Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Financial Information:
Portfolio of Investments 8
Notes to Portfolio of Investments 19
Statement of Assets and Liabilities 20
Statement of Operations 21
Statements of Changes in Net Assets 22
Notes to Financial Statements 23
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 World Growth
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)1999, 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 (Registered
Trademark) 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 not insured or guaranteed by the
FDIC or any other government agency. Although the fund seeks to preserve
the value of your investment at $1 per share, it is possible to lose
money by investing in the fund.
(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 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
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH, CFA,
APPEARS HERE.]
Since my last message to Investment Trust shareholders, the stock market has
reminded us that intense emotions are part of the investment process. In August,
the unraveling of markets around the world was downright scary. Huge daily
drops, the rampage into treasury bonds while other income markets dried up, and
the antics of huge hedge funds made for confusion and fear. At such times, it
becomes very hard for people to remember the long-term plans they have made for
their portfolios.
A scant three months later, stock markets have recouped losses and bond markets
have settled down. August looks like a momentary aberration. With the retreat of
fear, we are now seeing something the financial press has tagged "Internet
stocks." These are various companies, going public for the first time, whose
business is closely tied to Internet commerce. Some have soared to prices ten
times their initial offering, even though they have little or no earnings and
traditional analysts can detect little to support such lofty prices. In the
1600s, investors got the idea that tulip bulbs, which Dutch traders brought home
on their voyages, were highly valuable and bid their prices to incredible
levels. Those prices collapsed and the word "tulip" took on a special meaning
for investment professionals. The tulip craze became a classic example of
irrational investor behavior. When I watch the Internet IPOs, I think "Tulip."
This tells me that emotions can run both ways, from panic to euphoria, and make
people forget their long-term investment plans. But, you need those plans most
of all when the emotions are rampant. Trading in calm markets prepares you to
avoid trading during raging markets.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
For more complete information about mutual funds managed and distributed by USAA
IMCO, including charges and expenses, please call for a prospectus. Read it
carefully before investing.
Although none of the investments mentioned are guaranteed or insured, government
bonds are backed by the full faith and credit of the U.S. Government. Common
stocks are considered to have the most risk, followed by corporate bonds and
government bonds. All of these vehicles are subject to tax. If held to maturity,
bonds offer a fixed rate of return and fixed principal value. Return and
principal value of an investment in stocks will fluctuate.
Past performance is no guarantee of future results.
Investment Review
USAA WORLD GROWTH FUND
OBJECTIVE: Capital appreciation.
TYPES OF INVESTMENTS: At least 65% of the Fund's assets are invested in common
stocks and other equity securities of both foreign and domestic issuers,
including securities which are convertible into common stocks and real estate
investment trust (REITs). The remainder of the Fund's assets may be invested in
U.S. Government guaranteed securities which mature in less than one year and in
repurchase agreements collateralized by such securities.
- --------------------------------------------------------------------------------
11/30/98 5/31/98
- --------------------------------------------------------------------------------
Net Assets $309.7 Million $356.9 Million
Net Asset Value Per Share $16.21 $18.36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/98
- --------------------------------------------------------------------------------
5/31/98 to 11/30/98(+) 1 Year 5 Years Since Inception on 10/1/92
-8.65% 4.66% 11.22% 12.06%
- --------------------------------------------------------------------------------
(+) 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 an investment 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 World Growth Fund, the Morgan
Stanley Capital Index (MSCI)-World, and the Lipper Global Funds Average for the
period of 10/01/92 through 11/30/98. The data points from the graph are as
follows:
USAA World MSCI Lipper
Growth Fund Index Average
----------- ----------- -----------
10/01/92 $10,000 $10,000 $10,000
11/30/92 10,140 9,897 10,102
05/31/93 11,260 11,586 11,483
11/30/93 11,859 11,651 12,503
05/31/94 12,773 12,700 13,380
11/30/94 12,885 12,718 13,352
05/31/95 13,317 14,020 14,125
11/30/95 14,114 15,061 15,103
05/31/96 16,303 16,516 16,829
11/30/96 17,172 17,877 17,760
05/31/97 18,998 19,332 19,330
11/30/97 19,282 20,118 19,804
05/31/98 22,092 23,202 22,951
11/30/98 20,181 24,139 21,982
Data since inception on 10/01/92 through 11/30/98
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA World Growth Fund to its benchmark, the Morgan Stanley Capital Index
(MSCI)-World, an unmanaged index which reflects the movements of world stock
markets by representing a broad selection of domestically listed companies
within each market, and the Lipper Global Funds Average, an average performance
level of all global funds, as reported by Lipper Analytical Services, Inc., an
independent organization that monitors the performance of mutual funds.
Message from the Managers
[PHOTOGRAPH OF PORTFOLIO MANAGERS APPEARS HERE: From L to R: Curt Rohrman, CFA
(Domestic Securities), W. Travis Selmier, II, CFA (Foreign Securities), Albert
C. Sebastian, CFA (Foreign Securities), and David G. Peebles, CFA (Allocation
Manager, Foreign Securities).]
MARKET CONDITIONS
For the six months ended November 30, 1998, your Fund's total return was -8.65%
which compares unfavorably with the Lipper Global Funds Average(1) return of
- -3.92%.(2) Along with U.S. equities, European equities turned downward around
mid-year. While Asian markets were also weak, they had the best relative
performance because of currency appreciation and a decline in local interest
rates. Latin America and Canada continued to perform poorly.
(1) Refer to page 4 for the Lipper Average definition.
(2) Past performance is no guarantee of future results and the value of your
investment may vary according to the Fund's performance.
EUROPE
European markets performed poorly over the period primarily because of further
deterioration in the economic fundamentals of Russia and lower forecasted
economic growth. The financial sector, which had led the market in the first
half of 1998, sharply underperformed as many banks had to increase their credit
loss provisions on account of their emerging markets exposure. Defensive stocks,
such as utilities and consumer non-durables (e.g. tobacco, food), outperformed
the general indices. European markets rebounded sharply in October and November
as the U.S. and selected European central banks cut interest rates.
EMERGING MARKETS
The last six months have been a tale of two quarters for emerging markets; a
tumultuous summer culminating in August's massive sell-off was followed by a
strong recovery in investor sentiment. This resulted in pushing emerging markets
back up over 30% from its bottom in early September. The change in investor
sentiment has been key. Asian economies are showing signs of bottoming; Latin
markets have bounced as Brazil has begun to take the hard medicine needed to
solve its fiscal problems; and the European and Mediterranean market
participants have realized that Russia's collapse does not mean the end of the
world for these countries' economic growth.
JAPAN
A change in Prime Minister may hold the promise of progress on Japan's banking
crisis and economic slowdown, but we are still cautious with an underweighted
position. While concerned about the overall market, we have continued our
selective strategy of buying financially sound industrial and financial
companies. We have also added to our technology and telecommunications holdings
over the period.
UNITED STATES
Concerns about troubled international economies weighed heavily on U.S. stocks
through the summer, even though domestic business activity remained fairly
robust. Cyclical sectors were most hard hit, particularly basic materials,
capital goods, energy, and consumer cyclicals. Rising credit risks impacted
stocks in the financial sector. Sectors holding up relatively well included
technology and healthcare.
Effective October 1, management of the domestic portion of the World Growth Fund
has changed, as have many of the stocks in the Fund. Sectors with increased
weightings include technology, healthcare, consumer staples, and consumer
cyclicals. Weightings have been reduced in areas offering prospects for slower
growth, namely basic materials, capital goods, energy, and utilities.
OUTLOOK
Although forecasted economic growth for Europe has been revised downward,
European stocks may have the potential to offer the best earnings growth next
year. The introduction of the Euro, which is the common currency of the European
monetary union, on January 1, 1999, will further financial and economic
integration. Also, we expect to see continued mergers and acquisition activity
and shareholder-oriented policies in Europe. As well as local dynamics, events
in mature markets - economic growth, bank restructuring (especially in Japan),
multilateral institutions' support, and interest rate policies - will prove
critical for emerging markets in 1999. The Federal Reserve's series of rate cuts
in 1998 should set the stage for steady, or accelerating, profit growth in the
U.S. in 1999.
ASSET ALLOCATION
A pie chart is shown here depicting the Asset Allocation as of November 30, 1998
of the USAA World Growth Fund to be:
United States - 35.6%*; Other - 19.4%* (Countries with less than 3.0% of the
portfolio and U.S. Government & Agency Issue); United Kingdom - 8.1%*; France -
6.0%*; Netherlands - 5.8%*; Japan - 5.2%*; Canada - 4.0%*; Germany - 3.5%*;
Italy - 3.4%*; Switzerland - 3.3%*; Finland - 3.1%*; and Denmark - 3.0%*.
* Percentages are of the Net Assets in the Portfolio and may or may not equal
100%.
- ------------------------------------------
TOP 10 EQUITY HOLDINGS
(% OF NET ASSETS)
- ------------------------------------------
Nokia ADR 1.5
Telecom Italia S.p.A. 1.4
Novartis AG 1.4
Autoliv SDR 1.4
Elf Aquitaine ADR 1.2
Microsoft 1.1
Merita plc "A" 1.1
Avon Products 1.0
American International Group 1.0
America OnLine 1.0
- ------------------------------------------
- ------------------------------------------
TOP 10 INDUSTRIES
(% OF NET ASSETS)
- ------------------------------------------
Banks - Major Regional 6.6
Telephones 6.3
Drugs 5.1
Computer Software & Service 4.2
Auto Parts 4.1
Electronics - Semiconductors 3.6
Insurance - Multi/Lines 3.3
Communication Equipment 2.6
Oil - International Integrated 2.5
Telecommunications - LD 2.2
- ------------------------------------------
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 8 for a complete listing of the Portfolio of Investments.
USAA WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS
November 30, 1998
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------------------------------------------------------------------------------
FOREIGN SECURITIES (61.1%)
FOREIGN STOCKS (60.7%)
Argentina (0.3%)
15,052 IRSA Inversiones y Representaciones S.A. GDR $ 421
12,000 Telefonica de Argentina S.A. ADR 389
------------
810
------------
Australia (0.7%)
124,500 Cable & Wireless Optus Ltd. * 233
163,600 CSL Ltd. 1,275
378,400 HIH Insurance Ltd. 285
75,000 Smith (Howard) Ltd. 485
------------
2,278
------------
Austria (1.5%)
4,882 Bank Austria AG 252
28,200 Boehler Uddeholm AG 1,316
41,200 VA Flughafen Wien AG * 1,833
15,500 VA Technologie AG 1,299
------------
4,700
------------
Brazil (0.8%)
15,300 Companhia Brasileira de Distribuicao Grupo
Pao de Acucar ADR 307
18,332,074 Companhia Energetica de Minas Gerais (Cemig)
(Preferred) 464
54,000 Panamerican Beverages, Inc. "A" 1,245
3,200,000 Petroleo Brasileiro S.A.(Preferred) 456
------------
2,472
------------
Canada (4.0%)
170,200 Anderson Exploration Ltd. * 1,507
139,100 Canadian Occidental Petroleum Ltd. 1,852
50,900 Canadian National Railway Co. 2,749
157,000 National Bank of Canada 2,456
19,600 Northern Telecom Ltd. 915
76,000 OSF, Inc. * 561
76,900 Suncor, Inc. 2,345
------------
12,385
------------
Chile (0.1%)
11,000 Sociedad Quimica y Minera de Chile S.A. ADR 423
------------
China (0.1%)
200,000 New World Infrastructure Ltd.* 300
------------
Denmark (3.0%)
22,500 Carli Gry International A/S 1,186
23,000 ISS International Service System A/S "B" 1,516
86,600 SAS Danmark A/S 1,047
11,250 Tele Danmark A/S "B" 1,256
33,000 Tele Danmark A/S ADR 1,830
30,000 Unidanmark A/S 2,447
------------
9,282
------------
Egypt (0.1%)
27,100 Suez Cement Co. S.A.E. GDR 389
------------
Finland (3.1%)
585,800 Merita plc "A" 3,407
47,500 Nokia Corp. ADR 4,655
59,600 Raisio Group plc 772
62,800 Rauma OYJ 882
------------
9,716
------------
France (6.0%)
6,600 Accor S.A. 1,450
2,500 Bouygues Offshore S.A. ADR 30
28,805 CNP Assurances * 871
44,700 Coflexip ADR 1,631
57,300 Elf Aquitaine ADR 3,567
15,000 Eramet Group 475
4,700 Essilor International 1,830
9,130 ISIS S.A. 660
18,500 Louis Dreyfus Citrus 519
38,000 Renault S.A. 1,763
24,000 Rhone Poulenc S.A. 1,196
14,354 Simco S.A. 1,272
33,140 SEITA 1,922
17,000 Valeo S.A. 1,455
------------
18,641
------------
Germany (3.5%)
62,300 Continental AG 1,528
61,800 Hoechst AG 2,652
25,800 Merck KGaA 1,049
3,576 SAP AG 1,619
2,110 SAP AG (Preferred) 1,098
52,250 Veba AG 2,895
------------
10,841
------------
Greece (0.5%)
41,900 Hellenic Telecommunications Organization S.A. (OTE)* 1,045
12,880 National Bank of Greece S.A. GDR * 464
900 Panafon Hellenic Telecommunications Co. S.A. * 16
------------
1,525
------------
Hong Kong (0.3%)
25,000 Asia Satellite Telecommunications Holdings Ltd. ADR 397
90,000 Hutchison Whampoa Ltd. 642
------------
1,039
------------
Hungary (0.6%)
25,000 Magyar Tavkozlesi RT. (MATAV) ADR 683
44,000 Mol Magyar Olaj-Es Gazipari GDR 1,014
------------
1,697
------------
India (0.4%)
33,000 Hindalco Industries Ltd. GDR 379
56,800 Larsen & Toubro Ltd. GDR 381
44,900 Videsh Sanchar Nigam Ltd. GDR 459
------------
1,219
------------
Israel (0.1%)
24,300 Blue Square - Israel Ltd. ADR 296
------------
Italy (3.4%)
30,400 ENI S.p.A. ADR 1,858
301,000 Erg S.p.A. 1,041
33,500 Gucci Group N.V. 1,510
376,000 Italgas S.p.A. 1,858
695,000 Telecom Italia S.p.A. 4,340
------------
10,607
------------
Japan (4.8%)
59,000 Bridgestone Corp. 1,379
63,000 Daibiru Corp. 424
3,000 Honda Motor Co. Ltd. 108
22,000 Ito-Yokado Co. Ltd. 1,343
16,300 Justsystem Corp. * 79
64,600 Laox Co. Ltd. 419
51,000 Namco 994
15,000 Nomura Securities Co. Ltd. 146
505 NTT Data Corp. 2,205
15 NTT Mobile Communication Network, Inc. * 572
37,000 Sankyo Co. Ltd. 841
84,000 Sanwa Bank Ltd. 760
77,000 Sharp Corp. 679
18,000 Sony Corp. 1,316
7,000 Terumo Corp. 155
250,000 Toko, Inc. 1,007
420,000 Toshiba Corp. 2,352
------------
14,779
------------
Korea (0.3%)
120,431 Samsung Heavy Industries * 667
56,137 Samsung Heavy Industries Rights * 85
------------
752
------------
Malaysia (0.2%)
306,000 Genting Bhd (a) 454
------------
Mexico (0.3%)
32,014 Desc, Sociedad de Fomento Industrial, S.A.
de C.V. ADR 604
49,100 Tubos de Acero de Mexico, S.A. ADR 347
------------
951
------------
Netherlands (5.8%)
76,400 Akzo Nobel N.V. 3,132
42,500 Benckiser N.V. "B" 2,511
21,000 EVC International N.V. 166
48,650 ING Group N.V. 2,785
66,200 Koninklijke KPN N.V. 2,856
63,100 Koninklijke Pakhoed N.V. (Certificates) * 1,551
43,600 Oce-van der Grinten N.V. 1,532
25,000 Philips Electronics N.V. 1,583
5,460 Simac Techniek N.V. 699
34,600 VNU N.V. 1,188
------------
18,003
------------
Norway (1.5%)
463,000 Christiania Bank og Kreditkasse 1,700
230,000 Storebrand ASA * 1,705
64,300 Schibsted ASA 739
169,600 Tandberg Data ASA * 521
------------
4,665
------------
Philippines (0.2%)
3,500,000 SM Prime Holdings, Inc. 657
------------
Poland (0.3%)
80,000 Elektrim S.A. 673
153,404 Polifarb Cieszyn-Wroclaw S.A. 203
------------
876
------------
Portugal (1.8%)
60,896 Banco Pinto & Sotto Mayor S.A. 1,110
12,700 Brisa-Auto Estradas de Portugal S.A. 686
51,130 Cimentos de Portugal S.A. 1,617
45,900 Portugal Telecom S.A. ADR 2,022
------------
5,435
------------
Russia (0.1%)
17,600 LUKoil ADR 361
------------
Singapore (0.3%)
63,000 Keppel Corp. Ltd. 166
216,000 Overseas Union Bank Ltd. 871
------------
1,037
------------
South Africa (0.2%)
280,000 Sanlam Ltd. * 295
16,700 South African Breweries Ltd. 283
------------
578
------------
Spain (2.1%)
103,016 Argentaria, Caja Postal y Banco Hipotecario
de Espana, S.A. 2,398
44,200 Corporacion Mapfre 1,225
21,400 Telefonica de Espana S.A. ADR 2,982
------------
6,605
------------
Sweden (2.5%)
116,600 Autoliv, Inc. SDR 4,205
582,800 Swedish Match AB 1,969
69,100 Volvo AB 1,605
------------
7,779
------------
Switzerland (3.3%)
2,264 Novartis AG 4,248
7,300 Selecta Group AG 1,872
2,470 Sulzer AG P.C. 1,396
5,040 Swisscom AG * 1,696
7,121 Tag Heuer International S.A. 491
59,900 Tag Heuer International S.A. ADR 419
------------
10,122
------------
Taiwan (0.3%)
1,356,382 China Steel Corp. 882
------------
Turkey (0.1%)
10,455,000 Akbank T.A.S. 214
13,918,268 Yapi Ve Kredi Bankasi A.S. 169
3,340,384 Yapi Ve Kredi Bankasi Receipts *,(a) 41
------------
424
------------
United Kingdom (8.1%)
679,900 Billiton plc 1,486
72,200 British Telecommunications plc* 989
44,000 Cable & Wireless plc * 559
107,000 Cadbury Schweppes plc 1,606
975,000 Cookson Group plc 2,139
370,000 Corporate Services Group plc 897
24,200 Doncasters plc ADR * 396
145,400 EMI Group plc 866
184,000 Laporte plc 1,557
474,800 LucasVarity plc 1,629
617,000 Medeva plc 1,048
140,000 National Westminster Bank plc 2,554
162,386 Reuters Group plc 1,568
425,000 Safeway plc 2,096
540,000 Tomkins plc 2,503
429,722 WPP Group plc 2,368
17,201 Zeneca Group plc * 715
------------
24,976
------------
Total foreign stocks (cost: $153,116) 187,956
------------
Principal
Amount
(000)
- -------------
FOREIGN BONDS (0.4%)
Japan (0.4%)
$ 1,200 MBL International Finance(Bermuda) Trust, Convertible
Notes, 3.00%, 11/30/2002 (cost: $1,224) 1,200
------------
Total foreign securities (cost: $154,340) 189,156
------------
Number
of Shares
- -------------
DOMESTIC STOCKS (35.6%)
Aluminum (0.5%)
22,000 Aluminum Co. of America $ 1,631
------------
Banks - Major Regional (1.3%)
34,000 Fleet Financial Group, Inc. 1,417
26,000 Mellon Bank Corp. 1,637
27,000 SouthTrust Corp. 992
------------
4,046
------------
Banks - Money Center (0.5%)
26,000 First Union Corp. 1,580
------------
Beverages - Nonalcoholic (0.9%)
76,000 PepsiCo, Inc. 2,940
------------
Biotechnology (0.3%)
14,000 Amgen, Inc. * 1,054
------------
Broadcasting - Radio & TV (0.9%)
60,000 Clear Channel Communications, Inc. * 2,805
------------
Chemicals (0.8%)
52,000 Monsanto Co. 2,356
------------
Communication Equipment (0.8%)
28,266 Lucent Technologies, Inc. 2,433
------------
Computer - Hardware (1.1%)
16,000 Dell Computer Corp. * 973
40,000 Hewlett-Packard Co. 2,510
------------
3,483
------------
Computer - Networking (1.0%)
41,500 Cisco Systems, Inc. * 3,128
------------
Computer Software & Service (2.1%)
28,000 Microsoft Corp. * 3,416
60,000 Network Associates, Inc. * 3,052
------------
6,468
------------
Drugs (1.7%)
25,000 Pfizer, Inc. 2,791
24,000 Schering-Plough Corp. 2,553
------------
5,344
------------
Electrical Equipment (1.0%)
33,000 General Electric Co. 2,987
------------
Electronics - Semiconductors (2.5%)
99,400 Analog Devices, Inc. * 2,031
24,000 Intel Corp. 2,583
40,000 Texas Instruments, Inc. 3,055
------------
7,669
------------
Entertainment (0.8%)
80,000 Walt Disney Co. 2,575
------------
Equipment - Semiconductors (1.6%)
80,000 Applied Materials, Inc. * 3,100
32,000 KLA-Tencor Corp. * 1,090
22,000 Teradyne, Inc. * 705
------------
4,895
------------
Finance - Diversified (1.3%)
15,000 Fannie Mae 1,091
41,000 Morgan Stanley, Dean Witter, Discover & Co. 2,860
------------
3,951
------------
Foods (1.2%)
30,000 Hershey Foods Corp. 2,018
50,000 Keebler Foods Co. * 1,684
------------
3,702
------------
Healthcare - Diversified (1.5%)
18,000 Bristol-Myers Squibb Co. 2,206
32,000 Johnson & Johnson, Inc. 2,600
------------
4,806
------------
Healthcare - Specialized Services (0.2%)
11,000 ALZA Corp. * 575
------------
Hospitals (0.8%)
81,000 Tenet Healthcare Corp. * 2,395
------------
Household Products (0.9%)
32,000 Procter & Gamble Co. 2,804
------------
Housewares (0.9%)
63,000 Newell Co. 2,788
------------
Insurance - Multi-Line Companies (1.0%)
33,750 American International Group, Inc. 3,172
------------
Internet Services (1.0%)
36,000 America Online, Inc. * 3,152
------------
Leisure Time (0.8%)
69,000 Mattel, Inc. 2,385
------------
Manufacturing - Specialized (0.7%)
44,000 Avery Dennison Corp. 2,109
------------
Medical Products & Supplies (0.8%)
38,000 Medtronic, Inc. 2,572
------------
Oil & Gas - Drilling/Equipment (0.4%)
41,000 Halliburton Co. 1,204
------------
Personal Care (1.1%)
80,000 Avon Products, Inc. 3,250
12,000 Helen of Troy Ltd. * 201
------------
3,451
------------
Retail - Drugs (1.1%)
55,000 CVS Corp. 2,715
15,000 Duane Reade, Inc. * 602
------------
3,317
------------
Retail - General Merchandising (0.9%)
60,000 Dayton Hudson Corp. 2,700
------------
Retail - Specialty Apparel (1.0%)
41,000 Gap, Inc. 3,016
------------
Services - Commercial & Consumer (0.1%)
31,000 Applied Graphics Technologies, Inc. * 397
------------
Services - Data Processing (0.4%)
43,000 First Data Corp. 1,148
------------
Telecommunications - Long Distance (1.7%)
40,000 MCI Worldcom, Inc. * 2,360
37,000 Sprint Corp. 2,692
18,500 Sprint PCS * 296
------------
5,348
------------
Total domestic stocks (cost: $75,614) 110,386
------------
Principal
Amount
- -------------
U.S. GOVERNMENT & AGENCY ISSUES (3.7%)
Discount Note
$ 11,431 Federal Home Loan Mortgage Corp., 5.10%,
12/01/1998 (cost: $11,431) $ 11,431
------------
Total investments (cost: $241,385) $310,973
------------
- ------------------------
* Non-income producing.
PORTFOLIO SUMMARY BY INDUSTRY
-----------------------------
Banks - Major Regional 6.6%
Telephones 6.3
Drugs 5.1
Computer Software & Service 4.2
Auto Parts 4.1
U.S. Government & Agency Issues 3.7
Electronics - Semiconductors 3.6
Insurance - Multi-Line Companies 3.3
Communication Equipment 2.6
Oil - International Integrated 2.5
Telecommunications - Long Distance 2.2
Beverages - Nonalcoholic 2.0
Banks - Money Center 1.7
Chemicals 1.7
Household Products 1.7
Equipment - Semiconductors 1.6
Healthcare - Diversified 1.6
Chemicals - Specialty 1.5
Electrical Equipment 1.5
Medical Products & Supplies 1.5
Foods 1.4
Railroads / Shipping 1.4
Retail - Specialty Apparel 1.4
Finance - Diversified 1.3
Manufacturing - Diversified Industries 1.3
Retail - Specialty 1.3
Tobacco 1.3
Leisure Time 1.2
Automobiles 1.1
Computer - Hardware 1.1
Electric Utilities 1.1
Entertainment 1.1
Oil & Gas - Drilling / Equipment 1.1
Oil & Gas - Exploration & Production 1.1
Personal Care 1.1
Retail - Drugs 1.1
Computer - Networking 1.0
Internet Services 1.0
Other 20.0
------
100.4%
======
USAA WORLD GROWTH FUND
NOTES TO PORTFOLIO OF INVESTMENTS
November 30, 1998
(Unaudited)
GENERAL NOTES
Market values of securities are determined by procedures and practices discussed
in note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
ADR - American Depositary Receipts are receipts issued by a U.S. bank evidencing
ownership of foreign shares. Dividends are paid in U.S. dollars.
GDR - Global Depositary Receipts are receipts issued by a U.S. or foreign bank
evidencing ownership of foreign shares. Dividends are paid in U.S. dollars.
SPECIFIC NOTES
(a) Illiquid security valued using methods determined by the Fund's investment
manager under the general supervision of the Board of Trustees. At November 30,
1998, these securities represented .16% of the Fund's net assets.
See accompanying notes to financial statements.
USAA WORLD GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
November 30, 1998
(Unaudited)
ASSETS
Investments in securities, at market value
(identified cost of $241,385) $ 310,973
Cash 76
Cash denominated in foreign currencies (identified cost of $810) 826
Receivables:
Capital shares sold 217
Dividends and interest 501
Securities sold 1,068
Unrealized appreciation on foreign currency contracts held,
at value 2
----------
Total assets 313,663
----------
LIABILITIES
Securities purchased 1,526
Unrealized depreciation on foreign currency contracts held,
at value 7
Capital shares redeemed 2,121
USAA Investment Management Company 190
USAA Transfer Agency Company 63
Accounts payable and accrued expenses 28
----------
Total liabilities 3,935
----------
Net assets applicable to capital shares outstanding $ 309,728
==========
REPRESENTED BY:
Paid-in capital $ 241,776
Accumulated undistributed net investment income 338
Accumulated net realized loss on investments (1,997)
Net unrealized appreciation of investments 69,588
Net unrealized appreciation on foreign currency translations 23
----------
Net assets applicable to capital shares outstanding $ 309,728
==========
Capital shares outstanding, unlimited number of shares
authorized, no par value 19,101
==========
Net asset value, redemption price, and offering price per share $ 16.21
==========
See accompanying notes to financial statements.
USAA WORLD GROWTH FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended November 30, 1998
(Unaudited)
Net investment income:
Income (net of foreign taxes withheld of $209):
Dividends $ 2,208
Interest 360
----------
Total income 2,568
----------
Expenses:
Management fees 1,167
Transfer agent's fees 400
Custodian's fees 150
Postage 37
Shareholder reporting fees 16
Trustees' fees 2
Registration fees 27
Professional fees 13
Other 4
----------
Total expenses 1,816
----------
Net investment income 752
----------
Net realized and unrealized loss on investments and foreign
currency:
Net realized loss on:
Investments (1,527)
Foreign currency transactions (247)
Change in net unrealized appreciation/depreciation of:
Investments (30,909)
Foreign currency translations 267
----------
Net realized and unrealized loss (32,416)
----------
Decrease in net assets resulting from operations $ (31,664)
==========
See accompanying notes to financial statements.
USAA WORLD GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended November 30, 1998
and Year ended May 31, 1998
(Unaudited)
11/30/98 5/31/98
--------------------------
From operations:
Net investment income $ 752 $ 2,137
Net realized gain (loss) on investments (1,527) 20,147
Net realized loss on foreign currency
transactions (247) (201)
Change in net unrealized appreciation/
depreciation of:
Investments (30,909) 28,234
Foreign currency translations 267 (228)
--------------------------
Increase (decrease) in net assets
resulting from operations (31,664) 50,089
--------------------------
Distributions to shareholders from:
Net investment income (1,995) (1,436)
--------------------------
Net realized gains (10,052) (19,161)
--------------------------
From capital share transactions:
Proceeds from shares sold 47,439 98,870
Shares issued for dividends reinvested 11,871 20,347
Cost of shares redeemed (62,751) (98,628)
--------------------------
Increase (decrease) in net assets from
capital share transactions (3,441) 20,589
--------------------------
Net increase (decrease) in net assets (47,152) 50,081
Net assets:
Beginning of period 356,880 306,799
--------------------------
End of period $309,728 $356,880
==========================
Undistributed net investment income included
in net assets:
End of period $ 338 $ 1,828
==========================
Change in shares outstanding:
Shares sold 2,909 5,678
Shares issued for dividends reinvested 664 1,220
Shares redeemed (3,907) (5,684)
--------------------------
Increase (decrease) in shares outstanding (334) 1,214
==========================
See accompanying notes to financial statements.
USAA WORLD GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
(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 USAA
World Growth Fund (the Fund). The Fund's investment objective is capital
appreciation. USAA Investment Management Company (the Manager) seeks to achieve
this objective by investing at least 65% of the Fund's assets in common stocks,
preferred stocks and other equity securities of both foreign and domestic
issuers.
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. Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the Manager under the general supervision of the Board of Trustees.
B. Federal taxes - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required. As a result of certain
permanent differences between book and tax basis accounting, reclassifications
were made to the statement of assets and liabilities to decrease accumulated net
realized loss on investments by $7,000 and to decrease paid-in capital by
$7,000.
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 short-term 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 on a
daily basis.
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.
F. Euro Conversion Risk - On January 1, 1999, countries participating in the
European Monetary Union will begin converting their currencies into a new
currency unit called the euro. The countries initially participating in the
conversion are Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Portugal, and Spain. Conversion to the euro may present
certain risks to investments of the Fund held in one of the currencies being
replaced. The conversion is not expected to have a material impact on the Fund's
investments.
(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 the Fund's 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 the Fund's total
assets at NationsBank's borrowing rate plus a markup. The Fund had no borrowings
under either of these agreements during the six-month period ended November 30,
1998.
(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 of securities, excluding short-term
securities, for the six-month period ended November 30, 1998 were $109.8 million
and $119.8 million, respectively.
Gross unrealized appreciation and depreciation of investments at November 30,
1998 was $89.3 million and $19.7 million, 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, 1998, the terms of open foreign currency contracts were as
follows (in thousands):
Foreign Currency Contracts to Buy:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
U.S. Dollar
Exchange Value as of In Exchange Unrealized Unrealized
Date Contracts to Receive 11/30/98 for U.S. Dollar Appreciation Depreciation
- -----------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
12/01/98 4,590 Greek Drachma $ 16 $ 16 $ - $ -
12/04/98 622 Pound Sterling 1,026 1,030 - (4)
12/07/98 23 Pound Sterling 38 38 - -
12/07/98 1,680 South African Rand 295 296 - (1)
12/30/98 770 French Franc 136 135 1 -
- -----------------------------------------------------------------------------------------------------
$1,511 $1,515 $ 1 $ (5)
=====================================================================================================
</TABLE>
Foreign Currency Contracts to Sell:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
U.S. Dollar
Exchange Value as of In Exchange Unrealized Unrealized
Date Contracts to Deliver 11/30/98 for U.S. Dollar Appreciation Depreciation
- -----------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
12/01/98 8,379 Japanese Yen $ 68 $ 68 $ - $ -
12/02/98 4,606 Japanese Yen 37 37 - -
12/02/98 8,516 Japanese Yen 69 69 - -
12/02/98 101 Pound Sterling 167 168 1 -
12/02/98 259 Swiss Franc 185 183 - (2)
12/03/98 4,653 Japanese Yen 38 38 - -
12/07/98 52 Singapore Dollar 32 32 - -
- -----------------------------------------------------------------------------------------------------
$ 596 $ 595 $ 1 $ (2)
=====================================================================================================
</TABLE>
(6) TRANSACTIONS WITH MANAGER
A. Management fees - USAA Investment Management Company carries out the Fund's
investment policies and manages the Fund's portfolio. 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. Effective January 1, 1999, the annual charge will be
$26.
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, 1998 was $16,000.
(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 Eight-month
Period Ended Period Ended
November 30, Year Ended May 31, May 31,
------------------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 18.36 $ 16.84 $ 15.50 $ 12.96 $ 12.71 $ 11.80
Net investment income .04 .11 .11 .12 .07 .04(b)
Net realized and
unrealized gain (loss) (1.57) 2.51 2.28 2.73 .46 .93
Distributions from
net investment income (.10) (.08) (.14) (.08) - (.01)
Distributions of realized
capital gains (.52) (1.02) (.91) (.23) (.28) (.05)
------------------------------------------------------------------------------------
Net asset value at
end of period $ 16.21 $ 18.36 $ 16.84 $ 15.50 $ 12.96 $ 12.71
====================================================================================
Total return (%) * (8.65) 16.29 16.52 2.43 4.26 8.25
Net assets at end
of period (000) $309,728 $356,880 $306,799 $267,192 $200,745 $143,367
Ratio of expenses to
average net assets (%) 1.14(a) 1.13 1.20 1.27 1.28 1.28(a)
Ratio of net investment
income to average
net assets (%) .47(a) .64 .63 .96 .69 .42(a)
Portfolio turnover (%) 35.79 45.04 50.02 60.97 58.88 37.64
</TABLE>
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
TRUSTEES
Robert G. Davis, Chairman of the Board
Michael J.C. Roth, President and Vice Chairman of the Board
John W. Saunders, Jr., Vice President
Barbara B. Dreeben
Howard L. Freeman, Jr.
Robert L. Mason
Richard A. Zucker
INVESTMENT ADVISER, UNDERWRITER AND DISTRIBUTOR
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
TRANSFER AGENT
USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
Telephone Assistance Hours
Call toll free - Central Time
Monday - Friday 7:30 a.m. to 8:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
For Additional Information On Mutual Funds
1-800-531-8181, (in San Antonio) 456-7211
For account servicing, exchanges or redemptions
1-800-531-8448, (in San Antonio) 456-7202
Recorded Mutual Fund Price Quotes
24-Hour Service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
Mutual Fund TouchLine(Registered Trademark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
