELATED 5.0
RETAIL RELATED 4.9
TOBACCO 4.2
COMPUTER SOFTWARE & SERVICES 4.0
SPECIALIZED SERVICES 4.0
REAL ESTATE INVESTMENT TRUSTS 2.9
[A pie chart is shown here depicting the Asset Allocation as of May 31, 1997
for the USAA Growth Strategy Fund to be: Money Market Instruments - .3%*,
Bonds - 19.0%*, International Stocks - 19.8%*, Small Cap Stocks 28.5%* and
Large Cap Stocks - 32.2%*.]
* Percentages are of the Net Assets in the Portfolio and may or may not equal
100%.
Foreign investing is subject to additional risks which are discussed in the
Fund's prospectus. Since return on any investment is generally commensurate with
risk, investors should be aware of the potential volatility associated with
foreign markets.
See page 12 for a complete listing of the Portfolio of Investments in
Securities.
DISTRIBUTIONS TO SHAREHOLDERS
The following per share information describes the federal tax treatment of
distributions made during the fiscal year ended May 31, 1997. These figures are
provided for information purposes only and should not be used for reporting to
federal or state revenue agencies. Distributions for the calendar year will be
reported to you on Form 1099-DIV in January 1998.
Ordinary income $.56 *
====
21.61% of ordinary income distributions qualify for deduction by corporations.
* Includes distribution of short-term capital gains, if any, which are taxable
as ordinary income.
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, 1997, the related statement of operations for the
year then ended, the statements of changes in net assets for the year ended May
31, 1997 and the nine-month period ended May 31, 1996, and the financial
highlights information presented in note 8 to the financial statements for the
year ended May 31, 1997 and the nine-month period ended May 31, 1996. These
financial statements and the financial highlights information are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights information
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of securities
owned as of May 31, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights
information referred to above present fairly, in all material respects, the
financial position of the Growth Strategy Fund of USAA Investment Trust as of
May 31, 1997, the results of its operations for the year then ended, the changes
in its net assets for the year ended May 31, 1997 and the nine-month period
ended May 31, 1996, and the financial highlights information for the year ended
May 31, 1997 and the nine-month period ended May 31, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
July 9, 1997
Growth Strategy Fund
Statement of Assets and Liabilities
(In Thousands)
May 31, 1997
<TABLE>
<S> <C>
Assets
Investments in securities, at market value (identified cost of $171,518) $ 193,506
Cash 121
Cash denominated in foreign currencies (identified cost of $186) 185
Receivables:
Capital shares sold 474
Dividends and interest 782
Securities sold 4,947
----------
Total assets 200,015
----------
Liabilities
Securities purchased 5,717
Unrealized depreciation on foreign currency contracts held, at value 1
Capital shares redeemed 201
USAA Investment Management Company 118
USAA Transfer Agency Company 42
Accounts payable and accrued expenses 15
----------
Total liabilities 6,094
----------
Net assets applicable to capital shares outstanding $ 193,921
==========
Represented by:
Paid-in capital $ 172,448
Accumulated undistributed net investment income 1,057
Overdistributed net realized gain on investments (1,570)
Net unrealized appreciation of investments 21,988
Net unrealized depreciation on foreign currency translations (2)
----------
Net assets applicable to capital shares outstanding $ 193,921
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 14,800
==========
Net asset value, redemption price, and offering price per share $ 13.10
==========
</TABLE>
See accompanying notes to financial statements.
Growth Strategy Fund
Portfolio of Investments in Securities
May 31, 1997
Market
Number Value
of Shares Security (000)
--------- -------- ------
International Stocks (19.8%)
Argentina (0.2%)
4,900 Disco S.A. ADS * $ 165
2,160 IRSA Inversiones y
Representaciones S.A. GDS 85
11,000 Quilmes Industrial (Quinsa)
S.A. ADS 128
-------
378
-------
Australia (0.4%)
20,000 Broken Hill Proprietary Co. Ltd. 287
30,000 CSL Ltd. 184
40,000 Pasminco Ltd. 82
36,787 Village Roadshow Ltd.
(Preferred) 94
24,300 Woodside Petroleum Ltd. 205
-------
852
-------
Austria (0.6%)
530 Austria Mikro Systeme
International AG 41
3,800 Boehler Uddeholm AG 287
7,757 VA Stahl AG 350
2,250 VA Technologie AG 398
-------
1,076
-------
Belgium (0.3%)
420 Colruyt S.A. 169
4,000 Union Miniere S.A. * 322
-------
491
-------
Brazil (0.7%)
6,730,000 Companhia Energetica de Minas
Gerais (Cemig) (Preferred) 308
11,000 Multicanal Participacoes S.A.
ADS (Preferred) * 128
1,200,000 Petroleo Brasileiro S.A.
(Preferred) 287
3,100,000 Telebras PN (Preferred) 428
8,200 Uniao de Bancos Brasileiros
S.A. (Unibanco) GDR * 283
-------
1,434
-------
Canada (1.3%)
6,500 Alliance Forest Products, Inc.* 157
17,600 Anderson Exploration Ltd. * 233
78,000 Beau Canada Exploration Ltd. * 193
9,800 Canadian National Railway Co. 409
21,100 Canadian Occidental
Petroleum Ltd. 477
21,400 Gulf Canada Resources Ltd. * 194
32,000 National Bank of Canada 376
12,000 OSF, Inc. * 108
3,000 St. Laurent Paperboard, Inc. * 48
14,000 Suncor, Inc. 347
-------
2,542
-------
Chile (0.2%)
2,000 Madeco S.A. ADS 51
8,000 Maderas y Sinteticos S.A. ADS 124
3,000 Sociedad Quimica y Minera
de Chile S.A. ADS 195
-------
370
-------
China (0.1%)
45,000 New World Infrastructure Ltd. * 140
-------
Colombia (0.1%)
7,000 Banco de Colombia GDS 42
-------
Czech Republic (0.1%)
2,800 Komercni Banka A.S. GDR 68
800 SPT Telecom A.S. * 74
-------
142
-------
Denmark (0.7%)
4,800 Carli Gry International A/S 287
7,000 ISS International Service
System A/S "B" * 232
2,260 Novo Nordisk A/S "B" 242
12,500 SAS Danmark A/S 128
3,000 Tele Danmark A/S "B" 147
9,400 Tele Danmark A/S ADS 233
6,100 Unidanmark A/S 319
-------
1,588
-------
Egypt (0.1%)
4,400 Suez Cement Co. S.A.E. GDS * 81
-------
Finland (0.4%)
8,300 Nokia Corp. ADS 548
1,820 Raision Tehtaat 148
-------
696
-------
France (1.1%)
1,000 Accor S.A. 138
10,700 Bouygues Offshore S.A. ADR * 134
9,800 Coflexip ADS * 279
14,000 Elf Aquitaine ADS 730
3,400 Eramet Group 170
1,100 Essilor International 279
3,400 Louis Dreyfus Citrus * 123
830 Pathe S.A. * 191
4,000 Valeo S.A. 237
-------
2,281
-------
Germany (0.8%)
5,900 Leica Camera AG * 159
6,800 Pfeiffer Vacuum Technology
AG ADS * 154
20,000 Rofin-Sinar Technologies, Inc. * 310
1,200 SAP AG 214
1,100 SAP AG (Preferred) 200
7,440 Veba AG 420
-------
1,457
-------
Hong Kong (0.3%)
205,000 Amoy Properties Ltd. 233
11,000 Asia Satellite Telecommunications
Holdings Ltd. ADR 304
101,000 Cosco Pacific Ltd. 144
-------
681
-------
Hungary (0.1%)
10,000 Mol Magyar Olay Es
Gazipari GDS 187
-------
India (0.2%)
10,000 Arvind Mills Ltd. GDS 49
5,250 Hindalco Industries Ltd. GDR 173
5,500 Larsen & Toubro Ltd. GDR 73
8,300 Videsh Sanchar Nigam Ltd. GDR * 171
-------
466
-------
Indonesia (0.2%)
31,500 PT Astra International, Inc. 121
141,750 PT Bank Dagang Nasional
Indonesia 153
20,250 PT Bank Dagang Nasional
Indonesia Warrants * 8
26,000 PT HM Sampoerna 105
24,000 PT Jaya Real Property 34
18,500 PT Modern Photo Film 67
-------
488
-------
Israel (0.4%)
5,100 Blue Square - Israel Ltd. ADS * 89
10,400 ECI Telecommunications Ltd. 240
1,200 Koor Industries Ltd. ADS 21
6,500 Teva Pharmaceutical Industries
Ltd. ADR 390
-------
740
-------
Italy (0.5%)
4,800 Eni S.p.A. ADS 244
2,300 Fila Holdings S.p.A. ADS 98
9,293 Instituto Bancario San Paulo
di Torino S.p.A. 58
10,300 Instrumentation Laboratory
S.p.A. ADS * 41
6,400 SAES Getters S.p.A. ADR 58
304,000 SEAT S.p.A. * 90
152,000 SEAT S.p.A. Savings * 29
110,000 STET S.p.A. 432
-------
1,050
-------
Japan (2.9%)
13,000 Bridgestone Corp. 294
19,000 Canon, Inc. 481
11,000 Daibiru Corp. 135
24,000 Hitachi Ltd. 256
11,000 Honda Motor Co. Ltd. 323
6,000 Hoya Corp. 273
5,000 Ito-Yokado Co. Ltd. 285
3,000 Kyocera Corp. 216
12,900 Laox Co. Ltd. 193
40,000 Minebea Co. Ltd. 392
30,000 Mitsubishi Heavy Industries Ltd. 216
11,000 Namco 385
800 Nippon Television Network 319
81,000 NKK Corp. 159
21,000 Nomura Securities Co. Ltd. 249
7 NTT Data Communications
Systems Corp. 257
27,000 Shiseido Co. Ltd. 394
30,000 Terumo Corp. 528
3,000 Tostem Corp. 80
MBL International Finance
(Bermuda) Trust, Convertible
Notes, $200,000 par, 3.00%,
11/30/02 210
-------
5,645
-------
Korea (0.1%)
5,043 Korea Electric Power Corp. 156
1,341 Samsung Electronics Co. Ltd. 131
-------
287
-------
Malaysia (0.2%)
18,000 Edaran Otomobil Nasional
Bhd 157
20,000 Telekom Malaysia Bhd 148
-------
305
-------
Mexico (0.6%)
89,000 Controladora Comercial
Mexicana, S.A. de C.V. 71
1,800 Controladora Comercial
Mexicana, S.A. de C.V. GDR 29
9,599 Desc, Sociedad de Fomento
Industrial, S.A. de C.V. ADS$ 255
8,700 Empresas Ica Sociedad
Controladora, S.A.
de C.V. ADR 126
14,000 Panamerican Beverages, Inc. "A" 406
14,000 Tubos de Acero de Mexico,
S.A. ADS * 245
-------
1,132
-------
Netherlands (0.8%)
2,800 Akzo Nobel N.V. 372
3,940 EVC International N.V. 111
8,500 ING Group N.V. 375
2,250 Oce-van der Grinten N.V. 293
3,500 Philips Electronics N.V. 196
10,300 Verenigd Besit VNU 233
-------
1,580
-------
Norway (0.3%)
76,000 Christiania Bank og Kreditkasse 261
17,000 Nycomed ASA 233
8,400 Schibsted ASA 157
-------
651
-------
Peru (0.1%)
4,700 Telefonica del Peru S.A. "B" ADS 119
-------
Philippines (0.1%)
3,600 Metropolitan Bank and Trust Co. 81
300,000 SM Prime Holdings, Inc. 86
-------
167
-------
Poland (0.1%)
14,400 Elektrim S.A. 129
13,000 Polifarb-Cieszyn S.A. 73
-------
202
-------
Portugal (0.6%)
20,000 Banco Totta E Acores S.A. 285
23,800 Cimentos de Portugal S.A. 523
10,400 Portugal Telecom S.A. ADS 400
-------
1,208
-------
Russia (0.1%)
6,300 RAO Gazprom ADR 113
-------
Singapore (0.3%)
200,000 Kay Hian James Capel
Holdings Ltd. 190
28,000 Overseas Union Bank Ltd. 192
30,000 Singapore Land Ltd. 153
-------
535
-------
South Africa (0.3%)
5,580 Ellerine Holdings Ltd. 36
4,486 Foodcorp Ltd. 34
25,000 Gencor Ltd. 110
40,000 Malbak Ltd. 58
15,105 New Clicks Holdings Ltd. 17
7,000 South African Breweries Ltd. 197
6,596 South African Druggists Ltd. 49
-------
501
-------
Spain (0.6%)
9,648 Autopistas del Mare Nostrum S.A. 139
6,000 Corporacion Bancaria
de Espana S.A. 299
1,500 Corporacion Mapfre, S.A. 80
6,000 Telefonica de Espana S.A. ADR 524
7,706 Vallehermoso S.A. 195
-------
1,237
-------
Sweden (0.5%)
11,920 Autoliv, Inc. SDR * 451
12,900 NK Cityfastigheter AB * 89
3,600 Nordbanken AB 112
12,900 Volvo AB 357
-------
1,009
-------
Switzerland (1.1%)
80 Ares-Serono Group S.A. 109
461 Novartis AG 625
2,700 Oerlikon Buhrle AG * 313
700 Selecta Group * 111
180 SGS Group AG 398
720 Sulzer AG P.C. 566
14,200 Tag Heuer International
S.A. ADR * 202
-------
2,324
-------
Taiwan (0.3%)
205,000 China Steel Corp. 216
126,474 Far East Department Store * 186
60,000 Microtek International, Inc. * 161
-------
563
-------
Thailand (0.1%)
9,000 Bank Of Ayudhya Public Co. Ltd. 19
18,000 Finance One Public Co. * 5
-------
24
-------
Turkey (0.1%)
340,000 Erciyas Biracilik Ve Malt
Sanayi A.S. 25
1,800,000 Olmuksa Mukavva Sanayi Ve
Ticaret A.S. 52
2,031,527 Yapi Ve Kredi Bankasi A.S. 48
-------
125
-------
United Kingdom (1.6%)
102,000 Avis Europe plc * 219
22,000 Cadbury Schweppes plc 197
60,000 Cookson Group plc 231
73,700 Corporate Services Group plc 218
11,300 DFS Furniture Co. plc 111
4,000 Doncasters plc ADS * 89
1,700 Dr. Solomon's Group plc ADR * 34
34,000 Harvey Nichols plc 157
46,000 Medeva plc 206
36,000 National Westminster Bank plc 440
12,500 Northern Ireland Electricity plc 83
21,500 Reuters Holdings plc 241
30,000 Safeway plc 177
105,000 Tomkins plc 456
1,000 Vodafone Group plc ADR 45
85,000 WPP Group plc 333
-------
3,237
-------
Venezuela (0.1%)
3,700 Compania Anonima Nacional
Telefonos De Venezuela ADS * 137
700,000 Corimon C.A. S.A.C.A * 13
-------
150
-------
Other Holdings (0.1%)
90,000 Central European Growth
Fund plc 99
-------
Total international stocks
(cost: $32,795) 38,395
-------
Small Cap Stocks (28.5%)
Aerospace/Defense (0.6%)
15,000 AAR Corp. 465
12,500 Aviation Sales Co. * 272
12,500 First Aviation Services, Inc. * 119
10,000 Kellstrom Industries, Inc. * 150
5,000 Triumph Group, Inc. * 128
-------
1,134
-------
Air Freight (0.1%)
5,000 Atlas Air, Inc. * 144
5,000 Kitty Hawk, Inc. * 84
-------
228
-------
Auto Parts (0.3%)
20,100 Aftermarket Technology Corp. * 367
11,600 Dura Automotive Systems, Inc. * 304
-------
671
-------
Bank Holding Companies -
Major Regional (0.3%)
5,000 Bank United Corp. 174
5,775 Columbia Banking Systems, Inc. * 104
13,500 Hamilton Bancorp, Inc. * 290
-------
568
-------
Beverages - Alcoholic (0.2%)
10,000 Robert Mondavi Corp. * 445
-------
Biotechnology (0.9%)
5,600 Affymetrix, Inc. * 172
10,000 Arqule, Inc. * 185
5,000 CN Biosciences, Inc. * 79
5,000 Gilead Sciences, Inc. * 136
10,000 Human Genome Sciences, Inc. * 387
6,700 Ilex Oncology, Inc. * 94
5,000 Med Immune, Inc. * 78
2,500 Pharmacopeia, Inc. 38
10,000 Protein Design Labs, Inc. * 316
7,000 SangStat Medical Corp. * 175
-------
1,660
-------
Broadcasters (0.9%)
3,500 Argyle Television, Inc. * 82
7,000 Emmis Broadcasting Corp. * 269
9,100 Gray Communications
Systems, Inc. * 165
15,000 Heftel Broadcasting Corp. * 742
10,725 Outdoor Systems, Inc. * 355
4,800 Univision Communications, Inc. * 173
-------
1,786
-------
Brokerage Firms (0.1%)
6,000 Hambrecht & Quist Group * 137
-------
Building Materials (0.3%)
5,500 Barnett, Inc. * 122
11,200 Diamond Home Services, Inc. * 112
6,000 Service Experts, Inc. * 169
6,400 Watsco, Inc. 186
-------
589
-------
Chemicals (0.2%)
20,300 NuCo2, Inc. * 330
-------
Chemicals - Specialty (0.1%)
6,400 Brunswick Technologies, Inc. * 57
2,600 Zoltek Companies, Inc. * 81
-------
138
-------
Communication - Equipment
Manufacturers (1.1%)
8,100 ACC Corp. * 209
1,100 Advanced Fibre
Communications, Inc. * 61
11,000 Aware, Inc. * 151
20,000 Datum, Inc. * 485
7,500 ODS Networks, Inc. 121
3,000 Peerless Systems Corp. * 47
4,000 REMEC, Inc. * 120
2,000 Sawtek, Inc. * 67
15,000 Shiva Corp. * 193
6,500 Spectrian Corp. * 143
10,000 ViaSat, Inc. * 145
22,300 Yurie Systems, Inc. 368
-------
2,110
-------
Computer Software & Service (3.0%)
22,500 Alternative Resources Corp. * 416
10,000 Arbor Software Corp. * 297
16,200 Aspect Development, Inc. * 383
3,482 Avant! Corp. 80
8,900 Award Software
International, Inc. * 120
5,900 CCC Information Services
Group, Inc. * 102
15,600 Checkfree Corp. * 273
7,400 Claremont Technology Group,
Inc. * 169
16,300 Complete Busines Solutions,
Inc. * 289
21,300 Credit Management
Solutions, Inc. * 224
10,000 DBT Online * 452
16,000 Deltek Systems, Inc. * 224
5,000 ENVOY Corp. * 151
32,500 Geotel Communications Corp. * 431
1,000 HNC Software, Inc. * 33
1,300 I2 Technologies, Inc. * 56
3,400 Indus Group, Inc. * 60
9,000 Integrated Systems, Inc. * 130
7,100 Intelligroup, Inc. * 77
5,100 LHS Group, Inc. * 170
15,000 Macrovision Corp. * 189
5,000 Microware Systems Corp. * 39
4,000 Pegasystems, Inc. * 114
4,000 Phoenix International Ltd., Inc. * 83
12,500 PLATINUM Technology, Inc. * 181
3,000 Rational Software Corp. * 57
500 Sapient Corp. * 22
2,000 Security Dynamics
Technologies, Inc. * 74
5,000 Simulation Sciences, Inc. * 74
7,000 SRS Labs, Inc. * 75
3,100 Technology Modeling
Associates, Inc. * 37
7,000 TriTeal Corp. * 60
3,000 Wind River Systems, Inc. * 102
12,000 Wonderware Corp. * 164
30,000 XcelleNet, Inc. * 476
3,000 Xionics Document
Technologies, Inc. * 42
-------
5,926
-------
Computer Systems (1.0%)
7,000 Advanced Digital
Information Corp. 108
16,600 CHS Electronics, Inc. * 413
25,000 Integrated Process
Equipment Corp. * 459
30,000 Invision Technologies, Inc. * 431
6,000 Pomeroy Computer
Resources, Inc. * 138
10,000 Sandisk Corp. * 144
8,000 SBS Technologies, Inc. * 148
7,000 Total Control Products, Inc. * 53
-------
1,894
-------
Cosmetics (0.1%)
5,000 Carson, Inc. * 49
-------
Drugs (0.1%)
9,000 Kos Pharmaceuticals, Inc. * 269
-------
Electric Power (0.1%)
9,200 Calpine Corp. * 189
-------
Electrical Equipment (0.3%)
5,700 Charter Power Systems, Inc. 192
17,500 Chicago Miniature Lamp, Inc. 420
-------
612
-------
Electronics - Instrumentation (2.2%)
13,100 Brooks Automation, Inc. * 226
12,500 CFM Technologies Inc. * 380
13,600 Cymer, Inc. * 721
17,700 Electroglas, Inc. * 445
16,000 EMCORE Corp. * 272
11,500 Etec Systems, Inc. * 512
33,500 HMT Technology Corp. * 448
5,000 IKOS Systems, Inc. * 124
8,000 Integrated Measurement
Systems, Inc. * 134
15,000 Lecroy Corp. * 525
10,000 Photronics, Inc. * 446
2,400 Speedfam International, Inc. * 87
6,000 Thermo Optek Corp. * 75
-------
4,395
-------
Electronics - Semiconductors (1.0%)
8,500 Benchmarq Microelectronics, Inc.* 171
5,500 ESS Technology, Inc. * 85
5,000 Lattice Semiconductors Corp. * 290
19,500 Sierra Semiconductor Corp. * 471
3,000 SMART Modular
Technologies, Inc. * 101
8,000 TranSwitch Corp. * 51
6,000 Triquint Semiconductor, Inc. * 238
4,500 Vitesse Semiconductor Corp. * 162
21,000 Zoran Corp. * 438
-------
2,007
-------
Finance - Business/Commercial (0.4%)
6,000 Leasing Solutions, Inc. * 91
12,700 Medallion Financial Corp. 222
10,000 Sirrom Capital Corp. 389
-------
702
-------
Finance - Consumer (0.5%)
3,750 Aames Financial Corp. 48
5,800 ACC Consumer Finance Corp. * 64
7,500 Central Financial
Acceptance Corp. * 82
20,000 FIRSTPLUS Financial
Group, Inc. * 510
9,000 NCO Group, Inc. * 297
-------
1,001
-------
Finance - Real Estate (0.2%)
12,000 IMC Mortgage Co. * 173
16,500 Southern Pacific Funding Corp. * 231
-------
404
-------
Foods (0.2%)
5,500 Odwalla, Inc. * 73
8,500 Suiza Foods Corp. * 254
12,000 UniMark Group, Inc. * 82
-------
409
-------
Gaming Companies (0.3%)
11,400 Anchor Gaming * 484
3,000 Silicon Gaming, Inc. * 43
-------
527
-------
Healthcare - HMOs (0.1%)
3,700 First Commonwealth, Inc. * 68
5,000 United Dental Care, Inc. * 85
-------
153
-------
Healthcare - Miscellaneous (0.8%)
5,000 Advance Paradigm, Inc. * 82
1,900 Applied Analytical Industries,Inc.*35
1,100 Enterprise Systems, Inc. * 32
3,200 Health Systems Design Corp. * 16
4,000 Medquist, Inc. * 103
19,000 PAREXEL International Corp. * 625
3,000 Pediatrix Medical Group, Inc. * 119
6,200 Physicians Resource Group, Inc. * 73
1,600 Quadramed Corp. * 11
10,000 Renal Care Group, Inc. * 372
-------
1,468
-------
Home Furnishings & Appliances (0.1%)
5,000 Ethan Allen Interiors Inc. 261
-------
Hospitals (0.2%)
12,600 National Surgery Centers, Inc. * 485
-------
Hotel/Motel (0.3%)
9,000 Bristol Hotel Co. * 330
5,000 Doubletree Corp. * 224
5,000 Suburban Lodges of
America, Inc. * 105
-------
659
-------
Household Products (0.1%)
10,000 USA Detergents, Inc. * 130
-------
Housing - Manufactured (0.1%)
2,100 Belmont Homes, Inc. * 17
-------
Insurance - Property/Casualty (0.1%)
10,000 Nationwide Financial
Services, Inc. * 281
-------
Leisure Time (0.3%)
15,000 Action Performance
Companies, Inc. * 361
10,000 Penn National Gaming, Inc. * 180
5,500 RockShox, Inc. * 80
-------
621
-------
Machinery - Diversified (0.3%)
21,500 RDO Equipment Co. * 387
16,000 U. S. Rentals, Inc. * 380
-------
767
-------
Manufacturing - Diversified
Industries (0.1%)
6,900 United States Filter Corp. * 217
-------
Medical Products & Supplies (1.0%)
3,000 American Medserve Corp. * 44
6,000 ArthroCare Corp. * 46
10,000 Bionx Implants, Inc. * 160
5,000 Capstone Pharmacy Services, Inc. * 50
7,000 Gulf South Medical Supply * 138
3,000 Heartport, Inc. * 72
6,000 Henry Schein, Inc. * 200
15,000 IDEXX Laboratories, Inc. * 212
7,100 Marquette Medical Systems, Inc. * 163
10,000 NCS HealthCare, Inc. * 280
4,000 Perclose, Inc. * 93
8,900 Seamed Corp. * 157
5,300 Suburban Ostomy Supply, Inc. * 50
4,500 Urologix, Inc. * 75
7,000 Vertex Pharmaceuticals, Inc. * 283
3,600 Vitalink Pharmacy Services, Inc. * 69
5,000 Xomed Surgical Products, Inc. * 81
-------
2,173
-------
Nursing Care (0.1%)
5,000 Atria Communities, Inc. * 66
5,000 Multicare Companies, Inc. * 125
-------
191
-------
Office Equipment & Supplies (0.1%)
3,000 American Pad & Paper Co. * 56
-------
Oil - Exploration & Production (0.4%)
2,500 Costilla Energy, Inc. * 31
10,100 Edge Petroleum, Inc. * 144
3,900 Nuevo Energy Co. * 170
7,100 Rutherford-Moran Oil Corp. * 144
5,000 Stone Energy Corp. * 140
5,000 Swift Energy Co. * 134
-------
763
-------
Oil & Gas Drilling (0.6%)
5,000 Cliffs Drilling Co. * 350
6,000 Falcon Drilling Co., Inc. * 275
13,400 Patterson Energy, Inc. * 483
-------
1,108
-------
Oil Well Equipment & Service (1.1%)
3,500 Carbo Ceramics, Inc. * 79
13,200 Halter Marine Group, Inc. * 310
15,000 Hvide Marine, Inc. "A" * 360
9,000 Input/Output, Inc. * 160
9,300 National-Oilwell, Inc. * 450
8,000 Trico Marine Services, Inc. * 300
18,000 Varco International, Inc. * 495
5,000 Veritas DGC, Inc. * 104
-------
2,258
-------
Paper & Forest Products (0.1%)
3,100 Amscam Holdings, Inc. * 40
-------
Pollution Control (0.1%)
10,000 American Disposal
Services, Inc. * 200
-------
Publishing (0.2%)
7,500 C/NET, Inc. * 174
5,500 World Color Press, Inc. * 144
-------
318
-------
Real Estate (0.2%)
10,000 Signature Resorts, Inc. * 294
9,200 Vistana, Inc. * 109
-------
403
-------
Real Estate Investment Trusts (0.3%)
7,500 Alexandria Real Estate
Equities, Inc. * 165
5,000 American General
Hospitality Corp. 129
5,500 Golf Trust of America, Inc. 150
7,500 Prentiss Properties Trust 176
-------
620
-------
Restaurants (0.4%)
8,100 Einstein/Noah Bagel Corp. * 124
11,200 Landry's Seafood
Restaurants, Inc. * 207
6,300 Papa John's International, Inc. * 201
10,000 PJ America, Inc. * 170
-------
702
-------
Retail - Food Chains (0.1%)
5,000 Dominick's Supermarkets, Inc. * 121
-------
Retail - General Merchandising (0.1%)
5,000 Dollar Tree Stores, Inc. * 240
-------
Retail - Specialty (1.6%)
10,000 99 Cents Only Stores * 253
4,500 Abercrombie & Fitch Co. * 78
3,000 Alrenco, Inc. * 36
10,000 Coldwater Creek, Inc. * 170
3,500 Cross Continent Auto
Retailers, Inc. * 45
8,000 Daisytek International Corp. * 252
12,000 Delia's, Inc. * 284
5,000 Eagle Hardware and Garden, Inc.* 120
20,000 Finish Line, Inc. "A" * 248
6,300 Gadzooks, Inc. * 209
1,900 Garden Botanika, Inc. * 10
18,000 Garden Ridge Corp. * 218
7,000 Guitar Center, Inc. * 134
5,800 Hibbett Sporting Goods, Inc. * 100
13,250 Just For Feet, Inc. * 260
5,400 K&G Men's Center, Inc. * 90
5,000 MSC Industrial Direct Co., Inc. * 178
8,700 Party City Corp. * 126
8,000 Paul Harris Stores Inc. * 139
3,500 Petco Animal Supplies, Inc. * 94
-------
3,044
-------
Shoes (0.1%)
7,000 Vans, Inc. * 88
-------
Specialized Services (3.2%)
19,600 Administaff, Inc. * 390
24,000 Altron, Inc. * 399
2,000 American Residential
Services, Inc. * 41
5,100 APAC TeleServices, Inc. * 100
5,800 Benchmark Electronics, Inc. * 204
3,300 Caribiner International, Inc. * 214
5,800 COREStaff, Inc. * 138
8,800 Data Processing Resources Corp. * 194
11,200 Electronic Fab Technology Corp. * 71
14,200 F.Y.I., Inc. * 312
6,000 Fine Host Corp. * 183
2,100 Information Management
Resources, Inc. * 74
7,700 IntelliQuest Information
Group, Inc. * 150
18,500 International Network Services * 481
23,000 International Telecommunication
Data Systems, Inc. * 385
15,950 Lamar Advertising Co. "A" * 403
2,600 Lason, Inc. * 58
9,400 Mastech Corp. * 169
7,500 Merix Corp. * 122
4,500 Nova Corp. * 82
22,600 Obie Media Corp. * 141
3,000 Personnel Group of America, Inc. * 91
15,000 PMT Services, Inc. * 240
4,700 Precision Response Corp. * 108
3,000 Prime Service, Inc. * 73
6,000 RemedyTemp, Inc. "A" * 104
10,300 Rental Service Corp. * 224
3,000 Romac International, Inc. * 88
3,000 SCB Computer Technology, Inc. * 69
3,900 Snyder Communications, Inc. * 107
3,200 Staffmark, Inc. * 60
5,800 Superior Consultant, Inc. * 175
15,450 Sykes Enterprises, Inc. * 384
4,000 Teletech Holdings, Inc. * 92
6,400 Universal Outdoor Holdings, Inc. *208
5,000 Wackenhut Corp. "B" 76
3,000 Whittman-Hart, Inc. * 78
-------
6,488
-------
Telecommunications (0.6%)
8,100 Brooks Fiber Properties, Inc. * 209
4,500 Intermedia Communications of
Florida, Inc. * 136
7,000 IXC Communications, Inc. * 178
4,500 Pacific Gateway Exchange, Inc. * 119
7,000 SmartTalk TeleServices, Inc. * 94
10,000 Tel-Save Holdings, Inc. * 155
5,000 Telco Communications
Group, Inc. * 118
3,800 Teleport Communications
Group, Inc. * 115
-------
1,124
-------
Telephones (0.3%)
8,437 Brightpoint, Inc. 262
6,000 InterCel, Inc. * 82
1,500 McLeod, Inc. * 36
3,800 Omnipoint Corp. * 52
3,900 Premiere Technologies, Inc. * 104
-------
536
-------
Textiles (0.2%)
5,000 Cutter & Buck, Inc. * 66
19,000 North Face, Inc. * 347
-------
413
-------
Tobacco (0.1%)
5,000 General Cigar Holdings, Inc. * 148
-------
Transportation - Miscellaneous (0.1%)
5,000 Coach USA, Inc. * 131
-------
Truckers (0.3%)
16,500 Amerco * 453
5,000 Heartland Express, Inc. * 109
-------
562
-------
Miscellaneous (0.2%)
5,000 Carriage Services, Inc. * 89
10,000 Equity Corp. International * 240
-------
329
-------
Total small cap stocks
(cost: $47,817) 55,295
-------
Large Cap Stocks (32.2%)
Airlines (0.3%)
23,100 Southwest Airlines Co. 595
-------
Biotechnology (1.7%)
10,000 Amgen, Inc. * 669
20,000 Biogen Inc. * 664
55,000 Chiron Corp. * 1,038
40,000 Genzyme Corp. * 955
-------
3,326
-------
Communication - Equipment
Manufacturers (3.9%)
40,000 3Com Corp. * 1,930
28,000 Ascend Communications, Inc. * 1,561
50,000 Cascade Communications Corp. * 1,912
33,000 Cisco Systems, Inc. * 2,236
-------
7,639
-------
Computer Software & Service (0.4%)
20,000 First Data Corp. 800
-------
Computer Systems (0.8%)
4,200 Gateway 2000, Inc. * 279
20,000 Micron Electronics, Inc. * 304
10,000 Seagate Technology, Inc. * 406
10,000 Western Digital Corp. * 541
-------
1,530
-------
Drugs (2.8%)
15,000 Ivax Corp. * 161
30,000 Mylan Laboratories, Inc. 454
140,000 Pharmacia & Upjohn, Inc. 4,848
-------
5,463
-------
Electronics - Instrumentation (1.7%)
22,000 KLA Instruments Corp. * 1,046
40,900 Lam Research Corp. * 1,488
20,200 Teradyne, Inc. * 828
-------
3,362
-------
Electronics - Semiconductors (5.3%)
25,000 Advanced Micro Devices, Inc. * 1,000
9,066 Analog Devices, Inc. * 243
26,000 Applied Materials, Inc. * 1,696
5,000 Intel Corp. 757
4,500 LSI Logic Corp. * 188
65,200 Micron Technology, Inc. 2,771
31,500 Motorola, Inc. 2,091
10,600 Novellus Systems, Inc. * 868
8,100 Texas Instruments, Inc. 728
-------
10,342
-------
Finance - Consumer (0.8%)
50,000 Advanta Corp. 1,469
-------
Gaming Companies (0.3%)
27,200 International Game Technology 483
-------
Healthcare - Diversified (0.4%)
7,100 Warner-Lambert Co. 715
-------
Manufacturing - Diversified
Industries (0.5%)
18,700 Hillenbrand Industries, Inc. 881
-------
Medical Products & Supplies (2.3%)
23,100 Bausch & Lomb, Inc. 930
16,100 Boston Scientific Corp. * 859
20,000 St. Jude Medical, Inc. * 678
59,000 United States Surgical Corp. 1,991
-------
4,458
-------
Oil - Domestic (0.5%)
6,000 Atlantic Richfield Co. 873
-------
Oil - Exploration & Production (0.1%)
3,100 Burlington Resources, Inc. 144
-------
Oil - International (0.6%)
9,900 Texaco, Inc. 1,080
-------
Oil & Gas Drilling (0.9%)
25,000 Transocean Offshore, Inc. 1,725
-------
Oil Well Equipment & Service (2.0%)
12,800 Baker Hughes, Inc. 480
20,000 Ensco International, Inc.* 997
19,300 Halliburton Co. 1,493
20,000 Tidewater, Inc. 843
-------
3,813
-------
Restaurants (0.8%)
51,000 Brinker International, Inc. * 707
20,000 Lone Star Steakhouse
& Saloon, Inc. * 460
15,000 Outback Steakhouse, Inc. * 349
-------
1,516
-------
Retail - Food Chains (0.1%)
3,000 Great Atlantic & Pacific Tea
Co., Inc. 83
-------
Shoes (0.4%)
15,000 Nike, Inc. "B" 855
-------
Tobacco (3.5%)
68,300 Philip Morris Co., Inc. 3,005
95,600 RJR Nabisco Holdings Corp. 3,095
25,700 UST, Inc. 733
-------
6,833
-------
Truckers (2.1%)
33,500 Caliber System, Inc. 1,072
59,200 CNF Transportation, Inc. 1,909
21,100 Consolidated Freightways Corp.* 261
2,000 Roadway Express, Inc. 38
32,400 Ryder System, Inc. 1,074
-------
4,354
-------
Total large cap stocks
(cost: $53,295) 62,339
-------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT COUPON
(000) RATE MATURITY
- --------- ------ --------
<C> <C> <C> <C> <C>
Bonds (19.0%)
$2,000 Capital One Financial Corporation 7.25% 12/01/03 1,945
1,000 Comcast Cable Communications 8.13 5/01/04 1,017(a)
1,000 Corporacion Andina De Fomento, Bonds (Venezuela) 7.10 2/01/03 996
1,000 First Industrial LP 7.60 5/15/07 998
1,000 Fisher Scientific International, Inc. 7.13 12/15/05 974
1,000 Franchise Finance Corp. of America, Senior Notes 7.00 11/30/00 999
2,000 Giddings & Lewis, Inc., Notes 7.50 10/01/05 1,961
1,000 Great Atlantic & Pacific Tea, Inc., Senior Notes 7.70 1/15/04 1,005
1,000 Health Care Property Investors, Inc., Senior Notes 6.50 2/15/06 936
2,000 HUBCO, Inc. 8.20 9/15/06 2,061
1,000 Kmart Corp., Debentures 7.95 2/01/23 881
2,000 MacSaver Financial Services, Inc. 7.40 2/15/02 1,980
1,000 Merita Bank Ltd., Subordinated Note (Finland) 6.50 1/15/06 947
1,000 Pulte Corp., Senior Notes 7.00 12/15/03 975
1,000 RJR Nabisco, Inc., Notes 8.00 7/15/01 1,011
1,000 Security Capital Pacific Trust, Notes 7.15 10/15/03 992
2,000 Tele-Communications, Inc., Senior Notes 8.25 1/15/03 2,037
1,000 Time Warner, Inc., Notes 7.48 1/15/08 988
1,000 Washington Real Estate Investment Trust, Senior Notes7.25 8/13/06 989
2,000 WorldCom, Inc. 7.55 4/01/04 2,012
2,064 Government National Mortgage Association 6.50 10/20/25 1,950
2,457 Government National Mortgage Association 7.00 6/20/26 2,383
2,973 Government National Mortgage Association 7.50 10/20/26 2,954
1,965 Government National Mortgage Association 7.50 11/20/26 1,952
1,953 Government National Mortgage Association 8.00 9/20/26 1,984
------
Total bonds (cost: $37,061) 36,927
------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
- --------- -------- ------ -------- ------
<C> <C> <C> <C> <C>
Money Market Instrument (0.3%)
$ 550 Federal National Mortgage Association (cost: $550) 5.52% 6/02/97 $ 550
---------
Total investments (cost: $171,518) $ 193,506
=========
</TABLE>
- ----------------------
*Non-income producing.
<TABLE>
Portfolio Summary By Industry
-----------------------------
<C> <C>
Healthcare Related 12.0%
Electronics Related 11.4
Telecommunications Related 8.7
Oil Related 7.9
U.S. Government & Agency Issues 6.1
Bank Related 5.0
Retail Related 4.9
Tobacco 4.2
Computer Software & Service 4.0
Specialized Services 4.0
Real Estate Investment Trusts 2.9
Broadcasters 2.8
Truckers 2.5
Computer Systems 2.0
Finance - Consumer 1.3
Machine Tools 1.2
Restaurants 1.1
Auto Parts 1.0
Manufacturing - Diversified 1.0
Other 15.8
----
99.8%
====
</TABLE>
Growth Strategy Fund
Notes to Portfolio of Investments in Securities
May 31, 1997
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 Stocks 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.
ADS/ADR -- American Depositary Shares/Receipts are foreign shares held by a U.S.
bank which issues a receipt evidencing ownership. Dividends are paid in U.S.
dollars.
GDS/GDR -- Global Depositary Shares/Receipts are foreign shares held by a
non-U.S. bank which issues a receipt evidencing ownership. Dividends are paid in
U.S. dollars.
SPECIFIC NOTES
(a) Security is exempt from registration under the Securities Act of 1933 and
has been determined to be liquid by the Manager. Any resale of this security
may occur in an exempt transaction in the United States to a qualified
institutional buyer as defined by Rule 144A.
See accompanying notes to financial statements.
Growth Strategy Fund
Statement of Operations
(In Thousands)
May 31, 1997
<TABLE>
<S> <C>
Net investment income:
Income (net of foreign taxes withheld of $71):
Dividends $ 1,422
Interest 2,234
---------
Total income 3,656
---------
Expenses:
Management fees 991
Transfer agent's fees 393
Custodian's fees 220
Postage 23
Shareholder reporting fees 8
Trustees' fees 3
Registration fees 60
Audit fees 20
Legal fees 3
Other 8
---------
Total expenses 1,729
---------
Net investment income 1,927
---------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 955
Foreign currency transactions (4)
Change in net unrealized appreciation/depreciation of:
Investments 11,018
Translation of assets and liabilities in foreign currencies (2)
---------
Net realized and unrealized gain 11,967
---------
Increase in net assets resulting from operations $ 13,894
=========
</TABLE>
See accompanying notes to financial statements.
Growth Strategy Fund
Statements of Changes in Net Assets
(In Thousands)
Year ended May 31, 1997
and Nine-month period ended May 31, 1996*
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
From operations:
Net investment income $ 1,927 $ 389
Net realized gain on investments 955 1,393
Net realized loss on foreign currency transactions (4) (1)
Change in net unrealized appreciation/depreciation of:
Investments 11,018 10,970
Foreign currency translations (2) -
---------- ---------
Increase in net assets resulting from operations 13,894 12,751
---------- ---------
Distributions to shareholders from:
Net investment income (1,215) (83)
---------- ---------
Net realized gains (3,874) -
---------- ---------
From capital share transactions:
Proceeds from shares sold 138,121 77,248
Shares issued for dividends reinvested 4,982 53
Cost of shares redeemed (45,175) (2,781)
---------- ---------
Increase in net assets from capital share transactions 97,928 74,520
---------- ---------
Net increase in net assets 106,733 87,188
Net assets:
Beginning of period 87,188 -
---------- ---------
End of period $ 193,921 $ 87,188
========== =========
Undistributed net investment income included in net assets:
Beginning of period $ 338 $ -
========== =========
End of period $ 1,057 $ 338
========== =========
Change in shares outstanding:
Shares sold 11,224 7,082
Shares issued for dividends reinvested 412 5
Shares redeemed (3,679) (244)
---------- ---------
Increase in shares outstanding 7,957 6,843
========== =========
* Fund commenced operations September 1, 1995.
</TABLE>
See accompanying notes to financial statements.
Growth Strategy Fund
Notes to Financial Statements
May 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA INVESTMENT TRUST (the Trust), registered under the Investment Company Act
of 1940, as amended, 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). 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 Fund'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 were made to the
statement of assets and liabilities at May 31, 1997 to increase accumulated
undistributed net investment income by $10,776 and to decrease accumulated net
realized gain on investments by $10,776. A similar reclassification was made in
1996 in the amount of $32,948.
C. Investments in securities -- 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 13, 1998, one with USAA
Capital Corporation (CAPCO), 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, of which only 5% may
be borrowed from CAPCO, at the lending institution's borrowing rate plus a
markup. The Fund had no borrowings under either of these agreements during the
year ended May 31, 1997.
(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
or as otherwise required to avoid the payment of federal taxes. Overdistribution
of net realized gain on investments is a result of capital gain distributions
required for federal excise tax purposes, and does not represent a return of
capital. Such amounts will be available to offset future capital gains.
Distributions of net investment income of $.0699 per share and short-term
capital gains of $.0003 per share, declared and paid in July 1997, are not
reflected in the accompanying financial statements.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term securities,
for the year ended May 31, 1997 were $177,013,636 and $80,258,615, respectively.
Gross unrealized appreciation and depreciation of investments at May 31, 1997
was $27,054,807 and $5,066,341, 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, 1997, the terms of open foreign currency contracts were as follows
(in thousands):
<TABLE>
<CAPTION>
U.S. Dollar U.S. Dollar Unrealized
Exchange Currency to be Value as of Currency to be Value as of Appreciation
Date Delivered 5/31/97 Received 5/31/97 (Depreciation)
---- ---------- ------- -------- ------- --------------
<C> <C> <C> <C> <C> <C>
6/02/97 67 U.S. Dollar $ 67 41 British Pound $ 67 $ -
6/02/97 12 U.S. Dollar 12 97 Hong Kong Dollar 12 -
6/03/97 35 U.S. Dollar 35 21 British Pound 35 -
6/03/97 88 U.S. Dollar 88 54 British Pound 88 -
6/03/97 8 U.S. Dollar 8 5 British Pound 8 -
6/03/97 30 U.S. Dollar 30 50,035 Italian Lira 30 -
6/03/97 29 U.S. Dollar 29 48,749 Italian Lira 29 -
6/04/97 8 U.S. Dollar 8 5 British Pound 8 -
6/04/97 88 U.S. Dollar 88 54 British Pound 88 -
6/06/97 4 U.S. Dollar 4 2 British Pound 4 -
6/06/97 52 U.S. Dollar 52 32 British Pound 52 -
6/09/97 10 U.S. Dollar 10 117 Austrian Schilling 9 (1)
6/09/97 8 U.S. Dollar 8 114 Austrian Schilling 8 -
6/09/97 7 U.S. Dollar 7 78 Austrian Schilling 7 -
6/09/97 17 U.S. Dollar 17 200 Austrian Schilling 17 -
6/09/97 4,372 Indonesian Rupiah 2 2 U.S. Dollar 2 -
6/30/97 29 U.S. Dollar 29 167 French Franc 29 -
---- ---- ----
$494 $493 $ (1)
==== ==== ====
</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 based on an annual charge per shareholder account plus out-of-pocket
expenses.
C. Underwriting services -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
D. Brokerage services -- USAA Brokerage Services, a discount brokerage service
of the Manager, may execute portfolio transactions for the Fund. The amount of
brokerage commissions paid to USAA Brokerage Services during the year ended May
31, 1997 was $10,580.
(7) Transactions with Affiliates
Certain trustees and officers of the Fund are also directors, officers,
and/or employees of the Manager. None of the affiliated trustees or Fund
officers received any compensation from the Fund.
(8) Financial Highlights
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Nine-month
Year Ended Period Ended
May 31, May 31,
1997 1996*
---- -----
<S> <C> <C>
Net asset value at
beginning of period $ 12.74 $ 10.00
Net investment income .15 .11(b)
Net realized and
unrealized gain .77 2.66
Distributions from net
investment income (.12) (.03)
Distributions of realized
capital gains (.44) -
---------- --------
Net asset value at
end of period $ 13.10 $ 12.74
========== ========
Total return (%) ** 7.73 27.76
Net assets at end of
period (000) $ 193,921 $ 87,188
Ratio of expenses to
average net assets (%) 1.31 1.66(a)
Ratio of net investment
income to average
net assets (%) 1.46 1.34(a)
Portfolio turnover (%) 62.50 40.21
Average commission rate paid per share + $ .0197 $ .0072
</TABLE>
* Fund commenced operations September 1, 1995.
** Assumes reinvestment of all dividend income and capital gain distributions
during the period.
+ Calculated by aggregating all commissions paid on the purchase and sale of
securities and dividing by the actual number of shares purchased or sold for
which commissions were charged.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
