UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-4019
Exact name of registrant as specified in charter: USAA INVESTMENT TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: MARK S. HOWARD
USAA INVESTMENT TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: MAY 31
Date of reporting period: NOVEMBER 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
USAA PRECIOUS METALS AND MINERALS FUND - SEMIANNUAL REPORT FOR PERIOD ENDING
NOVEMBER 30, 2003
[LOGO OF USAA]
USAA(R)
USAA PRECIOUS METALS
and MINERALS Fund
[GRAPHIC OF USAA PRECIOUS METALS AND MINERALS FUND]
S e m i a n n u a l R e p o r t
- --------------------------------------------------------------------------------
NOVEMBER 30, 2003
(C)2004, USAA. All rights reserved.
Table of CONTENTS
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MESSAGE FROM THE PRESIDENT 2
INVESTMENT OVERVIEW & MANAGER'S COMMENTARY 5
FINANCIAL INFORMATION
Portfolio of Investments 12
Notes to Portfolio of Investments 15
Financial Statements 16
Notes to Financial Statements 19
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA INVESTMENT MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE
ONLY WHEN PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES
FURTHER DETAILS ABOUT THE FUND.
(C)2004, USAA. All rights reserved.
2
M E S S A G E
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from the PRESIDENT
"
WE MAY NOT HAVE REACHED THE PEAK
OF THE CURRENT CYCLICAL BULL MARKET,
[PHOTO OF CHRISTOPHER W. CLAUS] BUT WE HAVE SEEN A REMARKABLE
RUN-UP IN STOCK PRICES.
"
- --------------------------------------------------------------------------------
Economic reports confirm that the U.S. and global economies
began a robust expansion early in the autumn of 2003. We are
finally seeing the results of the fiscal and monetary policies
that were implemented to stimulate economic growth. The economy
is benefiting from the lowest short-term interest rates in
decades, reduced marginal tax rates, and increased government
spending. Productivity has increased to its highest level in 20
years, and corporate America is starting once again to invest
in capital goods and to add employees to its payrolls. Finally,
American goods and services are more competitive in global
markets because foreign currencies have gained strength over
the U.S. dollar.
All of these positive developments have translated into the
growth of the gross domestic product (GDP) and improved
corporate profitability, both of which have significantly
driven up stock prices. So we're left with the obvious
question: Can the economy keep growing fast enough and long
enough to support existing equity valuations and to provide for
higher stock prices?
While no one can predict what will happen, we do believe that
market volatility will remain the norm rather than the
exception. We may not have reached the peak of the current
cyclical bull market, but we have seen a remarkable run-up in
stock prices. Consequently, we would not be surprised to see
some form of
3
. . . C O N T I N U E D
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consolidation before stocks try to break through resistance
levels - assuming, of course, that the economy keeps growing,
more new jobs are created, corporate profitability continues to
improve, and short-term rates (which are expected to increase
in 2004) do not spike dramatically.
Whatever happens, the most effective strategy in any market
cycle is a well-thought-out investment plan that incorporates
asset allocation, diversification, and a true understanding of
your personal tolerance for risk - all matched to your
investment goals.
At USAA, we remain committed to helping you with your goals. We
will continue to provide you with outstanding resources - a
market-tested portfolio management team, world-class service,
and no-load mutual funds without excessive fees, sales loads,
or contractual plans.
For all of us here at USAA, I would like to thank you for your
business.
Sincerely,
/s/ Christopher W. Claus
Christopher W. Claus
President and Vice Chairman of the Board
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
FOR MORE COMPLETE INFORMATION ABOUT USAA MUTUAL FUNDS,
INCLUDING CHARGES AND OPERATING EXPENSES, REQUEST A PROSPECTUS
FROM USAA INVESTMENT MANAGEMENT COMPANY (USAA). READ IT
CAREFULLY BEFORE YOU INVEST.
MUTUAL FUND OPERATING EXPENSES APPLY AND CONTINUE THROUGHOUT
THE LIFE OF THE FUND.
5
I N V E S T M E N T
====================------------------------------------------------------------
OVERVIEW
USAA PRECIOUS METALS AND MINERALS FUND
OBJECTIVE
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Long-term capital appreciation and to protect the purchasing
power of shareholders' capital against inflation; secondary
objective of current income.
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
Normally invests at least 80% of the Fund's assets in equity
securities of domestic and foreign companies principally
engaged in the exploration, mining, or processing of gold and
other precious metals and minerals.
- --------------------------------------------------------------------------------
11/30/03 5/31/03
- --------------------------------------------------------------------------------
Net Assets $342.7 Million $156.2 Million
Net Asset Value Per Share $18.73 $10.70
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/03
- --------------------------------------------------------------------------------
5/31/03 TO 11/30/03* 1 YEAR 5 YEARS 10 YEARS
75.05% 113.04% 28.81% 8.52%
* TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
TOTAL RETURN MEASURES THE PRICE CHANGE IN A SHARE ASSUMING THE
REINVESTMENT OF ALL NET INVESTMENT INCOME DIVIDEND AND CAPITAL
GAIN DISTRIBUTIONS. NO ADJUSTMENT HAS BEEN MADE FOR TAXES
PAYABLE BY SHAREHOLDERS ON THEIR REINVESTED NET INVESTMENT
INCOME DIVIDENDS AND REALIZED 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.
6
. . . C O N T I N U E D
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OVERVIEW
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CUMULATIVE PERFORMANCE COMPARISON
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[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA PRECIOUS LIPPER GOLD PHILADELPHIA
S&P 500 METALS AND ORIENTED FUNDS LIPPER GOLD GOLD & SILVER
INDEX MINERALS FUND AVERAGE FUNDS INDEX LONDON GOLD INDEX
--------- ------------- -------------- ----------- ----------- -------------
11/30/1993 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
12/31/1993 10120.90 10,894.52 11124.03 11304.48 10562.15 11111.95
1/31/1994 10464.66 10,940.44 11155.04 10943.02 10188.73 11106.06
2/28/1994 10180.77 10,389.40 10614.13 10356.30 10287.14 10815.43
3/31/1994 9737.77 10,550.12 10611.26 10357.04 10493.39 11262.74
4/30/1994 9862.53 9,689.12 9997.20 10092.02 10149.64 9639.46
5/31/1994 10023.75 10,136.84 10205.16 10220.11 10450.26 10135.62
6/30/1994 9778.46 9,689.12 9840.86 10128.83 10467.78 9708.53
7/31/1994 10099.32 9,827.25 9896.19 10499.12 10353.19 9413.70
8/31/1994 10512.43 10,378.96 10455.40 11232.33 10400.38 9983.99
9/30/1994 10255.57 11,482.37 11358.93 12248.97 10645.73 11138.91
10/31/1994 10485.65 10,677.80 10706.97 11673.29 10349.15 9890.49
11/30/1994 10104.25 9,436.46 9452.56 10274.59 10328.93 8651.34
12/31/1994 10253.84 9,873.23 9774.48 10630.15 10332.97 9209.84
1/31/1995 10519.57 8,597.41 8403.27 8813.31 10107.85 8203.18
2/28/1995 10929.13 9,034.18 8690.68 9176.97 10148.29 8746.53
3/31/1995 11251.12 10,103.11 9550.66 10021.35 10568.89 10274.62
4/30/1995 11582.17 10,252.53 9748.41 10075.82 10508.22 9850.05
5/31/1995 12044.39 10,344.48 9822.11 10011.04 10361.28 10108.67
6/30/1995 12323.66 10,355.97 10019.47 10126.62 10450.26 10124.67
7/31/1995 12732.16 10,505.39 10375.87 10592.61 10335.67 9999.16
8/31/1995 12763.94 10,447.92 10437.25 10670.64 10308.71 10332.74
9/30/1995 13302.30 10,424.93 10508.50 10725.85 10353.19 10462.47
10/31/1995 13254.77 9,172.10 9427.27 9494.99 10316.80 9028.73
11/30/1995 13835.98 10,045.64 9999.33 10027.97 10455.65 10202.17
12/31/1995 14102.50 10,272.46 10156.42 10214.96 10434.08 10144.05
1/31/1996 14581.92 12,320.05 11985.86 12165.04 10934.21 12724.29
2/29/1996 14717.58 12,481.09 12524.68 12430.80 10802.10 12135.46
3/31/1996 14859.28 12,400.57 12681.96 12471.16 10686.17 12116.08
4/30/1996 15078.15 12,343.05 13030.76 12733.56 10550.01 12081.54
5/31/1996 15466.35 12,791.68 13857.60 13539.88 10529.79 12542.33
6/30/1996 15525.31 11,112.20 11955.40 11620.15 10299.27 10425.41
7/31/1996 14839.78 10,836.12 11665.75 11379.57 10388.24 10475.11
8/31/1996 15153.27 11,273.25 12443.14 12012.69 10419.25 10491.96
9/30/1996 16005.38 10,548.54 11904.25 11389.11 10218.39 9702.64
10/31/1996 16446.65 10,468.01 11731.22 11274.42 10231.87 9738.02
11/30/1996 17688.72 10,318.47 11409.95 10902.95 10010.78 10124.67
12/31/1996 17338.32 10,272.46 11268.34 10696.78 9955.51 9834.89
1/31/1997 18420.95 9,720.30 10642.73 10087.94 9315.18 9283.13
2/28/1997 18565.57 10,916.64 11942.69 11370.97 9668.37 10315.90
3/31/1997 17804.16 9,386.70 10320.25 9778.07 9386.63 8770.95
4/30/1997 18866.11 8,811.54 9613.62 9108.04 9170.94 7906.66
5/31/1997 20019.54 9,306.18 9999.43 9456.18 9317.88 8786.96
6/30/1997 20909.53 8,638.99 9166.29 8615.77 9019.95 8053.24
7/31/1997 22572.85 8,270.88 8806.21 8277.02 8798.87 8248.67
8/31/1997 21309.23 8,443.43 8872.03 8313.02 8771.91 8328.70
9/30/1997 22475.60 8,949.58 9285.12 8708.71 8953.90 9224.16
10/31/1997 21725.82 7,603.69 7820.56 7279.32 8395.79 7405.44
11/30/1997 22730.73 6,039.24 6256.79 5737.82 8002.16 5965.80
12/31/1997 23120.82 6,349.83 6486.96 5996.54 7824.21 6249.68
1/31/1998 23376.30 6,752.44 6826.82 6344.08 8219.20 6315.39
2/28/1998 25061.32 6,625.91 6663.93 6150.98 8018.33 6355.83
3/31/1998 26343.64 7,143.56 7033.40 6507.47 8115.39 6879.79
4/30/1998 26613.40 7,810.75 7536.80 6961.41 8376.92 7407.13
5/31/1998 26156.59 6,752.44 6460.23 5932.40 7915.88 6293.49
6/30/1998 27218.28 6,142.77 5846.83 5307.17 7988.68 6041.61
7/31/1998 26930.62 5,671.13 5514.22 4986.27 7787.81 5300.31
8/31/1998 23039.78 4,244.72 4270.52 3831.25 7371.26 4118.44
9/30/1998 24517.00 6,453.36 6061.79 5519.89 7922.62 6317.08
10/31/1998 26508.16 6,522.38 6012.98 5438.14 7880.83 6350.77
11/30/1998 28114.11 6,384.34 5831.84 5256.23 7972.50 5977.59
12/31/1998 29733.12 6,418.85 5731.89 5228.71 7759.50 5473.00
1/31/1999 30975.99 6,315.32 5633.97 5107.74 7694.80 5328.95
2/28/1999 30013.43 6,119.76 5476.03 4980.82 7739.28 5101.51
3/31/1999 31213.92 6,154.27 5514.28 5005.34 7534.38 5034.12
4/30/1999 32422.66 7,074.54 6267.61 5725.46 7727.15 6184.82
5/31/1999 31657.88 6,131.27 5412.95 4902.36 7241.84 5127.62
6/30/1999 33410.02 6,407.35 5622.53 5102.78 7036.94 5638.11
7/31/1999 32371.35 5,947.21 5314.95 4843.10 6891.35 5296.10
8/31/1999 32211.09 6,108.26 5517.30 5018.44 6869.78 5672.65
9/30/1999 31329.14 7,626.70 6714.53 6127.86 8061.47 6761.01
10/31/1999 33310.82 6,994.01 6060.02 5522.54 8064.17 5858.82
11/30/1999 33987.93 6,706.43 5911.82 5371.00 7855.22 5647.38
12/31/1999 35986.95 6,878.98 6021.27 5458.48 7825.56 5725.72
1/31/2000 34179.09 6,188.78 5421.88 4918.69 7638.18 5052.65
2/29/2000 33532.77 6,234.80 5409.98 4911.12 7917.23 5034.12
3/31/2000 36811.13 5,889.70 5126.55 4638.20 7461.58 4759.50
4/30/2000 35704.03 5,533.09 4813.26 4389.51 7415.75 4612.08
5/31/2000 34972.09 5,602.11 4881.67 4446.28 7340.25 4740.97
6/30/2000 35833.40 6,027.74 5140.96 4694.90 7768.94 4869.85
7/31/2000 35273.68 5,590.61 4761.11 4369.10 7461.58 4283.55
8/31/2000 37463.45 5,993.23 5127.10 4657.53 7468.32 4409.06
9/30/2000 35486.13 5,556.10 4810.87 4341.62 7378.00 4205.21
10/31/2000 35335.36 5,026.95 4377.56 3955.65 7131.30 3695.56
11/30/2000 32551.80 5,326.03 4581.83 4127.22 7255.32 3965.97
12/31/2000 32711.50 5,848.74 4988.31 4511.79 7399.57 4330.72
1/31/2001 33871.37 5,767.82 5000.03 4505.99 7131.30 4115.91
2/28/2001 30784.91 6,022.12 5220.62 4690.94 7190.62 4423.38
3/31/2001 28835.75 5,525.09 4755.85 4262.81 6947.96 4007.24
4/30/2001 31074.81 6,426.67 5437.24 4894.00 7094.90 4644.09
5/31/2001 31283.28 6,750.32 5678.17 5119.40 7212.19 4812.57
6/30/2001 30522.15 6,981.50 5692.19 5153.11 7295.77 4485.72
7/31/2001 30221.58 6,588.50 5392.58 4878.88 7169.05 4469.72
8/31/2001 28331.55 7,027.73 5672.24 5156.43 7360.47 4764.55
9/30/2001 26043.89 7,339.82 5866.97 5324.97 7902.40 4868.17
10/31/2001 26540.81 7,189.55 5724.80 5213.75 7515.50 4593.55
11/30/2001 28576.16 7,247.35 5715.31 5215.46 7427.88 4428.44
12/31/2001 28826.65 7,659.99 6003.29 5470.15 7454.84 4585.12
1/31/2002 28406.20 8,672.79 6708.04 6089.01 7611.22 5166.37
2/28/2002 27858.26 9,650.66 7412.73 6703.98 8003.50 5489.01
3/31/2002 28906.11 10,640.17 8154.17 7352.13 8126.18 5971.70
4/30/2002 27154.37 11,280.44 8683.84 7793.43 8309.52 6230.31
5/31/2002 26955.02 13,631.99 10445.33 9237.98 8805.61 7096.29
6/30/2002 25035.68 11,781.02 9130.41 8108.00 8587.22 6019.71
7/31/2002 23084.62 9,778.71 7524.95 6721.45 8213.80 5099.82
8/31/2002 23235.74 11,501.63 8735.78 7805.79 8433.54 5851.23
9/30/2002 20713.01 11,524.91 8811.75 7869.01 8727.42 5874.82
10/31/2002 22534.09 10,581.96 8050.84 7213.32 8544.08 5344.12
11/30/2002 23859.12 10,628.53 8096.58 7225.57 8602.05 5339.06
12/31/2002 22458.17 12,838.87 9904.25 8792.54 9361.01 6466.18
1/31/2003 21870.97 13,189.46 10067.38 8877.34 9908.33 6486.40
2/28/2003 21542.33 12,161.87 9459.71 8337.96 9367.75 6064.36
3/31/2003 21750.91 11,496.95 8777.84 7724.10 9028.04 5637.27
4/30/2003 23541.69 11,533.22 8738.81 7701.64 9079.27 5500.80
5/31/2003 24780.86 12,935.58 9713.49 8583.34 9743.87 6188.19
6/30/2003 25097.42 13,455.42 9995.01 8838.04 9328.66 6625.39
7/31/2003 25540.13 14,434.66 10545.92 9329.24 9564.57 6833.46
8/31/2003 26037.23 16,659.10 12032.86 10666.01 10126.72 7665.74
9/30/2003 25761.55 17,456.99 12466.40 11045.88 10461.04 7675.85
10/31/2003 27218.13 19,911.13 14066.98 12361.04 10413.86 8262.15
11/30/2003 27457.33 22,643.31 15806.16 13401.67 10740.09 9237.64
[END CHART]
DATA FROM 11/30/93 THROUGH 11/30/03.
NO ADJUSTMENT HAS BEEN MADE FOR TAXES PAYABLE BY SHAREHOLDERS
ON THEIR REINVESTED NET INVESTMENT INCOME DIVIDENDS AND
REALIZED CAPITAL GAIN DISTRIBUTIONS.
7
. . . C O N T I N U E D
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The graph illustrates the comparison of a $10,000 hypothetical
investment in the USAA Precious Metals and Minerals Fund to the
following benchmarks:
o The S&P 500 Index, an unmanaged index representing the
weighted average performance of a group of 500 widely held,
publicly traded stocks. It is not possible to invest
directly in the S&P 500 Index.
o The Lipper Gold Oriented Funds Average, an average
performance level of all gold-oriented funds, reported by
Lipper Inc., an independent organization that monitors the
performance of mutual funds.
o The Lipper Gold Funds Index, which tracks the total return
performance of the 10 largest funds within the Lipper Gold
Oriented Funds category.
o London Gold, represents the performance of gold bullion by
tracking the price of gold set in London.
o The Philadelphia Gold & Silver Index, typically referred to
as the XAU, which represents nine holdings in the gold and
silver sector.
8
M A N A G E R ' S
==================--------------------------------------------------------------
COMMENTARY on the Fund
[PHOTO OF MARK JOHNSON] MARK JOHNSON, CFA
USAA Investment Management Company
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM?
The USAA Precious Metals and Minerals Fund had a total return
of 75.05% for the six-month period ended November 30, 2003.
This compares to a return of 56.14% for the Lipper Gold Funds
Index, 10.80% for the S&P 500 Index, 50.14% for the
Philadelphia Gold & Silver Index (XAU), and 64.71% for the
Lipper Gold Oriented Funds Average.
* * * *
THE FUND'S PERFORMANCE RECEIVED AN OVERALL MORNINGSTAR
RATING(TM) OF 4 STARS IN THE SPECIALTY - PRECIOUS METALS
CATEGORY (34 FUNDS IN CATEGORY) AS OF NOVEMBER 30, 2003. THE
OVERALL MORNINGSTAR RATING FOR A FUND IS DERIVED FROM A
WEIGHTED AVERAGE OF THE PERFORMANCE FIGURES ASSOCIATED WITH ITS
THREE-, FIVE-, AND 10-YEAR (IF APPLICABLE) MORNINGSTAR RATING
METRICS.
With respect to the specialty - precious metals funds, the USAA
Precious Metals and Minerals Fund received a Morningstar Rating
of 5 stars for the three-year period among 34 funds, and 4
stars for the five- and 10-year periods among 29 and 18 funds,
REFER TO PAGE 7 FOR BENCHMARK DEFINITIONS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FOR EACH
FUND WITH AT LEAST A THREE-YEAR HISTORY, MORNINGSTAR CALCULATES
A MORNINGSTAR RATING(TM) BASED ON A MORNINGSTAR RISK-ADJUSTED
RETURN MEASURE THAT ACCOUNTS FOR VARIATION IN A FUND'S MONTHLY
PERFORMANCE (INCLUDING THE EFFECTS OF SALES CHARGES, LOADS, AND
REDEMPTION FEES), PLACING MORE EMPHASIS ON DOWNWARD VARIATIONS
AND REWARDING CONSISTENT PERFORMANCE. THE TOP 10% OF THE FUNDS
IN EACH BROAD ASSET CLASS RECEIVE 5 STARS, THE NEXT 22.5%
RECEIVE 4 STARS, THE NEXT 35% RECEIVE 3 STARS, THE NEXT 22.5%
RECEIVE 2 STARS, AND THE BOTTOM 10% RECEIVE 1 STAR.
9
. . . C O N T I N U E D
========================--------------------------------------------------------
respectively, through November 30, 2003. Ratings are based on
risk-adjusted returns.
The Fund also is listed as a Lipper Leader for total return
among 34 funds within the Lipper Gold Oriented Funds category
for the three-year period ending November 30, 2003. The Fund
was rated among 29 and 17 funds in the Gold Oriented Funds
category for the five- and 10-year periods, respectively,
ending November 30, 2003. Ratings are based on an
equal-weighted average of percentile ranks for the Total Return
metrics over three-, five-, and 10-year periods (if
applicable).
[LOGO OF LIPPER LEADER]
[TOTAL RETURN]
WHAT WAS THE PRIMARY DRIVER OF PERFORMANCE?
The price of gold rose 9.25% over the period, from $364.45 an
ounce at the end of May 2003 to $398.15 at the end of
November 2003.
WHAT WAS BEHIND THE RISE IN GOLD PRICES?
The economic situation was positive for gold and precious
metals, principally because times of large budget deficits and
large current account deficits generally lead to a weaker
dollar, since capital must be raised from overseas to fund
these dollar-based deficits. Because gold acts in many ways
like a currency, a weaker dollar typically translates into
higher gold prices. Also, in
LIPPER RATINGS FOR TOTAL RETURN REFLECT FUNDS' HISTORICAL TOTAL
RETURN PERFORMANCE RELATIVE TO PEERS AS OF NOVEMBER 30, 2003.
THE RATINGS ARE SUBJECT TO CHANGE EVERY MONTH. THE HIGHEST 20%
OF FUNDS IN EACH PEER GROUP ARE NAMED LIPPER LEADERS, THE NEXT
20% RECEIVE A SCORE OF 2, THE MIDDLE 20% ARE SCORED 3, THE NEXT
20% ARE SCORED 4, AND THE LOWEST 20% ARE SCORED 5. LIPPER
RATINGS ARE NOT INTENDED TO PREDICT FUTURE RESULTS, AND LIPPER
DOES NOT GUARANTEE THE ACCURACY OF THIS INFORMATION. MORE
INFORMATION IS AVAILABLE AT WWW.LIPPERLEADERS.COM. LIPPER
LEADER COPYRIGHT 2003, REUTERS, ALL RIGHTS RESERVED.
FOREIGN AND PRECIOUS METALS AND MINERALS INVESTING ARE SUBJECT
TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS, MARKET
ILLIQUIDITY, AND POLITICAL INSTABILITY.
10
. . . C O N T I N U E D
========================--------------------------------------------------------
COMMENTARY on the Fund
an effort to help their companies compete against U.S. firms,
other countries have kept their currencies down, creating a
situation of "competitive devaluations" globally, which makes
gold very attractive on a relative basis.
Additionally, gold benefits when people are worried about
inflation. Although inflation has been low for some time, the
bond market has begun to worry that heavy government borrowing
could lead to future inflation, which would cause gold prices
to rise.
HOW DID THE FUND PERFORM SO WELL COMPARED TO MOST OTHER GOLD-ORIENTED FUNDS?
Stock selection was the primary difference. For example, the
stock price of Wheaton River Minerals Ltd. rose 170% over the
six months, because it benefited from its acquisition strategy.
Another holding, Golden Star Resources Ltd., rose 268% as the
company reported much better than expected financial results.
Both stocks were among the Fund's 20 largest holdings as of May
31, 2003. In addition, a number of small positions in
exploration-oriented companies did especially well -- a few of
them more than tripled in value. During the period, only one
stock, McWatters Mining Inc., that the Fund owned declined in
value, and it was sold.
DO YOU EXPECT GOLD PRICES TO CONTINUE TO RISE?
It's impossible to predict what will happen in the short term,
although we don't expect the bull market in gold to end until
the Federal Reserve Board starts raising interest rates. The
primary purpose of the Fund is to help investors diversify
their portfolios. The last six months were unusual in that
stocks and gold, which typically move in opposite directions,
both rose. We will continue to do our best within the precious
metals and minerals markets, and we encourage all investors to
maintain appropriate diversification. We thank you, our
shareholders, for your continued support.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
11
P O R T F O L I O
==================--------------------------------------------------------------
HIGHLIGHTS
- ----------------------------------------------------------
TOP 10 EQUITY HOLDINGS
(% of Net Assets)
- ----------------------------------------------------------
Newcrest Mining Ltd. 5.4%
Glamis Gold Ltd. 4.9%
Compania de Minas Buenaventura S.A. ADR 4.6%
Newmont Mining Corp. 4.6%
Wheaton River Minerals Ltd. 4.5%
Golden Star Resources Ltd. 4.4%
Impala Platinum Holdings Ltd. 4.4%
Aber Diamond Corp. 4.0%
Barrick Gold Corp. 3.8%
Freeport-McMoRan Copper & Gold, Inc. "B" 3.8%
- ----------------------------------------------------------
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS ON PAGES 12-14.
12
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS (96.9%)
GOLD (80.9%)
AFRICAN GOLD COMPANIES (5.7%)
1,900,000 Afrikander Lease Ltd. * $ 1,426
150,000 AngloGold Ltd. ADR 7,195
400,000 Ashanti Goldfields Co. Ltd. GDR * 5,444
400,000 Gold Fields Ltd. ADR 5,476
--------
19,541
--------
AUSTRALIAN GOLD COMPANIES (11.2%)
800,000 Kingsgate Consolidated Ltd. 2,404
10,000,000 Lihir Gold Ltd. 11,369
2,000,000 Newcrest Mining Ltd. 18,538
600,000 Sino Gold Ltd. * 1,304
1,900,000 Sons of Gwalia Ltd. * 4,651
--------
38,266
--------
EUROPEAN GOLD COMPANIES (2.5%)
900,000 Kenor ASA * 808
280,000 Randgold Resources Ltd. ADR * 7,644
--------
8,452
--------
NORTH AMERICAN GOLD COMPANIES (56.9%)
770,000 Agnico-Eagle Mines Ltd. 9,125
3,000,000 American Bonanza Gold Mining (acquired 11/10/2003; cost $632) *(a,b) 898
1,500,000 American Bonanza Gold Mining Warrants
(acquired 11/10/2003; cost $0) *(a,b) -
1,600,000 Apollo Gold Corp. * 3,910
700,000 Ariane Gold Corp. * 863
580,000 Barrick Gold Corp. 12,986
1,800,000 Bema Gold Corp. * 7,524
500,000 Bolivar Gold Corp. * 925
250,000 Bolivar Gold Corp. Warrants * 289
250,000 Chesapeake Gold Corp. * 688
700,000 Cumberland Resources Ltd. * 2,660
200,000 Cumberland Resources Ltd. (acquired 07/17/2003; cost $444) *(a,b) 714
100,000 Cumberland Resources Ltd. Warrants (acquired 07/17/2003; cost $0) *(a,b) -
660,000 Desert Sun Mining Corp. * 1,018
80,000 Desert Sun Mining Corp. Warrants * 56
300,000 Desert Sun Mining Corp. (acquired 09/08/2003; cost $302) *(a,b) 421
250,000 Desert Sun Mining Corp. Warrants *(b) 125
13
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------
2,200,000 Eldorado Gold Corp. * $ 7,971
300,000 Freeport-McMoRan Copper & Gold, Inc. "B" 13,059
1,000,000 Gabriel Resources Ltd. * 3,708
425,000 Gammon Lake Resources, Inc. * 2,231
275,000 Gammon Lake Resources, Inc. (acquired 08/07/2003; cost $630) *(a,b) 1,319
960,000 Glamis Gold Ltd. * 16,704
430,000 Goldcorp, Inc. 7,697
2,000,000 Golden Star Resources Ltd. * 15,080
1,300,000 Hecla Mining Co. * 9,646
1,337,500 McWatters Mining, Inc. Warrants *(b) -
400,000 Meridian Gold, Inc. * 5,896
700,000 Metallic Ventures Gold, Inc. * 4,910
480,000 Minefinders Corp. Ltd. * 4,133
650,000 Nevsun Resources Ltd. * 3,683
330,000 Newmont Mining Corp. 15,886
1,600,000 Northgate Exploration Ltd. * 3,256
550,000 Placer Dome, Inc. 9,983
250,000 QGX Ltd. * 1,349
1,000,000 Strongbow Resources, Inc. * 385
5,400,000 Wheaton River Minerals Ltd. * 15,402
475,000 Wolfden Resources, Inc. (acquired 09/18/2003; cost $1,308) *(a,b) 2,570
375,000 Wolfden Resources, Inc. * 2,165
1,700,000 Yamana Gold, Inc. * 4,691
600,000 Yamana Gold, Inc. Warrants * 1,133
--------
195,059
--------
SOUTH AMERICAN GOLD COMPANIES (4.6%)
540,000 Compania de Minas Buenaventura S.A. ADR 15,719
--------
Total gold (cost: $148,968) 277,037
--------
DIAMONDS (4.0%)
360,000 Aber Diamond Corp. * (cost: $5,109) 13,720
--------
PLATINUM GROUP METALS (8.8%)
270,000 Anglo American Platinum Corp. 11,637
160,000 Impala Platinum Holdings Ltd. 15,100
800,000 SouthernEra Resources Ltd. * 3,453
--------
Total platinum group metals (cost: $19,374) 30,190
--------
14
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------
BASE METALS (3.2%)
500,000 FNX Mining Co., Inc. * $ 3,149
800,000 Ivanhoe Mines Ltd. * 7,299
500,000 Northern Orion Resources, Inc. Warrants * 598
--------
Total base metals (cost: $3,877) 11,046
--------
Total common stocks and warrants (cost: $177,328) 331,993
--------
PRINCIPAL
AMOUNT
(000)
- ---------
MONEY MARKET INSTRUMENTS (2.6%)
$ 9,030 UBS Finance, Inc., Commercial Paper, 1.04%,
12/01/2003 (cost: $9,030) 9,030
--------
TOTAL INVESTMENTS (COST: $186,358) $341,023
========
15
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
GENERAL NOTES
- --------------------------------------------------------------------------------
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The percentages shown represent the percentages of the investments to
net assets and, in total, may not equal 100%.
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) Restricted security not registered under the Securities Act of 1933
and deemed illiquid by USAA Investment Management Company (the
Manager), under liquidity guidelines approved by the Board of
Trustees. The currently unregistered common shares become salable
upon registration under Rule 144A through the approval of the
prospectus or the passage of 120 days, whichever occurs first.
Thereafter, the shares will be salable and be deemed liquid. The
aggregate market value of these securities at November 30, 2003,
was $5,922,000, which represented 1.73% of the Fund's net assets.
(b) Security was fair valued at November 30, 2003, by the Manager in
accordance with valuation procedures approved by the Board of
Trustees.
* Non-income-producing security for the 12 months preceding
November 30, 2003.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
S T A T E M E N T
==================--------------------------------------------------------------
of ASSETS and LIABILITIES
(in thousands)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
ASSETS
Investments in securities, at market value (identified cost of $186,358) $341,023
Cash 640
Cash denominated in foreign currencies (identified cost of $720) 836
Receivables:
Capital shares sold 1,282
Dividends and interest 101
Securities sold 423
--------
Total assets 344,305
--------
LIABILITIES
Payables:
Securities purchased 795
Capital shares redeemed 535
Unrealized depreciation on foreign currency contracts held, at value 3
Accrued management fees 199
Accrued transfer agent's fees 40
Other accrued expenses and payables 59
--------
Total liabilities 1,631
--------
Net assets applicable to capital shares outstanding $342,674
========
NET ASSETS CONSIST OF:
Paid-in capital $199,292
Accumulated undistributed net investment loss (3,687)
Accumulated net realized loss on investments (7,714)
Net unrealized appreciation of investments 154,665
Net unrealized appreciation on foreign currency translations 118
--------
Net assets applicable to capital shares outstanding $342,674
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 18,294
========
Net asset value, redemption price, and offering price per share $ 18.73
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA PRECIOUS METALS AND MINERALS FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2003 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $31) $ 1,105
Interest 31
----------
Total income 1,136
----------
EXPENSES
Management fees 848
Administrative and servicing fees 162
Transfer agent's fees 240
Custodian's fees 57
Postage 7
Shareholder reporting fees 19
Trustees' fees 3
Registration fees 28
Professional fees 26
Other 2
----------
Total expenses 1,392
Expenses paid indirectly (43)
----------
Net expenses 1,349
----------
NET INVESTMENT LOSS (213)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on:
Investments 6,454
Foreign currency transactions 5
Change in net unrealized appreciation/depreciation of:
Investments 123,273
Foreign currency translations 149
----------
Net realized and unrealized gain 129,881
----------
Increase in net assets resulting from operations $ 129,668
==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
S T A T E M E N T S
====================------------------------------------------------------------
of Changes in NET ASSETS
(in thousands)
USAA PRECIOUS METALS AND MINERALS FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2003 (UNAUDITED),
AND YEAR ENDED MAY 31, 2003
11/30/2003 5/31/2003
--------------------------
FROM OPERATIONS
Net investment income (loss) $ (213) $ 271
Net realized gain on investments 6,454 14,673
Net realized gain on foreign currency transactions 5 52
Change in net unrealized appreciation/depreciation of:
Investments 123,273 (23,727)
Foreign currency translations 149 (31)
--------------------------
Increase (decrease) in net assets resulting
from operations 129,668 (8,762)
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (5,007)
--------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 125,149 120,845
Reinvested dividends - 4,675
Cost of shares redeemed (68,335) (105,238)
--------------------------
Increase in net assets from capital
share transactions 56,814 20,282
--------------------------
Net increase in net assets 186,482 6,513
NET ASSETS
Beginning of period 156,192 149,679
--------------------------
End of period $ 342,674 $ 156,192
==========================
Accumulated undistributed net investment loss:
End of period $ (3,687) $ (3,474)
==========================
CHANGE IN SHARES OUTSTANDING
Shares sold 8,804 11,886
Shares issued for dividends reinvested - 470
Shares redeemed (5,108) (10,538)
--------------------------
Increase in shares outstanding 3,696 1,818
==========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (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 nine separate funds. The information presented in this
semiannual report pertains only to the USAA Precious Metals and
Minerals Fund (the Fund). The Fund's primary investment objective is to
seek long-term capital appreciation and to protect the purchasing power
of shareholders' capital against inflation. Current income is a
secondary objective. The Fund concentrates its investments in equity
securities of domestic and foreign companies engaged in the
exploration, mining, or processing of gold and other precious metals
and minerals, such as platinum, silver, and diamonds. As such, the Fund
may be exposed to more risk than portfolios with a broader industry
diversification.
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 or the Nasdaq
over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market
on which they trade. Portfolio securities traded primarily
on foreign securities exchanges or markets are valued at the
last quoted sales price, or the most recently determined
official closing price calculated according to local market
convention, available at the time the Fund is valued. If no
last sale or official closing price is reported or
available, the average of the bid and asked prices is
generally used.
2. Investments in open-end investment companies are valued at
their net asset value at the end of each business day.
20
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
3. Debt securities purchased with maturities of 60 days or less
are stated at amortized cost, which approximates market
value. Repurchase agreements are valued at cost.
4. Securities for which market quotations are not readily
available or are considered unreliable, or whose values have
been materially affected by events occurring after the close
of their primary markets but before the pricing of the Fund,
are valued in good faith at fair value, using methods
determined by the Manager, an affiliate of the Fund, under
valuation procedures approved by the Trust's 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 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 on a straight-line basis
over the life of the respective securities.
D. REPURCHASE AGREEMENTS - The Fund may enter into repurchase
agreements with commercial banks or recognized security
dealers. These agreements are collateralized by obligations
issued or guaranteed as to both principal and interest by the
U.S. government, its agencies, or its instrumentalities.
Obligations pledged as collateral are required to maintain a
value equal to or
21
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
in excess of the resale price of the repurchase agreement and
are held by the Fund, either through its regular custodian or
through a special "tri-party" custodian that maintains separate
accounts for both the Fund and its counterparty, until maturity
of the repurchase agreement. The Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into
repurchase agreements.
E. FOREIGN CURRENCY TRANSLATIONS - The Fund's assets may be
invested in the securities of foreign issuers and may be traded
in foreign currency. Since the Fund's accounting records are
maintained in U.S. dollars, foreign currency amounts are
translated into U.S. dollars on the following basis:
1. 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.
2. Market value of securities, other assets, and liabilities at
the exchange rate obtained from an independent pricing
service on a daily basis.
The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Separately, 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 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.
At the Fund's tax year-end of May 31, 2004, net realized
foreign currency gains/losses will be reclassified from
accumulated net realized
22
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
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.
F. EXPENSES PAID INDIRECTLY - A portion of the brokerage
commissions that the Fund pays may be reimbursed and used to
reduce the Fund's expenses. In addition, through other
fee-offset arrangements with certain of the Fund's service
providers, realized credits, if any, are used to reduce the
Fund's expenses. For the six-month period ended November 30,
2003, these fee-offset arrangements reduced the Fund's expenses
by $43,000.
G. USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that may affect the reported amounts in the
financial statements.
(2) LINES OF CREDIT
- --------------------------------------------------------------------------------
The Fund participates with other USAA funds in two joint, short-term,
revolving, committed loan agreements totaling $500 million: $400
million with USAA Capital Corporation (CAPCO), an affiliate of the
Manager, and $100 million with Bank of America. The purpose of the
agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely
disposition of securities.
Subject to availability under its agreement with CAPCO, the Fund may
borrow from CAPCO an amount up to 5% of the Fund's total assets at
CAPCO's borrowing rate with no markup. Subject to availability under
its agreement with Bank of America, the Fund may borrow from Bank of
America, at Bank of America's borrowing rate plus a 0.50% markup, an
23
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
amount which, when added to outstanding borrowings under the CAPCO
agreement, does not exceed 25% of the Fund's total assets.
The USAA funds that are party to the loan agreements are assessed
facility fees in aggregate by Bank of America in an annual amount equal
to 0.09% of the $100 million loan agreement, whether used or not, and
by CAPCO based on the funds' assessed proportionate share of CAPCO's
operating expenses related to obtaining and maintaining CAPCO's funding
programs in total (in no event to exceed 0.09% annually of the $400
million loan agreement). The facility fees are allocated among the
funds based on their respective average net assets for the period. The
Fund had no borrowings under either of these agreements during the
six-month period ended November 30, 2003.
(3) DISTRIBUTIONS
- --------------------------------------------------------------------------------
The tax basis of distributions and accumulated undistributed net
investment income will be determined based upon the Fund's tax year-
end of May 31, 2004, in accordance with applicable tax law.
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. At May 31, 2003, the Fund had capital loss carryovers of
$9,029,000 for federal income tax purposes, which, if not offset by
subsequent capital gains, will expire between 2008 and 2009. It is
unlikely that the Trust's Board of Trustees will authorize a
distribution of capital gains realized in the future until the capital
loss carryovers have been used or expire.
(4) INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Cost of purchases and proceeds from sales/maturities of securities,
excluding short-term securities, for the six-month period ended
November 30, 2003, were $71,115,000 and $23,797,000, respectively.
24
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
The cost of securities at November 30, 2003, for federal income tax
purposes, was approximately the same as that reported in the financial
statements.
Gross unrealized appreciation and depreciation of investments as of
November 30, 2003, were $156,757,000 and $2,092,000, respectively,
resulting in net unrealized appreciation of $154,665,000.
(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 may enter into currency contracts 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. The Fund may also enter into currency
contracts to hedge against foreign currency exchange risks on the
non-U.S. dollar denominated securities held in the Fund's portfolio.
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's giving up
the opportunity for potential profit.
At November 30, 2003, the terms of open foreign currency contracts were
as follows (in thousands):
FOREIGN CURRENCY CONTRACTS TO BUY
- ---------------------------------------------------------------------------------------
IN
U.S. DOLLAR EXCHANGE UNREALIZED
EXCHANGE CONTRACTS TO VALUE AS OF FOR U.S. APPRECIATION/
DATE RECEIVE 11/30/03 DOLLAR DEPRECIATION
- ---------------------------------------------------------------------------------------
12/01/03 81 $ 62 $ 62 $-
Canadian Dollar
12/01/03 56 43 43 -
Canadian Dollar
- ---------------------------------------------------------------------------------------
$105 $105 $-
- ---------------------------------------------------------------------------------------
25
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
FOREIGN CURRENCY CONTRACTS TO SELL
- ---------------------------------------------------------------------------------------
IN
U.S. DOLLAR EXCHANGE UNREALIZED
EXCHANGE CONTRACTS TO VALUE AS OF FOR U.S. APPRECIATION/
DATE RECEIVE 11/30/03 DOLLAR DEPRECIATION
- ---------------------------------------------------------------------------------------
12/01/03 263 $ 41 $ 39 $(2)
South African Rand
12/02/03 246 $ 39 $ 38 $(1)
South African Rand
12/03/03 206 $ 32 $ 32 $ -
South African Rand
- ---------------------------------------------------------------------------------------
$112 $109 $(3)
- ---------------------------------------------------------------------------------------
(6) LENDING OF PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
The Fund may lend its securities to qualified financial institutions,
such as certain broker-dealers, to earn additional income. The
borrowers are required to secure their loans continuously with cash
collateral in an amount at least equal, at all times, to the fair value
of the securities loaned. Cash collateral is invested in high-quality
short-term investments. The Fund retains a portion of income from the
investment of cash received as collateral. Risks to the Fund in
securities-lending transactions are that the borrower may not provide
additional collateral when required or return the securities when due,
and that the value of the short-term investments will be less than the
amount of cash collateral required to be returned to the borrower. The
Fund had no securities-lending transactions during the six-month period
ended November 30, 2003.
(7) TRANSACTIONS WITH MANAGER
- --------------------------------------------------------------------------------
A. MANAGEMENT FEES - The Manager carries out the Fund's investment
policies and manages the Fund's portfolio. The investment management
fee for the Fund is composed of a base fee and a performance adjustment
that increases or decreases the
26
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
base fee depending upon the performance of the Fund relative to the
performance of the Lipper Gold Funds Index, which tracks the total
return performance of the 10 largest funds in the Lipper Gold Oriented
Funds category. The Fund's base fee is accrued daily and paid monthly
at an annualized rate of 0.75% of the Fund's average net assets.
The performance adjustment will be calculated monthly by comparing the
Fund's performance to that of the Lipper index over the performance
period. The performance period for the Fund commenced on August 1,
2001, and will consist of the current month plus the preceding months
through that date until a period of 36 months is included in the
performance period. Thereafter, the performance period will consist of
the current month plus the previous 35 months.
The annual performance adjustment rate is multiplied by the average net
assets of the Fund over the entire performance period, which is then
multiplied by a fraction, the numerator of which is the number of days
in the month and the denominator of which is 365 (366 in leap years).
The resulting amount is then added to (in the case of overperformance)
or subtracted from (in the case of underperformance) the base fee, as
referenced in the following chart:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund and
its relevant index, rounded to the nearest 0.01%
27
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
For the six-month period ended November 30, 2003, the Fund
incurred total management fees, paid or payable to the Manager,
of $848,000, which included a performance adjustment of
$37,000.
B. ADMINISTRATIVE AND SERVICING FEES - The Manager provides
certain administrative and shareholder servicing functions for
the Fund. For such services, the Manager receives a fee accrued
daily and paid monthly at an annualized rate of 0.15% of the
Fund's average net assets. For the six-month period ended
November 30, 2003, the Fund incurred administrative and
servicing fees, paid or payable to the Manager, of $162,000.
C. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a
USAA Shareholder Account Services, an affiliate of the Manager,
provides transfer agent services to the Fund based on an annual
charge of $23 per shareholder account plus out-of-pocket
expenses. For the six-month period ended November 30, 2003, the
Fund incurred transfer agent's fees, paid or payable to USAA
Transfer Agency Company, of $240,000.
D. 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.
(8) 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.
28
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
(9) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
- --------------------------------------------------------------------------------
During the six-month period ended November 30, 2003, in accordance with
affiliated transaction procedures approved by the Trust's Board of
Trustees, security transactions were executed between the Fund and
other affiliated USAA funds at the then current market price with no
brokerage commissions incurred:
NET REALIZED
COST TO GAIN
SELLER PURCHASER PURCHASER TO SELLER
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USAA Cornerstone USAA Precious Metals and $5,731,000 $1,182,000
Strategy Fund Minerals Fund
29
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to FINANCIAL Statements
(continued)
USAA PRECIOUS METALS AND MINERALS FUND
NOVEMBER 30, 2003 (UNAUDITED)
(10) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
----------------------------------------------------------------------------------
2003 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------
Net asset value at beginning of $ 10.70 $ 11.71 $ 5.84 $ 4.87 $ 5.33 $ 5.87
period ----------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) (.01)(a) .02(a) (.01)(a) .01(a) (.02)(a) (.01)(a)
Net realized and unrealized
gain (loss) 8.04(a) (.65)(a) 5.93(a) .98(a) (.44)(a) (.53)(a)
----------------------------------------------------------------------------------
Total from investment operations 8.03(a) (.63)(a) 5.92(a) .99(a) (.46)(a) (.54)(a)
Less distributions:
From net investment income - (.38) (.05) (.02) - -
----------------------------------------------------------------------------------
Net asset value at end of period $ 18.73 $ 10.70 $ 11.71 $ 5.84 $ 4.87 $ 5.33
==================================================================================
Total return (%)* 75.05 (5.11) 101.95 20.50 (8.63) (9.20)
Net assets at end of period (000) $ 342,674 $ 156,192 $ 149,679 $ 70,459 $ 71,484 $82,491
Ratio of expenses to
average net assets (%)** 1.28(b,c) 1.47(c) 1.56(c) 1.68(c) 1.58 1.52
Ratio of net investment income
(loss) to average net assets (.20)(b) .20 (.16) .17 (.41) (.13)
(%)**
Portfolio turnover (%) 10.94 31.39 40.61 52.74 27.60 33.48
* Assumes reinvestment of all net investment income distributions during the period.
** For the six-month period ended November 30, 2003, average net assets were $217,613,000.
(a) Calculated using average shares. For the six-month period ended November 30, 2003, average shares were 15,764,000.
(b) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(c) Reflects total expenses, excluding any fee-offset arrangements, which decreased the Fund's expense ratios as follows:
(.04%) - - - N/A N/A
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TRUSTEES Robert G. Davis, CHAIRMAN OF THE BOARD
Christopher W. Claus, VICE CHAIRMAN OF THE BOARD
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Michael F. Reimherr
Laura T. Starks, Ph.D.
Richard A. Zucker
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, San Antonio, Texas 78265-9825
AND DISTRIBUTOR
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
INDEPENDENT AUDITOR Ernst & Young LLP
100 West Houston St., Suite 1900
San Antonio, Texas 78205
TELEPHONE Call toll free - Central time
ASSISTANCE HOURS Monday - Friday, 7 a.m. to 10 p.m.
Saturday, 8:30 a.m. to 5 p.m.
Sunday, 10:30 a.m. to 7 p.m.
FOR ADDITIONAL 1-800-531-8181, in San Antonio 456-7200
INFORMATION ABOUT For account servicing, exchanges,
MUTUAL FUNDS or redemptions
1-800-531-8448, in San Antonio 456-7202
RECORDED MUTUAL 24-hour service (from any phone)
FUND PRICE QUOTES 1-800-531-8066, in San Antonio 498-8066
MUTUAL FUND (from touch-tone phones only)
USAA TOUCHLINE For account balance, last transaction, fund
prices, or to exchange or redeem fund shares
1-800-531-8777, in San Antonio 498-8777
INTERNET ACCESS USAA.COM
THROUGH OUR ONGOING EFFORTS TO REDUCE EXPENSES, YOUR REPORT MAILINGS ARE
STREAMLINED. WE DEVELOP MAILING LISTS USING CRITERIA SUCH AS ADDRESS, MEMBER
NUMBER, AND SURNAME TO SEND ONE REPORT TO EACH HOUSEHOLD INSTEAD OF SENDING A
REPORT TO EVERY REGISTERED OWNER. THIS PRACTICE IS DESIGNED TO REDUCE DUPLICATE
COPIES AND SAVE PAPER AND POSTAGE COSTS TO THE FUND. IF YOU PREFER NOT TO
PARTICIPATE IN STREAMLINING AND WOULD LIKE TO CONTINUE RECEIVING ONE REPORT PER
REGISTERED ACCOUNT OWNER, PLEASE CALL US AND WE WILL BEGIN YOUR INDIVIDUAL
DELIVERY WITHIN 30 DAYS OF YOUR REQUEST.
COPIES OF THE MANAGER'S PROXY VOTING POLICIES AND PROCEDURES ARE AVAILABLE
WITHOUT CHARGE (I) BY CALLING 1-800-531-8448; (II) AT USAA.COM; AND (III) ON THE
SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
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[LOGO OF USAA] WE KNOW WHAT IT MEANS TO SERVE.(R)
USAA ----------------------------------
INSURANCE o MEMBER SERVICES
23408-0104 (C)2004, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports with fiscal
years on or after December 15, 2003.
ITEM 5-6. (RESERVED)
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
NOT APPLICABLE.
ITEM 8. (RESERVED)
ITEM 9. CONTROLS AND PROCEDURES
The chief executive officer and chief financial officer of USAA Investment Trust
(Trust) have concluded that the Trust's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the Trust in
this Form N-CSR was recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
based upon such officers' evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.