|
|
|
|
|
|
|
|
|
TABLE OF CONTENTS
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Financial Information:
Statement of Assets and Liabilities 10
Portfolio of Investments in Securities 11
Notes to Portfolio of Investments in Securities 26
Statement of Operations 27
Statements of Changes in Net Assets 28
Notes to Financial Statements 29
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 Cornerstone
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 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
CORNERSTONE STRATEGY FUND
OBJECTIVE: Achieve a positive, inflation-adjusted rate of return and a
reasonably stable value of Fund shares, thereby preserving purchasing power
of shareholders' capital.
5/31/96 11/30/96
Net Assets........................... $1,035.8 MILLION $1,152.3 MILLION
Net Asset Value Per Share............ $25.47 $26.60
Average Annual Total Returns as of 11/30/96
May 31, 1996 to November 30, 1996............... 9.19%+
1 Year......................................... 20.02%
5 Years........................................ 13.69%
10 Years........................................ 10.66%
+ 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 and the USAA Cornerstone Strategy Fund - $27,532.]
The graph illustrates the comparison of a $10,000 hypothetical investment
in the USAA Cornerstone Strategy Fund to the S&P 500 Index. The S&P 500 Index
is an unmanaged index representing the average performance of a group of 500
widely held, publicly traded stocks. It is not possible to invest directly in
the S&P 500 Index.
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.
MESSAGE FROM THE MANAGERS
[A photo of Portfolio Managers John W. Saunders, Jr. (U.S. Government
Securities), Harry W. Miller (Allocation Manager, Basic Value Stocks), Albert
C. Sebastian (Foreign Stocks), David G. Peebles (Foreign Stocks), W. Travis
Selmier, II (Foreign Stocks), and Mark W. Johnson (Gold and Real Estate Stocks)
appears here.]
The USAA Cornerstone Strategy Fund's objective is pursued by allocating the
Fund's net assets within a widely-diversified portfolio of investments in the
following categories: Basic Value Stocks (22-28%), Foreign Stocks (22-28%),
U.S. Government Securities (22-28%), Real Estate Stocks (22-28%), and Gold
Stocks (0-10%).
Basic Value Category
For the second year in a row the U.S. stock market continues to do
exceptionally well. Interest rates, short- and long-term, are lower than a
year ago. Inflation stays in the 3% area and earnings reports are good. All
these factors are good for the stock market. Your Fund, as of November 30,
1996, is invested 24.7% in the basic value sector.
Currently, we hold 40 issues as compared to 39 at the time of the May 31 annual
report. May Department Stores and Nordstrom (Retail - Department Stores) were
positions added to the portfolio while Amerada Hess (Oil - Domestic) was sold.
We look toward favorable comparisons in retail sales and earnings. Four
holdings had stock splits: Chrysler, Monsanto, Olin, and Xerox.
Exceptionally good performers during the previous six-month period were
Allstate (up 42.6%), Bristol-Myers Squibb (33.2%), Monsanto (31.6%), NICOR
(31.5%), and Minnesota Mining & Manufacturing (22.7%). Some underperformers
were XEROX (-6.6%), Ball (-11.3%), APL, Ltd. (-9.0%), and Olin Corp (-13.8%).
Your holdings are divisified in 22 industries. We do not see inflation getting
out of control or interest rates having a dramatic move in either direction.
We will remain overweighted in Aerospace/Defense, Chemicals, Machinery -
Diversified, Telephones, and Retailing.
Foreign Category
Since our last report, Eupopean market performance has remained favorable. On
the other hand, performance of emerging markets has been mixed. Our
underweighted position in Japan has proved correct as returns were negative.
Europe - The European markets continued to provide favorable returns over
the period due primarily to declining interest rates and further corporate
restructuring. Both short- and long-term rates declined across Europe,
particularly in Sweden, Italy, Spain, and Portugal, as central banks
continued to ease credit and the inflation outlook improved. Our holdings
in the Netherlands and Scandinavian contries made significant
contributions to our European performance.
Japan - Concerns stated six months ago - an anemic economy, problems
within the banking system, lack of local investor participation, and
the political uncertanity - still exist. Reducing our exposure to Japan
and concentrating on export-related stocks proved to be a favorable
strategy. With the current conditions, we hesitate to change our
underweighted position in Japan.
Emerging Markets - Spring rallies of most emerging markets ran out of
steam during the summer, with the exceptions of Hong Kong, China, Taiwan,
Brazil, and Hungary. Economic growth continued in most Latin American,
Eastern European, and Mediterranean contries, but many Asian economies
slowed. Moderate global economic growth plus continued foreign direct
investment and expanding international trade should lead to some
recovery in Asian markets and help underpin Latin American and Eastern
European markets next year.
For 1997, we expect continued economic improvement in Europe to provide a
favorable international investment climate. A rebound in many of the emerging
markets is anticipated with only selective opportunities in Japan. The
portfolio continues to be overweighted in emerging markets, Europe, and other
developed markets at the expense of Japan.
U.S. Government Category
Rising interest rates and the downward trend in the bond market, which began in
February, continued through mid-June. The 30-year Treasury Bond (1) reached
its lowest point for the year on June 12, 1996, which measured -14.3% on a
total return basis (change in price plus interest) from the end of last year.
The 30-year Treasury Bond recouped 63% of its drop in price between early
September and the end of this reporting period as interest rates declined.
The bond market continues to be impacted in a highly volatile manner following
mixed reports indicating either strength or moderation in our economy. We will
continue to maintain a mix of short, intermediate, and long-term maturities
within this portfolio segment to provide a high level of income with moderate
volatility in price.
Real Estate Category
Real Estate securities were solid performers during the six months ended
November 30, 1996. Shares of Real Estate Investment Trusts (REITs), as
measured by the National Association of Real Estate Investment Trusts (NAREIT)
equity index, rose 16.2% on a total return basis. This was above the 14.4%
return on the S&P 500 Index (2) and the 9.3% 10-year Treasury bond return.
However, REITs performed poorly relative to the S&P 500 Index on a three-year
basis (13.3% vs 20.9%) despite solid cash flow growth. Consequently, the
average REIT cash flow multiple versus the S&P 500 Index cash flow multiple
is at an historical low level. Because of strong property level fundamentals
we expect REITs to continue reporting favorable growth numbers. Therefore,
in our view, REIT stocks offer an interesting and potentially profitable
combination of growth and value.
Compared to the NAREIT equity index, the Fund is overweighted in office and
industrial properties, self-storage facilities, manufactured home communities,
and full-service hotels. It is underweighted in apartments and retail. Also,
it has no exposure to REITs that do not specialize by property type or to REITs
that focus on the long-term triple net lease or healthcare businesses.
Gold Category
Gold prices fell 4.9% from $390.55 to $371.30 during the six months ended
November 30, 1996, making the lowest price since April, 1994. The major forces
behind the decline were a strong U.S. dollar which depressed overseas demand,
rising mine output, European cental bank selling, and the announcements by the
International Monetary Fund and the Swiss National Bank of possible future
sales of a portion of their very large gold reserve positions.
1 Treasury bonds are non-callable, extremely liquid, and settle on a cash basis.
You can buy and pay for them or sell and receive payment for them on the same
day.
2 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.
Top 10 Industries
(% of Net Assets)
----------------------
Real Estate Investment Trusts 22.8
Oil 4.3
Telecommunications 4.3
Healthcare 4.0
Gold Mining 3.4
Aerospace/Defense 3.0
Chemicals 3.0
Retail 3.0
Machinery - Diversified 2.5
Banks 2.4
Top 3 Holdings in Each Sector
(% of Net Assets)
--------------------------------
GOLD
- -----
Barrick Gold .3
Newmont Mining .3
Freeport-McMoRan
Copper & Gold "A" .2
FOREIGN
- -------
Verenigd Besit VNU .4
Elf Aquitaine ADS .4
VA Technologie AG .4
REAL ESTATE
- -----------
Starwood Lodging Trust 1.0
Hilton Hotels 1.0
Duke Realty Investments 1.0
U.S. GOVERNMENT
- ---------------
U.S. Treasury Bond @ 7.88% 6.1
U.S. Treasury Bond @ 7.63% 5.0
GNMA Pool #348947 @ 7.00% 1.0
BASIC VALUE STOCKS
- ------------------
Boeing 1.2
B.F. Goodrich 1.2
Deere & Co. 1.2
Foreign investing is subject to additional risks which are discussed in
the Fund's prospectus. Gold mining stocks involve additional risk because of
gold's price volatility. Since return on any investment is generally
commensurate with risk, investors should be aware of the potential volatility
associated with foreign markets.
See page 11 for a complete listing of the Portfolio of Investments
in Securities.
[A pie chart is shown here depicting the Asset Allocation as of November 30,
1996 for the USAA Cornerstone Strategy Fund to be: Foreign - 23.9%, U.S.
Government Securities - 23.3%, Basic Value - 24.7%, Gold - 3.4% and Real Estate
- 24.4%.]
* Percentages are of the Net Assets in the Portfolio and may or may not
equal 100%.
<TABLE>
<CAPTION>
Cornerstone Strategy Fund
Statement of Assets and Liabilities
(In Thousands)
<S> <C>
Investments in securities, at market value (identified cost of $904,932) $ 1,149,096
Cash 446
Cash denominated in foreign currencies (identified cost of $909) 910
Receivables:
Capital shares sold 1,217
Dividends and interest 4,564
Securities sold 868
-------------
Total assets 1,157,101
-------------
Liabilities
Securities purchased 3,173
Unrealized depreciation on foreign currency contracts held, at value 15
Capital shares redeemed 520
USAA Investment Management Company 696
USAA Transfer Agency Company 214
Accounts payable and accrued expenses 219
---------------
Total liabilities 4,837
---------------
Net assets applicable to capital shares outstanding $ 1,152,264
================
Represented by:
Paid-in capital $ 887,646
Accumulated undistributed net investment income 17,382
Accumulated net realized gain on investments 3,066
Net unrealized appreciation of investments 244,164
Net unrealized appreciation on foreign currency translations 6
----------------
Net assets applicable to capital shares outstanding $ 1,152,264
================
Capital shares outstanding, unlimited number of shares authorized,
no par value 43,313
================
Net asset value, redemption price, and offering price per share $ 26.60
================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
Cornerstone Strategy Fund
Portfolio of Investments in Securities
<CAPTION>
November 30, 1996
(Unaudited)
Market
Number Value
of Shares Security (000)
Gold Stocks (3.4%)
<C> <S> <C>
African Gold Companies (0.5%)
100,000 Ashanti Goldfields Co. Ltd. GDS $ 1,437
70,000 Gold Fields of South Africa Ltd. ADR 2,037
15,000 Southvaal Holdings 433
40,000 Western Deep Levels Ltd. ADR 1,235
-------------
5,142
-------------
Australian Gold Companies (0.4%)
725,000 Acacia Resources Ltd. * 1,463
400,000 Newcrest Mining Ltd. 1,465
325,000 Plutonic Resources Ltd. 1,450
202,800 Ranger Minerals NL * 660
-------------
5,038
-------------
North American Gold Companies (2.3%)
150,000 Agnico-Eagle Mines Ltd. 2,062
110,000 Barrick Gold Corp. 3,300
260,000 Battle Mountain Gold Co. 1,885
75,000 Bresea Resources Ltd. * 634
115,000 Dayton Mining Corp. * 625
92,000 Freeport-McMoRan Copper & Gold, Inc. "A" 2,748
37,500 Getchell Gold Corp. * 1,467
67,500 Goldcorp, Inc. "A" * 586
75,000 Golden Knight Resources, Inc. * 473
15,000 Greenstone Resources Ltd. * 200
67,500 Newmont Mining Corp. 3,232
75,000 Pioneer Group, Inc. 1,819
110,000 Placer Dome, Inc. 2,594
175,000 Santa Fe Pacific Gold Corp. 2,013
325,000 TVX Gold, Inc. * 2,277
100,000 Vengold, Inc. * 137
81,714 Viceroy Resource Corp. * 418
81,000 Wharf Resources Ltd. 541
-------------
27,011
-------------
North American Platinum Companies (0.1%)
77,500 Stillwater Mining Co. * 1,356
-------------
South American Gold Companies (0.1%)
60,000 Compania de Minas Buenaventura ADR * $ 983
-------------
Total gold stocks (cost: $36,353) 39,530
-------------
Foreign Securities (23.9%)
Foreign Common Stocks (22.8%)
Argentina (0.3%)
50,700 Disco S.A. ADS * 1,274
18,000 IRSA Inversiones y Representaciones S.A. GDS 558
120,000 Quilmes Industrial (Quinsa) S.A. ADS 1,245
28,000 Telefonica de Argentina S.A. ADR 714
-------------
3,791
-------------
Australia (0.5%)
100,000 Broken Hill Proprietary Co. Ltd. 1,467
702,100 CSL Ltd. 3,623
555,600 National Mutual Holdings Ltd. * 782
-------------
5,872
-------------
Austria (0.4%)
30,000 VA Technologie AG 4,721
-------------
Belgium (0.3%)
7,580 Colruyt S.A. 3,385
-------------
Canada (1.5%)
69,000 Alliance Forest Products, Inc. * 1,259
109,300 Anderson Exploration Ltd. * 1,406
585,000 Beau Canada Exploration Ltd. * 1,041
98,500 Canadian National Railway Co. 4,051
157,000 Canadian Occidental Petroleum Ltd. 2,788
200,000 National Bank of Canada 2,128
104,000 OSF, Inc. * 1,003
74,000 Suncor, Inc. 3,100
-------------
16,776
-------------
Chile (0.3%)
19,400 Madeco S.A. ADS $ 461
86,100 Maderas y Sinteticos S.A. ADS 1,173
24,800 Sociedad Quimica y Minera de Chile S.A. ADS 1,289
-------------
2,923
-------------
China (0.1%)
500,000 New World Infrastructure Ltd. * 1,487
-------------
Colombia (0.1%)
118,000 Banco de Colombia GDS 914
-------------
Czech Republic (0.1%)
26,000 Komercni Banka A.S. GDR 663
9,000 SPT Telecom A.S. * 1,017
-------------
1,680
-------------
Denmark (0.7%)
5,300 InWear Group A/S * 240
60,000 ISS International Service System A/S "B" 1,660
9,370 Novo Nordisk A/S "B" 1,733
32,600 Tele Danmark A/S "B" 1,626
50,300 Tele Danmark A/S ADS 1,257
27,000 Unidanmark A/S 1,347
-------------
7,863
-------------
Egypt (0.1%)
39,300 Suez Cement Co. S.A.E. GDS * 631
-------------
Finland (0.4%)
80,000 Nokia Corp. ADS 4,490
-------------
France (1.4%)
72,300 Coflexip ADS * 1,943
111,000 Elf Aquitaine ADS 4,870
25,000 Eramet Group 1,324
10,700 Essilor International 3,081
26,900 Louis Dreyfus Citrus * 910
6,746 Pathe S.A. * 1,576
9,910 Roussel-Uclaf 2,597
-------------
16,301
-------------
Germany (0.8%)
21,400 Adidas AG $ 1,857
47,100 Deutsche Telekom AG ADR * 1,007
32,500 Leica Camera AG * 1,014
68,000 Pfeiffer Vacuum Technology AG ADS * 1,156
98,200 Rofin-Sinar Technologies, Inc. * 1,264
55,000 Veba AG 3,217
-------------
9,515
-------------
Hong Kong (0.5%)
1,770,000 Amoy Properties Ltd. 2,472
51,000 Asia Satellite Telecommunications Holdings Ltd. ADR * 1,294
800,000 Hong Kong Telecommunications Ltd. 1,387
271,000 Varitronix International Ltd. 503
-------------
5,656
-------------
Hungary (0.1%)
100,000 Mol Magyar Olay Es Gazipari GDS 1,145
-------------
India (0.2%)
40,500 Hindalco Industries Ltd. GDR 826
110,000 Larsen & Toubro Ltd. GDR 1,595
-------------
2,421
-------------
Indonesia (0.3%)
500,000 PT Asahimas Flat Glass Co. Ltd. 336
1,517,500 PT Bank Dagang Nasional Indonesia 1,504
210,000 PT HM Sampoerna 1,070
680,000 PT Jaya Real Property 870
-------------
3,780
-------------
Israel (0.3%)
46,800 Blue Square - Israel Ltd. ADS * 661
58,000 Koor Industries Ltd. ADS 1,008
61,000 Teva Pharmaceutical Industries Ltd. ADS 2,821
-------------
4,490
-------------
Italy (0.8%)
178,500 Arnoldo Mondadori Editore S.p.A. 1,498
53,400 Eni S.p.A. ADS 2,804
80,000 Instrumentation Laboratory S.p.A. ADS * $ 960
1,106,250 Olivetti and C., S.p.A. * 389
32,900 SAES Getters S.p.A. ADR * 352
950,000 STET S.p.A. 2,920
-------------
8,923
-------------
Japan (3.7%)
110,000 Bridgestone Corp. 2,028
144,000 Canon, Inc. 3,034
95,000 Daibiru Corp. 1,109
89,000 Higo Bank 617
230,000 Hitachi Ltd. 2,140
120,000 Honda Motor Co. Ltd. 3,540
66,000 Hoya Corp. 2,474
50,000 Ito-Yokado Co. Ltd. 2,524
28,000 Kyocera Corp. 1,799
104,500 Laox Co. Ltd. 1,606
270,000 Minebea Co. Ltd. 2,304
303,000 Mitsubishi Heavy Industries Ltd. 2,474
167,000 Mitsubishi Paper Mills Ltd. 780
7,000 Nippon Television Network 2,102
816,000 NKK Corp. * 2,006
170,000 Nomura Securities Co. Ltd. 2,866
60 NTT Data Communications Systems Corp. 1,781
210,000 Shiseido Co. Ltd. 2,526
275,000 Terumo Corp. 3,622
64,000 Tostem Corp. 1,843
-------------
43,175
-------------
Korea (0.2%)
33,000 Korea Electric Power Corp. 1,055
15,715 Samsung Electronics Co. Ltd. 1,185
1,583 Samsung Electronics Co. Ltd. (New) * 117
154 Samsung Electronics Co. Ltd. GDR * 7
-------------
2,364
-------------
Malaysia (0.2%)
135,000 Edaran Otomobil Nasional Bhd $ 1,330
140,000 Telekom Malaysia Bhd 1,274
-------------
2,604
-------------
Mexico (0.7%)
1,060,000 Controladora Comercial Mexicana, S.A. de C.V. * 954
21,800 Controladora Comercial Mexicana, S.A. de C.V. GDR * 392
98,255 Desc, Sociedad de Fomento Industrial, S.A. de C.V. ADS * 2,125
58,000 Panamerican Beverages, Inc. "A" 2,712
130,000 Tubos de Acero de Mexico, S.A. ADS * 1,771
-------------
7,954
-------------
Netherlands (1.2%)
33,000 EVC International N.V. 1,026
28,000 Forasol-Foramer N.V. * 504
123,780 ING Group N.V. 4,336
13,000 Oce-van der Grinten N.V. 1,417
33,500 Philips Electronics N.V. 1,357
240,000 Verenigd Besit VNU 4,899
-------------
13,539
-------------
Norway (0.4%)
759,000 Christiania Bank og Kreditkasse 2,330
119,000 Nycomed ASA * 1,743
-------------
4,073
-------------
Peru (0.1%)
54,000 Telefonica del Peru S.A. "B" ADS 1,046
-------------
Philippines (0.2%)
3,400,000 Megaworld Properties * 1,326
44,575 Metropolitan Bank and Trust Co. 1,034
-------------
2,360
-------------
Poland (0.2%)
120,000 Elektrim S.A. 1,094
154,780 Polifarb-Cieszyn S.A. 782
-------------
1,876
-------------
Portugal (0.5%)
101,000 Banco Totta E Acores S.A. * $ 1,779
56,700 Cimentos de Portugal * 1,185
111,700 Portugal Telecom, S.A. ADS 2,960
-------------
5,924
-------------
Russia (0.1%)
54,800 RAO Gazprom ADR * 988
-------------
Singapore (0.4%)
151,500 Keppel Corp. Ltd. 1,177
275,000 Overseas Union Bank Ltd. 2,020
220,000 Singapore Land Ltd. 1,263
-------------
4,460
-------------
South Africa (0.5%)
251,100 Gencor Ltd. 893
413,300 Malbak Ltd. 1,973
84,263 Nedcor Ltd. GDR 1,243
47,500 South African Breweries Ltd. 1,198
-------------
5,307
-------------
Spain (0.7%)
142,000 Autopistas del Mare Nostrum S.A. 2,193
16,400 Corporacion Mapfre 867
67,800 Telefonica de Espana S.A. ADR 4,475
42,699 Vallehermoso S.A. 888
-------------
8,423
-------------
Sweden (1.0%)
28,000 ABB AB "A" 3,240
90,000 Autoliv AB 3,953
45,000 Nordbanken AB 1,273
140,000 Volvo AB 3,075
-------------
11,541
-------------
Switzerland (0.9%)
3,650 Ciba Geigy AG 4,517
16,900 Oerlikon Buhrle AG * 1,744
780 SGS Group AG $ 1,804
2,993 Sulzer AG P.C. 1,722
39,900 Tag Heuer International S.A. ADS * 558
-------------
10,345
-------------
Taiwan (0.4%)
2,050,000 China Steel Corp. 1,887
961,658 Far East Department Store * 1,280
1,049,000 Microtek International, Inc. * 1,729
-------------
4,896
-------------
Thailand (0.1%)
157,700 Finance One Public Co. 451
320,000 Krung Thai Bank 914
-------------
1,365
-------------
Turkey (0.1%)
2,060,000 Olmuksa Mukavva Sanayi Ve Ticaret A.S. 247
13,620,200 Yapi Ve Kredi Bankasi A.S. 346
-------------
593
-------------
United Kingdom (1.8%)
594,000 Bank of Scotland 2,916
133,000 Comcast UK Cable Partners Ltd. * 1,812
615,000 Corporate Services Group plc 1,737
97,800 DFS Furniture Co. plc 941
15,600 Dr. Solomon's Group plc ADS * 269
400,000 Northern Ireland Electricity plc 2,387
780,000 Thistle Hotels plc * 2,282
743,500 Tomkins plc 3,106
55,000 Vodafone Group plc ADR 2,379
988,000 WPP Group plc 3,663
-------------
21,492
-------------
Venezuela (0.1%)
22,800 Compania Anonima Nacional Telefonos De Venezuela ADS * 579
-------------
Other Holdings (0.1%)
1,390,000 Central European Growth Fund plc $ 1,425
480,000 Central European Growth Fund plc Warrants * 89
-------------
1,514
-------------
Total foreign common stocks (cost: $208,431) 263,182
-------------
Foreign Preferred Stocks (0.9%)
Australia (0.2%)
864,100 Village Roadshow Ltd. 2,497
-------------
Brazil (0.5%)
69,400,000 Companhia Energetica de Minas Gerais (Cemig) 2,207
11,000,000 Petroleo Brasileiro S.A. 1,504
21,000,000 Telebras PN 1,590
-------------
5,301
-------------
Germany (0.1%)
10,700 SAP ADS 1,470
-------------
Korea (0.1%)
5,386 Samsung Electronics Co. Ltd. GDR 123
17,874 Samsung Electronics Co. Ltd. GDS 456
-------------
579
-------------
Total foreign preferred stocks (cost: $8,018) 9,847
-------------
Principal
Amount
(000)
Foreign Bond (0.2%)
Japan
$2,100 MBL International Finance (Bermuda) Trust, Convertible Notes,
3.00%, 11/30/02 (cost: $2,167) 2,318
-------------
Total foreign securities (cost: $218,616) 275,347
-------------
Real Estate Stocks (24.4%)
Hotel/Motel (1.0%)
400,000 Hilton Hotels Corp. $ 11,700
-------------
Paper & Forest Products (0.6%)
100,000 Rayonier, Inc. 3,875
75,000 Weyerhaeuser Co. 3,450
-------------
7,325
-------------
Real Estate Investment Trusts (22.8%)
142,900 Arden Realty Group, Inc. * 3,447
375,000 Avalon Properties, Inc. 9,609
450,000 Bradley Real Estate, Inc. 7,875
400,000 Cali Realty Corp. 11,300
170,000 Camden Property Trust 4,696
200,000 Centerpoint Properties Corp. 5,425
100,000 Charles E. Smith Residential Realty, Inc. 2,525
300,000 Chelsea GCA Realty, Inc. 9,450
275,000 Columbus Realty Trust 5,844
325,000 Developers Diversified Realty Corp. 10,928
325,000 Duke Realty Investments, Inc. 11,659
315,500 Evans Withycombe Residential, Inc. 6,428
250,000 Excel Realty Trust, Inc. 5,656
350,000 First Industrial Realty Trust, Inc. 10,019
275,000 Gables Residential Trust 7,356
175,000 Glimcher Realty Trust 3,413
350,000 Highwoods Properties, Inc. 10,763
350,000 Horizon Group, Inc. 6,825
350,000 Kimco Realty Corp. 10,194
450,000 Liberty Property Trust 10,463
300,000 Patriot American Hospitality, Inc. 11,363
450,000 Prentiss Properties Trust * 10,069
376,000 Public Storage, Inc. 9,541
275,000 Reckson Associates Realty Corp. 10,416
275,000 ROC Communities, Inc. 6,806
350,000 Shurgard Storage Centers, Inc. 9,625
525,000 South West Property Trust, Inc. 8,334
200,000 Sovran Self Storage, Inc. 5,675
250,000 Starwood Lodging Trust 11,938
300,000 Storage USA, Inc. 11,325
350,000 Sun Communities, Inc. 11,156
84,700 Weeks Corp. 2,403
-------------
262,526
-------------
Total real estate stocks (cost: $229,798) 281,551
-------------
Basic Value Stocks (24.7%)
Aerospace/Defense (3.0%)
300,000 B.F. Goodrich Co. 13,463
140,000 Boeing Co. 13,912
115,000 Rockwell International Corp. 7,389
-------------
34,764
-------------
Automobiles (0.6%)
200,000 Chrysler Corp. 7,100
-------------
Bank Holding Companies - Money Center (0.4%)
53,000 Bankers Trust New York Corp. 4,611
-------------
Chemicals (2.9%)
100,000 Dow Chemical Co. 8,375
325,000 Monsanto Co. 12,919
122,600 Olin Corp. 4,888
150,000 Union Carbide Corp. 6,919
-------------
33,101
-------------
Containers - Metals & Glass (0.3%)
135,000 Ball Corp. 3,308
-------------
Distribution & Pipelines (0.4%)
120,000 NICOR, Inc. 4,425
-------------
Drugs (0.4%)
110,000 Pharmacia & Upjohn, Inc. 4,249
-------------
Electric Power (0.4%)
190,000 Houston Industries, Inc. $ 4,180
-------------
Healthcare - Diversified (1.5%)
140,000 American Home Products Corp. 8,995
70,000 Bristol-Myers Squibb Co. 7,962
-------------
16,957
-------------
Insurance - Property/Casualty (1.0%)
150,000 Allstate Corp. 9,037
68,000 Hartford Steam Boiler Inspection & Insurance Co. 3,094
-------------
12,131
-------------
Machinery - Diversified (2.2%)
145,000 Caterpillar, Inc. 11,473
300,000 Deere & Co. 13,388
-------------
24,861
-------------
Manufacturing - Diversified Industries (0.7%)
100,000 Minnesota Mining & Manufacturing Co. 8,375
-------------
Office Equipment & Supplies (0.6%)
132,000 Xerox Corp. 6,485
-------------
Oil - Domestic (0.5%)
250,000 Occidental Petroleum Corp. 6,000
-------------
Oil - International (1.9%)
70,000 Chevron Corp. 4,690
60,000 Mobil Corp. 7,260
100,000 Texaco, Inc. 9,912
-------------
21,862
-------------
Paper & Forest Products (0.8%)
275,000 James River Corp. 8,800
-------------
Railroads (0.7%)
85,000 Norfolk Southern Corp. 7,650
-------------
Retail - Department Stores (0.8%)
120,000 May Department Stores Co. 5,850
85,000 Nordstrom, Inc. 3,698
-------------
9,548
-------------
Retail - General Merchandising (1.0%)
125,000 J.C. Penney Company, Inc. $ 6,719
90,000 Sears, Roebuck & Co. 4,477
-------------
11,196
-------------
Telephones (2.0%)
120,000 GTE Corp. 5,385
167,000 NYNEX Corp. 7,744
73,000 SBC Communications Corp. 3,842
160,000 Sprint Corp. 6,700
-------------
23,671
-------------
Tobacco (2.3%)
140,000 American Brands, Inc. 6,685
80,000 Philip Morris Companies, Inc. 8,250
180,000 RJR Nabisco Holdings Corp. 5,760
220,000 Universal Corp. 6,325
-------------
27,020
-------------
Transportation - Miscellaneous (0.3%)
150,000 APL Ltd. 3,600
-------------
Total basic value stocks (cost: $168,515) 283,894
-------------
Principal
Amount
(000)
U.S. Government & Agency Issues (23.3%)
Government National Mortgage Assoc. (6.2%)
$35,584 6.50%, 5/15/23 - 4/15/24 34,885
19,980 7.00%, 8/15/23 20,008
3,135 7.50%, 3/15/17 3,223
2,893 8.00%, 6/15/16 - 3/15/17 3,030
3,954 8.50%, 9/15/09 - 2/15/17 4,199
319 9.00%, 6/15/16 - 10/15/16 345
4,728 9.50%, 6/15/09 - 8/15/17 5,178
705 10.00%, 11/15/09 - 4/15/16 773
66 11.50%, 3/15/13 76
5 12.50%, 8/15/14 5
-------------
71,722
-------------
U.S. Treasury Bonds (11.1%)
$50,000 7.63%, 2/15/25 $ 57,547
60,000 7.88%, 2/15/21 70,162
-------------
127,709
-------------
Discount Note (6.0%)
69,365 Federal Home Loan Mortgage Corp., 5.70%, 12/02/96 69,343
-------------
Total U.S. government & agency issues (cost: $251,650) 268,774
-------------
Total investments (cost: $904,932) $ 1,149,096
=============
</TABLE>
- ---------------------------
*Non-income producing.
Portfolio Summary By Industry
---------------------------------
U.S. Government & Agency Issues 23.3%
Real Estate Investment Trusts 22.8
Oil 4.3
Telecommunications 4.3
Healthcare 4.0
Gold Mining 3.4
Aerospace / Defense 3.0
Chemicals 3.0
Retail 3.0
Machinery - Diversified 2.5
Banks 2.4
Tobacco 2.4
Paper & Forest Products 1.6
Automobiles 1.3
Hotel / Motel 1.2
Manufacturing - Diversified 1.2
Electric Power 1.1
Insurance - Property / Casualty 1.1
Railroads 1.0
Other 12.8
--------
99.7%
========
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.
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.
See accompanying notes to financial statements.
<TABLE>
Cornerstone Strategy Fund
Statement of Operations
(in Thousands)
<CAPTION>
Six-month period ended November 30, 1996
(Unaudited)
<S> <C>
Net investment income:
Income (net of foreign taxes withheld of $338):
Dividends $ 14,793
Interest 8,468
----------
Total income 23,261
----------
Expenses:
Management fees 4,039
Transfer agent's fees 1,260
Custodian's fees 236
Postage 143
Shareholder reporting fees 59
Trustees' fees 2
Registration fees 51
Audit fees 12
Legal fees 3
Other 21
----------
Total expenses 5,826
----------
Net investment income 17,435
----------
Net realized and unrealized gain on investments and foreign currency:
Net realized gain (loss) on:
Investments 12,077
Foreign currency transactions (9)
Change in net unrealized appreciation/depreciation of:
Investments 67,179
Translation of assets and liabilities in foreign currencies 8
----------
Net realized and unrealized gain 79,255
----------
Increase in net assets resulting from operations $ 96,690
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
Cornerstone Stratey Fund
Statement of Changes in Net Assets
(In Thousands)
<CAPTION>
Six-month period ended November 30, 1996
and Year ended May 31, 1996
(Unaudited)
11/30/96 5/31/96
<S> <C> <C>
From operations:
Net investment income $ 17,435 $ 28,893
Net realized gain on investments 12,077 32,052
Net realized loss on foreign currency transactions (9) (35)
Change in net unrealized appreciation/depreciation of:
Investments 67,179 92,461
Foreign currency translations 8 (18)
------------- --------------
Increase in net assets resulting from operations 96,690 153,353
------------- --------------
Distributions to shareholders from:
Net investment income (11,398) (28,657)
------------- --------------
Net realized gains (34,550) (12,787)
------------- --------------
From capital share transactions:
Proceeds from shares sold 85,146 163,592
Shares issued for dividends reinvested 45,128 40,525
Cost of shares redeemed (64,596) (154,769)
------------- --------------
Increase in net assets from capital share transactions 65,678 49,348
------------- --------------
Net increase in net assets 116,420 161,257
Net assets:
Beginning of period 1,035,844 874,587
------------- ---------------
End of period $ 1,152,264 $ 1,035,844
============== ===============
Undistributed net investment income included in net assets:
Beginning of period $ 11,354 $ 10,933
============== ===============
End of period $ 17,382 $ 11,354
============== ===============
Change in shares outstanding:
Shares sold 3,375 6,770
Shares issued for dividends reinvested 1,831 1,731
Shares redeemed (2,560) (6,475)
-------------- --------------
Increase in shares outstanding 2,646 2,026
============== ==============
</TABLE>
See accompanying notes to financial statements.
(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
Cornerstone Strategy Fund (the Fund). The Fund's investment objective is to
achieve a positive, inflation-adjusted rate of return and a reasonably stable
value of Fund shares, thereby preserving the purchasing power of shareholders'
capital.
A. Security valuation - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are valued at the last sales price on that
exchange. Portfolio securities traded primarily on foreign securities exchanges
are generally valued at the closing values of such securities on the exchange
where primarily traded. If no sale is reported, the latest bid price is
generally used depending upon local custom or regulation.
2. Over-the-counter securities are priced at the last sales price or, if not
available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less are stated at
amortized cost which approximates market value.
4. Other debt and government securities are valued each business day by a
pricing service (the Service) approved by the Trust's Board of Trustees. The
Service uses the mean between quoted bid and asked prices or the last sale price
to price securities when, in the Service's judgement, these prices are readily
available and are representative of the securities' market values. For many
securities, such prices are not readily available. The Service generally prices
these securities based on methods which include consideration of yields or
prices of securities of comparable quality, coupon, maturity and type,
indications as to values from dealers in securities, and general market
conditions.
5. Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the Manager under the general supervision of the Board of Trustees.
B. Federal taxes - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required. As a result of certain
permanent differences between book and tax basis accounting for investments in
passive foreign investment companies, reclassifications were made to the
statement of assets and liabilities at May 31, 1996 to increase accumulated
undistributed net investment income by $220,310 and to decrease accumulated
net realized gain on investments by $220,310.
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. Amortization of market discounts on long-term
securities is recognized as interest income upon disposition of the security
to the extent there is a gain on disposition.
D. Foreign currency translations - The assets of the Fund may be invested in the
securities of foreign issuers. Since the accounting records of the Fund are
maintained in U.S. dollars, foreign currency amounts are translated into U.S.
dollars on the following basis:
1. Market value of securities, other assets, and liabilities at the mean
between the bid and asked translation rates of such currencies against U.S.
dollars.
2. Purchases and sales of securities, income, and expenses at the rate of
exchange obtained from an independent pricing service on the respective dates of
such transactions.
Net realized and unrealized foreign currency gains/losses occurring during the
holding period of investments are a component of realized gain/loss on
investments and unrealized appreciation/depreciation on investments,
respectively.
Net realized foreign currency gains/losses arise from sales of foreign currency,
currency gains/losses realized between the trade and settlement dates on
security transactions, and from the difference between amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent of the amounts received. Net realized foreign currency
gains/losses have been reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets and
liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities other than investments in
securities resulting from changes in the exchange rate.
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.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term securities,
for the six-month period ended November 30, 1996 were $158,511,143 and
$140,801,193, respectively.
Gross unrealized appreciation and depreciation of investments as of November 30,
1996 was $259,464,382 and $15,300,442, 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):
<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 11/30/96 Received 11/30/96 (Depreciation)
<C> <S> <C> <S> <C> <C>
12/02/96 15 Australian Dollar $ 12 12 U.S. Dollar $ 12 $ -
12/02/96 11,919 Japanese Yen 105 105 U.S. Dollar 105 -
12/02/96 2,209 Philippine Peso 84 84 U.S. Dollar 84 -
12/02/96 3 U.S. Dollar 3 5 Deutsche Mark 3 -
12/02/96 921 U.S. Dollar 921 4,761 French Franc 911 (10)
12/03/96 3,356 Japanese Yen 29 29 U.S. Dollar 29 -
12/03/96 837 Philippine Peso 32 32 U.S. Dollar 32 -
12/03/96 138 Singapore Dollar 99 99 U.S. Dollar 99 -
12/03/96 23 U.S. Dollar 23 35 Deutsche Mark 23 -
12/03/96 14 U.S. Dollar 14 368 Thailand Baht 14 -
12/04/96 914 Philippine Peso 35 35 U.S. Dollar 35 -
12/04/96 24 British Pound 40 40 U.S. Dollar 40 -
12/04/96 137 Singapore Dollar 98 98 U.S. Dollar 98 -
12/04/96 7 U.S. Dollar 7 10 Deutsche Mark 7 -
12/04/96 17 U.S. Dollar 17 435 Thailand Baht 17 -
12/05/96 73 Australian Dollar 59 59 U.S. Dollar 59 -
12/05/96 11 Philippine Peso 1 1 U.S. Dollar 1 -
12/05/96 1,008 U.S. Dollar 1,008 1,352 Canadian Dollar 1,003 (5)
12/05/96 101 U.S. Dollar 101 156 Deutsche Mark 101 -
12/06/96 25 U.S. Dollar 25 38 Deutsche Mark 25 -
------ ------- ------
$ 2,713 $ 2,698 $ (15)
=======
</TABLE>
(6) Transactions with Manager
A. Management fees - The investment policies of the Fund and management of the
Fund's portfolio are carried out by USAA Investment Management Company (the
Manager). The Fund's management fees are computed at .75% of its annual average
net assets.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Fund. Shareholder accounting service fees are based on an annual charge
per shareholder account plus out-of-pocket expenses.
C. Underwriting 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.
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 six-month
period ended November 30, 1996 was $11,830.
(7) Financial Highlights
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
Six-month Eight-month
Period Ended Year Ended Period Ended Year Ended
November 30, May 31, May 31, September 30,
1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 25.47 $ 22.63 $ 23.24 $ 23.43 $ 19.94 $ 18.62
Net investment income .40 .73 .68 .40 .60 .65
Net realized and
unrealized gain 1.85 3.18 .67 .29 3.52 1.26
Distributions from net
investment income (.28) (.74 ) (.58) (.59) (.63 ) (.59)
Distributions of realized
capital gains (.84) (.33 ) (1.38) (.29) - -
---------- --------- ---------- -------- ------- --------
Net asset value at
end of period $ 26.60 $ 25.47 $ 22.63 $ 23.24 $ 23.43 $ 19.94
========== ========= ========== ========= ======== =========
Total return (%) * 9.19 17.79 6.43 3.00 21.35 10.53
Net assets at end
of period (000) $ 1,152,264 $ 1,035,844 $ 874,587 $ 814,869 $ 707,795 $ 567,212
Ratio of expenses to
average net assets (%) 1.09(a) 1.15 1.13 1.11(a) 1.18 1.18
Ratio of net investment
income to average
net assets (%) 3.26(a) 3.06 3.16 2.68(a) 2.92 3.25
Portfolio turnover (%) 13.98 36.15 33.17 30.87 45.18 32.71
Average commission
rate paid per share+ $ .0136 $ .0039
</TABLE>
* 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.
|
|