TABLE OF CONTENTS
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Statement of Assets and Liabilities 8
Portfolio of Investments in Securities 9
Notes to Portfolio of Investments in Securities 11
Statement of Operations 12
Statements of Changes in Net Assets 13
Notes to Financial Statements 14
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 Gold 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 December 31, 1996.
<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 16.47 11.45 13.12 -
Emerging Markets(1) 11/7/94 16.59 - - 4.84
Gold(1) 8/15/84 0.00 6.57 .93 -
Growth 4/5/71 17.80 13.69 13.24 -
Growth & Income 6/1/93 23.04 - - 16.24
International(1) 7/11/88 19.15 13.09 - 10.60
S&P 500 Index(4) 5/1/96 - - - 16.83+
World Growth(1) 10/1/92 19.08 - - 13.66
Asset Allocation
Balanced Strategy 9/1/95 13.45 - - 12.49
Cornerstone Strategy(1) 8/15/84 17.87 12.69 10.70 -
Growth and Tax Strategy(2)** 1/11/89 11.12 9.64 - 9.97
Growth Strategy(1) 9/1/95 22.13 - - 21.47
Income Strategy 9/1/95 3.00 - - 9.72
Income - Taxable
GNMA 2/1/91 2.94 6.43 - 7.66
Income 3/4/74 1.33 7.33 9.25 -
Income Stock 5/4/87 18.70 12.76 - 12.78
Short-Term Bond 6/1/93 6.31 - - 5.60
Income - Tax Exempt
Long-Term(2)** 3/19/82 4.47 6.87 7.37 -
Intermediate-Term(2)** 3/19/82 4.49 6.89 7.09 -
Short-Term(2)** 3/19/82 4.44 4.94 5.45 -
California Bond(2)** 8/1/89 5.39 7.29 - 7.65
Florida Tax-Free Income(2)** 10/1/93 4.38 - - 3.69
New York Bond(2)** 10/15/90 3.73 6.61 - 8.35
Texas Tax-Free Income(2)** 8/1/94 5.25 - - 9.44
Virginia Bond(2)** 10/15/90 5.06 7.09
Money Market
Money Market(3) 2/2/81 5.24 4.37 5.84 -
Tax Exempt Money Market(2,3)** 2/6/84 3.34 3.04 4.21 -
Treasury Money Market Trust(3) 2/1/91 5.10 4.16 - 4.32
California Money Market(2,3)** 8/1/89 3.27 2.93 - 3.64
Florida Tax-Free Money Market(2,3)** 10/1/93 3.24 - - 3.01
New York Money Market(2,3)** 10/15/90 3.20 2.79 - 3.07
Texas Tax-Free Money Market(2,3)** 8/1/94 3.25 - - 3.32
Virginia Money Market(2,3)** 10/15/90 3.17 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 dis-
tributed 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 alter-
native 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 yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested dividends
and capital gain distributions. The performance data quoted represent past
performance and are not an indication of future results. Investment return
and principal value of an investment will fluctuate, and an investor's
shares, when redeemed, may be worth more or less than their original cost.
** IRAs are not available for tax-exempt funds. The Growth and Tax Strategy Fund
is not available as an investment for your IRA because the majority of its
income is tax-exempt. California, Florida, New York, Texas, and Virginia
funds available to residents only.
+ Cumulative total return since inception.
MESSAGE FROM THE PRESIDENT
On January 29, 1995, my wife and I became grandparents. Karl Joseph Marbach
was born to Alexandra, my wife's daughter, and her husband Keith Marbach.
When my wife learned of the name Alexandra and Keith had chosen, she smiled.
She noted that my middle names are Joseph Carl, and she said, "I think this
kid's college education is secure."
-- May 31, 1995 Annual Report
In the May 31, 1995, annual report, my message centered on regular,
systematic investing, and I told you I was going to practice something
I had preached for many years. I introduced you to my grandson, Karl
Joseph, and told you I had set up an InveStart(Registered Trademark) account
for his college expenses. This is a progress report.
By the time you read this message, Karl Joseph will be 24 months old -- a good
time for an update. As you might expect me to say, Karl Joseph is a very bright
guy. He is one of the few people whom our wire-haired dachshund, Brunhilde,
will tolerate. We have found that Bruni is a discerning judge of people!
One of Karl's favorite things is watching me toss grapes and catch them in my
mouth. He loves stuffed animals, swimming, and his grandmother's cooking. I'm
very pleased to say that his progress is just as I expected.
I'm also pleased to let you know that his education fund is progressing well
too. I opened an InveStart account for Karl on June 2, 1995, in the Income Stock
Fund. The NAV then was $14.77, and at this writing it is well over $16.00. In
addition to my $100 initial investment, there have now been 17 electronic
transfers of $50 into the account. That totals $950, and an interesting thing
has happened. The account is worth much more than $950 because, in addition to
dividends and appreciation, it has attracted other money. This is a college
account and a great cause. Karl is surprisingly well on his way.
There is a lesson here. Funding a college education is a challenge, but starting
early with an account like this is an excellent step. It provides a place for a
few extra dollars that show up on special occasions.
"Secure" may be an exaggeration, but I did decide to practice one thing I have
preached for many years ... I opened an InveStart (Registered Trademark)
account for Karl Joseph.
-- May 31, 1995 Annual Report
We originally intended it for young USAA members as a good way to start
investing. We found, however, that many grandparents were using it as I just
did.
-- May 31, 1995 Annual Report
I do practice what I preach. Systematic investing makes sense, and InveStart has
an expanded lineup of available funds. I encourage you to look at your
investment as you study the information in this report, and if you are not
investing regularly, please consider if it may be appropriate for you.
If you have any questions about our systematic investment plans or any of our
other mutual funds, please call. Your team of account representatives will be
glad to assist you with any questions you may have.
Sincerely,
Michael J.C. Roth
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
[Photograph of Michael J.C. Roth, President and Vice Chairman
of the Board appears here.]
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.
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.
The performance data quoted represents past performance and is no guarantee of
future results. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
INVESTMENT REVIEW
GOLD FUND
OBJECTIVE: Long-term capital appreciation for the purpose of protecting the
purchasing power of capital from inflation. Current income is a secondary
objective.
TYPES OF INVESTMENTS: At least 80 percent of the Fund's assets are invested in
gold stocks. The remainder may be invested in common stocks of companies engaged
in other precious metal and mineral mining.
5/31/96 11/30/96
Net Assets................................... $167.1 Million $130.7 Million
Net Asset Value Per Share.................... $11.12 $8.97
Average Annual Total Returns as of 11/30/96
May 31, 1996 to November 30, 1996..................................-19.33%+
1 Year............................................................ 2.72%
5 Years........................................................... 6.06%
10 Years........................................................... 1.70%
+ 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 11/30/86 to 11/30/96, with dividends
and capital gains reinvested. The ending value of each item graphed is as
follows: S&P 500 - $41,154, Philadelphia Gold & Silver (XAU) - $15,113,
USAA Gold Fund - $11,831 and Gold Bullion-London Gold - $9,533.]
The graph illustrates a $10,000 hypothetical investment in the USAA Gold Fund;
the S&P 500 Index, which 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 Philadelphia Gold &
Silver Index, representing nine holdings in the gold & silver sector,
typically referred to as the XAU; and London Gold, a traditional Gold Bullion
index that is readily available.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested income
dividends and capital gain distributions. The performance data quoted represent
past performance and are not an indication of future results. Investment
return and principal value of an investment will fluctuate, and an investor's
shares, when redeemed, may be worth more or less than their original cost.
MESSAGE FROM THE MANAGER
[A photo of Mark W. Johnson, Portfolio Manager, appears here.]
Gold prices fell 4.9% from $390.55 to $371.30 during the six months ended
November 30, 1996, marking the lowest price since April, 1994. For the same
period, the cumulative return for the USAA Gold Fund was -19.33%. Prices of
gold mining common stocks suffered a more dramatic fall than the gold price
itself because of the high degree of operating leverage at the mining
companies. This leverage cuts both ways. For example, the USAA Gold Fund in
fiscal 1996 had a total return of 23.66%(1) on a 1.6% increase in the gold
price.(2)
We are both surprised and disappointed with the gold price and recent
developments in the gold market. Readers of our most recent annual report will
recall that we felt that gold would be unlikely to trade much below $390 on a
sustained basis because of strong end user demand coupled with reduced central
bank selling below $390. Clearly, this view was wrong. A number of factors
combined to drive the gold price down. However, the strong U.S. dollar was
the most important. Gold is priced all over the world in dollars per ounce.
Thus, if the dollar strengthens against the Japanese yen, and the price of
gold in dollars remains stable, for a Japanese buyer the price of gold has
risen. Indeed, according to the World Gold Council,(3) calendar year-to-date
bullion imports into Japan dropped 38% with no pockets of strength elsewhere
in the world. Meanwhile, it appears that mine production will overturn
two years of decline, rising about 4% in calendar 1996. This combination
of increased mine output coupled with soft physical demand proved unfavorable.
Developments in the governmental sectors also hurt the gold price. Apparent
increased selling by European central banks in advance of the European Monetary
Union could continue into 1997. Meanwhile, International Monetary Fund (IMF)
officials reached an agreement to sell five million ounces of gold to reduce
developing country debt. This agreement required the tacit approval of a number
of governments that hold substantial gold positions. Finally, on November 24, an
official of the Swiss National Bank (SNB) announced that Switzerland's Federal
Council "had agreed to consider an SNB proposal" that would include "the
possibility to sell part of its gold." The IMF and SNB proposals face
significant hurdles (U.S. congressional approval in the case of the IMF and a
popular vote and constitutional change for the Swiss) that will delay until at
least 1998, if not derail, these proposed sales.
Nonetheless, the cold hard reality is that these developments demonstrate just
how far the esteem in which central bankers hold gold has fallen. Indeed, one
wonders if the consensus view of gold by central bankers has now evolved to that
of John Maynard Keynes, who famously termed gold a "barbarous relic." If so,
then a pessimistic secular view on the gold price is inescapable given that some
15 years of mine supply are contained in the vaults of central banks and other
official organizations. That is enough potential incremental supply to cap the
gold price for a generation.
Although concerned about the longer-term outlook for gold, we should remember
that this is a volatile market that can experience price spikes. In that regard,
it is important to note that the speculative short position exceeds 6 million
ounces - a high level by historical standards and a bullish indicator. Any rally
in the gold price could be quite strong as the shorts cover their positions. The
catalyst for such a rally probably lies either in the value of the yen, a
narrowing of the contango (the premium of a one-year futures contract over the
near-term contract) from the current 3.7%, or a failure to peacefully and
smoothly integrate Hong Kong into China.
In managing the USAA Gold Fund, Lindsey Falconer, the Fund's Senior Securities
Analyst, and I will focus on low-cost producers that have good production or
reserve growth potential. This strategy, in our view, is the one most likely to
yield acceptable results in the context of a difficult environment.
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.
(1) Average Annual Total Return as of 5/31/96: 5 years - 11.93%,
10 years - 7.80%
(2) Past performance is no guarantee of future results and the value of your
investment may vary according to the Fund's performance.
(3) A non-profit association of 45 gold mining companies from 9 countries
based in Geneva that promotes gold in jewelry, industry and investment.
Top 10 Equity Holdings
(% of Net Assets)
Barrick Gold 8.0
Freeport-McMoRan
Copper & Gold "A" 6.9
Placer Dome 6.3
TVX Gold 5.4
Gold Fields of S. Africa 5.0
Agnico-Eagle Mines 5.0
Santa Fe Pacific Gold 4.8
Pioneer Group 4.6
Battle Mountain Gold 4.4
Newmont Mining 4.0
See page 9 for a complete listing of the Portfolio of Investments in Securities.
<TABLE>
<CAPTION>
Gold Fund
Statement of Assets and Liabilities
(In Thousands)
November 30, 1996
(Unaudited)
<S> <C>
Assets
Investments in securities, at market value (identified cost of $129,980) $ 130,822
Cash 20
Cash denominated in foreign currencies (identified cost of $367) 366
Receivables:
Capital shares sold 60
Dividends and interest 68
Securities sold 80
-----------
Total assets 131,416
-----------
Liabilities
Securities purchased 449
Capital shares redeemed 94
USAA Investment Management Company 83
USAA Transfer Agency Company 49
Accounts payable and accrued expenses 51
----------
Total liabilities 726
----------
Net assets applicable to capital shares outstanding $ 130,690
==========
Represented by:
Paid-in capital $ 203,436
Accumulated net investment loss (124)
Accumulated net realized loss on investments (73,462)
Net unrealized appreciation of investments 842
Net unrealized depreciation on foreign currency translations (2)
----------
Net assets applicable to capital shares outstanding $ 130,690
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 14,577
==========
Net asset value, redemption price, and offering price per share $ 8.97
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
Gold Fund
Portfolio of Investments in Securities
<CAPTION>
November 30, 1996
(Unaudited)
Market Number
Number value
of Shares Security (000)
<C> <S> <C>
Common Stocks (96.8%)
African Gold Companies (12.6%)
325,000 Ashanti Goldfields Co. Ltd. GDS $ 4,672
225,000 Gold Fields of South Africa Ltd. ADR 6,546
50,000 Southvaal Holdings 1,443
125,000 Western Deep Levels Ltd. ADR 3,859
-----------
16,520
-----------
Australian Gold Companies (12.4%)
2,350,000 Acacia Resources Ltd. * 4,744
1,300,000 Newcrest Mining Ltd. 4,762
1,000,000 Plutonic Resources Ltd. 4,460
675,800 Ranger Minerals NL * 2,200
-----------
16,166
-----------
North American Gold Companies (66.0%)
475,000 Agnico-Eagle Mines Ltd. 6,531
350,000 Barrick Gold Corp. 10,500
800,000 Battle Mountain Gold Co. 5,800
250,000 Bresea Resources Ltd. * 2,113
350,000 Dayton Mining Corp. * 1,903
300,000 Freeport-McMoRan Copper & Gold, Inc. "A" 8,963
125,000 Getchell Gold Corp. * 4,891
225,000 Goldcorp, Inc. "A" * 1,952
225,000 Golden Knight Resources, Inc. * 1,418
50,000 Greenstone Resources Ltd. * 667
110,000 Newmont Gold Co. 5,101
110,000 Newmont Mining Corp. 5,266
250,000 Pioneer Group, Inc. 6,063
350,000 Placer Dome, Inc. 8,253
550,000 Santa Fe Pacific Gold Corp. 6,325
1,000,000 TVX Gold, Inc. * 7,007
325,000 Vengold, Inc. * 446
250,000 Viceroy Resource Corp. * 1,279
259,100 Wharf Resources Ltd. 1,729
-----------
86,207
-----------
North American Platinum Companies (3.3%)
250,000 Stillwater Mining Co. * $ 4,375
-----------
South American Gold Companies (2.5%)
200,000 Compania de Minas Buenaventura ADR * 3,275
-----------
Total common stocks (cost: $125,701) 126,543
-----------
Principal
Amount
(000)
U.S. Government & Agency Issue (3.3%)
$ 4,280 Federal Home Loan Mortgage Corp., 5.70%, 12/02/96 (cost: $4,279) 4,279
-------------
Total investments (cost: $129,980) $ 130,822
=============
</TABLE>
- --------------------------
*Non-income producing.
Gold Fund
Notes to Portfolio of Investments in Securities
November 30, 1996
(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.
ADR - American Depositary Receipts are foreign shares held by a U.S. bank which
issues a receipt evidencing ownership. Dividends are paid in U.S. dollars.
GDS - Global Depositary Shares are foreign shares held by a non-U.S. bank which
issues a receipt evidencing ownership. Dividends are paid in U.S. dollars.
See accompanying notes to financial statments.
Gold Fund
Statement of Operations
(In Thousands)
Six-month period ended November 30, 1996
(Unaudited)
Net investment income:
Income (net of foreign taxes withheld of $51):
Dividends $ 709
Interest 68
------------
Total income 777
------------
Expenses:
Management fees 499
Transfer agent's fees 290
Custodian's fees 40
Postage 10
Shareholder reporting fees 5
Trustees' fees 2
Registration fees 31
Audit fees 12
Legal fees 3
Other 3
------------
Total expenses 895
------------
Net investment loss (118)
------------
Net realized and unrealized loss on investments
and foreign currency:
Net realized gain (loss) on:
Investments 527
Foreign currency transactions (1)
Change in net unrealized appreciation/depreciation of:
Investments (32,188)
Translation of assets and liabilities in foreign currencies (2)
------------
Net realized and unrealized loss (31,664)
------------
Decrease in net assets resulting from operations $ (31,782)
============
See accompanying notes to financial statements.
Gold Fund
Statements of Changes in Net Assets
(In Thousands)
Six-month period ended November 30, 1996
and Year ended May 31, 1996
(Unaudited) 11/30/96 5/31/96
---------- -----------
From operations:
Net investment loss $ (118) $ (211)
Net realized gain on investments 527 12,882
Net realized loss on foreign
currency transactions (1) (2)
Change in net unrealized
appreciation/depreciation of:
Investments (32,188) 21,735
Foreign currency translations (2) -
------------ ------------
Increase (decrease) in net assets resulting
from operations (31,782) 34,404
------------ ------------
Distributions to shareholders from:
Net investment income - (117)
------------ ------------
From capital share transactions:
Proceeds from shares sold 39,479 129,783
Shares issued for dividends reinvested - 112
Cost of shares redeemed (44,074) (157,338)
------------ ------------
Decrease in net assets from capital
share transactions (4,595) (27,443)
------------ ------------
Net increase (decrease) in net assets (36,377) 6,844
Net assets:
Beginning of period 167,067 160,223
------------ ------------
End of period $ 130,690 $ 167,067
============ ===========
Undistributed net investment income
(loss) included in net assets:
Beginning of period $ (5) $ 110
============ ============
End of period $ (124) $ (5)
============ ============
Change in shares outstanding:
Shares sold 4,128 13,066
Shares issued for dividends reinvested - 13
Shares redeemed (4,569) (15,870)
------------ -----------
Decrease in shares outstanding (441) (2,791)
============ ===========
See accompanying notes to financial statements.
Gold Fund
Notes to Financial Statements
November 30, 1996
(Unaudited)
(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 semiannual report pertains only to the Gold
Fund (the Fund). The Fund's primary investment objective is to seek long-term
capital appreciation and to protect the purchasing power of shareholders'
capital against inflation. Current income is a secondary objective.
A. Security valuation - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are valued at the last sales price on that
exchange. Portfolio securities traded primarily on foreign securities exchanges
are generally valued at the closing values of such securities on the exchange
where primarily traded. If no sale is reported, the latest bid price is
generally used depending upon local custom or regulation.
2. Over-the-counter securities are priced at the last sales price or, if not
available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less are stated at
amortized cost which approximates market value.
4. Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the Manager under the general supervision of the Board of Trustees.
B. Federal taxes - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required. As a result of certain
permanent differences between book and tax basis accounting, reclassifications
were made to the statement of assets and liabilities at May 31, 1996 to decrease
accumulated net investment loss by $214,733 and to decrease paid-in capital by
$61,000 and to increase accumulated net realized loss on investments by
$153,733.
C. Investments in securities - As is common in the industry, security
transactions are accounted for on the date the securities are purchased or sold
(trade date). Gain or loss from sales of investment securities is computed on
the identified cost basis. Dividend income, less foreign taxes, if any,
is recorded on the ex-dividend date. If the ex-dividend date has passed,
certain dividends from foreign securities are recorded upon notification.
Interest income is recorded on the accrual basis. Discounts and premiums on
short-term securities are amortized over the life of the respective
securities. The Fund concentrates its investments in securities of companies
principally engaged in gold exploration, mining, or processing and therefore
may be exposed to more risk than portfolios with a broader industry
diversification.
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 the difference between amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent of the amounts received. Net realized foreign currency
gains/losses have been reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets and
liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities other than investments in
securities resulting from changes in the exchange rate.
E. Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
(2) Lines of Credit
The Fund participates with other USAA funds in two joint short-term revolving
loan agreements totaling $850 million through January 14, 1997, one with USAA
Capital Corporation (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
six-month period ended November 30, 1996.
(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. At November 30,
1996, the Fund had capital loss carryovers for federal income tax purposes of
approximately $73,462,000 (approximately $7,000,000 of which will expire by May
31, 1997) which, if not offset by subsequent capital gains, will expire between
1997-2002. It is unlikely that the Fund's Board of Trustees will authorize a
distribution of capital gains realized in the future until the capital loss
carryovers have been utilized or expire.
(4) Investment Transactions
Purchases and sales of securities, excluding short-term securities, for the
six-month period ended November 30, 1996 were $8,515,812 and $12,633,274,
respectively.
Gross unrealized appreciation and depreciation of investments as of November 30,
1996 was $15,296,194 and $14,453,984, 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, 1996, the terms of open foreign currency contracts were as
follows (in thousands):
U.S. Dollar
Exchange Currency to be Value as of
Date Delivered 11/30/96
- --------- ------------------- ------------
12/02/96 99 Australian Dollar $ 80
======
U.S. Dollar Unrealized
Currency to be Value as of Appreciation
Received 11/30/96 (Depreciation)
- --------------- ----------- -----------------
80 U.S. Dollar $80 $-
====== ======
(6) Transactions with Manager
A. Management fees - The investment policies of the Fund and management of the
Fund's portfolio are carried out by USAA Investment Management Company (the
Manager). The Fund's management fees are computed at .75% of its annual average
net assets.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Fund. Shareholder accounting service fees are based on an annual charge
per shareholder account plus out-of-pocket expenses.
C. Underwriting services - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no fee or other remuneration for such services.
Gold Fund
Notes to Financial Statements (continued)
November 30, 1996
(Unaudited)
(7)Financial Highlights
Per share operating performance for a share outstanding throughout each period
is as follows:
Six-month
Period Ended Year Ended
November 30, May 31,
1996 1996 1995
Net asset value at
beginning of period $ 11.12 $ 9.00 $ 8.83
Net investment
income (loss) (.01)(b) (.02) .01
Net realized and
unrealized gain (loss) (2.14) 2.15 .17
Distributions from net
investment income - (.01) (.01)
---------- ---------- ----------
Net asset value at
end of period $ 8.97 $ 11.12 $ 9.00
=========== ========== ==========
Total return (%) * (19.33) 23.66 2.05
Net assets at end
of period (000) $ 130,690 $167,067 $160,223
Ratio of expenses to
average net assets (%) 1.27(a) 1.33 1.28
Ratio of net investment
income (loss) to average
net assets (%) (.17)(a) (.14) .10
Portfolio turnover (%) 6.15 16.48 34.76
Average commission
rate paid per share+ $ .0303 $ .0292
Gold Fund
Notes to Financial Statements (continued)
November 30, 1996
(Unaudited)
(7) Financial Highlights (continued)
Eight-month
Period Ended Year Ended
May 31, September 30,
1994 1993 1992
Net asset value at
beginning of period $ 7.95 $ 6.53 $ 6.40
Net investment
income (loss) .01 .02 .07
Net realized and
unrealized gain (loss) .88 1.44 .14
Distributions from net
investment income (.01) (.04) (.08)
----------- ----------- ----------
Net asset value at
end of period $ 8.83 $ 7.95 $ 6.53
=========== =========== ==========
Total return (%)* 11.19 22.53 3.30
Net assets at end
of period (000) $176,527 $150,793 $114,073
Ratio of expenses to
average net assets (%) 1.26(a) 1.41 1.43
Ratio of net investment
income (loss) to average
net assets (%) .15(a) .25 1.02
Portfolio turnover (%) 34.75 81.08 19.01
*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.
