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 EMERGING MARKETS FUND - SEMIANNUAL REPORT FOR PERIOD ENDING NOVEMBER 30,
2005
[LOGO OF USAA]
USAA(R)
USAA EMERGING
MARKETS Fund
[GRAPHIC OF USAA EMERGING MARKETS FUND]
S e m i a n n u a l R e p o r t
- --------------------------------------------------------------------------------
NOVEMBER 30, 2005
Table of CONTENTS
- --------------------------------------------------------------------------------
MESSAGE FROM THE PRESIDENT 2
MANAGERS' COMMENTARY 4
INVESTMENT OVERVIEW 7
FINANCIAL INFORMATION
Portfolio of Investments 12
Notes to Portfolio of Investments 19
Financial Statements 21
Notes to Financial Statements 24
EXPENSE EXAMPLE 39
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA INVESTMENT MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2006, USAA. All rights reserved.
2
M E S S A G E
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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
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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 '
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COMMENTARY on the Fund
D. KIRK HENRY, CFA ANDREW B. JOHNSEN, CFA
The Boston Company Asset The Boston Company Asset
Management, LLC Management, LLC
CLIFFORD A. SMITH, CFA PARAMESWARI ROYCHOUDHURY, CFA
The Boston Company Asset The Boston Company Asset
Management, LLC Management, LLC
CAROLYN M. KEDERSHA, CFA, CPA MICHELLE Y. CHAN, CFA
The Boston Company Asset The Boston Company Asset
Management, LLC Management, LLC
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM?
The USAA Emerging Markets Fund had a total return of 18.98% for
the six months ended November 30, 2005. This compares to a
return of 22.35% for the Lipper Emerging Markets Funds Average,
23.22% for the Lipper Emerging Markets Funds Index, and 23.66%
for the Morgan Stanley Capital International (MSCI) Emerging
Markets Index.
WHAT WAS THE OVERALL MARKET ENVIRONMENT?
Emerging markets continued to perform quite well on an absolute
basis, driven largely by the resilient global economy. We're
still seeing very impressive economic growth rates; for
example, China's gross domestic product (GDP) likely will grow
in excess of 9% this year, and India's likely will grow at
around 8%. Commodity exports are strong, with Russia benefiting
from the high price of oil and Brazil benefiting from oil and
metal exports. We're also seeing rising local consumption
across many emerging markets.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
REFER TO PAGE 9 FOR BENCHMARK DEFINITIONS.
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
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WHAT FACTORS LED THE FUND TO UNDERPERFORM ITS PEER GROUP?
Recognizing the high-risk/high-reward nature of emerging
markets, The Boston Company Asset Management, LLC establishes
price targets based on individual company fundamentals and
takes profits when these targets are reached. This can be a bit
frustrating when emerging markets have significant momentum, as
they do now, because the large capital inflows push stock
prices beyond the levels the fundamentals dictate. However,
over time our prudent strategy has helped provide a level of
protection against the significant downturns that inevitably
come in higher-risk markets.
For example, during the past six months, the strongest
performer in Mexico was American Movile, which is trading at a
very high trailing price-to-earnings (p/e) ratio of 31.4. Our
stock selection is focused on companies with more attractive
valuations and more stable growth profiles. For instance, in
Mexico, we are over-weight in Telefonos de Mexico S.A. de C.V.
ADR "L" (Telmex), which has a trailing p/e of 9.5. During the
period, investors flocked to American Movile because it had
signed up a lot of new subscribers, and wireless is a more
exciting story. But in addition to a low valuation, Telmex has
a strong growth profile, it's making good acquisitions, and
it's focused on business providers who are much less fickle
than individual wireless subscribers.
WHAT OTHER AREAS HAD AN IMPACT ON THE FUND'S PERFORMANCE?
In Brazil, we did well with our holding in Petroleo Brasileiro
S.A. ADR (Petrobras), the oil company, but we were hurt by
having only small positions relative to the Lipper Emerging
Markets Funds Index in Banco Bradesco S.A., which was up 95%
during
BANCO BRADESCO S.A. AND COMPANHIA VALE DO RIO DOCE ADR WERE
SOLD OUT OF THE FUND PRIOR TO NOVEMBER 30, 2005.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-18.
6
. . . C O N T I N U E D
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COMMENTARY on the Fund
the period, and in iron ore producer Companhia Vale do Rio Doce
ADR, which was up more than 50%.
Markets where we performed well included India, due to an
overweight position relative to the MSCI Emerging Markets
Index. We also did well in Russia, where our stock selection
focused on oil, and in South Korea.
We started seeing our information technology holdings perform
better as the period progressed, especially in Taiwan. We might
have been a bit early into hardware, semiconductor, and
contract manufacturing stocks, but our view was that they had
excessively sold off.
WHAT'S YOUR OUTLOOK?
Our objective is to find companies that can navigate a variety
of economic cycles. We think the portfolio is well-positioned
in stocks that were overlooked in this year's momentum-driven
market. We continue to look for high-quality businesses in a
wide range of markets and sectors, such as Asian financials and
Brazilian consumer stocks, which demonstrate strong
fundamentals with relatively low valuations.
We thank you, our shareholders, for your investment in the
Fund.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-18.
7
I N V E S T M E N T
====================------------------------------------------------------------
OVERVIEW
USAA EMERGING MARKETS FUND
OBJECTIVE
- --------------------------------------------------------------------------------
Capital appreciation.
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
Invests at least 80% of the Fund's assets in equity securities
of emerging market companies.
- --------------------------------------------------------------------------------
11/30/05 5/31/05
- --------------------------------------------------------------------------------
Net Assets $219.5 Million $152.4 Million
Net Asset Value Per Share $14.98 $12.59
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/05
- --------------------------------------------------------------------------------
5/31/05 TO 11/30/05* 1 YEAR 5 YEARS 10 YEARS
18.98% 24.36% 16.50% 6.10%
* 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.
8
. . . C O N T I N U E D
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OVERVIEW
CUMULATIVE PERFORMANCE COMPARISON
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LIPPER EMERGING LIPPER EMERGING MSCI EMERGING USAA EMERGING
MARKETS FUNDS AVERAGE MARKETS FUNDS INDEX MARKETS INDEX MARKETS FUND
--------------------- ------------------- ------------- -------------
11/30/95 $10,000.00 $10,000.00 $10,000.00 $10,000.00
12/31/95 10,331.69 10,346.52 10,443.52 10,235.70
01/31/96 11,236.03 11,286.88 11,185.86 11,451.60
02/29/96 11,169.72 11,155.05 11,008.01 11,595.30
03/31/96 11,234.03 11,247.65 11,093.75 11,540.03
04/30/96 11,734.15 11,644.61 11,537.31 12,159.04
05/31/96 11,890.01 11,760.26 11,485.79 12,302.74
06/30/96 11,957.79 11,782.74 11,557.51 12,125.88
07/31/96 11,250.93 11,099.50 10,767.63 11,238.38
08/31/96 11,540.27 11,403.04 11,043.25 11,655.91
09/30/96 11,644.06 11,519.80 11,138.91 11,818.28
10/31/96 11,357.15 11,255.57 10,841.84 11,423.95
11/30/96 11,658.28 11,509.90 11,023.50 11,760.29
12/31/96 11,830.36 11,610.01 11,073.36 11,934.26
01/31/97 12,723.22 12,497.66 11,828.67 12,850.49
02/28/97 13,124.64 12,943.29 12,335.24 13,279.62
03/31/97 12,789.61 12,613.71 12,011.22 13,024.46
04/30/97 12,878.59 12,613.30 12,032.44 12,885.29
05/31/97 13,450.09 13,049.38 12,376.81 13,372.40
06/30/97 14,199.10 13,688.35 13,039.18 13,987.09
07/31/97 14,723.25 14,089.25 13,233.83 14,287.17
08/31/97 13,254.39 12,537.93 11,549.83 13,192.68
09/30/97 13,865.05 12,990.33 11,869.86 13,922.34
10/31/97 11,699.63 10,821.07 9,922.16 11,756.91
11/30/97 11,323.22 10,326.71 9,560.13 11,192.01
12/31/97 11,497.23 10,421.05 9,790.51 11,521.53
01/31/98 10,764.18 9,694.38 9,022.63 10,462.35
02/28/98 11,674.87 10,560.58 9,964.38 11,639.22
03/31/98 12,137.56 10,953.74 10,396.79 12,204.11
04/30/98 12,257.84 11,006.40 10,283.54 12,098.20
05/31/98 10,745.37 9,554.88 8,874.27 10,568.27
06/30/98 9,829.57 8,649.08 7,943.40 9,544.39
07/31/98 10,135.45 8,912.79 8,195.25 9,723.06
08/31/98 7,433.17 6,358.93 5,825.68 6,588.89
09/30/98 7,588.16 6,597.55 6,195.23 7,051.89
10/31/98 8,173.08 7,231.30 6,847.60 8,072.87
11/30/98 8,630.91 7,717.02 7,417.10 8,500.26
12/31/98 8,563.65 7,620.53 7,309.61 8,512.13
01/31/99 8,450.33 7,465.88 7,191.68 8,298.43
02/28/99 8,342.17 7,401.79 7,261.63 8,239.07
03/31/99 9,177.20 8,226.51 8,218.64 9,058.23
04/30/99 10,324.45 9,369.31 9,235.46 10,316.65
05/31/99 10,184.70 9,256.19 9,181.73 10,079.21
06/30/99 11,374.35 10,295.71 10,223.79 11,159.55
07/31/99 11,083.56 10,039.53 9,946.05 10,906.50
08/31/99 11,009.57 9,928.40 10,036.54 10,739.08
09/30/99 10,666.58 9,575.80 9,696.88 10,236.81
10/31/99 11,023.36 9,863.99 9,903.36 10,464.02
11/30/99 12,237.72 10,952.04 10,791.34 11,337.02
12/31/99 14,436.51 12,876.13 12,163.78 12,975.39
01/31/00 14,240.74 12,726.86 12,236.28 12,700.34
02/29/00 14,886.08 13,105.62 12,397.88 13,130.86
03/31/00 14,922.10 13,144.50 12,458.39 13,106.94
04/30/00 13,273.92 11,714.50 11,277.42 11,432.69
05/31/00 12,566.45 11,090.97 10,811.19 10,739.08
06/30/00 13,254.92 11,640.93 11,192.01 11,313.10
07/31/00 12,513.89 11,165.97 10,616.42 10,797.01
08/31/00 12,727.88 11,281.35 10,668.61 10,940.65
09/30/00 11,460.84 10,203.18 9,737.07 9,971.08
10/31/00 10,616.71 9,441.44 9,031.11 9,372.57
11/30/00 9,575.06 8,588.00 8,241.41 8,426.94
12/31/00 9,899.73 8,898.00 8,440.46 8,833.92
01/31/01 11,066.01 9,928.92 9,602.71 9,659.86
02/28/01 10,139.60 9,159.01 8,850.81 8,833.92
03/31/01 9,163.42 8,285.30 7,981.48 8,043.89
04/30/01 9,714.20 8,708.63 8,375.86 8,414.97
05/31/01 9,930.54 8,948.11 8,475.84 8,570.58
06/30/01 9,728.35 8,792.01 8,301.86 8,450.88
07/31/01 9,112.93 8,246.78 7,777.26 8,007.98
08/31/01 8,948.54 8,139.25 7,700.55 7,720.70
09/30/01 7,678.91 6,977.80 6,508.66 6,751.13
10/31/01 8,093.68 7,344.08 6,912.58 7,086.29
11/30/01 8,915.05 8,071.57 7,634.28 7,648.88
12/31/01 9,459.53 8,586.75 8,240.25 8,322.07
01/31/02 9,798.64 8,925.31 8,519.49 8,730.37
02/28/02 10,004.90 9,124.95 8,659.46 9,006.57
03/31/02 10,571.51 9,624.72 9,181.22 9,607.01
04/30/02 10,666.12 9,742.30 9,239.92 9,619.02
05/31/02 10,569.77 9,652.69 9,092.70 9,522.95
06/30/02 9,784.48 8,947.18 8,410.55 8,814.43
07/31/02 9,081.94 8,278.48 7,770.87 8,069.89
08/31/02 9,131.03 8,346.39 7,890.61 8,165.96
09/30/02 8,217.07 7,509.42 7,039.28 7,289.32
10/31/02 8,615.47 7,867.57 7,496.04 7,553.51
11/30/02 9,131.21 8,396.84 8,012.02 8,081.90
12/31/02 8,870.39 8,189.33 7,745.82 7,901.77
01/31/03 8,791.08 8,141.90 7,712.09 7,805.70
02/28/03 8,579.30 7,949.85 7,503.95 7,589.54
03/31/03 8,297.09 7,693.49 7,291.17 7,373.38
04/30/03 9,040.58 8,434.78 7,940.61 8,081.90
05/31/03 9,704.14 9,041.30 8,510.52 8,682.34
06/30/03 10,180.92 9,496.43 8,995.58 9,102.64
07/31/03 10,715.49 9,931.14 9,558.95 9,607.01
08/31/03 11,421.27 10,594.65 10,200.54 10,099.37
09/30/03 11,599.91 10,829.64 10,275.32 10,327.54
10/31/03 12,542.40 11,673.21 11,149.73 11,108.11
11/30/03 12,677.12 11,846.40 11,286.74 11,312.25
12/31/03 13,717.74 12,852.95 12,104.99 12,092.82
01/31/04 14,132.36 13,220.45 12,534.90 12,465.10
02/29/04 14,741.03 13,813.87 13,113.13 13,005.49
03/31/04 14,902.03 13,999.14 13,281.63 13,089.55
04/30/04 13,668.76 12,895.80 12,195.76 12,284.96
05/31/04 13,390.04 12,644.15 12,034.08 12,080.82
06/30/04 13,385.70 12,709.07 12,010.17 12,236.93
07/31/04 13,164.00 12,522.55 11,797.80 12,056.80
08/31/04 13,676.67 13,009.15 12,291.66 12,417.06
09/30/04 14,473.82 13,772.00 13,001.59 13,005.49
10/31/04 14,847.11 14,192.27 13,313.07 13,329.73
11/30/04 16,116.63 15,359.42 14,546.19 14,542.61
12/31/04 16,915.14 16,155.35 15,246.47 15,260.44
01/31/05 16,997.08 16,212.78 15,294.73 15,115.56
02/28/05 18,394.88 17,564.62 16,637.74 16,262.51
03/31/05 17,125.55 16,370.35 15,541.63 15,127.63
04/30/05 16,728.58 15,969.74 15,127.39 14,825.80
05/31/05 17,272.78 16,463.82 15,660.00 15,200.07
06/30/05 17,767.05 17,010.33 16,200.57 15,767.51
07/31/05 18,944.39 18,184.57 17,346.89 16,757.50
08/31/05 19,144.99 18,467.31 17,503.04 16,829.94
09/30/05 20,802.66 20,082.43 19,135.13 18,170.06
10/31/05 19,573.15 18,871.46 17,884.93 16,902.38
11/30/05 21,067.52 20,285.92 19,365.75 18,085.55
[END CHART]
DATA FROM 11/30/95 THROUGH 11/30/05.
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.
9
. . . C O N T I N U E D
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The graph illustrates the comparison of a $10,000 hypothetical
investment in the USAA Emerging Markets Fund to the following
benchmarks:
o The Lipper Emerging Markets Funds Average is an average of
emerging markets funds, reported by Lipper Inc., an
independent organization that monitors the performance of
mutual funds.
o The Lipper Emerging Markets Funds Index tracks the total
return performance of the 30 largest funds within the Lipper
Emerging Markets Funds category.
o The Morgan Stanley Capital International (MSCI) Emerging
Markets Index is a free-float-adjusted market capitalization
index that is designed to measure equity market performance
in the global emerging markets.
10
. . . C O N T I N U E D
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OVERVIEW
- ------------------------------------------------------
TOP 10 INDUSTRIES*
(% of Net Assets)
- ------------------------------------------------------
Diversified Banks 11.5%
Integrated Telecommunication Services 10.8%
Integrated Oil & Gas 8.7%
Semiconductors 5.3%
Wireless Telecommunication Services 4.3%
Electric Utilities 4.2%
Computer Hardware 2.9%
Diversified Chemicals 2.9%
Electrical Components & Equipment 2.6%
Automobile Manufacturers 2.3%
- ------------------------------------------------------
*EXCLUDES MONEY MARKET INSTRUMENTS AND SHORT-TERM INVESTMENTS PURCHASED WITH
CASH COLLATERAL FROM SECURITIES LOANED.
- ------------------------------------------------------
TOP 10 EQUITY HOLDINGS
(% of Net Assets)
- ------------------------------------------------------
Petroleo Brasileiro S.A. ADR 2.6%
Telefonos de Mexico S.A. de C.V. ADR "L" 2.6%
LUKoil Holdings ADR 2.5%
Samsung Electronics Co. Ltd. 2.4%
United Microelectronics Corp. 2.4%
Reliance Industries Ltd. GDR 1.9%
Korea Electric Power Corp. 1.7%
Nedcor Ltd. 1.7%
SK Telecom Co. Ltd. ADR 1.7%
Kookmin Bank 1.6%
- ------------------------------------------------------
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-18.
11
. . . C O N T I N U E D
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ASSET ALLOCATION
11/30/05
[PIE CHART OF ASSET ALLOCATION]
Korea 19.2%
Other* 19.1%
Taiwan 15.0%
Brazil 11.0%
South Africa 8.8%
China 8.5%
India 7.3%
Mexico 7.2%
Malaysia 4.5%
Russia 4.0%
[END CHART]
*INCLUDES COUNTRIES WITH LESS THAN 3% OF THE PORTFOLIO, MONEY
MARKET INSTRUMENTS (4.3%), AND SHORT-TERM INVESTMENTS PURCHASED
WITH CASH COLLATERAL FROM SECURITIES LOANED (4.1%).
PERCENTAGES ARE OF THE NET ASSETS OF THE FUND AND MAY NOT EQUAL
100%.
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, SUCH AS
CURRENCY FLUCTUATIONS, MARKET ILLIQUIDITY, AND POLITICAL
INSTABILITY.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-18.
12
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
STOCKS (96.2%)
BRAZIL (11.0%)
34,600 Banco Itau S.A. ADR (Preferred) (Diversified Banks)(b) $ 877
44,290 Brasil Telecom Participacoes S.A. ADR (Preferred)
(Integrated Telecommunication Services) 1,719
11,768,800 Centrais Electricas Brasileiras S.A. (Electric Utilities) 215
31,176,000 Centrais Electricas Brasileiras S.A. "B" (Preferred) (Electric Utilities) 574
25,668,100 Companhia Energetica de Minas Gerais (CEMIG) (Preferred)
(Electric Utilities) 1,040
178,956,300 Companhia Paranaense de Energia-Copel (Preferred) (Electric Utilities) 1,551
19,214,300 Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP)
(Water Utilities) 1,212
36,500 Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) ADR
(Water Utilities) 573
14,549,400 Companhia de Tecidos Norte de Minas (Preferred) (Textiles) 1,410
81,205 Duratex S.A. (Preferred) (Building Products) 859
36,874 Embraer Empresa Brasileira de Aeronautica S.A. ADR (Preferred)
(Aerospace & Defense)(b) 1,390
89,900 Grendene S.A. (Footwear) 898
180,100 Klabin S.A. (Preferred) (Paper Packaging) 351
82,996 Petroleo Brasileiro S.A. ADR (Integrated Oil & Gas) 5,611
13,500 Telecomunicacoes Brasileiras S.A. ADR (Preferred) (Integrated
Telecommunication Services) 469
25,900 Telemar Norte Leste S.A. (Integrated Telecommunication Services) 764
651,135,884 Telemig Celular Participacoes S.A. (Preferred) (Wireless
Telecommunication Services) 1,226
67,385 Telesp - Telecomunicacoes de Sao Paulo S.A. (Preferred) (Integrated
Telecommunication Services) 1,405
24,170 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR (Preferred)
(Diversified Banks) 1,495
39,100 Votorantim Celulose e Papel S.A. ADR (Paper Products)(b) 482
--------
24,121
--------
CHILE (0.3%)
16,000 Banco Santander Chile S.A. ADR (Diversified Banks) 692
--------
CHINA (8.5%)
367,100 BYD Co. Ltd. "H" (Electrical Components & Equipment)(a) 554
503,000 Beijing Capital International Airport Co. Ltd. "H"
(Industrial Conglomerates)(a) 216
13
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
118,000 Beijing Enterprises Holdings Ltd. (Packaged Foods & Meat)(a) $ 204
2,318,000 Brilliance China Automotive Holdings Ltd. (Auto Parts & Equipment)(a) 331
1,490,000 CNOOC Ltd. (Oil & Gas Exploration & Production)(a) 992
413,700 China Mobile Ltd. (Wireless Telecommunication Services)(a) 2,018
3,221,000 China Petroleum and Chemical Corp. "H" (Integrated Oil & Gas)(a) 1,448
4,100 China Petroleum and Chemical Corp. ADR "H" (Integrated Oil & Gas) 185
591,100 China Resources Enterprise Ltd. (Industrial Conglomerates)(a) 1,051
651,000 China Shenhua Energy Co. Ltd. "H" (Coal & Consumable Fuels)*(a) 724
4,955,000 China Telecom Corp. Ltd. "H" (Integrated Telecommunication Services)(a) 1,707
5,888,400 Denway Motors Ltd. (Automobile Manufacturers)(a) 1,813
1,533,000 Global Bio-chem Technology Group Co. Ltd. (Agricultural Products)(a) 661
4,583,500 Huadian Power International Corp. Ltd. "H" (Electric Utilities)(a) 1,253
898,500 Huaneng Power International, Inc. "H" (Electric Utilities)(a) 614
368,000 Panva Gas Holdings Ltd. (Commodity Chemicals)*(a) 182
1,378,000 PetroChina Co. Ltd. "H" (Integrated Oil & Gas)(a) 1,081
707,500 Shanghai Industrial Holdings Ltd. (Industrial Conglomerates)(a) 1,315
415,000 Sinopec Shanghai Petrochemical Co. Ltd. "H" (Commodity Chemicals)(a) 144
2,321,600 Sinopec Yizheng Chemical Fibre Co. Ltd. "H" (Specialty Chemicals)(a) 412
2,085,000 Sinotrans Ltd. "H" (Air Freight & Logistics)(a) 752
441,500 Weiqiao Textile Co. Ltd. "H" (Textiles)(a) 585
778,000 Yanzhou Coal Mining Co. Ltd. "H" (Diversified Metals & Mining)(a) 492
--------
18,734
--------
CROATIA (0.3%)
57,900 Pliva d.d. GDR (Pharmaceuticals) 756
--------
EGYPT (0.2%)
43,600 Commercial International Bank S.A.E. GDR (Diversified Banks) 405
--------
HUNGARY (1.5%)
6,651 Gedeon Richter Rt. (Pharmaceuticals)(a) 1,189
465,200 Magyar Tavkozlesi Rt. (Integrated Telecommunication Services)(a) 2,089
--------
3,278
--------
INDIA (7.3%)
121,200 Dr. Reddy's Laboratories Ltd. ADR (Pharmaceuticals) 2,567
49,700 Gail India Ltd. GDR (Oil & Gas Refining & Marketing) 1,735
862,000 Hindalco Industries Ltd. GDR (Aluminum)(a) 2,323
380,750 Mahanagar Telephone Nigam Ltd. ADR (Integrated
Telecommunication Services) 2,380
14
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
118,257 Reliance Industries Ltd. GDR (Diversified Chemicals) $ 4,265
60,700 State Bank of India Ltd. GDR (Diversified Banks)(b) 2,767
--------
16,037
--------
INDONESIA (1.9%)
3,142,300 PT Bank Mandiri Tbk (Regional Banks)(a) 404
1,055,800 PT Gudang Garam Tbk (Tobacco)(a) 1,151
10,354,100 PT Indofood Sukses Makmur Tbk (Packaged Foods & Meat)(a) 876
3,277,500 PT Telekomunikasi Indonesia Tbk (Integrated Telecommunication
Services)(a) 1,803
--------
4,234
--------
ISRAEL (0.8%)
162,500 Bank Hapoalim Ltd. (Diversified Banks)(a) 705
130,500 Bank Leumi Le-Israel (Regional Banks)(a) 473
244,900 Super-Sol Ltd. (Food Retail)(a) 606
--------
1,784
--------
KOREA (19.2%)
3,043 Cheil Jedang Corp. (Packaged Foods & Meat)(a) 302
15,140 Daelim Industrial Co. Ltd. (Construction & Engineering)(a) 987
6,020 Hyundai Department Store Co. Ltd. (Department Stores)(a) 439
23,740 Hyundai Motor Co. Ltd. (Automobile Manufacturers)(a) 1,946
11,810 INI Steel Co. (Steel)(a) 249
63,520 Industrial Bank of Korea (Consumer Finance)(a) 959
143,600 KT Corp. ADR (Integrated Telecommunication Services) 3,135
50,033 Kangwon Land Inc. (Casinos & Gaming)(a) 983
53,620 Kookmin Bank (Diversified Banks)(a) 3,518
5,430 Kookmin Bank ADR (Diversified Banks) 358
109,100 Korea Electric Power Corp. (Electric Utilities)(a) 3,640
13,500 Korea Electric Power Corp. ADR (Electric Utilities) 228
39,140 Korean Air Lines Co. Ltd. (Airlines)(a) 1,029
33,200 Kumho Tire Co. Ltd. GDR (Tires & Rubber)*(a) 250
63,250 Kumho Tire Co., Inc. (Tires & Rubber)(a) 951
39,770 LG Chem Ltd. (Diversified Chemicals)(a) 2,007
39,010 LG Electronics, Inc. (Electrical Components & Equipment)(a) 2,946
8,900 POSCO (Steel)(a) 1,771
14,600 POSCO ADR (Steel) 727
26,020 SK Corp. (Oil & Gas Refining & Marketing)(a) 1,353
4,064 SK Telecom Co. Ltd. (Wireless Telecommunication Services)(a) 759
180,900 SK Telecom Co. Ltd. ADR (Wireless Telecommunication Services) 3,822
55,950 Samsung Electro Mechanics Co. Ltd. (Communications Equipment)(a) 1,848
15
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
9,216 Samsung Electronics Co. Ltd. (Semiconductors)(a) $ 5,308
12,416 Samsung Fire & Marine Insurance Co. Ltd. (Multi-Line Insurance)(a) 1,292
13,430 Samsung SDI Co. Ltd. (Computer Storage & Peripherals)(a) 1,394
--------
42,201
--------
MALAYSIA (4.5%)
955,900 AMMB Holdings Berhad (Multi-Sector Holdings)(a) 577
620,000 Commerce Asset-Holding Berhad (Diversified Banks)(a) 910
1,236,000 Gamuda Berhad (Construction & Engineering)(a) 1,178
340,600 Genting Berhad (Casinos & Gaming)(a) 1,848
318,600 Kuala Lumpur Kepong Berhad (Agricultural Products)(a) 700
533,800 MK Land Holdings Berhad (Real Estate Management & Development)(a) 91
188,100 Malayan Banking Berhad (Diversified Banks)(a) 558
88,000 Proton Holdings Berhad (Automobile Manufacturers)(a) 163
452,900 Resorts World Berhad (Hotels, Resorts, & Cruise Lines)(a) 1,355
1,506,500 Sime Darby Berhad (Multi-Sector Holdings)(a) 2,512
--------
9,892
--------
MEXICO (7.2%)
171,144 Cemex S.A. de C.V. CPO (Construction Materials) 963
126,920 Coca Cola Femsa S.A. de C.V. ADR (Soft Drinks)(b) 3,197
1,443,900 Controladora Comercial Mexicana S.A. de C.V. (UBC) "B" (Food Retail) 2,134
1,399,733 Desc S.A. de C.V. ADR "B" (Industrial Conglomerates)* 351
166,800 Embotelladoras Arca S.A. (Soft Drinks) 367
16,200 Grupo Aeroportuario del Sureste S.A. de C.V. ADR "B" (Airport Services) 508
649,900 Grupo Continental S.A. (Soft Drinks) 1,059
469,500 Kimberly-Clark de Mexico S.A. de C.V. "A" (Household Products) 1,710
250,700 Telefonos de Mexico S.A. de C.V. ADR "L" (Integrated
Telecommunication Services) 5,623
--------
15,912
--------
PHILIPPINES (0.9%)
1,092,600 ABS-CBN Broadcasting Corp. PDR (Broadcasting & Cable TV)*(a) 289
963,040 Bank of the Philippine Islands (Diversified Banks)(a) 1,043
374,200 Manila Electric Co. "B" (Construction & Engineering)*(a) 164
2,691,700 SM Prime Holdings, Inc. (Real Estate Management & Development)(a) 409
--------
1,905
--------
POLAND (1.2%)
164,900 Powszechna Kasa Oszczednosci Bank Polski S.A. (Regional Banks)(a) 1,384
159,057 Telekomunikacja Polska S.A. (Integrated Telecommunication Services)(a) 1,141
--------
2,525
--------
16
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
RUSSIA (4.0%)
97,600 LUKoil Holdings ADR (Integrated Oil & Gas) $ 5,568
45,580 OAO Gazprom ADR (Integrated Oil & Gas)(b) 3,227
--------
8,795
--------
SOUTH AFRICA (8.8%)
293,900 Alexander Forbes Ltd. (Other Diversified Financial Services)(a) 639
382,684 Aveng Ltd. (Building Products)(a) 1,090
110,602 Bidvest Group Ltd. (Industrial Conglomerates)(a) 1,499
430,400 Illovo Sugar Ltd. (Packaged Foods & Meat)(a) 710
5,693 Impala Platinum Holdings Ltd. (Precious Metals & Minerals)(a) 745
772,374 Nampak Ltd. (Paper Packaging)(a) 1,924
283,349 Nedcor Ltd. (Diversified Banks)(a) 3,822
664,500 Network Healthcare Holdings Ltd. (Health Care Facilities)*(a) 669
58,800 SASOL Ltd. (Integrated Oil & Gas)(a) 1,961
1,004,464 Sanlam Ltd. (Life & Health Insurance)(a) 2,044
267,353 Sappi Ltd. (Paper Products)(a) 2,850
167,300 Shoprite Holdings Ltd. (Food Retail)(a) 437
319,387 Steinhoff International Holdings Ltd. (Home Furnishings)*(a) 853
--------
19,243
--------
TAIWAN (15.0%)
474,949 Accton Technology Corp. (Communications Equipment)*(a) 213
2,031,597 Advanced Semiconductor Engineering, Inc. (Semiconductor Equipment)(a) 1,456
1,260,050 Benq Corp. (Communications Equipment)(a) 1,133
1,328,120 China Motor Corp. Ltd. (Automobile Manufacturers)(a) 1,219
936,000 China Steel Corp. (Steel)(a) 699
1,405,222 Chinatrust Financial Holding Co. Ltd. (Diversified Banks)(a) 1,128
86,900 Chunghwa Telecom Co. Ltd. ADR (Integrated Telecommunication Services) 1,514
3,727,545 Compal Electronics, Inc. (Computer Hardware)(a) 3,265
332,448 Delta Electronics, Inc. (Electronic Equipment Manufacturers)(a) 668
648,612 Elan Microelectronics Corp. (Semiconductor Equipment)(a) 253
2,871,200 First Financial Holding Co. Ltd. (Diversified Banks)(a) 1,996
279,000 Formosa Chemicals & Fibre Corp. (Specialty Chemicals)(a) 439
876,000 Nien Hsing Textile Co. Ltd. (Textiles)(a) 561
866,057 Optimax Technology Corp. (Electronic Equipment Manufacturers)(a) 1,482
1,706,000 Powerchip Semiconductor Corp. (Semiconductors)(a) 940
2,057,286 Quanta Computer, Inc. (Computer Hardware)(a) 3,148
4,862,639 SinoPac Holdings Co. (Diversified Banks)(a) 2,207
971,674 Sunplus Technology Co. Ltd. (Semiconductor Equipment)(a) 970
492,745 Taishin Financial Holdings Co. Ltd. (Diversified Banks)(a) 258
17
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ------------------------------------------------------------------------------------------------------
1,864,720 Taiwan Cellular Corp. (Wireless Telecommunication Services)(a) $ 1,648
807,000 Uni-President Enterprises Corp. (Packaged Foods & Meat)(a) 341
9,719,675 United Microelectronics Corp. (Semiconductors)(a) 5,375
12,100 United Microelectronics Corp. ADR (Semiconductors) 37
5,881,440 Yageo Corp. (Electrical Components & Equipment)*(a) 2,043
--------
32,993
--------
THAILAND (2.3%)
1,264,000 C.P. 7-Eleven Public Co. Ltd. (General Merchandise Stores) 176
5,788,100 Charoen Pokphand Foods Public Co. Ltd. (Agricultural Products) 711
328,200 Delta Electronics Public Co. Ltd. (Electrical Components & Equipment) 116
725,300 Kasikornbank Public Co. Ltd. (Diversified Banks)(a) 1,073
4,676,200 Krung Thai Bank Public Co. Ltd. (Regional Banks) 1,126
1,235,900 Siam Commercial Bank Public Co. Ltd. (Diversified Banks) 1,416
225,200 Siam Makro Public Co. Ltd. (General Merchandise Stores) 365
--------
4,983
--------
TURKEY (0.5%)
62,911 Tupras-Turkiye Petrol Rafinerileri A.S. (Oil & Gas Refining & Marketing)(a) 1,103
--------
UNITED KINGDOM (0.8%)
642,249 Old Mutual plc (Multi-Line Insurance)(a) 1,673
--------
Total stocks (cost: $176,120) 211,266
--------
MONEY MARKET INSTRUMENTS (4.3%)
MONEY MARKET FUNDS
736,847 SSgA Money Market Fund, 3.71%(c) 737
8,606,086 SSgA Prime Money Market Fund, 3.89%(c) 8,606
--------
Total money market instruments (cost: $9,343) 9,343
--------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (4.1%)
MONEY MARKET FUNDS (0.2%)
540,773 AIM Short-Term Investment Co. Liquid Assets Portfolio, 4.00%(c) 541
10,873 Merrill Lynch Premier Institutional Fund, 3.91%(c) 11
--------
552
--------
18
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
- ------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (3.9%)(d)
$8,500 Credit Suisse First Boston, LLC, 4.02%, acquired on 11/30/2005 and
due 12/01/2005 at $8,500 (collateralized by $8,845 of Federal Home
Loan Bank Bonds(e), 4.30%, due 2/04/2010; market value $8,671) $ 8,500
--------
Total short-term investments purchased with cash collateral from
securities loaned (cost: $9,052) 9,052
--------
TOTAL INVESTMENTS (COST: $194,515) $229,661
========
19
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA EMERGING MARKETS 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.
CPO - Certificate of ordinary participation.
GDR - Global depositary receipts are receipts issued by a U.S. or
foreign bank evidencing ownership of foreign shares. Dividends are
paid in U.S. dollars.
PDR - Philippine depositary receipts are receipts issued by a U.S. or
foreign bank evidencing ownership of a stock traded on the Philippine
stock exchange. Dividends are paid in U.S. dollars.
SPECIFIC NOTES
- --------------------------------------------------------------------------------
(a) Security was fair valued at November 30, 2005, by the Manager in
accordance with valuation procedures approved by the Board of
Trustees.
(b) The security or a portion thereof was out on loan as of November
30, 2005.
(c) Rate represents the money market fund annualized seven-day yield
at November 30, 2005.
(d) Collateral on repurchase agreements is received by the Fund upon
entering into the repurchase agreement. The collateral is
20
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
marked-to-market daily to ensure its market value is equal to or
in excess of the repurchase agreement price plus accrued interest.
(e) 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.
* Non-income-producing security for the 12 months preceding November
30, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
S T A T E M E N T
==================--------------------------------------------------------------
of ASSETS and LIABILITIES
(in thousands)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
ASSETS
Investments in securities, at market value (including securities on
loan of $8,898) (identified cost of $194,515) $229,661
Cash 1
Cash denominated in foreign currencies (identified cost of $2,596) 2,614
Receivables:
Capital shares sold 225
Dividends and interest 297
Securities sold 459
Other 5
--------
Total assets 233,262
--------
LIABILITIES
Payables:
Upon return of securities loaned 9,052
Securities purchased 4,249
Capital shares redeemed 88
USAA Investment Management Company (Note 7D) 2
Accrued management fees 170
Accrued transfer agent's fees 7
Other accrued expenses and payables 178
--------
Total liabilities 13,746
--------
Net assets applicable to capital shares outstanding $219,516
========
NET ASSETS CONSIST OF:
Paid-in capital $245,267
Accumulated undistributed net investment income 2,189
Accumulated net realized loss on investments (62,993)
Net unrealized appreciation of investments 35,146
Net unrealized depreciation on foreign currency translations (93)
--------
Net assets applicable to capital shares outstanding $219,516
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 14,657
========
Net asset value, redemption price, and offering price per share $ 14.98
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA EMERGING MARKETS FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2005 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $316) $ 1,983
Interest 124
Securities lending 27
-------
Total income 2,134
-------
EXPENSES
Management fees 912
Administration and servicing fees 140
Transfer agent's fees 258
Custody and accounting fees 130
Postage 23
Shareholder reporting fees 11
Trustees' fees 4
Registration fees 19
Professional fees 25
Other 5
-------
Total expenses 1,527
Expenses paid indirectly (7)
-------
Net expenses 1,520
-------
NET INVESTMENT INCOME 614
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments 12,067
Foreign currency transactions (169)
Change in net unrealized appreciation/depreciation of:
Investments 18,277
Foreign currency translations 16
-------
Net realized and unrealized gain 30,191
-------
Increase in net assets resulting from operations $30,805
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
S T A T E M E N T S
====================------------------------------------------------------------
of Changes in NET ASSETS
(in thousands)
USAA EMERGING MARKETS FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2005 (UNAUDITED),
AND YEAR ENDED MAY 31, 2005
11/30/2005 5/31/2005
-------------------------
FROM OPERATIONS
Net investment income $ 614 $ 1,736
Net realized gain on investments 12,067 13,181
Net realized (loss) on foreign currency transactions (169) (44)
Change in net unrealized appreciation/depreciation of:
Investments 18,277 10,208
Foreign currency translations 16 (52)
-----------------------
Increase in net assets resulting from operations 30,805 25,029
-----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (706)
-----------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 57,562 75,848
Reinvested dividends - 688
Cost of shares redeemed (21,202) (43,591)
-----------------------
Increase in net assets from capital
share transactions 36,360 32,945
-----------------------
Capital contribution from USAA Transfer
Agency Company - 3
-----------------------
Net increase in net assets 67,165 57,271
NET ASSETS
Beginning of period 152,351 95,080
-----------------------
End of period $219,516 $152,351
=======================
Accumulated undistributed net investment income:
End of period $ 2,189 $ 1,575
=======================
CHANGE IN SHARES OUTSTANDING
Shares sold 4,071 6,308
Shares issued for dividends reinvested - 55
Shares redeemed (1,515) (3,717)
-----------------------
Increase in shares outstanding 2,556 2,646
=======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA EMERGING MARKETS 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 Emerging Markets Fund
(the Fund), which is classified as diversified under the 1940 Act. The
Fund's investment objective is capital appreciation. The Fund
concentrates its investments in securities of companies in emerging
market countries, which may have limited or developing capital
markets. Such investments may involve greater risks than investments
in developed markets, and political, social, or economic changes in
these markets may cause the prices of such investments to be volatile.
A. SECURITY VALUATION - The value of each security is determined
(as of the close of trading on the New York Stock Exchange
(NYSE) on each business day the exchange is open) as set forth
below:
1. Equity securities, 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 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.
25
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 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.
26
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 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
27
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
recorded on the ex-dividend date. If the ex-dividend date has
passed, certain dividends from foreign securities are recorded
upon notification. Interest income is recorded on the accrual
basis. Discounts and premiums on short-term securities are
amortized on a straight-line basis over the life of the
respective securities.
D. REPURCHASE AGREEMENTS - The Fund may enter into repurchase
agreements with commercial banks or recognized security dealers.
These agreements are collateralized by obligations issued or
guaranteed as to both principal and interest by the U.S.
government, its agencies, or its instrumentalities.
Government-sponsored enterprises (GSEs), such as 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 exchange rate obtained from an independent pricing
service on the respective dates of such transactions.
28
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
2. Market value of securities, other assets, and liabilities at
the exchange rate obtained from an independent pricing
service on a daily basis.
The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with
the net realized and unrealized gain or loss from investments.
Separately, net realized foreign currency gains/losses may arise
from sales of foreign currency, currency gains/losses realized
between the trade and settlement dates on security transactions,
and from the difference between amounts of dividends, interest,
and foreign withholding taxes recorded on the Fund's books and
the U.S. dollar equivalent of the amounts received. At the
Fund's 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
29
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
and other bank credits reduced the Fund's expenses by $6,000 and
$1,000, respectively, resulting in a total reduction in Fund
expenses of approximately $7,000.
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.
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
30
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 0.5% 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.
Distributions of net investment income and realized gains from
security transactions not offset by capital losses are made annually
in the succeeding fiscal year or as otherwise required to avoid the
payment of federal taxes. At May 31, 2005, the Fund had capital loss
carryovers of $74,782,000, for federal income tax purposes, which if
not offset by subsequent capital gains, will expire between 2007 and
2010, as shown below. It is unlikely that the Trust's Board of
Trustees will authorize a distribution of capital gains realized in
the future until the capital loss carryovers have been used or expire.
CAPITAL LOSS CARRYOVERS
----------------------------------
EXPIRES BALANCE
------- -----------
2007 $27,431,000
2009 17,388,000
2010 29,963,000
-----------
Total $74,782,000
===========
31
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
(4) INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the six-month period ended November 30,
2005, were $65,702,000 and $32,089,000, 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 $41,248,000 and $6,102,000, respectively,
resulting in net unrealized appreciation of $35,146,000.
(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.
32
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS 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 163 $ 74 $ 74 $-
Brazilian Real
12/02/2005 44 20 20 -
Brazilian Real
12/01/2005 1,157 109 109 -
Mexican Peso
12/01/2005 185 49 49 -
Malaysian Ringgit
12/01/2005 117 31 31 -
Malaysian Ringgit
12/02/2005 148 39 39 -
Malaysian Ringgit
12/01/2005 102 31 31 -
Polish Zloty
12/02/2005 468 141 141 -
Polish Zloty
- ------------------------------------------------------------------------------------
$494 $494 $-
- ------------------------------------------------------------------------------------
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)
- ------------------------------------------------------------------------------------
12/02/2005 414 $64 $64 $-
South African Rand
33
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
(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 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 $27,000, 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 $8,898,000 and
received cash collateral of $9,052,000 for the loans. The cash
collateral was invested in short-term investments, as noted in the
Fund's portfolio of investments.
(7) TRANSACTIONS WITH MANAGER
- --------------------------------------------------------------------------------
A. MANAGEMENT FEES - The Manager provides investment management
services to the Fund pursuant to an Investment Advisory
Agreement. Under this agreement, the Manager is responsible for
managing the business and affairs of the Fund,
34
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 agreement should be renewed, terminated, or
modified. The Manager also is responsible for allocating assets
to the subadvisers. The allocation for each subadviser can range
from 0% to 100% of the Fund's assets, and the Manager can change
the allocations without shareholder approval.
The investment management fee for the Fund is composed of a base
fee and a performance adjustment that increases or decreases the
base fee depending upon the performance of the Fund relative to
the performance of the Lipper Emerging Markets Funds Index,
which tracks the total return performance of the 30 largest
funds in the Lipper Emerging Markets Funds category. The Fund's
base fee is accrued daily and paid monthly at an annualized rate
of 1.00% of the Fund's average net assets 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
35
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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%.
Under the performance fee arrangement, the Fund will pay a
positive performance fee adjustment for a performance period
whenever the Fund outperforms the Lipper Emerging Markets Funds
Index over that period, even if the Fund had overall negative
returns during the performance period.
For the six-month period ended November 30, 2005, the Fund
incurred total management fees, paid or payable to the Manager,
of $912,000, which is net of a performance adjustment of
$(19,000) that decreased the base management fee of 1.00% by
0.02%.
B. SUBADVISORY ARRANGEMENTS - The Manager has entered into an
investment subadvisory agreement with The Boston Company Asset
Management, LLC (The Boston Company), under which The Boston
Company directs the investment and reinvestment of the Fund's
assets (as allocated from time to time by the Manager). The
Manager (not the Fund) pays The Boston Company a subadvisory fee
in the annual amount of 0.69% of the portion of the Fund's
average net assets that The Boston Company manages. For the
six-month period ended November 30, 2005, the Manager incurred
subadvisory fees, paid or payable to The Boston Company, of
$645,000.
36
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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
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 $140,000.
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 $8,000
for these legal and tax services. These expenses are included in
the professional fees expenses on the Fund's statement of
operations.
D. EXPENSE LIMITATION - The Manager has voluntarily agreed to limit
the annual expenses of the Fund to 1.80% of the Fund's average
annual net assets, before reductions of any expenses paid
indirectly, and will reimburse the Fund for all expenses in
excess of that amount. This agreement may be modified or
terminated at any time. There were no reimbursable expenses for
the six-month period ended November 30, 2005. As of November 30,
2005, the Fund has a payable to the Manager of $2,000 to refund
prior payments made to the Fund based on earlier estimates of
reimbursable expenses.
E. 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
37
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 $258,000.
F. UNDERWRITING SERVICES - The Manager provides exclusive
underwriting and distribution of the Fund's shares on a
continuing best-efforts basis. The Manager receives no
commissions or fees for this service.
(8) TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
Certain trustees and officers of the Fund are also directors,
officers, and/or employees of the Manager. None of the affiliated
trustees or Fund officers received any compensation from the Fund.
38
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA EMERGING MARKETS FUND
NOVEMBER 30, 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 $ 12.59 $ 10.06 $ 7.24 $ 7.93 $ 7.16 $ 8.98
---------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .02 .13 .07 .03(a) (.02)(a) .04(a)
Net realized and unrealized
gain (loss) 2.37 2.47 2.75 (.72)(a) .81(a) (1.85)(a)
---------------------------------------------------------------------------------------
Total from investment operations 2.39 2.60 2.82 (.69)(a) .79(a) (1.81)(a)
Less distributions:
From net investment income - (.07) - - (.02) (.01)
---------------------------------------------------------------------------------------
Net asset value at end of period $ 14.98 $ 12.59 $ 10.06 $ 7.24 $ 7.93 $ 7.16
=======================================================================================
Total return (%)* 18.98 25.82 38.95 (8.70) 11.11 (20.19)
Net assets at end of period (000) $219,516 $152,351 $95,080 $54,794 $57,073 $51,709
Ratio of expenses to average
net assets (%)**(d) 1.63(b,c) 1.80(c) 1.92(c) 2.33(c) 2.51 1.39
Ratio of net investment income (loss)
to average net assets (%)** .66(b) 1.42 .92 .42 (.33) .47
Portfolio turnover (%) 18.05 36.24 75.67 140.89 257.45 196.75
* Assumes reinvestment of all net investment income distributions during the
period.
** For the six-month period ended November 30, 2005, average net assets were
$186,314,000.
(a) Calculated using average shares.
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(c) Effective March 1, 2004, the Manager voluntarily agreed to limit the Fund's
expense ratio to 1.80% of the Fund's average annual net assets. From June 1,
2003, through February 29, 2004, the voluntary expense ratio limit was 2.10%
of the Fund's average annual net assets.
(d) Reflects total operating expenses of the Fund before reductions of any
expenses paid indirectly. The Fund's expenses paid indirectly decreased the
expense ratios as follows:
(.00%)(+) (.02%) (.03%) (.00%)(+) (.01%) (.01%)
(+)Represents less than 0.01% of average net assets.
39
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
USAA EMERGING MARKETS 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
40
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
(continued)
USAA EMERGING MARKETS 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 $1,189.80 $8.93
Hypothetical
(5% return before expenses) 1,000.00 1,016.91 8.22
*Expenses are equal to the Fund's annualized expense ratio of 1.63%,
which is net of reimbursements and any expenses paid indirectly,
multiplied by the average account value over the period, multiplied by
183 days/365 days (to reflect the one-half year period). The Fund's
ending account value on the first line in the table is based on its
actual total return of 18.98% for the six-month period of June 1,
2005, through November 30, 2005.
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 & 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.
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[LOGO OF USAA] WE KNOW WHAT IT MEANS TO SERVE.(R)
USAA ----------------------------------
INSURANCE o MEMBER SERVICES
25559-0106 (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
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Signature and Title: Eileen M. Smiley, Assistant Secretary
Date: January 18, 2006
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /s/ CHRISTOPHER W. CLAUS
----------------------------------------------------
Signature and Title: Christopher W. Claus/President
Date: January 25, 2006
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By:* /s/ DEBRA K. DUNN
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Signature and Title: Debra K. Dunn/Treasurer
Date: January 24, 2006
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*Print the name and title of each signing officer under his or her signature.