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 9
Portfolio of Investments in Securities 10
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 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)1998, USAA. All rights reserved.
USAA FAMILY OF FUNDS SUMMARY
Fund Minimum
Type/Name Volatility Investment*
CAPITAL APPRECIATION
Aggressive Growth Very high $3,000
Emerging Markets(1) Very high $3,000
First Start Growth Moderate to high $3,000
Gold(1) Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International(1) Moderate to high $3,000
S&P 500 Index(2) Moderate $3,000
Science
& Technology(5) Very high $3,000
World Growth(1) Moderate to high $3,000
ASSET ALLOCATION
Balanced Strategy(1) Moderate $3,000
Cornerstone Strategy(1) Moderate $3,000
Growth and Tax
Strategy(3) Moderate $3,000
Growth Strategy(1) Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME -- TAXABLE
GNMA Low to moderate $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Short-Term Bond Low $3,000
INCOME -- TAX EXEMPT
Long-Term(3) Moderate $3,000
Intermediate-Term(3) Low to moderate $3,000
Short-Term(3) Low $3,000
State Bond Income(3)** Moderate $3,000
MONEY MARKET
Money Market(4) Very low $3,000
Tax Exempt
Money Market(3),(4) Very low $3,000
Treasury Money
Market Trust(4) Very low $3,000
State Money Market(3),(4)** Very low $3,000
(1)Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
(2)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.
(3)Some income may be subject to state or local taxes or the federal alternative
minimum tax.
(4)An investment in a money market fund is neither insured nor guaranteed by the
U.S. government, and there is no assurance that any of the funds will be able
to maintain a stable net asset value of $1 per share.
(5)This Fund may be more volatile than a fund that diversifies across many
industries.
* The InveStart(Registered Trademark) program is available for investors without
the $3,000 initial investment required to open an IMCO mutual fund account. A
mutual fund account can be opened with no initial investment if you elect to
have monthly automatic investments of at least $50 from a bank account.
InveStart is not available on tax-exempt funds or the S&P 500 Index Fund.
The minimum initial investment for IRAs is $250, except for the $2,000 minimum
required for the S&P 500 Index Fund. 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.
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,
and may lose value.
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.
MESSAGE FROM THE PRESIDENT
Every week I get a report which summarizes all of the feedback we have gotten,
by mail and phone, from our shareholders and brokerage customers. We get
suggestions, complaints and also some compliments each week. We look for trends
which point out problems and we are always sure to respond to every one of these
contacts. One in particular caught my eye on the report for the week of December
11, 1997. It said, "Shareholder notes that Mr. Roth established Income Stock
Fund for grandchild born in 1995; in 1997 another grandchild was born and Mr.
Roth established a Cornerstone Strategy Fund; why was investment not made in the
same fund?" Fair question.
The best answer is that I think both of these funds are great vehicles for
investing for a child's future, and I like variety.
The Income Stock Fund and the Cornerstone Strategy Fund both offer an investor
an equity product with less volatility than the stock market alone. In the case
of the Income Stock Fund, the decreased volatility comes from a heavy emphasis
on companies that pay high dividends or whose dividends tend to grow. For the
Cornerstone Strategy Fund, the decrease in volatility comes from a combination
of domestic value stocks, real estate stocks, foreign stocks and U.S. government
bonds. In any given year either of these funds could be more volatile than the
S&P 500 Index,(1) but both have long-term records(2) which indicate those will
be unusual occurrences.
This combination of risk and reward appeals to me. I have friends who argue
pursuasively that a more aggressive fund would be better for a long-term
investment like this. If you only consider return, I suspect they are correct,
but I am doing what I advise our customers to do. I am asking myself, "What are
you comfortable with?" My answer is either of these two funds is appropriate. So
far, Karl Joseph Marbach and Katharine Sophia Broyles are doing just fine. Maybe
their parents will only have to worry about the last two or three years of
college.
Sincerely,
Michael J.C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
(Photograph of the President, Michael J. C. Roth, CFA, appears here.)
(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)Past performance is no guarantee of future results and the value of your
investment may vary according to the Fund's performance.
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 11/30/97
Net Assets............................. $193.9 MILLION $229.4 MILLION
Net Asset Value Per Share.............. $13.10 $13.62
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/97
May 31, 1997 to November 30, 1997.............................. 4.49%+
1 Year......................................................... 10.63%
Since inception on September 1, 1995........................... 17.40%
+ Total returns for periods of less than one year are not annualized.
This six-month return is cumulative.
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 aninvestment will fluctuate, and an investor's shares, when
redeemed, may be worth more or less than their original cost.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, illustrating the comparison
of a $10,000 hypothetical investment in the USAA Growth Strategy Fund to the
S&P 500 Index for the period of 9/1/95 through 11/30/97. The data points
from the graph are as follows:
Year USAA Growth S&P 500
Strategy Fund Index
------------- -----
9/01/95 10,000 10,000
12/95 10,650 11,049
06/96 12,385 12,163
12/96 13,007 13,584
06/97 14,289 16,382
11/97 14,381 17,809
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Growth Strategy Fund 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.
MESSAGE FROM THE MANAGERS
[Photograph of the Portfolio Managers appears here: David G. Peebles, CFA
(International Stocks), W. Travis Selmier, II, CFA (International Stocks), David
G. Parsons, CFA (Allocation Manager, Large Cap Stocks), John K. Cabell, Jr., CFA
(Small Cap Stocks), Paul H. Lundmark, CFA (Bonds), Pamela K. Bledsoe, CFA (Money
Market Instruments), Eric M. Efron, CFA (Small Cap Stocks), and Albert C.
Sebastian, CFA (International 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 generally purchases out-of-favor
growth stocks. The Fund is heavily overweighted in technology, healthcare, oil
services, and trucking. Within healthcare, the Fund has large concentrations in
biotechnology, pharmaceuticals, and medical products. In the technology sector,
the Fund has large positions in semiconductor, networking, semiconductor
equipment, and disc drive manufacturers. For the six-month reporting period,
trucking and oil services performed very well; however, both healthcare and
technology were down. Our technology companies had performed extremely well
through August, but the ramifications of the currency crisis in the Far East
wreaked havoc upon them in the Fall. Nevertheless, in both the healthcare and
technology areas we are invested in the companies of the future that, over time,
may have the potential to generate strong revenue growth rates. The fact that
they are down makes them even more attractive to us. Indeed, if we did not own
them, we would begin buying these companies now. Large capitalization stocks
comprised 29% of the Fund's net assets on November 30, 1997.
Small Capitalization Stocks
The small capitalization sector of the Fund focuses on investing in rapidly
growing companies, that are innovative and are on the leading edge of change. We
are buying companies that are in position to take advantage of long-term social
and economic trends. To qualify for purchase for the Fund, these companies must
have market capitalizations of less than $1 billion.
Small capitalization equities are a high-risk, high-return investment. Investors
who are able to accept the short-term volatility of these stocks are likely to
be rewarded over the long term because of potential superior earnings growth.
While rapid growth, small capitalization opportunities exist in many industry
sectors, the Fund has made its largest investments in technology,
communications, energy, and healthcare.
During the six-month period that ended on November 30, 1997, small
capitalization stocks returned to favor and provided good investment returns.
Following this trend, the small capitalization sector of the Fund generated very
good returns versus the S&P 500 Index.(1) At the end of the investment period,
small capitalization stocks accounted for 27.8% of the Fund's net assets.
International Stocks
The international sector of the Fund again produced a good return versus
international indices, but below that of the S&P 500 Index. Over the past six
months, European markets provided favorable returns because of earnings growth,
falling interest rates, and corporate restructuring. However, beginning in July
of this year, a series of currency devaluations in Asia pushed many Far Eastern
markets to record lows. Globally, this had negative implications in other
emerging markets. Further, Asia's currency crisis, combined with problems within
the banking system, negatively affected the Japanese stock market.
We continue to favor European markets because of their economic and political
stability, favorable valuations, and more predictable earnings growth.
Divergence in emerging markets should continue as most Asian markets remain weak
while many Latin, Eastern European, and other markets are likely to recover
sooner. We remain negative on Japan and feel that it offers only selective
opportunities. At the end of the reporting period, international stocks made up
19.8% of the Fund's net assets.
Bonds
The bond component of the Fund is included to lower volatility and provide
current income. Our philosophy is that no one can consistently predict whether
interest rates are heading up or down over time. As a result, there will be no
dramatic change in the maturity of the portfolio in an effort to time the
market. The emphasis remains on bonds that represent value in terms of risk and
total return.
Since the last report, we have been reducing our exposure in lower-rated
corporates and mortgage pass-through securities that carry high coupons. We have
replaced those securities with instruments that are AAA-rated and are not as
interest rate sensitive as mortgage pass-throughs.
Within the Fund's bond portion, the best performing holdings were: Comcast Cable
Communications, Time Warner, and Kmart. Our investments in higher coupon
pass-throughs underperformed because of fears of large prepayments. At of the
end of the reporting period, bonds comprised 19.3% of the Fund's net assets.
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 4% of the Fund's net assets on November 30, 1997.
Performance
During the six months ended November 30, 1997, the Fund returned 4.49%.(2) This
was below the performance of the S&P 500 Index. The main problems were in the
large capitalization sector which was down and the international sector which
was up only marginally. Small capitalization stocks had outstanding returns. The
managers continue to believe that over the course of a market cycle this
compilation of management styles and assets may provide competitive returns with
less volatility than the average growth fund.
(1) The S&P 500 Index is an unmanaged index representing the average performance
of a group of 500 widely held, publicly traded stocks. It is not possible to
invest directly in the S&P 500 Index.
(2) Past performance is no guarantee of future results and the value of your
investment may vary according to the Fund's performance.
TOP 10 EQUITY HOLDINGS
(% OF NET ASSETS)
Pharmacia & Upjohn 2.1
Cisco Systems 1.2
CNF Transportation 1.1
Transocean Offshore 1.0
American Home Products .9
Amgen .9
Halliburton .9
Motorola .9
Ascend Communications .8
Caliber System .8
TOP 10 INDUSTRIES
(% OF NET ASSETS)
Oil & Gas - Drilling/Equipment 7.1
Drugs 3.8
Computer Software & Service 3.7
Biotechnology 3.6
Banks - Major Regional 3.5
Computer - Networking 3.4
Electronics - Semiconductors 3.4
Medical Products & Supplies 3.0
Communication - Equipment Manufacturers 2.9
Real Estate Investments Trusts 2.9
A pie chart is shown here depicting the Asset Allocation as of November 30, 1997
of the USAA Growth Strategy Fund to be: Large Cap Stocks - 29.0%*, Small Cap
Stocks - 27.8%*, Money Market Instruments - 3.8%*, Bonds - 19.3%*, International
Stocks - 19.8%*.
* 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 10 for a complete listing of the Portfolio of Investments in
Securities.
Growth Strategy Fund
Statement of Assets and Liabilities
(In Thousands)
November 30, 1997
(Unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at market value (identified cost of $206,414) $ 228,627
Cash 82
Cash denominated in foreign currencies (identified cost of $382) 339
Receivables:
Capital shares sold 169
Dividends and interest 824
Securities sold 908
Unrealized appreciation on foreign currency contracts held, at value 1
----------
Total assets 230,950
----------
Liabilities
Securities purchased 1,268
Capital shares redeemed 77
USAA Investment Management Company 144
USAA Transfer Agency Company 26
Accounts payable and accrued expenses 30
----------
Total liabilities 1,545
----------
Net assets applicable to capital shares outstanding $ 229,405
==========
Represented by:
Paid-in capital $ 201,824
Accumulated undistributed net investment income 856
Accumulated net realized gain on investments 4,555
Net unrealized appreciation of investments 22,213
Net unrealized depreciation on foreign currency translations (43)
----------
Net assets applicable to capital shares outstanding $ 229,405
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 16,845
==========
Net asset value, redemption price, and offering price per share $ 13.62
==========
</TABLE>
See accompanying notes to financial statements.
Growth Strategy Fund
Portfolio of Investments in Securities
November 30, 1997
(Unaudited)
Market
Number Value
of Shares Security (000)
--------- -------- ---
International Stocks (19.8%)
Argentina (0.2%)
7,900 Banco Rio de La Plata
S.A. ADR * $ 99
3,800 Disco S.A. ADS * 136
2,160 IRSA Inversiones y
Representaciones
S.A. GDS 66
2,500 Telefonica de Argentina
S.A. ADR 83
- ------------------------------------------------
384
- ------------------------------------------------
Australia (0.5%)
35,000 Broken Hill Proprietary
Co. Ltd. 321
30,000 CSL Ltd. 197
40,000 Pasminco Ltd. 41
145,000 Telstra Corp. Ltd. * 272
46,578 Woodside Petroleum Ltd. 334
- ------------------------------------------------
1,165
- ------------------------------------------------
Austria (0.5%)
2,307 Austria Mikro Systeme
International AG 139
4,087 Boehler Uddeholm AG 276
9,757 VA Stahl AG 361
2,750 VA Technologie AG 414
- ------------------------------------------------
1,190
- ------------------------------------------------
Belgium (0.2%)
310 Colruyt S.A. 159
4,500 Union Miniere S.A. * 324
- ------------------------------------------------
483
- ------------------------------------------------
Brazil (0.7%)
4,130,000 Companhia Energetica
de Minas Gerais (Cemig)
(Preferred) 201
11,000 Multicanal Participacoes
S.A ADS (Preferred) * 52
12,500 Panamerican Beverages,
Inc. "A" 428
1,200,000 Petroleo Brasileiro S.A.
(Preferred) 262
2,600,000 Telebras PN S.A.
(Preferred) 271
8,000 Uniao de Bancos Brasileiros
S.A. (Unibanco) GDR * 230
11,000 Usinas Siderurgicas
de Minas Gerais S.A.
(Preferred) 71
- ------------------------------------------------
1,515
- ------------------------------------------------
Canada (1.1%)
15,500 Alliance Forest
Products, Inc. * 249
26,000 Anderson
Exploration Ltd. * 241
5,200 Cadillac Fairview Corp. * 123
5,600 Canadian National
Railway Co. 289
21,100 Canadian Occidental
Petroleum Ltd. 471
41,200 National Bank of Canada 605
12,000 OSF, Inc. * 84
3,000 St. Laurent
Paperboard, Inc. * 38
18,600 Suncor, Inc. 613
- ------------------------------------------------
2,713
- ------------------------------------------------
Chile (0.2%)
3,290 Compania de Telefonos
de Chile ADR 89
5,900 Distribucion y Servicio
D & S S.A. ADS 103
3,000 Sociedad Quimica y
Minera de Chile
S.A. ADS 138
- ------------------------------------------------
330
- ------------------------------------------------
China (0.1%)
85,000 Cosco Pacific Ltd. 59
354,000 Jiangsu Expressway
Co. Ltd. * 69
55,000 New World
Infrastructure Ltd. * 109
- ------------------------------------------------
237
- ------------------------------------------------
Czech Republic (0.1%)
2,800 Komercni Banka A.S. GDR 35
900 SPT Telecom A.S. * 95
- ------------------------------------------------
130
- ------------------------------------------------
Denmark (0.9%)
6,800 Carli Gry International A/S 385
8,400 ISS International Service
System A/S "B" * 282
18,200 SAS Danmark A/S 276
3,000 Tele Danmark A/S "B" 179
16,400 Tele Danmark A/S ADS 490
6,100 Unidanmark A/S 431
- ------------------------------------------------
2,043
- ------------------------------------------------
Egypt (0.1%)
4,400 Suez Cement Co.
S.A.E. GDS 89
- ------------------------------------------------
Finland (0.3%)
7,000 Nokia Corp. ADS 582
1,220 Raision Tehtaat * 140
3,500 Rauma OY 61
- ------------------------------------------------
783
- ------------------------------------------------
France (1.5%)
1,300 Accor S.A. 246
10,700 Bouygues Offshore
S.A. ADR 241
10,800 Coflexip ADS 537
13,600 Elf Aquitaine ADS 779
3,800 Eramet Group 151
1,550 Essilor International 432
2,000 ISIS S.A. * 225
4,400 Louis Dreyfus Citrus 129
8,200 Renault S.A. * 230
3,000 Simco S.A. 213
6,600 Valeo S.A. 436
- ------------------------------------------------
3,619
- ------------------------------------------------
Germany (0.8%)
6,500 Bayer AG 241
5,900 Leica Camera AG 133
16,000 Rofin-Sinar
Technologies, Inc. * 236
1,200 SAP AG 349
550 SAP AG (Preferred) 169
500 Singulus Technologies AG * 22
9,340 Veba AG 555
- ------------------------------------------------
1,705
- ------------------------------------------------
Hong Kong (0.2%)
205,000 Amoy Properties Ltd. 176
7,000 Asia Satellite
Telecommunications
Holdings Ltd. ADR 148
30,000 CITIC Pacific Ltd. 120
17,000 Hutchison Whampoa Ltd. 113
- ------------------------------------------------
557
- ------------------------------------------------
Hungary (0.2%)
7,000 Magyar Tavkozlesi RT.
(MATAV) ADS * 142
10,000 Mol Magyar Olaj-Es
Gazipari GDS 210
2,000 OTP Bank GDR * 62
- ------------------------------------------------
414
- ------------------------------------------------
India (0.2%)
10,000 Arvind Mills Ltd. GDS * 23
7,250 Hindalco Industries
Ltd. GDR 163
5,500 Larsen & Toubro Ltd. GDR 54
9,300 Videsh Sanchar Nigam
Ltd. GDR 123
- ------------------------------------------------
363
- ------------------------------------------------
Indonesia (0.1%)
118,000 PT Astra
International, Inc. 62
60,000 PT HM Sampoerna 80
10,000 PT Jaya Real Property 1
- ------------------------------------------------
143
- ------------------------------------------------
Israel (0.3%)
5,100 Blue Square - Israel Ltd. ADS * 50
10,400 ECI Telecommunications Ltd. 283
6,900 Teva Pharmaceutical
Industries Ltd. ADR 341
- ------------------------------------------------
674
- ------------------------------------------------
Italy (0.9%)
8,300 ENI S.p.A. ADS 482
33,000 Erg S.p.A. * 125
9,300 Gucci Group N. V. * 378
10,300 Instrumentation
Laboratory S.p.A. ADS * 21
68,000 Italgas S.p.A. 262
6,400 SAES Getters S.p.A. ADR 66
582,000 SEAT S.p.A. * 231
452,000 SEAT S.p.A. Savings * 117
110,000 Telecom Italia S.p.A. * 434
- ------------------------------------------------
2,116
- ------------------------------------------------
Japan (2.5%)
13,000 Bridgestone Corp. 282
19,000 Canon, Inc. 459
16,000 Daibiru Corp. 157
40,000 Hitachi Ltd. 284
5,000 Hoya Corp. 153
7,000 Ito-Yokado Co. Ltd. 316
6,000 Justsystem Corp. 66
12,900 Laox Co. Ltd. 101
40,000 Minebea Co. Ltd. 445
40,000 Mitsubishi Heavy
Industries Ltd. 157
13,000 Namco 416
2,300 Nichiei Co. Ltd. 252
800 Nippon Television Network 258
65,000 NKK Corp. 66
26,000 Nomura Securities Co. Ltd. 322
9 NTT Data Communications
Systems Corp. 437
34,000 Sekisui Chemical Co. Ltd. 248
27,000 Shiseido Co. Ltd. 366
6,000 Sony Corp. 512
26,000 Terumo Corp. 407
13,000 Yamada Denki Co. 122
MBL International
Finance (Bermuda)
Trust, Convertible
Notes, $200,000 par,
3.00%, 11/30/02 212
- ------------------------------------------------
6,038
- ------------------------------------------------
Malaysia (0.1%)
14,000 Edaran Otomobil
Nasional Bhd 32
- ------------------------------------------------
Mexico (0.4%)
89,000 Controladora Comercial
Mexicana, S.A. de C.V. 97
11,599 Desc, Sociedad de
Fomento Industrial,
S.A. de C.V. ADS 436
8,700 Empresas Ica Sociedad
Controladora, S.A.
de C.V. ADR 135
12,000 Tubos de Acero
de Mexico, S.A. ADS * 265
- ------------------------------------------------
933
- ------------------------------------------------
Netherlands (1.0%)
4,700 Akzo Nobel N.V. 827
5,200 Benckiser N.V. "B" ADR * 181
700 Brunel International N.V. * 13
3,940 EVC International N.V. 92
9,500 ING Group N.V. 386
2,550 Oce-van der Grinten N.V. 291
5,000 Philips Electronics N.V. 335
1,360 Simac Techniek N.V. * 155
14,000 Verenigd Besit VNU 335
- ------------------------------------------------
2,615
- ------------------------------------------------
Norway (0.5%)
86,000 Christiania Bank og
Kreditkasse 310
19,000 Nycomed ASA, Series A 493
7,300 Nycomed ASA, Series B 183
14,700 Schibsted ASA 249
- ------------------------------------------------
1,235
- ------------------------------------------------
Peru (0.1%)
4,700 Telefonica del Peru S.A.
"B" ADS 99
- ------------------------------------------------
Philippines (0.1%)
300,000 SM Prime Holdings, Inc. 47
- ------------------------------------------------
Poland (0.1%)
17,000 Elektrim S.A. 163
13,000 Polifarb Cieszyn-Wroclaw
S.A. 53
4,333 Polifarb Cieszyn-Wroclaw
S.A. "D" * 18
- ------------------------------------------------
234
- ------------------------------------------------
Portugal (0.5%)
10,000 Banco Totta E Acores S.A. 189
1,200 Brisa-Auto Estradas de
Portugal S.A. * 37
16,300 Cimentos de Portugal S.A. 413
12,500 Portugal Telecom S.A. ADS * 573
- ------------------------------------------------
1,212
- ------------------------------------------------
Russia (0.3%)
3,800 LUKoil ADR 306
5,500 Mosenergo ADR * 197(a)
691,000 Unified Energy Systems * 156
- ------------------------------------------------
659
- ------------------------------------------------
Singapore (0.2%)
35,000 DBS Land Ltd. 60
200,000 Kay Hian James Capel
Holdings Ltd. 88
53,600 Overseas Union Bank Ltd. 210
30,000 Singapore Land Ltd. 88
- ------------------------------------------------
446
- ------------------------------------------------
South Africa (0.1%)
4,600 South African
Breweries Ltd. 113
- ------------------------------------------------
Spain (0.5%)
5,700 Corporacion Bancaria
de Espana S.A. * 353
5,200 Corporacion Mapfre, S.A. 254
6,000 Telefonica de Espana
S.A. ADR 519
- ------------------------------------------------
1,126
- ------------------------------------------------
Sweden (0.7%)
17,620 Autoliv, Inc. SDR 673
1,400 Munters AB * 14
21,900 NK Cityfastigheter AB * 160
3,600 Nordbanken AB 128
21,900 Swedish Match AB * 74
18,000 Volvo AB 480
- ------------------------------------------------
1,529
- ------------------------------------------------
Switzerland (0.8%)
346 Novartis AG 553
1,800 Selecta Group AG * 241
220 SGS Group AG 411
809 Sulzer AG P.C. 535
1,300 Tag Heuer
International S.A. * 126
24,200 Tag Heuer International
S.A. ADR * 239
- ------------------------------------------------
2,105
- ------------------------------------------------
Taiwan (0.1%)
205,000 China Steel Corp. 150
161,000 Far Eastern Department
Store, Ltd. 157
13,000 Microtek
International, Inc. * 15
- ------------------------------------------------
322
- ------------------------------------------------
Turkey (0.1%)
2,031,527 Yapi Ve Kredi
Bankasi A.S. 63
- ------------------------------------------------
United Kingdom (2.4%)
102,000 Avis Europe plc 265
41,900 Billiton plc * 103
20,500 British Borneo
Petroleum plc 153
33,000 Cadbury Schweppes plc 343
190,000 Cookson Group plc 658
97,700 Corporate Services
Group plc 342
11,300 DFS Furniture Co. plc 111
4,000 Doncasters plc ADS * 104
41,400 EMI Group plc 312
17,000 Harvey Nichols plc 66
40,200 Ionica Group plc * 81
140,000 LucasVarity plc 449
119,000 Medeva plc 402
36,000 National Westminster
Bank plc 546
31,900 Reuters Holdings plc 360
81,000 Safeway plc 443
105,000 Tomkins plc 534
85,000 WPP Group plc 379
- ------------------------------------------------
5,651
- ------------------------------------------------
Venezuela (0.1%)
4,700 Compania Anonima
Nacional Telefonos
de Venezuela ADS 186
- ------------------------------------------------
Other Holdings (0.1%)
90,000 Central European
Growth Fund plc * 91
- ------------------------------------------------
Total international stocks
(cost: $41,719) 45,389
- ------------------------------------------------
Small Cap Stocks (27.8%)
Advertising / Marketing (0.3%)
15,950 Lamar Advertising Co. "A" * 490
24,860 Obie Media Corp. * 230
- ------------------------------------------------
720
- ------------------------------------------------
Aerospace/Defense (0.6%)
15,000 AAR Corp. 578
12,500 Aviation Sales Co. * 446
10,000 Kellstrom Industries, Inc. * 262
8,800 Triumph Group, Inc. * 286
- ------------------------------------------------
1,572
- ------------------------------------------------
Air Freight (0.1%)
5,000 Kitty Hawk, Inc. * 88
- ------------------------------------------------
Asset Backed Financings (0.4%)
12,000 IMC Mortgage Co. * 161
10,000 Sirrom Capital Corp. 440
16,500 Southern Pacific
Funding Corp. * 204
- ------------------------------------------------
805
- ------------------------------------------------
Auto Parts (0.4%)
20,100 Aftermarket
Technology Corp. * 412
11,600 Dura Automotive
Systems, Inc. * 306
12,300 Stoneridge, Inc. * 207
- ------------------------------------------------
925
- ------------------------------------------------
Banks - Major Regional (0.5%)
8,400 Bank of the Ozarks, Inc. * 179
5,000 Bank United Corp. 210
5,775 Columbia Banking
Systems, Inc. * 156
10,000 First International
Bancorp, Inc. * 136
15,000 Hamilton Bancorp, Inc. * 422
- ------------------------------------------------
1,103
- ------------------------------------------------
Beverages - Alcoholic (0.3%)
4,700 Beringer Wine
Estates Holdings * 153
10,000 The Robert
Mondavi Corp. * 474
- ------------------------------------------------
627
- ------------------------------------------------
Biotechnology (1.0%)
5,600 Affymetrix, Inc. * 192
10,000 Arqule, Inc. * 206
6,300 CN Biosciences, Inc. * 151
5,000 Gilead Sciences, Inc. * 173
10,000 Human Genome
Sciences, Inc. * 410
5,000 IDEC Pharmaceuticals
Corp. * 175
5,900 Med Immune, Inc. * 226
10,000 Protein Design Labs, Inc. * 420
7,000 SangStat Medical Corp. * 244
- ------------------------------------------------
2,197
- ------------------------------------------------
Broadcasting
Radio & TV (0.9%)
7,000 Emmis Broadcasting Corp. * 315
9,100 Gray Communications
Systems, Inc. * 233
2,974 Hearst - Argyle Television * 87
15,000 Heftel Broadcasting Corp. * 1,108
4,800 Univision Communications,
Inc. * 320
- ------------------------------------------------
2,063
- ------------------------------------------------
Building Material Group (0.2%)
5,500 Barnett, Inc. * 112
4,300 Comfort Systems USA, Inc. * 73
6,000 Service Experts, Inc. * 163
- ------------------------------------------------
348
- ------------------------------------------------
Chemicals - Specialty (0.2%)
20,300 NuCo2, Inc. * 235
5,600 Zoltek Companies, Inc. * 208
- ------------------------------------------------
443
- ------------------------------------------------
Communication - Equipment
Manufacturers (1.2%)
2,200 Advanced Fibre
Communications, Inc. * 57
16,874 Brightpoint, Inc. * 271
20,000 Datum, Inc. * 377
9,500 Harmonic Lightwaves, Inc. * 124
5,000 Innova Corp. * 88
30,000 Macrovision Corp. * 420
5,100 Network General Corp. * 96
9,500 Ortel Corp. * 170
6,000 REMEC, Inc. * 140
3,400 Sawtek, Inc. * 99
6,500 Spectrian Corp. * 133
16,600 ViaSat, Inc. * 255
22,300 Yurie Systems, Inc. * 555
- ------------------------------------------------
2,785
- ------------------------------------------------
Computer - Hardware (0.3%)
12,200 JetFax, Inc. * 85
16,300 Melita International Corp. * 151
10,000 Sandisk Corp. * 245
5,200 SCM Microsystems, Inc. * 135
- ------------------------------------------------
616
- ------------------------------------------------
Computer - Networking (0.1%)
18,500 International
Network Services * 333
- ------------------------------------------------
Computer - Peripherals (0.1%)
6,900 Box Hill Systems Corp. * 81
10,000 Komag, Inc. * 200
- ------------------------------------------------
281
- ------------------------------------------------
Computer Software
& Service (2.6%)
16,200 Aspect Development, Inc. * 691
3,482 Avant Corp. * 83
13,500 Axiom, Inc. * 81
15,300 Best Software, Inc. * 159
7,400 Broderbund Software, Inc. * 215
10,900 CCC Information Services
Group, Inc. * 207
16,300 Complete Business
Solutions, Inc. * 554
5,000 ENVOY Corp. * 154
32,500 Geotel Communications
Corp. "A" * 589
13,000 H. T. E., Inc. * 237
1,000 HNC Software, Inc. * 32
6,500 Intelligroup, Inc. * 120
23,000 International
Telecommunication Data
Systems, Inc. * 600
5,700 Logility, Inc. * 79
14,500 Mapics, Inc. * 161
1,700 New Era of Networks, Inc. * 22
16,400 Omega Research, Inc. * 84
18,800 Omtool, Ltd. * 198
19,700 Pervasive Software, Inc. * 158
4,000 Phoenix International
Ltd., Inc. * 78
10,000 Pixar, Inc. * 232
12,500 PLATINUM
Technology, Inc. * 325
11,700 QAD, Inc. * 184
13,000 Rational Software Corp. * 132
2,000 Security Dynamics
Technologies, Inc. * 68
5,000 Simulation Sciences, Inc. * 90
30,000 XcelleNet, Inc. * 377
- ------------------------------------------------
5,910
- ------------------------------------------------
Containers - Paper (0.1%)
10,000 Ivex Packaging Corp. * 200
- ------------------------------------------------
Drugs (0.2%)
10,000 Jones Medical
Industries, Inc. 330
2,300 Kendle International, Inc. * 35
- ------------------------------------------------
365
- ------------------------------------------------
Electrical Equipment (0.1%)
10,800 Advanced Lighting
Technologies, Inc. * 227
4,500 Power-One, Inc. * 74
- ------------------------------------------------
301
- ------------------------------------------------
Electronics -
Instrumentation (1.0%)
13,100 Brooks Automation, Inc. * 278
12,500 CFM Technologies, Inc. * 231
20,000 Cymer, Inc. * 384
11,500 Etec Systems, Inc. * 526
33,500 HMT Technology Corp. * 440
10,000 Photronics, Inc. * 477
2,400 Speedfam
International, Inc. * 62
6,000 Thermo Optek Corp. * 103
- ------------------------------------------------
2,501
- ------------------------------------------------
Electronics -
Semiconductors (0.8%)
5,200 3DFX Interactive, Inc. * 85
8,200 Applied Micro
Circuits Corporation * 90
8,500 Benchmarq
Microelectronics, Inc. * 155
11,400 Faroudja, Inc. * 80
5,000 Lattice Semiconductors Corp. * 282
10,900 Pericom Semiconductor Corp. * 87
5,900 Qlogic Corp. * 195
13,400 RF Micro Devices, Inc. * 189
10,000 TranSwitch Corp. * 94
6,000 Triquint Semiconductor,
Inc. * 120
4,500 Vitesse Semiconductor
Corp. * 201
21,000 Zoran Corp. * 360
- ------------------------------------------------
1,938
- ------------------------------------------------
Engineering &
Construction (0.2%)
7,500 Amerilink Corp. * 188
9,300 Dycom Industries, Inc. * 209
7,600 Willbros Group, Inc. * 133
- ------------------------------------------------
530
- ------------------------------------------------
Entertainment (0.1%)
10,000 Ballantyne of Omaha, Inc. * 184
7,200 TSI International
Software Ltd. * 73
- ------------------------------------------------
257
- ------------------------------------------------
Equipment -
Semiconductors (0.5%)
9,200 Cerprobe Corp. * 164
12,700 Electroglas, Inc. * 241
16,000 EMCORE Corp. * 300
25,000 Integrated Process
Equipment Corp. * 538
- ------------------------------------------------
1,243
- ------------------------------------------------
Finance - Consumer (0.5%)
20,000 FIRSTPLUS Financial
Group, Inc. * 762
10,500 NCO Group, Inc. * 398
- ------------------------------------------------
1,160
- ------------------------------------------------
Finance - Diversified (0.1%)
12,700 Medallion Financial Corp. 273
- ------------------------------------------------
Foods (0.3%)
15,000 Authentic Specialty
Foods, Inc. * 148
8,500 Suiza Foods Corp. * 495
- ------------------------------------------------
643
- ------------------------------------------------
Healthcare - Diversified (0.5%)
19,000 PAREXEL
International Corp. * 656
13,800 Superior Consultant, Inc. * 412
- ------------------------------------------------
1,068
- ------------------------------------------------
Healthcare - HMOs (0.1%)
5,000 United Dental Care, Inc. * 64
- ------------------------------------------------
Healthcare - Specialized
Services (0.5%)
5,000 Advance Paradigm, Inc. * 148
5,000 Atria Communities, Inc. * 84
6,000 Medquist, Inc. * 156
3,000 Pediatrix Medical
Group, Inc. * 133
4,800 PMR Corp. * 110
15,000 Renal Care Group, Inc. * 476
- ------------------------------------------------
1,107
- ------------------------------------------------
Home Furnishings &
Appliances (0.2%)
10,000 Ethan Allen Interiors Inc. 385
- ------------------------------------------------
Homebuilding (0.1%)
5,000 Crossmann
Communities, Inc. 114
- ------------------------------------------------
Hospital (0.2%)
18,900 National Surgery
Centers, Inc. * 473
- ------------------------------------------------
Insurance - Multi-Line
Companies (0.1%)
8,700 Keystone Automotive
Industries, Inc. * 202
- ------------------------------------------------
Insurance -
Property/Casualty (0.4%)
5,000 Executive Risk, Inc. 325
12,000 Nationwide
Financial Services, Inc. * 410
3,000 Paula Financial, Inc. * 67
7,200 Penn-America Group, Inc. 133
- ------------------------------------------------
935
- ------------------------------------------------
Internet Services (0.1%)
17,100 Preview Travel, Inc. * 158
16,600 Sportsline USA, Inc. * 131
- ------------------------------------------------
289
- ------------------------------------------------
Investment
Banks / Brokerage (0.1%)
6,000 Hambrecht &
Quist Group * 230
- ------------------------------------------------
Investment Companies (0.1%)
8,000 Affiliated Managers
Group, Inc. * 200
- ------------------------------------------------
Leisure Time (0.3%)
15,000 Action Performance
Companies, Inc. * 435
12,100 Penn National
Gaming, Inc. * 139
- ------------------------------------------------
574
- ------------------------------------------------
Lodging/Hotel (0.3%)
5,000 Doubletree Corp. * 220
15,000 Signature Resorts, Inc. * 401
5,000 Suburban Lodges of
America, Inc. * 122
- ------------------------------------------------
743
- ------------------------------------------------
Machinery - Diversified (0.1%)
1,800 JLK Direct
Distribution, Inc. * 51
4,400 RDO Equipment Co. * 77
- ------------------------------------------------
128
- ------------------------------------------------
Manufacturing -
Specialized (0.1%)
6,900 United States Filter Corp.* 216
- ------------------------------------------------
Medical Products
& Supplies (0.5%)
7,000 Gulf South Medical
Supply, Inc. * 228
6,000 Henry Schein, Inc. * 212
5,000 Marquette Medical
Systems, Inc. * 113
10,000 NCS HealthCare, Inc. * 266
13,400 Ocular Sciences, Inc. * 338
800 Perclose, Inc. * 16
5,700 Seamed Corp. * 95
4,500 Urologix, Inc. * 90
- ------------------------------------------------
1,358
- ------------------------------------------------
Nursing Care (0.1%)
10,000 Centennial
HealthCare Corp. * 212
- ------------------------------------------------
Office Equipment
& Supplies (0.1%)
8,000 Daisytek International
Corp. * 314
- ------------------------------------------------
Oil & Gas - Drilling/
Equipment (3.4%)
7,000 Bayard Drilling Tech, Inc. * 129
3,500 Carbo Ceramics, Inc. * 116
10,000 Cliffs Drilling Co. * 555
6,000 Dril - Quip, Inc. * 180
12,000 Falcon Drilling Co., Inc. * 387
24,800 Friede Goldman
International, Inc. * 738
14,800 Gulf Islands
Fabrication Inc. * 327
5,900 Gulfmark Offshore, Inc. * 206
22,800 Halter Marine Group, Inc. * 636
6,600 Hanover Compressor Co. * 139
9,600 IRI International Corp. * 155
18,600 National-Oilwell, Inc. * 589
11,100 NS Group, Inc. * 208
26,800 Patterson Energy, Inc. * 985
4,600 Superior Energy
Services, Inc. * 49
3,500 Transcoastal Marine
Services, Inc. * 68
16,000 Trico Marine Services, Inc. * 445
13,300 UNIFAB International, Inc. * 269
10,000 UTI Energy Corp. * 280
18,000 Varco International, Inc. * 921
9,000 Veritas DGC, Inc. * 360
- ------------------------------------------------
7,742
- ------------------------------------------------
Oil & Gas - Exploration
& Production (0.2%)
15,000 Hvide Marine, Inc. "A" * 424
5,000 Stone Energy Corp. * 144
- ------------------------------------------------
568
- ------------------------------------------------
Railroads / Shipping (0.1%)
10,000 MotivePower
Industries, Inc. * 265
- ------------------------------------------------
Real Estate Investment
Trusts (0.3%)
10,000 Alexandria Real Estate
Equities, Inc. 311
1,600 LaSalle Partners, Inc. * 55
7,500 Prentiss Properties Trust 194
9,200 Vistana, Inc. * 204
- ------------------------------------------------
764
- ------------------------------------------------
Restaurants (0.4%)
15,000 Landry's Seafood
Restaurants, Inc. * 422
3,500 Logan's Roadhouse, Inc. * 62
6,300 Papa John's
International, Inc. * 210
12,100 PJ America, Inc. * 166
- ------------------------------------------------
860
- ------------------------------------------------
Retail - Food (0.1%)
5,000 Dominick's
Supermarkets, Inc. * 194
- ------------------------------------------------
Retail - General
Merchandising (0.1%)
7,500 Dollar Tree Stores, Inc. * 312
- ------------------------------------------------
Retail - Specialty (1.0%)
13,000 99 Cents Only Stores * 469
4,500 Abercrombie & Fitch Co. * 135
3,000 Alrenco, Inc. * 48
10,000 Cost Plus World Market * 331
18,000 Garden Ridge Corp. * 274
7,000 Guitar Center, Inc. * 152
9,800 Hibbett Sporting
Goods, Inc. * 270
2,100 N2K, Inc. * 41
8,700 Party City Corp. * 248
3,500 Petco Animal
Supplies, Inc. * 103
10,300 Rental Service Corp. * 259
- ------------------------------------------------
2,330
- ------------------------------------------------
Retail - Specialty Apparel (0.6%)
10,000 Coldwater Creek, Inc. * 310
19,200 Delia's, Inc. * 453
6,300 Gadzooks, Inc. * 176
7,000 Just For Feet, Inc. * 118
5,400 K&G Men's Center, Inc. * 103
8,000 Paul Harris Stores, Inc. * 169
- ------------------------------------------------
1,329
- ------------------------------------------------
Services - Commercial
& Consumer (1.8%)
24,000 Altron, Inc. * 378
11,500 Armor Holdings, Inc. * 129
5,000 Carriage Services, Inc. * 97
15,600 Checkfree Corp. * 408
26,300 Credit Management
Solutions, Inc. * 329
10,000 Equity Corp. International * 214
14,200 F.Y.I., Inc. * 337
6,000 Fine Host Corp. * 176
14,900 Globecomm Systems, Inc. * 190
5,200 Industrial Distribution
Group, Inc. * 100
7,700 IntelliQuest Information
Group, Inc. * 115
17,200 International Manufacturing
Services, Inc. "A" * 174
9,800 International Total
Services, Inc. * 152
7,500 Learning Tree
International, Inc. 187
9,200 Market Facts, Inc. * 162
1,300 Maximus, Inc. * 31
7,500 Merix Corp. * 111
5,000 MSC Industrial Direct Co. * 194
16,600 Novacare Employee
Services, Inc. * 149
14,400 OutSource
International, Inc. * 193
14,200 PRT Group, Inc. * 190
3,600 Staff Leasing, Inc. * 80
- ------------------------------------------------
4,096
- ------------------------------------------------
Services - Computer
Systems (0.2%)
11,200 EFTC Corp. * 167
9,400 Mastech Corp. * 275
- ------------------------------------------------
442
- ------------------------------------------------
Services - Data
Processing (0.2%)
5,400 Computer Horizons Corp. * 178
6,300 Network Solutions, Inc. "A" * 103
9,100 Pegasus Systems, Inc. * 162
4,500 SCB Computer
Technology, Inc. * 83
900 Syntel, Inc. * 10
- ------------------------------------------------
536
- ------------------------------------------------
Services - Facilities &
Environment (0.1%)
6,500 Cornell Corrections, Inc. * 114
5,000 Wackenhut Corp. "B" 99
- ------------------------------------------------
213
- ------------------------------------------------
Telecommunications -
Cellular/Wireless (0.2%)
20,500 Aerial Communications,
Inc. * 186
11,800 Omnipoint Corp. * 249
- ------------------------------------------------
435
- ------------------------------------------------
Telecommunications -
Long Distance (0.6%)
15,000 Concentric Network Corp. * 154
23,000 General
Communication, Inc. * 157
6,200 ITC DeltaCom, Inc. * 88
7,000 IXC Communications, Inc. * 243
4,500 Pacific Gateway
Exchange, Inc. * 175
9,900 Premiere Technologies,
Inc. * 236
7,000 SmartTalk TeleServices,
Inc. * 150
7,400 STAR Telecommunications,
Inc. * 213
3,400 Startec Global
Communications Corp. * 54
10,000 Tel-Save Holdings, Inc. * 216
- ------------------------------------------------
1,686
- ------------------------------------------------
Telephones (0.5%)
4,500 Intermedia Communications
of Florida, Inc. * 223
1,500 McLeod, Inc. * 56
4,500 Metromedia Fiber
Network, Inc. 76
4,500 NEXTLINK Communications,
Inc. "A" * 91
8,000 Powertel, Inc. * 155
3,800 Teleport Communications
Group, Inc. * 186
9,800 Winstar Communications,
Inc. * 259
- ------------------------------------------------
1,046
- ------------------------------------------------
Textiles - Apparel (0.2%)
5,000 Cutter & Buck, Inc. * 92
19,000 North Face, Inc. * 413
- ------------------------------------------------
505
- ------------------------------------------------
Tobacco (0.1%)
2,600 800-JR Cigar, Inc. * 72
- ------------------------------------------------
Truckers (0.2%)
1,900 C. H. Robinson
Worldwide, Inc. * 40
5,000 Coach USA, Inc. * 139
5,000 Heartland Express, Inc. * 118
6,000 Jevic Transportation, Inc. * 99
- ------------------------------------------------
396
- ------------------------------------------------
Waste Management (0.5%)
12,800 American Disposal
Services, Inc. * 456
7,500 Casella Waste
Systems, Inc. * 152
7,100 Eastern Environmental
Services, Inc. * 168
3,000 Superior Services, Inc. * 71
3,000 Waste Industries, Inc. * 60
12,000 Waterlink, Inc. * 225
- ------------------------------------------------
1,132
- ------------------------------------------------
Total small cap stocks
(cost: $48,901) 63,762
- ------------------------------------------------
Large Cap Stocks (29.0%)
Airlines (0.4%)
34,650 Southwest Airlines Co. 847
- ------------------------------------------------
Biotechnology (2.7%)
40,000 Amgen, Inc. * 2,045
20,000 Biogen, Inc. * 700
30,000 Centocor, Inc. * 1,305
55,000 Chiron Corp. * 1,000
40,000 Genzyme Corp. * 1,073
1,200 Genzyme Tissue Repair
Division Corp. * 9
- ------------------------------------------------
6,132
- ------------------------------------------------
Communication - Equipment
Manufacturers (1.3%)
31,500 Motorola, Inc. 1,980
40,000 Pairgain
Technologies, Inc. * 945
- ------------------------------------------------
2,925
- ------------------------------------------------
Computer - Hardware (0.2%)
8,400 Gateway 2000, Inc. * 240
20,000 Micron Electronics, Inc. * 222
- ------------------------------------------------
462
- ------------------------------------------------
Computer - Networking (3.2%)
40,000 3Com Corp. * 1,450
73,000 Ascend
Communications, Inc. * 1,821
55,000 Cabletron Systems, Inc. * 1,265
33,000 Cisco Systems, Inc. * 2,846
- ------------------------------------------------
7,382
- ------------------------------------------------
Computer - Peripherals (1.1%)
35,000 Quantum Corp. * 932
40,000 Seagate Technology, Inc. * 907
35,000 Western Digital Corp. * 707
- ------------------------------------------------
2,546
- ------------------------------------------------
Computer Software
& Service (0.4%)
30,000 Intuit, Inc. * 906
- ------------------------------------------------
Drugs (2.7%)
15,400 Dura Pharmaceuticals, Inc. * 676
15,000 Ivax Corp. * 106
30,000 Mylan Laboratories, Inc. 665
140,000 Pharmacia & Upjohn, Inc. 4,725
- ------------------------------------------------
6,172
- ------------------------------------------------
Electronics -
Instrumentation (0.3%)
17,000 KLA Instruments Corp. * 659
- ------------------------------------------------
Electronics -
Semiconductors (2.3%)
70,000 Advanced Micro
Devices, Inc. * 1,527
9,066 Analog Devices, Inc. * 284
10,000 Intel Corp. 776
24,500 LSI Logic Corp. * 570
57,000 Micron Technology, Inc. * 1,418
16,200 Texas Instruments, Inc. 798
- ------------------------------------------------
5,373
- ------------------------------------------------
Equipment -
Semiconductors (1.8%)
42,000 Applied Materials, Inc. * 1,386
40,900 Lam Research Corp. * 1,252
21,200 Novellus Systems, Inc. * 798
20,200 Teradyne, Inc. * 663
- ------------------------------------------------
4,099
- ------------------------------------------------
Finance - Consumer (0.6%)
50,000 Advanta Corp. 1,425
- ------------------------------------------------
Gaming Companies (0.3%)
27,200 International Game
Technology, Inc. 680
- ------------------------------------------------
Healthcare - Diversified (1.3%)
30,000 American Home
Products Corp. 2,096
7,100 Warner-Lambert Co. 993
- ------------------------------------------------
3,089
- ------------------------------------------------
Healthcare - HMOs (0.7%)
20,000 Pacificare Health
Systems, Inc. * 1,030
10,000 United HealthCare Corp. 521
- ------------------------------------------------
1,551
- ------------------------------------------------
Insurance - Life/Health (0.5%)
15,000 Aetna, Inc. 1,131
- ------------------------------------------------
Manufacturing -
Diversified
Industries (0.4%)
18,700 Hillenbrand Industries, Inc. 833
- ------------------------------------------------
Medical Products
& Supplies (2.0%)
23,100 Bausch & Lomb, Inc. 915
36,100 Boston Scientific Corp. * 1,631
20,000 St. Jude Medical, Inc. * 593
59,000 United States
Surgical Corp. 1,556
- ------------------------------------------------
4,695
- ------------------------------------------------
Oil & Gas - Drilling/
Equipment (3.3%)
24,800 Baker Hughes, Inc. 1,038
40,000 Ensco International, Inc. * 1,430
38,600 Halliburton Co. 2,082
10,000 Tidewater, Inc. 561
50,000 Transocean Offshore, Inc. 2,372
- ------------------------------------------------
7,483
- ------------------------------------------------
Restaurants (0.4%)
20,000 Lone Star Steakhouse
& Saloon, Inc. * 373
15,000 Outback Steakhouse, Inc. * 449
- ------------------------------------------------
822
- ------------------------------------------------
Services - Data
Processing (0.2%)
20,000 First Data Corp. 566
- ------------------------------------------------
Shoes (0.3%)
15,000 Nike, Inc. "B" 730
- ------------------------------------------------
Truckers (2.6%)
33,500 Caliber System, Inc. 1,790
59,200 CNF Transportation, Inc. 2,575
21,100 Consolidated
Freightways Corp. * 330
2,000 Roadway Express, Inc. 54
32,400 Ryder System, Inc. 1,177
- ------------------------------------------------
5,926
- ------------------------------------------------
Total large cap stocks
(cost: $63,779) 66,434
- ------------------------------------------------
Principal
Amount
(000)
---
Bonds (19.3%)
$ 2,000 Capital One Financial
Corporation, 7.25%,
12/01/03 2,008
1,000 Comcast Cable
Communications, Inc.,
8.13%, 5/01/04 1,065
1,000 Corporacion Andina
de Fomento, Bonds
(Venezuela), 7.10%,
2/01/03 1,006
2,000 Federal National Mortgage
Association REMIC,
9.00%, 11/18/24 2,152
1,993 Federal National Mortgage
Association REMIC,
9.50%, 9/18/23 2,167
1,000 First Industrial LP,
7.60%, 5/15/07 1,053
2,000 First Union Commercial
Mortgage Trust II,
6.60%, 11/18/29 2,003
2,000 FIRSTPLUS Home Loan
Owner Trust, 7.08%,
7/10/17 2,045
$ 2,000 FIRSTPLUS Home Loan
Owner Trust, 6.62%,
9/10/15 1,992
1,000 Franchise Finance Corp.
of America, Senior Notes,
7.00%, 11/30/00 1,015
2,000 Giddings & Lewis, Inc.,
Notes, 7.50%, 10/01/05 2,039
2,048 Government National
Mortgage Association,
6.50%, 10/20/25 2,010
2,390 Government National
Mortgage Association,
7.00%, 6/20/26 2,391
1,935 Government National
Mortgage Association,
7.50%, 10/20/26 1,967
1,000 Great Atlantic & Pacific
Tea, Inc., Senior Notes,
7.70%, 1/15/04 1,044
1,000 Health Care Property
Investors, Inc., Senior
Notes, 6.50%, 2/15/06 980
2,000 HUBCO, Inc.,
8.20%, 9/15/06 2,148
1,000 Kmart Corp., Debentures,
7.95%, 2/01/23 969
2,000 MacSaver Financial
Services, Inc., Notes,
7.40%, 2/15/02 2,015
1,000 Merita Bank Ltd.,
Subordinated Note
(Finland), 6.50%, 1/15/06 987
1,000 Pulte Corp., Senior Notes,
7.00%, 12/15/03 1,010
1,000 RJR Nabisco, Inc., Notes,
8.00%, 7/15/01 1,029
1,000 Security Capital Pacific
Trust, Notes, 7.15%,
10/15/03 1,016
2,000 Tele-Communications, Inc.,
Senior Notes, 8.25%,
1/15/03 2,112
$ 1,000 Time Warner, Inc., Notes,
7.48%, 1/15/08 1,045
1,000 Washington Real Estate
Investment Trust, Senior
Notes, 7.25%, 8/13/06 1,035
2,000 WMX Technologies, Inc.,
6.38%, 12/01/03 1,956
2,000 WorldCom, Inc., Senior
Notes, 7.55%, 4/01/04 2,091
- ------------------------------------------------
Total bonds
(cost: $43,323) 44,350
- ------------------------------------------------
Money Market Instrument (3.8%)
8,695 Federal Home Loan Bank,
5.60%, 12/01/97
(cost: $8,692) 8,692
- ------------------------------------------------
Total investments
(cost: $206,414) $ 228,627
================================================
- ---------------------
*Non-income producing.
Portfolio Summary by Industry
-----------------------------
U.S. Government & Agency Issue 8.4%
Oil & Gas - Drilling/Equipment 7.1
Drugs 3.8
Computer Software & Service 3.7
Biotechnology 3.6
Banks - Major Regional 3.5
Computers - Networking 3.4
Electronics - Semiconductors 3.4
Medical Products & Supplies 3.0
Communication - Equipment Manufacturers 2.9
Real Estate Investment Trusts 2.8
Truckers 2.8
Broadcasting Radio & TV 2.5
Services - Commercial & Consumer 2.4
Equipment - Semiconductors 2.3
Asset Backed Financings 2.1
Finance - Consumer 2.0
Healthcare - Diversified 1.8
Telecommunications - Long Distance 1.8
Telephones 1.8
Retail - Specialty 1.5
Auto Parts 1.4
Electronics - Instrumentation 1.4
Waste Management 1.3
Computer - Peripherals 1.2
Manufacturing - Specialized 1.2
Home Furnishings & Appliances 1.0
Retail - Food 1.0
Other 24.6
----
99.7%
====
Growth Strategy Fund
Notes to Portfolio of Investments in Securities
November 30, 1997
(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.
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)
Six-month period ended November 30, 1997
(Unaudited)
<TABLE>
<S> <C>
Net investment income:
Income (net of foreign taxes withheld of $37):
Dividends $ 727
Interest 1,543
-------
Total income 2,270
-------
Expenses:
Management fees 854
Transfer agent's fees 285
Custodian's fees 111
Postage 50
Shareholder reporting fees 14
Trustees' fees 2
Registration fees 73
Professional fees 15
Other 1
-------
Total expenses 1,405
-------
Net investment income 865
-------
Netrealized and unrealized gain on investments and foreign currency: Net
realized gain (loss) on:
Investments 6,129
Foreign currency transactions (3)
Change in net unrealized appreciation/depreciation of:
Investments 225
Translation of assets and liabilities in foreign currencies (41)
-------
Net realized and unrealized gain 6,310
-------
Increase in net assets resulting from operations $ 7,175
=======
</TABLE>
See accompanying notes to financial statements.
Growth Strategy Fund
Statements of Changes in Net Assets
(In Thousands)
Six-month period ended November 30, 1997
and Year ended May 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
11/30/97 5/31/97
-------- -------
<S> <C> <C>
From operations:
Net investment income $ 865 $ 1,927
Net realized gain on investments 6,129 955
Net realized loss on foreign currency transactions (3) (4)
Change in net unrealized appreciation/depreciation of:
Investments 225 11,018
Foreign currency translations (41) (2)
--------- ---------
Increase in net assets resulting from operations 7,175 13,894
--------- ---------
Distributions to shareholders from:
Net investment income (1,063) (1,215)
--------- ---------
Net realized gains (4) (3,874)
--------- ---------
From capital share transactions:
Proceeds from shares sold 45,197 138,121
Shares issued for dividends reinvested 1,061 4,982
Cost of shares redeemed (16,882) (45,175)
--------- ---------
Increase in net assets from capital share transactions 29,376 97,928
--------- ---------
Net increase in net assets 35,484 106,733
Net assets:
Beginning of period 193,921 87,188
--------- ---------
End of period $ 229,405 $ 193,921
========= =========
Undistributed net investment income included in net assets:
Beginning of period $ 1,057 $ 338
========= =========
End of period $ 856 $ 1,057
========= =========
Change in shares outstanding:
Shares sold 3,155 11,224
Shares issued for dividends reinvested 75 412
Shares redeemed (1,185) (3,679)
--------- ---------
Increase in shares outstanding 2,045 7,957
========= =========
</TABLE>
See accompanying notes to financial statements.
Growth Strategy Fund
Notes to Financial Statements
November 30, 1997
(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 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 average of the bid and asked
prices 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 and to decrease accumulated net realized
gain on investments by $10,776.
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, one with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($750 million uncommitted), and one with
NationsBank of Texas, N.A. ($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 its agreement with CAPCO, the Fund may borrow from
CAPCO an amount up to 5% of its total assets at CAPCO's borrowing rate with no
markup. Subject to availability under its agreement with NationsBank, the Fund
may borrow from NationsBank an amount which, when added to outstanding
borrowings under the CAPCO agreement, does not exceed 25% of its total assets at
NationsBank's borrowing rate plus a markup. During the six-month period ended
November 30, 1997, the Fund had no borrowings under either of these agreements.
(3) Distributions
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made in the succeeding fiscal year
or as otherwise required to avoid the payment of federal taxes.
(4) Investment Transactions
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended November 30, 1997 were
$73,602,535 and $52,991,596, respectively.
Gross unrealized appreciation and depreciation of investments at November 30,
1997 was $36,709,182 and $14,495,997, 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, 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 11/30/97 Received 11/30/97 (Depreciation)
---- --------- -------- -------- -------- ------------
<C> <S> <C> <C> <C> <C>
12/01/97 1,302 Belgian Franc $ 36 36 U.S. Dollar $ 36 $ -
12/01/97 40,664 Indonesian Rupiah 11 11 U.S. Dollar 11 -
12/01/97 23,229 Indonesian Rupiah 6 6 U.S. Dollar 6 -
12/01/97 11 Netherlands Guilder 5 5 U.S. Dollar 5 -
12/01/97 29 U.S. Dollar 29 41 Swiss Franc 29 -
12/01/97 9 U.S. Dollar 9 46 Finnish Markka 9 -
12/01/97 41 U.S. Dollar 41 81 Netherlands Guilder 41 -
12/02/97 28,832 Indonesian Rupiah 8 8 U.S. Dollar 8 -
12/03/97 7 Netherlands Guilder 4 4 U.S. Dollar 4 -
12/03/97 49 U.S. Dollar 49 71 Australian Dollar 49 -
12/03/97 44 U.S. Dollar 44 65 Australian Dollar 44 -
12/03/97 64 U.S. Dollar 64 38 British Pound 65 1
12/03/97 15 U.S. Dollar 15 21 Swiss Franc 15 -
12/03/97 52 U.S. Dollar 52 276 Finnish Markka 52 -
12/04/97 48 U.S. Dollar 48 70 Australian Dollar 48 -
12/09/97 68 U.S. Dollar 68 849 Austrian Schilling 68 -
----- ---- --
$ 489 $ 490 $ 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 of $23.50 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 six-month
period ended November 30, 1997 was $3,380.
(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>
Six-month Nine-month
Period Ended Year Ended Period Ended
November 30, May 31, May 31,
1997 1997 1996 *
---- ---- ----
<S> <C> <C> <C>
Net asset value at
beginning of period $ 13.10 $ 12.74 $ 10.00
Net investment income .05 .15 .11(b)
Net realized and
unrealized gain .54 .77 2.66
Distributions from net
investment income (.07) (.12) (.03)
Distributions of realized
capital gains - (.44) -
---------- ---------- --------
Net asset value at
end of period $ 13.62 $ 13.10 $ 12.74
========== ========== ========
Total return (%) ** 4.49 7.73 27.76
Net assets at end
of period (000) $ 229,405 $ 193,921 $ 87,188
Ratio of expenses to
average net assets (%) 1.24(a) 1.31 1.66(a)
Ratio of net investment
income to average
net assets (%) .76(a) 1.46 1.34(a)
Portfolio turnover (%) 24.18 62.50 40.21
Average commission rate
paid per share + $ .0072 $ .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.
