TABLE OF CONTENTS
USAA FAMILY OF FUNDS 1
MESSAGE FROM THE PRESIDENT 2
INVESTMENT REVIEW 4
MESSAGE FROM THE MANAGERS 5
FINANCIAL INFORMATION
Distributions to Shareholders 8
Independent Auditors' Report 9
Portfolio of Investments 10
Notes to Portfolio of Investments 20
Statement of Assets and Liabilities 21
Statement of Operations 22
Statements of Changes in Net Assets 23
Notes to Financial Statements 24
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)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(Registered
Trademark) 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(Registered Trademark) 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(Registered
Trademark) 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]
--------------------------------------------------------------------------------
THE FIRST FIVE MONTHS OF 2000 WERE AS FASCINATING AND CHALLENGING A PERIOD AS
INVESTORS HAVE SEEN IN A LONG TIME. IT WAS FRAMED BY TWO EVENTS THAT WERE
STUNNINGLY OPPOSITE TO ONE ANOTHER.
--------------------------------------------------------------------------------
The more notable of the two was the precipitous drop of the NASDAQ Index. This
market gauge is dominated by the tech stocks which created the stupendous
returns of 1999. Many mutual funds could boast triple-digit returns for 12-month
periods, and the valuation of tech stocks in general reached undreamt-of levels.
More traditional investors struggled with the triple-digit price/earnings ratios
of the techs, and the retort was that this was the new economy. Then, about
three months into 2000, the trend cracked. The NASDAQ began falling, and it fell
hard. There were numerous drops of 5% or more in a day, very severe for an
entire index.
The second event was at the opposite end of the investment spectrum. Most people
were highly aware that the Federal Reserve (the Fed) was getting serious about
inflation and was raising interest rates. Therefore, bonds were a bad
investment? Wrong!
The Fed indeed raised short-term rates more than once. But something else was
happening. The federal government continued to run a budget surplus, and that
surplus has begun to be applied to the national debt. The Treasury began to
retire its 30-year bond. The effect was that by early June the six-month
Treasury bill yielded over 6.30%, but the 30-year bond, which had long been the
benchmark for the entire bond market, had a yield of 5.91%. Not only could you
get a higher rate of interest investing for 180 days instead of 30 years, but if
you happened to already own the 30-year bond, you received the benefit of a
run-up in its price.
In May THE WALL STREET JOURNAL reported that one of the world's foremost hedge
funds had suspected that tech stocks would drop, but missed the opportunity to
get out ahead of the event.
And there was no forewarning of what happened in the bond market. Once again, at
a pair of major market turns most investors were surprised. And that is why we
continue to believe that a well-allocated portfolio, set up before the fact, is
an excellent way to approach investing.
Sincerely,
Michael J.C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
INVESTMENT REVIEW
USAA WORLD GROWTH FUND
OBJECTIVE: CAPITAL APPRECIATION.
TYPES OF INVESTMENTS: Invests principally in a mix of foreign and domestic
equity securities.
--------------------------------------------------------------------------------
5/31/00 5/31/99
--------------------------------------------------------------------------------
Net Assets $414.5 Million $326.7 Million
Net Asset Value Per Share $20.61 $18.11
--------------------------------------------------------------------------------
Average Annual Total Returns as of 5/31/00
--------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION ON 10/1/92
22.59% 15.72% 14.18%
--------------------------------------------------------------------------------
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 5/31/00. 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 10,098
05/31/93 11,260 11,586 11,476
11/30/93 11,859 11,651 12,526
05/31/94 12,773 12,700 13,443
11/30/94 12,885 12,718 13,408
05/31/95 13,317 14,020 14,221
11/30/95 14,114 15,061 15,167
05/31/96 16,303 16,516 16,926
11/30/96 17,172 17,877 17,920
05/31/97 18,998 19,332 19,576
11/30/97 19,282 20,118 20,032
05/31/98 22,092 23,201 23,286
11/30/98 20,181 24,139 22,390
05/31/99 22,547 26,249 23,918
11/30/99 25,844 29,262 27,855
05/31/00 27,640 29,818 29,035
DATA SINCE INCEPTION ON 10/01/92 THROUGH 5/31/00.
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 THAT 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 FROM LEFT TO RIGHT: ALBERT C SEBASTIAN, CFA
(FOREIGN SECURITIES); KEVIN P. MOORE (FOREIGN SECURITIES); AND CURT ROHRMAN, CFA
(DOMESTIC SECURITIES) APPEARS HERE.]
MARKET CONDITIONS
For the 12-month period ended May 31, 2000, your USAA World Growth Fund's total
return was 22.59%, which compares with the Lipper Global Funds Average return of
23.29% and with the Morgan Stanley Capital Index (MSCI)-World Index return of
12.45%. Last year the Fund's performance was negatively impacted by its
under-representation in Asian as well as Internet equities. However, the Fund's
relative return this year was positively impacted since we are still
underweighted in these same stocks.
EUROPE
In 2000, the Fund has benefited from its overweighted position in European
equities. This is in spite of a weaker euro compared to the U.S. dollar. Within
Europe, the Fund has benefited from good stock selection and an overweighted
position in energy and health care. Consumer staples and financials have also
performed well, while metal and mining stocks have performed poorly.
CANADA
The Canadian equity market has rebounded strongly this year, and the Fund has
consequently benefited from its overweighted position. Energy stocks have been
particularly strong as a result of higher oil and natural gas prices. Technology
and financial stocks have also positively contributed to performance.
JAPAN
Our overweighted position in the technology sector worked well in 1999. Despite
the recent turmoil in the technology stocks, it was the primary reason for our
outperformance over the last 12 months. Our underweighted position in bank
stocks and other OLD ECONOMY stocks has turned out to be a good one. We believe
that corporate restructuring is still effective and the earnings outlook
continues to be favorable. However, we are still skeptical about the Japanese
government's commitment to tighter fiscal policy and deregulation. We will
remain underweighted in this area until we see more progress.
EMERGING MARKETS
Most emerging markets started 2000 on a strong upswing, only to be caught up in
the negative sentiment that gripped equity markets beginning in March. Economic
growth in most Asian emerging markets continues to rebound from the lows of the
regional crisis. Latin American markets have also rebounded on the back of
strong exports as well as improving domestic economies. The South African
economy, while suffering from currency and interest rate pressure, continues to
grow while economic performance in Eastern European and Middle Eastern countries
is mixed. We believe that improving domestic demand, coupled with the potential
for falling interest rates, provides a favorable backdrop for emerging markets
over the next 12 months.
UNITED STATES
U.S. stocks performed well through the period despite a series of Federal
Reserve interest rate hikes. A combination of robust domestic growth,
strengthening overseas economies, and low inflation worldwide provided the
perfect environment for accelerating earnings growth. The technology sector
remained the performance leader, driven by global demand for Internet
infrastructure, software and services, and wireless communications equipment and
services. Concerns regarding slowing computer sales following year 2000
preparations proved unfounded. Domestic holdings benefited from a heavy
weighting in technology. Several stocks in the health care, consumer, and
financial industries also showed good gains.
OUTLOOK
We are encouraged by the strength of the global economy and positively view
recent signs that the U.S. economic growth may be slowing. We continue to favor
Europe and Canada based on attractive valuations, sustainable economic growth,
corporate restructuring, and a benign inflation outlook. In Japan, the market
will continue to be led by large-capitalization growth stocks in the
telecommunication and technology sectors. However, we are less positive about
Japan due to the high level of financial and government debt as well as the
uncertain political outlook. In emerging markets, we favor Brazil and Mexico as
well as technology stocks in Korea and Taiwan. Overall, the portfolio continues
to underweight the financial and utility sectors and to overweight the
technology, industrial, health care, and energy sectors.
Our outlook for the United States market is optimistic. Interest rate increases
in the first half of 2000 may have successfully slowed the economy to a point
where aggregate supply and demand are in general balance. Technology investments
should provide sufficient productivity increases to offset any potential labor
shortages. Overall, we now anticipate an extension of 1999's healthy global
economic environment.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
REFER TO THE BOTTOM OF PAGE 4 FOR THE LIPPER AVERAGE AND THE MSCI-WORLD
DEFINITIONS.
-------------------------------------------
Top 10 Equity Holdings
(% of Net Assets)
-------------------------------------------
Nokia Corp. ADR 2.5
Cisco Systems, Inc. 1.5
Kloninklijke Phillips Elec. N.V. ADR 1.5
Texas Instruments, Inc. 1.5
General Electric Co. 1.4
Intel Corp. 1.4
Total Fina S.A. 1.4
Nortel Networks Corp. 1.3
Clear Channel Communications, Inc. 1.2
Oracle Corp. 1.2
-------------------------------------------
-------------------------------------------
Top 10 Industries
(% of Net Assets)
-------------------------------------------
Telephones 6.6
Drugs 6.1
Electronics - Semiconductors 5.6
Communications Equipment 5.6
Banks - Money Center 4.3
Computer Software & Service 3.8
Insurance - Multiline Companies 3.6
Electrical Equipment 3.1
Oil - International Integrated 2.8
Beverages - Nonalcoholic 2.6
--------------------------------------------
ASSET ALLOCATION
A pie chart is shown here depicting the Asset Allocation as of May 31, 2000 of
the USAA World Growth Fund to be:
United States - 32.6%; Other - 28.1% (Countries with less than 3.0% of the
portfolio and Money Market Instruments); United Kingdom - 9.5%; Japan - 9.5%;
Netherlands - 6.3%; Canada - 5.5%; France 4.7% and Finland - 3.6%.
PERCENTAGES ARE OF THE NET ASSETS OF THE FUND AND MAY OR MAY NOT EQUAL 100%.
SEE PAGE 10 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.
DISTRIBUTIONS TO SHAREHOLDERS
The following per share information describes the federal tax treatment of
distributions made during the fiscal year ended May 31, 2000. These figures are
provided for information purposes only and should not be used for reporting to
federal or state revenue agencies. Distributions for the calendar year will be
reported to you on Form 1099-DIV in January 2001.
The Fund has elected under Section 853 of the Internal Revenue Code to pass
through the credit for taxes paid in foreign countries. Per share foreign gross
income earned and foreign taxes paid during the fiscal year by the Fund are $.23
and $.03, respectively.
Ordinary income * $ .68
Long-term capital gains .81
-----
Total $1.49
=====
14.7% of ordinary income distributions qualify for deduction by corporations.
* INCLUDES DISTRIBUTION OF SHORT-TERM CAPITAL GAINS, IF ANY, WHICH ARE TAXABLE
AS ORDINARY INCOME.
INDEPENDENT AUDITORS' REPORT
KPMG
The Shareholders and Board of Trustees
USAA WORLD GROWTH FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the USAA World Growth Fund, a series of the
USAA Investment Trust, as of May 31, 2000, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights, presented in note 8 to the financial statements, for each of the
years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA World Growth Fund as of May 31, 2000, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
San Antonio, Texas
July 7, 2000
USAA WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------
FOREIGN SECURITIES (60.9%)
FOREIGN STOCKS (60.8%)
ARGENTINA (0.1%)
156,000 PC Holdings S.A. $ 246
----------------------------------------------------------------------------
AUSTRALIA (0.1%)
572,000 Pasminco Ltd. * 297
----------------------------------------------------------------------------
AUSTRIA (1.0%)
28,000 Bank Austria AG 1,330
33,700 Boehler Uddeholm AG 1,317
10,500 VA Technologie AG 577
26,700 Vienna Airport (Flughafen Wien) 895
----------------------------------------------------------------------------
4,119
----------------------------------------------------------------------------
BRAZIL (0.5%)
10,500 Companhia Brasileira de Distribuicao Grupo Pao de
Acucar ADR 315
25,800 Companhia Cerveja Ria Brahma 374
23,500 Embratel Participacoes S.A. ADR 492
1,436,000 Petroleo Brasileiro S.A. 330
17,000 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR 411
----------------------------------------------------------------------------
1,922
----------------------------------------------------------------------------
CANADA (5.5%)
106,000 Anderson Exploration Ltd. * 1,957
37,800 Canadian Imperial Bank of Commerce 1,018
107,300 Canadian National Railway Co. 2,877
96,200 Canadian Occidental Petroleum Ltd. 2,387
38,900 C-MAC Industries, Inc. * 1,486
78,500 Manulife Financial Corp. 1,383
99,800 Nortel Networks Corp. 5,420
123,000 Suncor Energy, Inc. 2,821
118,800 Sun Life Financial Services * 1,872
59,300 Toronto-Dominion Bank 1,485
----------------------------------------------------------------------------
22,706
----------------------------------------------------------------------------
CHINA (0.4%)
92,400 China Telecom Ltd. * 691
1,097,000 Cosco Pacific Ltd. 816
262,000 Legend Hldg. 266
----------------------------------------------------------------------------
1,773
----------------------------------------------------------------------------
DENMARK (1.5%)
379,196 Nordic Baltic Holding * 2,441
70,600 SAS Danmark A/S 635
47,500 Tele Danmark A/S "B" 3,354
----------------------------------------------------------------------------
6,430
----------------------------------------------------------------------------
EGYPT (0.0%)(a)
10,400 Suez Cement Co. S.A.E. GDR 115
----------------------------------------------------------------------------
FINLAND (3.6%)
103,677 Metso OYJ 1,354
197,200 Nokia Corp. ADR 10,255
39,350 Perlos Corp. 1,413
41,800 Sampo Insurance Co. "A" 1,755
----------------------------------------------------------------------------
14,777
----------------------------------------------------------------------------
FRANCE (4.7%)
28,500 Accor S.A. 1,154
43,209 Aventis S.A. 2,810
43,005 CNP Assurances 1,397
56,000 Coflexip ADR 3,262
19,000 Eramet Group 895
13,130 ISIS S.A. 831
30,000 Renault S.A. 1,413
45,700 Rhodia S.A. 759
74,974 Total Fina S.A. 5,918
21,000 Valeo S.A. 1,064
----------------------------------------------------------------------------
19,503
----------------------------------------------------------------------------
GERMANY (1.9%)
54,800 Continental AG 1,012
60,600 Merck KGaA 1,880
3,860 SAP AG 1,603
70,250 Veba AG 3,552
----------------------------------------------------------------------------
8,047
----------------------------------------------------------------------------
GREECE (0.2%)
20,000 Hellenic Telecommunications Orgn. S.A. (OTE) 494
53,158 National Bank of Greece S.A. GDR * 485
----------------------------------------------------------------------------
979
----------------------------------------------------------------------------
HONG KONG (0.3%)
44,000 Hutchison Whampoa Ltd. 507
80,000 HSBC Holdings 883
----------------------------------------------------------------------------
1,390
----------------------------------------------------------------------------
HUNGARY (0.1%)
8,100 Magyar Tavkozlesi RT. (MATAV) ADR 276
----------------------------------------------------------------------------
INDIA (0.1%)
25,200 Videsh Sanchar Nigam Ltd. GDR 393
----------------------------------------------------------------------------
ISRAEL (0.3%)
71,372 Bank Hapoalim Ltd. 205
24,300 Blue Square Ltd. ADR 240
3,200 Check Point Software Technologies Ltd. * 601
1,200 Teva Pharmaceutical Industries Ltd. ADR 65
----------------------------------------------------------------------------
1,111
----------------------------------------------------------------------------
ITALY (2.7%)
47,000 ENI S.p.A. ADR 2,553
25,000 Gucci Group N.V. 2,141
539,000 Italgas S.p.A. 2,207
89,800 Telecom Italia S.p.A. 1,240
465,700 Telecom Italia S.p.A. Savings 2,889
----------------------------------------------------------------------------
11,030
----------------------------------------------------------------------------
JAPAN (9.4%)
25,200 Asatsu DK 821
63,000 Daibiru Corp. 524
255 DDI Corp. 2,604
71,000 Fujitsu Ltd. 2,011
40,000 Honda Motor Co. Ltd. 1,319
3,700 Internet Initiative, Inc. ADR * 229
19,000 Ito-Yokado Co. Ltd. 1,127
125,000 Kikkoman Corp. 876
63,000 Kirin Brewery Co. Ltd. 760
15,000 Murata Manufacturing Co. Ltd. 2,591
162,000 Nikko Securities Co. Ltd. 1,501
528,000 Nippon Steel Corp. 1,157
205 Nippon Telegraph & Telephone Corp. (NTT) 2,436
47 NTT Mobile Communication Network, Inc. 1,213
39,000 Paris Miki, Inc. 2,585
21,000 Pasona Softbank, Inc. 503
10,200 Ryohin Keikaku Co. 1,486
66,000 Sailor Pen Co. Ltd. 1,157
30,450 Sanix, Inc. * 1,699
32,700 Sony Corp. * 2,960
196,000 Sumitomo Corp. 1,820
47,000 Sumitomo Electric Industries, Ltd. 685
32,000 Takeda Chemical Industries 2,184
210,000 Toshiba Corp. 2,028
2,000 Toys R Us * 321
259 West Japan Railway 1,094
36,200 Zenrin Co. 1,103
----------------------------------------------------------------------------
38,794
----------------------------------------------------------------------------
KOREA (0.8%)
50,200 Korea Electric Power Corp. ADS 784
19,643 Korea Telecom Corp. ADR 727
24,200 Samsung Corp. 194
4,318 Samsung Electronics Co. Ltd. 1,177
76,000 Shinhan Bank 569
----------------------------------------------------------------------------
3,451
----------------------------------------------------------------------------
MALAYSIA (0.2%)
74,600 Malayan Bank Berhad 318
30,000 Malaysian Pacific 337
139,000 Technology Resources Industries Bhd * 167
----------------------------------------------------------------------------
822
----------------------------------------------------------------------------
MEXICO (0.5%)
38,600 Coca Cola Femsa S.A. ADR 586
14,000 Fomento Economico Mexicano, S.A. de C.V. ADR 533
11,200 Telefonos de Mexico, S.A. de C.V. ADR 545
24,100 Tubos de Acero de Mexico, S.A. ADR 326
----------------------------------------------------------------------------
1,990
----------------------------------------------------------------------------
NETHERLANDS (6.3%)
86,400 Akzo Nobel N.V. 3,298
31,000 EVC International N.V. * 304
54,800 Fortis NL N.V. 1,442
22,800 Getronics N.V. 382
66,550 ING Group N.V. 3,980
40,700 Koninklijke KPN N.V. 3,675
142,464 Koninklijke Philips Electronics N.V. ADR 6,295
64,400 Oce-van der Grinten N.V. 913
49,900 Versatel Telecom * 1,802
79,700 Vopak Kon 1,822
44,100 VNU N.V. 2,250
----------------------------------------------------------------------------
26,163
----------------------------------------------------------------------------
NORWAY (1.4%)
634,800 Christiania Bank og Kreditkasse 3,271
38,300 Schibsted ASA 746
262,000 Storebrand ASA 1,688
----------------------------------------------------------------------------
5,705
----------------------------------------------------------------------------
PORTUGAL (1.5%)
102,656 Banco Pinto & Sotto Mayor S.A. * 2,318
164,000 Brisa-Auto Estrada de Portugal S.A. 1,202
229,500 Portugal Telecom S.A. ADR 2,496
----------------------------------------------------------------------------
6,016
----------------------------------------------------------------------------
RUSSIA (0.1%)
7,000 Lukoil ADR 387
----------------------------------------------------------------------------
SINGAPORE (0.2%)
53,000 Natsteel Electronics 156
76,000 Singapore Airlines 662
----------------------------------------------------------------------------
818
----------------------------------------------------------------------------
SOUTH AFRICA (0.1%)
316,600 Firstrand Ltd. 333
34,462 South African Breweries plc 210
----------------------------------------------------------------------------
543
----------------------------------------------------------------------------
SPAIN (2.5%)
115,937 Altadis S.A. 1,700
181,193 Banco Bilbao Vizcaya Argentaria 2,536
93,550 Repsol S.A. 1,996
68,127 Telefonica de Espana S.A. ADR * 4,147
----------------------------------------------------------------------------
10,379
----------------------------------------------------------------------------
SWEDEN (2.9%)
92,000 Autoliv, Inc. GDR 2,535
167,600 Ericsson LM Tel Co. ADR 3,436
588,744 Nordic Baltic Holding * 3,845
83,280 Skandinaviska Enskilda Banken "A" 908
432,800 Swedish Match AB 1,344
432,800 Swedish Match Redemption Rights 22
----------------------------------------------------------------------------
12,090
----------------------------------------------------------------------------
SWITZERLAND (1.7%)
1,984 Novartis AG 2,927
4,600 Selecta Group AG 1,320
2,180 Sulzer AG P.C. * 1,468
4,090 Swisscom AG 1,437
----------------------------------------------------------------------------
7,152
----------------------------------------------------------------------------
TAIWAN (0.5%)
63,000 Asustek Computer 636
194,121 Compal Electronics, Inc. 463
185,600 Taiwan Semiconductor Manufacturing Co. * 946
54,000 Winbond Electronic * 163
----------------------------------------------------------------------------
2,208
----------------------------------------------------------------------------
TURKEY (0.2%)
10,000,000 Eregli Demir Ve Celik Fabrikalari T.A.S. * 463
31,034,771 Yapi Ve Kredi Bankasi A.S. 383
----------------------------------------------------------------------------
846
----------------------------------------------------------------------------
UNITED KINGDOM (9.5%)
57,900 AstraZeneca Group plc 2,442
184,300 Bank of Scotland 1,738
624,400 Billiton plc 2,121
62,000 BOC Group plc 872
1,300 Bookham Technology * 64
149,500 Cable & Wireless plc 2,495
424,900 Cadbury Schweppes 2,830
177,786 Celltech Group 2,587
146,600 CGU plc 2,229
1,050,000 Cookson Group plc 3,395
690,000 Corporate Services Group plc * 924
23,400 Glaxo Wellcome plc ADR 1,318
1,952,000 Laporte * 22
142,000 Laporte plc * 1,137
425,000 Old Mutual plc 894
96,800 Powergen plc 638
261,000 Reckitt & Colman 2,864
192,886 Reuters Group plc 2,876
141,800 Royal Bank Scot Group 2,335
215,000 Safeway plc 788
613,700 Tomkins plc 1,759
251,722 WPP Group plc 3,063
----------------------------------------------------------------------------
39,391
----------------------------------------------------------------------------
Total Foreign Stocks (cost: $189,640) 251,869
----------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
----------------------------------------------------------------------------
FOREIGN BOND (0.1%)
JAPAN (0.1%)
$400 MBL International Finance (Bermuda) Trust,
3%, 11/30/2002 (cost: $400) $ 420
----------------------------------------------------------------------------
Total Foreign Securities (cost: $190,040) 252,289
----------------------------------------------------------------------------
NUMBER
OF SHARES
---------
DOMESTIC STOCKS (32.6%)
AEROSPACE/DEFENSE (0.4%)
40,000 Boeing Co. 1,563
----------------------------------------------------------------------------
ALUMINUM (0.6%)
44,000 Alcoa, Inc. 2,571
----------------------------------------------------------------------------
BANKS - MAJOR REGIONAL (0.5%)
52,000 Mellon Financial Corp. 2,005
----------------------------------------------------------------------------
BEVERAGES - NONALCOHOLIC (1.8%)
152,000 Pepsi Bottling Group, Inc. 3,971
81,000 PepsiCo, Inc. 3,296
----------------------------------------------------------------------------
7,267
----------------------------------------------------------------------------
BIOTECHNOLOGY (0.6%)
40,000 Amgen, Inc. * 2,545
----------------------------------------------------------------------------
BROADCASTING - RADIO & TV (1.2%)
64,000 Clear Channel Communications, Inc. * 4,792
----------------------------------------------------------------------------
COMMUNICATION EQUIPMENT (1.0%)
55,000 Lucent Technologies, Inc. 3,155
15,000 QualComm, Inc. * 996
----------------------------------------------------------------------------
4,151
----------------------------------------------------------------------------
COMPUTER - HARDWARE (1.7%)
75,000 Dell Computer Corp. * 3,234
33,000 Hewlett-Packard Co. 3,964
----------------------------------------------------------------------------
7,198
----------------------------------------------------------------------------
COMPUTER - NETWORKING (1.5%)
110,000 Cisco Systems, Inc. * 6,263
----------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICE (3.3%)
75,000 America Online, Inc. * 3,975
30,000 BMC Software, Inc. * 1,320
56,000 Microsoft Corp. * 3,504
68,000 Oracle Corp. * 4,887
----------------------------------------------------------------------------
13,686
----------------------------------------------------------------------------
DRUGS (2.1%)
34,000 Merck & Co., Inc. 2,537
75,000 Pfizer, Inc. 3,342
58,000 Pharmacia Corp. 3,013
----------------------------------------------------------------------------
8,892
----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.4%)
108,000 General Electric Co. 5,684
----------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTORS (3.8%)
47,000 Analog Devices, Inc. * 3,619
48,000 Intel Corp. 5,985
84,000 Texas Instruments, Inc. 6,069
----------------------------------------------------------------------------
15,673
----------------------------------------------------------------------------
ENTERTAINMENT (0.9%)
90,000 Walt Disney Co. 3,797
----------------------------------------------------------------------------
EQUIPMENT - SEMICONDUCTORS (1.0%)
48,000 Applied Materials, Inc. * 4,008
----------------------------------------------------------------------------
FINANCE - DIVERSIFIED (0.5%)
28,000 Morgan Stanley Dean Witter & Co. 2,014
----------------------------------------------------------------------------
FOODS (1.3%)
35,000 Hershey Foods Corp. 1,815
103,000 Keebler Foods Co. * 3,734
----------------------------------------------------------------------------
5,549
----------------------------------------------------------------------------
HEALTH CARE - DIVERSIFIED (1.5%)
23,000 American Home Products Corp. 1,239
33,000 Bristol-Myers Squibb Co. 1,817
32,000 Johnson & Johnson, Inc. 2,864
3,000 Warner-Lambert Co. 367
----------------------------------------------------------------------------
6,287
----------------------------------------------------------------------------
HOSPITALS (0.1%)
42,000 Health Management Associates * 496
----------------------------------------------------------------------------
INSURANCE - MULTILINE COMPANIES (0.8%)
28,000 American International Group, Inc. 3,152
----------------------------------------------------------------------------
MANUFACTURING - SPECIALIZED (0.7%)
44,000 Avery Dennison Corp. 2,695
----------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES (1.4%)
37,000 Guidant Corp. * 1,873
76,000 Medtronic, Inc. 3,924
----------------------------------------------------------------------------
5,797
----------------------------------------------------------------------------
OIL & GAS - DRILLING/EQUIPMENT (1.0%)
82,000 Halliburton Co. 4,183
----------------------------------------------------------------------------
PERSONAL CARE (1.1%)
111,000 Avon Products, Inc. 4,586
----------------------------------------------------------------------------
RETAIL - DRUGS (0.3%)
42,000 Duane Reade, Inc. * 1,257
----------------------------------------------------------------------------
RETAIL - FOOD (0.5%)
45,000 Safeway, Inc. * 2,076
----------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISING (0.9%)
60,000 Target Corp. 3,761
----------------------------------------------------------------------------
RETAIL - SPECIALTY APPAREL (0.7%)
86,000 Gap, Inc. 3,015
----------------------------------------------------------------------------
Total Domestic Stocks (cost: $68,881) 134,963
----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
---------
MONEY MARKET INSTRUMENT (6.3%)
$ 26,357 Federal Home Loan Bank, Discount Note, 6.30%, 6/01/2000
(cost: $26,357) 26,357
----------------------------------------------------------------------------
Total Investments (cost: $285,278) $413,609
============================================================================
PORTFOLIO SUMMARY BY INDUSTRY
-----------------------------
Telephones 6.6%
Drugs 6.1
Electronics - Semiconductors 5.6
Communication Equipment 5.6
Banks - Money Center 4.3
Computer Software & Service 3.8
Insurance - Multiline Companies 3.6
Electrical Equipment 3.1
Oil - International Integrated 2.8
Beverages - Nonalcoholic 2.6
Banks - Major Regional 2.4
Computer - Hardware 2.1
Oil & Gas - Drilling/Equipment 2.0
Retail - Specialty 1.7
Manufacturing - Diversified Industries 1.6
Foods 1.6
Health Care - Diversified 1.5
Computer - Networking 1.5
Medical Products & Supplies 1.4
Railroads/Shipping 1.4
Finance - Diversified 1.3
Manufacturing - Specialized 1.3
Chemicals - Specialty 1.3
Electric Utilities 1.2
Broadcasting - Radio & TV 1.2
Auto Parts 1.1
Oil & Gas - Exploration & Production 1.1
Personal Care 1.1
Equipment - Semiconductors 1.0
Telecommunications - Cellular/Wireless 1.0
Other 26.9
----
Total 99.8%
====
USAA WORLD GROWTH FUND
NOTES TO PORTFOLIO OF INVESTMENTS
MAY 31, 2000
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) Represents less than 0.1% of net assets.
* Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA WORLD GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
MAY 31, 2000
ASSETS
Investments in securities, at market value
(identified cost of $285,278) $413,609
Cash 71
Cash denominated in foreign currencies (identified cost
of $1,673) 1,674
Receivables:
Capital shares sold 86
Dividends and interest 702
--------
Total assets 416,142
--------
LIABILIITES
Securities purchased 931
Capital shares redeemed 340
USAA Investment Management Company 258
USAA Transfer Agency Company 72
Accounts payable and accrued expenses 64
Dividends on capital shares 7
--------
Total liabilities 1,672
--------
Net assets applicable to capital shares outstanding $414,470
========
REPRESENTED BY:
Paid-in capital $264,793
Accumulated undistributed net investment income 1,330
Accumulated net realized gain on investments 20,056
Net unrealized appreciation of investments 128,331
Net unrealized depreciation on foreign currency translations (40)
--------
Net assets applicable to capital shares outstanding $414,470
========
Capital shares outstanding, unlimited number of shares
authorized, no par value 20,109
========
Net asset value, redemption price, and offering price
per share $ 20.61
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA WORLD GROWTH FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED MAY 31, 2000
Net investment income:
Income:
Dividends (net of foreign taxes withheld of $619) $ 4,775
Interest 871
-------
Total income 5,646
-------
Expenses:
Management fees 2,806
Transfer agent's fees 840
Custodian's fees 301
Postage 129
Shareholder reporting fees 18
Trustees' fees 3
Registration fees 55
Professional fees 43
Other 5
-------
Total expenses 4,200
-------
Net investment income 1,446
-------
Net realized and unrealized gain (loss) on investments and
foreign currency:
Net realized gain (loss) on:
Investments 33,244
Foreign currency transactions (108)
Change in net unrealized appreciation/depreciation of:
Investments 38,320
Foreign currency translations (8)
-------
Net realized and unrealized gain 71,448
-------
Increase in net assets resulting from operations $72,894
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA WORLD GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
YEARS ENDED MAY 31,
2000 1999
----------------------
From operations:
Net investment income $ 1,446 $ 1,764
Net realized gain on investments 33,244 12,989
Net realized loss on foreign currency transactions (108) (206)
Change in net unrealized appreciation/depreciation
of:
Investments 38,320 (10,486)
Foreign currency translations (8) 212
----------------------
Increase in net assets resulting from
operations 72,894 4,273
----------------------
Distributions to shareholders from:
Net investment income (1,104) (1,995)
----------------------
Net realized gains (26,002) (10,052)
----------------------
From capital share transactions:
Proceeds from shares sold 131,190 125,901
Reinvested dividends 26,625 11,871
Cost of shares redeemed (115,835) (160,176)
----------------------
Increase (decrease) in net assets
from capital share transactions 41,980 (22,404)
----------------------
Net increase (decrease) in net assets 87,768 (30,178)
Net assets:
Beginning of period 326,702 356,880
----------------------
End of period $414,470 $326,702
======================
Accumulated undistributed net investment income:
End of period $ 1,330 $ 1,104
======================
Change in shares outstanding:
Shares sold 6,452 7,368
Shares issued for dividends reinvested 1,347 664
Shares redeemed (5,728) (9,429)
----------------------
Increase (decrease) in shares outstanding 2,071 (1,397)
======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA WORLD GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
(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 11 separate funds. The
information presented in this annual 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 the Fund's assets mostly in a mix of foreign and domestic equity
securities.
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
undistributed net investment income by $8,000, and to increase accumulated net
realized gain on investments by $8,000.
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.
(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
year ended May 31, 2000.
(3) DISTRIBUTIONS
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually 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 period ended May 31, 2000, were $141,139,000 and
$140,001,000, respectively.
Gross unrealized appreciation and depreciation of investments at May 31, 2000,
were $144,802,000 and $16,472,000, 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 May 31, 2000, the terms of open foreign currency contracts were as follows
(in thousands):
<TABLE>
<CAPTION>
Foreign Currency Contracts to Buy:
----------------------------------------------------------------------------------
U.S. Dollar
Exchange Contracts to Value as of In Exchange Unrealized Unrealized
Date Receive 5/31/00 for U.S. Dollar Appreciation Depreciation
----------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
6/2/00 15 Argentine Peso $ 15 $ 15 $ - $ -
----------------------------------------------------------------------------------
6/5/00 61 Argentine Peso 61 61 - -
----------------------------------------------------------------------------------
6/5/00 50 British Pound 74 74 - -
----------------------------------------------------------------------------------
$150 $150 $ - $ -
==================================================================================
</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 $26.00 per shareholder account plus
out-of-pocket expenses.
C. UNDERWRITING SERVICES - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing, best-efforts basis. The
Manager receives no commissions or fees for this service.
D. BROKERAGE SERVICES - USAA Brokerage Services, a discount brokerage service
of the Manager, may execute portfoli transactions for the Fund. The amount of
brokerage commissions paid to USAA Brokerage Services during the period ended
May 31, 2000, was $4,000.
(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:
YEAR ENDED MAY 31,
--------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------
Net asset value at
beginning of period $ 18.11 $ 18.36 $ 16.84 $ 15.50 $ 12.96
Net investment income .05 .10 .11 .11 .12
Net realized and
unrealized gain 3.94 .27 2.51 2.28 2.73
Distributions from net
investment income (.06) (.10) (.08) (.14) (.08)
Distributions of realized
capital gains (1.43) (.52) (1.02) (.91) (.23)
--------------------------------------------------
Net asset value at
end of period $ 20.61 $ 18.11 $ 18.36 $ 16.84 $ 15.50
==================================================
Total return (%) * 22.59 2.06 16.29 16.52 22.43
Net assets at end of
period (000) $414,470 $326,702 $356,880 $306,799 $267,192
Ratio of expenses to
average net assets (%) 1.12 1.16 1.13 1.20 1.27
Ratio of net investment
income to average net
assets (%) .39 .55 .64 .63 .96
Portfolio turnover (%) 39.20 51.19 45.04 50.02 60.97
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
TRUSTEES
Robert G. Davis, CHAIRMAN OF THE BOARD
Michael J.C. Roth, VICE CHAIRMAN OF THE BOARD
Barbara B. Dreeben
Robert L. Mason
David G. Peebles
Michael F. Reimherr
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
