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: EILEEN M. SMILEY
USAA INVESTMENT TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-4103
Date of fiscal year end: MAY 31
Date of reporting period: NOVEMBER 30, 2005
ITEM 1. REPORT TO STOCKHOLDERS.
USAA WORLD GROWTH FUND - SEMIANNUAL REPORT FOR PERIOD ENDING NOVEMBER 30, 2005
[LOGO OF USAA]
USAA(R)
USAA WORLD GROWTH Fund
[GRAPHIC OF USAA WORLD GROWTH FUND]
S e m i a n n u a l R e p o r t
- --------------------------------------------------------------------------------
NOVEMBER 30, 2005
Table of CONTENTS
- --------------------------------------------------------------------------------
MESSAGE FROM THE PRESIDENT 2
MANAGERS' COMMENTARY 4
FUND RECOGNITION 7
INVESTMENT OVERVIEW 8
FINANCIAL INFORMATION
Portfolio of Investments 11
Notes to Portfolio of Investments 17
Financial Statements 19
Notes to Financial Statements 22
EXPENSE EXAMPLE 35
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)2006, USAA. All rights reserved.
2
M E S S A G E
==============------------------------------------------------------------------
from the PRESIDENT
"
WE WILL CONTINUE TO LOOK FOR VALUE
[PHOTO OF CHRISTOPHER W. CLAUS] IN OUR INVESTMENTS, EXAMINE THE RISKS,
AND MAINTAIN OUR INVESTMENT DISCIPLINE.
"
December 2005
- --------------------------------------------------------------------------------
As I write to you during the final weeks of 2005, I am watching
some interesting dynamics that could affect all of us in the
new year.
In 2006, we expect the Federal Reserve Board (the Fed) to stop
tightening short-term interest rates. After raising rates to
4.25% in December 2005, Fed governors, we believe, are likely
to hike rates at least one more time on January 31, 2006. If
the Fed keeps tightening, there is the possibility that
short-term interest rates could eventually be higher than
long-term rates, resulting in what is called an inverted yield
curve. In some cases, an inverted yield curve has been the
precursor of an economic downturn.
For the moment, however, the U.S. economy appears to be on
solid footing, with estimates for gross domestic product (GDP)
growth of about 3% for 2006. While the country is not
experiencing an economic boom, we can expect moderate growth in
the months ahead, which should translate into gains in
corporate earnings in the mid-single digits. Whether earnings
will be robust enough to support current stock market
valuations, however, remains uncertain. Beyond our shores,
international stocks outperformed U.S. equities during 2005. We
believe we could see a repeat of this in 2006.
In the gold market, prices have continued to rise, fueled by
high oil prices, strong investor demand, and an increase in
consumer purchases of jewelry. We expect these conditions to
persist during 2006.
I believe the housing market is at or near the peak in the
number of units sold. Inventory has grown, mortgage rates are
inching
3
. . . C O N T I N U E D
========================--------------------------------------------------------
upward, and some institutions have tightened their lending
standards. If housing prices fall, the first to feel the pain
could be investors who are "flipping" properties using
interest-only or adjustable-rate mortgages (ARMs). The dramatic
increase in short-term rates would be particularly painful for
housing investors also, especially those with ARMs and
interest-only mortgages.
Among the biggest stories of 2005 was the resiliency of
long-term interest rates. Instead of spiking higher, they were
range bound most of the year. In 2006, both short- and
long-term rates will continue to be a key market indicator. If
rates rise, bond prices will fall - hurting the bond market.
Going forward, two factors will have great influence on
long-term rates. One is inflation, which appears to be under
control at present. The second is the purchase of U.S. debt by
foreign investors, which helps us support our budget deficit.
With interest rates in other countries significantly lower, it
seems likely that foreign demand will remain strong, buoying
U.S. bonds. We believe that long-term rates will not spike
dramatically but continue to drift upward in a manageable
fashion.
In this environment, our central concern is that we are paid
for the risk we take in all our portfolios. It makes sense to
be cautious; there is some risk in the market, but risk
premiums are very low.
We will continue to look for value in our investments, examine
the risks, and maintain our investment discipline. From all of
us at USAA Investment Management Company, thank you for your
business and the opportunity to serve your investment needs.
Sincerely,
/S/ CHRISTOPHER W. CLAUS
Christopher W. Claus
President and Vice Chairman of the Board
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
M A N A G E R S '
==================--------------------------------------------------------------
COMMENTARY on the Fund
[PHOTO OF DAVID R. MANNHEIM] [PHOTO OF SIMON TODD]
DAVID R. MANNHEIM SIMON TODD, ASIP, CFA
MFS Investment Management MFS Investment Management
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM?
The USAA World Growth Fund had a total return of 6.95% for the
six months ended November 30, 2005. This compares to a 9.48%
return for the Lipper Global Funds Average, 10.11% for the
Lipper Global Funds Index, and 8.80% for the Morgan Stanley
Capital International (MSCI) World Index.
HOW DID OVERSEAS STOCK MARKETS PERFORM COMPARED TO THE UNITED STATES?
Overseas developed markets as measured by the MSCI Europe,
Australasia and Far East (EAFE) Index had a total return (in
U.S. dollars) of 11.23%, while the S&P 500 Index returned just
5.88%. Valuations for international companies as a group remain
well below their U.S. counterparts, with an earnings
environment equal to or better than that in the United States.
Inflows into international equity mutual funds in 2005 have
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
REFER TO PAGE 9 FOR BENCHMARK DEFINITIONS.
THE MSCI-EAFE INDEX IS AN UNMANAGED INDEX THAT REFLECTS THE
MOVEMENTS OF STOCK MARKETS IN EUROPE, AUSTRALASIA, AND THE FAR
EAST BY REPRESENTING A BROAD SELECTION OF DOMESTICALLY LISTED
COMPANIES WITHIN EACH MARKET.
THE S&P 500 INDEX IS AN UNMANAGED INDEX REPRESENTING THE
WEIGHTED AVERAGE PERFORMANCE OF A GROUP OF 500 WIDELY HELD,
PUBLICLY TRADED STOCKS. IT IS NOT POSSIBLE TO INVEST DIRECTLY
IN THE S&P 500 INDEX.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 11-16.
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, SUCH AS
CURRENCY FLUCTUATIONS, MARKET ILLIQUIDITY, AND POLITICAL
INSTABILITY.
5
. . . C O N T I N U E D
========================--------------------------------------------------------
been higher than those into U.S. equity funds for the first
time since 1990. Additionally, we've seen restructuring and the
ability to take out costs happening in Europe, much as it
happened in the United States in the late 1990s and early
2000s.
WHAT HAS BEEN THE MOST SURPRISING MARKET IN TERMS OF PERFORMANCE?
We've seen strong outperformance in Japan. The Japanese prime
minister was re-elected with a mandate to restructure and
reform, and that has led to a very strong snapback in the
stocks of Japanese banks, which have suffered for many years
from non-performing loans and other structural problems. As
compared to the MSCI World Index, our substantial underweight
in Japan as a market and the big Japanese banks specifically
detracted from performance during the six months, although it
had been highly beneficial in the past few years. We still
don't find the bank stocks particularly attractive, but we are
finding companies in other sectors in Japan that we like.
IN WHAT KIND OF COMPANIES IS THE FUND INVESTING?
We conduct bottom-up fundamental research, investing company by
company. The portfolio's industry sector and geographic weights
are a result of where we are finding opportunities. If you look
at the portfolio, the type of companies we're finding
attractive are those focused on corporate spending, as opposed
to consumer spending. The consumer has done really well for a
long time, but corporations have been hesitant to spend at a
time when they have record amounts of cash on hand. Investments
that have been put off are starting to be made, benefiting
companies in industries such as machinery, heavy construction,
and mining.
6
. . . C O N T I N U E D
========================--------------------------------------------------------
COMMENTARY on the Fund
WHICH STOCKS HAD THE BIGGEST IMPACT ON RELATIVE PERFORMANCE?
As is sometimes the case, the biggest contributor to relative
performance was the fact that we didn't own a poorly performing
stock, specifically Pfizer, Inc. (U.S.). Stocks that we did own
that had the largest contribution to relative performance were
Goldman Sachs Group, Inc. (U.S.), EnCana Corp. (Canada),
Hutchison Telecommunications International Ltd. (Hong Kong),
and Canadian National Railway Co. (Canada). Hutchison
Communications was supported by strong revenue and profit
growth and particularly good news from its mobile businesses in
emerging markets. Canadian National Railway is benefiting from
increasing capital expenditures, strong earnings, and a share
buyback program.
Among the major detractors from relative performance were
Dell, Inc. (U.S.), Symantec Corp. (U.S.), Eli Lilly and Co.
(U.S.), and Sanofi-Aventis S.A. (France).
WHAT'S YOUR OUTLOOK?
We're finding opportunities in a broad range of sectors, from
consumer products companies to industrial firms that we believe
should benefit from higher capital expenditures. As always,
we're choosing to invest in what we believe to be fundamentally
solid companies, one stock at a time, wherever we find them in
developed stock markets.
7
F U N D
========------------------------------------------------------------------------
RECOGNITION
USAA WORLD GROWTH FUND
[LOGO OF LIPPER LEADER
TAX EFFICIENCY]
The Fund is listed as a Lipper Leader for Tax Efficiency among 49 funds within
the Lipper Global Multi-Cap Core Funds category for the overall period ending
November 30, 2005.
LIPPER RATINGS FOR TAX EFFICIENCY REFLECT FUNDS' HISTORICAL SUCCESS IN
POSTPONING TAXABLE DISTRIBUTIONS RELATIVE TO PEERS AS OF NOVEMBER 30, 2005. TAX
EFFICIENCY OFFERS NO BENEFIT TO INVESTORS IN TAX-SHELTERED ACCOUNTS SUCH AS
401(K) PLANS. THE FUND RECEIVED A LIPPER LEADER RATING FOR TAX EFFICIENCY AMONG
38 AND 10 FUNDS FOR THE FIVE- AND 10-YEAR PERIODS, RESPECTIVELY, AND A SCORE OF
3 AMONG 49 FUNDS FOR THE THREE-YEAR PERIOD. RATINGS ARE SUBJECT TO CHANGE EVERY
MONTH AND ARE BASED ON AN EQUAL-WEIGHTED AVERAGE OF PERCENTILE RANKS FOR THE TAX
EFFICIENCY 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
2006, REUTERS, ALL RIGHTS RESERVED.
8
I N V E S T M E N T
====================------------------------------------------------------------
OVERVIEW
USAA WORLD GROWTH FUND
OBJECTIVE
- --------------------------------------------------------------------------------
Capital appreciation.
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
Invests principally in a mix of foreign (including emerging
market) and domestic equity securities.
- --------------------------------------------------------------------------------
11/30/05 5/31/05
- --------------------------------------------------------------------------------
Net Assets $351.9 Million $330.8 Million
Net Asset Value Per Share $18.77 $17.55
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/05
- --------------------------------------------------------------------------------
5/31/05 TO 11/30/05* 1 YEAR 5 YEARS 10 YEARS
6.95% 9.30% 2.64% 6.87%
*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.
9
. . . C O N T I N U E D
========================--------------------------------------------------------
CUMULATIVE PERFORMANCE COMPARISON
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LIPPER GLOBAL LIPPER GLOBAL MSCI WORLD USAA WORLD
FUNDS AVERAGE FUNDS INDEX INDEX GROWTH FUND
------------- ------------- ---------- -----------
11/30/95 $10,000.00 $10,000.00 $10,000.00 $10,000.00
12/31/95 10,192.83 10,194.66 10,290.26 10,269.28
01/31/96 10,483.24 10,495.46 10,474.28 10,559.92
02/29/96 10,609.36 10,605.87 10,535.92 10,746.23
03/31/96 10,774.14 10,768.55 10,709.06 10,984.70
04/30/96 11,142.35 11,125.55 10,958.68 11,446.74
05/31/96 11,281.29 11,225.10 10,965.96 11,551.08
06/30/96 11,272.79 11,195.36 11,019.21 11,551.08
07/31/96 10,772.75 10,708.98 10,627.57 10,938.45
08/31/96 11,031.38 10,983.52 10,747.51 11,271.10
09/30/96 11,387.94 11,292.96 11,166.09 11,557.32
10/31/96 11,398.81 11,295.76 11,241.83 11,518.64
11/30/96 11,949.55 11,829.93 11,869.59 12,166.46
12/31/96 11,936.56 11,848.76 11,677.27 12,228.99
01/31/97 12,240.55 12,113.98 11,815.81 12,692.58
02/28/97 12,297.26 12,187.93 11,949.49 12,692.58
03/31/97 12,096.79 12,042.12 11,710.90 12,564.69
04/30/97 12,294.13 12,194.93 12,091.46 12,724.55
05/31/97 13,033.61 12,940.25 12,835.59 13,459.88
06/30/97 13,585.48 13,495.73 13,473.56 14,075.33
07/31/97 14,262.62 14,169.96 14,091.91 14,716.61
08/31/97 13,496.09 13,385.28 13,147.01 13,999.33
09/30/97 14,326.10 14,216.10 13,859.03 14,840.28
10/31/97 13,457.91 13,321.59 13,127.38 13,949.87
11/30/97 13,575.79 13,349.43 13,357.44 13,661.31
12/31/97 13,785.73 13,505.91 13,518.00 13,802.37
01/31/98 13,943.18 13,657.48 13,892.47 13,819.42
02/28/98 14,910.49 14,579.40 14,829.97 14,859.50
03/31/98 15,708.65 15,313.10 15,453.91 15,694.97
04/30/98 15,936.35 15,536.22 15,602.61 15,959.25
05/31/98 15,793.61 15,403.07 15,404.74 15,652.35
06/30/98 15,939.14 15,450.99 15,768.00 15,584.14
07/31/98 15,971.70 15,457.55 15,740.36 15,339.35
08/31/98 13,597.70 13,206.18 13,638.98 12,728.40
09/30/98 13,679.90 13,213.82 13,877.85 12,631.37
10/31/98 14,540.75 14,088.56 15,130.03 13,681.04
11/30/98 15,383.02 14,864.66 16,027.43 14,298.50
12/31/98 16,227.61 15,482.21 16,808.01 15,233.50
01/31/99 16,768.44 15,805.66 17,173.61 15,718.64
02/28/99 16,240.12 15,349.76 16,714.33 15,198.22
03/31/99 16,832.50 15,876.67 17,407.81 15,842.13
04/30/99 17,595.00 16,596.95 18,091.61 16,397.84
05/31/99 17,147.29 16,108.97 17,428.08 15,974.45
06/30/99 18,135.38 16,920.63 18,238.51 16,874.17
07/31/99 18,173.01 16,966.11 18,181.33 17,042.85
08/31/99 18,161.36 16,948.38 18,146.54 17,143.91
09/30/99 18,089.94 16,801.26 17,968.12 16,886.66
10/31/99 18,894.73 17,455.07 18,899.64 17,401.17
11/30/99 20,476.77 18,627.35 19,428.88 18,310.73
12/31/99 23,136.00 20,697.20 20,999.07 19,915.26
01/31/00 22,211.63 19,888.72 19,794.11 19,079.13
02/29/00 23,962.00 21,118.71 19,845.12 19,915.26
03/31/00 24,343.38 21,644.64 21,214.33 20,732.40
04/30/00 22,907.77 20,564.64 20,314.90 20,048.29
05/31/00 22,110.13 19,953.34 19,798.17 19,582.71
06/30/00 23,129.66 20,743.39 20,462.36 20,418.85
07/31/00 22,511.99 20,323.04 19,883.88 19,733.56
08/31/00 23,526.71 21,148.21 20,528.21 20,473.32
09/30/00 22,219.65 20,024.04 19,434.26 19,113.76
10/31/00 21,505.45 19,536.30 19,106.26 18,374.00
11/30/00 20,029.19 18,397.69 17,943.83 17,054.43
12/31/00 20,578.83 18,937.37 18,231.74 17,684.23
01/31/01 20,922.95 19,250.96 18,582.82 18,174.07
02/28/01 19,223.90 17,840.29 17,010.29 16,324.67
03/31/01 17,785.95 16,601.09 15,890.15 14,975.11
04/30/01 19,062.35 17,738.86 17,061.48 16,294.68
05/31/01 18,879.21 17,630.79 16,839.15 15,894.81
06/30/01 18,346.56 17,135.21 16,309.19 15,404.97
07/31/01 17,909.22 16,710.38 16,091.20 15,155.05
08/31/01 17,140.56 16,046.71 15,316.46 14,595.24
09/30/01 15,440.12 14,547.67 13,964.80 13,145.71
10/31/01 15,875.85 14,909.97 14,231.45 13,595.56
11/30/01 16,825.52 15,723.15 15,071.23 14,405.30
12/31/01 17,062.94 15,951.91 15,164.44 14,588.70
01/31/02 16,542.67 15,468.53 14,703.49 14,156.37
02/28/02 16,390.35 15,377.19 14,574.17 14,136.26
03/31/02 17,157.35 16,105.66 15,245.35 14,850.11
04/30/02 16,724.25 15,715.02 14,698.96 14,458.00
05/31/02 16,702.65 15,750.62 14,723.47 14,498.21
06/30/02 15,677.68 14,835.92 13,827.60 13,643.60
07/31/02 14,297.66 13,523.90 12,660.86 12,376.77
08/31/02 14,346.02 13,586.14 12,682.48 12,497.42
09/30/02 12,957.91 12,235.67 11,286.13 11,512.10
10/31/02 13,692.75 12,934.68 12,117.74 12,165.63
11/30/02 14,364.83 13,567.80 12,769.24 12,577.85
12/31/02 13,706.11 12,976.45 12,148.83 12,258.72
01/31/03 13,275.51 12,560.44 11,778.60 11,784.12
02/28/03 12,963.17 12,251.35 11,572.46 11,440.79
03/31/03 12,844.36 12,115.96 11,534.26 11,481.19
04/30/03 13,906.85 13,156.10 12,556.41 12,480.87
05/31/03 14,776.44 13,966.35 13,271.29 13,147.32
06/30/03 15,027.73 14,234.51 13,499.31 13,298.79
07/31/03 15,364.97 14,535.40 13,771.86 13,440.16
08/31/03 15,748.63 14,920.19 14,067.71 13,581.53
09/30/03 15,794.71 15,001.74 14,152.37 13,732.99
10/31/03 16,677.15 15,854.97 14,990.79 14,419.64
11/30/03 16,954.55 16,149.28 15,217.37 14,773.07
12/31/03 17,908.43 17,123.49 16,170.89 15,658.38
01/31/04 18,254.45 17,482.77 16,430.37 15,941.79
02/29/04 18,578.17 17,856.10 16,705.50 16,326.41
03/31/04 18,483.27 17,779.79 16,594.65 16,265.68
04/30/04 18,013.63 17,320.17 16,254.77 16,154.34
05/31/04 18,070.19 17,378.80 16,390.40 16,285.93
06/30/04 18,399.23 17,671.26 16,739.60 16,630.07
07/31/04 17,688.39 17,010.91 16,193.05 16,103.74
08/31/04 17,673.81 17,020.70 16,264.22 16,083.49
09/30/04 18,111.02 17,475.66 16,571.90 16,447.88
10/31/04 18,526.99 17,893.29 16,977.42 16,893.23
11/30/04 19,559.84 18,891.15 17,869.27 17,773.83
12/31/04 20,290.48 19,584.99 18,551.39 18,526.85
01/31/05 19,827.35 19,212.66 18,133.72 18,247.40
02/28/05 20,448.17 19,825.69 18,708.16 18,702.81
03/31/05 19,994.54 19,412.99 18,346.58 18,350.90
04/30/05 19,524.40 18,978.17 17,945.28 17,936.89
05/31/05 19,920.10 19,300.51 18,264.12 18,164.60
06/30/05 20,129.24 19,506.80 18,422.16 18,071.44
07/31/05 20,901.43 20,277.66 19,065.67 18,816.66
08/31/05 21,154.47 20,527.79 19,209.34 19,044.36
09/30/05 21,676.50 21,074.96 19,708.28 19,354.87
10/31/05 21,087.88 20,598.98 19,230.13 19,034.01
11/30/05 21,711.41 21,252.71 19,870.87 19,427.32
[END CHART]
DATA FROM 11/30/95 THROUGH 11/30/05.
The graph illustrates the comparison of a $10,000 hypothetical
investment in the USAA World Growth Fund to the following benchmarks:
THE LIPPER GLOBAL FUNDS AVERAGE IS AN AVERAGE PERFORMANCE LEVEL
OF ALL GLOBAL FUNDS, REPORTED BY LIPPER INC., AN INDEPENDENT
ORGANIZATION THAT MONITORS THE PERFORMANCE OF MUTUAL FUNDS.
THE LIPPER GLOBAL FUNDS INDEX TRACKS THE TOTAL RETURN
PERFORMANCE OF THE 30 LARGEST FUNDS WITHIN THE LIPPER GLOBAL
FUNDS CATEGORY.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX IS
AN UNMANAGED INDEX THAT REFLECTS THE MOVEMENTS OF WORLD STOCK
MARKETS BY REPRESENTING A BROAD SELECTION OF DOMESTICALLY
LISTED COMPANIES WITHIN EACH MARKET.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, 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.
10
. . . C O N T I N U E D
========================-------------------------------------------------------
OVERVIEW
- ---------------------------------------------------------
TOP 10 EQUITY HOLDINGS
(% of Net Assets)
- ---------------------------------------------------------
Reckitt Benckiser plc 3.4%
Nestle S.A. 2.8%
Air Liquide S.A. 2.5%
Roche Holdings AG 2.1%
Johnson & Johnson, Inc. 2.0%
Samsung Electronics Co. Ltd. 1.9%
American Express Co. 1.8%
Goldman Sachs Group, Inc. 1.8%
Sanofi-Aventis S.A. 1.8%
Schneider Electric S.A. 1.8%
- ---------------------------------------------------------
- ---------------------------------------------------------
TOP 10 INDUSTRIES
(% of Net Assets)
- ---------------------------------------------------------
Pharmaceuticals 10.6%
Household Products 5.4%
Health Care Equipment 4.0%
Industrial Gases 3.6%
Diversified Banks 3.3%
Movies & Entertainment 3.3%
Regional Banks 3.2%
Agricultural Products 3.1%
Semiconductors 3.1%
Integrated Oil & Gas 2.9%
- ---------------------------------------------------------
ASSET ALLOCATION
11/30/05
[PIE CHART OF ASSET ALLOCATION]
United States 36.6%
United Kingdom 13.4%
France 12.1%
Japan 9.6%
Switzerland 7.5%
Other* 29.7%
[END CHART]
*INCLUDES COUNTRIES WITH LESS THAN 3% OF THE PORTFOLIO, MONEY
MARKET INSTRUMENTS (3.1%), AND SHORT-TERM INVESTMENTS
PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (9.6%).
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 11-16.
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
==================--------------------------------------------------------------
of INVESTMENTS
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
INTERNATIONAL STOCKS (59.6%)
AUSTRALIA (0.7%)
184,364 QBE Insurance Group Ltd. (Property & Casualty Insurance)(f) $ 2,584
--------
AUSTRIA (1.0%)
64,300 Erste Bank der oesterreichischen Sparkassen AG (Regional Banks)(f) 3,416
--------
CANADA (1.5%)
48,388 Canadian National Railway Co. (Railroads) 3,864
28,600 EnCana Corp. (Oil & Gas Exploration & Production) 1,269
--------
5,133
--------
FRANCE (12.1%)
186,000 AXA S.A. (Multi-Line Insurance)(f) 5,578
48,870 Air Liquide S.A. (Industrial Gases)(a,f) 8,792
58,300 Credit Agricole S.A. (Regional Banks)(f) 1,756
35,400 L'Oreal S.A. (Personal Products)(f) 2,548
56,800 LVMH Moet Hennessy Louis Vuitton S.A. (Apparel &
Accessories & Luxury Goods)(a,f) 4,844
2,100 Pernod Ricard S.A. (Distillers & Vintners) 343
79,700 Sanofi-Aventis S.A. (Pharmaceuticals)(f) 6,412
74,782 Schneider Electric S.A. (Electrical Components & Equipment)(f) 6,420
10,400 Total S.A. (Integrated Oil & Gas)(a,f) 2,599
25,174 Total S.A. ADR (Integrated Oil & Gas) 3,139
--------
42,431
--------
GERMANY (2.4%)
40,700 Bayerische Motoren Werke AG (Automobile Manufacturers)(f) 1,790
37,500 E. On AG (Multi-Utilities)(f) 3,565
50,400 Schering AG (Pharmaceuticals)(f) 3,257
--------
8,612
--------
HONG KONG (1.5%)
254,000 Esprit Holdings Ltd. (Apparel Retail)(f) 1,785
2,492,000 Hutchison Telecommunications International Ltd. (Wireless
Telecommunication Services)*(f) 3,454
--------
5,239
--------
HUNGARY (0.5%)
25,000 OTP Bank Ltd. GDR (Regional Banks)(f) 1,641
--------
12
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
INDONESIA (0.3%)
3,675,500 PT Bank Central Asia Tbk (Diversified Banks)(f) $ 1,207
--------
ITALY (1.1%)
604,300 UniCredito Italiano S.p.A. (Regional Banks)(f) 3,733
--------
JAPAN (9.6%)
384,000 Asahi Glass Co. Ltd. (Building Products)(a,f) 4,409
154,000 Bridgestone Corp. (Tires & Rubber)(a,f) 3,297
95,000 Canon, Inc. (Electronic Equipment Manufacturers)(a,f) 5,342
57,600 Chugai Pharmaceutical Co. Ltd. (Pharmaceuticals)(a,f) 1,296
26,700 Nintendo Co. Ltd. (Leisure Products)(f) 2,924
39,400 Nitto Denko Corp. (Specialty Chemicals)(f) 2,696
39,100 Omron Corp. (Electrical Components & Equipment)(f) 889
164,000 Ricoh Co., Ltd. (Office Electronics)(f) 2,862
435,000 Shinsei Bank Ltd. (Diversified Banks)(f) 2,433
416,000 Tokyo Gas Co. Ltd. (Gas Utilities)(f) 1,671
220,000 Toray Industries, Inc. (Textiles)(f) 1,499
92,500 Toyota Motor Corp. (Automobile Manufacturers)(f) 4,475
--------
33,793
--------
KOREA (1.9%)
11,480 Samsung Electronics Co. Ltd. (Semiconductors)(f) 6,612
--------
NETHERLANDS (0.5%)
134,700 Reed Elsevier N.V. (Publishing)(f) 1,790
--------
POLAND (0.2%)
85,200 Powszechna Kasa Oszczednosci Bank Polski S.A. (Regional Banks)(f) 715
--------
SINGAPORE (0.8%)
1,867,150 Singapore Telecommunications Ltd. (Integrated Telecommunication Services)(f) 2,766
--------
SPAIN (2.0%)
204,800 Banco Bilbao Vizcaya Argentaria S.A. (Diversified Banks)(f) 3,610
125,100 Iberdrola S.A. (Electric Utilities)(a,f) 3,280
--------
6,890
--------
13
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
SWEDEN (2.2%)
69,300 Atlas Copco AB "A" (Industrial Machinery)(f) $ 1,384
417,800 LM Ericsson Telephone Co. "B" ADR (Communications Equipment)(f) 1,359
107,700 Sandvik AB (Industrial Machinery)(f) 5,082
--------
7,825
--------
SWITZERLAND (7.5%)
37,543 Julius Baer Holding Ltd. "B" (Diversified Banks)(f) 2,628
33,274 Nestle S.A. (Packaged Foods & Meat)(f) 9,802
50,200 Roche Holdings AG (Pharmaceuticals)(f) 7,512
7,300 Swiss Re (Reinsurance)(f) 537
64,166 UBS AG (Diversified Capital Markets)(f) 5,888
--------
26,367
--------
THAILAND (0.4%)
618,400 Bangkok Bank Public Co. Ltd. (Diversified Banks)(f) 1,574
--------
UNITED KINGDOM (13.4%)
71,900 AstraZeneca plc (Pharmaceuticals)(f) 3,305
302,551 BP plc (Oil & Gas Exploration & Production)(f) 3,323
363,495 Diageo plc (Distillers & Vintners)(f) 5,234
94,200 GlaxoSmithKline plc (Pharmaceuticals)(f) 2,332
1,046,800 Hilton Group plc (Casinos & Gaming)(f) 6,019
135,400 Next plc (Apparel Retail)(f) 3,221
386,500 Reckitt Benckiser plc (Household Products)(f) 11,912
251,100 Smith & Nephew plc (Health Care Equipment)(f) 2,234
775,100 Tesco plc (Food Retail)(f) 4,055
1,004,900 Vodafone Group plc (Wireless Telecommunication Services)(f) 2,158
397,200 William Hill plc (Casinos & Gaming)(f) 3,476
--------
47,269
--------
Total international stocks (cost: $155,110) 209,597
--------
U.S. STOCKS (36.6%)
BIOTECHNOLOGY (1.1%)
78,100 Gilead Sciences, Inc.* 3,959
--------
COMPUTER HARDWARE (1.3%)
146,900 Dell, Inc.* 4,430
--------
14
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
CONSUMER FINANCE (1.8%)
122,800 American Express Co. $ 6,314
--------
DATA PROCESSING & OUTSOURCED SERVICES (1.3%)
78,500 DST Systems, Inc.* 4,668
--------
HEALTH CARE EQUIPMENT (3.4%)
78,300 Fisher Scientific International, Inc.* 5,048
46,300 Medtronic, Inc. 2,573
108,000 Waters Corp.* 4,237
--------
11,858
--------
HEALTH CARE SUPPLIES (0.8%)
50,300 DENTSPLY International, Inc. 2,798
--------
HOME IMPROVEMENT RETAIL (0.7%)
60,500 Home Depot, Inc. 2,528
--------
HOUSEHOLD PRODUCTS (2.0%)
33,400 Colgate-Palmolive Corp. 1,821
91,637 Procter & Gamble Co. 5,241
--------
7,062
--------
HYPERMARKETS & SUPER CENTERS (1.1%)
77,100 Wal-Mart Stores, Inc. 3,744
--------
INDUSTRIAL CONGLOMERATES (1.1%)
49,000 3M Co. 3,846
--------
INDUSTRIAL GASES (1.1%)
72,300 Praxair, Inc. 3,760
--------
INTEGRATED OIL & GAS (1.3%)
77,600 Chevron Corp. 4,447
--------
INVESTMENT BANKING & BROKERAGE (1.8%)
48,900 Goldman Sachs Group, Inc. 6,306
--------
15
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
IT CONSULTING & OTHER SERVICES (1.7%)
206,100 Accenture Ltd. "A" $ 5,861
--------
LIFE & HEALTH INSURANCE (0.6%)
42,800 Lincoln National Corp. 2,225
--------
MOTORCYCLE MANUFACTURERS (1.3%)
84,900 Harley-Davidson, Inc. 4,573
--------
MOVIES & ENTERTAINMENT (3.3%)
162,700 Viacom, Inc. "B" 5,434
250,700 Walt Disney Co. 6,250
--------
11,684
--------
OIL & GAS DRILLING (0.9%)
42,700 Noble Corp. 3,077
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.8%)
57,000 Citigroup, Inc. 2,767
--------
PERSONAL PRODUCTS (1.0%)
112,800 Estee Lauder Companies, Inc. "A" 3,724
--------
PHARMACEUTICALS (3.7%)
119,700 Eli Lilly and Co. 6,045
113,300 Johnson & Johnson 6,996
--------
13,041
--------
SEMICONDUCTORS (1.2%)
165,200 Intel Corp. 4,408
--------
SOFT DRINKS (0.8%)
47,400 PepsiCo, Inc. 2,806
--------
SYSTEMS SOFTWARE (2.5%)
495,300 Oracle Corp.* 6,226
148,200 Symantec Corp.* 2,619
--------
8,845
--------
Total U.S. stocks (cost: $117,667) 128,731
--------
16
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
- ------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS (3.1%)
COMMERCIAL PAPER (3.1%)
-----------------------
AGRICULTURAL PRODUCTS (3.1%)
$10,906 Cargill Inc., 4.01%, 12/01/2005(g,h) (cost: $10,906) $ 10,906
--------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (9.6%)
REPURCHASE AGREEMENTS (9.3%)(B)
14,000 Credit Suisse First Boston, LLC, 4.02%, acquired on 11/30/2005 and due
12/01/2005 at $14,000 (collateralized by $14,560 of Federal
Home Loan Bank Bonds(d), 3.80%, due 9/30/2008; market value
$14,284) 14,000
13,000 Deutsche Bank Securities, Inc., 4.00%, acquired on 11/30/2005
and due 12/01/2005 at $13,000 (collateralized by $5,795 of
Fannie Mae Notes(d), 6.00%, due 8/14/2023; $7,107 of Federal
Farm Credit Discount Notes(d), 4.11%(e), due 12/06/2005; and
$411 of Freddie Mac Notes(d), 2.30%, due 2/24/2006; combined
market value $13,260) 13,000
4,850 Lehman Brothers, Inc., 3.99%, acquired on 11/30/2005 and due
12/01/2005 at $4,850 (collateralized by $8,100 of Freddie Mac
Notes(d), 5.58%(e), due 11/05/2014; market value $4,950) 4,850
1,000 Morgan Stanley & Co., Inc., 4.02%, acquired on 11/30/2005
and due 12/01/2005 at $1,000 (collateralized by $1,035 of
Fannie Mae Notes(d), 4.00%, due 5/23/2007; market value $1,025) 1,000
--------
32,850
--------
NUMBER
OF SHARES
- ----------
MONEY MARKET FUNDS (0.3%)
817,616 AIM Short-Term Investment Co. Liquid Assets Portfolio, 4.00%(c) 818
122,560 Merrill Lynch Premier Institutional Fund, 3.91%(c) 122
--------
940
--------
Total short-term investments purchased with cash collateral from
securities loaned (cost: $33,790) 33,790
--------
TOTAL INVESTMENTS (COST: $317,473) $383,024
========
17
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (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.
GDR - Global depositary receipts are receipts issued by a U.S. or
foreign bank evidencing ownership of foreign shares. Dividends are paid
in U.S. dollars.
SPECIFIC NOTES
- --------------------------------------------------------------------------------
(a) The security or a portion thereof was out on loan as of November
30, 2005.
(b) 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.
(c) Rate represents the money market fund annualized seven-day yield at
November 30, 2005.
(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) Zero-coupon security. Rate represents the effective yield at date
of purchase.
18
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
(f) Security was fair valued at November 30, 2005, by USAA Investment
Management Company (the Manager) in accordance with valuation
procedures approved by the Board of Directors.
(g) 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 Directors, unless otherwise
noted as illiquid.
(h) Commercial paper issued in reliance on the "private placement"
exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Unless this commercial paper is
subsequently registered, a resale of this commercial paper in the
United States must be effected in a transaction exempt from
registration under the Securities Act of 1933. Section 4(2)
commercial paper is normally resold to other investors through or
with the assistance of the issuer or an investment dealer who makes
a market in this security, and as such has been deemed liquid by
USAA Investment Management Company (the Manager) under liquidity
guidelines approved by the Board of Directors, unless otherwise
noted as illiquid.
* Non-income-producing security for the 12 months preceding November
30, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
S T A T E M E N T
==================--------------------------------------------------------------
of ASSETS and LIABILITIES
(in thousands)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
ASSETS
Investments in securities, at market value (including securities
on loan of $30,683) (identified cost of $317,473) $383,024
Cash 8
Cash denominated in foreign currencies (identified cost of $30) 28
Receivables:
Capital shares sold 161
Dividends and interest 596
Securities sold 5,853
Other 8
--------
Total assets 389,678
--------
LIABILITIES
Payables:
Upon return of securities loaned 33,797
Securities purchased 3,616
Capital shares redeemed 110
Unrealized depreciation on foreign currency contracts held, at value 4
Accrued management fees 216
Accrued transfer agent's fees 3
Other accrued expenses and payables 51
--------
Total liabilities 37,797
--------
Net assets applicable to capital shares outstanding $351,881
========
NET ASSETS CONSIST OF:
Paid-in capital $255,642
Accumulated undistributed net investment income 1,684
Accumulated net realized gain on investments 29,018
Net unrealized appreciation of investments 65,551
Net unrealized depreciation on foreign currency translations (14)
--------
Net assets applicable to capital shares outstanding $351,881
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 18,749
========
Net asset value, redemption price, and offering price per share $ 18.77
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA WORLD GROWTH FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2005 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $86) $ 2,201
Interest 145
Securities lending 37
-------
Total income 2,383
-------
EXPENSES
Management fees 1,287
Administration and servicing fees 257
Transfer agent's fees 425
Custody and accounting fees 108
Postage 51
Shareholder reporting fees 14
Trustees' fees 4
Registration fees 18
Professional fees 28
Other 7
-------
Total expenses 2,199
Expenses paid indirectly (24)
-------
Net expenses 2,175
-------
NET INVESTMENT INCOME 208
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments 14,189
Foreign currency transactions (85)
Change in net unrealized appreciation/depreciation of:
Investments 8,492
Foreign currency translations 13
-------
Net realized and unrealized gain 22,609
-------
Increase in net assets resulting from operations $22,817
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
S T A T E M E N T S
====================------------------------------------------------------------
of Changes in NET ASSETS
(in thousands)
USAA WORLD GROWTH FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2005 (UNAUDITED), AND YEAR ENDED
MAY 31, 2005
11/30/2005 5/31/2005
-------------------------
FROM OPERATIONS
Net investment income $ 208 $ 1,559
Net realized gain on investments 14,189 23,455
Net realized loss on foreign currency transactions (85) (33)
Change in net unrealized appreciation/depreciation of:
Investments 8,492 8,048
Foreign currency translations 13 (41)
-----------------------
Increase in net assets resulting from operations 22,817 32,988
-----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (1,517)
Net realized gains - (5,663)
-----------------------
Distributions to shareholders - (7,180)
-----------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 20,533 45,314
Reinvested dividends - 7,049
Cost of shares redeemed (22,261) (36,011)
-----------------------
Increase (decrease) in net assets from capital share
transactions (1,728) 16,352
-----------------------
Capital contribution from USAA Transfer Agency Company - 3
-----------------------
Net increase in net assets 21,089 42,163
NET ASSETS
Beginning of period 330,792 288,629
-----------------------
End of period $351,881 $330,792
=======================
Accumulated undistributed net investment income:
End of period $ 1,684 $ 1,476
=======================
CHANGE IN SHARES OUTSTANDING
Shares sold 1,120 2,626
Shares issued for dividends reinvested - 398
Shares redeemed (1,219) (2,109)
-----------------------
Increase in shares outstanding (99) 915
=======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
USAA INVESTMENT TRUST (the Trust), registered under the Investment
Company Act of 1940 (the 1940 Act), as amended, is an open-end
management investment company organized as a Massachusetts business
trust consisting of 10 separate funds. The information presented in
this semiannual report pertains only to the USAA World Growth Fund (the
Fund), which is classified as diversified under the 1940 Act. The
Fund's investment objective is capital appreciation.
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, including exchange-traded funds (ETFs),
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 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. Equity 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 their last quoted sales or official closing
23
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 ETFs,
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 valued 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
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. The effect of fair value pricing is that
securities may not be priced on the basis of quotations
24
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
from the primary market in which they are traded, and the
actual price realized from the sale of a security may differ
materially from the fair value price. Valuing these securities
at fair value is intended to cause the Fund's NAV to be more
reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not
limited to, obtaining market quotations from secondary pricing
services, broker-dealers, or widely used quotation systems.
General factors considered in determining the fair value of
securities include fundamental analytical data, the nature and
duration of any restrictions on disposition of the securities,
and an evaluation of the forces that influenced the market in
which the securities are purchased and sold.
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).
Gains or losses from sales of investment securities are 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.
25
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
Government-sponsored enterprises (GSEs), such as Fannie Mae and
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.
E. FOREIGN CURRENCY TRANSLATIONS - The Fund's assets may be invested
in the securities of foreign issuers and may be traded in foreign
currency. Since the Fund's accounting records are maintained in
U.S. dollars, foreign currency amounts are translated into U.S.
dollars on the following basis:
1. Purchases and sales of securities, income, and expenses at the
rate of exchange obtained from an independent pricing service
on the respective dates of such transactions.
2. Market value of securities, other assets, and liabilities at
the exchange rate obtained from an independent pricing service
on a daily basis.
The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments.
Separately, net realized foreign currency gains/losses 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,
26
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
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, 2006, 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 recaptured as a credit that is tracked
and used by the custodian to directly reduce expenses paid by the
Fund. 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, 2005, brokerage commission
recapture credits and custodian and other bank credits reduced the
Fund's expenses by $23,000 and $1,000, respectively, resulting in
a total reduction in Fund expenses of $24,000.
G. INDEMNIFICATIONS - Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liabilities
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.
27
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
H. USE OF ESTIMATES - The preparation of financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that may
affect the reported amounts in the financial statements.
(2) LINES OF CREDIT
- --------------------------------------------------------------------------------
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $300 million with USAA Capital Corporation (CAPCO), an
affiliate of the Manager. The purpose of the agreement is to meet
temporary or emergency cash needs, including redemption requests that
might otherwise require the untimely disposition of securities. Subject
to availability under the agreement, 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.
The USAA funds that are party to the loan agreement are assessed
facility fees 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 $300 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, 2005, the Fund paid CAPCO
facility fees of less than $500, which represents 1.1% of total fees
paid to CAPCO by the USAA funds. The Fund had no borrowings under this
agreement during the six-month period ended November 30, 2005.
(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, 2006, in accordance with applicable tax law.
28
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually in the
succeeding fiscal year or as otherwise required to avoid the payment of
federal taxes.
(4) INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the six-month period ended November 30,
2005, were $71,148,000 and $77,358,000, respectively.
As of November 30, 2005, the cost of securities, including short-term
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, 2005, were $70,484,000 and $4,933,000, respectively,
resulting in net unrealized appreciation of $65,551,000.
(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.
29
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
At November 30, 2005, 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 11/30/2005 FOR U.S. DOLLAR (DEPRECIATION)
- --------------------------------------------------------------------------------------------------
12/01/2005 431 $328 $331 $(3)
Swiss Franc
12/01/2005 710 540 540 -
Swiss Franc
- --------------------------------------------------------------------------------------------------
$868 $871 $(3)
- --------------------------------------------------------------------------------------------------
FOREIGN CURRENCY CONTRACTS TO SELL
- --------------------------------------------------------------------------------------------------
U.S. DOLLAR UNREALIZED
EXCHANGE CONTRACTS TO VALUE AS OF IN EXCHANGE APPRECIATION
DATE DELIVER 11/30/2005 FOR U.S. DOLLAR (DEPRECIATION)
- --------------------------------------------------------------------------------------------------
12/01/2005 1 $ 1 $ 1 $ -
Euro
12/01/2005 3,222 27 27 -
Japanese Yen
12/01/2005 19 11 11 -
Singapore Dollar
12/02/2005 42 36 36 -
Canadian Dollar
12/05/2005 263 310 310 -
Euro
12/05/2005 717 1,240 1,240 -
Pound Sterling
12/05/2005 7,346 910 909 (1)
Swedish Krona
- --------------------------------------------------------------------------------------------------
$2,535 $2,534 $(1)
- --------------------------------------------------------------------------------------------------
(6) LENDING OF PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
The Fund, through its third-party securities-lending agent,
Metropolitan West Securities LLC (MetWest), may lend its securities to
qualified financial institutions, such as certain broker-dealers, to
earn additional
30
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
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, 2005, the Fund received
securities-lending income of $37,000, which is net of the 20% income
retained by MetWest. As of November 30, 2005, the Fund loaned
securities having a fair market value of approximately $30,683,000 and
received cash collateral of $33,797,000 for the loans. Of this amount,
$33,790,000 was invested in short-term investments, as noted in the
Fund's portfolio of investments, and $7,000 remained in cash.
(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, subject to the
authority of and supervision by the Trust's Board of Trustees.
The Manager 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
recommends to the Trust's Board of Trustees as to whether each
subadviser's
31
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 Global Funds
Index, which tracks the total return performance of the 30
largest funds in the Lipper Global Funds category. The Fund's
base fee is accrued daily and paid monthly at an annualized
rate of 0.75% of the Fund's average net assets for the fiscal
year.
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
- -----------------------------------------------------------------------------
+/- 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%.
32
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
Under the performance fee arrangement, the Fund will pay a
positive performance fee adjustment for a performance period
whenever the Fund outperforms the Lipper Global 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, 2005, the Fund
incurred total management fees, paid or payable to the Manager,
of $1,287,000, which included no performance adjustment.
B. SUBADVISORY ARRANGEMENTS - The Manager has entered into an
investment subadvisory agreement with MFS Investment Management
(MFSIM), under which MFSIM 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 MFSIM a
subadvisory fee in the annual amount of 0.335% of the first
$350 million of the aggregate average net assets of the USAA
World Growth Fund, the USAA International Fund, the USAA Life
Investment Trust World Growth Fund, and the portion of the USAA
Cornerstone Strategy Fund that MFSIM manages (MFSIM Funds),
plus 0.225% of the aggregate average net assets of the MFSIM
Funds over $350 million but not over $1 billion, plus 0.200% of
the aggregate average net assets of the MFSIM Funds over $1
billion. Effective January 1, 2006, the Manager (not the Fund)
will pay MFSIM a subadvisory fee in the annual amount of 0.29%
of the aggregate average net assets of the MFSIM Funds. For the
six-month period ended November 30, 2005, the Manager incurred
subadvisory fees, paid or payable to MFSIM, of $1,729,000 for
the MFSIM Funds in total, of which $421,000 was based on the
average net assets of the USAA World Growth Fund.
C. ADMINISTRATION AND SERVICING FEES - The Manager provides
certain administration and shareholder servicing functions for
the Fund. For such services, the Manager receives a fee accrued
daily and
33
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (UNAUDITED)
paid monthly at an annualized rate of 0.15% of the Fund's
average net assets. For the six-month period ended November 30,
2005, the Fund incurred administration and servicing fees, paid
or payable to the Manager, of $257,000.
In addition to the services provided under its Administration
and Servicing Agreement with the Fund, the Manager also
provides certain legal and tax services for the benefit of the
Fund. The Trust's Board of Trustees has approved the
reimbursement of these expenses incurred by the Manager. For
the six-month period ended November 30, 2005, the Fund
reimbursed the Manager $10,000 for these legal and tax
services. These expenses are included in the professional fees
expenses on the Fund's statement of operations.
D. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a
USAA Shareholder Account Services (SAS), 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. The Fund also pays SAS fees that are related
to the administration and servicing of accounts that are traded
on an omnibus basis. For the six-month period ended November
30, 2005, the Fund incurred transfer agent's fees, paid or
payable to SAS, of $425,000.
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.
(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.
34
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (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,
----------------------------------------------------------------------------------------
2005 2005 2004 2003 2002 2001
----------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 17.55 $ 16.09 $ 13.02 $ 14.42 $ 15.90 $ 20.61
----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .01 .08 .08 .04 .03 .07
Net realized and
unrealized gain (loss) 1.21 1.78 3.03 (1.39) (1.43) (3.70)
----------------------------------------------------------------------------------------
Total from investment operations 1.22 1.86 3.11 (1.35) (1.40) (3.63)
----------------------------------------------------------------------------------------
Less distributions:
From net investment income - (.08) (.04) (.05) (.07) (.07)
From realized capital gains - (.32) - - (.01) (1.01)
----------------------------------------------------------------------------------------
Total distributions - (.40) (.04) (.05) (.08) (1.08)
----------------------------------------------------------------------------------------
Net asset value at end of period $ 18.77 $ 17.55 $ 16.09 $ 13.02 $ 14.42 $ 15.90
========================================================================================
Total return (%)* 6.95 11.54 23.87 (9.32) (8.79) (18.83)
Net assets at end of period (000) $351,881 $330,792 $288,629 $231,337 $276,019 $320,269
Ratio of expenses to average
net assets (%)**(b) 1.28(a) 1.31 1.32 1.53 1.40 1.14
Ratio of net investment income to
average net assets (%)** .12(a) .50 .59 .35 .21 .41
Portfolio turnover (%) 21.43 36.49 56.13 138.42 51.18 38.30
* Assumes reinvestment of all net investment income and realized capital gain
distributions during the period.
** For the six-month period ended November 30,
2005, average net assets were $342,372,000.
(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:
(.01%) (.01%) (.02%) (.00%)(+) (.00%)(+) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
35
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (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, 2005, through November 30, 2005.
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
36
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
(continued)
USAA WORLD GROWTH FUND
NOVEMBER 30, 2005 (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, 2005-
JUNE 1, 2005 NOVEMBER 30, 2005 NOVEMBER 30, 2005
-------------------------------------------------------------
Actual $1,000.00 $1,069.50 $6.57
Hypothetical
(5% return before 1,000.00 1,018.72 6.41
expenses)
*Expenses are equal to the Fund's annualized expense ratio of 1.27%,
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
6.95% for the six-month period of June 1, 2005, through November 30,
2005.
37
N O T E S
==========----------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
38
N O T E S
==========----------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
39
N O T E S
==========----------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
40
N O T E S
==========----------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
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 AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
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
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.
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 FORMS N-Q 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 FORMS N-Q 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
23412-0106 (C)2006, 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.
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. The only material change to
the procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
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 (except for the Total Return Strategy Fund)
By:* /s/ EILEEN M. SMILEY
-----------------------------------------------------------
Signature and Title: Eileen M. Smiley, Assistant Secretary
Date: January 18, 2006
------------------------------
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: January 25, 2006
------------------------------
By:* /s/ DEBRA K. DUNN
---------------------------------------------
Signature and Title: Debra K. Dunn/Treasurer
Date: January 24, 2006
------------------------------
*Print the name and title of each signing officer under his or her signature.