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: MAY 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
USAA INVESTMENT TRUST, TREASURY MONEY MARKET TRUST - ANNUAL REPORT FOR PERIOD
ENDING MAY 31, 2004
[LOGO OF USAA]
USAA(R)
USAA TREASURY MONEY
MARKET Trust(R)
[GRAPHIC OF USAA TREASURY MONEY MARKET TRUST]
A n n u a l R e p o r t
- --------------------------------------------------------------------------------
MAY 31, 2004
Table of CONTENTS
- --------------------------------------------------------------------------------
MESSAGE FROM THE PRESIDENT 2
INVESTMENT OVERVIEW & MANAGER'S COMMENTARY 5
FINANCIAL INFORMATION
Report of Independent Registered Public Accounting Firm 10
Portfolio of Investments 11
Notes to Portfolio of Investments 13
Financial Statements 14
Notes to Financial Statements 17
DIRECTORS' AND OFFICERS' INFORMATION 23
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
==============------------------------------------------------------------------
from the PRESIDENT
"
FIRST-QUARTER EARNINGS WERE STRONG . . .
[PHOTO OF CHRISTOPHER W. CLAUS] SECOND-QUARTER EARNINGS SHOULD
CONTINUE TO IMPRESS.
"
- --------------------------------------------------------------------------------
As I write to you in early June, the U.S. economy continues to
improve. The country has seen job growth for nine consecutive
months, including 248,000 new jobs created in May. The gross
domestic product (GDP) is also growing at a healthy pace - up
3.9% during the first quarter - and I expect the economy to be
reasonably strong throughout 2004. First-quarter earnings were
strong, exceeding expectations by a record number. Second-
quarter earnings should continue to impress.
Despite the good news, the financial markets have been volatile
and nervous. The primary concerns are the price of oil, Iraq,
the pending presidential election, inflation, and rising
interest rates. In the case of oil, demand is outstripping
supply, with buyers now paying a "terrorist premium." A
disruption in oil production would make oil prices spike, and
if oil costs more than $40 a barrel, the price increase could
wipe out about one-half percent of world GDP.
Iraq is likely to remain a difficult situation for years to
come as democracy in the Middle East strives to take root. And
while markets tend to perform fairly well during presidential
elections - perhaps an expression of voters' optimism - no one
knows quite what to expect this time around. On the inflation
front, our expectation is that inflation will remain moderate
and under control, even though the price of oil and some foods
may rise. The Federal Reserve Board (the Fed) is expected to
raise short-term interest rates, but we believe any rate
increases in the near future
3
. . . C O N T I N U E D
========================--------------------------------------------------------
will occur at a "measured pace." If inflation does rise above
the level expected, the Fed is likely to move more quickly and
aggressively in an effort to combat long-term inflation.
Going forward, we expect stock prices to end the year higher
than they are now. Short-term interest rates should rise,
making money market funds a more attractive choice for people
holding cash. Longer-term investors will feel the initial pinch
of rate increases, but should be rewarded in time with the
potential for higher yields and the compounding of interest
payments.
Regardless of what occurs in the coming months, we remain
committed to helping you achieve your investment goals. Our
market-tested portfolio management team will continue to
provide you with a range of resources, including quality
service and no-load mutual funds that have no sales loads,
12b-1 fees, or long-term contractual plans.
On behalf of everyone at USAA, thank you for your business.
Sincerely,
/s/ Christopher W. Claus
Christopher W. Claus
President and Vice Chairman of the Board
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND
EXPENSES OF THE USAA MUTUAL FUNDS CAREFULLY BEFORE INVESTING.
CONTACT US FOR A PROSPECTUS CONTAINING THIS AND OTHER
INFORMATION ABOUT THE FUNDS FROM USAA INVESTMENT MANAGEMENT
COMPANY, DISTRIBUTOR. READ IT CAREFULLY BEFORE INVESTING.
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.
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 TREASURY MONEY MARKET TRUST
OBJECTIVE
- --------------------------------------------------------------------------------
Maximum current income while maintaining the highest degree of
safety and liquidity.
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
Invests principally in U.S. government securities with
maturities of 397 days or less; normally at least 80% of the
Fund's assets will be in U.S. Treasury bills, notes, and bonds,
and repurchase agreements collateralized by these instruments.
- --------------------------------------------------------------------------------
5/31/04 5/31/03
- --------------------------------------------------------------------------------
Net Assets $188.8 Million $205.6 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AND 7-DAY YIELD AS OF 5/31/04
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 7-DAY YIELD
0.63% 2.94% 4.00% 0.58%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS
NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE
HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED. FOR
PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
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.
TOTAL RETURN EQUALS INCOME RETURN AND ASSUMES REINVESTMENT OF
ALL NET INVESTMENT INCOME DIVIDEND AND REALIZED CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS QUOTED DO NOT REFLECT THE
DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. YIELDS AND
RETURNS FLUCTUATE. THE SEVEN-DAY YIELD QUOTATION MORE CLOSELY
REFLECTS CURRENT EARNINGS OF THE FUND THAN THE TOTAL RETURN
QUOTATION.
6
. . . C O N T I N U E D
========================--------------------------------------------------------
OVERVIEW
7-DAY YIELD COMPARISON
[CHART OF 7-DAY YIELD COMPARISON]
USAA
TREASURY MONEY
MARKET FUND iMONEYNET AVERAGE
-------------- -----------------
5/27/2003 0.87% 0.47%
6/24/2003 0.79 0.43
7/29/2003 0.65 0.32
8/26/2003 0.59 0.29
9/30/2003 0.64 0.33
10/28/2003 0.65 0.30
11/25/2003 0.64 0.31
12/30/2003 0.65 0.32
1/27/2004 0.63 0.30
2/24/2004 0.59 0.30
3/30/2004 0.59 0.31
4/27/2004 0.56 0.31
5/25/2004 0.57 0.31
[END CHART]
DATA REPRESENT THE LAST TUESDAY OF EACH MONTH. ENDING DATE
5/25/04.
The graph tracks the Fund's seven-day yield against iMoneyNet,
Inc. (formerly IBC Financial Data, Inc.) U.S. Treasury & Repo,
an average of all major Treasury money market fund yields.
7
M A N A G E R ' S
==================--------------------------------------------------------------
COMMENTARY on the Fund
[PHOTO OF PAMELA BLEDSOE NOBLE] PAMELA BLEDSOE NOBLE, CFA
USAA Investment Management Company
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM?
The USAA Treasury Money Market Trust had a total return of
0.63% for the year ended May 31, 2004. This compares to an
average return of 0.33% for similar Treasury and repurchase
agreement (repo) money market funds ranked by iMoneyNet,
Inc. This performance placed the Fund in the top 8% of its peer
group as ranked by iMoneyNet, Inc.
WHAT WERE THE MAJOR DRIVERS OF THE FUND'S YIELD DURING THE PERIOD?
The interest-rate policy of the Federal Reserve Board (the
Fed), as well as the market's expectations of future interest
rates, influenced the Fund's performance. During the reporting
period, the Fed adjusted rates only once, cutting the federal
funds rate on June 25, 2003. Since that time, the economy
clearly has gained strength, and the markets have begun to
expect the need for interest rates to increase. As of this
writing, it is widely expected that the Fed will raise the
federal funds rate at its end-of-June meeting.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
IMONEYNET, INC. RANKED THE FUND 5 OUT OF 88 TREASURY RETAIL
MONEY MARKET FUNDS FOR THE ONE-YEAR PERIOD ENDED MAY 31, 2004.
8
. . . C O N T I N U E D
========================--------------------------------------------------------
COMMENTARY on the Fund
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
The Fund continued to pursue a strategy to maximize yield
while maintaining flexibility to respond to changing market
conditions. To stabilize the yield in the low-rate
environment, we invested in a portfolio of U.S Treasury
securities with maturities from one month to one year.
The remaining assets were invested in repos backed by
Treasury securities. We continually evaluate the best
investment options among repos and Treasuries. We have been
aware for some time that the next move in rates would be
higher, so the Fund currently has a higher percentage in
repos. (When the Fed raises the federal funds rate, there will
be an immediate impact on repo rates.)
HOW DRAMATIC DO YOU EXPECT THE FED RATE HIKES WILL BE?
The Fed's goal is price stability. In recent speeches, members
of the Fed have acknowledged that core inflation has been
higher than expected this year, and they are prepared to do
what is required to maintain price stability. Exactly how this
will translate into the federal funds rate is unclear; however,
we expect rates to move gradually higher over the course of
2004. We will continue to monitor the market carefully, looking
for prudent opportunities to increase the Fund's yield while
keeping in mind that the primary purpose of the Fund is to
provide liquidity and stability.
We thank you for the confidence you have placed in us and will
continue to work hard on your behalf.
9
. . . C O N T I N U E D
========================--------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000
[CHART OF CUMULATIVE PERFORMANCE OF $10,000]
USAA
TREASURY MONEY
MARKET TRUST
--------------
5/31/1994 $10,000.00
6/30/1994 10,029.63
7/31/1994 10,059.69
8/31/1994 10,096.29
9/30/1994 10,131.63
10/31/1994 10,169.21
11/30/1994 10,208.63
12/31/1994 10,251.04
1/31/1995 10,297.50
2/28/1995 10,340.82
3/31/1995 10,390.08
4/30/1995 10,434.92
5/31/1995 10,488.00
6/30/1995 10,537.32
7/31/1995 10,586.65
8/31/1995 10,635.24
9/30/1995 10,680.43
10/31/1995 10,730.52
11/30/1995 10,778.04
12/31/1995 10,823.59
1/31/1996 10,874.11
2/29/1996 10,916.88
3/31/1996 10,959.72
4/30/1996 11,006.41
5/31/1996 11,051.85
6/30/1996 11,093.14
7/31/1996 11,142.30
8/31/1996 11,187.43
9/30/1996 11,234.11
10/31/1996 11,281.15
11/30/1996 11,325.91
12/31/1996 11,375.46
1/31/1997 11,423.40
2/28/1997 11,466.73
3/31/1997 11,515.28
4/30/1997 11,563.06
5/31/1997 11,611.33
6/30/1997 11,661.86
7/31/1997 11,712.77
8/31/1997 11,760.69
9/30/1997 11,813.53
10/31/1997 11,865.02
11/30/1997 11,912.01
12/31/1997 11,967.72
1/31/1998 12,018.25
2/28/1998 12,065.31
3/31/1998 12,119.39
4/30/1998 12,170.25
5/31/1998 12,219.42
6/30/1998 12,274.32
7/31/1998 12,327.85
8/31/1998 12,381.62
9/30/1998 12,433.44
10/31/1998 12,481.52
11/30/1998 12,530.63
12/31/1998 12,578.84
1/31/1999 12,623.50
2/28/1999 12,666.76
3/31/1999 12,718.21
4/30/1999 12,765.13
5/31/1999 12,808.54
6/30/1999 12,859.59
7/31/1999 12,907.68
8/31/1999 12,959.78
9/30/1999 13,010.25
10/31/1999 13,059.56
11/30/1999 13,115.94
12/31/1999 13,170.57
1/31/2000 13,225.56
2/29/2000 13,279.94
3/31/2000 13,339.80
4/30/2000 13,395.40
5/31/2000 13,461.89
6/30/2000 13,526.14
7/31/2000 13,593.93
8/31/2000 13,662.54
9/30/2000 13,727.73
10/31/2000 13,800.07
11/30/2000 13,868.89
12/31/2000 13,935.25
1/31/2001 14,006.81
2/28/2001 14,063.83
3/31/2001 14,122.80
4/30/2001 14,179.20
5/31/2001 14,229.59
6/30/2001 14,273.92
7/31/2001 14,319.91
8/31/2001 14,361.33
9/30/2001 14,392.33
10/31/2001 14,422.32
11/30/2001 14,445.88
12/31/2001 14,464.41
1/31/2002 14,481.83
2/28/2002 14,498.20
3/31/2002 14,515.06
4/30/2002 14,531.73
5/31/2002 14,547.97
6/30/2002 14,563.65
7/31/2002 14,580.91
8/31/2002 14,599.04
9/30/2002 14,614.27
10/31/2002 14,631.09
11/30/2002 14,644.53
12/31/2002 14,656.83
1/31/2003 14,669.21
2/28/2003 14,679.82
3/31/2003 14,690.58
4/30/2003 14,701.56
5/31/2003 14,712.92
6/30/2003 14,722.18
7/31/2003 14,730.18
8/31/2003 14,738.32
9/30/2003 14,745.53
10/31/2003 14,754.13
11/30/2003 14,761.39
12/31/2003 14,769.64
1/31/2004 14,777.44
2/29/2004 14,784.21
3/31/2004 14,791.56
4/30/2004 14,799.19
5/31/2004 14,805.71
[END CHART]
DATA FROM 5/31/94 THROUGH 5/31/04.
The graph illustrates a hypothetical $10,000 investment in the
USAA Treasury Money Market Trust.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
CUMULATIVE PERFORMANCE QUOTED DOES NOT REFLECT THE DEDUCTION OF
TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE
REDEMPTION OF FUND SHARES. INCOME MAY BE SUBJECT TO FEDERAL,
STATE, OR LOCAL TAXES, OR TO THE ALTERNATIVE MINIMUM TAX. FOR
SEVEN-DAY YIELD INFORMATION, PLEASE REFER TO THE FUND'S
INVESTMENT OVERVIEW PAGE.
10
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D
========================--------------------------------------------------------
Public ACCOUNTING Firm
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
USAA TREASURY MONEY MARKET TRUST:
We have audited the accompanying statement of assets and
liabilities of the USAA Treasury Money Market Trust (a
portfolio of USAA Investment Trust), including the portfolio of
investments, as of May 31, 2004, and the related statement of
operations for the year then ended, and the statements of
changes in net assets and financial highlights for each of the
two years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on
our audits. The financial highlights for each of the periods
presented through May 31, 2002, were audited by other auditors
whose report dated July 5, 2002, expressed an unqualified
opinion on those statements and financial highlights.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
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, 2004, by correspondence with the
custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. 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 USAA Treasury Money Market
Trust as of May 31, 2004, the results of its operations for the
year then ended, and the changes in its net assets and
financial highlights for each of the two years in the period
then ended, in conformity with U.S. generally accepted
accounting principles.
/S/ ERNST & YOUNG LLP
San Antonio, Texas
July 9, 2004
11
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(in thousands)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
PRINCIPAL
AMOUNT SECURITY VALUE
- -----------------------------------------------------------------------------------------------
U.S. TREASURY BILLS (13.3%)(a)
$ 1,000 0.96%, 6/24/2004 $ 999
3,000 0.98%, 6/24/2004 2,998
3,100 1.00%, 8/26/2004 3,093
3,000 0.97%, 9/09/2004 2,992
5,000 0.97%, 9/23/2004 4,985
5,000 1.02%, 10/07/2004 4,982
5,000 1.10%, 10/14/2004 4,979
--------
Total U.S. Treasury bills (cost: $25,028) 25,028
--------
U.S. TREASURY NOTES (20.2%)(b)
5,000 2.88%, 6/30/2004 5,007
5,000 2.25%, 7/31/2004 5,008
5,000 6.00%, 8/15/2004 5,049
10,000 2.13%, 8/31/2004 10,024
5,000 1.88%, 9/30/2004 5,012
5,000 1.75%, 12/31/2004 5,015
3,000 1.63%, 4/30/2005 2,996
--------
Total U.S. Treasury notes (cost: $38,111) 38,111
--------
U.S. GOVERNMENT GUARANTEED SECURITY (0.9%)
1,700 Overseas Private Investment Corp. Certificates of Participation,
1.12%, 4/02/2007(c) (cost: $1,700) 1,700
--------
Total investment in securities (cost: $64,839) 64,839
--------
REPURCHASE AGREEMENTS (63.5%)
9,381 Bank One Capital Markets, Inc., 0.95%, acquired on 5/28/2004 and
due 6/01/2004 at $9,381 (collateralized by an $8,830 U.S. Treasury
note, 6.50% due 10/15/2006; market value $9,667)(d) 9,381
45,000 Credit Suisse First Boston Corp., 0.98%, acquired on 5/28/2004 and
due 6/01/2004 at $45,000 (collateralized by a $47,200 U.S.
Treasury note, 2.625% due 5/15/2008; market value $45,901)(d) 45,000
47,000 Deutsche Bank Securities, 0.98%, acquired on 5/28/2004 and due
6/01/2004 at $47,000 (collateralized by a $47,544 U.S. Treasury
note, 3.875% due 5/15/2009; market value $47,941)(d) 47,000
12
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS (continued)
(in thousands)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
PRINCIPAL
AMOUNT SECURITY VALUE
- -----------------------------------------------------------------------------------------------
$ 9,000 UBS Securities LLC, 0.98%, acquired on 5/28/2004 and due 6/01/2004
at $9,000 (collateralized by an $8,760 U.S. Treasury note, 4.875%
due 2/15/2012; market value $9,185)(d) $ 9,000
9,500 Wachovia Securities, Inc., 0.98%, acquired on 5/28/2004 and due
6/01/2004 at $9,500 (collateralized by a $7,261 U.S. Treasury
bond, 8.125% due 8/15/2019; market value $9,690)(d) 9,500
--------
Total repurchase agreements (cost: $119,881) 119,881
--------
TOTAL INVESTMENTS (COST: $184,720) $184,720
========
13
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
GENERAL NOTES
- --------------------------------------------------------------------------------
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The cost of securities at May 31, 2004, for federal income tax
purposes, was $184,720,000.
The percentages shown represent the percentages of the investments to
net assets and, in total, may not equal 100%.
SPECIFIC NOTES
- --------------------------------------------------------------------------------
(a) Rates for U.S. Treasury bills represent the discount rate at
purchase date.
(b) Rates for U.S. Treasury notes represent the stated coupon payment
rate at time of issuance.
(c) Variable-rate demand note (VRDN) - provides the right, on any
business day, to sell the security at face value on either that day
or within the rate-reset period. The interest rate is adjusted at a
stipulated quarterly interval to a rate that reflects current
market conditions. The effective maturity for this instrument is
deemed to be less than 397 days in accordance with detailed
regulatory requirements. This security is shown at its current rate
as of May 31, 2004.
(d) Collateral on repurchase agreements is received by the Fund upon
entering into the repurchase agreement. The collateral is marked-
to-market daily to ensure its market value is equal to or in excess
of the repurchase agreement price plus accrued interest.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
S T A T E M E N T
==================--------------------------------------------------------------
of ASSETS and LIABILITIES
(in thousands)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
ASSETS
Investments in securities (valued at amortized cost) $ 64,839
Repurchase agreements 119,881
Cash 351
Receivables:
Capital shares sold 71
Interest 394
Securities matured 5,000
--------
Total assets 190,536
--------
LIABILITIES
Payables:
Capital shares redeemed 1,726
Dividends on capital shares 3
Accrued management fees 20
Other accrued expenses and payables 25
--------
Total liabilities 1,774
--------
Net assets applicable to capital shares outstanding $188,762
========
NET ASSETS CONSIST OF:
Paid-in capital $188,762
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 188,762
========
Net asset value, redemption price, and offering price per share $ 1.00
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA TREASURY MONEY MARKET TRUST
YEAR ENDED MAY 31, 2004
INVESTMENT INCOME
Interest income $2,050
------
EXPENSES
Management fees 242
Administrative and servicing fees 193
Transfer agent's fees 207
Custody and accounting fees 61
Postage 18
Shareholder reporting fees 20
Trustees' fees 6
Registration fees 49
Professional fees 29
Other 3
------
Total expenses 828
Expenses paid indirectly (3)
------
Net expenses 825
------
NET INVESTMENT INCOME $1,225
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
S T A T E M E N T S
====================------------------------------------------------------------
of Changes in NET ASSETS
(in thousands)
USAA TREASURY MONEY MARKET TRUST
YEARS ENDED MAY 31,
2004 2003
------------------------
FROM OPERATIONS
Net investment income $ 1,225 $ 2,259
------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,225) (2,259)
------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 161,558 151,047
Reinvested dividends 1,166 2,170
Cost of shares redeemed (179,520) (134,026)
------------------------
Increase (decrease) in net assets from
capital share transactions (16,796) 19,191
------------------------
Net increase (decrease) in net assets (16,796) 19,191
NET ASSETS
Beginning of period 205,558 186,367
------------------------
End of period $ 188,762 $ 205,558
========================
CHANGE IN SHARES OUTSTANDING
Shares sold 161,558 151,047
Shares issued for dividends reinvested 1,166 2,170
Shares redeemed (179,520) (134,026)
------------------------
Increase (decrease) in shares outstanding (16,796) 19,191
========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
(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
annual report pertains only to the USAA Treasury Money Market Trust
(the Fund). The Fund's investment objective is to provide maximum
current income while maintaining the highest degree of safety and
liquidity.
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. Pursuant to Rule 2a-7 under the Investment Company Act of
1940, securities in the Fund are stated at amortized cost,
which approximates market value. This method values a
security at its cost on the date of purchase and,
thereafter, assumes a constant amortization to maturity of
any premiums or discounts. Repurchase agreements are valued
at cost.
2. Securities for which valuations are not readily available or
are considered unreliable are valued in good faith at fair
value, using methods determined by USAA Investment
Management (the Manager), an affiliate of the Fund, under
valuation procedures and procedures to stabilize net asset
value 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.
18
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
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. Interest income is
recorded daily on the accrual basis. Discounts and premiums on
securities are amortized over the life of the respective
securities using the straight-line method.
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 in excess of the repurchase agreement price
plus accrued interest 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. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS - Delivery and
payment for securities that have been purchased by the Fund on
a when-issued basis can take place a month or more after the
trade date. During the period prior to settlement, these
securities do not earn interest, are subject to market
fluctuation, and may increase or decrease in value prior to
their delivery. The Fund maintains segregated assets with a
market value equal to or greater than the amount of its
purchase commitments. The Fund had no when-issued commitments
as of May 31, 2004.
F. EXPENSES PAID INDIRECTLY - Through fee-offset arrangements with
certain of the Fund's service providers, realized credits,
if any,
19
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
are used to reduce the Fund's expenses. For the year ended
May 31, 2004, these fee-offset arrangements reduced the Fund's
expenses by $3,000.
G. INDEMNIFICATIONS - Under the Trust's organizational documents,
its officers and trustees are indemnified against certain
liability arising out of the performance of their duties to the
Trust. In addition, in the normal course of business the Trust
enters into contracts that contain a variety of representations
and warranties that provide general indemnifications. The
Trust's maximum exposure under these arrangements is unknown,
as this would involve future claims that may be made against
the Trust that have not yet occurred. However, the Trust
expects the risk of loss to be remote.
H. USE OF ESTIMATES - The preparation of financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that
may affect the reported amounts in the financial statements.
(2) LINES OF CREDIT
- --------------------------------------------------------------------------------
The Fund participates with other USAA funds in two joint, short-term,
revolving, 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 and State Street Bank
and Trust Company (State Street), under which Bank of America and State
Street have each committed $50 million. 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 and State Street, the Fund may
borrow from Bank of America and State Street, at the federal funds rate
20
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
plus a 0.50% markup, an 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 and State Street 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. For the year ended May 31, 2004,
the Fund paid CAPCO facility fees of $1,000. The Fund had no
borrowings under either of these agreements during the year ended
May 31, 2004.
(3) DISTRIBUTIONS
- --------------------------------------------------------------------------------
The character of distributions made during the year from net investment
income or net realized gains is determined in accordance with federal
tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. Also, due to the
timing of distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
were recorded by the Fund.
The tax character of distributions paid during the years ended May 31,
2004, and 2003, was as follows:
2004 2003
-----------------------------
Ordinary income* $1,225,000 $2,259,000
*Includes distribution of short-term realized capital gains, if any,
which are taxable as ordinary income.
21
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
As of May 31, 2004, the components of net assets representing
distributable earnings on a tax basis were as follows:
Undistributed ordinary income $3,000
Net investment income is accrued daily as dividends and distributed
to shareholders monthly. Distributions of 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) TRANSACTIONS WITH MANAGER
- --------------------------------------------------------------------------------
A. MANAGEMENT FEES - The Manager carries out the Fund's investment
policies and manages the Fund's portfolio. The Fund's
management fees are accrued daily and paid monthly at an
annualized rate of 0.125% of the Fund's average net assets. For
the year ended May 31, 2004, the Fund incurred management fees,
paid or payable to the Manager, of $242,000.
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 0.10% of the
Fund's average net assets. For the year ended May 31, 2004, the
Fund incurred administrative and servicing fees, paid or
payable to the Manager, of $193,000.
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 $25.50 per shareholder account plus out-of-pocket
expenses. For the year ended May 31, 2004, the Fund incurred
transfer agent's fees, paid or payable to USAA Transfer Agency
Company, of $207,000.
22
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA TREASURY MONEY MARKET TRUST
MAY 31, 2004
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.
(5) 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.
(6) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share operating performance for a share outstanding throughout each period
is as follows:
YEAR ENDED MAY 31,
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .01 .01 .02 .06 .05
Less distributions:
From net investment income (.01) (.01) (.02) (.06) (.05)
----------------------------------------------------------------------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============================================================================
Total return (%)* 0.63 1.14 2.24 5.70 5.05
Net assets at end of period (000) $188,762 $205,558 $186,367 $165,941 $153,400
Ratio of expenses to average net assets (%)** .43(a) .43(a) .42(a) .36(a) .35
Ratio of net investment income to
average net assets (%)** .63 1.13 2.17 5.55 5.00
* Assumes reinvestment of all net investment income distributions during the
period.
** For the year ended May 31, 2004, average net assets were $193,550,000.
(a) Reflects total expenses, excluding any expenses paid indirectly, which did
not affect the Fund's expense ratios.
23
D I R E C T O R S ' A N D O F F I C E R S '
====================------------------------------------------------------------
INFORMATION
DIRECTORS* AND OFFICERS OF THE COMPANY
- --------------------------------------------------------------------------------
The Board of Directors of the Company consists of seven Directors.
These Directors and the Company's Officers supervise the business
affairs of the USAA family of funds. The Board of Directors is
responsible for the general oversight of the funds' business and for
assuring that the funds are managed in the best interests of each
fund's respective shareholders. The Board of Directors periodically
reviews the funds' investment performance as well as the quality of
other services provided to the funds and their shareholders by each
of the fund's service providers, including USAA Investment Management
Company (IMCO) and its affiliates. The term of office for each
Director shall be fifteen (15) years or until the Director reaches
age 70. All members of the Board of Directors shall be presented to
shareholders for election or reelection, as the case may be, at least
once every five years. Vacancies on the Board of Directors can be
filled by the action of a majority of the Directors, provided that at
least two-thirds of the Directors have been elected by the
shareholders.
Set forth below are the Directors and Officers of the Company, their
respective offices and principal occupations during the last five
years, length of time served, and information relating to any other
directorships held. Each serves on the Board of Directors of the USAA
family of funds consisting of four registered investment companies
offering 38 individual funds as of May 31, 2004. Unless otherwise
indicated, the business address of each is 9800 Fredericksburg Road,
San Antonio, TX 78288.
If you would like more information about the funds' Directors, you
may call (800) 531-8181 to request a free copy of the funds'
statement of additional information (SAI).
* FOR SIMPLICITY THROUGHOUT THIS SECTION, THE BOARDS OF DIRECTORS AND
BOARDS OF TRUSTEES OF THE FOUR LEGAL ENTITIES THAT COMPRISE THE
USAA FAMILY OF FUNDS WILL BE IDENTIFIED AS THE BOARD OF DIRECTORS.
24
. . . C O N T I N U E D
========================--------------------------------------------------------
INFORMATION
INTERESTED DIRECTORS(1)
- --------------------------------------------------------------------------------
ROBERT G. DAVIS (2)
Director and Chairman of the Board of Directors
Born: November 1946
Year of Election or Appointment: 1996
Chairman, Chief Executive Officer, and President of United Services
Automobile Association (USAA) (10/02-present); President and Chief
Executive Officer of USAA (4/00-10/02); President and Chief Operating
Officer of USAA (6/99-3/00); Director of USAA (2/99-present); Deputy
Chief Executive Officer for Capital Management of USAA (6/98-5/99);
President, Chief Executive Officer, Director, and Chairman of the
Board of Directors of USAA Capital Corporation (CAPCO) and several of
its subsidiaries and affiliates (1/97-present); and President, Chief
Executive Officer, Director, and Chairman of the Board of Directors
of USAA Financial Planning Services (FPS) (1/97-7/03). Mr. Davis
serves as a Director/Trustee and Chairman of the Boards of
Directors/Trustees of the USAA family of funds. He also serves as a
Director and Chairman of the Boards of Directors of USAA Investment
Management Company (IMCO), USAA Life Insurance Company, USAA Federal
Savings Bank, USAA Real Estate Company (RealCo), and USAA Financial
Advisors, Inc. (FAI).
CHRISTOPHER W. CLAUS (2, 4)
Director, President, and Vice Chairman of the Board of Directors
Born: December 1960
Year of Election or Appointment: 2001
President and Chief Executive Officer, Director, and Vice Chairman of
the Board of Directors, IMCO (2/01-present). Senior Vice President of
Investment Sales and Service, IMCO (7/00-2/01); Vice President,
Investment Sales and Service, IMCO (12/94-7/00). Mr. Claus serves as
President, Director/Trustee, and Vice Chairman of the Boards of
Directors/Trustees of the USAA family of funds. He also serves as
President, Director, and Chairman of the Board of Directors of USAA
Shareholder Account Services. He also holds the Officer position of
Senior Vice President of USAA Life Investment Trust, a registered
investment company offering five individual funds.
25
. . . C O N T I N U E D
========================--------------------------------------------------------
INFORMATION
NON-INTERESTED (INDEPENDENT) DIRECTORS
- --------------------------------------------------------------------------------
BARBARA B. DREEBEN (3, 4, 5, 6)
Director
Born: June 1945
Year of Election or Appointment: 1994
President, Postal Addvantage (7/92-present), a postal mail list
management service. Mrs. Dreeben serves as Director/Trustee of the
USAA family of funds. Mrs. Dreeben holds no other directorships of
any publicly held corporations or other investment companies outside
the USAA family of funds.
ROBERT L. MASON, PH.D. (3, 4, 5, 6)
Director
Born: July 1946
Year of Election or Appointment: 1997
Institute Analyst, Southwest Research Institute (3/02-present); Staff
Analyst, Southwest Research Institute (9/98-3/02), which focuses in
the fields of technological research. Dr. Mason serves as a
Director/Trustee of the USAA family of funds. Dr. Mason holds no
other directorships of any publicly held corporations or other
investment companies outside the USAA family of funds.
MICHAEL F. REIMHERR (3, 4, 5, 6)
Director
Born: August 1945
Year of Election or Appointment: 2000
President of Reimherr Business Consulting (5/95-present), an
organization that performs business valuations of large companies to
include the development of annual business plans, budgets, and
internal financial reporting. Mr. Reimherr serves as a
Director/Trustee of the USAA family of funds. Mr. Reimherr holds no
other directorships of any publicly held corporations or other
investment companies outside the USAA family of funds.
26
. . . C O N T I N U E D
========================--------------------------------------------------------
INFORMATION
LAURA T. STARKS, PH.D. (3, 4, 5, 6)
Director
Born: February 1950
Year of Election or Appointment: 2000
Charles E. and Sarah M. Seay Regents Chair Professor of Finance,
University of Texas at Austin (9/96-present). Dr. Starks serves as a
Director/Trustee of the USAA family of funds. Dr. Starks holds no
other directorships of any publicly held corporations or other
investment companies outside the USAA family of funds.
RICHARD A. ZUCKER (2, 3, 4, 5, 6)
Director
Born: July 1943
Year of Election or Appointment: 1992
Vice President, Beldon Roofing Company (7/85-present). Mr. Zucker
serves as a Director/Trustee of the USAA family of funds. Mr. Zucker
holds no other directorships of any publicly held corporations or
other investment companies outside the USAA family of funds.
(1) INDICATES THOSE DIRECTORS WHO ARE EMPLOYEES OF USAA INVESTMENT
MANAGEMENT COMPANY OR AFFILIATED COMPANIES AND ARE CONSIDERED
"INTERESTED PERSONS" UNDER THE INVESTMENT COMPANY ACT OF 1940.
(2) MEMBER OF EXECUTIVE COMMITTEE
(3) MEMBER OF AUDIT COMMITTEE
(4) MEMBER OF PRICING AND INVESTMENT COMMITTEE
(5) MEMBER OF CORPORATE GOVERNANCE COMMITTEE
(6) THE ADDRESS FOR ALL NON-INTERESTED DIRECTORS IS THAT OF THE USAA
FUNDS, P.O. BOX 659430, SAN ANTONIO, TX 78265-9430.
27
. . . C O N T I N U E D
========================--------------------------------------------------------
INFORMATION
INTERESTED OFFICERS(1)
- --------------------------------------------------------------------------------
CLIFFORD A. GLADSON
Vice President
Born: November 1950
Year of Appointment: 2002
Senior Vice President, Fixed Income Investments, IMCO
(9/02-present); Vice President, Fixed Income Investments, IMCO
(5/02-9/02); Vice President, Mutual Fund Portfolios, IMCO
(12/99-5/02); Assistant Vice President, Fixed Income Investments,
IMCO (11/94-12/99). Mr. Gladson also holds the Officer position of
Vice President of USAA Life Investment Trust, a registered
investment company offering five individual funds.
STUART WESTER
Vice President
Born: June 1947
Year of Appointment: 2002
Vice President, Equity Investments, IMCO (1/99-present); Vice
President, Investment Strategy and Analysis, CAPCO (6/96-1/99). Mr.
Wester also holds the Officer position of Vice President of USAA
Life Investment Trust, a registered investment company offering five
individual funds.
MARK S. HOWARD
Secretary
Born: October 1963
Year of Appointment: 2002
Senior Vice President, Life/IMCO/FPS General Counsel, USAA
(10/03-present); Senior Vice President, Securities Counsel, USAA
(12/02-10/03); Senior Vice President, Securities Counsel &
Compliance, IMCO (1/02-12/02); Vice President, Securities Counsel &
Compliance, IMCO (7/00-1/02); and Assistant Vice President,
Securities Counsel, USAA (2/98-7/00). Mr. Howard also holds the
Officer positions of Senior Vice President, Secretary, and Counsel
for USAA Life Insurance Company, IMCO, FAI, FPS, and USAA
Shareholder Account Services; and Secretary for USAA Life Investment
Trust, a registered investment company offering five individual
funds.
DAVID M. HOLMES
Treasurer
Born: June 1960
Year of Appointment: 2001
Senior Vice President, Life/IMCO/FPS Senior Financial Officer,
USAA (12/02-present); Senior Vice President, Senior Financial
Officer,
28
. . . C O N T I N U E D
========================--------------------------------------------------------
INFORMATION
IMCO (6/01-12/02); Vice President, Senior Financial Officer, RealCo
(12/97-5/01). Mr. Holmes also holds the Officer positions of Senior
Vice President, Senior Financial Officer of USAA Life Insurance
Company, IMCO, USAA Shareholder Account Services, FAI, and FPS; and
Treasurer of USAA Life Investment Trust, a registered investment
company offering five individual funds.
EILEEN M. SMILEY
Assistant Secretary
Born: November 1959
Year of Appointment: 2003
Vice President, Securities Counsel, USAA (2/04-present); Assistant
Vice President, Securities Counsel, USAA (1/03-2/04); Attorney,
Morrison & Foerster, LLP (1/99-1/03). Ms. Smiley also holds the
Officer position of Vice President and Assistant Secretary of IMCO,
FAI, and FPS; and Assistant Secretary of USAA Life Investment Trust,
a registered investment company offering five individual funds.
ROBERTO GALINDO, JR.
Assistant Treasurer
Born: November 1960
Year of Appointment: 2000
Assistant Vice President, Portfolio Accounting/Financial
Administration, USAA (12/02-present); Assistant Vice President,
Mutual Fund Analysis & Support, IMCO (10/01-12/02); Executive
Director, Mutual Fund Analysis & Support, IMCO (6/00-10/01);
Director, Mutual Fund Analysis, IMCO (9/99-6/00); Vice President,
Portfolio Administration, Founders Asset Management LLC (7/98-8/99).
Mr. Galindo also holds the Officer position of Assistant Treasurer of
USAA Life Investment Trust, a registered investment company offering
five individual funds.
(1) INDICATES THOSE OFFICERS WHO ARE EMPLOYEES OF USAA INVESTMENT
MANAGEMENT COMPANY OR AFFILIATED COMPANIES AND ARE CONSIDERED
"INTERESTED PERSONS" UNDER THE INVESTMENT COMPANY ACT OF 1940.
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 Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1900
ACCOUNTING FIRM 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.
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- --------------------------------------------------------------------------------
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[LOGO OF USAA] WE KNOW WHAT IT MEANS TO SERVE.(R)
USAA ----------------------------------
INSURANCE o MEMBER SERVICES
23415-0704 (C)2004, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
On June 25, 2003, the Board of Trustees of USAA Investment Trust approved a Code
of Ethics (Sarbanes Code) applicable solely to its senior financial officers,
including its principal executive officer (President), as defined under the
Sarbanes-Oxley Act of 2002 and implementing regulations of the Securities and
Exchange Commission. A copy of the Sarbanes Code is attached as an Exhibit to
this Form N-CSR.
No amendments have been made to the Sarbanes Code since it was adopted, and no
waivers (explicit or implicit) from a provision of the Sarbanes Code have been
granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Dr. Laura T. Starks, Ph.D. has been designated as an audit committee financial
expert for USAA Investment Trust. Dr. Starks has served as a professor of
Finance at the University of Texas at Austin since 1987, and has served as the
Chair Professor of Finance since 1996. Dr. Starks also has served as a
consultant to numerous clients, including accounting firms, on a range of
finance, accounting and auditing issues. Dr. Starks is an independent director
who serves as a member of the Audit Committee, Pricing and Investment Committee
and the Corporate Governance Committee of the Board of Trustees of USAA
Investment Trust.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The Registrant, USAA Investment Trust, consists of 9 funds. The
aggregate fees billed by the Registrant's independent auditor, Ernst & Young
LLP, for professional services rendered for the audit of the Registrant's annual
financial statements and services provided in connection with statutory and
regulatory filings by the Registrant for fiscal years ended May 31, 2004 and
2003 were $145,300 and $140,400 respectively.
(b) AUDIT RELATED FEE. No such fees were billed by Ernst & Young LLP for 2004 or
2003.
(c) TAX FEES. The aggregate fees paid or accrued by the Registrant for
professional services rendered by Ernst & Young LLP for the review of the
Registrant's federal, state and city income tax returns and excise tax
calculations for fiscal years ended May 31, 2004 and 2003 were $39,400 and
$38,400, respectively.
(d) ALL OTHER FEES. No such fees were billed by Ernst & Young LLP for fiscal
years ended May 31, 2004 or 2003.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICY. All audit and non-audit services to
be performed for the Registrant by Ernst & Young LLP must be pre-approved by the
Audit Committee. The Audit Committee Charter also permits the Chair of the Audit
Committee to pre-approve any permissible non-audit service that must be
commenced prior to a scheduled meeting of the Audit Committee. All non-audit
services were pre-approved by the Audit Committee or its Chair, consistent with
the Audit Committee's preapproval procedures.
(2) Not applicable.
(f) Not applicable.
(g) The aggregate non-audit fees billed by Ernst & Young LLP for services
rendered to the Registrant and the Registrant's investment adviser, IMCO, for
2004 and 2003 were $55,200 and $75,400, respectively.
(h) Ernst & Young LLP provided non-audit services to IMCO in 2004 and 2003 that
were not required to be pre-approved by the Registrant's Audit Committee because
the services were not directly related to the operations of the Registrant's
funds. The Board of Directors/Trustees will consider Ernst & Young LLP's
independence and will consider whether the provision of these non-audit services
to IMCO is compatible with maintaining Ernst & Young LLP's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 10. 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.
ITEM 11. EXHIBITS.
(a)(1). Code of Ethics pursuant to Item 2 of Form N-CSR is filed hereto exactly
as set forth below:
CODE OF ETHICS
FOR PRINCIPAL EXECUTIVE OFFICER
AND SENIOR FINANCIAL OFFICERS
USAA MUTUAL FUND, INC.
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA STATE TAX-FREE TRUST
USAA LIFE INVESTMENT TRUST
I. PURPOSE OF THE CODE OF ETHICS
USAA Mutual Fund, Inc., USAA Tax-Exempt Fund, Inc., USAA Investment
Trust, USAA State Tax-Free Trust and USAA Life Investment Trust (collectively,
the Funds, and each a Company) have adopted this code of ethics (the Code) to
comply with Section 406 of the Sarbanes-Oxley Act of 2002 (the Act) and
implementing regulations of the Securities and Exchange Commission (SEC). The
Code applies to each Company's Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer (each a Covered Officer), as detailed
in Appendix A.
The purpose of the Code is to promote:
o honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between the Covered Officers' personal
and professional relationships;
o full, fair, accurate, timely and understandable disclosure in reports
and documents that each Company files with, or submits to, the SEC and
in other public communications made by each Company;
o compliance with applicable laws and governmental rules and regulations;
o prompt internal reporting of violations of the Code to the Chief Legal
Officer of each Company, the President of each Company (if the
violation concerns the Treasurer) and the Chairman of the Board of
Directors/Trustees of each Company; and
o accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business
ethics and should be sensitive to actual and apparent conflicts of interest.
II. CONFLICTS OF INTEREST
A. DEFINITION OF A CONFLICT OF INTEREST.
A conflict of interest exists when a Covered Officer's private interest
influences, or reasonably appears to influence, the Covered Officer's judgment
or ability to act in the best interests of the Funds and their shareholders. For
example, a conflict of interest could arise if a Covered Officer, or an
immediate family member, receives personal benefits as a result of his or her
position with the Funds.
Certain conflicts of interest arise out of relationships between
Covered Officers and the Funds and are already subject to conflict of interest
provisions in the Investment Company Act of 1940 (the 1940 Act) and the
Investment Advisers Act of 1940 (the Advisers Act). For example, Covered
Officers may not individually engage in certain transactions with the Funds
because of their status as "affiliated persons" of the Funds. The USAA Funds'
and USAA Investment Management Company's (IMCO) compliance programs and
procedures are designed to prevent, or identify and correct, violations of these
provisions. This Code does not, and is not intended to, repeat or replace these
programs and procedures, and such conflicts fall outside of the parameters of
this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts could arise from, or as a result of, the contractual
relationships between the Funds and IMCO of which the Covered Officers are also
officers or employees. As a result, this Code recognizes that the Covered
Officers will, in the normal course of their duties (whether formally for the
Funds or for IMCO, or for both), be involved in establishing policies and
implementing decisions that will have different effects on IMCO and the Funds.
The participation of Covered Officers in such activities is inherent in the
contractual relationship between the Funds and IMCO and is consistent with the
performance by the Covered Officers of their duties as officers of the Funds.
Thus, if performed in compliance with the provisions of the 1940 Act and the
Advisers Act, such activities will be deemed to have been handled ethically. In
addition, it is recognized by each Company's Board of Directors/Trustees (each a
Board, and collectively the Boards) that the Covered Officers also may be
officers or employees of one or more other investment companies covered by this
joint USAA Funds' Code.
B. GENERAL RULE. Covered Officers Should Avoid Actual and
Apparent Conflicts of Interest.
Conflicts of interest, other than the conflicts described in the two
preceding paragraphs, are covered by the Code. The following list provides
examples of conflicts of interest under the Code, but Covered Officers should
keep in mind that these examples are not exhaustive. The overarching principle
is that the personal interest of a Covered Officer should not be placed
improperly before the interest of the Funds and their shareholders.
Each Covered Officer must not engage in conduct that constitutes an
actual conflict of interest between the Covered Officer's personal interest and
the interests of the Funds and their shareholders. Examples of actual conflicts
of interest are listed below but are not exclusive. Each Covered Officer must
not:
o use his personal influence or personal relationships improperly to
influence investment decisions or financial reporting by the Funds
whereby the Covered Officer would benefit personally to the detriment
of the Funds and their shareholders;
o cause the Funds to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit of the Funds and their shareholders.
o accept gifts, gratuities, entertainment or any other benefit from any
person or entity that does business or is seeking to do business with
the Funds during contract negotiations.
o accept gifts, gratuities, entertainment or any other benefit with a
market value over $100 per person, per year, from or on behalf of any
person or entity that does, or seeks to do, business with or on behalf
of the Funds.
o EXCEPTION. Business-related entertainment such as meals, and
tickets to sporting or theatrical events, which are infrequent
and not lavish are excepted from this prohibition. Such
entertainment must be appropriate as to time and place,
reasonable and customary in nature, modest in cost and value,
incidental to the business, and not so frequent as to raise any
question of impropriety (Customary Business Entertainment).
Certain situations that could present the appearance of a conflict of
interest should be discussed with, and approved by, or reported to, an
appropriate person. Examples of these include:
o service as a director on the board or an officer of any public or
private company, other than a USAA company or a Company, must be
approved by the USAA Funds' and IMCO's Code of Ethics Committee and
reported to each affected Company.
o the receipt of any non-nominal (i.e., valued over $25) gifts from any
person or entity with which a Company has current or prospective
business dealings must be reported to the Chief Legal Officer. For
purposes of this Code, the individual holding the title of Secretary of
a Company shall be considered the Chief Legal Officer of a Company.
o the receipt of any business-related entertainment from any person or
entity with which the Funds have current or prospective business
dealings must be approved in advance by the Chief Legal Officer unless
such entertainment qualifies as Customary Business Entertainment.
o any ownership interest in, or any consulting or employment relationship
with, any of the Company's service providers, other than IMCO or any
other USAA company, must be approved by the Chairman of the Board of
the Directors/Trustees and reported to each affected Board.
o any material direct or indirect financial interest in commissions,
transaction charges or spreads paid by the Funds for effecting
portfolio transactions or for selling or redeeming shares other than an
interest arising from the Covered Officer's employment, such as
compensation or equity ownership should be approved by the Chairman of
the Board of Directors/Trustees and reported to each affected Board.
III. DISCLOSURE AND COMPLIANCE REQUIREMENTS
o Each Covered Officer should familiarize himself with the disclosure
requirements applicable to the Funds, and the procedures and policies
implemented to promote full, fair, accurate, timely and understandable
disclosure by each Company.
o Each Covered Officer should not knowingly misrepresent, or cause others
to misrepresent, facts about the Funds to others, whether within or
outside the Funds, including to the Funds' Directors/Trustees and
auditors, and to government regulators and self-regulatory
organizations.
o Each Covered Officer should, to the extent appropriate within his area
of responsibility, consult with other officers and employees of the
Funds and IMCO with the goal of promoting full, fair, accurate, timely
and understandable disclosure in the reports and documents filed by a
Company with, or submitted to, the SEC, and in other public
communications made by the Funds.
o Each Covered Officer is responsible for promoting compliance with the
standards and restrictions imposed by applicable laws, rules and
regulations, and promoting compliance with the USAA Funds' and IMCO's
operating policies and procedures.
o A Covered Officer should not retaliate against any person who reports a
potential violation of this Code in good faith.
o A Covered Officer should notify the Chief Legal Officer promptly if he
knows of any violation of the Code. Failure to do so itself is a
violation of this Code.
IV. REPORTING AND ACCOUNTABILITY
A. INTERPRETATION OF THE CODE. The Chief Legal Officer of each
Company is responsible for applying this Code to specific
situations in which questions are presented under it and has the
authority to interpret the Code in any particular situation. The
Chief Legal Officer should consult, if appropriate, the USAA
Funds' outside counsel or counsel for the Independent
Directors/Trustees. However, any approvals or waivers sought by a
Covered Officer will be reported initially to the Chairman of the
Board of Directors/Trustees and will be considered by the Board
of Directors/Trustees.
B. REQUIRED REPORTS
o EACH COVERED OFFICER MUST:
o Upon adoption of the Code, affirm in writing to the Boards
that he has received, read and understands the Code.
o Annually thereafter affirm to the Chief Legal Officer that
he has complied with the requirements of the Code.
o THE CHIEF LEGAL OFFICER MUST:
o report to the Board about any matter or situation submitted
by a Covered Officer for interpretation under the Code, and
the advice given by the Chief Legal Officer;
o report annually to the Board and the Corporate Governance
Committee describing any issues that arose under the Code,
or informing the Board and Corporate Governance Committee
that no reportable issues occurred during the year.
C. INVESTIGATION PROCEDURES
The Funds will follow these procedures in investigating and enforcing
this Code:
o INITIAL COMPLAINT. All complaints or other inquiries concerning
potential violations of the Code must be reported to the Chief
Legal Officer. The Chief Legal Officer shall be responsible for
documenting any complaint. The Chief Legal Officer also will
report immediately to the President of the Company (if the
complaint involves the Treasurer), the Chairman of the Board (or
for the USAA Life Investment Trust (LIT) the Chairman/CEO of USAA
if the complaint involves the Chairman of the LIT Board) and the
Chairperson of the Audit Committee any material potential
violations that could have a material effect on the Funds'
financial condition or reputation. For all other complaints, the
Chief Legal Officer will report quarterly to the Board.
o INVESTIGATIONS. The Chief Legal Officer will take all appropriate
action to investigate any potential violation unless the Chairman
of the Board or the Chairperson of the Audit Committee direct
another person to undertake such investigation. The Chief Legal
Officer may utilize USAA's Office of Ethics to do a unified
investigation under this Code and USAA's Code of Conduct. The
Chairman of the Board, or the Board as a whole, may direct the
Company's outside counsel or the counsel to the Independent
Directors/Trustees (if any) to participate in any investigation
under this Code.
o STATUS REPORTS. The Chief Legal Officer will provide monthly
status reports to the Board about any alleged violation of the
Code that could have a material effect on the Funds' financial
condition or reputation, and quarterly updates regarding all
other alleged violations of the Code.
o VIOLATIONS OF THE CODE. If after investigation, the Chief Legal
Officer, or other investigating person, believes that a violation
of the Code has occurred, he will report immediately to the
Chairman of the Board (and for the USAA LIT the Chairman/CEO of
USAA if the violation involves the Chairman of the LIT Board) the
nature of the violation, and his recommendation regarding the
materiality of the violation. If, in the opinion of the
investigating person, the violation could materially affect the
Funds' financial condition or reputation, the Chief Legal Officer
also will notify the Chairperson of the Audit Committee of each
Company.
The Chief Legal Officer will inform, and make a recommendation
to, the Board, which will consider what further action is
appropriate. Appropriate action could include: (1) review of, and
modifications to, the Code or other applicable policies or
procedures; (2) notifications to appropriate personnel of IMCO or
USAA; (3) dismissal of the Covered Officer; and/or (4) other
disciplinary actions including reprimands or fines.
o The Boards of Directors/Trustees understand that Covered
Officers also are subject to USAA's Code of Business
Conduct. If a violation of this Code also violates USAA's
Code of Business Conduct, these procedures do not limit or
restrict USAA's ability to discipline such Covered Officer
under USAA's Code of Business Conduct. In that event, the
Chairman of the Board of Directors/Trustees will report to
the Boards the action taken by USAA with respect to a
Covered Officer.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Funds for
purposes of Section 406 of the Act and the implementing regulations adopted by
the SEC applicable to registered investment companies. If other policies and
procedures of a Company, IMCO, or other service providers govern or purport to
govern the behavior or activities of Covered Officers, they are superseded by
this Code to the extent that they overlap, conflict with, or are more lenient
than the provisions of this Code. The USAA Funds' and IMCO's Joint Code of
Ethics under Rule 17j-1 under the 1940 Act, and IMCO's more detailed compliance
policies and procedures (including its Insider Trading Policy) are separate
requirements applying to Covered Officers and other IMCO employees, and are not
part of this Code. Also, USAA's Code of Conduct imposes separate requirements on
Covered Officers and all employees of USAA, and also is not part of this Code.
VI. AMENDMENTS
Any amendment to this Code, other than amendments to Appendix A, must
be approved or ratified by majority vote of the Board of Directors/Trustees.
VII. CONFIDENTIALITY AND DOCUMENT RETENTION
The Chief Legal Officer shall retain material investigation documents
and reports required to be prepared under the Code for six years from the date
of the resolution of any such complaint. All reports and records prepared or
maintained pursuant to this Code will be considered confidential and shall be
maintained and protected accordingly. Except as otherwise required by law or
this Code, such matters shall not be disclosed to anyone other than the
appropriate Board of Directors/Trustees and counsel for the Independent
Directors/Trustees (if any), the appropriate Company and its counsel, IMCO, and
other personnel of USAA as determined by the affected Company's Chief Legal
Officer or the Chairman of the Board of Directors/Trustees.
Approved and adopted by IMCO's Code of Ethics Committee: June 12, 2003 Approved
and adopted by the Boards of Directors/Trustees of USAA Mutual Fund, Inc., USAA
Tax-Exempt Fund, Inc., USAA Investment Trust & USAA State Tax-Free Trust: June
25, 2003.
Approved and adopted by the Board of Trustees of USAA Life Investment Trust:
August 20, 2003.
APPENDIX A
COVERED OFFICERS
TITLE COMPANY
PRESIDENT USAA Mutual Fund, Inc.
USAA Tax-Exempt Fund, Inc.
USAA Investment Trust
USAA State Tax-Free Trust
USAA Life Investment Trust
TREASURER USAA Mutual Fund, Inc.
USAA Tax-Exempt Fund, Inc.
USAA Investment Trust
USAA State Tax-Free Trust
USAA Life Investment Trust
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA INVESTMENT TRUST
By:* /s/ EILEEN M. SMILEY
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Signature and Title: Eileen M. Smiley, Assistant Secretary
Date: 07-25-04
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /s/ CHRISTOPHER W. CLAUS
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Signature and Title: Christopher W. Claus/President
Date: 07-28-04
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By:* /s/ DAVID HOLMES
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Signature and Title: David Holmes/Treasurer
Date: 07-28-04
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*Print the name and title of each signing officer under his or her signature.