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 INTERNATIONAL FUND - SEMIANNUAL REPORT FOR PERIOD ENDING NOVEMBER 30,
2005
[LOGO OF USAA]
USAA(R)
USAA INTERNATIONAL Fund
[GRAPHIC OF USAA INTERNATIONAL FUND]
S e m i a n n u a l R e p o r t
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NOVEMBER 30, 2005
Table of CONTENTS
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MESSAGE FROM THE PRESIDENT 2
MANAGERS' COMMENTARY 4
FUND RECOGNITION 7
INVESTMENT OVERVIEW 8
FINANCIAL INFORMATION
Portfolio of Investments 12
Notes to Portfolio of Investments 17
Financial Statements 19
Notes to Financial Statements 22
EXPENSE EXAMPLE 36
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
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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
[PHOTO OF DAVID R. MANNHEIM] [PHOTO OF MARCUS L. SMITH]
DAVID R. MANNHEIM MARCUS L. SMITH
MFS Investment Management MFS Investment Management
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HOW DID THE FUND PERFORM?
The USAA International Fund had a total return of 10.46% for
the six months ended November 30, 2005. This compares to an
11.86% return for the Lipper International Funds Average,
12.37% for the Lipper International Funds Index, and 11.23% for
the Morgan Stanley Capital International Europe, Australasia
and Far East (MSCI-EAFE) Index.
WHY DID OVERSEAS STOCK MARKETS AS A GROUP OUTPERFORM THE U.S. MARKET DURING THE
SIX MONTHS?
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 have 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,
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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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-EAFE 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.
Emerging markets also performed strongly, along with Japan, and
the Fund did have substantial positions in emerging market
stocks, which were trimmed during the year. Among these stocks
were Grupo Televisa S.A. de C.V. ADR (Mexico), Companhia Vale
Do Rio Doce ADR (Brazil), and Samsung Electronics Co. Ltd.
(Korea). These holdings, among others, somewhat offset the
negative impact of being underweight in Japan.
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.
We have positions in William Hill plc (U.K.) and Hilton Group
plc (U.K.), both cash-generating gaming businesses with high
returns and growing revenues from online gaming. We're
underweight
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-16.
6
. . . C O N T I N U E D
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COMMENTARY on the Fund
in financial services, largely as a result of not owning large
commercial banks in Germany and Japan. In energy, we're focused
on companies that are growing existing reserves such as EnCana
Corp. (Canada) and Total S.A. ADR (France), companies that have
the potential to do well regardless of the direction of the
price of oil.
WHAT HOLDINGS HAD THE BIGGEST IMPACT ON PERFORMANCE?
Our largest holding, Reckitt Benckiser plc (U.K.), was a slight
drag on relative performance as third quarter results came in
below expectations, but given management's ability to execute
its strategy over a long time period, we remain positive on the
company, while closely watching for pressure on profit margins.
Hutchison Telecommunications International Ltd. (Hong Kong) did
well during the period, supported by strong revenue and profit
growth and particular good news from its mobile businesses in
emerging markets. Canadian National Railway Co. (Canada) is
benefiting from increasing capital expenditures, strong
earnings, and a share buyback program. Chugai Pharmaceutical
Co. Ltd. (Japan) appreciated sharply after one of its drugs was
shown to slow the development of rheumatoid arthritis.
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.
On behalf of everyone at USAA, we thank you for your continued
support.
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-16.
7
F U N D
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RECOGNITION
USAA INTERNATIONAL FUND
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OVERALL MORNINGSTAR RATING(TM)
out of 195 foreign large growth funds for the period ending November 30, 2005:
OVERALL RATING
* * * *
3-YEAR 5-YEAR 10-YEAR
* * * * * * * * * * * *
out of 195 funds out of 142 funds out of 60 funds
The Overall Morningstar Rating for a fund is derived from a weighted
average of the performance figures associated with its 3-, 5-,
and 10-year (if applicable) Morningstar Ratings metrics. Ratings
are based on risk-adjusted returns.
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[LOGO OF LIPPER LEADER]
PRESERVATION
The Fund is listed as a Lipper Leader for Preservation among 7,972 equity funds
within the Lipper International Multi-Cap Core Funds category for the overall
period ending November 30, 2005.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FOR EACH FUND WITH AT LEAST
A THREE-YEAR HISTORY, MORNINGSTAR CALCULATES A MORNINGSTAR RATING(TM) BASED ON A
MORNINGSTAR RISK-ADJUSTED RETURN MEASURE THAT ACCOUNTS FOR VARIATION IN A FUND'S
MONTHLY PERFORMANCE (INCLUDING THE EFFECTS OF SALES CHARGES, LOADS, AND
REDEMPTION FEES), PLACING MORE EMPHASIS ON DOWNWARD VARIATIONS AND REWARDING
CONSISTENT PERFORMANCE. THE TOP 10% OF THE FUNDS IN EACH BROAD ASSET CLASS
RECEIVE 5 STARS, THE NEXT 22.5% RECEIVE 4 STARS, THE NEXT 35% RECEIVE 3 STARS,
THE NEXT 22.5% RECEIVE 2 STARS, AND THE BOTTOM 10% RECEIVE 1 STAR. (EACH SHARE
CLASS IS COUNTED AS A FRACTION OF ONE FUND WITHIN THIS SCALE AND RATED
SEPARATELY, WHICH MAY CAUSE SLIGHT VARIATIONS IN THE DISTRIBUTION PERCENTAGES.)
LIPPER RATINGS FOR PRESERVATION REFLECT FUNDS' HISTORICAL LOSS AVOIDANCE
RELATIVE TO OTHER FUNDS WITHIN THE SAME ASSET CLASS AS OF NOVEMBER 30, 2005.
PRESERVATION RATINGS ARE RELATIVE, RATHER THAN ABSOLUTE, MEASURES, AND FUNDS
NAMED LIPPER LEADERS FOR PRESERVATION MAY STILL EXPERIENCE LOSSES PERIODICALLY;
THOSE LOSSES MAY BE LARGER FOR EQUITY AND MIXED EQUITY FUNDS THAN FOR
FIXED-INCOME FUNDS. THE FUND RECEIVED A LIPPER LEADER RATING FOR PRESERVATION
AMONG 7,972 AND 5,853 EQUITY FUNDS FOR THE THREE- AND FIVE-YEAR PERIODS,
RESPECTIVELY, AND A SCORE OF 2 AMONG 2,015 EQUITY FUNDS IN LIPPER'S
INTERNATIONAL MULTI-CAP CORE FUNDS CATEGORY FOR THE 10-YEAR PERIOD. RATINGS ARE
SUBJECT TO CHANGE EVERY MONTH AND ARE BASED ON AN EQUAL-WEIGHTED AVERAGE OF
PERCENTILE RANKS FOR THE PRESERVATION METRIC 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 INTERNATIONAL FUND
OBJECTIVE
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Capital appreciation with current income as a secondary
objective.
TYPES OF INVESTMENTS
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Invests at least 80% of the Fund's assets in equity securities
of foreign (including emerging market) companies.
- --------------------------------------------------------------------------------
11/30/05 5/31/05
- --------------------------------------------------------------------------------
Net Assets $762.3 Million $645.9 Million
Net Asset Value Per Share $23.55 $21.32
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AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/05
- --------------------------------------------------------------------------------
5/31/05 TO 11/30/05* 1 YEAR 5 YEARS 10 YEARS
10.46% 12.36% 6.46% 7.65%
*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
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CUMULATIVE PERFORMANCE COMPARISON
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LIPPER LIPPER
USAA INTERNATIONAL INTERNATIONAL FUNDS
INTERNATIONAL FUND FUNDS INDEX AVERAGE MSCI-EAFE INDEX
11/30/95 $10,000.00 $10,000.00 $10,000.00 $10,000.00
12/31/95 10,315.20 10,290.02 10,288.60 10,402.90
01/31/96 10,655.13 10,533.16 10,533.69 10,445.61
02/29/96 10,840.54 10,578.37 10,591.03 10,480.92
03/31/96 11,038.32 10,743.63 10,761.10 10,703.50
04/30/96 11,526.58 11,093.64 11,094.80 11,014.68
05/31/96 11,563.66 11,081.22 11,098.53 10,811.99
06/30/96 11,644.00 11,182.18 11,174.46 10,872.84
07/31/96 11,086.48 10,805.01 10,764.29 10,555.06
08/31/96 11,421.48 10,945.93 10,925.31 10,578.19
09/30/96 11,630.06 11,190.63 11,165.89 10,859.21
10/31/96 11,585.82 11,146.19 11,116.81 10,748.08
11/30/96 12,204.64 11,670.49 11,619.01 11,175.73
12/31/96 12,290.06 11,774.69 11,680.20 11,031.97
01/31/97 12,681.54 11,789.87 11,687.99 10,645.88
02/28/97 12,745.72 12,002.70 11,843.40 10,820.00
03/31/97 12,764.98 12,066.29 11,870.96 10,859.18
04/30/97 12,848.41 12,118.82 11,895.33 10,916.80
05/31/97 13,496.60 12,802.13 12,591.78 11,627.20
06/30/97 14,183.31 13,416.93 13,171.72 12,268.41
07/31/97 14,635.89 13,847.70 13,575.54 12,466.88
08/31/97 13,853.72 12,849.28 12,606.01 11,535.80
09/30/97 14,768.46 13,673.92 13,418.43 12,182.03
10/31/97 13,747.66 12,635.97 12,430.62 11,245.66
11/30/97 13,296.92 12,529.95 12,338.79 11,131.02
12/31/97 13,401.24 12,628.09 12,449.56 11,228.11
01/31/98 13,401.24 12,933.52 12,743.18 11,741.61
02/28/98 14,279.32 13,754.58 13,603.56 12,495.01
03/31/98 15,164.38 14,501.55 14,336.43 12,879.76
04/30/98 15,519.79 14,724.42 14,546.48 12,981.70
05/31/98 15,289.82 14,753.69 14,581.28 12,918.70
06/30/98 14,948.34 14,624.69 14,467.86 13,016.50
07/31/98 14,875.47 14,849.05 14,676.67 13,148.46
08/31/98 12,357.75 12,712.99 12,539.65 11,519.51
09/30/98 11,924.91 12,317.29 12,104.75 11,166.34
10/31/98 13,028.66 13,222.99 13,023.60 12,330.33
11/30/98 13,403.80 13,885.33 13,701.74 12,962.03
12/31/98 13,930.43 14,227.01 14,122.90 13,473.37
01/31/99 14,125.21 14,313.33 14,274.71 13,433.59
02/28/99 13,620.22 13,945.12 13,901.81 13,113.43
03/31/99 13,916.00 14,409.27 14,393.94 13,660.81
04/30/99 14,666.26 15,080.87 15,075.05 14,214.33
05/31/99 14,276.70 14,520.48 14,459.44 13,482.31
06/30/99 14,832.19 15,209.07 15,230.98 14,007.95
07/31/99 15,363.51 15,548.73 15,621.58 14,424.31
08/31/99 15,524.77 15,671.57 15,767.32 14,476.99
09/30/99 15,524.77 15,721.89 15,834.33 14,622.71
10/31/99 15,656.71 16,270.58 16,459.44 15,170.41
11/30/99 16,550.96 17,463.93 17,772.94 15,697.50
12/31/99 17,921.02 19,609.62 19,988.04 17,106.38
01/31/00 17,217.93 18,461.80 18,880.20 16,019.46
02/29/00 17,905.73 19,680.06 20,145.71 16,450.71
03/31/00 18,371.91 19,730.78 20,180.48 17,088.40
04/30/00 17,477.77 18,479.25 18,848.05 16,189.15
05/31/00 17,026.88 17,971.49 18,181.89 15,793.75
06/30/00 17,867.52 18,803.54 19,009.70 16,411.42
07/31/00 17,262.17 18,194.07 18,377.27 15,723.38
08/31/00 17,527.74 18,501.54 18,727.84 15,859.85
09/30/00 16,618.36 17,423.68 17,635.15 15,087.61
10/31/00 15,934.31 16,832.01 16,989.47 14,731.21
11/30/00 15,282.45 16,121.44 16,228.44 14,178.79
12/31/00 15,982.59 16,723.42 16,820.61 14,682.75
01/31/01 16,248.17 16,821.92 16,907.77 14,675.18
02/28/01 15,097.35 15,641.56 15,659.13 13,575.02
03/31/01 14,010.92 14,541.84 14,486.51 12,670.09
04/30/01 15,089.31 15,426.30 15,446.89 13,550.56
05/31/01 14,670.83 15,052.61 15,047.08 13,072.31
06/30/01 14,147.73 14,627.48 14,534.24 12,537.71
07/31/01 14,059.21 14,247.24 14,142.45 12,309.59
08/31/01 13,938.50 13,961.55 13,791.13 11,997.65
09/30/01 12,481.87 12,440.36 12,314.74 10,782.44
10/31/01 12,811.83 12,777.31 12,636.73 11,058.60
11/30/01 13,318.83 13,254.38 13,127.57 11,466.25
12/31/01 13,653.01 13,490.80 13,309.82 11,534.38
01/31/02 13,181.10 12,946.28 12,760.76 10,921.50
02/28/02 13,425.19 13,127.75 12,837.92 10,998.11
03/31/02 14,157.47 13,822.17 13,523.36 11,646.43
04/30/02 14,206.29 13,919.13 13,585.36 11,669.85
05/31/02 14,344.61 14,118.14 13,738.08 11,817.72
06/30/02 13,888.97 13,560.85 13,188.81 11,347.30
07/31/02 12,481.36 12,207.02 11,884.79 10,227.10
08/31/02 12,554.59 12,216.76 11,860.23 10,203.88
09/30/02 11,618.89 10,901.02 10,597.13 9,108.05
10/31/02 12,310.49 11,466.80 11,112.70 9,597.56
11/30/02 12,538.31 12,009.66 11,608.19 10,033.15
12/31/02 12,413.82 11,625.35 11,219.16 9,695.79
01/31/03 11,888.71 11,199.58 10,786.66 9,291.02
02/28/03 11,601.55 10,867.96 10,517.33 9,077.79
03/31/03 11,494.88 10,601.81 10,296.53 8,899.43
04/30/03 12,594.32 11,651.41 11,258.13 9,771.68
05/31/03 13,242.50 12,399.82 11,949.45 10,363.77
06/30/03 13,431.21 12,692.79 12,213.21 10,614.22
07/31/03 13,570.69 13,048.69 12,513.89 10,871.16
08/31/03 13,726.58 13,425.19 12,839.51 11,133.69
09/30/03 14,079.39 13,694.61 13,105.70 11,476.90
10/31/03 14,743.97 14,511.07 13,897.38 12,192.24
11/30/03 15,228.06 14,802.54 14,179.18 12,463.30
12/31/03 16,374.15 15,809.90 15,179.07 13,436.99
01/31/04 16,630.51 16,149.64 15,446.25 13,627.00
02/29/04 17,085.35 16,518.89 15,763.45 13,941.57
03/31/04 16,969.57 16,599.39 15,815.85 14,020.01
04/30/04 16,762.83 16,104.64 15,351.48 13,702.87
05/31/04 16,903.41 16,095.51 15,366.73 13,731.84
06/30/04 17,159.77 16,419.76 15,667.85 14,050.19
07/31/04 16,605.70 15,882.03 15,155.98 13,594.21
08/31/04 16,647.05 15,966.51 15,234.16 13,654.24
09/30/04 17,110.16 16,391.73 15,676.12 14,011.10
10/31/04 17,631.15 16,911.47 16,173.07 14,488.88
11/30/04 18,598.71 17,996.33 17,196.72 15,478.66
12/31/04 19,396.59 18,749.75 17,915.43 16,157.60
01/31/05 19,032.63 18,446.64 17,593.04 15,861.15
02/28/05 19,867.08 19,250.35 18,357.12 16,546.50
03/31/05 19,343.33 18,740.32 17,868.77 16,130.82
04/30/05 18,917.23 18,266.21 17,426.52 15,751.57
05/31/05 18,917.23 18,381.54 17,481.27 15,759.19
06/30/05 18,934.98 18,628.16 17,747.27 15,968.30
07/31/05 19,822.70 19,325.49 18,399.38 16,457.82
08/31/05 20,417.47 19,881.93 18,964.92 16,873.65
09/30/05 21,012.24 20,705.53 19,685.16 17,625.23
10/31/05 20,523.99 20,109.43 19,078.17 17,110.48
11/30/05 20,896.84 20,655.87 19,542.20 17,528.93
[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 International Fund to the following benchmarks:
THE LIPPER INTERNATIONAL FUNDS INDEX TRACKS THE TOTAL RETURN
PERFORMANCE OF THE 30 LARGEST FUNDS WITHIN THE LIPPER
INTERNATIONAL FUNDS CATEGORY.
THE LIPPER INTERNATIONAL FUNDS AVERAGE IS AN AVERAGE
PERFORMANCE LEVEL OF ALL INTERNATIONAL FUNDS, REPORTED BY
LIPPER INC., AN INDEPENDENT ORGANIZATION THAT MONITORS THE
PERFORMANCE OF MUTUAL FUNDS.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA
AND FAR EAST (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.
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 INDUSTRIES
(% of Net Assets)
- ---------------------------------------------
Pharmaceuticals 10.0%
Regional Banks 6.3%
Diversified Banks 5.2%
Casinos & Gaming 4.1%
Packaged Foods & Meat 4.0%
Household Products 3.8%
Oil & Gas Exploration & Production 3.6%
Electrical Components & Equipment 3.4%
Industrial Machinery 3.0%
Semiconductors 2.9%
- ---------------------------------------------
- ---------------------------------------------
TOP 10 EQUITY HOLDINGS
(% of Net Assets)
- ---------------------------------------------
Reckitt Benckiser plc 3.8%
Nestle S.A. 3.2%
Roche Holdings AG 3.2%
Schneider Electric S.A. 3.0%
Samsung Electronics Co. Ltd. 2.9%
Total S.A. ADR 2.5%
UBS AG 2.5%
AXA S.A. 2.4%
Hilton Group plc 2.3%
Sandvik AB 2.3%
- ---------------------------------------------
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS
ON PAGES 12-16.
11
. . . C O N T I N U E D
========================--------------------------------------------------------
ASSET ALLOCATION
11/30/05
[PIE CHART OF ASSET ALLOCATION]
United Kingdom 19.0%
France 18.7%
Japan 16.1%
Switzerland 10.7%
Sweden 3.8%
Other* 41.3%
[END CHART]
*INCLUDES COUNTRIES WITH LESS THAN 3% OF THE PORTFOLIO, MONEY
MARKET INSTRUMENTS, (2.1%), AND SHORT-TERM INVESTMENTS
PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (11.0%).
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 12-16.
12
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ---------------------------------------------------------------------------------------------
STOCKS (96.5%)
AUSTRALIA (1.3%)
699,407 QBE Insurance Group Ltd. (Property & Casualty Insurance)(b) $ 9,803
--------
AUSTRIA (1.8%)
254,190 Erste Bank der oesterreichischen Sparkassen AG (Regional Banks)(b) 13,506
--------
BRAZIL (0.5%)
92,630 Companhia Vale Do Rio Doce ADR (Steel) 4,016
--------
CANADA (2.9%)
188,591 Canadian National Railway Co. (Railroads) 15,061
157,240 EnCana Corp. (Oil & Gas Exploration & Production) 6,977
--------
22,038
--------
CHINA (1.7%)
19,148,500 CNOOC Ltd. (Oil & Gas Exploration & Production)(b) 12,751
--------
FRANCE (18.7%)
622,120 AXA S.A. (Multi-Line Insurance)(b) 18,657
39,347 Air Liquide S.A. (Industrial Gases)(b,c) 7,078
64,167 Air Liquide S.A. - Registered Shares (Industrial Gases)*
(acquired 7/02/2002-11/29/2004; cost: $9,085)(a) 11,544
112,740 Business Objects S.A. (Application Software)*(b) 4,486
399,700 Credit Agricole S.A. (Regional Banks)(b) 12,036
59,990 Groupe DANONE (Packaged Foods & Meat)(b) 6,183
149,930 LVMH Moet Hennessy Louis Vuitton S.A. (Apparel &
Accessories & Luxury Goods)(b,c) 12,787
27,600 Pernod Ricard S.A. (Distillers & Vintners)(b) 4,507
176,270 Sanofi-Aventis S.A. (Pharmaceuticals)(b) 14,180
265,336 Schneider Electric S.A. (Electrical Components & Equipment)(b) 22,778
112,010 Societe Television Francaise 1 (Broadcasting & Cable TV)(b) 2,803
155,873 Total S.A. ADR (Integrated Oil & Gas)(c) 19,436
143,430 Veolia Environnement S.A. (Multi-Utilities)(b) 6,143
--------
142,618
--------
GERMANY (2.5%)
100,060 E. On AG (Multi-Utilities)(b) 9,512
147,770 Schering AG (Pharmaceuticals)(b) 9,549
--------
19,061
--------
13
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ---------------------------------------------------------------------------------------------
HONG KONG (2.3%)
840,000 Esprit Holdings Ltd. (Apparel Retail)(b) $ 5,903
8,425,000 Hutchison Telecommunications International Ltd. (Wireless
Telecommunication Services)*(b) 11,679
--------
17,582
--------
HUNGARY (1.0%)
116,580 OTP Bank Ltd. GDR (Regional Banks)(b,c) 7,653
--------
INDONESIA (0.5%)
11,702,500 PT Bank Central Asia Tbk (Diversified Banks)(b) 3,844
--------
IRELAND (0.5%)
272,940 Depfa Bank plc (Specialized Finance)(b) 4,097
--------
ISRAEL (1.0%)
361,080 Check Point Software Technologies Ltd. (Systems Software)* 7,687
--------
ITALY (2.2%)
104,565 FastWeb S.p.A. (Communications Equipment)*(b) 4,895
1,902,400 UniCredito Italiano S.p.A. (Regional Banks)(b) 11,750
--------
16,645
--------
JAPAN (16.1%)
1,342,000 Asahi Glass Co. Ltd. (Building Products)(b,c) 15,409
515,000 Bridgestone Corp. (Tires & Rubber)(b) 11,024
302,000 Canon, Inc. (Electronic Equipment Manufacturers)(b,c) 16,983
189,800 Chugai Pharmaceutical Co. Ltd. (Pharmaceuticals)(b,c) 4,270
421,000 Kaneka Corp. (Diversified Chemicals)(b) 5,013
87,200 Nintendo Co. Ltd. (Leisure Products)(b) 9,551
146,700 Nitto Denko Corp. (Specialty Chemicals)(b) 10,037
129,300 Omron Corp. (Electrical Components & Equipment)(b) 2,940
634,000 Ricoh Co. Ltd. (Office Electronics)(b) 11,064
1,615,000 Shinsei Bank Ltd. (Diversified Banks)(b) 9,031
1,259,000 Tokyo Gas Co. Ltd. (Gas Utilities)(b) 5,058
907,000 Toray Industries, Inc. (Textiles)(b) 6,179
339,600 Toyota Motor Corp. (Automobile Manufacturers)(b) 16,431
--------
122,990
--------
14
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ---------------------------------------------------------------------------------------------
KOREA (2.9%)
38,720 Samsung Electronics Co. Ltd. (Semiconductors)(b) $ 22,301
--------
MEXICO (1.3%)
126,770 Grupo Televisa S.A. de C.V. ADR (Broadcasting & Cable TV) 10,066
--------
NETHERLANDS (0.7%)
381,370 Reed Elsevier N.V. (Publishing)(b) 5,068
--------
POLAND (0.4%)
351,400 Powszechna Kasa Oszczednosci Bank Polski S.A. (Regional Banks)(b) 2,948
--------
SINGAPORE (1.2%)
6,365,000 Singapore Telecommunications Ltd. (Integrated
Telecommunication Services)(b) 9,427
--------
SPAIN (2.9%)
814,340 Banco Bilbao Vizcaya Argentaria S.A. (Diversified Banks)(b) 14,353
291,310 Iberdrola S.A. (Electric Utilities)(b,c) 7,638
--------
21,991
--------
SWEDEN (3.8%)
281,320 Atlas Copco AB "A" (Industrial Machinery)(b) 5,619
1,791,980 LM Ericsson Telephone Co. "B" ADR (Communications Equipment)(b) 5,831
367,120 Sandvik AB (Industrial Machinery)(b) 17,321
--------
28,771
--------
SWITZERLAND (10.7%)
118,807 Julius Baer Holding Ltd. "B" (Diversified Banks)(b) 8,317
81,638 Nestle S.A. (Packaged Foods & Meat)(b) 24,049
163,510 Roche Holdings AG (Pharmaceuticals)(b) 24,469
16,900 Swiss Re (Reinsurance)(b) 1,244
41,330 Synthes, Inc. (Health Care Equipment)(b) 4,429
208,040 UBS AG (Diversified Capital Markets)(b) 19,089
--------
81,597
--------
THAILAND (0.6%)
1,706,680 Bangkok Bank Public Co. Ltd. (Diversified Banks)(b) 4,344
--------
15
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
- ---------------------------------------------------------------------------------------------
UNITED KINGDOM (19.0%)
300,530 AstraZeneca plc (Pharmaceuticals)(b) $ 13,815
842,070 BG Group plc (Oil & Gas Exploration & Production)(b) 7,825
865,370 Diageo plc (Distillers & Vintners)(b) 12,459
390,130 GlaxoSmithKline plc (Pharmaceuticals)(b) 9,659
3,094,760 Hilton Group plc (Casinos & Gaming)(b) 17,796
387,680 Next plc (Apparel Retail)(b) 9,223
946,900 Reckitt Benckiser plc (Household Products)(b) 29,184
1,013,305 Smith & Nephew plc (Health Care Equipment)(b) 9,013
2,130,010 Tesco plc (Food Retail)(b) 11,143
3,729,190 Vodafone Group plc (Wireless Telecommunication Services)(b) 8,010
1,549,770 William Hill plc (Casinos & Gaming)(b) 13,562
369,870 Yell Group plc (Publishing)(b) 3,140
--------
144,829
--------
Total stocks (cost: $588,934) 735,633
--------
PRINCIPAL
AMOUNT
(000)
- ----------
MONEY MARKET INSTRUMENTS (2.1%)
COMMERCIAL PAPER
$16,237 American General Finance Corp., 4.02%, 12/01/2005
(cost: $16,237) 16,237
--------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (11.0%)
REPURCHASE AGREEMENTS (10.9%)(e)
32,000 Credit Suisse First Boston, LLC, 4.02%, acquired on 11/30/2005
and due 12/01/2005 at $32,000 (collateralized by $33,020 of
Federal Home Loan Bank Bonds(f), 3.80%, due 9/30/2008 and $250
of Fannie Mae Notes(f), 5.75%, due 7/27/2020;
combined market value $32,642) 32,000
33,000 Deutsche Bank Securities, Inc., 4.00%, acquired on
11/30/2005 and due 12/01/2005 at $33,000
(collateralized by $7,718 of Fannie Mae Notes(f),
4.63%, due 10/15/2014 and $26,070 of Federal Farm
Credit Bank Bonds(f), 4.25%, due 10/10/2008; combined
market value $33,661) 33,000
16
P O R T F O L I O
==================--------------------------------------------------------------
of INVESTMENTS
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
- ---------------------------------------------------------------------------------------------
$ 9,000 Lehman Brothers, Inc., 3.99%, acquired on 11/30/2005 and
due 12/01/2005 at $9,000 (collateralized by $9,510 of
Federal Home Loan Bank Bonds(f), 3.50%, due 11/28/2008;
market value $9,183) $ 9,000
9,500 Morgan Stanley & Co., Inc., 4.02%, acquired on 11/30/2005
and due 12/01/2005 at $9,500 (collateralized by $9,795 of
Fannie Mae Notes(f), 4.00%, due 5/23/2007; market value $9,702) 9,500
--------
83,500
--------
NUMBER
OF SHARES
- ----------
MONEY MARKET FUNDS (0.1%)
407,549 AIM Short-Term Investment Co. Liquid Assets Portfolio, 4.00%(d) 407
--------
Total short-term investments purchased with cash collateral
from securities loaned (cost: $83,907) 83,907
--------
TOTAL INVESTMENTS (COST: $689,078) $835,777
========
17
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
USAA INTERNATIONAL 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) Security deemed illiquid by USAA Investment Management
Company (the Manager), under liquidity guidelines approved
by the Board of Trustees. The market value of this security
at November 30, 2005, was $11,544,000, which represented
1.5% of the Fund's net assets.
(b) Security was fair valued at November 30, 2005, by the
Manager in accordance with valuation procedures approved by
the Board of Trustees.
(c) The security or a portion thereof was out on loan as of
November 30, 2005.
(d) Rate represents the money market fund annualized seven-day
yield at November 30, 2005.
18
N O T E S
==========----------------------------------------------------------------------
to Portfolio of INVESTMENTS
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
(e) 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.
(f) 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.
19
S T A T E M E N T
==================--------------------------------------------------------------
of ASSETS and LIABILITIES
(in thousands)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
ASSETS
Investments in securities, at market value (including securities
on loan of $78,640) (identified cost of $689,078) $835,777
Cash 4
Cash denominated in foreign currencies (identified cost of $2,048) 1,914
Receivables:
Capital shares sold 998
Dividends and interest 1,530
Securities sold 12,612
Other 19
--------
Total assets 852,854
--------
LIABILITIES
Payables:
Upon return of securities loaned 83,911
Securities purchased 5,834
Capital shares redeemed 196
Unrealized depreciation on foreign currency contracts held, at value 15
Accrued management fees 449
Accrued transfer agent's fees 29
Other accrued expenses and payables 81
--------
Total liabilities 90,515
--------
Net assets applicable to capital shares outstanding $762,339
========
NET ASSETS CONSIST OF:
Paid-in capital $568,414
Accumulated undistributed net investment income 4,507
Accumulated net realized gain on investments 42,892
Net unrealized appreciation of investments 146,699
Net unrealized depreciation on foreign currency translations (173)
--------
Net assets applicable to capital shares outstanding $762,339
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 32,377
========
Net asset value, redemption price, and offering price per share $ 23.55
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
S T A T E M E N T
==================--------------------------------------------------------------
of OPERATIONS
(in thousands)
USAA INTERNATIONAL FUND
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2005 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $264) $ 4,963
Interest 336
Securities lending 106
-------
Total income 5,405
-------
EXPENSES
Management fees 2,613
Administration and servicing fees 532
Transfer agent's fees 777
Custody and accounting fees 235
Postage 90
Shareholder reporting fees 28
Trustees' fees 4
Registration fees 24
Professional fees 34
Other 11
-------
Total expenses 4,348
Expenses paid indirectly (12)
-------
Net expenses 4,336
-------
NET INVESTMENT INCOME 1,069
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments 20,803
Foreign currency transactions (148)
Change in net unrealized appreciation/depreciation of:
Investments 46,999
Foreign currency translations (123)
-------
Net realized and unrealized gain 67,531
-------
Increase in net assets resulting from operations $68,600
=======
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 INTERNATIONAL 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 $ 1,069 $ 5,668
Net realized gain on investments 20,803 32,598
Net realized loss on foreign currency transactions (148) (190)
Change in net unrealized appreciation/depreciation of:
Investments 46,999 19,169
Foreign currency translations (123) (98)
----------------------
Increase in net assets resulting from operations 68,600 57,147
----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (3,680)
Net realized gains - (35,604)
----------------------
Distributions to shareholders - (39,284)
----------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 94,291 188,433
Reinvested dividends - 38,077
Cost of shares redeemed (46,460) (77,945)
----------------------
Increase in net assets from capital share transactions 47,831 148,565
----------------------
Capital contribution from USAA Transfer Agency Company - 3
----------------------
Net increase in net assets 116,431 166,431
NET ASSETS
Beginning of period 645,908 479,477
----------------------
End of period $762,339 $645,908
======================
Accumulated undistributed net investment income:
End of period $ 4,507 $ 3,438
======================
CHANGE IN SHARES OUTSTANDING
Shares sold 4,137 8,747
Shares issued for dividends reinvested - 1,766
Shares redeemed (2,058) (3,661)
----------------------
Increase in shares outstanding 2,079 6,852
======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
USAA INTERNATIONAL 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 International Fund (the Fund), which is
classified as diversified under the 1940 Act. The Fund's
primary investment objective is capital appreciation with
current income as a secondary objective.
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.
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 INTERNATIONAL 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 INTERNATIONAL 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
25
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
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.
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,
26
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
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
and other bank credits reduced the Fund's expenses by
$9,000 and $3,000, respectively, resulting in a total
reduction in Fund expenses of $12,000.
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 INTERNATIONAL 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 $1,000, which represents 2.2% 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 INTERNATIONAL 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 $195,783,000 and $154,728,000,
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 $152,091,000 and $5,392,000,
respectively, resulting in net unrealized appreciation of
$146,699,000.
(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 INTERNATIONAL 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 1,284 $ 976 $ 986 $(10)
Swiss Franc
12/05/2005 1,645 1,251 1,251 -
Swiss Franc
- ---------------------------------------------------------------------------------------------------
$2,227 $2,237 $(10)
- ---------------------------------------------------------------------------------------------------
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 235 $ 201 $ 201 $ -
Canadian Dollar
12/01/2005 1 1 1 -
Euro Currency
12/02/2005 262 309 309 -
Euro Currency
12/01/2005 886 1,532 1,535 3
Pound Sterling
12/02/2005 610 1,055 1,049 (6)
Pound Sterling
12/05/2005 1,478 2,556 2,557 1
Pound Sterling
12/01/2005 13,025 109 108 (1)
Japanese Yen
12/05/2005 22,110 2,738 2,736 (2)
Swedish Krona
12/01/2005 101 60 60 -
Singapore Dollar
- ---------------------------------------------------------------------------------------------------
$8,561 $8,556 $(5)
- ---------------------------------------------------------------------------------------------------
30
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL 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 $106,000, 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
$78,640,000 and received cash collateral of $83,911,000 for the
loans. Of this amount, $83,907,000 was invested in short-term
investments, as noted in the Fund's portfolio of investments,
and $4,000 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
31
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
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
International Funds Index, which tracks the total return
performance of the 30 largest funds in the Lipper
International 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
32
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
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
International 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 $2,613,000, which included a performance
adjustment of $(48,000) that decreased the base management
fee of 0.75% by 0.01%.
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
33
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
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 $871,000
was based on the average net assets of the USAA
International 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 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 $532,000.
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 $13,000 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 $777,000.
34
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL FUND
NOVEMBER 30, 2005 (UNAUDITED)
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.
35
N O T E S
==========----------------------------------------------------------------------
to FINANCIAL Statements
(continued)
USAA INTERNATIONAL 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 $ 21.32 $ 20.45 $ 16.15 $ 17.63 $ 18.23 $ 22.28
---------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .03 .10 .15 .11 .14 .16
Net realized and unrealized
gain (loss) 2.20 2.35 4.30 (1.46) (.56) (3.01)
---------------------------------------------------------------------
Total from investment operations 2.23 2.45 4.45 (1.35) (.42) (2.85)
---------------------------------------------------------------------
Less distributions:
From net investment income - (.14) (.10) (.13) (.18) (.11)
From realized capital gains - 1.44) (.05) - - (1.09)
---------------------------------------------------------------------
Total distributions - (1.58) (.15) (.13) (.18) (1.20)
---------------------------------------------------------------------
Net asset value at end of period $ 23.55 $ 21.32 $ 20.45 $ 16.15 $ 17.63 $ 18.23
=====================================================================
Total return (%)* 10.46 11.91 27.63 (7.63) (2.22) (13.84)
Net assets at end of period (000) $762,339 $645,908 $479,477 $347,543 $382,459 $419,236
Ratio of expenses to average
net assets (%)**(b) 1.22(a) 1.24 1.31 1.42 1.32 1.14
Ratio of net investment income
to average net assets (%)** .30(a) 1.02 .91 .79 .78 .84
Portfolio turnover (%) 22.54 41.11 58.70 148.14 35.63 32.75
* Assumes reinvestment of all net investment income and realized capital gain
distributions during the period. Calculated using net assets adjusted for
last day trades and could differ from the Lipper reported return.
** For the six-month period ended November 30, 2005, average net assets were
$708,379,000.
(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:
(.00%)(+) (.01%) (.01%) (.01%) (.00%)(+) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
36
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
USAA INTERNATIONAL 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
37
E X P E N S E
==============------------------------------------------------------------------
EXAMPLE
(continued)
USAA INTERNATIONAL 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 $1,104.60 $6.44
Hypothetical
(5% return before expenses) 1,000.00 1,018.95 6.18
*Expenses are equal to the Fund's annualized expense ratio of
1.22%, 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 10.46% for
the six-month period of June 1, 2005, through November 30,
2005.
38
N O T E S
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N O T E S
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TRUSTEES Christopher W. Claus
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Michael F. Reimherr
Laura T. Starks, Ph.D.
Richard A. Zucker
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, San Antonio, Texas 78265-9825
AND DISTRIBUTOR
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
CUSTODIAN 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
23410-0106 (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.