UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
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, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
USAA EMERGING MARKETS FUND - SEMIANNUAL REPORT FOR PERIOD ENDING NOVEMBER 30,
2004
[LOGO OF USAA]
USAA(R)
USAA EMERGING
MARKETS Fund
[GRAPHIC OF USAA EMERGING MARKETS FUND]
S e m i a n n u a l R e p o r t
- --------------------------------------------------------------------------------
NOVEMBER 30, 2004
Table of CONTENTS
- --------------------------------------------------------------------------------
MESSAGE FROM THE PRESIDENT 2
INVESTMENT OVERVIEW & MANAGERS' COMMENTARY 5
FINANCIAL INFORMATION
Portfolio of Investments 13
Notes to Portfolio of Investments 20
Financial Statements 22
Notes to Financial Statements 25
EXPENSE EXAMPLE 39
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)2005, USAA. All rights reserved.
2
M E S S A G E
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from the PRESIDENT
"
WE REMAIN COMMITTED TO DELIVERING
QUALITY USAA SERVICE AND PROVIDING YOU
[PHOTO OF CHRISTOPHER W. CLAUS] WITH A RANGE OF RESOURCES, INCLUDING OUR
MARKET-TESTED PORTFOLIO MANAGEMENT
TEAM AND NO-LOAD MUTUAL FUNDS.
"
December 2004
- --------------------------------------------------------------------------------
As I write to you in early December, the equity markets have
rallied. Several factors are responsible. First, the
presidential election is over. Investors are relieved that the
uncertainty has ended, the results are not in dispute, and no
terrorist attack occurred on U.S. soil. In addition, the U.S.
economy is on sound footing. The annual gross domestic product
(GDP) - the total value of all the goods and services produced
in the country - is expected to be up around 4%, on an
inflation-adjusted basis, in 2004 and a moderate yet healthy
3.5% in 2005. In most of America, the housing market remains
strong. Inflation is also under control, which has kept
long-term interest rates in check.
The Federal Reserve Board (the Fed) is expected to continue
raising short-term interest rates at a measured pace. In fact,
the Fed has announced its intention to move toward a more
"neutral" interest-rate position, which should put short-term
rates above 3% sometime in 2005. This is good news for money
market investors, because as your yields rise, you will be paid
more on your cash positions. At the same time, however,
interest rates on credit-card debt will also increase. In the
months ahead, we expect to see a narrowing of the yield
relationship between bonds of different maturities. In other
words, the yield curve will "flatten." We do not expect a major
increase in long-term interest rates, which the bond market,
not the Fed, controls.
3
. . . C O N T I N U E D
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In 2005, the primary drivers of stock market performance will
be the growth in corporate earnings, the valuation of those
earnings, Fed policy changes, and the level of long-term
interest rates. Corporate earnings are expected to improve by
about 7%. The dollar is likely to remain weak relative to
foreign currencies, making American products more affordable
around the world and helping the U.S. GDP. But because foreign
governments finance the federal budget deficit, the bond market
may push up long-term rates to make U.S. securities more
attractive to foreign investors.
Whatever lies ahead, we remain committed to delivering quality
USAA service and providing you with a range of resources,
including our market-tested portfolio management team and
no-load mutual funds without excessive fees. 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.
Mutual fund operating expenses apply and continue throughout
the life of the fund.
Past performance is no guarantee of future results.
5
I N V E S T M E N T
====================------------------------------------------------------------
OVERVIEW
USAA EMERGING MARKETS FUND
OBJECTIVE
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Capital appreciation.
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
Invests at least 80% of the Fund's assets in equity securities
of emerging market companies.
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11/30/04 5/31/04
- --------------------------------------------------------------------------------
Net Assets $122.4 Million $95.1 Million
Net Asset Value Per Share $12.04 $10.06
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/04
- --------------------------------------------------------------------------------
5/31/04 TO 11/30/04* 1 YEAR 5 YEARS 10 YEARS
20.38% 28.56% 5.11% 3.53%
*TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
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. The return
and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less
than their original cost. For performance data current to the
most recent month-end, visit usaa.com.
TOTAL RETURN MEASURES THE PRICE CHANGE IN A SHARE ASSUMING THE
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.
6
. . . C O N T I N U E D
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OVERVIEW
CUMULATIVE PERFORMANCE COMPARISON
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LIPPER EMERGING USAA LIPPER EMERGING MSCI EMERGING
MARKETS FUNDS EMERGING MARKETS FUNDS MARKETS
AVERAGE MARKETS FUND INDEX INDEX
--------------- ------------ --------------- -------------
11/30/1994 $10000.00 $10000.00 $10000.00 $10000.00
12/31/1994 9315.17 9602.09 9241.06 9196.96
1/31/1995 8410.99 8785.34 8296.05 8218.48
2/28/1995 8263.33 8691.10 8158.06 8007.63
3/31/1995 8328.83 9130.89 8193.60 8058.50
4/30/1995 8697.51 9560.21 8457.04 8420.02
5/31/1995 9121.50 10230.37 8852.18 8867.96
6/30/1995 9163.74 10418.85 8887.73 8894.19
7/31/1995 9503.51 10806.28 9197.16 9093.84
8/31/1995 9316.77 10565.45 8961.95 8879.63
9/30/1995 9344.37 10408.38 8918.04 8837.48
10/31/1995 8948.53 9769.63 8546.94 8499.18
11/30/1995 8816.47 9723.55 8326.36 8347.62
12/31/1995 9113.48 9952.73 8614.89 8717.85
1/31/1996 9943.47 11135.02 9397.87 9337.53
2/29/1996 9880.68 11274.74 9288.10 9189.07
3/31/1996 9927.69 11221.00 9365.20 9260.64
4/30/1996 10356.18 11822.90 9695.72 9630.90
5/31/1996 10516.42 11962.62 9792.02 9587.90
6/30/1996 10578.46 11790.65 9810.74 9647.77
7/31/1996 9969.20 10927.69 9241.84 8988.41
8/31/1996 10232.58 11333.68 9494.59 9218.48
9/30/1996 10339.77 11491.56 9591.81 9298.34
10/31/1996 10092.57 11108.13 9371.80 9050.35
11/30/1996 10371.11 11435.17 9583.57 9202.00
12/31/1996 10506.67 11604.33 9666.92 9243.62
1/31/1997 11291.34 12495.24 10406.01 9874.12
2/28/1997 11637.21 12912.50 10777.06 10296.99
3/31/1997 11331.45 12664.40 10502.64 10026.51
4/30/1997 11391.59 12529.07 10502.29 10044.22
5/31/1997 11906.44 13002.71 10865.39 10331.69
6/30/1997 12583.22 13600.41 11397.42 10884.61
7/31/1997 13069.14 13892.20 11731.23 11047.09
8/31/1997 11765.46 12827.97 10439.54 9641.36
9/30/1997 12319.14 13537.45 10816.22 9908.50
10/31/1997 10443.04 11431.88 9010.01 8282.64
11/30/1997 10129.66 10882.60 8598.39 7980.43
12/31/1997 10287.39 11203.01 8676.95 8172.74
1/31/1998 9660.25 10173.12 8071.89 7531.75
2/28/1998 10438.84 11317.45 8793.13 8317.88
3/31/1998 10875.40 11866.73 9120.48 8678.84
4/30/1998 10999.72 11763.74 9164.33 8584.30
5/31/1998 9701.03 10276.10 7955.74 7407.90
6/30/1998 8893.52 9280.54 7201.54 6630.84
7/31/1998 9167.14 9454.26 7421.12 6841.08
8/31/1998 6798.24 6406.73 5294.67 4863.05
9/30/1998 6923.41 6856.94 5493.36 5171.54
10/31/1998 7436.02 7849.69 6021.04 5716.11
11/30/1998 7842.57 8265.26 6425.47 6191.51
12/31/1998 7793.76 8276.81 6345.13 6101.78
1/31/1999 7706.57 8069.02 6216.36 6003.34
2/28/1999 7594.57 8011.30 6163.00 6061.73
3/31/1999 8337.85 8807.81 6849.69 6860.61
4/30/1999 9364.71 10031.44 7801.23 7709.41
5/31/1999 9222.16 9800.57 7707.04 7664.56
6/30/1999 10286.44 10851.04 8572.58 8534.43
7/31/1999 10037.11 10604.99 8359.28 8302.59
8/31/1999 9973.82 10442.19 8266.74 8378.12
9/30/1999 9674.93 9953.80 7973.16 8094.59
10/31/1999 9997.57 10174.74 8213.11 8266.95
11/30/1999 11072.57 11023.61 9119.07 9008.20
12/31/1999 13054.67 12616.68 10721.13 10153.86
1/31/2000 12867.16 12349.23 10596.84 10214.38
2/29/2000 13446.68 12767.85 10912.22 10349.28
3/31/2000 13491.12 12744.59 10944.59 10399.79
4/30/2000 12037.69 11116.63 9753.92 9413.96
5/31/2000 11380.25 10442.19 9234.75 9024.77
6/30/2000 12010.66 11000.35 9692.66 9342.67
7/31/2000 11338.99 10498.53 9297.19 8862.18
8/31/2000 11538.77 10638.20 9393.26 8905.75
9/30/2000 10397.32 9695.42 8495.54 8128.14
10/31/2000 9624.10 9113.46 7861.28 7538.82
11/30/2000 8674.91 8193.97 7150.68 6879.61
12/31/2000 8954.57 8589.70 7408.79 7045.77
1/31/2001 9999.61 9392.80 8267.18 8015.98
2/28/2001 9145.22 8589.70 7626.13 7388.32
3/31/2001 8256.95 7821.52 6898.64 6662.64
4/30/2001 8743.54 8182.33 7251.12 6991.85
5/31/2001 8916.89 8333.64 7450.52 7075.31
6/30/2001 8736.15 8217.25 7320.55 6930.07
7/31/2001 8193.22 7786.60 6866.57 6492.16
8/31/2001 8048.38 7507.26 6777.04 6428.12
9/30/2001 6906.70 6564.49 5809.97 5433.18
10/31/2001 7265.24 6890.38 6114.95 5770.36
11/30/2001 8012.09 7437.43 6720.68 6372.80
12/31/2001 8515.13 8092.01 7149.64 6878.65
1/31/2002 8802.69 8489.02 7431.54 7111.75
2/28/2002 8979.08 8757.59 7597.77 7228.58
3/31/2002 9482.64 9341.42 8013.90 7664.13
4/30/2002 9555.16 9353.10 8111.79 7713.13
5/31/2002 9470.75 9259.69 8037.18 7590.24
6/30/2002 8761.10 8570.76 7449.75 7020.80
7/31/2002 8114.34 7846.80 6892.96 6486.82
8/31/2002 8172.91 7940.21 6949.51 6586.78
9/30/2002 7331.63 7087.81 6252.61 5876.12
10/31/2002 7694.92 7344.69 6550.83 6257.41
11/30/2002 8170.78 7858.47 6991.51 6688.13
12/31/2002 7932.99 7683.32 6818.74 6465.91
1/31/2003 7870.66 7589.91 6779.24 6437.76
2/28/2003 7684.63 7379.72 6619.33 6264.01
3/31/2003 7435.62 7169.54 6405.88 6086.39
4/30/2003 8113.60 7858.47 7023.10 6628.52
5/31/2003 8712.19 8442.31 7528.11 7104.26
6/30/2003 9143.74 8851.00 7907.07 7509.17
7/31/2003 9631.34 9341.42 8269.03 7979.44
8/31/2003 10265.81 9820.17 8821.49 8515.02
9/30/2003 10432.94 10042.03 9017.15 8577.45
10/31/2003 11285.89 10801.02 9719.53 9307.37
11/30/2003 11414.15 10999.53 9863.74 9421.74
12/31/2003 12368.25 11758.52 10701.83 10104.78
1/31/2004 12723.67 12120.50 11007.82 10463.65
2/29/2004 13280.80 12645.95 11501.93 10946.34
3/31/2004 13417.96 12727.69 11656.19 11086.99
4/30/2004 12302.85 11945.35 10737.51 10180.55
5/31/2004 12044.85 11746.84 10527.98 10045.59
6/30/2004 12036.27 11898.64 10582.04 10025.63
7/31/2004 11825.52 11723.49 10426.73 9848.3564
8/31/2004 12297.03 12073.79 10831.89 10260.6104
9/30/2004 13008.77 12645.95 11467.06 10853.2305
10/31/2004 13358.86 12961.23 11817.00 11113.2393
11/30/2004 14495.08 14140.58 12788.81 12142.6055
[END CHART]
DATA FROM 11/30/94 THROUGH 11/30/04.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE, AND 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.
7
. . . C O N T I N U E D
========================--------------------------------------------------------
The graph illustrates the comparison of a $10,000 hypothetical
investment in the USAA Emerging Markets Fund to the following
benchmarks:
o The Lipper Emerging Markets Funds Average is an average of
emerging markets funds, reported by Lipper Inc., an
independent organization that monitors the performance of
mutual funds.
o The Lipper Emerging Markets Funds Index tracks the total
return performance of the 30 largest funds within the Lipper
Emerging Markets Funds category.
o The Morgan Stanley Capital International (MSCI) Emerging
Markets Index is a free-float-adjusted market capitalization
index that is designed to measure equity market performance
in the global emerging markets.
8
M A N A G E R ' S
==================--------------------------------------------------------------
COMMENTARY on the Fund
D. KIRK HENRY, CFA CAROLYN M. KEDERSHA, CFA, CPA
The Boston Company Asset The Boston Company Asset
Management, LLC Management, LLC
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM?
The USAA Emerging Markets Fund had a total return of 20.38% for
the six-month period ended November 30, 2004. This compares to
a 19.97% return for the Lipper Emerging Markets Funds Average,
21.47% for the Lipper Emerging Markets Funds Index, and 20.69%
for the MSCI Emerging Markets Index.
[LOGO OF LIPPER LEADER CONSISTENT RETURN]
The Fund is listed as a Lipper Leader for Consistent Return of
152 funds within the Lipper Emerging Markets Funds category for
the overall period ending November 30, 2004.
WHAT LED TO THESE CONTINUING STRONG GAINS IN EMERGING MARKETS?
Most economists were expecting a downturn in global economic
activity, but it didn't materialize. In addition to strong
demand from
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
REFER TO PAGE 7 FOR BENCHMARK DEFINITIONS.
LIPPER RATINGS FOR CONSISTENT RETURN REFLECT FUNDS' HISTORICAL
RISK-ADJUSTED RETURNS, ADJUSTED FOR VOLATILITY, RELATIVE TO
PEERS AS OF NOVEMBER 30, 2004. THE USAA EMERGING MARKETS FUND
IN LIPPER'S EMERGING MARKETS FUNDS CATEGORY RECEIVED A LIPPER
LEADER RATING FOR CONSISTENT RETURN AMONG 152 AND 19 FUNDS FOR
THE THREE- AND 10-YEAR PERIODS, RESPECTIVELY, AND A SCORE OF 2
AMONG 114 FUNDS FOR THE FIVE-YEAR PERIOD. RATINGS ARE SUBJECT
TO CHANGE EVERY MONTH AND ARE BASED ON AN EQUAL-WEIGHTED
AVERAGE OF PERCENTILE RANKS FOR THE CONSISTENT RETURN METRICS
OVER THREE-, FIVE-, AND 10-YEAR PERIODS (IF APPLICABLE). 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 2004, REUTERS,
ALL RIGHTS RESERVED.
9
. . . C O N T I N U E D
========================--------------------------------------------------------
the United States, there was strong local demand within
emerging - market economies. Many companies in emerging markets
posted record earnings based on exports and domestic demand.
DID THE WEAKENING U.S. DOLLAR HELP?
In some cases, yes. However, countries such as China, Taiwan,
and Malaysia, among others, peg their currencies to the U.S.
dollar, so there was no translation effect. Local currencies in
South Africa, South Korea, and in much of Latin America are not
pegged to the U.S. dollar, and their strength helped magnify
the impact of positive local stock market performance.
WHERE WAS THE FUND'S BEST PERFORMANCE?
We did very well in South Korea. Korea Electric Power Corp.
(KEPCO) led performance. It was able to buy raw materials
cheaply with its appreciating currency, and also benefited from
strong demand for electricity due to high industrial
production.
In India, we benefited from a post-Indian election bounce in
the telecom firm Mahanagar Telephone Nigam Ltd. ADR (MTNL), as
the new government moved to increase foreign ownership of local
telecoms and rumors began circulating about possible industry
consolidation.
South Africa was another area where our holdings did quite
well. Bidvest Group Ltd., an industrial conglomerate that
benefited from a stronger local economy and currency, led
performance there.
WHAT AREAS DETRACTED FROM PERFORMANCE?
We were hurt in Mexico because we had no exposure to American
Movil, a high-performing stock we thought was too expensive.
Technology was another weak area for the Fund, especially in
Taiwan, because rising inventories and limited demand
visibility hurt the technology sector.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 13-19.
10
. . . C O N T I N U E D
========================--------------------------------------------------------
COMMENTARY on the Fund
WHAT'S YOUR OUTLOOK?
We will continue to look for attractive valuations across
emerging markets. There are many companies with tremendous
potential, but there is always price risk, so we remain
sensitive to valuation in our ongoing effort to conserve
capital.
We thank you for the opportunity and privilege of serving you.
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, SUCH AS
CURRENCY FLUCTUATIONS, MARKET ILLIQUIDITY, AND POLITICAL
INSTABILITY.
11
P O R T F O L I O
==================--------------------------------------------------------------
HIGHLIGHTS
TOP 10 INDUSTRIES*
(% of Net Assets)
Diversified Banks 12.7%
Integrated Telecommunication Services 10.5%
Integrated Oil & Gas 5.6%
Electric Utilities 4.6%
Wireless Telecommunication Services 4.5%
Semiconductors 4.4%
Industrial Conglomerates 2.8%
Automobile Manufacturers 2.5%
Multi-Line Insurance 2.5%
Computer Hardware 2.4%
*EXCLUDES MONEY MARKET INSTRUMENTS AND SHORT-TERM INVESTMENTS PURCHASED WITH
CASH COLLATERAL FROM SECURITIES LOANED.
TOP 10 EQUITY HOLDINGS
(% of Net Assets)
Korea Electric Power Corp. 2.8%
Nedcor Ltd. 2.5%
United Microelectronics Corp. 2.5%
China Mobile Ltd. 2.4%
Telefonos de Mexico S.A. de C.V. ADR "L" 2.4%
Petroleo Brasileiro S.A. ADR 2.1%
Reliance Industries Ltd. GDR 1.9%
LUKoil Holdings ADR 1.7%
Samsung Electronics Co. Ltd. 1.7%
Coca Cola Femsa S.A. de
C.V. ADR 1.5%
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS ON PAGES 13-19.
12
. . . C O N T I N U E D
========================--------------------------------------------------------
HIGHLIGHTS
ASSET ALLOCATION
11/30/04
[PIE CHART OF ASSET ALLOCATION]
Korea 18.3%
Taiwan 12.0%
South Africa 11.8%
India 9.5%
Brazil 9.4%
Mexico 7.2%
Hong Kong 4.1%
Malaysia 3.7%
Other* 24.6%
[END CHART]
*INCLUDES COUNTRIES WITH LESS THAN 3% OF THE PORTFOLIO, MONEY
MARKET INSTRUMENTS (4.5%), AND SHORT-TERM INVESTMENTS PURCHASED
WITH CASH COLLATERAL FROM SECURITIES LOANED (0.9%).
PERCENTAGES ARE OF THE NET ASSETS OF THE FUND AND MAY NOT EQUAL
100%.
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, SUCH AS
CURRENCY FLUCTUATIONS, MARKET ILLIQUIDITY, AND POLITICAL
INSTABILITY.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 13-19.
13
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ----------------------------------------------------------------------------------------------
EQUITY SECURITIES (95.2%)
STOCKS (95.2%)
BERMUDA (0.2%)
914,000 Brilliance China Automotive Holdings Ltd.
(Auto Parts & Equipment) $ 183
66,400 Texwinca Holdings Ltd. (Textiles) 61
---------
244
---------
BRAZIL (9.4%)
9,860 Banco Bradesco S.A. (Preferred) (Diversified Banks) 642
12,870 Banco Itau S.A. ADR (Preferred) (Diversified Banks) 830
17,400 Brasil Telecom Participacoes S.A. ADR (Preferred)
(Integrated Telecommunication Services) 649
30,781,400 Companhia Energetica de Minas Gerais (CEMIG) (Preferred)
(Electric Utilities) 711
14,822,900 Companhia Paranaense de Energia-Copel (Electric Utilities) 55
128,288,700 Companhia Paranaense de Energia-Copel (Preferred) (Electric Utilities) 588
8,580 Companhia de Bebidas das Americas ADR (Preferred) (Brewers) 221
13,360,300 Companhia de Saneamento Basico do Estado de Sao Paulo
(SABESP) (Water Utilities) 714
17,600 Companhia de Saneamento Basico do Estado de Sao Paulo
(SABESP) ADR (Water Utilities) 238
6,590,400 Companhia de Tecidos Norte de Minas (Preferred) (Textiles) 632
9,851,100 Duratex S.A. (Preferred) (Building Products) 433
35,674 Embraer Empresa Brasileira de Aeronautica S.A. ADR
(Preferred) (Aerospace & Defense) 998
66,126 Petroleo Brasileiro S.A. ADR (Integrated Oil & Gas) 2,524
23,800 Telecomunicacoes Brasileiras S.A. ADR (Preferred)
(Integrated Telecommunication Services) 732
23,603,400 Telecomunicacoes FIA (Preferred) (Integrated
Telecommunication Services) 420
17,100 Telemar Norte Leste S.A. (Integrated Telecommunication Services) 398
235,270,600 Telemig Celular S.A. (Preferred) (Wireless Telecommunication Services) 339
24,879 Tim Participacoes S.A. ADR (Preferred) (Wireless
Telecommunication Services) 379
---------
11,503
---------
CHILE (0.4%)
16,000 Banco Santander Chile S.A. ADR (Diversified Banks) 476
---------
14
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ----------------------------------------------------------------------------------------------
CHINA (1.9%)
1,295,700 China Telecom Corp. Ltd. "H" (Integrated Telecommunication Services) $ 479
684,500 Denway Motors Ltd. (Automobile Manufacturers) 245
2,571,100 Huadian Power International Corp. Ltd. "H"
(Electric Utilities) 884
1,852,000 Qingling Motors Co. Ltd. "H" (Automobile Manufacturers) 257
1,939,000 Sinopec Yizheng Chemical Fibre Co. Ltd. "H" (Specialty Chemicals) 424
---------
2,289
---------
CROATIA (0.4%)
35,800 Pliva d.d. GDR (Pharmaceuticals) 473
---------
EGYPT (0.7%)
82,600 Commercial International Bank S.A.E. GDR (Diversified Banks) 500
35,100 Suez Cement Co. S.A.E. GDR (Construction Materials) 365
---------
865
---------
HONG KONG (4.1%)
199,000 Beijing Enterprises Holdings Ltd. (Packaged Foods & Meat) 240
897,900 China Mobile Ltd. (Wireless Telecommunication Services) 2,944
605,100 China Resources Enterprise Ltd. (Industrial Conglomerates) 887
486,400 Shanghai Industrial Holdings Ltd. (Industrial Conglomerates) 995
---------
5,066
---------
HUNGARY (2.2%)
7,786 Gedeon Richter Rt. (Pharmaceuticals) 957
9,400 MOL Magyar Olaj-es Gazipari Rt. (Integrated Oil & Gas) 632
276,900 Magyar Tavkozlesi Rt. (Integrated Telecommunication Services) 1,175
---------
2,764
---------
INDIA (9.5%)
68,500 Dr. Reddy's Laboratories Ltd. ADR (Pharmaceuticals) 1,213
46,900 Gail India Ltd. GDR (Oil & Gas Refining & Marketing & Transportation) 1,383
47,600 Hindalco Industries Ltd. GDR (Aluminum) 1,387
70,600 ICICI Bank Ltd. ADR (Diversified Banks) 1,308
35,400 ITC Ltd. GDR (Tobacco) 1,033
193,750 Mahanagar Telephone Nigam Ltd. ADR (Integrated
Telecommunication Services) 1,695
96,257 Reliance Industries Ltd. GDR (Diversified Chemicals)(a) 2,302
42,400 State Bank of India Ltd. GDR (Diversified Banks) 1,353
---------
11,674
---------
15
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ----------------------------------------------------------------------------------------------
INDONESIA (2.5%)
394,700 Astra Agro Lestari Tbk (Agricultural Products) $ 145
2,286,000 PT Bank Mandiri Tbk (Regional Banks) 463
544,500 PT Gudang Garam Tbk (Tobacco) 808
8,817,200 PT Indofood Sukses Makmur Tbk (Packaged Foods & Meat) 735
1,657,800 PT Telekomunikasi Indonesia Tbk (Integrated Telecommunication
Services) 921
---------
3,072
---------
ISRAEL (1.0%)
220,400 Bank Hapoalim Ltd. (Diversified Banks) 643
182,000 Super-Sol Ltd. (Food Retail)* 427
3,700 Taro Pharmaceutical Industries Ltd. (Pharmaceuticals)* 110
---------
1,180
---------
KOREA (18.3%)
50 Cheil Communications Inc. (Advertising) 7
11,780 Cheil Jedang Corp. (Packaged Foods & Meat) 781
15,330 Hyundai Department Store Co. (Department Stores) 489
28,850 Hyundai Development Co. (Homebuilding) 472
21,470 Hyundai Motor Co. Ltd. (Automobile Manufacturers) 1,057
22,200 INI Steel Co. (Steel) 292
72,250 Industrial Bank of Korea (Consumer Finance) 530
84,700 KT Corp. ADR (Integrated Telecommunication Services) 1,834
87,653 Kangwon Land Inc. (Casinos & Gaming) 1,162
61,940 Kia Motors Corp. (Automobile Manufacturers) 590
45,320 Kookmin Bank (Diversified Banks)* 1,725
4,300 Kookmin Bank ADR (Diversified Banks)* 161
134,890 Korea Electric Power Corp. (Electric Utilities) 3,371
12,600 LG Chem Ltd. (Diversified Chemicals) 523
8,360 LG Electronics Investment Ltd. (Electrical Components & Equipment) 505
16,000 LG Household & Health Care Ltd. (Household Products) 413
5,800 POSCO (Steel) 1,081
8,500 POSCO ADR (Steel) 402
4,400 SK Telecom Co. Ltd. (Wireless Telecommunication Services)(a) 831
18,500 SK Telecom Co. Ltd. ADR (Wireless Telecommunication Services) 416
15,270 Samsung Corp. (Trading Companies & Distributors) 223
50,970 Samsung Electro Mechanics Co. Ltd. (Communications Equipment)* 1,327
5,062 Samsung Electronics Co. Ltd. (Semiconductors) 2,098
18,420 Samsung Fire & Marine Insurance Co. Ltd. (Multi-Line Insurance) 1,379
6,900 Samsung SDI Co. Ltd. (Computer Storage & Peripherals) 707
---------
22,376
---------
16
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ----------------------------------------------------------------------------------------------
MALAYSIA (3.7%)
744,100 Gamuda Berhad (Construction & Engineering) $ 1,038
225,900 Genting Berhad (Casinos & Gaming) 1,100
217,400 Kuala Lumpur Kepong Berhad (Agricultural Products) 395
16,100 Malaysia International Shipping Corp. Berhad (Marine) 62
147,100 Proton Holdings Berhad (Automobile Manufacturers) 352
117,300 Resorts World Berhad (Hotels, Resorts, & Cruise Lines) 298
778,000 Sime Darby Berhad (Multi-Sector Holdings) 1,238
---------
4,483
---------
MEXICO (7.2%)
111 Cemex S.A. de C.V. ADR (Construction Materials) 3
105,401 Cemex S.A. de C.V. CPO (Construction Materials) 679
86,000 Coca Cola Femsa S.A. de C.V. ADR (Soft Drinks) 1,877
22,500 Consorcio ARA,S.A. de C.V.(Real Estate
Management & Development)* 66
716,500 Controladora Comercial Mexicana S.A. de C.V. (UBC) "B" (Food Retail) 802
1,399,733 Desc S.A. de C.V. ADR "B" (Industrial Conglomerates)* 379
400,500 Grupo Continental S.A. (Soft Drinks) 655
436,900 Kimberly-Clark de Mexico S.A. de C.V. "A" (Household Products) 1,457
83,800 Telefonos de Mexico S.A. de C.V. ADR "L" (Integrated
Telecommunication Services) 2,934
---------
8,852
---------
PHILIPPINES (0.8%)
632,000 ABS-CBN Broadcasting Corp. PDR (Broadcasting & Cable TV) 208
579,540 Bank of the Philippine Islands (Diversified Banks) 526
274,200 Manila Electric Co. "B" (Construction & Engineering)* 121
583,700 SM Prime Holdings, Inc. (Real Estate Management & Development) 78
---------
933
---------
POLAND (1.8%)
3,000 Bank Przemyslowo-Handlowy PBK S.A. (Diversified Banks) 428
46,200 KGHM Polska Miedz S.A. (Diversified Metals & Mining)* 468
21,000 Powszechna Kasa Oszczednosci Bank Polski S.A. (Regional Banks)* 166
174,957 Telekomunikacja Polska S.A. (Integrated Telecommunication Services) 950
48,500 Telekomunikacja Polska S.A. GDR (Integrated
Telecommunication Services) 264
---------
2,276
---------
RUSSIA (1.7%)
16,500 LUKoil Holdings ADR (Integrated Oil & Gas) 2,050
---------
17
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ----------------------------------------------------------------------------------------------
SOUTH AFRICA (11.8%)
50,300 Alexander Forbes Ltd. (Other Diversified Financial Services) $ 93
338,900 Aveng Ltd. (Building Products) 685
86,102 Bidvest Group Ltd. (Industrial Conglomerates) 1,106
259,200 Illovo Sugar Ltd. (Packaged Foods & Meat) 361
9,783 Impala Platinum Holdings Ltd. (Precious Metals & Minerals) 835
18,910 Imperial Holdings Ltd. (Trucking) 332
1,637,707 Metoz Holdings Ltd. (Food Distributors) 578
556,593 Nampak Ltd. (Paper Packaging) 1,432
234,221 Nedcor Ltd. (Diversified Banks) 3,064
35,900 Network Healthcare Holdings Ltd. (Health Care Facilities)* 33
83,900 SASOL Ltd. (Integrated Oil & Gas) 1,669
316,900 Sanlam Ltd. (Life & Health Insurance) 660
118,753 Sappi Ltd. (Paper Products) 1,610
224,300 Shoprite Holdings Ltd. (Food Retail) 519
505,487 Steinhoff International Holdings Ltd. (Home Furnishings) 1,035
52,300 Tongaat-Hulett Group Ltd. (Agricultural Products) 450
---------
14,462
---------
TAIWAN (12.0%)
474,949 Accton Technology Corp. (Communications Equipment)* 193
280,000 Advanced Semiconductor Engineering, Inc. (Semiconductor Equipment)* 208
731,112 Asustek Computer, Inc. (Computer Storage & Peripherals) 1,690
579,000 Benq Corp. (Communications Equipment) 602
545,000 China Motor Corp. Ltd. (Automobile Manufacturers) 604
19,300 Chunghwa Telecom Co. Ltd. ADR (Integrated Telecommunication
Services)(a) 402
1,778,495 Compal Electronics, Inc. (Computer Hardware) 1,706
16,074 Compal Electronics, Inc. GDR (Computer Hardware) 74
404,560 Delta Electronics, Inc. (Electronic Equipment Manufacturers) 628
341,640 Elan Microelectronics Corp. (Semiconductor Equipment) 186
986,000 First Financial Holding Co. Ltd. (Diversified Banks)* 814
441,000 Nien Hsing Textile Co. Ltd. (Textiles) 426
746,463 Quanta Computer, Inc. (Computer Hardware) 1,216
2,331,639 SinoPac Holdings Co. (Diversified Banks) 1,295
561,720 Taiwan Cellular Corp. (Wireless Telecommunication Services) 601
4,945,065 United Microelectronics Corp. (Semiconductors)* 3,100
43,500 United Microelectronics Corp. ADR (Semiconductors)* 152
2,179,440 Yageo Corp. (Electrical Components & Equipment)* 744
---------
14,641
---------
18
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ----------------------------------------------------------------------------------------------
THAILAND (2.7%)
96,400 C.P. 7-Eleven Public Co. Ltd. (General Merchandise Stores) $ 122
3,538,100 Charoen Pokphand Foods Public Co. Ltd. (Agricultural Products) 317
328,200 Delta Electronics Public Co. Ltd. (Electrical Components & Equipment) 139
607,300 Kasikornbank Public Co. Ltd.(Diversified Banks)* 886
3,237,500 Krung Thai Bank Public Co. Ltd. (Regional Banks) 718
697,700 Siam Commercial Bank Public Co. Ltd. (Diversified Banks) 893
225,200 Siam Makro Public Co. Ltd. (General Merchandise Stores) 291
---------
3,366
---------
TURKEY (0.1%)
76,101,500 Tupras-Turkiye Petrol Rafinerileri A.S. (Oil & Gas Refining
& Marketing & Transportation) 110
---------
UNITED KINGDOM (2.8%)
72,330 Anglo American plc (Precious Metals & Minerals) 1,752
651,400 Old Mutual plc (Multi-Line Insurance) 1,631
---------
3,383
---------
Total stocks (cost: $96,661) 116,538
---------
RIGHTS (0.0%)(f)
BRAZIL
1 Telesp Celular Participacoes S.A.* (cost: $0) -
---------
Total equity securities (cost: $96,661) 116,538
---------
MONEY MARKET INSTRUMENTS (4.5%)
MONEY MARKET FUNDS(b)
722,714 SSgA Money Market Fund, 1.61% 722
4,827,741 SSgA Prime Money Market Fund, 1.85% 4,828
---------
Total money market instruments (cost: $5,550) 5,550
---------
19
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (0.9%)
REPURCHASE AGREEMENT (0.8%)(c)
$1,000 Deutsche Bank Securities, Inc., 2.05%, acquired on 11/30/2004
and due 12/01/2004 at $1,000 (collateralized by $1,492 of
Fannie Mae Notes(d), 3.84%(e), due 10/01/2033;
market value $1,020) $ 1,000
---------
NUMBER
OF SHARES
- ------------
MONEY MARKET FUNDS (0.1%)(b)
12,367 AIM Short-Term Investment Co. Liquid Assets Portfolio,1.93%, 13
10,253 Merrill Lynch Premier Institutional Fund, 1.90%, 10
---------
23
---------
Total short-term investments purchased with cash collateral
from securities loaned (cost: $1,023) 1,023
---------
TOTAL INVESTMENTS (COST: $103,234) $ 123,111
=========
20
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
GENERAL NOTES
- --------------------------------------------------------------------------------
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category 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.
CPO - Certificate of ordinary participation.
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.
PDR - Philippine depositary receipts are receipts issued by a U.S. or
foreign bank evidencing ownership of a stock traded on the Philippine
stock exchange. Dividends are paid in U.S. dollars.
SPECIFIC NOTES
- --------------------------------------------------------------------------------
(a) The security or a portion thereof was out on loan as of November
30, 2004.
(b) Rate represents the money market fund annualized seven-day yield
at November 30, 2004.
(c) 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.
21
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
(d) U.S. government agency issues - securities issued by
government-sponsored enterprises (GSEs) are supported only by the
credit of the issuing agency, instrumentality, or corporation, and
are neither issued nor guaranteed by the U.S. government.
(e) Variable- or floating-rate security - interest rate is adjusted
periodically. The interest rate disclosed represents the current
rate at November 30, 2004.
(f) Represents less than 0.1% of net assets.
* Non-income-producing security for the 12 months preceding
November 30, 2004.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
S T A T E M E N T
==================--------------------------------------------------------------
of ASSETS and LIABILITIES
(in thousands)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
ASSETS
Investments in securities, at market value (including securities on
loan of $1,010) (identified cost of $103,234) $123,111
Cash 34
Cash denominated in foreign currencies (identified cost of $1,154) 1,175
Receivables:
Capital shares sold 317
USAA Investment Management Company 22
Dividends and interest 162
Securities sold 1,236
Other 1
--------
Total assets $126,058
--------
LIABILITIES
Payables:
Upon return of securities loaned 1,023
Securities purchased 2,321
Capital shares redeemed 105
Unrealized depreciation on foreign currency contracts held, at value 1
Accrued management fees 92
Accrued transfer agent's fees 4
Other accrued expenses and payables 118
--------
Total liabilities 3,664
--------
Net assets applicable to capital shares outstanding $122,394
========
NET ASSETS CONSIST OF:
Paid-in capital $184,165
Accumulated undistributed net investment income 891
Accumulated net realized loss on investments (82,491)
Net unrealized appreciation of investments 19,877
Net unrealized depreciation on foreign currency translations (48)
--------
Net assets applicable to capital shares outstanding $122,394
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 10,162
========
Net asset value, redemption price, and offering price per share $ 12.04
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA EMERGING MARKETS FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $175) $ 1,133
Interest 17
Securities lending 7
-------
Total income 1,157
-------
EXPENSES
Management fees 498
Administrative and servicing fees 75
Transfer agent's fees 173
Custody and accounting fees 115
Postage 13
Shareholder reporting fees 12
Trustees' fees 3
Registration fees 25
Professional fees 24
Other 4
-------
Total expenses 942
Expenses reimbursed (38)
Expenses paid indirectly (15)
-------
Net expenses 889
-------
NET INVESTMENT INCOME 268
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on:
Investments 5,576
Foreign currency transactions 39
Change in net unrealized appreciation/depreciation of:
Investments 13,216
Foreign currency translations 9
-------
Net realized and unrealized gain 18,840
-------
Increase in net assets resulting from operations $19,108
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
S T A T E M E N T S
====================------------------------------------------------------------
of Changes in NET ASSETS
(in thousands)
USAA EMERGING MARKETS FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004 (UNAUDITED),
AND YEAR ENDED MAY 31, 2004
11/30/2004 5/31/2004
-------------------------
FROM OPERATIONS
Net investment income $ 268 $ 762
Net realized gain on investments 5,576 15,113
Net realized gain (loss) on foreign currency transactions 39 (67)
Change in net unrealized appreciation/depreciation of:
Investments 13,216 5,516
Foreign currency translations 9 (56)
-------------------------
Increase in net assets resulting
from operations 19,108 21,268
-------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 23,623 144,757
Cost of shares redeemed (15,417) (125,739)
-------------------------
Increase in net assets from capital
share transactions 8,206 19,018
-------------------------
Net increase in net assets 27,314 40,286
NET ASSETS
Beginning of period 95,080 54,794
-------------------------
End of period $ 122,394 $ 95,080
=========================
Accumulated undistributed net investment income:
End of period $ 891 $ 623
=========================
CHANGE IN SHARES OUTSTANDING
Shares sold 2,179 15,944
Shares redeemed (1,472) (14,059)
-------------------------
Increase in shares outstanding 707 1,885
=========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (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 Emerging Markets Fund (the
Fund). The Fund's investment objective is capital appreciation. The
Fund concentrates its investments in securities of companies in
emerging market countries, which may have limited or developing capital
markets. Such investments may involve greater risks than investments in
developed markets, and political, social, or economic changes in these
markets may cause the prices of such investments to be volatile.
A. SECURITY VALUATION - The value of each security is determined
(as of the close of trading on the New York Stock Exchange (NYSE)
on each business day the exchange is open) as set forth below:
1. Equity 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. Equity 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. Securities trading in various foreign markets may take place
on days when the NYSE is closed. Further, when the NYSE is
open, the foreign markets may be closed. Therefore, the
calculation of the Fund's net asset value (NAV) may not take
26
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
place at the same time the prices of certain foreign securities
held by the Fund are determined. In most cases, events
affecting the values of foreign securities that occur between
the time of their last quoted sales or official closing prices
and the close of normal trading on the NYSE on a day the Fund's
NAV is calculated will not be reflected in the value of the
Fund's foreign securities. However, USAA Investment Management
Company (the Manager), an affiliate of the Fund, and the Fund's
subadviser, if applicable, will monitor for events that would
materially affect the value of the Fund's foreign securities
and, if necessary, the Manager will value the foreign
securities in good faith, considering such available
information that the Manager deems relevant, under valuation
procedures approved by the Trust's Board of Trustees. In
addition, the Fund may use information from an external vendor
or other sources to adjust the foreign market closing prices of
foreign equity securities to reflect what the Fund believes to
be the fair value of the securities as of the close of the
NYSE. Fair valuation of affected foreign equity securities may
occur frequently based on an assessment that events that occur
on a fairly regular basis (such as U.S. market movements) are
significant.
3. Investments in open-end investment companies, other than
exchange-traded funds, are valued at their NAV at the end of
each business day.
4. Debt securities purchased with original maturities of 60 days
or less are stated at amortized cost, which approximates market
value. Repurchase agreements are valued at cost.
5. 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
27
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
valued in good faith at fair value, using methods determined by
the Manager in consultation with the Fund's subadviser if
applicable, under valuation procedures approved by the Trust's
Board of Trustees. Valuing securities at fair value is intended
to cause the Fund's NAV to be more reliable than it otherwise
would be.
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. Government-
sponsored enterprises (GSEs), such as Federal National Mortgage
Association (Fannie Mae) and Federal Home Loan Mortgage
Corporation (Freddie Mac), are supported only by the credit of the
issuing U.S. government agency, and are neither issued nor
guaranteed by the U.S. government. Obligations pledged as
28
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
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. 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
exchange rate 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 may arise
from sales of foreign currency, currency gains/losses realized
between the trade and settlement dates on security transactions,
and from the difference between amounts of dividends, interest,
and foreign withholding taxes recorded on the Fund's books and
the U.S. dollar equivalent of the amounts received. At the Fund's
29
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
tax year-end of May 31, 2005, net realized foreign currency
gains/losses will be reclassified from accumulated net realized
gain/loss to accumulated undistributed net investment income on
the statement of assets and liabilities as such amounts are
treated as ordinary income/loss for tax purposes. Net unrealized
foreign currency exchange gains/losses arise from changes in the
value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rate.
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 arrangements with the
Fund's custodian and other banks utilized by the Fund for cash
management purposes, realized credits, if any, generated from
cash balances in the Fund's bank accounts are used to reduce the
Fund's expenses. For the six-month period ended November 30,
2004, brokerage commission reimbursements and custodian and other
bank credits reduced the Fund's expenses by $15,000 and less than
$500, respectively, resulting in a total reduction in Fund
expenses of approximately $15,000.
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
30
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
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 a
rate per annum equal to the rate at which CAPCO obtains funding in the
capital markets, 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 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
31
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
allocated among the funds based on their respective average net assets
for the period. For the six-month period ended November 30, 2004, the
Fund paid CAPCO facility fees of less than $500. The Fund had no
borrowings under either of these agreements during the six-month
period ended November 30, 2004.
On November 17, 2004, the Trust's Board of Trustees approved,
effective January 6, 2005, the termination of the $100 million line of
credit with Bank of America and State Street and the renewal of the
line of credit with CAPCO at a reduced amount of $300 million.
(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, 2005, 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, 2004, the Fund had capital loss
carryovers of $87,976,000 for federal income tax purposes, which if
not offset by subsequent capital gains, will expire between 2007 and
2010, as shown below. 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.
CAPITAL LOSS CARRYOVER BALANCE EXPIRES
----------------------------------------------------------------
$40,625,000 2007
17,388,000 2009
29,963,000 2010
-----------
Total $87,976,000
===========
32
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
(4) INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the six-month period ended November 30,
2004, were $27,786,000 and $21,498,000, respectively.
As of November 30, 2004, the cost of securities, 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, 2004, were $22,877,000 and $3,000,000, respectively,
resulting in net unrealized appreciation of $19,877,000.
(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.
33
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
At November 30, 2004, the terms of open foreign currency contracts
were as follows (in thousands):
FOREIGN CURRENCY CONTRACTS TO BUY
- ------------------------------------------------------------------------------------
U.S. DOLLAR UNREALIZED
EXCHANGE CONTRACTS TO VALUE AS OF IN EXCHANGE APPRECIATION
DATE RECEIVE 11/30/2004 FOR U.S. DOLLAR (DEPRECIATION)
- ------------------------------------------------------------------------------------
12/02/2004 313,274 $ 35 $ 35 $ -
Indonesian Rupiah
12/03/2004 218 57 57 -
Malaysian Ringgit
12/01/2004 1,350 34 34 -
Thailand Baht
11/30/2004 256 44 44 -
South African Rand
12/01/2004 177 30 30 -
South African Rand
12/01/2004 708 122 123 (1)
South African Rand
- ------------------------------------------------------------------------------------
$322 $323 $(1)
- ------------------------------------------------------------------------------------
FOREIGN CURRENCY CONTRACTS TO SELL
- ------------------------------------------------------------------------------------
U.S. DOLLAR UNREALIZED
EXCHANGE CONTRACTS TO VALUE AS OF IN EXCHANGE APPRECIATION
DATE DELIVER 11/30/2004 FOR U.S. DOLLAR (DEPRECIATION)
- ------------------------------------------------------------------------------------
12/01/2004 18 $35 $35 $ -
Pound Sterling
12/01/2004 62 8 8 -
Hong Kong Dollar
12/02/2004 52 7 7 -
Hong Kong Dollar
- ------------------------------------------------------------------------------------
$50 $50 -
- ------------------------------------------------------------------------------------
34
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
(6) LENDING OF PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
The Fund, through its securities-lending agent, Metropolitan West
Securities LLC (MetWest), 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 to the
fair value of the securities loaned, initially in an amount at least
equal to 102% of the fair value of domestic securities loaned and 105%
of the fair value of international securities loaned. Cash collateral
is invested in high-quality short-term investments. The Fund and
MetWest retain 80% and 20%, respectively, of the income earned from
the investment of cash received as collateral. MetWest receives no
other fees from the Fund for its services as securities-lending agent.
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. For the six-month period ended
November 30, 2004, the Fund received securities-lending income of
$7,000, which is net of the 20% income retained by MetWest. As of
November 30, 2004, the Fund loaned securities having a fair market
value of approximately $1,010,000 and received cash collateral of
$1,023,000 for the loans. The cash collateral was invested in
short-term investments, as noted in the Fund's portfolio of
investments.
(7) TRANSACTIONS WITH MANAGER
- --------------------------------------------------------------------------------
A. MANAGEMENT FEES - The Manager provides investment management
services to the Fund pursuant to an Investment Advisory Agreement.
Under this agreement, the Manager is responsible for managing the
business and affairs of the Fund,
35
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
subject to the authority of and supervision by the Trust's Board
of Trustees. The Fund is authorized to select (with approval of
the Trust's Board of Trustees) one or more subadvisers to manage
the actual day-to-day investment of the Fund's assets. The
Manager monitors each subadviser's performance through
quantitative and qualitative analysis, and periodically reports
to the Trust's Board of Trustees as to whether each subadviser's
agreement should be renewed, terminated, or modified. The Manager
also is responsible for allocating assets to the subadvisers. The
allocation for each subadviser can range from 0% to 100% of the
Fund's assets, and the Manager can change the allocations without
shareholder approval.
The investment management fee for the Fund is composed of a base
fee and a performance adjustment that increases or decreases the
base fee depending upon the performance of the Fund relative to
the performance of the Lipper Emerging Markets Funds Index, which
tracks the total return performance of the 30 largest funds in
the Lipper Emerging Markets Funds category. The Fund's base fee
is accrued daily and paid monthly at an annualized rate of 1.00%
of the Fund's average net assets.
The performance adjustment is calculated monthly by comparing the
Fund's performance to that of the Lipper index over the
performance period. The performance period for the Fund consists
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
36
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
(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%.
Under the performance fee arrangement, the Fund will pay a
positive performance fee adjustment for a performance period
whenever the Fund outperforms the Lipper Emerging Markets Funds
Index over that period, even if the Fund had overall negative
returns during the performance period.
For the six-month period ended November 30, 2004, the Fund
incurred total management fees, paid or payable to the Manager,
of $498,000, which is net of a performance adjustment of $(4,000)
that decreased the base management fee of 1.00% by 0.01%.
B SUBADVISORY ARRANGEMENTS - The Manager has entered into an
investment subadvisory agreement with The Boston Company Asset
Management, LLC (The Boston Company), under which The Boston
Company directs the investment and reinvestment of the Fund's
assets (as allocated from time to time by the Manager). The
Manager (not the Fund) pays The Boston Company a subadvisory fee
in the annual amount of 0.69% of the portion of the Fund's average
net assets that The Boston Company manages. For the six-month
period ended November 30, 2004, the Manager paid The Boston
Company subadvisory fees of $347,000.
37
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
C. 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,
2004, the Fund incurred administrative and servicing fees, paid or
payable to the Manager, of $75,000.
D. EXPENSE LIMITATION -The Manager has voluntarily agreed to limit
the annual expenses of the Fund to 1.80% of the Fund's average
annual net assets, excluding the effect of any expenses paid
indirectly, and will reimburse the Fund for all expenses in excess
of that amount. This agreement may be modified or terminated at
any time. For the six-month period ended November 30, 2004, the
Fund incurred reimbursable expenses of $38,000.
E. 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, 2004, the Fund
incurred transfer agent's fees, paid or payable to USAA Transfer
Agency Company, of $173,000.
F. 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.
38
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
(9) 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,
------------------------------------------------------------------------------------------
2004 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 10.06 $ 7.24 $ 7.93 $ 7.16 $ 8.98 $ 8.49
------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income (loss) .02 .07 .03(a) (.02)(a) .04(a) .02
Net realized and
unrealized gain (loss) 1.96 2.75 (.72)(a) .81(a) (1.85)(a) .54
------------------------------------------------------------------------------------------
Total from investment operations 1.98 2.82 (.69)(a) .79(a) (1.81)(a) .56
Less distributions:
From net investment income - - - (.02) (.01) (.07)
------------------------------------------------------------------------------------------
Net asset value at end of period $ 12.04 $ 10.06 $ 7.24 $ 7.93 $ 7.16 $ 8.98
==========================================================================================
Total return (%)* 19.68 38.95 (8.70) 11.11 (20.19) 6.55
Net assets at end of period (000) $122,394 $95,080 $54,794 $57,073 $51,709 $234,953
Ratio of expenses to
average net assets (%)** 1.80(b,c,d) 1.92(c,d) 2.33(c,d) 2.51(d) 1.39(d) 1.28(d)
Ratio of expenses to
average net assets,
excluding reimbursements (%)** 1.87(b,d) - - - - -
Ratio of net investment
income (loss) to average
net assets (%)** .53(b) .92 .42 (.33) .47 .14
Portfolio turnover (%) 22.11 75.67 140.89 257.45 196.75 147.24
* Assumes reinvestment of all net investment income distributions during the period. Calculated using net assets adjusted for
last day trades and could differ from the Lipper reported return.
** For the six-month period ended November 30, 2004, average net assets were $100,471,000.
(a) Calculated using average shares.
(b) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(c) Effective March 1, 2004, the Manager voluntarily agreed to limit the Fund's expense ratio to 1.80% of the Fund's average
annual net assets. From June 1, 2003, through February 29, 2004, the voluntary expense ratio limit was 2.10% of the Fund's
average annual net assets.
(d) Reflects total operating expenses of the Fund before reductions of any expenses paid indirectly. The Fund's expenses paid
indirectly decreased the expense ratios as follows:
(.03%) (.03%) - (.01%) (.01%) -
39
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
EXAMPLE
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: direct
costs, such as wire fees, redemption fees, and low balance fees; and
indirect costs, including management fees, transfer agency fees, and
other Fund operating expenses. This Example is intended to help you
understand your indirect costs, also referred to as "ongoing costs,"
(in dollars) of investing in the Fund and to compare these costs with
the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire six-month period of
June 1, 2004, through November 30, 2004.
ACTUAL EXPENSES
- --------------------------------------------------------------------------------
The first line of the table on the next page provides information
about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested at the
beginning of the period, to estimate the expenses that you paid over
the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading "Expenses
Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
- --------------------------------------------------------------------------------
The second line of the table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may
40
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2004 (UNAUDITED)
use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example
with the 5% hypothetical examples that appear in the shareholder
reports of other funds.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any direct costs,
such as wire fees, redemption fees, or low balance fees. Therefore,
the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of
owning different funds. In addition, if these direct costs were
included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JUNE 1, 2004-
JUNE 1, 2004 NOVEMBER 30, 2004 NOVEMBER 30, 2004
------------------------------------------------------
Actual $1,000.00 $1,196.80 $9.75
Hypothetical
(5% return before expenses) 1,000.00 1,016.19 8.92
*Expenses are equal to the Fund's annualized expense ratio of 1.77%,
which is net of reimbursements and any expenses paid indirectly,
multiplied by the average account value over the period, multiplied by
183 days/365 days (to reflect the one-half year period). The Fund's
ending account value on the first line in the table is based on its
actual total return of 19.68% for the six-month period of June 1,
2004, through November 30, 2004.
41
N O T E S
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TRUSTEES Christopher W. Claus
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 (800) 531-8181
INFORMATION ABOUT For account servicing, exchanges,
MUTUAL FUNDS or redemptions
(800) 531-8448
RECORDED MUTUAL 24-hour service (from any phone)
FUND PRICE QUOTES (800) 531-8066
MUTUAL FUND (from touch-tone phones only)
USAA TOUCHLINE For account balance, last transaction, fund
prices, or to exchange or redeem fund shares
(800) 531-8777
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, APPROVED BY THE
TRUST'S BOARD OF TRUSTEES FOR USE IN VOTING PROXIES ON BEHALF OF THE FUND, ARE
AVAILABLE WITHOUT CHARGE (I) BY CALLING (800) 531-8448; (II) AT USAA.COM; AND
(III) ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. INFORMATION REGARDING HOW THE
FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT
12-MONTH PERIOD ENDED JUNE 30, IS AVAILABLE (I) AT USAA.COM; AND (II) ON THE
SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
AS A RESULT OF RULES RECENTLY ADOPTED BY THE SEC, THE FUND FILES ITS COMPLETE
SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF
EACH FISCAL YEAR ON FORM N-Q. THESE FORM N-QS ARE AVAILABLE (I) BY CALLING (800)
531-8448; (II) AT USAA.COM; AND (III) ON THE SEC'S WEB SITE AT
HTTP://WWW.SEC.GOV. THESE FORM N-QS ALSO MAY BE REVIEWED AND COPIED AT THE SEC'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
[LOGO OF RECYCLED PAPER]
Recycled
Paper
- --------------------------------------------------------------------------------
[LOGO OF USAA] 9800 Fredericksburg Road -------------
USAA(R) San Antonio, Texas 78288 PRSRT STD
U.S.
Postage
P A I D
USAA
-------------
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and others electronically.
Sign up at USAA.COM.
- --------------------------------------------------------------------------------
[LOGO OF USAA] WE KNOW WHAT IT MEANS TO SERVE.(R)
USAA ----------------------------------
INSURANCE o MEMBER SERVICES
25559-0105 (C)2005, 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.
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 principal executive officer and principal 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.
In October 2004, certain changes were made to the policies and procedures to
address the reporting of audit and non-audit fees required in annual reports on
Form N-CSR. None of these changes are relevant to this semi-annual 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). NOT APPLICABLE. This item must be disclosed only in annual reports.
(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
-----------------------------------------------------------
Signature and Title: Eileen M. Smiley, Assistant Secretary
Date: 01/25/05
------------------------------
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: 01/25/05
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By:* /s/ DAVID HOLMES
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Signature and Title: David Holmes/Treasurer
Date: 01/25/05
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*Print the name and title of each signing officer under his or her signature.