Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Shareholder Voting Results 8
Financial Information
Portfolio of Investments 9
Notes to Portfolio of Investments 16
Statement of Assets and Liabilities 17
Statement of Operations 18
Statements of Changes in Net Assets 19
Notes to Financial Statements 20
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 International
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)2000, 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 Very high $3,000
First Start Growth Moderate to high $3,000
Gold Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International Moderate to high $3,000
S&P 500 (Registered Trademark)
Index Moderate $3,000
Science & Technology Very high $3,000
Small Cap Stock Very high $3,000
World Growth Moderate to high $3,000
ASSET ALLOCATION
===============================================================================
Balanced Strategy Moderate $3,000
Cornerstone Strategy Moderate $3,000
Growth and Tax
Strategy Moderate $3,000
Growth Strategy Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME - TAXABLE
===============================================================================
GNMA Low to moderate $3,000
High-Yield
Opportunities High $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Intermediate-Term
Bond Low to moderate $3,000
Short-Term Bond Low $3,000
INCOME - TAX EXEMPT
===============================================================================
Long-Term Moderate $3,000
Intermediate-Term Low to moderate $3,000
Short-Term Low $3,000
State Bond Income Moderate $3,000
MONEY MARKET
===============================================================================
Money Market Very low $3,000
Tax Exempt
Money Market Very low $3,000
Treasury Money
Market Trust Very low $3,000
State Money Market Very low $3,000
- -------------------------------------------------------------------------------
Foreign investing is subject to additional risks, which are discussed in the
funds' prospectuses.
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.
Some income may be subject to state or local taxes or the federal alternative
minimum tax.
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.
The Science & Technology 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.
Nondeposit investment products are not insured by the FDIC, are not deposits or
other obligations of, or guaranteed by, USAA Federal Savings Bank, are subject
to investment risks, and may lose value.
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company, including charges and operating 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]
As I write this message, I am also in the process of preparing to lead a panel
on personal finance at the Greater San Antonio Chamber of Commerce's annual
conference on economic development. As we enter 2000, I have asked my fellow
panelists to look back to what they consider to be the key lessons they have
learned in careers that all span at least 25 years in investments.
The incident and the person I have chosen is the visit of a well-known equity
strategist from one of the major investment bankers to San Antonio in the spring
of 1982. I should remind you what the spring of 1982 was like. The market had
not yet shaken off the effects of repeated, arbitrary increases in the price of
oil; the roaring inflation which followed; and the highest U.S. interest rates
since the Civil War. Stocks and bonds had not yet come off their worst
performance since World War II. Against this backdrop, that well-known equity
strategist delivered a magnificent after-dinner presentation. He plucked facts
and figures from a wide variety of sources and wove them into a compelling
argument. His conclusion was clear: "Stay out of this market!" He was brilliant.
He was dead wrong. That summer saw the beginning of the greatest bull market for
both stocks and bonds in U.S. history.
This incident has greatly influenced my thinking and my career. It taught me
these things:
- - It is best to base investment strategy on something other than a
forecast of the market.
- - If you insist on forecasting the market, it doesn't help to make
the little calls. You absolutely must be right at times like spring
of 1982.
- - If you use an asset allocation approach to investing, your chances of
being in at a major turning point are 100%.
That is why I believe in the asset allocation approach of our strategy funds.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
Past performance is no guarantee of future results.
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company, including charges and operating expenses,
please call for a prospectus. Read it carefully before investing.
Investment Review
USAA INTERNATIONAL FUND
OBJECTIVE: Capital appreciation with current income as a secondary objective.
TYPES OF INVESTMENTS: Invests principally in equity securities of foreign
companies.
- --------------------------------------------------------------------------------
11/30/99 5/31/99
================================================================================
Net Assets $557.0 Million $499.9 Million
Net Asset Value Per Share $22.58 $19.79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 11/30/99
================================================================================
5/31/99 to 11/30/99(+) 1 Year 5 Years 10 Years
15.93% 23.48% 11.43% 10.43%
- --------------------------------------------------------------------------------
(+) 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 gains distributions. No adjustment has
been made for taxes payable by shareholders on their reinvested income dividends
and capital gains 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 International Fund, the Morgan
Stanley Capital Index (MSCI)-EAFE, and the Lipper International Funds Average
for the period of 11/30/89 through 11/30/99. The data points from the graph are
as follows:
USAA
International MSCI-EAFE Lipper
Fund Index Average
------------- --------- -------
11/30/89 $10,000 $10,000 $10,000
05/31/90 10,659 9,195 10,622
11/30/90 9,465 7,811 9,410
05/31/91 10,167 8,702 10,307
11/30/91 10,246 8,463 10,149
05/31/92 11,452 8,409 11,242
11/30/92 10,709 7,777 10,106
05/31/93 12,680 9,787 11,878
11/30/93 13,648 9,665 12,958
05/31/94 15,357 11,116 14,395
11/30/94 15,699 11,099 14,357
05/31/95 15,739 11,664 14,589
11/30/95 16,293 11,939 15,183
05/31/96 18,841 12,909 16,783
11/30/96 19,885 13,343 17,434
05/31/97 21,990 13,882 18,832
11/30/97 21,665 13,290 18,276
05/31/98 24,912 15,424 21,466
11/30/98 21,839 15,476 20,194
05/31/99 23,261 16,097 21,081
11/30/99 26,966 18,741 25,811
Data from 11/30/89 through 11/30/99
The graph illustrates how a $10,000 hypothetical investment in the USAA
International Fund outperformed its benchmark, the Morgan Stanley Capital Index
(MSCI)-EAFE, an unmanaged index which reflects the movements of stock markets in
Europe, Australia, and the Far East by representing a broad selection of
domestically listed companies within each market, and the Lipper International
Funds Average, an average performance level of all international 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: FROM LEFT TO RIGHT: ALBERT SEBASTIAN, CFA;
DAVID G. PEEBLES, CFA; AND KEVIN P. MOORE APPEAR HERE]
MARKET CONDITIONS
For the six-month period ended November 30, 1999, your Fund's total return was
15.93% compared with the Lipper International Funds Average return of 22.68% and
the Morgan Stanley Capital Index (MSCI)-EAFE return of 16.43%. The Fund's
performance was negatively impacted by its underweighted position in Japan and
other Asian markets, while holdings in telecommunications and technology
benefited performance for the period.
EUROPE
In Europe, rising interest rates as well as weak currencies negatively impacted
equity returns. An improved profit outlook and stronger economic growth
positively impacted performance. Telecommunications and technology stocks were
the best-performing issues, with media and mining stocks also performing well.
However, auto-related and interest-rate-sensitive stocks performed poorly for
the period.
CANADA
Canada was a mixed bag with telecommunications and technology performing well,
while financials were relatively weak. Energy stocks were also mixed despite
higher energy prices.
JAPAN
The market continued to be very strong during the last six months due mainly to
global popularity of telecommunications and technology stocks. Growth stocks
continued to outperform value stocks due to the secular transformation of the
Japanese economy -- from manufacturing to service. The other focus of the market
this year has been corporate restructuring, which we expect to continue next
year. Consolidation of the banking sector should continue which would, in turn,
bring more efficient credit usage. The yen turned around after the middle of the
year with expectation of a stronger Japanese economic recovery. The Organization
for Economic Cooperation and Development (OECD) recently revised this year's and
next year's gross domestic product (GDP) growth from -0.9% to +1.4%, and from 0%
to +1.4%, respectively. The current Obuchi administration appears to be very
solid, and we expect no political turmoil to take place in the next six months.
Our overweighting in the technology and telecommunications sectors positively
impacted our performance this year.
Past performance is no guarantee of future results.
Refer to the bottom of page 4 for the Lipper Average and the MSCI-EAFE
definitions.
EMERGING MARKETS
Most of the regional markets suffered a pullback in the midsummer months, and
all, except for some Eastern European markets, experienced strong rallies
beginning in late September. Over the past six months, emerging markets have
retained or added to most of the gains they experienced since the lows during
the Russian and Asian crises of late 1998. Expectations for the Asian economies
continued to rise during the last six months while concerns lingered regarding
Eastern European economies. Commodity price increases and interest-rate declines
continue to support a rebound in the South African economy. The Latin markets
have also rebounded as concerns about presidential elections in Mexico and
economic concerns in Brazil have receded.
OUTLOOK
We continue to be encouraged by the strength of the global economy and continue
to view Europe positively. European valuations still look relatively attractive,
and interest rates in Europe have the potential to decline based on a benign
inflation outlook. The value of the Eurodollar could stabilize -- or possibly
move higher -- as economic growth patterns in the United States and Europe
converge next year. We are comfortable with our energy exposure, as the
fundamental values of the stocks do not reflect current energy prices. In Japan,
the market will continue to be led by telecommunications and technology sectors
as well as by large-capitalization growth stocks. We believe that a combination
of falling interest rates in emerging markets and increased global growth
provides the potential for a positive backdrop in 2000.
<TABLE>
<CAPTION>
- -------------------------------------------- ----------------------------------------
Top 10 Equity Holdings Top 10 Industries
(% of Net Assets) (% of Net Assets)
- -------------------------------------------- ----------------------------------------
<S> <C> <S> <C>
Nokia 2.8 Telephones 10.6
Total Fina SA ADR 2.1 Banks - Major Regional 8.3
Nortel Networks Corp. 2.0 Drugs 5.6
WPP Group plc 1.7 Communication Equipment 4.7
Telefonica de Espana S.A. ADR 1.7 Insurance - Multiline 4.5
Cookson Group plc 1.7 Oil - International Integrated 4.2
Koninklijke Philips Electronics N.V. 1.5 Auto Parts & Equipment 2.8
Akzo Nobel N.V. 1.5 Retail-Specialty 2.7
ING Group N.V. 1.4 Railroads/Shipping 2.6
National Westminster Bank plc 1.4 Manufacturing - Diversified 2.2
- -------------------------------------------- ----------------------------------------
</TABLE>
ASSET ALLOCATION
11/30/99
A pie chart is shown here depicting the Asset Allocation as of November 30, 1999
of the USAA International Fund to be:
Other - 21.0% (Countries with less than 3.0% of the portfolio and U.S.
Government & Agency Issues); United Kingdom - 16.7%; Japan - 13.6%; Netherlands
- - 9.9%; France - 7.8%; Canada - 7.5%; Finland - 5.2%; Italy - 4.2%; Germany -
3.4%; Spain - 3.5%; Denmark - 3.2%; and Switzerland - 3.1%.
Percentages are of the net assets in the portfolio and may or may not equal
100%.
See page 9 for a complete listing of the portfolio of investments.
Foreign investing is subject to additional risks, such as currency fluctuations,
market illiquidity, and political instability.
Shareholder Voting Results
On October 15, 1999, a special meeting of shareholders was held to vote on the
following proposals. All proposals were approved by the shareholders. All
shareholders of record on August 19, 1999, were entitled to vote on each
proposal. The number of votes shown below are for the entire series of the USAA
Investment Trust (the Trust) for proposals 1 and 2.
1 Proposal to elect Trustees as follows:
TRUSTEES VOTES FOR VOTES WITHHELD
Robert G. Davis 181,888,787 2,690,901
Michael J.C. Roth 181,881,641 2,698,047
David G. Peebles 181,888,787 2,690,901
Robert L. Mason 181,888,787 2,690,901
Michael F. Reimherr 181,883,427 2,696,261
Richard A. Zucker 181,875,813 2,696,966
Barbara B. Dreeben 181,883,427 2,696,261
John W. Saunders, Jr. and Howard L. Freeman, Jr. did not stand for re-election
to the Board. Their term of office will terminate on December 31, 1999.
2 Proposal to ratify the selection by the Board of Trustees of KPMG LLP as
auditors for the Trust for the fiscal year ending May 31, 2000.
NUMBER OF SHARES VOTING
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
179,181,697 2,930,888 2,467,103
USAA INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS
November 30, 1999
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------------------------------------------------------------------------------
STOCKS (94.6%)
Argentina (0.2%)
38,385 IRSA Inversiones y Representaciones S.A. GDR $ 1,226
- --------------------------------------------------------------------------------
Austria (1.6%)
22,200 Bank Austria AG 1,175
63,600 Boehler Uddeholm AG 2,666
80,800 VA Flughafen Wien AG 2,809
42,000 VA Technologie AG 2,576
- --------------------------------------------------------------------------------
9,226
- --------------------------------------------------------------------------------
Brazil (0.7%)
44,200 Companhia Brasileira de Distribuicao Grupo Pao de
Acucar ADR 1,179
77,800 Panamerican Beverages, Inc. "A" 1,459
7,500,000 Petroleo Brasileiro S.A. (Preferred) 1,516
- --------------------------------------------------------------------------------
4,154
- --------------------------------------------------------------------------------
Canada (7.5%)
369,300 Anderson Exploration Ltd. * 4,115
100,800 Canadian Imperial Bank of Commerce 2,243
231,500 Canadian National Railway Co. 6,931
271,700 Canadian Occidental Petroleum Ltd. 5,247
244,700 Manulife Financial Corp. * 3,166
150,000 Nortel Networks Corp. 11,100
141,300 Suncor Energy, Inc. 5,334
177,400 Toronto-Dominion Bank 4,279
- --------------------------------------------------------------------------------
42,415
- --------------------------------------------------------------------------------
Chile (0.1%)
1,561 Sociedad Quimica y Minera de Chile S.A. ADR "A" 44
27,000 Sociedad Quimica y Minera de Chile S.A. ADR "B" 768
- --------------------------------------------------------------------------------
812
- --------------------------------------------------------------------------------
China (0.5%)
117,200 China Telecom Ltd. * 626
1,552,000 Cosco Pacific Ltd. 1,269
796,000 New World Infrastructure Ltd.* 897
- --------------------------------------------------------------------------------
2,792
- --------------------------------------------------------------------------------
Denmark (3.2%)
43,900 ISS International Service System A/S "B" * 2,557
164,200 SAS Danmark A/S 1,690
107,100 Tele Danmark A/S "B" 6,905
92,900 Unidanmark A/S 7,047
- --------------------------------------------------------------------------------
18,199
- --------------------------------------------------------------------------------
Egypt (0.2%)
74,300 Suez Cement Co. S.A.E. GDR 1,200
- --------------------------------------------------------------------------------
Finland (5.2%)
1,305,800 Merita plc "A" 7,869
214,179 Metso OYJ * 2,321
112,920 Nokia Corp. ADR 15,604
100,700 Sampo Insurance Co. "A" 3,298
- --------------------------------------------------------------------------------
29,092
- --------------------------------------------------------------------------------
France (7.8%)
17,100 Accor S.A. 3,884
78,386 CNP Assurances 2,566
115,000 Coflexip ADR 4,643
52,800 Eramet Group 2,926
27,200 ISIS S.A. 1,642
81,600 Renault S.A. 3,588
70,500 Rhodia 1,286
73,300 Rhone Poulenc S.A. 4,543
79,980 SEITA 4,111
178,733 Total Fina S.A. 11,819
42,800 Valeo S.A. 2,868
- --------------------------------------------------------------------------------
43,876
- --------------------------------------------------------------------------------
Germany (3.4%)
125,800 Continental AG 2,510
121,600 Hoechst AG 5,992
120,200 Merck KGaA 3,513
151,460 Veba AG 7,403
- --------------------------------------------------------------------------------
19,418
- --------------------------------------------------------------------------------
Greece (0.5%)
80,900 Hellenic Telecommunications Organization S.A. (OTE) 1,734
88,530 National Bank of Greece S.A. GDR 1,239
- --------------------------------------------------------------------------------
2,973
- --------------------------------------------------------------------------------
Hong Kong (0.3%)
150,000 Hutchison Whampoa Ltd. 1,849
- --------------------------------------------------------------------------------
Hungary (0.2%)
27,700 Magyar Tavkozlesi RT. (MATAV) ADR 836
- --------------------------------------------------------------------------------
India (0.5%)
118,600 Videsh Sanchar Nigam Ltd. GDR 2,728
- --------------------------------------------------------------------------------
Israel (0.3%)
356,565 Bank Hapoalim Ltd. 941
63,000 Blue Square - Israel Ltd. ADR 772
- --------------------------------------------------------------------------------
1,713
- --------------------------------------------------------------------------------
Italy (4.2%)
95,300 ENI S.p.A. ADR 5,158
66,000 Gucci Group N.V. 5,495
1,087,000 Italgas S.p.A. 4,272
198,900 Telecom Italia S.p.A. 2,193
1,258,700 Telecom Italia S.p.A. Savings 6,786
- --------------------------------------------------------------------------------
23,904
- --------------------------------------------------------------------------------
Japan (13.4%)
160,000 Daibiru Corp. 1,119
400 East Japan Railway Co. 2,358
9,800 Internet Initiative Japan, Inc. ADR * 936
44,000 Ito-Yokado Co. Ltd. 4,755
325,000 Kikkoman Corp. 2,509
153,000 Kirin Brewery Co. Ltd. 1,773
11,800 Nichii Gakkan Co. 2,435
390,000 Nikko Securities Co. Ltd. 4,866
1,302,000 Nippon Steel Corp. 2,942
298 Nippon Telegraph & Telephone Corp. (NTT) 5,357
130 NTT Mobile Communication Network, Inc. 4,572
90,000 Ono Pharmaceutical Co. Ltd. 2,856
74,000 Paris Miki, Inc. 6,710
49,500 Sanix Inc. 5,495
344,000 Sharp Corp. 7,046
5,600 Softbank Corp. 4,054
35,700 Sony Corp. 6,628
280,000 Sumitomo Electric Industries, Ltd. 3,180
500,000 Toshiba Corp. 3,689
34,500 Toyota Motor Corp. 2,344
- --------------------------------------------------------------------------------
75,624
- --------------------------------------------------------------------------------
Korea (0.9%)
47,964 Korea Telecom Corp. ADR * 2,542
60,000 Samsung Corp. * 1,247
5,964 Samsung Electronics Co. Ltd. 1,235
- --------------------------------------------------------------------------------
5,024
- --------------------------------------------------------------------------------
Malaysia (0.5%)
573,500 Genting Bhd 1,992
650,000 Malaysia International Shipping Corp. Bhd 967
- --------------------------------------------------------------------------------
2,959
- --------------------------------------------------------------------------------
Mexico (0.7%)
17,300 Telefonos de Mexico, S.A. de C.V. ADR 1,601
175,000 Tubos de Acero de Mexico, S.A. ADR 2,199
- --------------------------------------------------------------------------------
3,800
- --------------------------------------------------------------------------------
Netherlands (9.9%)
193,800 Akzo Nobel N.V. 8,300
122,500 Benckiser N.V. "B" 7,469
56,060 EVC International N.V. * 602
117,200 Fortis NL N.V. 4,019
142,302 ING Group N.V. 8,009
93,800 Koninklijke KPN N.V. 5,227
69,552 Koninklijke Philips Electronics N.V. ADR 8,312
115,400 Oce-van der Grinten N.V. 2,012
135,000 Versatel Telecom * 3,809
94,700 VNU N.V. 3,755
168,600 Vopak Kon * 4,443
- --------------------------------------------------------------------------------
55,957
- --------------------------------------------------------------------------------
Norway (2.6%)
1,506,700 Christiania Bank og Kreditkasse 6,954
137,100 Schibsted ASA 2,092
605,100 Storebrand ASA * 4,242
448,200 Tandberg Data ASA * 1,107
- --------------------------------------------------------------------------------
14,395
- --------------------------------------------------------------------------------
Philippines (0.1%)
3,600,000 SM Prime Holdings, Inc. 571
- --------------------------------------------------------------------------------
Portugal (2.2%)
225,820 Banco Pinto & Sotto Mayor S.A. 4,847
311,000 Brisa-Auto Estradas de Portugal S.A. 2,300
113,700 Portugal Telecom S.A. ADR 5,458
- --------------------------------------------------------------------------------
12,605
- --------------------------------------------------------------------------------
Russia (0.1%)
22,500 LUKoil ADR 765
- --------------------------------------------------------------------------------
Singapore (0.3%)
120,000 DBS Group Holdings, Ltd. 1,557
- --------------------------------------------------------------------------------
South Africa (0.4%)
87,497 South African Breweries plc 821
400,000 Standard Bank Investment Corp. Ltd. 1,399
- --------------------------------------------------------------------------------
2,220
- --------------------------------------------------------------------------------
Spain (3.5%)
255,600 Argentaria, Caja Postal y Banco Hipotecario de Espana, S.A. 5,847
185,750 Repsol S.A. 4,062
153,985 Telefonica de Espana S.A. ADR * 9,566
- --------------------------------------------------------------------------------
19,475
- --------------------------------------------------------------------------------
Sweden (2.6%)
191,980 Autoliv, Inc. GDR 5,754
152,400 Skandinaviska Enskilda Bank Rights * 165
152,400 Skandinaviska Enskilda Banken "A" 1,451
1,433,000 Swedish Match AB 5,120
94,400 Volvo AB * 2,291
- --------------------------------------------------------------------------------
14,781
- --------------------------------------------------------------------------------
Switzerland (3.1%)
5,004 Novartis AG 7,802
11,600 Selecta Group AG 3,940
5,237 Sulzer AG P.C. * 3,264
6,570 Swisscom AG 2,232
- --------------------------------------------------------------------------------
17,238
- --------------------------------------------------------------------------------
Taiwan (0.8%)
3,551,625 China Steel Corp. 2,524
619,650 Compal Electronics, Inc. 1,977
619,650 Compal Electronics, Inc. Rights * 0
- --------------------------------------------------------------------------------
4,501
- --------------------------------------------------------------------------------
Turkey (0.4%)
5,300,000 Enka Holding Yatrim A.S. 1,535
35,735,794 Yapi Ve Kredi Bankasi A.S. 655
- --------------------------------------------------------------------------------
2,190
- --------------------------------------------------------------------------------
United Kingdom (16.7%)
126,700 AstraZeneca Group plc 5,645
400,000 Bank of Scotland 4,736
1,479,900 Billiton plc 7,156
122,200 BOC Group plc 2,522
207,000 British Telecommunications plc 4,153
498,500 British-Borneo Oil & Gas plc * 1,479
270,000 Cable & Wireless plc 3,429
958,900 Cadbury Schweppes 6,086
350,100 CGU plc 5,281
2,335,000 Cookson Group plc 9,309
1,414,400 Corporate Services Group plc * 2,661
58,200 Glaxo Wellcome plc ADR 3,459
239,000 Laporte plc 2,224
2,151,000 Laporte plc "B" * 17
1,422,000 Medeva plc 3,878
348,000 National Westminster Bank plc 8,008
1,045,000 Old Mutual plc * 2,279
91,800 Powergen plc 794
417,933 Reuters Group plc 4,668
685,000 Safeway plc 2,021
1,328,790 Tomkins plc 4,609
683,058 WPP Group plc 9,669
- --------------------------------------------------------------------------------
94,083
- --------------------------------------------------------------------------------
Total stocks (cost: $383,252) 534,158
- --------------------------------------------------------------------------------
Principal
Amount
(000)
---------
BOND (0.2%)
Japan
$1,000 MBL International Finance
(Bermuda) Trust, Convertible Notes, 3%,
11/30/2002 (cost: $1,000) 1,145
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY ISSUES (4.3%)
24,019 Federal Home Loan Mortgage Corp., 5.61%, 12/01/99
(cost: $24,019) 24,019
- --------------------------------------------------------------------------------
Total investments (cost: $408,271) $559,322
================================================================================
PORTFOLIO SUMMARY BY INDUSTRY
-----------------------------
Telephones 10.6%
Banks - Major Regional 8.3
Drugs 5.6
Communication Equipment 4.7
Insurance - Multiline Companies 4.5
U.S. Government 4.3
Oil - International Integrated 4.2
Auto Parts 2.8
Retail - Specialty 2.7
Railroads/Shipping 2.6
Manufacturing - Diversified Industries 2.2
Chemicals - Specialty 2.1
Electrical Equipment 2.0
Metals/Mining 1.9
Oil & Gas - Exploration & Production 1.9
Banks - Money Center 1.9
Iron & Steel 1.8
Advertising/Marketing 1.8
Tobacco 1.6
Investment Banks/Brokerage 1.6
Automobiles 1.5
Electric Utilities 1.5
Beverages - Nonalcoholic 1.3
Household Products 1.3
Manufacturing - Specialized 1.2
Leisure Time 1.2
Chemicals 1.2
Services - Commercial & Consumer 1.1
Oil & Gas - Drilling/Equipment 1.1
Waste Management 1.0
Textiles - Apparel 1.0
Other 16.6
----
Total 99.1%
====
USAA INTERNATIONAL FUND
NOTES TO PORTFOLIO OF INVESTMENTS
November 30, 1999
(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.
* Non-income producing security.
See accompanying notes to financial statements.
<TABLE>
USAA INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
November 30, 1999
(Unaudited)
<S> <C>
ASSETS
Investments in securities, at market value (identified cost of $408,271) $559,322
Cash 127
Cash denominated in foreign currencies (identified cost of $1,741) 1,601
Receivables:
Capital shares sold 228
Dividends and interest 750
Securities sold 432
--------
Total assets 562,460
--------
LIABILITIES
Securities purchased 1,782
Unrealized depreciation on foreign currency contracts held, at value 16
Capital shares redeemed 3,032
USAA Investment Management Company 339
USAA Transfer Agency Company 90
Accounts payable and accrued expenses 238
--------
Total liabilities 5,497
--------
Net assets applicable to capital shares outstanding $556,963
========
REPRESENTED BY:
Paid-in capital $380,566
Accumulated undistributed net investment income 861
Accumulated net realized gain on investments 24,653
Net unrealized appreciation of investments 151,051
Net unrealized depreciation on foreign currency translations (168)
--------
Net assets applicable to capital shares outstanding $556,963
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 24,665
========
Net asset value, redemption price, and offering price per share $ 22.58
========
See accompanying notes to financial statements.
</TABLE>
USAA INTERNATIONAL FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended November 30, 1999
(Unaudited)
Net investment income:
Income:
Dividends (net of foreign taxes withheld of $535) $ 3,542
Interest 460
-------
Total income 4,002
-------
Expenses:
Management fees 1,996
Transfer agent's fees 553
Custodian's fees 271
Postage 161
Shareholder reporting fees 4
Trustees' fees 2
Registration fees 56
Professional fees 23
Other 8
-------
Total expenses 3,074
-------
Net investment income 928
-------
Net realized and unrealized gain (loss) on investments and
foreign currency:
Net realized gain (loss) on:
Investments 24,942
Foreign currency transactions (68)
Change in net unrealized appreciation/depreciation on:
Investments 52,976
Foreign currency translations (32)
-------
Net realized and unrealized gain 77,818
-------
Increase in net assets resulting from operations $78,746
=======
See accompanying notes to financial statements.
<TABLE>
USAA INTERNATIONAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended November 30, 1999,
and year ended May 31, 1999
(Unaudited)
<CAPTION>
11/30/99 5/31/99
-----------------------
<S> <C> <C>
From operations:
Net investment income $ 928 $ 5,191
Net realized gain on investments 24,942 5,304
Net realized loss on foreign currency transactions (68) (695)
Change in net unrealized appreciation/depreciation on:
Investments 52,977 (55,849)
Foreign currency translations (32) 726
-----------------------
Increase (decrease) in net assets
resulting from operations 78,747 (45,323)
-----------------------
Distributions to shareholders from:
Net investment income (3,172) (5,475)
-----------------------
Net realized gains (5,238) (15,641)
-----------------------
From capital share transactions:
Proceeds from shares sold 83,556 221,748
Shares issued for dividends reinvested 7,919 19,949
Cost of shares redeemed (104,731) (304,031)
-----------------------
Decrease in net assets from capital share transactions (13,256) (62,334)
-----------------------
Net increase (decrease) in net assets 57,081 (128,773)
Net assets:
Beginning of period 499,882 628,655
-----------------------
End of period $556,963 $499,882
=======================
Undistributed net investment income included in net assets:
End of period $ 861 $ 3,172
=======================
Change in shares outstanding:
Shares sold 3,969 11,569
Shares issued for dividends reinvested 381 952
Shares redeemed (4,943) (15,912)
-----------------------
Decrease in shares outstanding (593) (3,391)
=======================
</TABLE>
See accompanying notes to financial statements.
USAA INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
(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
International Fund (the Fund). The Fund's primary investment objective is
capital appreciation. Current income is a secondary objective. USAA Investment
Management Company (the Manager) seeks to achieve this objective by investing a
great majority of the Fund's assets in equity securities of foreign companies.
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 last quoted sale price, or the most recently
determined closing price calculated according to local market convention
available at the time the Fund is valued. If no sale is reported, the average of
the bid and asked prices is generally used.
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 that 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.
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.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($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 both agreements 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
Bank of America, the Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 25% of the Fund's total
assets. The Fund had no borrowings under either of these agreements during the
six-month period ended November 30, 1999.
(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, 1999, were $78.7 million
and $106.4 million, respectively.
Gross unrealized appreciation and depreciation of investments at November 30,
1999, were $178.6 million and $27.5 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, 1999, the terms of open foreign currency contracts were as
follows (in thousands):
<TABLE>
Foreign Currency Contracts to Buy:
<CAPTION>
- ------------------------------------------------------------------------------------------
U.S. Dollar
Exchange Contracts to Value as of In Exchange Unrealized Unrealized
Date Receive 11/30/99 for U.S. Dollar Appreciation Depreciation
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
12/01/99 1,118 British Pound $1,783 $1,799 $ - $(16)
- ------------------------------------------------------------------------------------------
$1,783 $1,799 $ - $(16)
==========================================================================================
</TABLE>
<TABLE>
Foreign Currency Contracts to Sell:
<CAPTION>
- ------------------------------------------------------------------------------------------
U.S. Dollar
Exchange Contracts to Value as of In Exchange Unrealized Unrealized
Date Deliver 11/30/99 for U.S. Dollar Appreciation Depreciation
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
12/07/99 271 British Pound $432 $432 $ - $ -
- ------------------------------------------------------------------------------------------
$432 $432 $ - $ -
==========================================================================================
</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 $26 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.
(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) YEAR 2000
Like other mutual funds, the Fund could be adversely affected if the computer
systems used by the Manager and the Fund's other service providers are not able
to perform their intended functions effectively after 1999 because of the
inability of computer software to distinguish the year 2000 from the year 1900.
The Manager has taken steps to address this potential year 2000 problem with
respect to the computer systems that they use and to obtain satisfactory
assurances that the comparable steps are being taken by the Fund's other major
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund from this
problem.
(9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Six-month
Period Ended
November 30, Year Ended May 31,
----------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 19.79 $ 21.94 $ 21.03 $ 18.71 $ 15.78 $ 16.36
Net investment income .01 .21 .19 .15 .17 .10
Net realized and
unrealized gain (loss) 3.12 (1.62) 2.41 2.87 2.92 .29
Distributions from net
investment income (.13) (.19) (.12) (.20) (.07) -
Distributions of realized
capital gains (.21) (.55) (1.57) (.50) (.09) (.97)
---------------------------------------------------------------------
Net asset value at
end of period $ 22.58 $ 19.79 $ 21.94 $ 21.03 $ 18.71 $ 15.78
=====================================================================
Total return (%) * 15.93 (6.63) 13.29 16.72 19.71 2.49
Net assets at end of
period (000) $566,963 $499,882 $628,655 $616,576 $417,995 $346,033
Ratio of expenses to
average net assets (%) 1.15(a) 1.12 1.05 1.09 1.19 1.17
Ratio of net investment
income to average net
assets (%) .35(a) .98 .87 .79 1.04 .81
Portfolio turnover (%) 15.39 37.69 42.97 46.03 70.01 64.30
</TABLE>
* Assumes reinvestment of all dividend income and capital gains distributions
during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
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 LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
Telephone Assistance Hours
Call toll free - Central Time
Monday - Friday 7:00 a.m. to 9:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
Sundays 11:30 a.m. to 8:00 p.m.
Internet Access
usaa.com(Service Mark)
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 USAA TouchLine(Registered Trademark)
(from touch-tone phones only)
For account balance, last transaction, fund prices,
or to exchange or redeem fund shares
1-800-531-8777, (in San Antonio) 498-8777
