-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KYIwAwCmxOxoI3k/OOw1lvko3BT1C9Q0qdNhZn7nAZSlm2OxC5LgYwavgleHuPIR gjW6kKKeFWJHQjxf6akXuA== 0000745903-05-000010.txt : 20050131 0000745903-05-000010.hdr.sgml : 20050131 20050131140709 ACCESSION NUMBER: 0000745903-05-000010 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041130 FILED AS OF DATE: 20050131 DATE AS OF CHANGE: 20050131 EFFECTIVENESS DATE: 20050131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USAA INVESTMENT TRUST CENTRAL INDEX KEY: 0000745903 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04019 FILM NUMBER: 05561219 BUSINESS ADDRESS: STREET 1: 9800 FREDERICKSBURG ROAD STREET 2: A-3-W CITY: SAN ANTONIO STATE: TX ZIP: 78288-0227 BUSINESS PHONE: 2104988696 MAIL ADDRESS: STREET 1: 9800 FREDERICKSBURG ROAD STREET 2: A-3-W CITY: SAN ANTONIO STATE: TX ZIP: 78288-0227 N-CSRS 1 ncsrintl113004.txt FORM N-CSR USAA INTERNATIONA FD. SEMI-ANNUAL RPT 11-30-2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR/S CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4019 Exact name of registrant as specified in charter: USAA INVESTMENT TRUST Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD SAN ANTONIO, TX 78288 Name and address of agent for service: MARK S. HOWARD USAA INVESTMENT TRUST 9800 FREDERICKSBURG ROAD SAN ANTONIO, TX 78288 Registrant's telephone number, including area code: (210) 498-0226 Date of fiscal year end: MAY 31 Date of reporting period: NOVEMBER 30, 2004 ITEM 1. REPORT TO STOCKHOLDERS. USAA INTERNATIONAL FUND - SEMIANNUAL REPORT FOR PERIOD ENDING NOVEMBER 30, 2004 [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 - -------------------------------------------------------------------------------- NOVEMBER 30, 2004 Table of CONTENTS - -------------------------------------------------------------------------------- MESSAGE FROM THE PRESIDENT 2 INVESTMENT OVERVIEW & MANAGERS' COMMENTARY 5 FINANCIAL INFORMATION Portfolio of Investments 13 Notes to Portfolio of Investments 18 Financial Statements 20 Notes to Financial Statements 23 EXPENSE EXAMPLE 37
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY USAA INVESTMENT MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS ABOUT THE FUND. (C)2005, USAA. All rights reserved. 2 M E S S A G E ==============------------------------------------------------------------------ from the PRESIDENT " WE REMAIN COMMITTED TO DELIVERING QUALITY USAA SERVICE AND PROVIDING YOU [PHOTO OF CHRISTOPHER W. CLAUS] WITH A RANGE OF RESOURCES, INCLUDING OUR MARKET-TESTED PORTFOLIO MANAGEMENT TEAM AND NO-LOAD MUTUAL FUNDS. " December 2004 - -------------------------------------------------------------------------------- As I write to you in early December, the equity markets have rallied. Several factors are responsible. First, the presidential election is over. Investors are relieved that the uncertainty has ended, the results are not in dispute, and no terrorist attack occurred on U.S. soil. In addition, the U.S. economy is on sound footing. The annual gross domestic product (GDP) - the total value of all the goods and services produced in the country - is expected to be up around 4%, on an inflation-adjusted basis, in 2004 and a moderate yet healthy 3.5% in 2005. In most of America, the housing market remains strong. Inflation is also under control, which has kept long-term interest rates in check. The Federal Reserve Board (the Fed) is expected to continue raising short-term interest rates at a measured pace. In fact, the Fed has announced its intention to move toward a more "neutral" interest-rate position, which should put short-term rates above 3% sometime in 2005. This is good news for money market investors, because as your yields rise, you will be paid more on your cash positions. At the same time, however, interest rates on credit-card debt will also increase. In the months ahead, we expect to see a narrowing of the yield relationship between bonds of different maturities. In other words, the yield curve will "flatten." We do not expect a major increase in long-term interest rates, which the bond market, not the Fed, controls. 3 . . . C O N T I N U E D ========================-------------------------------------------------------- In 2005, the primary drivers of stock market performance will be the growth in corporate earnings, the valuation of those earnings, Fed policy changes, and the level of long-term interest rates. Corporate earnings are expected to improve by about 7%. The dollar is likely to remain weak relative to foreign currencies, making American products more affordable around the world and helping the U.S. GDP. But because foreign governments finance the federal budget deficit, the bond market may push up long-term rates to make U.S. securities more attractive to foreign investors. Whatever lies ahead, we remain committed to delivering quality USAA service and providing you with a range of resources, including our market-tested portfolio management team and no-load mutual funds without excessive fees. On behalf of everyone at USAA, thank you for your business. Sincerely, /S/ CHRISTOPHER W. CLAUS Christopher W. Claus President and Vice Chairman of the Board CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE USAA MUTUAL FUNDS CAREFULLY BEFORE INVESTING. CONTACT US FOR A PROSPECTUS CONTAINING THIS AND OTHER INFORMATION ABOUT THE FUNDS FROM USAA INVESTMENT MANAGEMENT COMPANY, DISTRIBUTOR. READ IT CAREFULLY BEFORE INVESTING. Mutual fund operating expenses apply and continue throughout the life of the fund. Past performance is no guarantee of future results. 5 I N V E S T M E N T ====================------------------------------------------------------------ OVERVIEW USAA INTERNATIONAL FUND OBJECTIVE - -------------------------------------------------------------------------------- Capital appreciation with current income as a secondary objective. TYPES OF INVESTMENTS - -------------------------------------------------------------------------------- Invests at least 80% of the Fund's assets in equity securities of foreign (including emerging market) companies.
- -------------------------------------------------------------------------------- 11/30/04 5/31/04 - -------------------------------------------------------------------------------- Net Assets $552.4 Million $479.5 Million Net Asset Value Per Share $22.49 $20.45
- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/04 - --------------------------------------------------------------------------------
5/31/04 TO 11/30/04* 1 YEAR 5 YEARS 10 YEARS 10.03% 22.13% 2.36% 6.80%
*TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS SIX-MONTH RETURN IS CUMULATIVE. The performance data quoted represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month-end, visit usaa.com. TOTAL RETURN MEASURES THE PRICE CHANGE IN A SHARE ASSUMING THE REINVESTMENT OF ALL NET INVESTMENT INCOME DIVIDEND AND REALIZED CAPITAL GAIN DISTRIBUTIONS. THE TOTAL RETURNS QUOTED DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 6 . . . C O N T I N U E D ========================-------------------------------------------------------- OVERVIEW CUMULATIVE PERFORMANCE COMPARISON [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA LIPPER LIPPER INTERNATIONAL INTERNATIONAL INTERNATIONAL MSCI-EAFE FUND FUNDS INDEX FUNDS AVERAGE INDEX ------------- ------------- -------------- --------- 11/30/1994 $10000.00 $10000.00 $10000.00 $10000.00 12/31/1994 9885.64 9866.59 9911.29 10062.62 1/31/1995 9212.20 9377.10 9469.82 9676.06 2/28/1995 9116.90 9374.68 9511.09 9648.29 3/31/1995 9371.03 9621.29 9802.08 10250.06 4/30/1995 9764.93 9974.94 10126.25 10635.55 5/31/1995 10025.41 10073.19 10240.73 10508.77 6/30/1995 10101.65 10111.44 10270.21 10324.48 7/31/1995 10620.43 10667.30 10820.59 10967.25 8/31/1995 10371.67 10487.06 10592.75 10548.88 9/30/1995 10492.86 10662.46 10775.42 10754.91 10/31/1995 10295.12 10440.47 10571.34 10465.81 11/30/1995 10378.34 10549.49 10684.09 10757.01 12/31/1995 10705.47 10855.44 10993.80 11190.42 1/31/1996 11058.26 11111.94 11233.98 11236.36 2/29/1996 11250.69 11159.64 11297.98 11274.34 3/31/1996 11455.94 11333.98 11490.02 11513.76 4/30/1996 11962.67 11703.23 11850.83 11848.51 5/31/1996 12001.16 11690.12 11839.59 11630.47 6/30/1996 12084.55 11796.62 11923.87 11695.93 7/31/1996 11505.93 11398.73 11497.22 11354.09 8/31/1996 11853.60 11547.39 11658.59 11378.97 9/30/1996 12070.07 11805.54 11920.20 11681.26 10/31/1996 12024.16 11758.65 11879.24 11561.72 11/30/1996 12666.39 12311.77 12422.29 12021.75 12/31/1996 12755.04 12421.69 12492.63 11867.10 1/31/1997 13161.34 12437.71 12482.76 11451.78 2/28/1997 13227.94 12662.24 12650.31 11639.09 3/31/1997 13247.93 12729.32 12688.39 11681.23 4/30/1997 13334.51 12784.73 12718.36 11743.22 5/31/1997 14007.23 13505.59 13475.93 12507.39 6/30/1997 14719.92 14154.17 14106.84 13197.14 7/31/1997 15189.62 14608.61 14535.55 13410.64 8/31/1997 14377.86 13555.33 13505.95 12409.08 9/30/1997 15327.21 14425.29 14368.02 13104.22 10/31/1997 14267.79 13330.30 13309.79 12096.97 11/30/1997 13799.99 13218.45 13210.57 11973.65 12/31/1997 13908.26 13321.99 13332.89 12078.09 1/31/1998 13908.26 13644.20 13658.34 12630.46 2/28/1998 14819.57 14510.37 14572.52 13440.90 3/31/1998 15738.11 15298.39 15346.52 13854.77 4/30/1998 16106.97 15533.51 15577.02 13964.43 5/31/1998 15868.29 15564.39 15609.75 13896.65 6/30/1998 15513.90 15428.30 15488.33 14001.86 7/31/1998 15438.27 15664.99 15716.01 14143.81 8/31/1998 12825.30 13411.56 13447.54 12391.55 9/30/1998 12376.07 12994.11 13001.51 12011.64 10/31/1998 13521.59 13949.58 13982.86 13263.74 11/30/1998 13910.92 14648.31 14704.82 13943.27 12/31/1998 14457.47 15008.77 15151.60 14493.32 1/31/1999 14659.62 15099.83 15296.23 14450.53 2/28/1999 14135.53 14711.39 14897.17 14106.13 3/31/1999 14442.50 15201.04 15422.17 14694.95 4/30/1999 15221.15 15909.54 16147.21 15290.37 5/31/1999 14816.85 15318.36 15486.93 14502.93 6/30/1999 15393.35 16044.79 16279.90 15068.36 7/31/1999 15944.78 16403.12 16680.12 15516.25 8/31/1999 16112.14 16532.70 16825.32 15572.91 9/30/1999 16112.14 16585.79 16882.37 15729.66 10/31/1999 16249.07 17164.63 17514.17 16318.83 11/30/1999 17177.15 18423.55 18791.54 16885.82 12/31/1999 18599.04 20687.15 21050.02 18401.35 1/31/2000 17869.36 19476.25 19885.24 17232.15 2/29/2000 18583.18 20761.46 21131.36 17696.04 3/31/2000 19066.99 20814.96 21204.68 18382.00 4/30/2000 18139.02 19494.66 19839.05 17414.68 5/31/2000 17671.07 18959.00 19206.82 16989.35 6/30/2000 18543.52 19836.77 20054.21 17653.78 7/31/2000 17915.26 19193.80 19376.58 16913.65 8/31/2000 18190.88 19518.18 19698.63 17060.46 9/30/2000 17247.10 18381.08 18561.55 16229.76 10/31/2000 16537.17 17756.90 17906.56 15846.38 11/30/2000 15860.65 17007.29 17172.95 15252.13 12/31/2000 16587.28 17642.35 17813.74 15794.25 1/31/2001 16862.90 17746.26 17904.81 15786.10 2/28/2001 15668.55 16501.04 16624.28 14602.66 3/31/2001 14541.01 15340.90 15399.24 13629.23 4/30/2001 15660.20 16273.95 16402.89 14576.35 5/31/2001 15225.89 15879.73 15979.19 14061.90 6/30/2001 14683.00 15431.23 15432.18 13486.83 7/31/2001 14591.13 15030.11 15033.47 13241.44 8/31/2001 14465.85 14728.71 14666.55 12905.88 9/30/2001 12954.11 13123.94 13090.58 11598.68 10/31/2001 13296.55 13479.40 13424.16 11895.75 11/30/2001 13822.73 13982.69 13944.95 12334.26 12/31/2001 14169.56 14232.10 14145.04 12407.54 1/31/2002 13679.79 13657.66 13566.84 11748.27 2/28/2002 13933.12 13849.10 13661.19 11830.68 3/31/2002 14693.11 14581.67 14383.43 12528.08 4/30/2002 14743.77 14683.97 14457.25 12553.27 5/31/2002 14887.33 14893.91 14628.77 12712.33 6/30/2002 14414.45 14306.00 14056.88 12206.30 7/31/2002 12953.58 12877.78 12663.68 11001.30 8/31/2002 13029.58 12888.05 12636.72 10976.32 9/30/2002 12058.48 11500.02 11298.52 9797.54 10/31/2002 12776.25 12096.88 11833.81 10324.11 11/30/2002 13012.69 12669.57 12357.06 10792.67 12/31/2002 12883.48 12264.15 11951.24 10429.78 1/31/2003 12338.51 11814.98 11486.44 9994.36 2/28/2003 12040.48 11465.14 11211.94 9764.99 3/31/2003 11929.78 11184.36 10979.41 9573.13 4/30/2003 13070.82 12291.64 11992.42 10511.41 5/31/2003 13743.52 13081.17 12721.15 11148.32 6/30/2003 13939.37 13390.24 13009.83 11417.73 7/31/2003 14084.13 13765.69 13327.31 11694.12 8/31/2003 14245.92 14162.89 13669.50 11976.52 9/30/2003 14612.07 14447.11 13956.52 12345.71 10/31/2003 15301.80 15308.43 14797.71 13115.21 11/30/2003 15804.20 15615.92 15090.83 13406.79 12/31/2003 16993.65 16678.63 16163.80 14454.19 1/31/2004 17259.71 17037.04 16449.87 14658.58 2/29/2004 17731.75 17426.57 16810.20 14996.96 3/31/2004 17611.60 17511.50 16868.85 15081.35 4/30/2004 17397.03 16989.57 16362.43 14740.19 5/31/2004 17542.94 16979.93 16374.12 14771.36 6/30/2004 17809.00 17322.00 16695.24 15113.80 7/31/2004 17233.96 16754.73 16145.57 14623.31 8/31/2004 17276.87 16843.85 16239.15 14687.89 9/30/2004 17757.50 17292.44 16711.50 15071.76 10/31/2004 18298.21 17840.73 17243.90 15585.71 11/30/2004 19302.38 18985.20 18337.11 16650.42
[END CHART] DATA FROM 11/30/94 THROUGH 11/30/04. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE, AND THE CUMULATIVE PERFORMANCE QUOTED DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 7 . . . C O N T I N U E D ========================-------------------------------------------------------- The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA International Fund to the following benchmarks: o The Lipper International Funds Index tracks the total return performance of the 30 largest funds within the Lipper International Funds category. o 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. o The Morgan Stanley Capital International Europe, Australia and Far East (MSCI-EAFE) Index is an unmanaged index that reflects the movements of stock markets in Europe, Australia, and the Far East by representing a broad selection of domestically listed companies within each market. 8 M A N A G E R S ' ==================-------------------------------------------------------------- COMMENTARY on the Fund DAVID R. MANNHEIM MARCUS L. SMITH MFS Investment Management MFS Investment Management - -------------------------------------------------------------------------------- HOW DID THE FUND PERFORM? The USAA International Fund had a total return of 10.03% for the six-month period ended November 30, 2004. This compares to a 5.91% return for the Lipper International Funds Average, 6.62% for the Lipper International Funds Index, and 12.72% for the Morgan Stanley Capital International Europe, Australia and Far East (MSCI-EAFE) Index. * * * * * THE FUND'S PERFORMANCE RECEIVED AN OVERALL MORNINGSTAR RATING(TM) OF 5 STARS IN THE FOREIGN LARGE GROWTH FUNDS CATEGORY (175 FUNDS IN CATEGORY) AS OF NOVEMBER 30, 2004. THE OVERALL MORNINGSTAR RATING FOR A FUND IS DERIVED FROM A WEIGHTED AVERAGE OF THE PERFORMANCE FIGURES ASSOCIATED WITH ITS THREE-, FIVE-, AND 10-YEAR (IF APPLICABLE) MORNINGSTAR RATING METRICS. With respect to the foreign large growth funds category, the USAA International Fund received a Morningstar Rating of 5 stars for the three- and five-year periods among 175 and 130 funds, respectively, and 4 stars for the 10-year period among 46 funds through November 30, 2004. Ratings are based on risk-adjusted returns. REFER TO PAGE 7 FOR BENCHMARK DEFINITIONS. FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS, MARKET ILLIQUIDITY, AND POLITICAL INSTABILITY. 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. 9 . . . C O N T I N U E D ========================-------------------------------------------------------- WHAT WAS THE MARKET ENVIRONMENT DURING THE PERIOD? It was a volatile period, highlighted by an escalation of geopolitical risk, dramatically rising oil prices, and uncertainty surrounding the U.S. presidential election. For U.S. investors in this Fund, the depreciation of the U.S. dollar was helpful as returns from overseas markets (with stronger currencies) were translated back into dollars. WHAT WERE THE SPECIFIC HOLDINGS OR SECTORS THAT GREATLY DETRACTED FROM OR POSITIVELY AFFECTED PERFORMANCE? Stock selection in leisure companies was a primary detractor of performance over the six-month period. One holding, British Sky Broadcasting Group plc (U.K.), fell sharply when it announced slower revenue growth and a capital expenditure plan that would further postpone margin improvement. We sold our entire position in August 2004. We also suffered when the Australia-based News Corp., Inc. "B" announced shareholder approval of a change in its country of domicile to the United States. Since News Corp., Inc. "B" would then no longer be an "international" stock, many international funds began to sell. The stock of NOK Corp. (Japan), which among other businesses makes the flexible printed circuits used in mobile phones, fell when management lowered forecasts due to slower growth in the mobile phone business and the rising cost of raw materials. Our view is that this is a short-term problem, and we remain confident in the stock. Our cash position also held us back. As a U.S.-based mutual fund, we had an average cash balance of 3% of assets in U.S. dollars during the period to handle the normal cash flow needs of any mutual fund. With higher stock prices overseas and the fall of the dollar, even this small 3% cash position had an impact on the Fund's total return. YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS ON PAGES 13-17. 10 . . . C O N T I N U E D ========================-------------------------------------------------------- COMMENTARY on the Fund There were positive impacts on performance from the transportation sector, specifically from Canadian National Railway Co. (Canada). The stock gained sharply when the company reported better-than-expected third-quarter profits due to higher shipments, price increases, and the rebounding Canadian economy. We also benefited from several holdings in the retail sector. Hennes & Mauritz AB "B" (Sweden), better known to U.S. shoppers as H&M, had better-than-expected sales thanks to good strategic placement of new stores. Esprit Holdings Ltd. (Hong Kong) and Next plc (U.K.) were two other strong retail stocks. WERE THERE ANY NEW PURCHASES OF NOTE? We bought Japanese bank, Shinsei Bank Ltd., which came out of the temporary nationalization of the Long Term Credit Bank. Shinsei Bank Ltd. has cleaned up its balance sheet and is heavily capitalized. Also in Japan, we bought Nintendo Co., because we expect the new Nintendo DS (a Game Boy replacement) to do well. WHAT'S YOUR OUTLOOK? We believe the market as a whole can achieve earnings in the 8% to 10% range, and we're looking to invest in companies that we believe can reach the 11% to 12% range or better. We are focused on transparent companies with strong fundamentals, and believe a volatile market will favor money managers, such as MFS, who are good stock-pickers. 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 13-17. 11 P O R T F O L I O ==================-------------------------------------------------------------- HIGHLIGHTS TOP 10 INDUSTRIES (% of Net Assets) Pharmaceuticals 8.8% Diversified Banks 8.1% Regional Banks 5.2% Integrated Telecommunication Services 5.1% Wireless Telecommunication Services 4.1% Industrial Machinery 4.0% Household Products 3.8% Apparel Retail 3.5% Multi-Line Insurance 3.4% Electrical Components & Equipment 3.1%
TOP 10 EQUITY HOLDINGS (% of Net Assets) Reckitt Benckiser plc 3.8% L'Air Liquide S.A. 2.6% Vodafone Group plc 2.6% Roche Holdings AG 2.2% Sandvik AB 2.2% Schneider Electric S.A. 2.2% Total S.A. ADR 2.2% UBS AG 2.2% Diageo plc 2.1% Erste Bank der oesterreichischen Sparkassen AG 2.0%
YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS ON PAGES 13-17. 12 . . . C O N T I N U E D ========================-------------------------------------------------------- HIGHLIGHTS ASSET ALLOCATION 11/30/04 [PIE CHART OF ASSET ALLOCATION] United Kingdom 19.9% Japan 17.6% France 13.9% Switzerland 7.7% Sweden 7.4% Spain 4.8% Canada 3.6% Other* 32.4%
[END CHART] *INCLUDES COUNTRIES WITH LESS THAN 3% OF THE PORTFOLIO, MONEY MARKET INSTRUMENTS, (4.2%), AND SHORT-TERM INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (5.2%). PERCENTAGES ARE OF THE NET ASSETS OF THE FUND AND MAY NOT EQUAL 100%. FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS, MARKET ILLIQUIDITY, AND POLITICAL INSTABILITY. YOU WILL FIND A COMPLETE LIST OF SECURITIES THAT THE FUND OWNS ON PAGES 13-17. 13 P O R T F O L I O ==================-------------------------------------------------------------- of INVESTMENTS USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED)
MARKET NUMBER VALUE OF SHARES SECURITY (000) - --------------------------------------------------------------------------------------------------- STOCKS (97.9%) AUSTRALIA (1.1%) 592,715 QBE Insurance Group Ltd. (Property & Casualty Insurance) $ 6,388 -------- AUSTRIA (2.0%) 220,260 Erste Bank der oesterreichischen Sparkassen AG (Regional Banks) 11,182 -------- BRAZIL (1.5%) 85,550 Brasil Telecom Participacoes S.A. ADR (Preferred) (Integrated Telecommunication Services) 3,190 193,060 Companhia Vale Do Rio Doce ADR (Diversified Metals & Mining) 4,792 -------- 7,982 -------- CANADA (3.6%) 146,110 BCE, Inc. (Integrated Telecommunication Services) 3,541 139,071 Canadian National Railway Co. (Railroads) 8,062 148,240 Encana Corp. (Oil & Gas Exploration & Production) 8,444 -------- 20,047 -------- CAYMAN ISLANDS (0.8%) 5,362,000 Hutchison Telecommunications International Ltd. (Wireless Telecommunication Services)* 4,378 -------- FRANCE (13.9%) 459,700 AXA S.A. (Multi-Line Insurance) 10,739 132,660 Business Objects S.A. (Application Software)* 3,101 294,460 Credit Agricole S.A. (Regional Banks)(a) 8,698 83,334 L'Air Liquide S.A. (Industrial Gases) 14,375 78,210 Sanofi-Synthelabo S.A. (Pharmaceuticals)(a) 5,874 177,881 Schneider Electric S.A. (Electrical Components & Equipment) 12,323 83,135 Societe Television Francaise 1 (Broadcasting & Cable TV) 2,641 112,683 Total S.A. ADR (Integrated Oil & Gas)(a) 12,350 220,110 Veolia Environnement S.A. (Multi-Utilities & Unregulated Power) 6,925 -------- 77,026 -------- GERMANY (2.7%) 184,310 Bayerische Motoren Werke AG (Automobile Manufacturers) 7,766 102,670 Schering AG (Pharmaceuticals) 7,289 -------- 15,055 --------
14 P O R T F O L I O ==================-------------------------------------------------------------- of INVESTMENTS (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED)
MARKET NUMBER VALUE OF SHARES SECURITY (000) - --------------------------------------------------------------------------------------------------- HONG KONG (1.4%) 6,532,500 CNOOC Ltd. (Oil & Gas Exploration & Production) $ 3,717 776,500 Esprit Holdings Ltd. (Apparel Retail) 4,254 -------- 7,971 -------- HUNGARY (1.3%) 121,000 OTP Bank Ltd. GDR (Regional Banks) 6,957 -------- IRELAND (1.9%) 370,520 Depfa Bank plc (Specialized Finance) 6,042 2,473,710 Irish Life & Permanent plc (Other Diversified Financial Services) 4,199 -------- 10,241 -------- ITALY (1.5%) 380,160 RAS S.p.A. (Multi-Line Insurance) 8,216 -------- JAPAN (17.6%) 310,000 Bridgestone Corp. (Tires & Rubber) 5,611 223,000 Canon, Inc. (Electronic Equipment Manufacturers) 11,167 422,300 Chugai Pharmaceutical Co. Ltd. (Pharmaceuticals) 6,619 903 KDDI Corp. (Integrated Telecommunication Services) 4,452 81,900 Kyocera Corp. (Electronic Equipment Manufacturers) 5,762 95,300 Murata Manufacturing Co. Ltd. (Electrical Components & Equipment) 4,976 146,000 NOK Corp. (Auto Parts & Equipment) 4,229 81,700 Nintendo Co. (Leisure Products) 9,816 146,200 Nitto Denko Corp. (Specialty Chemicals) 7,605 57,400 Seiko Epson Corp. (Office Electronics) 2,345 843,000 Sekisui Chemical Co. Ltd. (Homebuilding) 5,530 1,063,000 Shinsei Bank Ltd. (Diversified Banks)(a) 7,097 46,500 Tokyo Broadcasting System, Inc. (Broadcasting & Cable TV) 736 2,115,000 Tokyo Gas Co. Ltd. (Gas Utilities) 8,477 1,150,000 Toray Industries, Inc. (Textiles) 5,055 201,100 Toyota Motor Corp. (Automobile Manufacturers) 7,533 -------- 97,010 -------- KOREA (1.5%) 20,000 Samsung Electronics Co. Ltd. (Semiconductors) 8,288 -------- MEXICO (2.0%) 86,430 America Movil S.A. de C.V. ADR "L" (Wireless Telecommunication Services) 4,037 115,560 Grupo Televisa S.A. de C.V. ADR (Broadcasting & Cable TV) 7,196 -------- 11,233 --------
15 P O R T F O L I O ==================-------------------------------------------------------------- of INVESTMENTS (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED)
MARKET NUMBER VALUE OF SHARES SECURITY (000) - --------------------------------------------------------------------------------------------------- NETHERLANDS (1.0%) 412,540 Reed Elsevier N.V. (Publishing) $ 5,513 -------- POLAND (0.3%) 232,410 Powszechna Kasa Oszczednosci Bank Polski S.A. (Regional Banks)* 1,840 -------- SINGAPORE (2.4%) 491,000 DBS Group Holdings Ltd. (Diversified Banks) 4,733 4,117,000 Singapore Telecommunications Ltd. (Integrated Telecommunication Services) 5,954 294,000 United Overseas Bank Ltd. (Diversified Banks) 2,440 -------- 13,127 -------- SPAIN (4.8%) 573,540 Banco Bilbao Vizcaya Argentaria S.A. (Diversified Banks)(a) 9,414 256,280 Iberdrola S.A. (Electric Utilities) 6,008 609,011 Telefonica S.A. (Integrated Telecommunication Services) 10,675 11,543 Telefonica S.A. ADR (Integrated Telecommunication Services) 606 -------- 26,703 -------- SWEDEN (7.4%) 218,600 Atlas Copco AB "A" (Industrial Machinery) 9,602 3,020,730 Ericsson LM "B" (Communications Equipment)* 10,041 278,980 Hennes & Mauritz AB "B" (Apparel Retail) 8,942 306,210 Sandvik AB (Industrial Machinery) 12,360 -------- 40,945 -------- SWITZERLAND (7.7%) 22,640 Credit Suisse Group (Diversified Banks) 881 135,520 Novartis AG (Pharmaceuticals) 6,477 115,370 Roche Holdings AG (Pharmaceuticals) 12,118 13,460 Straumann AG (Health Care Supplies) 2,934 27,612 Syngenta AG (Specialty Chemicals) 2,912 44,030 Synthes, Inc. (Health Care Equipment)* 4,756 153,669 UBS AG (Diversified Banks) 12,388 -------- 42,466 -------- TAIWAN (0.3%) 1,671,687 Compal Electronics, Inc. (Computer Hardware) 1,603 -------- UNITED KINGDOM (19.9%) 1,057,320 Amvescap plc (Investment Banking & Brokerage) 6,468 259,190 AstraZeneca plc (Pharmaceuticals) 10,109
16 P O R T F O L I O ==================-------------------------------------------------------------- of INVESTMENTS (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED)
MARKET NUMBER VALUE OF SHARES SECURITY (000) - --------------------------------------------------------------------------------------------------- 339,690 BG Group plc (Oil & Gas Exploration & Production) $ 2,352 226,650 BOC Group plc (Diversified Chemicals) 4,046 332,380 Bunzl plc (Diversified Commercial Services) 2,830 831,510 Diageo plc (Distillers & Vintners) 11,608 2,014,230 Kingfisher plc (Home Improvement Retail) 11,064 203,420 Next plc (Apparel Retail) 6,223 709,490 Reckitt Benckiser plc (Household Products) 20,879 249,075 Royal Bank Scotland Group plc (Diversified Banks) 7,639 5,276,850 Vodafone Group plc (Wireless Telecommunication Services) 14,291 902,450 William Hill plc (Casinos & Gaming) 8,950 424,120 Yell Group plc (Publishing) 3,500 -------- 109,959 -------- UNITED STATES (1.3%) 390,022 News Corp., Inc. "B" (Movies & Entertainment) 7,000 -------- Total stocks (cost: $424,945) 541,130 -------- PRINCIPAL AMOUNT (000) - ---------- MONEY MARKET INSTRUMENTS (4.2%) DISCOUNT NOTE $23,179 Federal Home Loan Bank(d), 1.90%(e), 12/01/2004 (cost: $23,179) 23,179 -------- SHORT-TERM INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (5.2%) REPURCHASE AGREEMENTS (5.2%)(c) 13,000 CS First Boston LLC, 2.06%, acquired on 11/30/2004 and due 12/01/2004 at $13,000 (collateralized by $13,290 of Freddie Mac Discount Notes(d), 2.29%(g), due 1/03/2005; market value $13,262) 13,000 9,500 Deutsche Bank Securities, Inc., 2.05%, acquired on 11/30/2004 and due 12/01/2004 at $9,500 (collateralized by $10,635 of Fannie Mae Notes(d), 5.47%(f), due 4/25/2017; and $176,891 of Freddie Mac Notes(d), 5.09%-5.51%(f), due 2/15/2022-11/15/2032; combined market value $9,690) 9,500 1,000 Lehman Brothers, Inc., 2.05%, acquired on 11/30/2004 and due 12/01/2004 at $1,000 (collateralized by $1,025 of Fannie Mae Discount Notes(d), 2.24%(g), due 2/09/2005; market value $1,020) 1,000
17 P O R T F O L I O ==================-------------------------------------------------------------- of INVESTMENTS (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED)
PRINCIPAL MARKET AMOUNT VALUE (000) SECURITY (000) - --------------------------------------------------------------------------------------------------- $ 3,500 Merrill Lynch Government Securities, Inc., 2.04%, acquired on 11/30/2004 and due 12/01/2004 at $3,500 (collateralized by $3,580 of Federal Home Loan Bank Bonds(d), 3.70%, due 7/28/2009; market value $3,575) $ 3,500 1,500 Morgan Stanley & Co., Inc., 2.05%, acquired on 11/30/2004 and due 12/01/2004 at $1,500 (collateralized by $1,535 of Fannie Mae Discount Notes(d), 2.16%(g), due 1/12/2005; market value $1,531) 1,500 -------- 28,500 -------- NUMBER OF SHARES - ---------- MONEY MARKET FUNDS (0.0%)(b,h) 18,894 AIM Short-Term Investment Co. Liquid Assets Portfolio, 1.93% 19 38,859 Merrill Lynch Premier Institutional Fund, 1.90% 39 -------- 58 -------- Total short-term investments purchased with cash collateral from securities loaned (cost: $28,558) 28,558 -------- TOTAL INVESTMENTS (COST: $476,682) $592,867 ========
18 N O T E S ==========---------------------------------------------------------------------- to Portfolio of INVESTMENTS USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) GENERAL NOTES - -------------------------------------------------------------------------------- Market values of securities are determined by procedures and practices discussed in Note 1 to the financial statements. The portfolio of investments category percentages shown represent the percentages of the investments to net assets and, in total, may not equal 100%. ADR - American depositary receipts are receipts issued by a U.S. bank evidencing ownership of foreign shares. Dividends are paid in U.S. dollars. GDR - Global depositary receipts are receipts issued by a U.S. or foreign bank evidencing ownership of foreign shares. Dividends are paid in U.S. dollars. SPECIFIC NOTES - -------------------------------------------------------------------------------- (a) The security or a portion thereof was out on loan as of November 30, 2004. (b) Rate represents the money market fund annualized seven-day yield at November 30, 2004. (c) Collateral on repurchase agreements is received by the Fund upon entering into the repurchase agreement. The collateral is marked- to-market daily to ensure its market value is equal to or in excess of the repurchase agreement price plus accrued interest. (d) U.S. government agency issues - securities issued by government- sponsored enterprises (GSEs) are supported only by the credit of the issuing agency, instrumentality, or corporation, and are neither issued nor guaranteed by the U.S. government. (e) Rate represents the discount rate at the purchase date. 19 N O T E S ==========---------------------------------------------------------------------- to Portfolio of INVESTMENTS (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) (f) Variable- or floating-rate security - interest rate is adjusted periodically. The interest rate disclosed represents the current rate at November 30, 2004. (g) Zero-coupon security. Rate represents the effective yield at date of purchase. (h) Represents less than 0.1% of net assets. * Non-income-producing security for the 12 months preceding November 30, 2004. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 S T A T E M E N T ==================-------------------------------------------------------------- of ASSETS and LIABILITIES (in thousands) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) ASSETS Investments in securities, at market value (including securities on loan of $27,289) (identified cost of $476,682) $592,867 Cash 1 Cash denominated in foreign currencies (identified cost of $308) 323 Receivables: Capital shares sold 571 Foreign currency sold 775 Dividends and interest 1,025 Securities sold 3,658 Other 6 Unrealized appreciation on foreign currency contracts held, at value 24 -------- Total assets 599,250 -------- LIABILITIES Payables: Upon return of securities loaned 28,558 Securities purchased 16,824 Capital shares redeemed 275 Upon settlement of delayed trades 775 Unrealized depreciation on foreign currency contracts held, at value 17 Accrued management fees 357 Accrued transfer agent's fees 9 Other accrued expenses and payables 43 -------- Total liabilities 46,858 -------- Net assets applicable to capital shares outstanding $552,392 ======== NET ASSETS CONSIST OF: Paid-in capital $393,411 Accumulated undistributed net investment income 3,795 Accumulated net realized gain on investments 38,941 Net unrealized appreciation of investments 116,185 Net unrealized appreciation on foreign currency translations 60 -------- Net assets applicable to capital shares outstanding $552,392 ======== Capital shares outstanding, unlimited number of shares authorized, no par value 24,561 ======== Net asset value, redemption price, and offering price per share $ 22.49 ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 S T A T E M E N T ==================-------------------------------------------------------------- of OPERATIONS (in thousands) USAA INTERNATIONAL FUND SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004 (UNAUDITED) INVESTMENT INCOME Dividends (net of foreign taxes withheld of $364) $ 3,145 Interest 110 Securities lending 69 ------- Total income 3,324 ------- EXPENSES Management fees 1,932 Administrative and servicing fees 371 Transfer agent's fees 525 Custody and accounting fees 162 Postage 38 Shareholder reporting fees 14 Trustees' fees 3 Registration fees 22 Professional fees 28 Other 7 ------- Total expenses 3,102 Expenses paid indirectly (27) ------- Net expenses 3,075 ------- NET INVESTMENT INCOME 249 ------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY Net realized gain (loss) on: Investments 13,269 Foreign currency transactions (9) Change in net unrealized appreciation/depreciation of: Investments 35,654 Foreign currency translations 12 ------- Net realized and unrealized gain 48,926 ------- Increase in net assets resulting from operations $49,175 =======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 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, 2004 (UNAUDITED), AND YEAR ENDED MAY 31, 2004
11/30/2004 5/31/2004 ----------------------- FROM OPERATIONS Net investment income $ 249 $ 3,764 Net realized gain on investments 13,269 37,376 Net realized loss on foreign currency transactions (9) (153) Change in net unrealized appreciation/depreciation of: Investments 35,654 55,707 Foreign currency translations 12 (33) ----------------------- Increase in net assets resulting from operations 49,175 96,661 ----------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income - (2,281) Net realized gains - (1,058) ----------------------- Distributions to shareholders - (3,339) ----------------------- FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 55,106 167,465 Reinvested dividends - 3,186 Cost of shares redeemed (31,366) (132,039) ----------------------- Increase in net assets from capital share transactions 23,740 38,612 ----------------------- Net increase in net assets 72,915 131,934 NET ASSETS Beginning of period 479,477 347,543 ----------------------- End of period $ 552,392 $ 479,477 ======================= Accumulated undistributed net investment income: End of period $ 3,795 $ 3,546 ======================= CHANGE IN SHARES OUTSTANDING Shares sold 2,634 9,100 Shares issued for dividends reinvested - 164 Shares redeemed (1,519) (7,344) ----------------------- Increase in shares outstanding 1,115 1,920 =======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- USAA INVESTMENT TRUST (the Trust), registered under the Investment Company Act of 1940, as amended, is a diversified, open-end management investment company organized as a Massachusetts business trust consisting of nine separate funds. The information presented in this semiannual report pertains only to the USAA International Fund (the Fund). 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, except as otherwise noted, traded primarily on a domestic securities exchange or the Nasdaq over-the-counter markets are valued at the last sales price or official closing price on the exchange or primary market on which they trade. Equity securities traded primarily on foreign securities exchanges or markets are valued at the last quoted sales price, or the most recently determined official closing price calculated according to local market convention, available at the time the Fund is valued. If no last sale or official closing price is reported or available, the average of the bid and asked prices is generally used. 2. Securities trading in various foreign markets may take place on days when the NYSE is closed. Further, when the NYSE is open, the foreign markets may be closed. Therefore, the calculation of the Fund's net asset value (NAV) may not take 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 24 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) NAV is calculated will not be reflected in the value of the Fund's foreign securities. However, USAA Investment Management Company (the Manager), an affiliate of the Fund, and the Fund's subadviser, if applicable, will monitor for events that would materially affect the value of the Fund's foreign securities and, if necessary, the Manager will value the foreign securities in good faith, considering such available information that the Manager deems relevant, under valuation procedures approved by the Trust's Board of Trustees. In addition, the Fund may use information from an external vendor or other sources to adjust the foreign market closing prices of foreign equity securities to reflect what the Fund believes to be the fair value of the securities as of the close of the NYSE. Fair valuation of affected foreign equity securities may occur frequently based on an assessment that events that occur on a fairly regular basis (such as U.S. market movements) are significant. 3. Investments in open-end investment companies, other than exchange-traded funds, are valued at their NAV at the end of each business day. 4. Debt securities purchased with original maturities of 60 days or less are stated at amortized cost, which approximates market value. Repurchase agreements are valued at cost. 5. Securities for which market quotations are not readily available or are considered unreliable, or whose values have been materially affected by events occurring after the close of their primary markets but before the pricing of the Fund, are valued in good faith at fair value, using methods determined by the Manager in consultation with the Fund's subadviser if applicable, under valuation procedures approved by the Trust's Board of Trustees. Valuing securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be. 25 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) B. FEDERAL TAXES - The Fund's policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its income to its shareholders. Therefore, no federal income tax provision is required. C. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the date the securities are purchased or sold (trade date). Gain or loss from sales of investment securities is computed on the identified cost basis. Dividend income, less foreign taxes, if any, is recorded on the ex-dividend date. If the ex-dividend date has passed, certain dividends from foreign securities are recorded upon notification. Interest income is recorded on the accrual basis. Discounts and premiums on short-term securities are amortized on a straight-line basis over the life of the respective securities. D. REPURCHASE AGREEMENTS - The Fund may enter into repurchase agreements with commercial banks or recognized security dealers. These agreements are collateralized by obligations issued or guaranteed as to both principal and interest by the U.S. government, its agencies, or its instrumentalities. Government-sponsored enterprises (GSEs), such as Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), are supported only by the credit of the issuing U.S. government agency, and are neither issued nor guaranteed by the U.S. government. Obligations pledged as 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. 26 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) E. FOREIGN CURRENCY TRANSLATIONS - The Fund's assets may be invested in the securities of foreign issuers and may be traded in foreign currency. Since the Fund's accounting records are maintained in U.S. dollars, foreign currency amounts are translated into U.S. dollars on the following basis: 1. Purchases and sales of securities, income, and expenses at the exchange rate obtained from an independent pricing service on the respective dates of such transactions. 2. Market value of securities, other assets, and liabilities at the exchange rate obtained from an independent pricing service on a daily basis. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Separately, net realized foreign currency gains/losses may arise from sales of foreign currency, currency gains/losses realized between the trade and settlement dates on security transactions, and from the difference between amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts received. At the Fund's tax year-end of May 31, 2005, net realized foreign currency gains/losses will be reclassified from accumulated net realized gain/loss to accumulated undistributed net investment income on the statement of assets and liabilities as such amounts are treated as ordinary income/loss for tax purposes. Net unrealized foreign currency exchange gains/losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rate. F. EXPENSES PAID INDIRECTLY - A portion of the brokerage commissions that the Fund pays may be reimbursed and used to reduce the 27 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) Fund's expenses. In addition, through arrangements with the Fund's custodian and other banks utilized by the Fund for cash management purposes, realized credits, if any, generated from cash balances in the Fund's bank accounts are used to reduce the Fund's expenses. For the six-month period ended November 30, 2004, brokerage commission reimbursements and custodian and other bank credits reduced the Fund's expenses by $26,000 and $1,000, respectively, resulting in a total reduction in Fund expenses of $27,000. G. INDEMNIFICATIONS - Under the Trust's organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In addition, in the normal course of business the Trust enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Trust's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust expects the risk of loss to be remote. H. USE OF ESTIMATES - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts in the financial statements. (2) LINES OF CREDIT - -------------------------------------------------------------------------------- The Fund participates with other USAA funds in two joint, short-term, revolving, committed loan agreements totaling $500 million: $400 million with USAA Capital Corporation (CAPCO), an affiliate of the Manager, and $100 million with Bank of America and State Street Bank and Trust Company (State Street), under which Bank of America and State Street have each committed $50 million. The purpose of the agreements is to meet temporary or emergency cash needs, including 28 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) redemption requests that might otherwise require the untimely disposition of securities. Subject to availability under its agreement with CAPCO, the Fund may borrow from CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to the rate at which CAPCO obtains funding in the capital markets, with no markup. Subject to availability under its agreement with Bank of America and State Street, the Fund may borrow from Bank of America and State Street, at the federal funds rate plus a 0.50% markup, an amount which, when added to outstanding borrowings under the CAPCO agreement, does not exceed 25% of the Fund's total assets. The USAA funds that are party to the loan agreements are assessed facility fees in aggregate by Bank of America and State Street in an annual amount equal to 0.09% of the $100 million loan agreement, whether used or not, and by CAPCO based on the funds' assessed proportionate share of CAPCO's operating expenses related to obtaining and maintaining CAPCO's funding programs in total (in no event to exceed 0.09% annually of the $400 million loan agreement). The facility fees are allocated among the funds based on their respective average net assets for the period. For the six-month period ended November 30, 2004, the Fund paid CAPCO facility fees of $2,000. The Fund had no borrowings under either of these agreements during the six-month period ended November 30, 2004. On November 17, 2004, the Trust's Board of Trustees approved, effective January 6, 2005, the termination of the $100 million line of credit with Bank of America and State Street and the renewal of the line of credit with CAPCO at a reduced amount of $300 million. (3) DISTRIBUTIONS - -------------------------------------------------------------------------------- The tax basis of distributions and accumulated undistributed net investment income will be determined based upon the Fund's tax year-end of May 31, 2005, in accordance with applicable tax law. 29 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (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, 2004, were $129,391,000 and $99,852,000, respectively. The cost of securities at November 30, 2004, for federal income tax purposes, was approximately the same as that reported in the financial statements. Gross unrealized appreciation and depreciation of investments as of November 30, 2004, were $122,158,000 and $5,973,000, respectively, resulting in net unrealized appreciation of $116,185,000. (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. 30 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) At November 30, 2004, the terms of open foreign currency contracts were as follows (in thousands):
FOREIGN CURRENCY CONTRACTS TO BUY - ----------------------------------------------------------------------------------------------------------- U.S. DOLLAR UNREALIZED EXCHANGE CONTRACTS TO VALUE AS OF IN EXCHANGE APPRECIATION DATE RECEIVE 11/30/2004 FOR U.S. DOLLAR (DEPRECIATION) - ----------------------------------------------------------------------------------------------------------- 12/03/2004 226 $ 174 $ 174 $ - Australian Dollar 12/02/2004 385 325 324 (1) Canadian Dollar 12/02/2004 479 419 419 - Swiss Franc 12/01/2004 435 578 577 (1) Euro 12/02/2004 2,553 3,390 3,385 (5) Euro 12/03/2004 318 423 422 (1) Euro 12/02/2004 1,580 2,991 3,012 21 Pound Sterling 12/02/2004 2,698 347 347 - Hong Kong Dollar 12/01/2004 11,898 116 115 (1) Japanese Yen 12/03/2004 325,894 3,166 3,162 (4) Japanese Yen 12/01/2004 2,553 775 775 - Polish Zloty 12/03/2004 1,103 350 349 (1) Polish Zloty 12/02/2004 589 187 187 - Polish Zloty 12/02/2004 5,687 847 844 (3) Swedish Krona 12/03/2004 579 354 354 - Singapore Dollar - ----------------------------------------------------------------------------------------------------------- $14,442 $14,446 $ 4 - -----------------------------------------------------------------------------------------------------------
31 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED)
FOREIGN CURRENCY CONTRACTS TO SELL - ----------------------------------------------------------------------------------------------------------- U.S. DOLLAR UNREALIZED EXCHANGE CONTRACTS TO VALUE AS OF IN EXCHANGE APPRECIATION DATE DELIVER 11/30/2004 FOR U.S. DOLLAR (DEPRECIATION) - ----------------------------------------------------------------------------------------------------------- 12/03/2004 1,322 $1,160 $1,158 $2 Swiss Franc 12/02/2004 49,776 484 483 1 Japanese Yen - ----------------------------------------------------------------------------------------------------------- $1,644 $1,641 $3 - -----------------------------------------------------------------------------------------------------------
(6) LENDING OF PORTFOLIO SECURITIES - -------------------------------------------------------------------------------- The Fund, through its securities-lending agent, Metropolitan West Securities LLC (MetWest), may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with cash collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Cash collateral is invested in high-quality short-term investments. The Fund and MetWest retain 80% and 20%, respectively, of the income earned from the investment of cash received as collateral. MetWest receives no other fees from the Fund for its services as securities-lending agent. Risks to the Fund in securities-lending transactions are that the borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower. For the six-month period ended November 30, 2004, the Fund received securities-lending income of $69,000, which is net of the 20% income retained by MetWest. As of November 30, 2004, the Fund loaned securities having a fair market value of approximately $27,289,000 and received cash collateral of $28,558,000 for the loans. The cash collateral was invested in short-term investments, as noted in the Fund's portfolio of investments. 32 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) (7) TRANSACTIONS WITH MANAGER - -------------------------------------------------------------------------------- A. MANAGEMENT FEES - The Manager provides investment management services to the Fund pursuant to an Investment Advisory Agreement. Under this agreement, the Manager is responsible for managing the business and affairs of the Fund, subject to the authority of and supervision by the Trust's Board of Trustees. The Fund is authorized to select (with approval of the Trust's Board of Trustees) one or more subadvisers to manage the actual day-to-day investment of the Fund's assets. The Manager monitors each subadviser's performance through quantitative and qualitative analysis, and periodically reports to the Trust's Board of Trustees as to whether each subadviser's agreement should be renewed, terminated, or modified. The Manager also is responsible for allocating assets to the subadvisers. The allocation for each subadviser can range from 0% to 100% of the Fund's assets, and the Manager can change the allocations without shareholder approval. The investment management fee for the Fund is composed of a base fee and a performance adjustment that increases or decreases the base fee depending upon the performance of the Fund relative to the performance of the Lipper 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. 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 33 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) period, which is then multiplied by a fraction, the numerator of which is the number of days in the month and the denominator of which is 365 (366 in leap years). The resulting amount is then added to (in the case of overperformance) or subtracted from (in the case of underperformance) the base fee, as referenced in the following chart:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS - ---------------------------------------------------------------------------------- +/-1.00% to 4.00% +/-0.04% +/-4.01% to 7.00% +/-0.05% +/-7.01% and greater +/-0.06%
(1)Based on the difference between average annual performance of the Fund and its relevant index, rounded to the nearest 0.01%. 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, 2004, the Fund incurred total management fees, paid or payable to the Manager, of $1,932,000, which included a performance adjustment of $76,000 that increased the base management fee of 0.75% by 0.03%. 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 International Fund, the USAA World Growth Fund, the USAA Life Investment Trust World Growth Fund, and the portion of the 34 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) 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, and 0.220% of the aggregate average net assets of the MFSIM Funds over $1 billion. Prior to August 1, 2004, the Manager (not the Fund) paid MFSIM a subadvisory fee in the annual amount of 0.335% of the first $350 million of the aggregate average net assets of the MFSIM Funds, plus 0.225% of the aggregate average net assets of the MFSIM Funds over $350 million. For the six-month period ended November 30, 2004, the Manager paid MFSIM subadvisory fees of $1,542,000 for the MFSIM Funds in total, of which $629,000 was based on the average net assets of the USAA International Fund. C. ADMINISTRATIVE AND SERVICING FEES - The Manager provides certain administrative and shareholder servicing functions for the Fund. For such services, the Manager receives a fee accrued daily and paid monthly at an annualized rate of 0.15% of the Fund's average net assets. For the six-month period ended November 30, 2004, the Fund incurred administrative and servicing fees, paid or payable to the Manager, of $371,000. D. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services, an affiliate of the Manager, provides transfer agent services to the Fund based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. For the six-month period ended November 30, 2004, the Fund incurred transfer agent's fees, paid or payable to USAA Transfer Agency Company, of $525,000. E. UNDERWRITING SERVICES - The Manager provides exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis. The Manager receives no commissions or fees for this service. 35 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) (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. 36 N O T E S ==========---------------------------------------------------------------------- to FINANCIAL Statements (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) (9) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Per share operating performance for a share outstanding throughout each period is as follows:
SIX-MONTH PERIOD ENDED NOVEMBER 30, YEAR ENDED MAY 31, ------------------------------------------------------------------------------------------ 2004 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------ Net asset value at beginning of period $ 20.45 $ 16.15 $ 17.63 $ 18.23 $ 22.28 $ 19.79 ------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .00(c) .15 .11 .14 .16 .11 Net realized and unrealized gain (loss) 2.04 4.30 (1.46) (.56) (3.01) 3.70 ------------------------------------------------------------------------------------------ Total from investment operations 2.04 4.45 (1.35) (.42) (2.85) 3.81 ------------------------------------------------------------------------------------------ Less distributions: From net investment income - (.10) (.13) (.18) (.11) (.18) From realized capital gains - (.05) - - (1.09) (1.14) ------------------------------------------------------------------------------------------ Total distributions - (.15) (.13) (.18) (1.20) (1.32) ------------------------------------------------------------------------------------------ Net asset value at end of period $ 22.49 $ 20.45 $ 16.15 $ 17.63 $ 18.23 $ 22.28 ========================================================================================== Total return (%)* 9.98 27.63 (7.63) (2.22) (13.84) 19.26 Net assets at end of period (000) $552,392 $479,477 $347,543 $382,459 $419,236 $533,305 Ratio of expenses to average net assets (%)** 1.25(a,b) 1.31(b) 1.42(b) 1.32(b) 1.14(b) 1.11(b) Ratio of net investment income to average net assets (%)** .10(a) .91 .79 .78 .84 .73 Portfolio turnover (%) 20.63 58.70 148.14 35.63 32.75 39.75 * 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, 2004, average net assets were $494,472,000. (a) Annualized. The ratio is not necessarily indicative of 12 months of operations. (b) Reflects total operating expenses of the Fund before reductions of any expenses paid indirectly. The Fund's expenses paid indirectly decreased the expense ratios as follows: (.01%) (.01%) (.01%) - - - (c) Represents less than $0.01 per share.
37 E X P E N S E ==============------------------------------------------------------------------ EXAMPLE USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) EXAMPLE - -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: direct costs, such as wire fees, redemption fees, and low balance fees; and indirect costs, including management fees, transfer agency fees, and other Fund operating expenses. This Example is intended to help you understand your indirect costs, also referred to as "ongoing costs," (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period of June 1, 2004, through November 30, 2004. ACTUAL EXPENSES - -------------------------------------------------------------------------------- The first line of the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested at the beginning of the period, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - -------------------------------------------------------------------------------- The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the 38 E X P E N S E ==============------------------------------------------------------------------ EXAMPLE (continued) USAA INTERNATIONAL FUND NOVEMBER 30, 2004 (UNAUDITED) Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any direct costs, such as wire fees, redemption fees, or low balance fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these direct costs were included, your costs would have been higher.
EXPENSES PAID BEGINNING ENDING DURING PERIOD* ACCOUNT VALUE ACCOUNT VALUE JUNE 1, 2004- JUNE 1, 2004 NOVEMBER 30, 2004 NOVEMBER 30, 2004 --------------------------------------------------------------- Actual $1,000.00 $1,099.80 $6.53 Hypothetical (5% return before expenses) 1,000.00 1,018.85 6.28
*Expenses are equal to the Fund's annualized expense ratio of 1.24%, 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). 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_____________________________________________________________________ _____________________________________________________________________ TRUSTEES Christopher W. Claus Barbara B. Dreeben Robert L. Mason, Ph.D. Michael F. Reimherr Laura T. Starks, Ph.D. Richard A. Zucker ADMINISTRATOR, USAA Investment Management Company INVESTMENT ADVISER, P.O. Box 659453 UNDERWRITER, San Antonio, Texas 78265-9825 AND DISTRIBUTOR TRANSFER AGENT USAA Shareholder Account Services 9800 Fredericksburg Road San Antonio, Texas 78288 CUSTODIAN State Street Bank and Trust Company P.O. Box 1713 Boston, Massachusetts 02105 INDEPENDENT Ernst & Young LLP REGISTERED PUBLIC 100 West Houston St., Suite 1900 ACCOUNTING FIRM San Antonio, Texas 78205 TELEPHONE Call toll free - Central time ASSISTANCE HOURS Monday - Friday, 7 a.m. to 10 p.m. Saturday, 8:30 a.m. to 5 p.m. Sunday, 10:30 a.m. to 7 p.m. FOR ADDITIONAL (800) 531-8181 INFORMATION ABOUT For account servicing, exchanges, MUTUAL FUNDS or redemptions (800) 531-8448 RECORDED MUTUAL 24-hour service (from any phone) FUND PRICE QUOTES (800) 531-8066 MUTUAL FUND (from touch-tone phones only) USAA TOUCHLINE For account balance, last transaction, fund prices, or to exchange or redeem fund shares (800) 531-8777 INTERNET ACCESS USAA.COM THROUGH OUR ONGOING EFFORTS TO REDUCE EXPENSES, YOUR REPORT MAILINGS ARE STREAMLINED. WE DEVELOP MAILING LISTS USING CRITERIA SUCH AS ADDRESS, MEMBER NUMBER, AND SURNAME TO SEND ONE REPORT TO EACH HOUSEHOLD INSTEAD OF SENDING A REPORT TO EVERY REGISTERED OWNER. THIS PRACTICE IS DESIGNED TO REDUCE DUPLICATE COPIES AND SAVE PAPER AND POSTAGE COSTS TO THE FUND. IF YOU PREFER NOT TO PARTICIPATE IN STREAMLINING AND WOULD LIKE TO CONTINUE RECEIVING ONE REPORT PER REGISTERED ACCOUNT OWNER, PLEASE CALL US AND WE WILL BEGIN YOUR INDIVIDUAL DELIVERY WITHIN 30 DAYS OF YOUR REQUEST. COPIES OF THE MANAGER'S PROXY VOTING POLICIES AND PROCEDURES, APPROVED BY THE TRUST'S BOARD OF TRUSTEES FOR USE IN VOTING PROXIES ON BEHALF OF THE FUND, ARE AVAILABLE WITHOUT CHARGE (I) BY CALLING (800) 531-8448; (II) AT USAA.COM; AND (III) ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, IS AVAILABLE (I) AT USAA.COM; AND (II) ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. AS A RESULT OF RULES RECENTLY ADOPTED BY THE SEC, THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THESE FORM N-QS ARE AVAILABLE (I) BY CALLING (800) 531-8448; (II) AT USAA.COM; AND (III) ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. THESE FORM N-QS ALSO MAY BE REVIEWED AND COPIED AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. [LOGO OF RECYCLED PAPER] Recycled Paper - -------------------------------------------------------------------------------- [LOGO OF USAA] 9800 Fredericksburg Road ------------- USAA(R) San Antonio, Texas 78288 PRSRT STD U.S. Postage P A I D USAA ------------- Receive this document and others electronically. Sign up at USAA.COM. - -------------------------------------------------------------------------------- [LOGO OF USAA] WE KNOW WHAT IT MEANS TO SERVE.(R) USAA ---------------------------------- INSURANCE o MEMBER SERVICES 23410-0105 (C)2005, USAA. All rights reserved. ITEM 2. CODE OF ETHICS. NOT APPLICABLE. This item must be disclosed only in annual reports. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. NOT APPLICABLE. This item must be disclosed only in annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. NOT APPLICABLE. This item must be disclosed only in annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not Applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Filed as part of the report to shareholders. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not Applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Corporate Governance Committee selects and nominates candidates for membership on the Board as independent directors. Currently, there is no procedure for shareholders to recommend candidates to serve on the Board. ITEM 10. CONTROLS AND PROCEDURES The principal executive officer and principal financial officer of USAA Investment Trust (Trust) have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. In October 2004, certain changes were made to the policies and procedures to address the reporting of audit and non-audit fees required in annual reports on Form N-CSR. None of these changes are relevant to this semi-annual report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. ITEM 11. EXHIBITS. (a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports. (a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. (a)(3). Not Applicable. (b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: USAA INVESTMENT TRUST By:* /s/ EILEEN M. SMILEY ----------------------------------------------------------- Signature and Title: Eileen M. Smiley, Assistant Secretary Date: 01/25/05 ------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By:* /s/ CHRISTOPHER W. CLAUS ---------------------------------------------------- Signature and Title: Christopher W. Claus/President Date: 01/25/05 ------------------------------ By:* /s/ DAVID HOLMES -------------------------------------------- Signature and Title: David Holmes/Treasurer Date: 01/25/05 ------------------------------ *Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 exh99cert113004it.txt USAA INVESTMENT TRUST-CERTIFICATION 11-30-2004 ITEM 11 (A)(2). EXHIBITS. CERTIFICATIONS I, CHRISTOPHER W. CLAUS, certify that: -------------------- 1. I have reviewed the reports on Form N-CSR for the period ending November 30, 2004 for each of the Funds of USAA INVESTMENT TRUST; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 01-25-2005 /s/ CHRISTOPHER W. CLAUS ----------------------------------- Christopher W. Claus President I, DAVID HOLMES, certify that: 1. I have reviewed the reports on Form N-CSR for the period ending November 30, 2004 for each of the Funds of USAA INVESTMENT TRUST; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based such evaluation; and (d) disclosed in the report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 01-25-2005 /s/ DAVID HOLMES ----------------------------------- David Holmes Treasurer EX-99.906 CERT 3 exh99906cert113004it.txt USAA INVESTMENT TRUST-CERTIFICATION 11-30-2004 SECTION 906 CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Name of Issuer: USAA INVESTMENT TRUST In connection with the Semiannual Report on Form N-CSR (Report) of the above-named issuer for the Funds for the period ended November 30, 2004, the undersigned hereby certifies, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Date: 01-25-2005 /s/ CHRISTOPHER W. CLAUS ----------- ------------------------- Christopher W. Claus President SECTION 906 CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Name of Issuer: USAA INVESTMENT TRUST In connection with the Semiannual Report on Form N-CSR (Report) of the above-named issuer for the Funds for the period ended November 30, 2004, the undersigned hereby certifies, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Date: 01-25-2005 /s/ DAVID HOLMES ---------- ----------------------- David Holmes Treasurer -----END PRIVACY-ENHANCED MESSAGE-----