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 GROWTH & TAX STRATEGY FUND - SEMIANNUAL REPORT FOR PERIOD ENDING
NOVEMBER 30, 2004
[LOGO OF USAA]
USAA(R)
USAA GROWTH and
TAX STRATEGY Fund
[GRAPHIC OF USAA GROWTH AND TAX STRATEGY 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 38
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
==============------------------------------------------------------------------
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
========================--------------------------------------------------------
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 GROWTH AND TAX STRATEGY FUND
OBJECTIVE
- --------------------------------------------------------------------------------
Conservative balance for the investor between income, the
majority of which is exempt from federal income tax, and the
potential for long-term growth of capital to preserve
purchasing power.
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
Invests principally in tax-exempt bonds and money market
instruments and the remainder in blue chip stocks.
- --------------------------------------------------------------------------------
11/30/04 5/31/04
- --------------------------------------------------------------------------------
Net Assets $190.6 Million $186.8 Million
Net Asset Value Per Share $15.39 $14.61
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AND 30-DAY SEC YIELD* AS OF 11/30/04
- --------------------------------------------------------------------------------
5/31/04 TO 11/30/04** 1 YEAR 5 YEARS 10 YEARS 30-DAY SEC YIELD
6.57% 9.11% 0.77% 7.11% 1.69%
* CALCULATED AS PRESCRIBED BY THE SECURITIES AND EXCHANGE COMMISSION.
** 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
========================--------------------------------------------------------
OVERVIEW
CUMULATIVE PERFORMANCE COMPARISON
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LEHMAN BROTHERS USAA
RUSSELL 1000 LIPPER BALANCED LIPPER BALANCED MUNICIPAL BOND GROWTH & TAX
GROWTH INDEX FUNDS INDEX FUNDS AVERAGE INDEX STRATEGY FUND
------------ --------------- --------------- --------------- -------------
11/30/1994 $10000.00 $10000.00 $10000.00 $10000.00 $10000.00
12/31/1994 10167.53 10096.11 10088.10 10220.14 10077.15
1/31/1995 10385.06 10221.60 10227.86 10512.36 10302.24
2/28/1995 10820.13 10519.51 10542.73 10818.09 10587.93
3/31/1995 11135.71 10705.54 10733.27 10942.43 10787.22
4/30/1995 11379.22 10906.32 10942.92 10955.34 10944.57
5/31/1995 11775.32 11255.37 11319.17 11304.92 11206.82
6/30/1995 12229.83 11454.84 11529.34 11206.12 11206.46
7/31/1995 12738.06 11697.00 11801.55 11312.13 11385.84
8/31/1995 12751.97 11788.27 11891.23 11455.69 11509.79
9/30/1995 13339.77 12069.81 12173.08 11528.07 11749.57
10/31/1995 13349.02 12039.22 12150.73 11695.65 11704.90
11/30/1995 13867.85 12413.38 12531.51 11889.96 12106.98
12/31/1995 13947.35 12608.76 12711.83 12004.09 12364.94
1/31/1996 14413.89 12836.36 12953.35 12094.78 12554.47
2/29/1996 14677.50 12842.54 12993.22 12013.09 12608.62
3/31/1996 14696.34 12890.99 13035.97 11859.63 12716.70
4/30/1996 15083.01 12976.32 13154.30 11825.99 12716.70
5/31/1996 15610.04 13109.30 13327.60 11821.49 12844.14
6/30/1996 15631.24 13152.53 13350.78 11950.33 12935.84
7/31/1996 14715.41 12814.05 12966.41 12058.44 12762.08
8/31/1996 15095.23 13016.39 13203.05 12055.74 12884.61
9/30/1996 16194.43 13499.20 13707.08 12224.22 13233.35
10/31/1996 16292.01 13784.81 13962.83 12362.38 13423.62
11/30/1996 17515.24 14427.24 14601.90 12588.82 13870.76
12/31/1996 17172.32 14254.45 14442.56 12535.66 13740.12
1/31/1997 18376.75 14695.25 14888.57 12559.39 14018.58
2/28/1997 18252.32 14749.79 14889.11 12674.72 14124.19
3/31/1997 17264.59 14321.10 14449.30 12505.63 13806.38
4/30/1997 18411.01 14751.62 14881.46 12610.45 14087.35
5/31/1997 19739.65 15355.70 15543.66 12800.25 14668.67
6/30/1997 20529.66 15864.71 16020.23 12936.60 14969.02
7/31/1997 22345.34 16768.37 16952.74 13294.89 15540.25
8/31/1997 21037.46 16236.83 16479.90 13170.26 15189.34
9/30/1997 22072.70 16884.03 17138.12 13326.43 15631.03
10/31/1997 21256.88 16576.59 16858.90 13412.32 15580.51
11/30/1997 22159.76 16881.08 17151.05 13491.31 15782.59
12/31/1997 22408.00 17147.78 17411.13 13688.02 15960.61
1/31/1998 23078.05 17269.63 17519.17 13829.18 16073.80
2/28/1998 24814.02 17955.27 18271.53 13833.38 16567.75
3/31/1998 25803.22 18504.30 18809.28 13845.69 17020.38
4/30/1998 26160.29 18633.92 18953.78 13783.23 16989.29
5/31/1998 25417.96 18445.52 18742.19 14001.26 16906.36
6/30/1998 26974.71 18785.67 19045.92 14056.52 17062.00
7/31/1998 26796.16 18565.59 18799.52 14091.66 16825.09
8/31/1998 22774.70 16966.15 17097.04 14309.40 15780.77
9/30/1998 24524.19 17698.43 17839.29 14487.79 16401.56
10/31/1998 26495.24 18360.56 18619.58 14487.49 16741.93
11/30/1998 28510.60 19032.61 19353.16 14538.25 17348.22
12/31/1998 31081.40 19734.77 20067.06 14574.89 17807.73
1/31/1999 32906.44 20050.34 20445.82 14748.18 18369.04
2/28/1999 31403.17 19568.40 19888.62 14683.91 17983.83
3/31/1999 33057.04 20051.42 20383.76 14704.03 18511.20
4/30/1999 33099.31 20708.21 20975.52 14740.67 18787.98
5/31/1999 32082.08 20388.89 20668.78 14655.38 18444.77
6/30/1999 34329.27 20952.61 21291.17 14444.54 18967.68
7/31/1999 33238.24 20560.74 20870.10 14497.10 18726.41
8/31/1999 33781.33 20345.01 20630.49 14380.88 18581.51
9/30/1999 33071.69 20084.34 20356.08 14386.88 18313.66
10/31/1999 35569.19 20665.88 20967.67 14231.01 18964.91
11/30/1999 37488.29 20888.23 21261.23 14382.38 19122.11
12/31/1999 41387.36 21506.30 21966.14 14275.16 19458.65
1/31/2000 39446.77 20966.02 21375.65 14212.99 19074.23
2/29/2000 41375.15 20915.51 21455.04 14378.17 19345.59
3/31/2000 44336.61 22146.99 22679.04 14692.32 20634.16
4/30/2000 42226.88 21741.13 22217.36 14605.52 20144.77
5/31/2000 40100.49 21536.57 21930.94 14529.54 19666.76
6/30/2000 43139.63 21880.31 22395.66 14914.56 20110.86
7/31/2000 41341.23 21820.68 22325.47 15122.08 19961.89
8/31/2000 45084.42 22794.68 23391.07 15355.14 20649.44
9/30/2000 40819.66 22314.96 22822.91 15275.25 19607.23
10/31/2000 38888.17 22295.22 22737.99 15441.93 19803.41
11/30/2000 33155.79 21485.92 21817.72 15558.76 19191.77
12/31/2000 32106.69 22019.94 22374.02 15943.18 19329.67
1/31/2001 34324.80 22487.28 22909.88 16101.15 19504.03
2/28/2001 28497.41 21614.39 21868.46 16152.21 18562.53
3/31/2001 25396.39 20916.38 21084.39 16296.96 17865.22
4/30/2001 28608.35 21794.19 22025.05 16120.37 18497.83
5/31/2001 28187.32 21988.30 22205.74 16293.96 18591.54
6/30/2001 27534.53 21651.39 21901.49 16402.98 18369.41
7/31/2001 26846.38 21635.72 21863.45 16645.95 18487.47
8/31/2001 24651.03 21020.00 21173.90 16920.14 17767.33
9/30/2001 22189.84 20009.86 20004.86 16863.38 16860.65
10/31/2001 23354.01 20344.75 20450.97 17064.30 17217.86
11/30/2001 25597.53 21154.74 21311.01 16920.45 17896.57
12/31/2001 25549.43 21307.31 21451.59 16760.37 17723.37
1/31/2002 25098.06 21120.43 21230.41 17051.09 17783.36
2/28/2002 24056.51 20976.92 20996.12 17256.51 17555.37
3/31/2002 24888.58 21435.58 21468.68 16918.34 17831.95
4/30/2002 22857.29 20921.17 20950.63 17249.00 17216.22
5/31/2002 22304.31 20911.41 20847.96 17353.82 17180.00
6/30/2002 20241.05 20019.31 19883.25 17537.32 16444.17
7/31/2002 19128.30 18993.25 18897.99 17762.86 16188.75
8/31/2002 19185.48 19188.12 19092.82 17976.40 16334.71
9/30/2002 17195.39 18042.52 17955.53 18370.13 15827.50
10/31/2002 18772.75 18794.60 18656.91 18065.59 16305.26
11/30/2002 19792.39 19557.07 19372.77 17990.51 16501.27
12/31/2002 18425.21 19029.90 18827.55 18370.13 16248.53
1/31/2003 17978.12 18744.84 18549.20 18323.57 16013.40
2/28/2003 17895.56 18604.26 18416.82 18579.75 16087.65
3/31/2003 18228.62 18680.18 18504.49 18590.87 16346.77
4/30/2003 19576.39 19691.08 19492.19 18713.70 16932.36
5/31/2003 20553.54 20561.99 20391.27 19151.88 17430.74
6/30/2003 20836.55 20717.91 20549.25 19070.49 17517.46
7/31/2003 21355.03 20765.92 20584.53 18403.16 17304.44
8/31/2003 21886.16 21116.49 20939.78 18540.41 17479.87
9/30/2003 21651.86 21143.29 20942.74 19085.50 17692.88
10/31/2003 22867.99 21840.85 21620.26 18989.40 18058.60
11/30/2003 23107.40 22034.22 21825.26 19187.31 18209.93
12/31/2003 23906.54 22823.73 22568.55 19346.19 18710.94
1/31/2004 24394.76 23164.53 22891.35 19457.01 18875.85
2/29/2004 24549.75 23480.25 23189.96 19749.83 19066.13
3/31/2004 24094.35 23368.24 23079.35 19681.05 18873.62
4/30/2004 23814.25 22877.15 22555.71 19214.94 18503.55
5/31/2004 24258.11 22978.15 22667.98 19145.27 18643.92
6/30/2004 24561.24 23337.41 23030.44 19214.94 18822.08
7/31/2004 23172.74 22898.06 22545.78 19467.82 18334.19
8/31/2004 23058.30 23037.35 22658.05 19857.94 18436.90
9/30/2004 23277.60 23379.59 22943.19 19963.36 18913.74
10/31/2004 23640.65 23632.42 23181.01 20135.14 19352.69
11/30/2004 24453.86 24269.00 23829.73 19969.06 19869.10
[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 Growth and Tax Strategy Fund to the
following benchmarks:
o The Russell 1000 Growth Index measures the performance of
those Russell 1000 companies with higher price-to-book ratios
and higher forecasted growth values.
o The Lipper Balanced Funds Index tracks the total return
performance of the 30 largest funds within the Lipper
Balanced Funds category.
o The Lipper Balanced Funds Average is an average performance
level of all balanced funds, reported by Lipper Inc., an
independent organization that monitors the performance of
mutual funds.
o The Lehman Brothers Municipal Bond Index is an unmanaged
benchmark of total return performance for the long-term,
investment-grade, tax-exempt bond market.
8
M A N A G E R S '
==================--------------------------------------------------------------
COMMENTARY on the Fund
CLIFFORD A. GLADSON, CFA MARK B. BARIBEAU, CFA
USAA Investment Management Company Loomis, Sayles & Company, L.P.
PAMELA N. CZEKANSKI, CFA RICHARD D. SKAGGS, CFA
Loomis, Sayles & Company, L.P. Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM?
The USAA Growth and Tax Strategy Fund had a total return of
6.57% for the six-month period ended November 30, 2004. This
compares to a 5.05% return for the Lipper Balanced Funds
Average, 5.62% for the Lipper Balanced Funds Index, 0.81% for
the Russell 1000 Growth Index, and 4.30% for the Lehman
Brothers Municipal Bond Index.
HOW DID THE FUND MANAGE TO OUTPERFORM OTHER BALANCED FUNDS?
The biggest factor was the outstanding performance of the
Fund's new equity subadviser, Loomis, Sayles & Company, L.P.
(Loomis Sayles). The USAA-managed tax-exempt assets also posted
strong returns. Remember that the structure of your Fund is
unique. Under the Internal Revenue Code, the Fund must have at
least 50% of its assets invested in tax-exempt securities at
the end of each fiscal quarter in order to pass tax-exempt
income to its shareholders. Therefore, in a six-month period
such as this one when stocks generally outperformed bonds, most
balanced funds had a much larger allocation to stocks than we
did. The fact that we outperformed while also keeping at least
50% of assets in tax-exempt bonds is really quite impressive.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
REFER TO PAGE 7 FOR BENCHMARK DEFINITIONS.
9
. . . C O N T I N U E D
========================--------------------------------------------------------
HOW DID THE FUND'S TAX-EXEMPT MUNICIPAL BONDS PERFORM?
As the Federal Reserve Board (the Fed) was in the process of
doubling the federal funds rate, from 1% to 2%, the yield on
the Bond Buyer 40-Bond Index, the industry standard for
long-term investment-grade municipal bonds, fell from 5.21% to
4.99% over the six-month period. The Fund was helped by this
fall in yields. When yields go down, bond prices go up, and we
therefore benefited as we lengthened the average maturity of
the bonds we were buying from 15 to 25 years out to 20 to 25
years.
Looking ahead, we expect the economy to continue to grow at a
measured pace, with the Fed continuing its prudent policy of
small, consistent rate increases until the federal funds rate
is 1% above the rate of inflation. As long as inflation stays
below 3%, we anticipate the yield curve will flatten, which
means that long-term rates will not rise as much as short-term
rates.
HOW DID THE FUND'S EQUITY PORTION PERFORM?
Loomis Sayles took over the equity portion on July 1, 2004, and
from then to the end of the period the equity portion more than
tripled the return of the Russell 1000 Growth Index. Our key
discipline is to invest in leading, revenue-driven large growth
companies. Technology companies generated almost half of our
excess return above the benchmark. The strongest of the
technology holdings was Apple Computer, Inc., thanks to
positive earnings revisions that were largely the result of
tremendous iPod sales. Other technology holdings that stood out
were Autodesk, Inc., the computer-aided design software
company, Symantec Corp., the anti-virus software company, and
eBay, Inc.
THE BOND BUYER 40-BOND INDEX IS REPRESENTATIVE OF YIELDS OF 40
LARGE ONE-YEAR, TAX-EXEMPT NOTES.
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
We also benefited from what we refer to as "special situations"
stocks that meet our criteria of combining excellent revenue
growth with solid bottom-line execution. These included Legg
Mason, Inc., the regional brokerage firm, Moody's Corp., the
ratings agency, and Chicago Mercantile Exchange Holdings, Inc.,
among others.
WHAT'S YOUR OUTLOOK FOR THE STOCK MARKET?
The economy appears poised to maintain steady growth in the
range of 2% to 4% for the near future. This is not an
environment that favors companies that need a cyclical
resurgence to substantially increase earnings. Instead, we
think companies that can produce double-digit revenue growth,
and bring it to the bottom line, will perform well.
We thank you for the opportunity and privilege of serving you.
11
P O R T F O L I O
==================--------------------------------------------------------------
HIGHLIGHTS
- -------------------------------------------------------
TAX-EXEMPT SECURITIES
TOP 5 HOLDINGS
(% of Net Assets)
- -------------------------------------------------------
Wisconsin - Univ. of Wisconsin Hospitals
and Clinics Auth. RB, Series 2000 3.6%
Connecticut - Mashantucket (Western)
Pequot Tribe RB, Series 1997B 3.2%
Texas - Lewisville RB, Series 1998B 3.2%
Texas - Northwest ISD GO, Series 1997 3.0%
California - Public Works Board RB
(MLO), Series 2004F 2.9%
- ---------------------------------------------
TOP 10 INDUSTRIES
(% of Net Assets)
- ---------------------------------------------
Hospital 9.8%
General Obligation Bonds 8.8%
Water/Sewer Utility 7.1%
Education 6.4%
Special Assessment/Tax/
Fee Bonds 4.3%
Communications Equipment 3.5%
Consumer Finance 3.4%
Health Care Equipment 3.3%
Casinos & Gaming 3.2%
Real Estate Tax/Fee Bonds 3.2%
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
- ---------------------------------------------
TOP 5 EQUITY HOLDINGS
(% of Net Assets)
- ---------------------------------------------
eBay, Inc. 1.8%
Dell, Inc. 1.6%
Apple Computer, Inc. 1.5%
Microsoft Corp. 1.5%
Zimmer Holdings, Inc. 1.5%
ASSET ALLOCATION
11/30/04
[PIE CHART OF ASSET ALLOCATION]
Tax-Exempt Bonds 50.6%
Blue Chip Stocks 49.4%
Tax-Exempt Money Market Instruments 2.1%
[END CHART]
PERCENTAGES ARE OF THE NET ASSETS OF THE FUND AND MAY NOT
EQUAL 100%.
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 GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
- -------------------------------------------------------------------------------------------------
TAX-EXEMPT SECURITIES (52.7%)
TAX-EXEMPT BONDS (50.6%)
ARIZONA (1.7%)
$ 3,000 Maricopa County School District GO (INS) 5.00% 7/01/2017 $ 3,290
ARKANSAS (1.4%)
2,500 Conway Health Facilities Board Hospital RB,
Series 1999A 6.40 8/01/2029 2,643
CALIFORNIA (2.9%)
5,500 Public Works Board RB (MLO),
Series 2004F(d) 5.00 1/01/2029 5,532
CONNECTICUT (3.2%)
6,000 Mashantucket (Western) Pequot Tribe RB,
Series 1997B(b) 5.75 9/01/2027 6,156
GEORGIA (2.7%)
4,500 Atlanta Airport RB, Series 2000A (INS) 5.60 11/01/2030 5,079
HAWAII (1.1%)
2,000 State GO, Series 2003DA (INS) 5.25 9/01/2019 2,161
ILLINOIS (2.2%)
5,500 Health Facilities Auth. RB,
Series 1996 (Mercy Hospital) 6.38 1/01/2015 4,144
LOUISIANA (1.5%)
2,500 Local Government Environmental Facilities
and Community Development Auth. RB,
Series 2000 (INS) 6.55 9/01/2025 2,775
MAINE (1.7%)
3,000 Health and Higher Educational Facilities
Auth. RB, Series 2000C (INS) 5.75 7/01/2030 3,298
14
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
- -------------------------------------------------------------------------------------------------
MICHIGAN (4.5%)
$ 4,000 Detroit Sewage Disposal RB,
Series 1999A (INS)(e) 5.75% 7/01/2026 $ 4,542
4,000 Hospital Finance Auth. RB, Series 1996 6.25 10/01/2027 4,048
MONTANA (0.5%)
1,000 Facility Finance Auth. RB, Series 2002
(Providence Services) (INS) 4.75 12/01/2021 1,016
NEW JERSEY (0.5%)
1,000 Middlesex County Improvement Auth. RB,
Series 2004A 5.00 8/15/2023 1,019
NEW YORK (7.0%)
4,000 Metropolitan Transportation Auth. RB,
Series 2000A 6.00 4/01/2030 4,580
2,690 New York City GO, Series 2000A(e) 6.00 5/15/2020 3,002
1,000 Sales Tax Asset Receivables Co. RB,
Series 2004A (INS) 5.00 10/15/2032 1,016
1,000 State Environmental Facilities Corp. RB,
Series 2004E 5.00 6/15/2025 1,037
2,000 Urban Development Corp. RB,
Series 2002C-1 5.00 3/15/2024 2,061
1,500 Urban Development Corp. RB,
Series 2002C-1 5.00 3/15/2025 1,536
OHIO (2.0%)
1,000 Municipal Electric Generation Agency RB,
Joint Venture 5 (INS) 5.00 2/15/2023 1,038
2,470 State Univ. General Receipt Bonds,
Series 2003B 5.25 6/01/2017 2,679
RHODE ISLAND (0.1%)
205 Housing and Mortgage Finance Corp. SFH RB,
Series 15-A 6.85 10/01/2024 209
TEXAS (13.3%)
3,410 Fort Worth Higher Education Finance Corp. RB,
Series 1997A 6.00 10/01/2016 3,426
15
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
- -------------------------------------------------------------------------------------------------
$ 4,000 Houston Utility Systems RB,
Series 2004A (INS) 5.13% 5/15/2028 $ 4,110
5,675 Lewisville RB, Series 1998B (INS) 5.80 9/01/2025 6,164
30,270 Northwest ISD GO, Series 1997 (NBGA) 6.38(a) 8/15/2032 5,792
2,000 Pflugerville GO, Series 2003A (INS) 5.00 8/01/2028 2,022
3,420 San Antonio Water System RB,
Series 2002A (INS) 5.50 5/15/2018 3,767
WASHINGTON (0.5%)
1,000 Vancouver Downtown Redevelopment
Auth. RB, Series 2003A (INS) 5.00 1/01/2023 999
WISCONSIN (3.8%)
500 Muskego Norway School District GO (INS) 5.00 4/01/2022 519
6,030 Univ. of Wisconsin Hospitals and Clinics
Auth. RB, Series 2000 (INS) 6.13 4/01/2021 6,804
--------
Total tax-exempt bonds (cost: $91,138) 96,464
--------
TAX-EXEMPT MONEY MARKET INSTRUMENTS (2.1%)
VARIABLE-RATE DEMAND NOTES (1.7%)(c)
------------------------------------
ALASKA (0.3%)
600 Valdez Marine Terminal RB, Series 2003A 1.68 6/01/2037 600
CALIFORNIA (0.4%)
800 State Pollution Control Financing Auth. PCRB,
Series 1996E (LOC - JPMorgan Chase Bank) 1.67 11/01/2026 800
FLORIDA (0.5%)
1,000 Capital Projects Finance Auth. RB,
Series 2002C (LOC - Bank of Scotland) 1.67 6/01/2012 1,000
ILLINOIS (0.3%)
500 Educational Facilities Auth. RB, Series 2001
(LOC - Harris Trust & Savings) 1.71 10/01/2031 500
16
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
- -------------------------------------------------------------------------------------------------
NEW YORK (0.2%)
$300 Dormitory Auth. RB, Series 1993
(LOC - Landesbank Hessen-Thuringen) 1.68% 7/01/2023 $ 300
--------
3,200
--------
NUMBER
OF SHARES
- ---------
MONEY MARKET FUND (0.4%)(f)
--------------------------
822,255 SSgA Tax Free Money Market Fund 1.05 - 822
--------
Total tax-exempt money market instruments
(cost: $4,022) 4,022
--------
Total tax-exempt securities (cost: $95,160) 100,486
--------
BLUE CHIP STOCKS (49.4%)
AIR FREIGHT & LOGISTICS (0.6%)
22,575 Expeditors International of Washington, Inc. 1,202
--------
APPAREL, ACCESSORIES, & LUXURY GOODS (1.5%)
56,800 Coach, Inc.* 2,831
--------
APPAREL RETAIL (1.2%)
37,750 Chico's FAS, Inc.* 1,457
20,425 Urban Outfitters, Inc.* 868
--------
2,325
--------
APPLICATION SOFTWARE (1.0%)
29,175 Autodesk, Inc. 1,908
--------
ASSET MANAGEMENT & CUSTODY BANKS (1.7%)
26,837 Legg Mason, Inc. 1,829
24,300 T. Rowe Price Group, Inc. 1,437
--------
3,266
--------
BIOTECHNOLOGY (1.5%)
18,250 Biogen Idec, Inc.* 1,071
35,750 Genentech, Inc.* 1,725
--------
2,796
--------
17
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- -------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (3.5%)
58,550 Cisco Systems, Inc.* $ 1,096
83,150 Juniper Networks, Inc.* 2,289
53,900 Motorola, Inc. 1,038
55,825 QUALCOMM, Inc. 2,323
--------
6,746
--------
COMPUTER HARDWARE (3.1%)
43,300 Apple Computer, Inc.* 2,903
75,575 Dell, Inc.* 3,063
--------
5,966
--------
COMPUTER STORAGE & PERIPHERALS (1.2%)
74,800 Network Appliance, Inc.* 2,256
--------
CONSUMER ELECTRONICS (0.7%)
11,275 Harman International Industries, Inc. 1,385
--------
CONSUMER FINANCE (3.4%)
42,025 American Express Co. 2,341
22,025 Capital One Financial Corp. 1,731
48,625 SLM Corp. 2,488
--------
6,560
--------
FOOD RETAIL (1.0%)
20,050 Whole Foods Market, Inc. 1,820
--------
GENERAL MERCHANDISE STORES (0.9%)
32,275 Target Corp. 1,653
--------
HEALTH CARE EQUIPMENT (3.3%)
33,200 Biomet, Inc. 1,589
47,750 St. Jude Medical, Inc.* 1,821
36,000 Zimmer Holdings, Inc.* 2,938
--------
6,348
--------
HOME IMPROVEMENT RETAIL (1.1%)
50,050 Home Depot, Inc. 2,090
--------
HOTELS, RESORTS, & CRUISE LINES (0.7%)
25,450 Starwood Hotels & Resorts Worldwide, Inc. "B" 1,331
--------
18
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- -------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (1.4%)
72,800 General Electric Co. $ 2,574
--------
INDUSTRIAL MACHINERY (1.2%)
39,000 Danaher Corp. 2,218
--------
INTERNET RETAIL (1.8%)
30,650 eBay, Inc.* 3,447
--------
INTERNET SOFTWARE & SERVICES (3.0%)
10,100 Google, Inc. "A"* 1,849
43,100 VeriSign, Inc.* 1,418
66,300 Yahoo!, Inc.* 2,494
--------
5,761
--------
INVESTMENT BANKING & BROKERAGE (1.6%)
14,950 Goldman Sachs Group, Inc. 1,566
16,725 Lehman Brothers Holdings, Inc. 1,402
--------
2,968
--------
MANAGED HEALTH CARE (2.4%)
20,300 Anthem, Inc.* 2,057
29,125 UnitedHealth Group, Inc. 2,413
--------
4,470
--------
OIL & GAS EQUIPMENT & SERVICES (0.5%)
14,350 Smith International, Inc.* 869
--------
OIL & GAS EXPLORATION & PRODUCTION (1.6%)
22,450 EOG Resources, Inc. 1,685
37,325 XTO Energy, Inc. 1,357
--------
3,042
--------
PHARMACEUTICALS (1.2%)
36,625 Johnson & Johnson, Inc. 2,209
--------
RESTAURANTS (1.2%)
41,400 Starbucks Corp.* 2,329
--------
19
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- -------------------------------------------------------------------------------------------------
SPECIALIZED FINANCE (1.5%)
6,925 Chicago Mercantile Exchange Holdings, Inc. $ 1,355
19,350 Moody's Corp. 1,563
--------
2,918
--------
SPECIALTY STORES (0.7%)
36,150 PETsMART, Inc. 1,239
--------
SYSTEMS SOFTWARE (3.0%)
24,725 Adobe Systems, Inc. 1,497
107,475 Microsoft Corp. 2,881
21,950 Symantec Corp.* 1,401
--------
5,779
--------
TRADING COMPANIES & DISTRIBUTORS (0.6%)
20,000 Fastenal Co. 1,223
--------
WIRELESS TELECOMMUNICATION SERVICES (1.3%)
89,900 Nextel Communications, Inc. "A"* 2,559
--------
Total blue chip stocks (cost: $78,018) 94,088
--------
TOTAL INVESTMENTS (COST: $173,178) $194,574
========
20
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA GROWTH AND TAX STRATEGY 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%.
PORTFOLIO DESCRIPTION ABBREVIATIONS
GO General Obligation
ISD Independent School District
MLO Municipal Lease Obligation
PCRB Pollution Control Revenue Bond
RB Revenue Bond
SFH Single-Family Housing
CREDIT ENHANCEMENTS - add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
interest payments when due. A high-quality bank, insurance company or
other corporation, or a collateral trust may provide the enhancement.
(LOC) Principal and interest payments are guaranteed by a bank letter
of credit.
(NBGA) Principal and interest payments are guaranteed by a non-bank
guarantee agreement from Texas Permanent School Fund.
(INS) Principal and interest payments are insured by one of the
following companies: AMBAC Assurance Corp., ACA Financial
Guaranty Corp., Financial Guaranty Insurance Co., Financial
Security Assurance Holdings Ltd., or MBIA Insurance Corp. The
insurance does not guarantee the market value of the security.
21
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
SPECIFIC NOTES
- --------------------------------------------------------------------------------
(a) Zero-coupon security. Rate represents the effective yield at date
of purchase.
(b) Restricted security that is not registered under the Securities Act
of 1933. A resale of this security in the United States may occur
in an exempt transaction to a qualified institutional buyer as
defined by Rule 144A, and as such, has been deemed liquid by USAA
Investment Management Company (the Manager) under liquidity
guidelines approved by the Board of Trustees, unless otherwise
noted as illiquid.
(c) Variable-rate demand notes (VRDNs) - provide the right, on any
business day, to sell the security at face value on either that day
or in seven days. The interest rate is adjusted at a stipulated
daily, weekly, monthly, or quarterly interval to a rate that
reflects current market conditions. VRDNs will normally trade as if
the maturity is the earlier put date, even though stated maturity
is longer.
(d) At November 30, 2004, the cost of securities purchased on a
when-issued basis was $2,025,000.
(e) At November 30, 2004, portions of these securities were segregated
to cover when-issued purchases.
(f) Rate represents the money market fund annualized seven-day yield at
November 30, 2004.
* 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 GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
ASSETS
Investments in securities, at market value
(identified cost of $173,178) $194,574
Receivables:
Capital shares sold 20
Dividends and interest 1,572
Securities sold 872
--------
Total assets 197,038
--------
LIABILITIES
Payables:
Securities purchased (when-issued $2,025) 5,554
Capital shares redeemed 12
Upon settlement of delayed trades 772
Accrued management fees 59
Other accrued expenses and payables 60
--------
Total liabilities 6,457
--------
Net assets applicable to capital shares outstanding $190,581
========
NET ASSETS CONSIST OF:
Paid-in capital $152,757
Accumulated undistributed net investment income 973
Accumulated net realized gain on investments 15,455
Net unrealized appreciation of investments 21,396
--------
Net assets applicable to capital shares outstanding $190,581
========
Capital shares outstanding, unlimited number of shares
authorized, no par value 12,386
========
Net asset value, redemption price, and offering price per share $ 15.39
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA GROWTH AND TAX STRATEGY FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004 (UNAUDITED)
INVESTMENT INCOME
Dividends $ 578
Interest 2,514
-------
Total income 3,092
-------
EXPENSES
Management fees 404
Administrative and servicing fees 139
Transfer agent's fees 101
Custody and accounting fees 38
Postage 14
Shareholder reporting fees 12
Trustees' fees 3
Registration fees 19
Professional fees 20
Other 5
-------
Total expenses 755
Expenses paid indirectly (18)
-------
Net expenses 737
-------
NET INVESTMENT INCOME 2,355
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain:
Unaffiliated transactions 10,595
Affiliated transactions 66
Change in net unrealized appreciation/depreciation (1,255)
-------
Net realized and unrealized gain 9,406
-------
Increase in net assets resulting from operations $11,761
=======
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 GROWTH AND TAX STRATEGY 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 $ 2,355 $ 4,569
Net realized gain on investments 10,661 6,985
Change in net unrealized appreciation/depreciation
of investments (1,255) 1,197
--------------------------
Increase in net assets resulting from operations 11,761 12,751
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,145) (4,421)
Net realized gains - (106)
--------------------------
Distributions to shareholders (2,145) (4,527)
--------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 2,728 9,102
Shares issued for dividends reinvested 1,922 4,050
Cost of shares redeemed (10,444) (21,546)
--------------------------
Decrease in net assets from capital
share transactions (5,794) (8,394)
--------------------------
Net increase (decrease) in net assets 3,822 (170)
NET ASSETS
Beginning of period 186,759 186,929
--------------------------
End of period $ 190,581 $ 186,759
==========================
Accumulated undistributed net investment income:
End of period $ 973 $ 763
==========================
CHANGE IN SHARES OUTSTANDING
Shares sold 186 629
Shares issued for dividends reinvested 132 282
Shares redeemed (712) (1,489)
--------------------------
Decrease in shares outstanding (394) (578)
==========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA GROWTH AND TAX STRATEGY 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 Growth and Tax Strategy
Fund (the Fund). The Fund's investment objective is to seek a
conservative balance between income, the majority of which is exempt
from federal income tax, and the potential for long-term growth of
capital to preserve purchasing power.
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
the 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 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
26
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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. Other debt securities are valued each business day by a pricing
service (the Service) approved by the Trust's Board of
Trustees. The Service uses the mean between quoted bid and
asked prices or the last sales price to price securities when,
in the Service's judgment, these prices are readily available
and are representative of the securities' market values. For
many securities, such prices are not readily available. The
Service generally prices these securities based on methods that
include
27
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
consideration of yields or prices of securities of comparable
quality, coupon, maturity, and type; indications as to values
from dealers in securities; and general market conditions.
6. Securities for which market quotations are not readily
available or are considered unreliable, or whose values have
been materially affected by events occurring after the close of
their primary markets but before the pricing of the Fund, are
valued in good faith at fair value, using methods determined by
the Manager 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 are amortized over the life of the
respective securities, using the effective yield method for
long-term securities and the straight-line method for short-term
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
28
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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
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. The Fund did not invest in any repurchase
agreements as of November 30, 2004.
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.
29
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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 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. 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 purchase of securities on
a when-issued basis may increase the volatility of the Fund's NAV
to the extent that the Fund makes such purchases while remaining
substantially fully invested. As of November 30, 2004, the
outstanding when-issued commitments for the Fund were $2,025,000.
G. 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
30
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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 $17,000 and $1,000,
respectively, resulting in a total reduction in Fund expenses of
$18,000.
H. 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.
I. 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.
31
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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 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 $1,000. 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.
32
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
Distributions of net investment income are made quarterly.
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) INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Cost of purchases and proceeds from sales/maturities of securities,
excluding short-term securities, for the six-month period ended
November 30, 2004, were $122,850,000 and $129,663,000, 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 $23,174,000 and $1,778,000, respectively,
resulting in net unrealized appreciation of $21,396,000.
(5) 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
33
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
collateral when required or return the securities when due, and that
the value of the short-term investments will be less than the amount of
cash collateral required to be returned to the borrower. The Fund had
no securities-lending transactions during the six-month period ended
November 30, 2004.
(6) 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 and for directly managing the
day-to-day investment of a portion of the Fund's assets, subject
to the authority of and supervision by the Trust's Board of
Trustees. The Fund is also authorized to select (with approval of
the Trust's Board of Trustees) one or more subadvisers to manage
the day-to-day investment of a portion 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 Balanced Funds Index, which tracks
the total return performance of the 30 largest funds in the Lipper
Balanced Funds category. The Fund's base fee is accrued daily and
paid monthly at an annualized rate of 0.50% of the Fund's average
net assets.
34
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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 (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
- --------------------------------------------------------------------------------
+/-0.20% to 0.50% +/-0.04%
+/-0.51% to 1.00% +/-0.05%
+/-1.01% 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 Balanced 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
$404,000, which is net of a performance adjustment of $(58,000)
that decreased the base management fee of 0.50% by 0.06%.
B. SUBADVISORY ARRANGEMENTS - The Manager has entered into an
investment subadvisory agreement with Loomis, Sayles &
35
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
Company, L.P. (Loomis Sayles), under which Loomis Sayles directs
the investment and reinvestment of the portion of the Fund's
assets invested in blue chip stocks (as allocated from time to
time by the Manager). The Manager (not the Fund) pays Loomis
Sayles a subadvisory fee in the annual amount of 0.20% of the
portion of the Fund's average net assets that Loomis Sayles
manages. Prior to July 1, 2004, RCM Capital Management LLC (RCM)
was the subadviser of the Fund and was paid subadvisory fees in
the annual amount of 0.20% of the portion of the Fund's average
net assets that RCM managed. For the six-month period ended
November 30, 2004, the Manager paid subadvisory fees to Loomis
Sayles and RCM of $75,000 and $15,000, respectively.
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 $139,000.
D. 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 six-month period ended November 30, 2004, the
Fund incurred transfer agent's fees, paid or payable to USAA
Transfer Agency Company, of $101,000.
E. 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.
36
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
(7) TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
Certain trustees and officers of the Fund are also directors, officers,
and/or employees of the Manager. None of the affiliated trustees or
Fund officers received any compensation from the Fund.
(8) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
- --------------------------------------------------------------------------------
During the six-month period ended November 30, 2004, in accordance with
affiliated transaction procedures approved by the Trust's Board of
Trustees, security transactions were executed between the Fund and the
following affiliated USAA fund at the then-current market price with no
brokerage commissions incurred:
NET REALIZED
COST TO GAIN
SELLER PURCHASER PURCHASER TO SELLER
---------------------------------------------------------------------------------
USAA Growth and Tax USAA Intermediate-Term Fund $2,118,000 $66,000
Strategy Fund
37
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA GROWTH AND TAX STRATEGY 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 $ 14.61 $ 13.99 $ 14.23 $ 15.87 $ 17.28 $ 16.66
-------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .19 .35 .35 .41 .49 .48
Net realized and
unrealized gain (loss) .76 .62 (.17) (1.60) (1.42) .61
-------------------------------------------------------------------------------------
Total from investment operations .95 .97 .18 (1.19) (.93) 1.09
-------------------------------------------------------------------------------------
Less distributions:
From net investment income (.17) (.34) (.37) (.45) (.48) (.47)
From realized capital gains - (.01) (.05) - - -
-------------------------------------------------------------------------------------
Total distributions (.17) (.35) (.42) (.45) (.48) (.47)
-------------------------------------------------------------------------------------
Net asset value at end of period $ 15.39 $ 14.61 $ 13.99 $ 14.23 $ 15.87 $ 17.28
=====================================================================================
Total return (%)* 6.57 6.96 1.46 (7.59) (5.47) 6.62
Net assets at end of period (000) $190,581 $186,759 $186,929 $205,108 $238,813 $263,592
Ratio of expenses to
average net assets (%)** .82(a,b) .80(b) .91(b) .83(b) .70(b) .71(b)
Ratio of net investment
income to average
net assets (%)** 2.55(a) 2.41 2.67 2.75 2.91 2.80
Portfolio turnover (%) 66.27 43.22 52.38 31.81 35.69 66.43
* Assumes reinvestment of all net investment income and realized capital gain distributions during the period.
** For the six-month period ended November 30, 2004, average net assets were $184,460,000.
(a) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(b) 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:
(.02%) (.01%) - (.02%) (.01%) -
38
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
USAA GROWTH AND TAX STRATEGY 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 use
this information to compare the ongoing costs of investing in the
39
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
(continued)
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2004 (UNAUDITED)
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
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 $1,065.70 $4.13
Hypothetical
(5% return before expenses) 1,000.00 1,021.07 4.04
*Expenses are equal to the Fund's annualized expense ratio of 0.80%,
which is net of 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
6.57% for the six-month period of June 1, 2004, through November 30,
2004.
40
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
-------------
Receive this document
and others electronically.
Sign up at USAA.COM.
- --------------------------------------------------------------------------------
[LOGO OF USAA] WE KNOW WHAT IT MEANS TO SERVE.(R)
USAA ----------------------------------
INSURANCE o MEMBER SERVICES
27801-0105 (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
----------------------------------------------------
Signature and Title: Christopher W. Claus/President
Date: 01/25/05
------------------------------
By:* /s/ DAVID HOLMES
--------------------------------------------
Signature and Title: David Holmes/Treasurer
Date: 01/25/05
------------------------------
*Print the name and title of each signing officer under his or her signature.