As filed with the Securities and Exchange Commission on September 28, 1995.
1933 Act File No. 2-49560
1940 Act File No. 811-2429
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 38
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 26
USAA MUTUAL FUND, INC.
-------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
9800 Fredericksburg Rd., San Antonio, TX 78288
------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (210) 498-0600
Michael D. Wagner, Secretary
USAA MUTUAL FUND, INC.
9800 Fredericksburg Rd.
San Antonio, TX 78288-0227
---------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective under Rule 485
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
X on December 1, 1995 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has heretofore registered an indefinite number of
shares of the Aggressive Growth Fund, Growth Fund, Growth &
Income Fund, Income Stock Fund, Income Fund, Short-Term Bond
Fund, and Money Market Fund pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The Registrant filed its Rule
24f-2 notice for the fiscal year ended July 31, 1995 on September 21, 1995.
Exhibit Index on Page 202-203
Page 1 of 505
USAA MUTUAL FUND, INC.
CROSS REFERENCE SHEET
Part A
FORM N-1A ITEM NO. SECTION IN PROSPECTUS
1. Cover Page Same
2. Synopsis. Fees and Expenses
3. Condensed Financial
Information Financial Highlights
Performance Information
4. General Description
of Registrant Investment Objective and Policies
Description of Shares
5. Management of the Fund Management of the Company
Service Providers
6. Capital Stock and Other
Securities Dividends, Distributions and Taxes
Description of Shares
7. Purchase of Securities
Being Offered Purchase of Shares
Conditions of Purchase and Redemption
Exchanges
Other Services
Share Price Calculation
8. Redemption or Repurchase Redemption of Shares
Conditions of Purchase and Redemption
Exchanges
Other Services
9. Legal Proceedings Not Applicable
USAA MUTUAL FUND, INC.
CROSS REFERENCE SHEET
Part B
FORM N-1A ITEM NO. SECTION IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Same
11. Table of Contents Same
12. General Information and
History Not Applicable
13. Investment Objectives
and Policies Investment Policies
Investment Restrictions
Portfolio Transactions
14. Management of the
Registrant Directors and Officers of the Company
15. Control Persons and
Principal Holders
of Securities Directors and Officers of the Company
16. Investment Advisory and
Other Services Directors and Officers of the Company
The Company's Manager
General Information
17. Brokerage Allocation and
Other Practices Portfolio Transactions
18. Capital Stock and Other
Securities Further Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered Valuation of Securities
Additional Information Regarding
Redemption of Shares
Investment Plans
20. Tax Status Tax Considerations
21. Underwriters The Company's Manager
22. Calculation of Performance
Data Calculation of Performance Data
23. Financial Statements General Information
Part A
Prospectus for the Aggressive Growth Fund
is included herein
USAA AGGRESSIVE GROWTH FUND
December 1, 1995 PROSPECTUS
USAA Aggressive Growth Fund (the Fund) is one of seven
no-load mutual funds offered by USAA Mutual Fund, Inc.
(the Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's investment objective is appreciation of capital.
Investments are primarily in common stocks of companies that
have the prospect of rapidly growing earnings. Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 12.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is calculated.
Page 14.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before investing.
Shares of the USAA Aggressive Growth Fund are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 12
Redemption of Shares 14
Conditions of Purchase and Redemption 15
Exchanges 16
Other Services 17
Share Price Calculation 18
Dividends, Distributions and Taxes 19
Management of the Company 20
Description of Shares 21
Service Providers 22
Telephone Assistance Numbers 22
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- ----------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .47%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .26%
Custodian Fees .04%
All Other Expenses .09%
---
Total Other Expenses .39%
---
Total Fund Operating Expenses .86%
===
- ----------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
Example of Effect of Fund Expenses
- ---------------------------------------------------------------------
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 9
3 years - $ 27
5 years - $ 48
10 years - $106
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE ABOVE.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the ten-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 17.74 $ 20.40 $ 18.85 $ 20.60 $ 12.34
Net investment income (loss) (.05)(b) (.02)(b) .02 (.01)(b) .03
Net realized and
unrealized gain (loss) 8.35 (1.37) 3.67 (1.73) 8.33
Distributions from net
investment income - (.02) - (.01) (.10)
Distributions of realized
capital gains (1.55) (1.25) (2.14) - -
------ ------ ------ ------ ------
Net asset value at
end of period $ 24.49 $ 17.74 $ 20.40 $ 18.85 $ 20.60
====== ====== ====== ====== ======
Total return (%)* 49.98 (7.31) 21.32 (8.45) 68.22
Net assets at end of
period (000) $363,390 $248,953 $277,198 $234,967 $208,084
Ratio of expenses to
average net assets (%) .86 .83(a) .86 .82 .87
Ratio of net investment
income (loss) to average
net assets (%) (.28) (.10)(a) .10 (.05) .17
Portfolio turnover (%) 138.32 98.99 113.01 74.08 50.12
YEAR ENDED SEPTEMBER 30,
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 19.78 $ 17.23 $ 21.79 $ 17.29 $ 14.78
Net investment income (loss) .11 .14 .13 .11 .07
Net realized and
unrealized gain (loss) (4.74) 3.02 (2.71) 4.81 2.55
Distributions from net
investment income (.19) (.14) (.12) (.07) (.11)
Distributions of realized
capital gains (2.62) (.47) (1.86) (.35) -
------ ------ ------ ------ ------
Net asset value at
end of period $ 12.34 $ 19.78 $ 17.23 $ 21.79 $ 17.29
====== ====== ====== ====== ======
Total return (%)* (27.00) 19.20 (9.73) 28.92 17.78
Net assets at end of
period (000) $114,674 $157,467 $139,260 $149,826 $119,003
Ratio of expenses to
average net assets (%) .94 .91 1.00 .97 1.05
Ratio of net investment
income (loss) to average
net assets (%) .68 .78 .82 .54 .37
Portfolio turnover (%) 77.60 98.15 67.56 35.34 57.30
- --------------
* Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
Further information concerning the Fund's total return
is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is appreciation of capital.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES,
TECHNIQUES AND RISK FACTORS
The Manager will pursue this objective by investing the
Fund's assets primarily in common stocks, preferred
stocks and other securities convertible into common
stocks or securities which carry the right to buy common
stocks. The Fund will invest in companies that have the
prospect of rapidly growing earnings. These investments
may tend to be made in smaller, less recognized
companies, but may also include large, widely recognized
companies. Investments may also include foreign
securities. Up to 10% of the Fund's assets may be
invested in shares of U.S. Real Estate Investment Trusts
(REITs). The Fund's investments in REITs may subject the
Fund to many of the same risks associated with the direct
ownership of real estate. In addition, REITs are
dependent upon the capabilities of the REIT manager(s)
and have limited diversification.
While the portfolio will be broadly diversified, the
Fund is expected to be significantly more volatile than
the average equity mutual fund. Investing in smaller
less well-known companies, especially those that have a
narrow product line or are thinly traded, often involves
greater risk than investing in established companies with
proven track records.
Convertible securities are bonds, preferred stocks, and
other securities that pay interest or dividends and offer
the buyer the option of converting the security into
common stock. The value of convertible securities
depends partially on interest rate changes and the credit
quality of the issuer. Because a convertible security
affords an investor the opportunity, through its
conversion feature, to participate in the capital
appreciation of the underlying common stock, the value of
convertible securities may also change based on the price
of the common stock.
Up to 30% of the Fund's total assets may be invested in
foreign securities, including American Depositary
Receipts (ADRs), Global Depositary Receipts (GDRs), or
similar forms of ownership interest in securities of
foreign issuers deposited with a depositary. Foreign
holdings may include securities issued in emerging as
well as established markets. Foreign securities may
present greater risks than domestic securities. For a
discussion of risks associated with investments in
foreign issuers, see Special Risk Considerations.
As a temporary defensive measure, the Manager may
invest up to 100% of the Fund's assets in high quality,
short-term debt instruments.
The Fund's portfolio turnover rate will vary from year
to year depending on market conditions. It may exceed
100%. Because a high turnover rate increases transaction
costs and may increase taxable capital gains, the Manager
carefully weighs the anticipated benefits of trading.
Forward Currency Contracts - The Fund values its
securities and other assets in U.S. dollars. The Fund
may, however, hold securities denominated in foreign
currencies. As a result, the value of the securities will
be directly affected by changes in the exchange rate
between the dollar and foreign currencies. In managing
currency exposure, the Fund may enter into forward
currency contracts. A forward currency contract involves
an agreement to purchase or sell a specified currency at
a specified future date or over a specified time period
at a price set at the time of the contract.
The Fund may enter into forward currency contracts
under two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. Second, when
management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S.
dollar, it may enter into a forward contract to sell that
currency. The Fund may not hedge with respect to a
particular currency for an amount greater than the
aggregate market value (determined at the time of making
any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward currency contracts to protect the
value of the Fund's assets against a decline in the value
of a currency does not eliminate fluctuations in the
value of the Fund's underlying security holdings. In
addition, although the use of forward currency contracts
can minimize the risk of loss due to a decline in value
of the foreign currency, the use of such contracts will
tend to limit any potential gain resulting from an
increase in the relative value of the foreign currency to
the U.S. dollar. Under such circumstances, a fund that
has entered into forward currency contracts to hedge its
currency risks may be in a less favorable position than a
fund that had not entered into such contracts. The
projection of short-term currency market movements is
extremely difficult and successful execution of a short-
term hedging strategy is uncertain.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper that is subject to restrictions on
transfer, and other securities that may be resold
pursuant to Rule 144A under the Securities Act of 1933,
may be determined to be liquid in accordance with
guidelines established by the Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than
borrowings).
b. The Fund may not with respect to 75% of its total
assets, purchase the securities of any issuer
(except Government Securities, as such term is
defined in the 1940 Act) if, as a result, the Fund
would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have
more than 5% of the value of its total assets
invested in the securities of such issuer.
c. The Fund may not invest more than 25% of the value
of its total assets in any one industry. This
limitation does not apply to securities issued or
guaranteed by the U.S. Government or its corporate
instrumentalities.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities - Investing in foreign
securities presents certain risks not present in domestic
investments. Such risks may include currency exchange
rate fluctuations, foreign market illiquidity, increased
price volatility, exchange control regulations, different
accounting, reporting and disclosure requirements,
political or social instability, and difficulties in
obtaining judgments or effecting collections thereon.
Brokerage commissions and custodial services may be more
costly, and stock trade settlements may be more lengthy,
more costly and more difficult than in domestic markets.
These investments may be subject to foreign withholding
taxes which may reduce the effective rates of return.
Information which may impact the market value of
securities of a foreign issuer may not be available to
the Manager on a timely basis. The Manager will endeavor
to ascertain such information on as timely a basis as is
practicable, however, any impact on the net asset value
will be deemed to have occurred upon authentication by
the Manager.
A developing country can be considered to be a country
which is in the initial stages of its industrialization
cycle. Investments in developing countries involve
exposure to economic structures that are generally less
diverse and mature than in the United States, and to
political systems which may be less stable. Due to
illiquidity and lack of hedging instruments, it is
presently difficult or in some cases impossible to hedge
the currency risk in these markets. In the past, markets
of developing countries have been more volatile than the
markets of developed countries.
Political risk includes a greater potential for coup
d'etats, insurrections and expropriation by governmental
organizations. For example, the Fund may invest in
Eastern Europe and former states of the Soviet Union
(also known as the CIS or the Commonwealth of Independent
States). These countries were under communist systems
which had nationalized private industry. There is no
guarantee that nationalization may not occur again in
this region or others in which the Fund invests, in which
case the Fund may lose all or part of its investment in
that country's issuers.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price will be
the net asset value (NAV) per share next determined after the Fund
receives your request in proper form. If the Fund receives your
request prior to the close of the New York Stock Exchange on a day
on which the Exchange is open, your purchase price will be the NAV
per share determined for that day. If the Fund receives your
request after the time at which the NAV per share is calculated,
the purchase will be effective on the next business day. A check
drawn on a foreign bank will not be deemed received for the purchase
of shares until such time as the check has cleared and
the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50 monthly
electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Aggressive Growth Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when you apply for your
account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the best interest
of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the shareholders;
(3) impose a redemption charge of up to 1%of the net asset value
of shares redeemed if circumstances indicate a
charge is necessary for the protection of remaining
investors (for example, if excessive market-timing
share activity unfairly burdens long-term investors);
provided, however, this 1% charge will not be imposed
upon shareholders unless authorized by the Board of
Directors and adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed appropriate by the Manager
for purchases, redemptions, or changes in account information.
The section Additional Information Regarding Redemption of Shares in
the SAI contains information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to receive a
fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual
Reports to households having multiple accounts with the
same address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms, a copy of
the SAI, the most recent Annual Report and/or Semiannual Report, or
if you have any questions concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange.
Portfolio securities traded primarily on foreign
securities exchanges are generally valued at the closing
values of such securities on the exchange where primarily
traded. If no sale is reported, the latest bid price is
generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Directors.
Securities which cannot be valued by the methods set
forth above, and all other assets, are valued in good
faith at fair value using methods determined by the
Manager under the general supervision of the Board of Directors.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder specifies
otherwise. The share price will be the net asset value of
the Fund shares computed on the ex-dividend date. Any
income dividend or capital gain distributions paid by the
Fund will reduce the per share net asset value by the
amount of the dividend or distribution. An investor
should consider carefully the effects of purchasing
shares of the Fund shortly before any dividend or
distribution. Although in effect a return of capital,
these distributions are subject to taxes.
It is anticipated that the Fund will not pay any
significant dividends from net in-vestment income.
Potential investors should be in a financial position to
forego current income from investment in this Fund.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company (IMCO),
was organized in May 1970 and is an affiliate of United
Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $____
billion in total assets under management. The Manager's mailing
address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees are computed at one-half of one percent (.50%) of
the first $200,000,000 of ANA, with the fee reduced to
two-fifths of one percent (.40%) for that portion of ANA
in excess of $200,000,000 and not over $300,000,000, and
further reduced to one-third of one percent (.33%) for
that portion of ANA in excess of $300,000,000. The fees
paid to the Manager for the fiscal year ended July 31,
1995 were equal to .47% of ANA.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled .86%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Directors has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGERS
The following individuals are primarily responsible for
managing the Fund.
John K. Cabell, Jr. and Eric M. Efron, Associate
Portfolio Managers of Equity Investments since March of
1995, have managed the Fund since March 1995. Mr. Cabell
has 17 years investment management experience and has
worked six years as a Senior Securities Analyst in Equity
Investments for IMCO. His business experience during the
past five years also included the following positions:
Chief Economist for Retirement Systems of Alabama from
March 1991 to March 1994 and Senior Investment Analyst
for Seidler Amdec from October 1990 to February 1991.
Mr. Cabell earned the Chartered Financial Analyst (CFA)
designation in 1982 and is a member of the Association
for Investment Management and Research (AIMR) and the San
Antonio Financial Analysts Society, Inc. (SAFAS). He
holds an MA and BS from the University of Alabama. Mr.
Efron has 20 years investment management experience and
has worked four years as a Senior Securities Analyst in Equity
Investments for IMCO. Prior to joining IMCO, he held various
investment positions with C&S/Sovran Bank of Atlanta, Georgia
from September 1984 to December 1991. Mr. Efron earned the CFA
designation in 1983 and is also a member of the AIMR and SAFAS.
He holds an MBA from New York University, an MA from the
University of Michigan, and a BA from Oberlin College, Ohio.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those already
existing without approval of the shareholders of the Company.
Under provisions of the Bylaws of the Company, no
annual meeting of shareholders is required. Ordinarily,
no shareholder meeting will be held unless required by
the Investment Company Act of 1940. The Directors may
fill vacancies on the Board or appoint new Directors provided
that immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share (with
proportionate voting for fractional shares) irrespective
of the relative net asset value of the shares. For
matters affecting an individual fund, a separate vote of
the shareholders of that fund is required.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the Growth Fund
is included herein
USAA GROWTH FUND
December 1, 1995 PROSPECTUS
USAA Growth Fund (the Fund) is one of seven no-load
mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's primary investment objective is long-term growth of capital
with secondary objectives of regular income and conservation of principal.
Investments are primarily in common stocks. Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 11.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is calculated. Page 13.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before investing.
Shares of the USAA Growth Fund are not deposits or
other obligations of, or guaranteed by the USAA Federal
Savings Bank, are not insured by the FDIC or any other
Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 11
Redemption of Shares 13
Conditions of Purchase and Redemption 14
Exchanges 15
Other Services 16
Share Price Calculation 17
Dividends, Distributions and Taxes 18
Management of the Company 19
Service Providers 20
Description of Shares 20
Telephone Assistance Numbers 20
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- ----------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .75%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .21%
Custodian Fees .02%
All Other Expenses .06%
----
Total Other Expenses .29%
----
Total Fund Operating Expenses 1.04%
====
- --------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
Example of Effect of Fund Expenses
- ---------------------------------------------------------------------
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of the periods shown.
1 year - $ 11
3 years - $ 33
5 years - $ 57
10 years - $ 127
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the ten-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 17.63 $ 19.76 $ 17.49 $ 16.28 $ 13.25
Net investment income .26 .19 .19 .36 .46
Net realized and
unrealized gain (loss) 3.95 (.17) 2.67 1.26 3.03
Distributions from net
investment income (.27) (.16) (.32) (.41) (.46)
Distributions of realized
capital gains (2.51) (1.99) (.27) - -
------ ------ ------ ------ ------
Net asset value at
end of period $ 19.06 $ 17.63 $ 19.76 $ 17.49 $ 16.28
====== ====== ====== ====== ======
Total return (%)* 26.46 .31 16.77 10.17 27.12
Net assets at end of
period (000) $922,821 $618,685 $605,457 $432,125 $318,846
Ratio of expenses to
average net assets (%) 1.04 1.04(a) 1.07 1.07 1.11
Ratio of net investment
income to average net
assets (%) 1.63 1.33(a) 1.07 2.27 3.18
Portfolio turnover (%) 69.64 117.80 96.19 39.39 36.99
YEAR ENDED SEPTEMBER 30,
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 14.68 $ 11.68 $ 19.63 $ 15.94 $ 13.76
Net investment income .41 .41 .29 .38 .22
Net realized and
unrealized gain (loss) (1.38) 2.93 (3.99) 5.09 2.54
Distributions from net
investment income (.46) (.34) (.37) (.19) (.28)
Distributions of realized
capital gains - - (3.88) (1.59) (.30)
------ ------ ------ ------ ------
Net asset value at
end of period $ 13.25 $ 14.68 $ 11.68 $ 19.63 $ 15.94
====== ====== ====== ====== ======
Total return (%)* (6.78) 29.37 (18.28) 37.93 20.66
Net assets at end of
period (000) $223,051 $229,547 $208,129 $272,257 $173,775
Ratio of expenses to
average net assets (%) 1.18 1.19 1.22 1.09 1.09
Ratio of net investment
income to average net
assets (%) 2.95 3.02 2.40 2.14 1.37
Portfolio turnover (%) 55.77 95.28 109.22 124.26 109.65
- --------------
* Assumes reinvestment of all dividend income and
capital gain distributions during the period.
(a) Annualized. The ratio is not necessarily
indicative of 12 months of operations.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
Further information concerning the Fund's total return
is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's primary investment objective is long-term
growth of capital with secondary objectives of regular
income and conservation of principal.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing the
Fund's assets primarily in common stocks, preferred
stocks or in securities convertible into common stocks or
securities which carry the right to buy common stocks and
U.S. Real Estate Investment Trusts (REITs). The Fund
will limit its investments in convertible securities, at
the time of acquisition, to 5% of the value of its net
assets. The Fund's investments in REITs may subject the
Fund to many of the same risks associated with the direct
ownership of real estate. In addition, REITs are
dependent upon the capabilities of the REIT manager(s)
and have limited diversification.
A carefully selected portfolio of securities broadly
diversified among industries and companies will be
maintained. Generally, investments will be in
established companies with substantial capitalization.
The Manager may also invest in nonconvertible debt
securities and nonconvertible preferred stock when these
securities seem to offer a good prospect for appreciation.
The Manager will not seek to realize profits for the
Fund by anticipating short-term market movements and
intends to purchase securities for long-term capital appreciation.
Up to 30% of the Fund's total assets may be invested in
American Depositary Receipts (ADRs) or similar forms of
ownership interest in securities of foreign issuers
deposited with a depositary, and securities of foreign
issuers which are traded on U.S. securities exchanges or
in U.S. over-the-counter markets. Securities of foreign
issuers may present greater risks than securities of
domestic issuers. Such risks include currency exchange
rate fluctuations, increased price volatility, different
accounting, reporting and disclosure requirements, and
political or social instability. These investments may
be subject to foreign withholding taxes which may reduce
the effective rates of return.
As a temporary defensive measure, the Manager may
invest up to 100% of the Fund's assets in high quality,
short-term debt instruments.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper that is subject to restrictions on
transfer, and other securities that may be resold
pursuant to Rule 144A under the Securities Act of 1933,
may be determined to be liquid in accordance with
guidelines established by the Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than
borrowings).
b. The Fund may not with respect to 75% of its total
assets, purchase the securities of any issuer
(except Government Securities, as such term is
defined in the 1940 Act) if, as a result, the Fund
would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have
more than 5% of the value of its total assets
invested in the securities of such issuer.
c. The Fund may not invest more than 25% of the value
of its total assets in any one industry. This
limitation does not apply to securities issued or
guaranteed by the U.S. Government or its corporate
instrumentalities.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per
share determined for that day. If the Fund receives your
request after the time at which the NAV per share is calculated,
the purchase will be effective on the next business day. A
check drawn on a foreign bank will not be deemed received for
the purchase of shares until such time as the check has cleared
and the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50 monthly
electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted from
via a bank account, paycheck, income-producing investment or from
Electronic a USAA money market account. Sign up for these services when
Funds opening an account or call 1-800-531-8448 to add these
Transfer services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Growth Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the
purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances
indicate a charge is necessary for the protection of
remaining investors (for example, if excessive market-timing
share activity unfairly burdens long-term investors);
provided, however, this 1% charge will not be imposed
upon shareholders unless authorized by the Board of
Directors and adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed appropriate by the
Manager for purchases, redemptions, or changes in account
information. The section Additional Information Regarding
Redemption of Shares in the SAI contains information on acceptable
guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to receive a
fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual
Reports to households having multiple accounts with the
same address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a securities exchange are
valued at the last sales price on that exchange. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Directors.
Securities which cannot be valued by the methods set
forth above, and all other assets, are valued in good
faith at fair value using methods determined by the
Manager under the general supervision of the Board of
Directors.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder specifies
otherwise. The share price will be the net asset value of
the Fund shares computed on the ex-dividend date. Any
income dividend or capital gain distributions paid by the
Fund will reduce the per share net asset value by the
amount of the dividend or distribution. An investor
should consider carefully the effects of purchasing
shares of the Fund shortly before any dividend or
distribution. Although in effect a return of capital,
these distributions are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company (IMCO),
was organized in May 1970 and is an affiliate of United
Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $____
billion in total assets under management. The Manager's mailing
address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at three-fourths of one
percent (.75%) of ANA for the fiscal year ended July 31,
1995. This fee is higher than that charged to most other
mutual funds, but is comparable to fees charged to other
mutual funds with similar investment objectives and policies.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled 1.04%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Directors has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
David G. Parsons, Assistant Vice President of Equity
Investments since March of 1995, has managed the Fund
since January 1994. Mr. Parsons has 12 years investment
management experience working for IMCO where he has held
various positions in Equity Investments. Mr. Parsons
earned the Chartered Financial Analyst designation in
1986 and is a member of the Association for Investment
Management and Research and the San Antonio Financial
Analysts Society, Inc. He holds an MBA from the
University of Texas, an MA from Southern Illinois
University and a BA from Austin College, Texas.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those
already existing without approval of the shareholders of
the Company.
Under provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Ordinarily, no shareholder
meeting will be held unless required by the Investment
Company Act of 1940. The Directors may fill vacancies on
the Board or appoint new Directors provided that
immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share (with
proportionate voting for fractional shares) irrespective
of the relative net asset value of the shares. For
matters affecting an individual fund, a separate vote of
the shareholders of that fund is required.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
Part A
Prospectus for the Growth & Income Fund
is included herein
USAA GROWTH & INCOME FUND
December 1, 1995 PROSPECTUS
USAA Growth & Income Fund (the Fund) is one of seven no-
load mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's investment objective is capital growth and current income.
Investments are primarily in dividend paying
common stocks. Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 10.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 12.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before investing.
Shares of the USAA Growth & Income Fund are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 5
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 10
Redemption of Shares 12
Conditions of Purchase and Redemption 13
Exchanges 14
Other Services 15
Share Price Calculation 16
Dividends, Distributions and Taxes 17
Management of the Company 18
Service Providers 19
Description of Shares 19
Telephone Assistance Numbers 19
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- ---------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .60%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .25%
Custodian Fees .05%
All Other Expenses .11%
----
Total Other Expenses .41%
----
Total Fund Operating Expenses 1.01%
====
- ----------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
Example of Effect of Fund Expenses
- ---------------------------------------------------------------------
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of the periods shown.
1 year - $ 10
3 years - $ 32
5 years - $ 56
10 years - $ 124
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the three-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH FOUR-MONTH
YEAR ENDED PERIOD ENDED PERIOD ENDED
JULY 31, JULY 31, SEPTEMBER 30,
1995 1994 1993*
---- ---- ----
Net asset value at
beginning of period $ 10.36 $ 10.23 $ 10.00
Net investment income .24(b) .17(b) .03
Net realized and
unrealized gain 1.81 .16 .20
Distributions from net
investment income (.23) (.18) -
Distributions of realized
capital gains (.11) (.02) -
------- ------- -------
Net asset value at
end of period $ 12.07 $ 10.36 $ 10.23
======= ======= =======
Total return (%)** 20.30 3.28 2.30
Net assets at end of
period (000) $208,490 $134,622 $ 69,606
Ratio of expenses to
average net assets (%) 1.01 1.12(a) 1.63(a)
Ratio of net investment
income to average net
assets (%) 2.21 1.95(a) 1.87(a)
Portfolio turnover (%) 19.45 13.90 10.68
- --------------
* Fund commenced operations June 1, 1993.
** Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months
of operations.
(b) Calculated using weighted average shares.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
Further information concerning the Fund's total return
is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is capital growth and
current income.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing at
least 65% of the Fund's assets in dividend paying common
stocks or in securities convertible into common stocks or
securities which carry the right to buy common stocks and
U.S. Real Estate Investment Trusts (REITs). The Fund
will limit its investments in convertible securities, at
the time of acquisition, to 5% of the value of its net
assets. The Manager may also invest in nonconvertible
debt securities and nonconvertible preferred stock. The
Fund's investments in REITs may subject the Fund to many
of the same risks associated with the direct ownership of
real estate. In addition, REITs are dependent upon the
capabilities of the REIT manager(s) and have limited diversification.
Up to 30% of the Fund's total assets may be invested in
American Depositary Receipts (ADRs) or similar forms of
ownership interest in securities of foreign
issuers deposited with a depositary, and securities of
foreign issuers which are traded on U.S. securities
exchanges or in U.S. over-the-counter markets.
Securities of foreign issuers may present greater risks
than securities of domestic issuers. Such risks include
currency exchange rate fluctuations, increased price
volatility, different accounting, reporting and
disclosure requirements, and political or social instability.
These investments may be subject to foreign withholding taxes
which may reduce the effective rates of return.
As a temporary defensive measure, the Manager may
invest up to 100% of the Fund's assets in high quality,
short-term debt instruments.
The nonconvertible debt securities and the
nonconvertible preferred stock must be investment grade
at the time of purchase. Investment grade securities are
those issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, those rated at least Baa
by Moody's Investors Service (Moody's), BBB by Standard &
Poor's Ratings Group (S&P), BBB by Fitch Investors
Service (Fitch), or BBB by Duff and Phelps (D&P), or
those judged to be of equivalent quality by the Manager
if not rated. Securities rated in the lowest level of
investment grade have some speculative characteristics
since adverse economic conditions and changing
circumstances are more likely to have an adverse impact
on such securities. If the rating of a security is
downgraded below investment grade, the Manager will
determine whether it is in the best interest of the
Fund's shareholders to continue to hold such security in
the Fund's portfolio. For a more complete description of
debt ratings, see Appendix A to the SAI.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper that is subject to restrictions on
transfer, and other securities that may be resold
pursuant to Rule 144A under the Securities Act of 1933,
may be determined to be liquid in accordance with
guidelines established by the Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than
borrowings).
b. The Fund may not with respect to 75% of its total
assets, purchase the securities of any issuer
(except Government Securities, as such term is
defined in the 1940 Act) if, as a result, the Fund
would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have
more than 5% of the value of its total assets
invested in the securities of such issuer.
c. The Fund may not invest more than 25% of the value
of its total assets in any one industry. This
limitation does not apply to securities issued or
guaranteed by the U.S. Government or its corporate
instrumentalities.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which
the Exchange is open, your purchase price will be the NAV
per share determined for that day. If the Fund receives
your request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and
the "Invest by Mail" stub that accompanies
your fund's transaction confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Growth & Income Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the
shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances
indicate a charge is necessary for the protection of
remaining investors (for example, if excessive market-timing
share activity unfairly burdens long-term investors);
provided, however, this 1% charge will not be imposed
upon shareholders unless authorized by the Board of
Directors and adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Direct
Purchase Service, Automatic Purchase Plan, or
Directed Dividends investment plans, or
iii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual
Reports to households having multiple accounts with the same
address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a securities exchange are
valued at the last sales price on that exchange. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days
or less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Directors.
Securities which cannot be valued by the methods set
forth above, and all other assets, are valued in good
faith at fair value using methods determined by the
Manager under the general supervision of the Board of
Directors.
For additional information, see Valuation of
Securities in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
quarterly. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions
are automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-dividend
date. Any income dividend or capital gain distributions paid
by the Fund will reduce the per share net asset value by the
amount of the dividend or distribution. An investor
should consider carefully the effects of purchasing
shares of the Fund shortly before any dividend or
distribution. Although in effect a return of capital,
these distributions are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company (IMCO),
was organized in May 1970 and is an affiliate of United
Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $_____
billion in total assets under management. The
Manager's mailing address is 9800 Fredericksburg Rd., San
Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at three-fifths of one
percent (.60%) of ANA for the fiscal year ended July 31, 1995.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled 1.01%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Directors has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
R. David Ullom, Assistant Vice President of Equity
Investments since September of 1994, has managed the Fund
since its inception in June 1993. Mr. Ullom has 21 years
investment management experience and has worked for IMCO
ten years where he has held various positions in Equity
Investments. Mr. Ullom earned the Chartered Financial
Analyst designation in 1980 and is a member of the
Association for Investment Management and Research and
the San Antonio Financial Analysts Society, Inc. He
holds an MBA from Washington University, Missouri and a
BS from Oklahoma State University.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those already
existing without approval of the shareholders of the Company.
Under provisions of the Bylaws of the Company, no
annual meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the Investment
Company Act of 1940. The Directors may fill vacancies on
the Board or appoint new Directors provided that
immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share
(with proportionate voting for fractional shares)
irrespective of the relative net asset value of the
shares. For matters affecting an individual fund, a
separate vote of the shareholders of that fund is required.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
[THIS PAGE LEFT BLANK INTENTIONALLY]
Part A
Prospectus for the Income Stock Fund
is included herein
USAA INCOME STOCK FUND
December 1, 1995 PROSPECTUS
USAA Income Stock Fund (the Fund) is one of seven no-load
mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's investment objective is current income with the prospect of
increasing dividend income and the potential for capital appreciation.
Investments are primarily in common stocks of well-established,
large companies with above-average dividend yields. Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 11.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 13.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before
investing.
Shares of the USAA Income Stock Fund are not deposits
or other obligations of, or guaranteed by the USAA
Federal Savings Bank, are not insured by the FDIC or any
other Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 11
Redemption of Shares 13
Conditions of Purchase and Redemption 14
Exchanges 15
Other Services 16
Share Price Calculation 17
Dividends, Distributions and Taxes 18
Management of the Company 19
Service Providers 20
Description of Shares 20
Telephone Assistance Numbers 20
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- --------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .50%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .19%
Custodian Fees .02%
All Other Expenses .04%
---
Total Other Expenses .25%
---
Total Fund Operating Expenses .75%
===
- ---------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
Example of Effect of Fund Expenses
- ---------------------------------------------------------------------
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of the periods shown.
1 year - $ 8
3 years - $ 24
5 years - $ 42
10 years - $ 93
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the nine-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
---- ---- ---- ----
Net asset value at
beginning of period $ 13.50 $ 14.95 $ 13.42 $ 12.63
Net investment income .74 .60 .71 .71
Net realized and
unrealized gain (loss) 1.69 (1.12) 1.62 .78
Distributions from net
investment income (.75) (.74) (.71) (.70)
Distributions of realized
capital gains (.22) (.19) (.09) -
------ ------ ------ ------
Net asset value at
end of period $ 14.96 $ 13.50 $ 14.95 $ 13.42
====== ====== ====== ======
Total return (%)** 18.83 (3.53) 18.05 12.14
Net assets at end of
period (000) $1,408,371 $1,190,024 $1,043,686 $ 480,733
Ratio of expenses to
average net assets (%) .75 .73(a) .70 .74
Ratio of net investment
income to average net
assets (%) 5.34 5.25(a) 5.43 5.99
Portfolio turnover (%) 34.94 24.82 26.98 15.79
YEAR ENDED SEPTEMBER 30,
1991 1990 1989 1988 1987*
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 10.27 $ 12.32 $ 10.26 $ 10.74 $ 10.00
Net investment income .69 .61 .54 .45 .21
Net realized and
unrealized gain (loss) 2.34 (1.47) 2.01 (.49) .56
Distributions from net
investment income (.67) (.61) (.49) (.42) (.03)
Distributions of realized
capital gains - (.58) - (.02) -
------ ------ ------ ------ ------
Net asset value at
end of period $ 12.63 $ 10.27 $ 12.32 $ 10.26 $ 10.74
====== ====== ====== ====== ======
Total return (%)** 30.45 (7.73) 25.66 (0.10) 7.71
Net assets at end of
period (000) $179,339 $ 80,853 $ 55,296 $ 31,241 $ 21,652
Ratio of expenses to
average net assets (%) .83 1.00 1.00 1.00 1.00(a)
Ratio of net investment
income to average net
assets (%) 6.30 5.75 5.10 4.72 5.22(a)
Portfolio turnover (%) 26.65 49.16 72.30 27.56 7.22
- --------------
* Fund commenced operations May 4, 1987.
** Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months
of operations.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
Further information concerning the Fund's total return
is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is current income with
the prospect of increasing dividend income and the
potential for capital appreciation.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing the
Fund's assets primarily in common stocks of well-
established, large companies with above-average dividend
yields. Investments may include preferred stocks,
securities convertible into common stocks or securities
which carry the right to buy common stocks and U.S. Real
Estate Investment Trusts (REITs). The Fund's investments
in REITs may subject the Fund to many of the same risks
associated with the direct ownership of real estate. In
addition, REITs are dependent upon the capabilities of
the REIT manager(s) and have limited diversification.
Convertible securities are bonds, preferred stocks,
and other securities that pay interest or dividends and
offer the buyer the option of converting the security
into common stock. The value of convertible securities
depends partially on interest rate changes and the credit
quality of the issuer. Because a convertible security
affords an investor the opportunity, through its
conversion feature, to participate in the capital
appreciation of the underlying common stock, the value of
convertible securities may also change based on the price
of the common stock. The Fund may invest up to 35% of
its net assets in convertible preferred stocks and up to
5% of its net assets in convertible debt securities,
measured at the time a security is purchased.
The convertible securities in which the Fund will
invest may be rated below investment grade as determined
by Moody's Investors Service, Inc. (Moody's) or Standard
& Poor's Ratings Group (S&P), or unrated but judged by
the Manager to be of comparable quality. For a more
complete description of debt ratings, see Appendix A to
the SAI. Such securities are deemed to be speculative
and involve greater risk of default due to changes in
interest rates, economic conditions, and the issuer's
creditworthiness. As a result, their market prices tend
to fluctuate more than higher-quality securities. During
periods of general economic downturns or rising interest
rates, issuers of such securities may experience
financial difficulties which could affect their ability
to make timely interest and principal payments. The
Fund's ability to timely and accurately value and dispose
of lower quality securities may also be affected by the
absence or periodic discontinuance of liquid trading markets.
The Fund is structured to provide a portfolio with a
yield above the average of the S&P 500 Index and is
expected to pro-duce a growing stream of income over time.
The Manager may write covered call options with respect
to not more than 5% of the Fund's total assets. As a
temporary defensive measure, the Manager may invest up to
100% of Fund assets in high quality short-term debt
instruments, including repurchase agreements.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper that is subject to restrictions on
transfer, and other securities that may be resold
pursuant to Rule 144A under the Securities Act of 1933,
may be determined to be liquid in accordance with
guidelines established by the Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings).
b. The Fund may not with respect to 75% of its total
assets, purchase the securities of any issuer
(except Government Securities, as such term is
defined in the 1940 Act) if, as a result, the Fund
would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have
more than 5% of the value of its total assets
invested in the securities of such issuer.
c. The Fund may not invest more than 25% of the value
of its total assets in any one industry. This
limitation does not apply to securities issued or
guaranteed by the U.S. Government or its corporate
instrumentalities.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per share
determined for that day. If the Fund receives your request after
the time at which the NAV per share is calculated, the purchase
will be effective on the next business day. A check drawn on a
foreign bank will not be deemed received for the purchase
of shares until such time as the check has cleared and
the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000 or minimum $100 with a minimum $50
monthly electronic investment
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000 or minimum $100 with a minimum $50
monthly electronic investment
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest
by Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Income Stock Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances
indicate a charge is necessary for the protection of
remaining investors (for example, if excessive market-timing
share activity unfairly burdens long-term investors);
provided, however, this 1% charge will not be imposed
upon shareholders unless authorized by the Board of
Directors and adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. With this program you can
make initial investments as low as $100 and automatic
monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Direct
Purchase Service, Automatic Purchase Plan, or
Directed Dividends investment plans, or
iii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual Reports
to households having multiple accounts with the same
address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a securities exchange are
valued at the last sales price on that exchange. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Directors.
Securities which cannot be valued by the methods set
forth above, and all other assets, are valued in good
faith at fair value using methods determined by the
Manager under the general supervision of the Board of Directors.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
quarterly. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-
dividend date. Any income dividend or capital gain
distributions paid by the Fund will reduce the per share
net asset value by the amount of the dividend or
distribution. An investor should consider carefully the
effects of purchasing shares of the Fund shortly before
any dividend or distribution. Although in effect a
return of capital, these distributions are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company (IMCO),
was organized in May 1970 and is an affiliate of United
Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $_____
billion in total assets under management. The Manager's mailing
address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at one-half of one percent
(.50%) of ANA for the fiscal year ended July 31, 1995.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled .75%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Directors has adopted
procedures to ensure that any commissions paid to USAA
Brokerage Services are reasonable and fair.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
Harry W. Miller, Senior Vice President of Equity
Investments since October of 1987, has managed the Fund
since January 1989. Mr. Miller has 38 years of
experience in investment management and has worked for
IMCO 21 years. Mr. Miller earned the Chartered Financial
Analyst designation in 1968 and is a member of the
Association for Investment Management and Research and
the San Antonio Financial Analysts Society, Inc. He
holds an MBA from the University of Southern California
and a BS from Rider College, New Jersey.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those
already existing without approval of the shareholders of
the Company.
Under provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Ordinarily, no shareholder
meeting will be held unless required by the Investment
Company Act of 1940. The Directors may fill vacancies on
the Board or appoint new Directors provided that
immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share (with
proportionate voting for fractional shares) irrespective
of the relative net asset value of the shares. For
matters affecting an individual fund, a separate vote of
the shareholders of that fund is required.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
Part A
Prospectus for the Income Fund
is included herein
USAA INCOME FUND
December 1, 1995 PROSPECTUS
USAA Income Fund (the Fund) is one of seven no-load
mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's investment objective is maximum current income without
undue risk to principal. Investments are primarily in
income producing securities. Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 13.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 15.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before
investing.
Shares of the USAA Income Fund are not deposits or
other obligations of, or guaranteed by the USAA Federal
Savings Bank, are not insured by the FDIC or any other
Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 13
Redemption of Shares 15
Conditions of Purchase and Redemption 16
Exchanges 17
Other Services 18
Share Price Calculation 19
Dividends, Distributions and Taxes 20
Management of the Company 21
Service Providers 22
Description of Shares 22
Telephone Assistance Numbers 22
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- --------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .24%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .12%
Custodian Fees .02%
All Other Expenses .03%
---
Total Other Expenses .17%
---
Total Fund Operating Expenses .41%
===
- ---------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
Example of Effect of Fund Expenses
- ---------------------------------------------------------------------
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of the periods shown.
1 year - $ 4
3 years - $ 13
5 years - $ 23
10 years - $ 52
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the ten-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 11.67 $ 13.28 $ 12.76 $ 12.11 $ 11.03
Net investment income .84 .72 .90 .95 .98
Net realized and
unrealized gain (loss) .45 (1.30) .52 .64 1.09
Distributions from net
investment income (.85) (.78) (.90) (.93) (.99)
Distributions of realized
capital gains - (.25) - (.01) -
------- ------- ------- ------- -------
Net asset value at
end of period $ 12.11 $ 11.67 $ 13.28 $ 12.76 $ 12.11
======= ======= ======= ======= =======
Total return (%)* 11.64 (4.52) 11.58 13.72 19.64
Net assets at end of
period (000) $1,755,171 $1,718,934 $1,932,064 $1,359,721 $ 827,505
Ratio of expenses to
average net assets (%) .41 .41(a) .41 .42 .47
Ratio of net investment
income to average net
assets (%) 7.27 6.98(a) 7.00 7.78 8.61
Portfolio turnover (%) 30.86(b) 25.36(b) 44.82 21.78 15.45
YEAR ENDED SEPTEMBER 30,
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 11.50 $ 11.20 $ 10.89 $ 12.08 $ 11.46
Net investment income 1.03 1.05 1.06 1.07 1.15
Net realized and
unrealized gain (loss) (.44) .30 .57 (.96) .61
Distributions from net
investment income (1.03) (1.05) (1.06) (1.24) (1.12)
Distributions of realized
capital gains (.03) - (.26) (.06) (.02)
------- ------- ------- ------- ------
Net asset value at
end of period $ 11.03 $ 11.50 $ 11.20 $ 10.89 $ 12.08
====== ======= ======= ======= =======
Total return (%)* 5.28 12.78 15.87 .56 16.23
Net assets at end of
period (000) $ 434,705 $ 332,140 $ 284,639 $ 249,901 $ 213,608
Ratio of expenses to
average net assets (%) .53 .57 .61 .61 .65
Ratio of net investment
income to average net
assets (%) 9.19 9.36 9.57 9.13 9.69
Portfolio turnover (%) 12.07 13.79 10.66 35.90 37.58
- --------------
* Assumes reinvestment of all dividend income and
capital gain distributions during the period.
(a) Annualized. The ratio is not necessarily
indicative of 12 months of operations.
(b) The Fund may simultaneously purchase and sell the
same securities. These transactions can be high
in volume and are dissimilar to other trade
activity within the Fund. If these transactions
were excluded from the calculation, the portfolio
turnover rate would be as follows:
TEN-MONTH
YEAR ENDED PERIOD ENDED
JULY 31, 1995 JULY 31, 1994
------------- -------------
Portfolio turnover (%) 9.09 16.79
Purchases and sales of this type are as follows:
Purchases (000) $360,943 $155,322
Sales (000) $361,366 $155,497
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's total return or yield
in advertisements and reports to shareholders or
prospective investors. The Fund's performance may also
be compared to that of other mutual funds with a similar
investment objective and to stock or relevant indexes
that are referenced in Appendix B to the SAI. Standard
total return and yield results reported by the Fund do
not take into account recurring and nonrecurring charges
for optional services which only certain shareholders
elect and which involve nominal fees, such as the $10 fee
for a delivery of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
The Fund may advertise performance in terms of a 30-day
yield quotation. The yield quotation is computed by
dividing the net investment income per share earned
during the period by the offering price per share on the
last day of the period. This income is then annualized.
Further information concerning the Fund's yield and
total return is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective is maximum current income
without undue risk to principal.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing the
Fund's assets primarily in U.S. dollar-denominated
securities selected for their high yields relative to the
risk involved. Consistent with this policy, in periods
of rising interest rates, a greater portion of the
portfolio may be invested in securities the value of
which is believed to be less sensitive to interest rate changes.
The Fund's portfolio may consist of:
(1) Obligations of the U.S. Government, its agencies
and instrumentalities;
(2) Mortgage-backed securities;
(3) Corporate debt securities such as notes, bonds,
and commercial paper;
(4) U.S. bank obligations, including certificates of
deposit and banker's acceptances;
(5) Obligations of state and local governments and
their agencies and instrumentalities;
(6) Asset-backed securities;
(7) Master demand notes;
(8) Dollar-denominated instruments issued outside the
U.S. capital markets by foreign corporations and
financial institutions and by foreign branches of
U.S. corporations and financial institutions
(Eurodollar obligations);
(9) Dollar-denominated instruments issued by foreign
issuers in the U.S. capital markets (Yankee obligations);
(10) Other debt securities;
(11) Convertible securities;
(12) Common stocks;
(13) Preferred stocks.
As a temporary measure, the Manager may invest up to
100% of the Fund's assets in high quality, short-term
debt instruments.
The debt securities in the Fund must be investment
grade at the time of purchase. Investment grade
securities are those issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, those
rated at least Baa by Moody's Investors Service
(Moody's), BBB by Standard & Poor's Ratings Group (S&P),
BBB by Fitch Investors Service (Fitch), or BBB by Duff
and Phelps (D&P), or those judged to be of equivalent
quality by the Manager if not rated. Securities rated in
the lowest level of investment grade have some
speculative characteristics since adverse economic
conditions and changing circumstances are more likely to
have an adverse impact on such securities. If the rating
of a security is downgraded below investment grade, the
Manager will determine whether it is in the best interest
of the Fund's shareholders to continue to hold such
security in the Fund's portfolio. For a more complete
description of debt ratings, see Appendix A to the SAI.
Mortgage-Backed and Asset-Backed Securities - Mortgage-
backed securities include, but are not limited to,
securities issued by the Government National Mortgage
Association (Ginnie Mae), the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac). These securities
represent ownership in a pool of mortgage loans. They
differ from conventional bonds in that principal is paid
back to the investor as payments are made on the
underlying mortgages in the pool. Accordingly, the Fund
receives monthly scheduled payments of principal and
interest along with any unscheduled principal prepayments
on the underlying mortgages. Because these scheduled and
unscheduled principal payments must be reinvested at
prevailing interest rates, mortgage-backed securities do
not provide an effective means of locking in long-term
interest rates for the investor. Like other fixed income
securities, when interest rates rise, the value of a
mortgage-backed security generally will decline; however,
when interest rates are declining, the value of mortgage-
backed securities with prepayment features may not
increase as much as other fixed income securities.
Mortgage-backed securities also include collateralized
mortgage obligations (CMOs). CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage-
related securities. CMOs are divided into pieces
(tranches) with varying maturities and the cash flow from
the underlying mortgages are used to pay off each tranche
separately. CMOs are designed to provide investors with
more predictable maturities than regular mortgage
securities but such maturities can be difficult to
predict because of the effect of prepayments. Failure to
accurately predict prepayments can adversely affect the
Fund's return on these investments. CMOs may also be
less marketable than other securities.
Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments
generated by particular assets, such as credit card,
motor vehicle, or trade receivables. They may be pass-
through certificates, which have characteristics very
similar to mortgage-backed securities, discussed above.
They may also be in the form of asset-backed commercial
paper, which is issued by a special purpose entity,
organized solely to issue the commercial paper and to
purchase interests in the assets. The credit quality of
these securities depends primarily upon the quality of
the underlying assets and the level of credit support and
enhancement provided.
The weighted average life of such securities is likely
to be substantially shorter than their stated final
maturity as a result of scheduled principal payments and
unscheduled principal prepayments.
Master Demand Notes - The Fund may invest in variable
rate master demand notes (Master Demand Notes). Master
demand notes are obligations that permit the investment
of fluctuating amounts by the Fund, at varying rates of
interest using direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily
changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to
the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the
full amount of the note without penalty. Frequently,
such obligations are secured by letters of credit or
other credit support arrangements provided by banks.
Because master demand notes are direct lending
arrangements between the lender and borrower, these
instruments generally will not be traded, and there
generally is no secondary market for these notes,
although they are redeemable (and immediately
repayable by the borrower) at face value, plus accrued
interest, at any time. Therefore, where master demand
notes are not secured by bank letters of credit or other
credit support arrangements, the Fund's right to redeem
depends on the ability of the borrower to pay principal
and interest on demand. In connection with master demand
note arrangements, the Fund will continuously monitor the
earning power, cash flow, and other liquidity ratios of
the issuer, and the borrower's ability to pay principal
and interest on demand. Master demand notes, as such,
are not typically rated by credit rating agencies. The
Fund will invest in master demand notes only if the Board
of Directors or its delegate has determined that they are
of credit quality comparable to the debt securities in
which the Fund generally may invest.
Eurodollar and Yankee Obligations - While investments in
Eurodollar and Yankee obligations are intended to reduce
risk by providing further diversification, such
investments involve sovereign risk in addition to credit
and market risk. Sovereign risk includes local political
or economic developments, potential nationalization, and
withholding taxes on dividend or interest payments.
Issuers of Eurodollar and Yankee obligations may be
subject to different or less stringent accounting and
reporting requirements than similar U.S. issuers, thereby
rendering investment analysis more difficult. The Fund
may incur difficulties in obtaining judgements or
effecting collections thereon. Also, securities of
foreign companies may be less liquid or more volatile
than securities of U.S. companies.
In addition, the Fund may invest in Eurodollar and
Yankee obligations of investment-grade emerging market
countries. An emerging market country can be considered
to be a country which is in the initial stages of its
industrial cycle. Investments in emerging market countries
involve exposure to economic structures that are generally
less diverse and mature than in the United States, and to
political systems which may be less stable. In the past,
markets of emerging market countries have been more volatile
than the markets of developed countries.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates which are adjusted
periodically to market rates. These interest rate
adjustments can both raise and lower the income generated
by such securities. These changes will have the same effect
on the income earned by a Fund depending on the proportion of
such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller the
impact of interest rate fluctuations on the value of
these securities. The market value of variable rate
securities usually tends toward par (100% of face value)
at interest rate adjustment time.
Put Bonds - The Fund may invest in securities (including
securities with variable interest rates) which may be
redeemed or sold back (put) to the issuer of the security
or a third party at face value prior to stated maturity
(Put Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer.
When-Issued Securities - The Fund may invest in new
issues of securities offered on a when-issued basis; that
is, delivery and payment take place after the date of the
commitment to purchase, normally within 45 days. Both
price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the Fund.
On the settlement date, the Fund will meet its obligations
from then available cash, sale of segregated securities,
sale of other securities, or sale of the when-issued
securities themselves.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper and certain Put Bonds that are subject
to restrictions on transfer, and other securities that
may be resold pursuant to Rule 144A under the Securities
Act of 1933, may be determined to be liquid in accordance
with guidelines established by the Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings).
b. The Fund may not with respect to 75% of its total
assets, purchase the securities of any issuer
(except Government Securities, as such term is
defined in the 1940 Act) if, as a result, the Fund
would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have
more than 5% of the value of its total assets
invested in the securities of such issuer.
c. The Fund may not invest more than 25% of the value
of its total assets in any one industry. This
limitation does not apply to securities issued or
guaranteed by the U.S. Government or its corporate
instrumentalities.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per share
determined for that day. If the Fund receives your request
after the time at which the NAV per share is calculated, the
purchase will be effective on the next business day. A check
drawn on a foreign bank will not be deemed received for the
purchase of shares until such time as the check has cleared
and the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Income Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph
to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances indicate a
charge is necessary for the protection of remaining
investors (for example, if excessive market-timing
share activity unfairly burdens long-term investors);
provided, however, this 1% charge will not be imposed
upon shareholders unless authorized by the Board of
Directors and adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Direct
Purchase Service, Automatic Purchase Plan, or
Directed Dividends investment plans, or
iii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company intends
to consolidate mailings of Annual and Semiannual Reports
to households having multiple accounts with the same
address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a securities exchange are
valued at the last sales price on that exchange. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Directors.
Securities which cannot be valued by the methods set
forth above, and all other assets, are valued in good
faith at fair value using methods determined by the
Manager under the general supervision of the Board of
Directors.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
monthly. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-
dividend date. Any income dividend or capital gain
distributions paid by the Fund will reduce the per share
net asset value by the amount of the dividend or
distribution. An investor should consider carefully the
effects of purchasing shares of the Fund shortly before
any dividend or distribution. Although in effect a
return of capital, these distributions are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company (IMCO),
was organized in May 1970 and is an affiliate of United
Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $____
billion in total assets under management. The Manager's
mailing address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at twenty-four one hundredths
of one percent (.24%) of ANA for the fiscal year ended
July 31, 1995.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled .41%.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
John W. Saunders, Jr., Senior Vice President of Fixed
Income Investments since October of 1985, has managed the
Fund since October 1985. Mr. Saunders has 26 years
investment management experience and has worked for IMCO
26 years. Mr. Saunders earned the Chartered Financial
Analyst designation in 1976 and is a member of the
Association for Investment Management and Research and
the San Antonio Financial Analysts Society, Inc. He
holds a BS from Portland State University, Oregon.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those
already existing without approval of the shareholders of
the Company.
Under provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Ordinarily, no shareholder
meeting will be held unless required by the Investment
Company Act of 1940. The Directors may fill vacancies on
the Board or appoint new Directors provided that
immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share (with
proportionate voting for fractional shares) irrespective
of the relative net asset value of the shares. For
matters affecting an individual fund, a separate vote of
the shareholders of that fund is required.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the Short-Term Bond Fund
is included herein
USAA SHORT-TERM BOND FUND
December 1, 1995 PROSPECTUS
USAA Short-Term Bond Fund (the Fund) is one of seven no-
load mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's investment objective is high current income consistent with
preservation of principal. Investments are in a broad range of
investment grade debt securities. The Manager will
maintain a dollar-weighted average portfolio
maturity of 3 years or less. Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 12.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 14.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before investing.
Shares of the USAA Short-Term Bond Fund are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 5
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 12
Redemption of Shares 14
Conditions of Purchase and Redemption 16
Exchanges 17
Other Services 17
Share Price Calculation 18
Dividends, Distributions and Taxes 19
Management of the Company 20
Service Providers 21
Description of Shares 21
Telephone Assistance Numbers 21
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- --------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets (ANA))
- ----------------------------------------------------------------------------
Management Fees .00%
12b-1 Fees None
Other Expenses, net of reimbursements
Transfer Agent Fees** .22%
Custodian Fees .09%
All Other Expenses .19%
---
Total Other Expenses .50%
---
Total Fund Operating Expenses, net of reimbursements .50%
===
- -----------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
During the year, the Manager voluntarily limited the
annual expenses of the Fund to .50% of its ANA and
reimbursed the Fund for all expenses in excess of this
limitation. The Management Fees, Other Expenses, and
Total Fund Operating Expenses reflect all such expense
reimbursements by the Manager. Absent such
reimbursements, the amount of the Management Fees, Other
Expenses, and Total Fund Operating Expenses as a
percentage of ANA would have been .24%, .50%, and .74%,
respectively. The Manager has voluntarily agreed to
continue to limit the Fund's annual expenses until
December 1, 1996, to .50% of its ANA and will reimburse
the Fund for all expenses in excess of such limitation.
Example of Effect of Fund Expenses
- -----------------------------------------------------------------------
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of the periods shown.
1 year - $ 5
3 years - $ 16
5 years - $ 28
10 years - $ 63
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the three-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH FOUR-MONTH
YEAR ENDED PERIOD ENDED PERIOD ENDED
JULY 31, JULY 31, SEPTEMBER 30,
1995 1994 1993*
---- ---- ----
Net asset value at
beginning of period $ 9.74 $ 10.08 $ 10.00
Net investment income .61 .37 .14
Net realized and
unrealized gain (loss) .13 (.33) .08
Distributions from net
investment income (.61) (.37) (.14)
Distributions of realized
capital gains - (.01) -
------ ------ ------
Net asset value at
end of period $ 9.87 $ 9.74 $ 10.08
====== ====== ======
Total return (%)** 7.90 .39 2.19
Net assets at end of
period (000) $76,190 $48,228 $25,679
Ratio of expenses to
average net assets (%) .50(b) .50(a)(b) .50(a)(b)
Ratio of net investment
income to average net
assets (%) 6.34(b) 4.51(a)(b) 4.21(a)(b)
Portfolio turnover (%) 103.02 142.08 32.49
- --------------
* Fund commenced operations June 1, 1993.
** Assumes reinvestment of all dividend income and
capital gain distributions during the period.
(a) Annualized. The ratio is not necessarily
indicative of 12 months of operations.
(b) The information contained in this table is based
on actual expenses for the period, after giving
effect to reimbursements of expenses by the
Manager. Absent such reimbursements the Fund's
ratios would have been:
TEN-MONTH FOUR-MONTH
YEAR ENDED PERIOD ENDED PERIOD ENDED
JULY 31, JULY 31, SEPTEMBER 30,
1995 1994 1993*
---- ---- ----
Ratio of expenses to average
net assets (%) .74 .87(a) 1.57(a)
Ratio of net investment income
to average net assets (%) 6.10 4.14(a) 3.14(a)
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's total return or yield
in advertisements and reports to shareholders or
prospective investors. The Fund's performance may also
be compared to that of other mutual funds with a similar
investment objective and to stock or relevant indexes
that are referenced in Appendix B to the SAI. Standard
total return and yield results reported by the Fund do
not take into account recurring and nonrecurring charges
for optional services which only certain shareholders
elect and which involve nominal fees, such as the $10 fee
for a delivery of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
The Fund may advertise performance in terms of a 30-day
yield quotation. The yield quotation is computed by
dividing the net investment income per share earned
during the period by the offering price per share on the
last day of the period. This income is then annualized.
Further information concerning the Fund's yield and
total return is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is high current income
consistent with preservation of principal.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing the
Fund's assets primarily in U.S. dollar-denominated
investment grade debt securities. The Manager will
maintain a dollar-weighted average portfolio maturity of
3 years or less.
The Fund's portfolio may consist of:
(1) Obligations of the U.S. Government, its agencies
and instrumentalities, and repurchase agreements
collateralized by such obligations;
(2) Mortgage-backed securities;
(3) Corporate debt securities such as notes, bonds,
and commercial paper;
(4) U.S. bank or foreign bank obligations, including
certificates of deposit and banker's acceptances;
(5) Obligations of state and local governments and
their agencies and instrumentalities;
(6) Asset-backed securities;
(7) Master demand notes;
(8) Dollar-denominated instruments issued outside the
U.S. capital markets by foreign corporations and financial
institutions and by foreign branches of U.S.
corporations and financial institutions (Eurodollar obligations);
(9) Dollar-denominated instruments issued by foreign
issuers in the U.S. capital markets (Yankee obligations);
(10) Other debt securities.
The debt securities in the Fund must be investment
grade at the time of purchase. Investment grade
securities are those issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, those
rated at least Baa, P-3, or MIG 4/VMIG 4 by Moody's
Investors Service (Moody's), BBB, A-3, or SP-2 by
Standard & Poor's Ratings Group (S&P), BBB or F-3 by
Fitch Investors Service (Fitch), or BBB or Duff 3 by Duff
and Phelps (D&P); or those judged to be of equivalent
quality by the Manager if not rated.
Securities rated in the lowest level of investment
grade have some speculative characteristics since adverse
economic conditions and changing circumstances are more
likely to have an adverse impact on such securities. If
the rating of a security is downgraded below investment
grade, the Manager will determine whether it is in the
best interest of the Fund's shareholders to continue to
hold such security in the Fund's portfolio. For a more
complete description of debt ratings, see Appendix A to
the SAI.
In an effort to control fluctuations in market value,
the Manager will maintain a dollar-weighted average
portfolio maturity of the Fund of 3 years or less. The
Fund may hold individual securities with remaining
maturities longer than 3 years as long as the portfolio
dollar-weighted average maturity is 3 years or less.
There is no minimum weighted average maturity limitation.
In determining a security's maturity for purposes of
calculating the Fund's average maturity, estimates of the
expected time for its principal to be paid may be used.
This can be substantially shorter than its stated final
maturity. For a discussion of the method of calculating
the weighted average maturity of the Fund's portfolio,
see Investment Policies in the SAI.
Mortgage-Backed and Asset-Backed Securities - Mortgage-
backed securities include, but are not limited to,
securities issued by the Government National Mortgage
Association (Ginnie Mae), the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac). These securities
represent ownership in a pool of mortgage loans. They
differ from conventional bonds in that principal is paid
back to the investor as payments are made on the
underlying mortgages in the pool. Accordingly, the Fund
receives monthly scheduled payments of principal and
interest along with any unscheduled principal prepayments
on the underlying mortgages. Because these scheduled and
unscheduled principal payments must be reinvested at
prevailing interest rates, mortgage-backed securities do
not provide an effective means of locking in long-term
interest rates for the investor. Like other fixed income
securities, when interest rates rise, the value of a
mortgage-backed security generally will decline; however,
when interest rates are declining, the value of mortgage-
backed securities with prepayment features may not
increase as much as other fixed income securities.
Mortgage-backed securities also include collateralized
mortgage obligations (CMOs). CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage-
related securities. CMOs are divided into pieces
(tranches) with varying maturities and the cash flow from
the underlying mortgages are used to pay off each tranche
separately. CMOs are designed to provide investors with
more predictable maturities than regular mortgage securities
but such maturities can be difficult to predict because of
the effect of prepayments. Failure to accurately predict
prepayments can adversely affect the Fund's return on
these investments. CMOs may also be less marketable than
other securities.
Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments
generated by particular assets, such as credit card,
motor vehicle, or trade receivables. They may be pass-
through certificates, which have characteristics very
similar to mortgage-backed securities, discussed above.
They may also be in the form of asset-backed commercial
paper, which is issued by a special purpose entity,
organized solely to issue the commercial paper and to
purchase interests in the assets. The credit quality of
these securities depends primarily upon the quality of
the underlying assets and the level of credit support and
enhancement provided.
In determining the dollar-weighted average portfolio
maturity of the Fund, the maturities of mortgage-backed
securities and asset-backed securities are determined on
a "weighted average life" basis. The weighted average
life of such securities is likely to be substantially
shorter than their stated final maturity as a result of
scheduled principal payments and unscheduled principal
prepayments.
Master Demand Notes - The Fund may invest in variable
rate master demand notes (Master Demand Notes). Master
demand notes are obligations that permit the investment
of fluctuating amounts by the Fund, at varying rates of
interest using direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily
changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to
the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the
full amount of the note without penalty. Frequently, such
obligations are secured by letters of credit or other
credit support arrangements provided by banks. Because
master demand notes are direct lending arrangements
between the lender and borrower, these instruments
generally will not be traded, and there generally is no
secondary market for these notes, although they are
redeemable (and immediately repayable by the borrower) at
face value, plus accrued interest, at any time.
Therefore, where master demand notes are not secured by
bank letters of credit or other credit support
arrangements, the Fund's right to redeem depends on the
ability of the borrower to pay principal and interest on
demand. In connection with master demand note
arrangements, the Fund will continuously monitor the
earning power, cash flow, and other liquidity ratios of
the issuer, and the borrower's ability to pay principal
and interest on demand. Master demand notes, as such,
are not typically rated by credit rating agencies. The
Fund will invest in master demand notes only if the Board
of Directors or its delegate has determined that they are
of credit quality comparable to the debt securities in
which the Fund generally may invest.
Eurodollar and Yankee Obligations -
While investments in Eurodollar and Yankee obligations
are intended to reduce risk by providing further
diversification, such investments involve sovereign risk
in addition to credit and market risk. Sovereign risk
includes local political or economic developments,
potential nationalization, and withholding taxes on
dividend or interest payments. Issuers of Eurodollar and
Yankee obligations may be subject to different or less
stringent accounting and reporting requirements than
similar U.S. issuers, thereby rendering investment
analysis more difficult. The Fund may incur difficulties
in obtaining judgements or effecting collections thereon.
Also, securities of foreign companies may be less liquid
or more volatile than securities of U.S. companies.
In addition, the Fund may invest in Eurodollar and
Yankee obligations of investment-grade emerging market
countries. An emerging market country can be considered
to be a country which is in the initial stages of its
industrial cycle. Investments in emerging market
countries involve exposure to economic structures that
are generally less diverse and mature than in the United
States, and to political systems which may be less
stable. In the past, markets of emerging market
countries have been more volatile than the markets of
developed countries.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates which are adjusted
periodically to market rates. These interest rate
adjustments can both raise and lower the income generated
by such securities. These changes will have the same
effect on the income earned by a Fund depending on the
proportion of such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller the
impact of interest rate fluctuations on the value of
these securities. The market value of variable rate
securities usually tends toward par (100% of face value)
at interest rate adjustment time.
Put Bonds - The Fund may invest in securities (including
securities with variable interest rates) which may be
redeemed or sold back (put) to the issuer of the security
or a third party at face value prior to stated maturity
(Put Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer.
When-Issued Securities - Fund may invest in new issues of
securities offered on a when-issued basis; that is,
delivery and payment take place after the date of the
commitment to purchase, normally within 45 days. Both
price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper and certain Put Bonds that are subject
to restrictions on transfer, and other securities that
may be resold pursuant to Rule 144A under the Securities
Act of 1933, may be determined to be liquid in accordance
with guidelines established by the Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than
borrowings).
b. The Fund may not with respect to 75% of its total
assets, purchase the securities of any issuer
(except Government Securities, as such term is
defined in the 1940 Act) if, as a result, the Fund
would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have
more than 5% of the value of its total assets
invested in the securities of such issuer.
c. The Fund may not invest more than 25% of the value
of its total assets in any one industry. This
limitation does not apply to securities issued or
guaranteed by the U.S. Government or its corporate
instrumentalities.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per
share determined for that day. If the Fund receives your
request after the time at which the NAV per share is calculated,
the purchase will be effective on the next business day. A check
drawn on a foreign bank will not be deemed received for the purchase
of shares until such time as the check has cleared and
the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Short-Term Bond Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
Checkwriting * Checks can be issued for your Short-Term Bond Fund account.
To establish your checkwriting privilege (CWP),
complete the signature card which accompanies the
application form or Shareholder Services Guide, or
request and complete the signature card separately. A
one-time $5 checkwriting fee is charged to each account
by the Transfer Agent for the establishment of the
privilege. There is no charge for the use of checks nor
for subsequent reorders. This privilege is subject to
SSB's rules and regulations governing checking accounts.
Checks must be written for an amount of at least $250.
Checks written for less than $250 will be returned.
Checkwriting may not be used to close an account because
the value of the account changes daily as dividends are accrued.
When a check is presented to the Transfer Agent for
payment, a sufficient number of full and fractional
shares in the investor's account will be redeemed to
cover the amount of the check. Checks will be returned
if there are insufficient shares to cover the amount of
the check. Presently, there is a $15 processing fee
assessed against an account for any redemption check not
honored by a clearing or paying agent. A check paid
during the month will be returned to the shareholder by
separate mail. Checkwriting fees are subject to change
at any time. The Trust, the Transfer Agent and SSB each
reserve the right to change or suspend the checkwriting
privilege upon 30 days' written notice to participating
shareholders. See the SAI for further information.
You may request that the Transfer Agent stop payment on
a check. The Transfer Agent will use its best efforts to
execute stop payment instructions, but does not guarantee
that such efforts will be effective. A $10 charge will
be made for each stop payment requested by a shareholder.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances
indicate a charge is necessary for the protection
of remaining investors (for example, if excessive
market-timing share activity unfairly burdens
long-term investors); provided, however, this 1%
charge will not be imposed upon shareholders
unless authorized by the Board of Directors and
adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal taxes
on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Direct
Purchase Service, Automatic Purchase Plan, or
Directed Dividends investment plans, or
iii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a consolidated
statement for all of your mutual fund accounts, regardless of
account activity. The fourth quarter consolidated
statement will reflect all account activity for the prior
tax year. There will be a $10 fee charged for copies of
historical statements for other than the prior tax year
for any one account. You will receive the Fund's
financial statements with a summary of its investments
and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual
Reports to households having multiple accounts with the
same address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a securities exchange are
valued at the last sales price on that exchange. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Directors.
Securities which cannot be valued by the methods set
forth above, and all other assets, are valued in good
faith at fair value using methods determined by the
Manager under the general supervision of the Board of Directors.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and paid on the
last business day of the month. Daily dividends are
declared at the time the NAV per share is calculated.
All shares purchased shall begin accruing dividends on
the day following the effective date of the purchase and
shall receive dividends through the effective date of redemption.
When shareholders elect to receive monthly cash
dividends, funds accrued during each month will be sent
to the shareholder following the payment date.
Any net capital gain generally will be distributed at
least annually. Any capital gain distribution paid by
the Fund will reduce the per share net asset value by the
amount of the distribution. An investor should consider
carefully the effects of purchasing shares of the Fund
shortly before any distribution. Although in effect a
return of capital, these distributions are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company
(IMCO), was organized in May 1970 and is an affiliate of
United Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $___
billion in total assets under management. The Manager's
mailing address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees are computed at twenty-four one hundredths of one
percent (.24%) of ANA. For the fiscal year ended July
31, 1995, the Manager did not receive any management fees
because of the Manager's voluntary expense limitation.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the Manager
limited total operating expenses to .50% of the Fund's
ANA. The Manager reimbursed the Fund $136,499 for
expenses in excess of the limitation. The Manager has
voluntarily agreed to continue to limit the Fund's annual
expenses to .50% of its ANA until December 1, 1996, and
will reimburse the Fund for all expenses in excess of
such limitation.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
Paul H. Lundmark, Executive Director of Fixed Income
Investments since November of 1994, has managed the Fund
since its inception in June 1993. Mr. Lundmark has ten
years investment management experience and has worked for
IMCO four years. He has held various positions in Fixed
Income Investments since January 1992. From May 1990 to
July 1991 he was employed as an Associate with Raymond
James & Associates, Inc., St. Petersburg, Florida. Mr.
Lundmark earned the Chartered Financial Analyst
designation in 1989 and is a member of the Association
for Investment Management and Research and the San
Antonio Financial Analysts Society, Inc. He holds an MBA
and BSB from the University of Minnesota.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those
already existing without approval of the shareholders of
the Company.
Under provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Ordinarily, no shareholder
meeting will be held unless required by the Investment
Company Act of 1940. The Directors may fill vacancies on
the Board or appoint new Directors provided that
immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share (with
proportionate voting for fractional shares) irrespective
of the relative net asset value of the shares. For
matters affecting an individual fund, a separate vote of
the shareholders of that fund is required.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the Money Market Fund
is included herein
USAA MONEY MARKET FUND
December 1, 1995 PROSPECTUS
USAA Money Market Fund (the Fund) is one of seven no-load
mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT ARE THE INVESTMENT
OBJECTIVE AND POLICIES?
The Fund's investment objective is the highest income consistent with
preservation of capital and maintenance of liquidity. Investments are
in high quality debt instruments with maturities of 397 days or less.
The Manager will maintain a dollar-weighted average portfolio maturity
of 90 days or less and will endeavor to maintain a constant net asset
value per share of $1.00. Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 13.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 15.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Company and the Fund that you should know before
investing.
Shares of the USAA Money Market Fund are not deposits
or other obligations of, or guaranteed by the USAA
Federal Savings Bank, are not insured by the FDIC or any
other Government Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Company, dated
December 1, 1995, is available upon request and without
charge by writing to USAA MUTUAL FUND, INC., 9800
Fredericksburg Rd., San Antonio, TX 78288, or by calling
1-800-531-8181. The SAI has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE
THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 13
Redemption of Shares 15
Conditions of Purchase and Redemption 17
Exchanges 18
Other Services 18
Share Price Calculation 19
Dividends, Distributions and Taxes 20
Management of the Company 21
Service Providers 22
Description of Shares 22
Telephone Assistance Numbers 22
FEES AND EXPENSES
The following summary is provided to assist you in
understanding the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
- ---------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets (ANA))
- ---------------------------------------------------------------------------
Management Fees, net of reimbursements .23%
12b-1 Fees None
Other Expenses, net of reimbursements
Transfer Agent Fees** .12%
Custodian Fees .03%
All Other Expenses .07%
---
Total Other Expenses .22%
---
Total Fund Operating Expenses, net of reimbursements .45%
===
- -------------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 18.
During the year, the Manager voluntarily limited the
annual expenses of the Fund to .45% of its ANA and
reimbursed the Fund for all expenses in excess of this
limitation. The Management Fees, Other Expenses, and
Total Fund Operating Expenses reflect all such expense
reimbursements by the Manager. Absent such
reimbursements, the amount of the Management Fees, Other
Expenses, and Total Fund Operating Expenses as a
percentage of ANA would have been .24%, .22%, and .46%,
respectively. The Manager has voluntarily agreed to
continue to limit the Fund's annual expenses until
December 1, 1996, to .45% of its ANA and will reimburse
the Fund for all expenses in excess of such limitation.
Example of Effect of Fund Expenses
- -----------------------------------------------------------------------
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of the periods shown.
1 year - $ 5
3 years - $ 14
5 years - $ 25
10 years - $ 57
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the ten-
year period ended July 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
TEN-MONTH
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .05 .03 .03 .04 .07
Distributions from net
investment income (.05) (.03) (.03) (.04) (.07)
------ ------ ------ ------ ------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return (%)* 5.49 2.74 3.09 4.32 6.71
Net assets at end of
period (000) $1,540,055 $1,006,020 $813,784 $900,312 $984,404
Ratio of expenses to
average net assets (%) .45(b) .46(a) .48 .48 .54
Ratio of net investment
income to average net
assets (%) 5.44 3.28(a) 3.05 4.25 6.52
YEAR ENDED SEPTEMBER 30,
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .08 .09 .07 .06 .07
Distributions from net
investment income (.08) (.09) (.07) (.06) (.07)
------ ------ ------ ------ ------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return (%)* 8.12 8.87 6.94 6.12 6.92
Net assets at end of
period (000) $980,917 $882,694 $679,979 $507,195 $286,632
Ratio of expenses to
average net assets (%) .62 .68 .72 .79 .88
Ratio of net investment
income to average net
assets (%) 7.86 8.55 6.75 6.01 6.72
- --------------
* Assumes reinvestment of all dividend income and
capital gain distributions during the period.
(a) Annualized. The ratio is not necessarily
indicative of 12 months of operations.
(b) The Manager has voluntarily agreed to limit the
annual expenses of the Fund to .45% of its annual
average net assets. Without this limitation, the
Fund's ratio would have been .46%.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Company may quote the Fund's yield in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Yield results
reported by the Fund do not take into account recurring
and nonrecurring charges for optional services which only
certain shareholders elect and which involve nominal
fees, such as the $10 fee for a delivery of redemption
proceeds by wire transfer.
The Fund may advertise its yield and effective yield.
The yield of the Fund refers to the income generated by
an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income
is then annualized, that is, the amount of income generated
by the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a percentage
of the investment.
The effective yield is calculated similarly, but when
annualized, the income earned by an investment in the
Fund is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
Further information concerning the Fund's yield is
included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
*Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections. The
investor also enjoys conveniences, such as daily pricing,
liquidity, and in the case of the USAA Family of Funds,
no sales charge. The portfolio, because of its size, has
lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wished to invest in a
widely diversified common stock portfolio. The
shareholder could include the Aggressive Growth Fund,
Growth Fund, Growth & Income Fund, and Income Stock Fund
in such a portfolio. This portfolio would include stocks
of large and small companies, high-dividend stocks and
growth stocks. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is the highest income
consistent with preservation of capital and maintenance
of liquidity.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing the
Fund's assets in high quality U.S. dollar-denominated
debt securities of domestic and foreign issuers which
have been determined to present minimal credit risk. The
following categories of money market instruments are utilized:
(1) Obligations of the U.S. Government, its agencies
and instrumentalities, and repurchase agreements
collateralized by such obligations;
(2) Short-term corporate debt obligations such as
notes, bonds, and commercial paper;
(3) U.S. bank or foreign bank obligations including
certificates of deposit, banker's acceptances, and
time deposits;
(4) Obligations of state and local governments and
their agencies and instrumentalities;
(5) Municipal lease obligations
(6) Mortgage-backed securities;
(7) Asset-backed securities;
(8) Master demand notes;
(9) Dollar-denominated instruments issued outside the
U.S. capital markets by foreign corporations and
financial institutions and by foreign branches of
U.S. corporations and financial institutions
(Eurodollar obligations);
(10) Dollar-denominated instruments issued by foreign
issuers in the U.S. capital markets (Yankee obligations);
(11) Other short-term debt obligations.
The Fund will purchase only high quality securities
that qualify as "first tier" securities under the
Securities and Exchange Commission rules applicable to
money market mutual funds. In general, a first tier
security is defined as a security that is:
(1) issued or guaranteed by the U.S. Government or any
agency or instrumentality thereof;
(2) rated in the highest category for short-term
securities by at least two Nationally Recognized
Statistical Rating Organizations (NRSROs), or by
one NRSRO if the security is rated by only one
NRSRO;
(3) unrated but issued by an issuer that has other
comparable short-term debt obligations so rated; or
(4) unrated but determined to be of comparable quality
by the Manager.
If a security is downgraded after purchase, the Manager
will follow written procedures adopted by the Fund's
Board of Directors and a determination will be made as to
whether it is in the best interest of the Fund's
shareholders for the Fund to continue to hold the security.
Current NRSROs include Moody's Investors Service, Inc.,
Standard & Poor's Ratings Group, Fitch Investors Service,
Inc., Duff & Phelps Inc., Thompson BankWatch, Inc., and
IBCA Inc. For a description of debt ratings, see
Appendix A to the SAI.
Consistent with regulatory requirements, the Manager
will purchase securities with remaining maturities of 397
days or less and will maintain a dollar-weighted average
portfolio maturity of no more than 90 days. The Fund
will endeavor to maintain a constant net asset value of
$1.00 per share, although there is no assurance that it
will be able to do so. The shares are neither insured
nor guaranteed by the U.S. Government.
The Fund will also comply with diversification requirements
which are generally applicable to money market funds under
regulations of the Securities and Exchange Commission.
Generally, these requirements limit a money market fund's
investments in the securities of any issuer to no more than 5% of
the fund's assets, excluding securities issued or guaranteed by
the U.S. Government or its agencies and instrumentalities.
Municipal Lease Obligations - The Fund may invest in
municipal lease obligations and certificates of
participation in such obligations (collectively, lease
obligations). A lease obligation does not constitute a
general obligation of the municipality for which the
municipality's taxing power is pledged, although the
lease obligation is ordinarily backed by the
municipality's covenant to budget for the payments due
under the lease obligation.
Certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no
obligation to make lease obligation payments in future
years unless money is appropriated for such purpose on a
yearly basis. Although "non-appropriation" lease
obligations are secured by the leased property,
disposition of the property in the event of foreclosure
might prove difficult. In evaluating a potential
investment in such a lease obligation, the Manager will
consider: (1) the credit quality of the obligor, (2)
whether the underlying property is essential to a
governmental function, and (3) whether the lease
obligation contains covenants prohibiting the obligor
from substituting similar property if the obligor fails
to make appropriations for the lease obligation.
Mortgage-Backed and Asset-Backed Securities - Mortgage-
backed securities include, but are not limited to,
securities issued by the Government National Mortgage
Association (Ginnie Mae), the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac). These securities
represent ownership in a pool of mortgage loans. They
differ from conventional bonds in that principal is paid
back to the investor as payments are made on the
underlying mortgages in the pool. Accordingly, the Fund
receives monthly scheduled payments of principal and
interest along with any unscheduled principal prepayments
on the underlying mortgages. Because these scheduled and
unscheduled principal payments must be reinvested at
prevailing interest rates, mortgage-backed securities do
not provide an effective means of locking in long-term
interest rates for the investor. Like other fixed income
securities, when interest rates rise, the value of a
mortgage-backed security generally will decline; however,
when interest rates are declining, the value of mortgage-
backed securities with prepayment features may not
increase as much as other fixed income securities.
Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments
generated by particular assets, such as credit card,
motor vehicle, or trade receivables. They may be pass-
through certificates, which have characteristics very
similar to mortgage-backed securities, discussed above.
They may also be in the form of asset-backed commercial
paper, which is issued by a special purpose entity,
organized solely to issue the commercial paper and to
purchase interests in the assets. The credit quality of
these securities depends primarily upon the quality of
the underlying assets and the level of credit support and
enhancement provided.
Master Demand Notes - The Fund may invest in variable
rate master demand notes (Master Demand Notes). Master
demand notes are obligations that permit the investment
of fluctuating amounts by the Fund, at varying rates of
interest using direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily
changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to
the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to
the full amount of the note without penalty. Frequently,
such obligations are secured by letters of credit or other
credit support arrangements provided by banks. Because master
demand notes are direct lending arrangements between the
lender and borrower, these instruments generally will not
be traded, and there generally is no secondary market for
these notes, although they are redeemable (and
immediately repayable by the borrower) at face value,
plus accrued interest, at any time. Therefore, where
master demand notes are not secured by bank letters of
credit or other credit support arrangements, the Fund's
right to redeem depends on the ability of the borrower to
pay principal and interest on demand. In connection with
master demand note arrangements, the Fund will
continuously monitor the earning power, cash flow, and
other liquidity ratios of the issuer, and the borrower's
ability to pay principal and interest on demand. Master
demand notes, as such, are not typically rated by credit
rating agencies. The Fund will invest in master demand
notes only if the Board of Directors or its delegate has
determined that they are of credit quality comparable to
the debt securities in which the Fund generally may
invest.
Eurodollar and Yankee Obligations - While investments in
Eurodollar and Yankee obligations are intended to reduce
risk by providing further diversification, such
investments involve sovereign risk in addition to credit
and market risk. Sovereign risk includes local political
or economic developments, potential nationalization, and
withholding taxes on dividend or interest payments.
Issuers of Eurodollar and Yankee obligations may be
subject to different or less stringent accounting and
reporting requirements than similar U.S. issuers, thereby
rendering investment analysis more difficult. The Fund
may incur difficulties in obtaining judgements or
effecting collections thereon. Also, securities of
foreign companies may be less liquid or more volatile
than securities of U.S. companies.
In addition, the Fund may invest in Eurodollar and
Yankee obligations of investment-grade emerging market
countries. An emerging market country can be considered
to be a country which is in the initial stages of its
industrial cycle. Investments in emerging market
countries involve exposure to economic structures that
are generally less diverse and mature than in the United
States, and to political systems which may be less
stable. In the past, markets of emerging market
countries have been more volatile than the markets of
developed countries.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell the security back to the
seller (a commercial bank or recognized securities
dealer) at an agreed upon price on an agreed upon date,
usually not more than seven days from the date of
purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased
security. The obligation of the seller to pay the agreed
upon price is in effect secured by the value of the
underlying security. In these transactions, the
securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase
obligation and will be held by the Fund's custodian until
repurchased. If the seller defaults and the value of the
underlying security declines, the Fund may incur a loss
and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates which are adjusted
periodically to market rates. These interest rate
adjustments can both raise and lower the income generated
by such securities. These changes will have the same
effect on the income earned by a Fund depending on the
proportion of such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller the
impact of interest rate fluctuations on the value of
these securities. The market value of variable rate
securities usually tends toward par (100% of face value)
at interest rate adjustment time.
Put Bonds - The Fund may invest in securities (including
securities with variable interest rates) which may be
redeemed or sold back (put) to the issuer of the security
or a third party at face value prior to stated maturity
(Put Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer.
When-Issued Securities - The Fund may invest in new
issues of securities offered on a when-issued basis; that
is, delivery and payment take place after the date of the
commitment to purchase, normally within 45 days. Both
price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between the purchase and
settlement. Such securities can be sold before
settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Liquidity - The Fund may not invest more than 10% of the
value of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
Commercial paper and certain Put Bonds that are subject
to restrictions on transfer, securities that may be
resold pursuant to Rule 144A under the Securities Act of
1933, and lease obligations may be determined to be
liquid in accordance with guidelines established by the
Board of Directors.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings).
b. The Fund may not invest more than 25% of the value
of its total assets in any one industry. Banks
are not considered a single industry for purposes
of this policy, nor shall this limitation apply to
securities issued or guaranteed by the U.S.
Government or its corporate instrumentalities.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which
the Exchange is open, your purchase price will be the NAV
per share determined for that day. If the Fund receives
your request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000 or minimum $100 with a minimum $50
monthly electronic investment
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000 or minimum $100 with a minimum $50
monthly electronic investment
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50 - (Except transfers from brokerage
accounts)
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Money Market Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343 for more
USAA AMA information.
Methods of Payment:
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed) redemptions
via EFT can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s) will be
Redemption mailed to the address of record.
This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15-day waiting period before a
check redemption can be processed following a telephone
address change.
Checkwriting * Checks can be issued for your Money Market Fund account.
To establish your checkwriting privilege (CWP),
complete the signature card which accompanies the
application form or Shareholder Services Guide, or
request and complete the signature card separately. A
one-time $5 checkwriting fee is charged to each account
by the Transfer Agent for the establishment of the
privilege. There is no charge for the use of checks nor
for subsequent reorders. This privilege is subject to
SSB's rules and regulations governing checking accounts.
Checks must be written for an amount of at least $250.
Checks written for less than $250 will be returned.
Checkwriting may not be used to close an account because
the value of the account changes daily as dividends are accrued.
When a check is presented to the Transfer Agent for
payment, a sufficient number of full and fractional
shares in the investor's account will be redeemed to
cover the amount of the check. Checks will be returned
if there are insufficient shares to cover the amount of
the check. Presently, there is a $15 processing fee
assessed against an account for any redemption check not
honored by a clearing or paying agent. A check paid
during the month will be returned to the shareholder by
separate mail. Checkwriting fees are subject to change
at any time. The Trust, the Transfer Agent and SSB each
reserve the right to change or suspend the checkwriting
privilege upon 30 days' written notice to participating
shareholders. See the SAI for further information.
You may request that the Transfer Agent stop payment on
a check. The Transfer Agent will use its best efforts to
execute stop payment instructions, but does not guarantee
that such efforts will be effective. A $10 charge will
be made for each stop payment requested by a shareholder.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 500 shares of the
Fund, subject to certain limitations described in
Additional Information Regarding Redemption of Shares in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances
indicate a charge is necessary for the protection
of remaining investors (for example, if excessive
market-timing share activity unfairly burdens
long-term investors); provided, however, this 1%
charge will not be imposed upon shareholders
unless authorized by the Board of Directors and
adequate notice has been given to shareholders;
(4) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. With this program you can
make initial investments as low as $100 and automatic
monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation for purchases or
redemptions by check and exchanges. If your account had
activity other than reinvested dividends, such as wire
purchases or redemptions or purchases under the
InvesTronic(registered trademark), Direct Purchase
Service, Automatic Purchase Plan or Directed Dividends
investment plans, you will receive a monthly statement that
will reflect quarter-to-date account activity.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual
Reports to households having multiple accounts with the
same address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Securities are stated at amortized cost
which approximates market value.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and paid on the
last business day of the month. Daily dividends are
declared at the time the NAV per share is calculated.
All shares purchased shall begin accruing dividends on
the day following the effective date of the purchase and
shall receive dividends through the effective date of redemption.
When shareholders elect to receive monthly cash
dividends, funds accrued during each month will be sent
to the shareholder following the payment date.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY
The business affairs of the Company are subject to the
supervision of the Board of Directors.
The Manager, USAA Investment Management Company
(IMCO), was organized in May 1970 and is an affiliate of
United Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $___
billion in total assets under management. The Manager's
mailing address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted to
engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Company, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of Directors.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees are computed at twenty-four one hundredths of one
percent (.24%) of ANA. For the fiscal year ended July
31, 1995, the fees paid to the Manager, net of
reimbursement, were .23% of ANA.
OPERATING EXPENSES
For the fiscal year ended July 31, 1995, the Manager
limited total operating expenses to .45% of the Fund's
ANA. The Manager reimbursed the Fund $154,109 for
expenses in excess of the limitation. The Manager has
voluntarily agreed to continue to limit the Fund's annual
expenses until December 1, 1996, to .45% of its ANA and
will reimburse the Fund for all expenses in excess of the
limitation.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
J. Eric Thorderson, Executive Director of Fixed Income
Investments since March of 1994, has managed the Fund
since March 1994. Mr. Thorderson has eight years
investment management experience and has worked for IMCO
five years where he has held various positions in Fixed
Income Investments. Mr. Thorderson earned the Chartered
Financial Analyst designation in 1989 and is a member of
the Association for Investment Management and Research
and the San Antonio Financial Analysts Society, Inc. He
holds an MBA from the University of Illinois and a BA
from Wayne State University of Michigan.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those
already existing without approval of the shareholders of
the Company.
Under provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Ordinarily, no shareholder
meeting will be held unless required by the Investment
Company Act of 1940. The Directors may fill vacancies on
the Board or appoint new Directors provided that
immediately after such action at least two-thirds of the
Directors have been elected by shareholders.
Shareholders are entitled to one vote per share (with
proportionate voting for fractional shares) irrespective
of the relative net asset value of the shares. For
matters affecting an individual fund, a separate vote of
the shareholders of that fund is required.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part B
Statement of Additional Information for the
Aggressive Growth Fund, Growth Fund, Growth & Income Fund,
Income Stock Fund, Income Fund, Short-Term Bond Fund,
and Money Market Fund
is included herein
(LOGO OF USAA STATEMENT OF
THE USAA MUTUAL ADDITIONAL INFORMATION
EAGLE HERE) FUND, INC. December 1, 1995
- ------------------------------------------------------------------------
USAA MUTUAL FUND, INC.
USAA MUTUAL FUND, INC. (the Company) is a registered investment
company offering shares of seven no-load mutual funds which are
described in this Statement of Additional Information (SAI): the
Aggressive Growth Fund, Growth Fund, Growth & Income Fund, Income
Stock Fund, Income Fund, Short-Term Bond Fund, and Money Market
Fund (collectively, the Funds). Each Fund is classified as a
diversified investment company and has its own investment
objective designed to meet different investment goals.
A Prospectus for the Funds dated December 1, 1995, which provides
the basic information you should know before investing in the
Funds, may be obtained without charge upon written request to
USAA Mutual Fund, Inc., 9800 Fredericksburg Rd., San Antonio, TX
78288, or by calling toll free 1-800-531-8181. This SAI is not a
Prospectus and contains information in addition to and more
detailed than that set forth in each Fund's Prospectus. It is
intended to provide you with additional information regarding the
activities and operations of the Company and the Funds, and
should be read in conjunction with each Fund's Prospectus.
- -------------------------------------------------------------------------
TABLE OF CONTENTS
Page
2 Valuation of Securities
3 Additional Information Regarding Redemption of Shares
4 Investment Plans
5 Investment Policies
9 Investment Restrictions
10 Portfolio Transactions
12 Further Description of Shares
13 Tax Considerations
14 Directors and Officers of the Company
17 The Company's Manager
18 General Information
19 Calculation of Performance Data
20 Appendix A - Long-Term and Short-Term Debt Ratings
24 Appendix B - Comparison of Portfolio Performance
27 Appendix C - Dollar-Cost Averaging
VALUATION OF SECURITIES
Shares of each Fund are offered on a continuing best efforts
basis through USAA Investment Management Company (IMCO or the
Manager). The offering price for shares of each Fund is equal to
the current net asset value (NAV) per share. The NAV per share
of each Fund is calculated by adding the value of all its
portfolio securities and other assets, deducting its liabilities,
and dividing by the number of shares outstanding.
A Fund's NAV per share is calculated each day, Monday
through Friday, except days on which the New York Stock Exchange
(NYSE) is closed. The NYSE is currently scheduled to be closed
on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas, and on
the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
The value of the securities of the Aggressive Growth,
Growth, Growth & Income, Income Stock, Income, and Short-Term
Bond Funds is determined by one or more of the following methods:
(1) Portfolio securities, except as otherwise noted, traded
primarily on a domestic securities exchange are valued at
the last sales price on that exchange. Portfolio securities
traded primarily on foreign securities exchanges are
generally valued at the closing values of such securities on
the exchange where primarily traded. If no sale is
reported, the latest bid price is generally used depending
upon local custom or regulation.
(2) Over-the-counter securities are priced at the last sales
price or, if not available, at the average of the bid and
asked prices at the time trading closes on the NYSE.
(3) Debt securities purchased with maturities of 60 days or less
are stated at amortized cost which approximates market
value. Repurchase agreements are valued at cost.
(4) Other debt securities may be valued each business day by a
pricing service (the Service) approved by the Board of
Directors. The Service uses the mean between quoted bid and
asked prices or the last sales price to price securities
when, in the Service's judgment, these prices are readily
available and are representative of the securities' market
values. For many securities, such prices are not readily
available. The Service generally prices those securities
based on methods which include consideration of yields or
prices of securities of comparable quality, coupon, maturity
and type, indications as to values from dealers in
securities, and general market conditions.
(5) Securities which cannot be valued by the methods set forth
above, and all other assets, are valued in good faith at
fair value using methods determined by the Manager under the
general supervision of the Board of Directors.
Securities trading in foreign markets may not take place on all
days on which the NYSE is open. Further, trading takes place in
various foreign markets on days on which the NYSE is not open.
The calculation of a Fund's net asset value therefore may not
take place contemporaneously with the determination of the prices
of securities held by a Fund. Events affecting the values of
portfolio securities that occur between the time their prices are
determined and the close of normal trading on the NYSE on a day a
Fund's NAV is calculated will not be reflected in a Fund's NAV,
unless the Manager determines that the particular event would
materially affect NAV. In such a case, the Fund's Manager, under
the supervision of the Board of Directors, will use all relevant
available information to determine a fair value for the affected
portfolio securities.
The value of the Money Market Fund's securities is stated at
amortized cost which approximates market value. This involves
valuing a security at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates. While this method
provides certainty in valuation, it may result in periods during
which the value of an instrument, as determined by amortized
cost, is higher or lower than the price the Fund would receive
upon the sale of the instrument.
The valuation of the Money Market Fund's portfolio
instruments based upon their amortized cost is subject to the
Fund's adherence to certain procedures and conditions.
Consistent with regulatory requirements, the Manager will
purchase securities with remaining maturities of 397 days or less
and will maintain a dollar-weighted average portfolio maturity of
no more than 90 days. The Manager will invest only in securities
that have been determined to present minimal credit risk and that
satisfy the quality and diversification requirements of
applicable rules and regulations of the Securities and Exchange
Commission (SEC).
The Board of Directors has established procedures designed
to stabilize the Money Market Fund's price per share, as computed
for the purpose of sales and redemptions, at $1.00. There can be
no assurance, however, that the Fund will at all times be able to
maintain a constant $1.00 NAV per share. Such procedures include
review of the Fund's holdings at such intervals as is deemed
appropriate to determine whether the Fund's NAV calculated by
using available market quotations deviates from $1.00 per share
and, if so, whether such deviation may result in material
dilution or is otherwise unfair to existing shareholders. In the
event that it is determined that such a deviation exists, the
Board of Directors will take such corrective action as it regards
as necessary and appropriate. Such action may include selling
portfolio instruments prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, withholding
dividends, or establishing a NAV per share by using available
market quotations.
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES
The value of a shareholder's investment at the time of redemption
may be more or less than the cost at purchase, depending on the
value of the securities held in each Fund's portfolio. Requests
for redemption which are subject to any special conditions, or
which specify an effective date other than as provided herein,
cannot be accepted. A gain or loss for tax purposes may be
realized on the sale of shares, depending upon the price when redeemed.
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the Aggressive
Growth, Growth, Growth & Income, Income Stock, Income, or Short-
Term Bond Funds and less than 500 shares of the Money Market Fund
provided (1) the value of the account has been reduced, for
reasons other than market action, below the minimum initial
investment in such Fund at the time of the establishment of the
account, (2) the account has remained below the minimum level for
six months, and (3) 60 days' prior written notice of the proposed
redemption has been sent to the shareholder. Shares will be
redeemed at the NAV on the date fixed for redemption by the Board
of Directors. Prompt payment will be made by mail to the last
known address of the shareholder.
The Company reserves the right to suspend the right of
redemption or postpone the date of payment (1) for any periods
during which the NYSE is closed, (2) when trading in the markets
the Company normally utilizes is restricted, or an emergency
exists as determined by the SEC so that disposal of the Company's
investments or determination of its net asset value is not
reasonably practicable, or (3) for such other periods as the SEC
by order may permit for protection of the Company's shareholders.
For the mutual protection of the investor and the Funds, a
guarantee of signature may be required by the Company. If
required, each signature on the account registration must be
guaranteed. Signature guarantees are acceptable from FDIC member
banks, brokers, dealers, municipal securities dealers, municipal
securities brokers, government securities dealers, government
securities brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. A signature guarantee for active duty military
personnel stationed abroad may be provided by an officer of the
United States Embassy or Consulate, a staff officer of the Judge
Advocate General, or an individual's commanding officer.
Redemption By Check
Shareholders in the Short-Term Bond Fund or Money Market Fund may
request that checks be issued for their accounts. A one-time $5
checkwriting fee is charged to each account by the Transfer Agent
for the use of the privilege. Checks must be written in the
amount of at least $250.
Checks issued to shareholders of either Fund will be sent
only to the person in whose name the account is registered and
only to the address of record. The checks must be manually
signed by the registered owner(s) exactly as the account is
registered. For joint accounts the signature of either or both
joint owners will be required on the check, according to the
election made on the signature card. Dividends will continue to
be earned by the shareholder until the shares are redeemed by the
presentation of a check.
When a check is presented to the Transfer Agent for payment,
a sufficient number of full and fractional shares in the
investor's account will be redeemed to cover the amount of the
check. If an investor's account is not adequate to cover the
amount of a check, the check will be returned unpaid. A check
drawn on an account in the Short-Term Bond Fund may be returned
for insufficient funds if the net asset value per share of that
Fund declines over the time between the date the check was
written and the date it was presented for payment. Because the
value of the account in either the Short-Term Bond Fund or Money
Market Fund changes as dividends are accrued on a daily basis,
checks may not be used to close an account.
After clearance, checks paid during the month will be
returned to the shareholder by separate mail. The checkwriting
privilege will be subject to the customary rules and regulations
of State Street Bank and Trust Company (State Street Bank or the
Custodian) governing checking accounts. Other than the initial
one-time fee, there is no charge to the shareholder for the use
of the checks or for subsequent reorders of checks.
Additional Information Regarding Redemption of Shares, cont.
The Company reserves the right to assess a processing fee
against a shareholder's account for any redemption check not
honored by a clearing or paying agent. Currently, this fee is
$15 and is subject to change at any time. Some examples of such
dishonor are improper endorsement, checks written for an amount
less than the minimum check amount, and insufficient or
uncollectible funds.
The Company, the Transfer Agent, and State Street Bank each
reserve the right to change or suspend the checkwriting privilege
upon 30 days' written notice to participating shareholders.
INVESTMENT PLANS
The following investment plans are made available by the Company
to shareholders of all the Funds. At the time you sign up for
any of the following investment plans that utilize the electronic
funds transfer service, you will choose the day of the month (the
effective date) on which you would like to regularly purchase
shares. When this day falls on a weekend or holiday, the
electronic transfer will take place on the last business day
before the effective date. You may terminate your participation
in a plan at any time. Please call the Manager for details and
necessary forms or applications.
Systematic Purchase of Shares
InvesTronic(registered trademark) - an automatic investment
program for the purchase of additional shares through electronic
funds transfer. The investor selects the day(s) each month that
money is transferred from a checking or savings account. By
completing an application, which may be obtained from the
Manager, you invest a specific amount each month ($50 minimum) in
any of your accounts.
Direct Purchase Service - the periodic purchase of shares through
electronic funds transfer from a non-governmental employer, an
income-producing investment, or an account with a participating
financial institution.
Automatic Purchase Plan - the periodic transfer of funds from a
USAA money market fund to purchase shares in another non-money
market USAA mutual fund. There is a minimum investment required
for this program of $5,000, with a monthly transaction minimum of
$50. The minimum initial investment requirement for the other
USAA mutual fund must be satisfied before the first transfer.
Buy/Sell Service - the intermittent purchase or redemption of
shares through electronic funds transfer to or from a checking or
savings account.
Participation in these systematic purchase plans will permit
a shareholder to engage in dollar-cost averaging. For additional
information concerning the benefits of dollar-cost averaging, see
Appendix C.
Systematic Withdrawal Plan
If a shareholder in a single investment account (accounts in
different Funds cannot be aggregated for this purpose) owns
shares having a net asset value of $5,000 or more, the
shareholder may request that enough shares to produce a fixed
amount of money be liquidated from the account monthly or
quarterly. The amount of each withdrawal must be at least $50.
Using the electronic funds transfer service, shareholders may
choose to have withdrawals electronically deposited at their bank
or other financial institution. They may also elect to have
checks mailed to a designated address.
Such a plan may be initiated by depositing shares worth at
least $5,000 with the Transfer Agent and by completing a
Systematic Withdrawal Plan application, which may be requested
from the Manager. The shareholder may terminate participation in
the plan at any time. There is no charge to the shareholder for
withdrawals under the Systematic Withdrawal Plan. The Company
will not bear any expenses in administering the plan beyond the
regular transfer agent and custodian costs of issuing and
redeeming shares. Any additional expenses of administering the
plan will be borne by the Manager.
Withdrawals will be made by redeeming full and fractional
shares on the date selected by the shareholder at the time the
plan is established. Withdrawal payments made under this plan
may exceed dividends and distributions and, to this extent, will
involve the use of principal and could reduce the dollar value of
a shareholder's investment and eventually exhaust the account.
Reinvesting dividends and distributions helps replenish the
account. Because share values and net investment income can
fluctuate, shareholders should not expect withdrawals to be
offset by rising income or share value gains.
Each redemption of shares may result in a gain or loss,
which must be reported on the shareholder's income tax return.
Therefore, a shareholder should keep an accurate record of any
gain or loss on each withdrawal.
Tax-Deferred Retirement Plans
Federal taxes on current income may be deferred if an investor
qualifies for certain types of retirement programs. For the
convenience of the investor, the following plans are made
available by the Manager: IRA (including SEP/IRA) and 403(b)(7)
accounts. The minimum initial investment in each of these plans
is $1,000 for each Fund with the exception of spousal IRAs for
which the minimum investment is $250. Subsequent investments of
$50 or more per account may be made at any time. Effective after
Janaury 31, 1996, the minimum initial investment for these plans
will decrease to $250 or minimum $100 with a minimum $50 monthly
electronic investment. Investments may be made in one or any
combination of the portfolios described in the Prospectus of each
Fund of USAA Mutual Fund, Inc. and USAA Investment Trust (not
available in the Growth and Tax Strategy Fund).
Retirement plan applications for the IRA and 403(b)(7)
programs should be sent directly to USAA Shareholder Account
Services, 9800 Fredericksburg Rd., San Antonio, TX 78288. State
Street Bank serves as Custodian for these tax-deferred retirement
plans under the programs made available by the Manager.
Applications for these retirement plans received by the Manager
will be forwarded to the Custodian for acceptance.
An administrative fee of $20 is deducted from the proceeds
of a distribution closing an account. Exceptions to the fee are:
partial distributions, total transfer within USAA, and
distributions due to disability or death. This charge is subject
to change as provided in the various agreements. There may be
additional charges, as mutually agreed upon between the investor
and the Custodian, for further services requested of the
Custodian.
Each employer or individual establishing a tax-deferred
retirement plan is advised to consult with a tax adviser before
establishing the plan. Detailed information about the plans may
be obtained from the Manager.
INVESTMENT POLICIES
The section captioned Investment Objective and Policies in each
Fund's Prospectus describes the fundamental investment objective
and the investment policies applicable to each Fund and the
following is provided as additional information.
Tax-Exempt Securities
These securities include general obligation bonds, which are
secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest; revenue bonds,
which are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue
source, but not from the general taxing power; and certain types
of industrial development bonds issued by or on behalf of public
authorities to obtain funds for privately-operated facilities,
provided that the interest paid on such securities qualifies as
exempt from federal income taxes.
Section 4(2) Commercial Paper and Rule 144A Securities
Each Fund may invest in commercial paper issued in reliance on
the "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933 (Section 4(2)
Commercial Paper). Section 4(2) Commercial Paper is restricted
as to disposition under the federal securities laws; therefore,
any resale of Section 4(2) Commercial Paper must be effected in a
transaction exempt from registration under the Securities Act of
1933. Section 4(2) Commercial Paper is normally resold to other
investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) Commercial
Paper, thus providing liquidity.
Each Fund may also purchase restricted securities eligible
for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (Rule 144A Securities).
Rule 144A provides a non-exclusive safe harbor from the
registration requirements of the Securities Act of 1933 for
resales of certain securities to institutional investors.
Liquidity Determinations
The Board of Directors has established guidelines pursuant to
which Municipal Lease Obligations, Section 4(2) Commercial Paper,
Rule 144A Securities, and certain restricted debt securities that
are subject to unconditional put or demand features exercisable
within seven days (Restricted Put Bonds) may be determined to be
liquid for purposes of complying with the Funds' investment
restrictions applicable to
Investment Policies, cont.
investments in illiquid securities. In determining the liquidity
of Municipal Lease Obligations, Section 4(2) Commercial Paper and
Rule 144A Securities, the Manager will consider the following
factors, among others, established by the Board of Directors:
(1) the frequency of trades and quotes for the security, (2) the
number of dealers willing to purchase or sell the security and
the number of other potential purchasers, (3) dealer undertakings
to make a market in the security, and (4) the nature of the
security and the nature of the marketplace trades, including the
time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer. Additional factors
considered by the Manager in determining the liquidity of a
municipal lease obligation are: (1) whether the lease
obligation is of a size that will be attractive to institutional
investors, (2) whether the lease obligation contains a non-
appropriation clause and the likelihood that the obligor will
fail to make an appropriation therefor, and (3) such other
factors as the Manager may determine to be relevant to such
determination. In determining the liquidity of Restricted Put
Bonds, the Manager will evaluate the credit quality of the party
(the Put Provider) issuing (or unconditionally guaranteeing
performance on) the unconditional put or demand feature of the
Restricted Put Bond. In evaluating the credit quality of the Put
Provider, the Manager will consider all factors that it deems
indicative of the capacity of the Put Provider to meet its
obligations under the Restricted Put Bond based upon a review of
the Put Provider's outstanding debt and financial statements and
general economic conditions.
Certain foreign securities (including Eurodollar
obligations) may be eligible for resale pursuant to Rule 144A in
the United States and may also trade without restriction in one
or more foreign markets. Such securities may be determined to be
liquid based upon these foreign markets without regard to their
eligibility for resale pursuant to Rule 144A. In such cases,
these securities will not be treated as Rule 144A securities for
purposes of the liquidity guidelines established by the Board of
Directors and will not be considered "restricted securities" for
purposes of a Fund's investment restriction.
Calculation of Portfolio Weighted Average Maturity
Weighted average maturity is derived by multiplying the value of
each investment by the number of days remaining to its maturity,
adding these calculations, and then dividing the total by the
value of the Fund's portfolio. An obligation's maturity is
typically determined on a stated final maturity basis, although
there are some exceptions to this rule.
With respect to obligations held by the Funds, if it is
probable that the issuer of an instrument will take advantage of
a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will
probably be called, refunded, or redeemed may be considered to be
its maturity date. Also, the maturities of mortgage-backed
securities, some asset-backed securities and securities subject
to sinking fund arrangements, are determined on a weighted
average life basis, which is the average time for principal to be
repaid. For mortgage-backed and some asset-backed securities,
this average time is calculated by assuming a constant prepayment
rate (CPR) for the life of the mortgages or assets backing the
security. The CPR for a security can vary depending upon the
level and volatility of interest rates. This, in turn, can
affect the weighted average life of the security. The weighted
average lives of these securities will be shorter than their
stated final maturities. In addition, for purposes of the Fund's
investment policies, an instrument will be treated as having a
maturity earlier than its stated maturity date if the instrument
has technical features such as puts or demand features which, in
the judgment of the Manager, will result in the instrument being
valued in the market as though it has the earlier maturity.
The Money Market Fund will determine the maturity of an
obligation in its portfolio in accordance with Rule 2a-7 under
the Investment Company Act of 1940, as amended (1940 Act).
Writing Covered Call Options - Income Stock Fund only
The Fund may write (sell) covered call options and purchase
options to close out options previously written by the Fund. The
purpose of writing covered call options is to generate additional
premium income for the Fund. This premium income will serve to
enhance the Fund's total return and will reduce the effect of any
price decline of the security involved in the option. Covered
call options will generally be written on securities which, in
the Manager's opinion, are not expected to make any major price
moves in the near future but which, over the long term, are
deemed to be attractive investments for the Fund.
A call option gives the holder (buyer) the right to purchase
a security at a specified price (the exercise price) at any time
until a certain date (the expiration date). So long as the
obligation of the writer of a call option continues, he may be
assigned an exercise notice by the broker-dealer through whom
such option was sold, requiring him to deliver the underlying
security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such
earlier time at which the writer effects a closing purchase
transaction by repurchasing the option which he previously sold.
To secure his obligation to deliver the underlying security in
the case of a call option, a writer is required to deposit in
escrow the underlying security or other assets in accordance
with the rules of the particular clearing corporations and of the
exchanges. The Fund will write only covered call options. This
means that the Fund will only write a call option on a security
which the Fund already owns. The Fund will not write call
options on when-issued securities. The Fund will write covered
call options in standard contracts which may be quoted on NASDAQ,
or on national securities exchanges. In order to comply with the
requirements of the securities laws in several states, the Fund
will not write a covered call option if, as a result, the
aggregate market value of all portfolio securities covering call
options exceeds 5% of the market value of the Fund's total assets.
Portfolio securities on which call options may be written
will be purchased solely on the basis of investment
considerations consistent with the Fund's investment objectives.
The writing of covered call options is a conservative investment
technique believed to involve relatively little risk (in contrast
to the writing of naked or uncovered options, which the Fund will
not do), but capable of enhancing the Fund's total return. When
writing a covered call option, the Fund, in return for the
premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the
security decline. Unlike one who owns securities not subject to
an option, the Fund has no control over when it may be required
to sell the underlying securities, since it may be assigned an
exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the
market value of the underlying security during the option period.
If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security. The security
covering the call will be maintained in a segregated account of
the Fund's custodian. The Fund does not consider a security
covered by a call to be pledged as that term is used in the
Fund's policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The
premium the Fund will receive from writing a call option will
reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to
such market price, the historical price volatility of the
underlying security, and the length of the option period. In
determining whether a particular call option should be written on
a particular security, the Manager will consider the
reasonableness of the anticipated premium and the likelihood that
a liquid secondary market will exist for those options. The
premium received by the Fund for writing covered call options
will be recorded as a liability in the Fund's statement of assets
and liabilities. This liability will be adjusted daily to the
option's current market value, which will be the latest sale
price at the time at which the net asset value per share of the
Fund is computed (close of the New York Stock Exchange), or in
the absence of such sale, the latest asked price. The liability
will be extinguished upon expiration of the option, the purchase
of an identical option in a closing transaction, or delivery of
the underlying security upon the exercise of the option.
Closing transactions may be effected in order to realize a
profit on an outstanding call option, to prevent an underlying
security from being called, or to permit the sale of the
underlying security. Furthermore, effecting a closing
transaction will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both.
If the Fund desires to sell a particular security from its
portfolio on which it has written a call option, it will seek to
effect a closing transaction prior to, or concurrently with, the
sale of the security. There is, of course, no assurance that the
Fund will be able to effect such closing transactions at a
favorable price. If the Fund cannot enter into such a
transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at
market risk on the security. This could result in higher
transaction costs, including brokerage commissions. The Fund
will pay brokerage commissions in connection with the writing of
options to close out previously written options. Such brokerage
commissions are normally higher than those applicable to
purchases and sales of portfolio securities.
Call options written by the Fund will normally have
expiration dates of less than nine months from the date written.
The exercise price of the options may be below, equal to, or
above the current market values of the underlying securities at
the time the options are written. From time to time, the Fund
may purchase an underlying security for delivery in accordance
with an exercise notice of a call option assigned to it, rather
than delivering such security from its portfolio. In such cases,
additional brokerage commissions will be incurred.
The Fund will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or
more than the premium received from the writing of the option.
Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.
Investment Policies, cont.
Forward Currency Contracts
The Aggressive Growth Fund may enter into forward currency
contracts in order to protect against uncertainty in the level of
future foreign exchange rates.
A forward contract involves an agreement to purchase or sell
a specific currency at a specified future date or over a
specified time period at a price set at the time of the contract.
These contracts are usually traded directly between currency
traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirements, and no
commissions are charged.
The Fund may enter into forward currency contracts under two
circumstances. First, when the Fund enters into a contract for
the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into such a contract, the Fund will be
able to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and
the foreign currency from the date the security is purchased or
sold to the date on which payment is made or received. Second,
when management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S. dollar, it
may enter into a forward contract to sell that currency. The
Fund may not hedge with respect to a particular currency for an
amount greater than the aggregate market value (determined at the
time of making any sale of forward currency) of the securities
held in its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward contracts involves certain risks. The
precise matching of contract amounts and the value of securities
involved generally will not be possible since the future value of
such securities in currencies more than likely will change
between the date the contract is entered into and the date it
matures. The projection of short-term currency market movements
is extremely difficult and successful execution of a short-term
hedging strategy is uncertain. Under normal circumstances,
consideration of the prospect for currency parities will be
incorporated into the longer term investment strategies. The
Manager believes it is important, however, to have the
flexibility to enter into such contracts when it determines it is
in the best interest of the Fund to do so. It is impossible to
forecast what the market value of portfolio securities will be at
the expiration of a contract. Accordingly, it may be necessary
for the Fund to purchase additional currency (and bear the
expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to
deliver, and if a decision is made to sell the security and make
delivery of the currency. Conversely, it may be necessary to
sell some of the foreign currency received on the sale of the
portfolio security if its market value exceeds the amount of
currency the Fund is obligated to deliver.
The Fund is not required to enter into such transactions and
will not do so unless deemed appropriate by the Manager.
Although the Fund values its assets each business day in
terms of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so
from time to time, and shareholders should be aware of currency
conversion costs. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on
the difference (spread) between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
Investments in Real Estate Investment Trusts (REITs)
Because the Aggressive Growth, Growth, Growth & Income, and
Income Stock Funds may invest their assets in REITs, the Funds
may also be subject to certain risks associated with direct
investments in REITs. REITs may be affected by changes in the
value of their underlying properties and by defaults by borrowers
or tenants. Furthermore, REITs are dependent upon specialized
management skills of their managers and may have limited
geographic diversification, thereby, subjecting them to risks
inherent in financing a limited number of projects. REITs depend
generally on their ability to generate cash flow to make
distributions to shareholders, and certain REITs have self-
liquidation provisions by which mortgages held may be paid in
full and distributions of capital returns may be made at any time.
Convertible Securities
Convertible securities are bonds, preferred stocks, and other
securities that pay interest or dividends and offer the buyer the
option of converting the security into common stock. The value
of convertible securities depends partially on interest rate
changes and the credit quality of the issuer. Because a
convertible security affords an investor the opportunity, through
its conversion feature, to participate in the capital appreciation
of the underlying common stock, the value of convertible securities
may also change based on the price of the common stock.
The convertible securities in which the Funds will invest
may be rated below investment grade as determined by Moody's
Investors Service, Inc. (Moody's) or Standard & Poor's Ratings
Group (S&P), or unrated but judged by the Manager to be of
comparable quality (commonly called junk bonds). For a more
complete description of debt ratings, see Appendix A. Such
securities are deemed to be speculative and involve greater risk
of default due to changes in interest rates, economic conditions,
and the issuer's creditworthiness. As a result, their market
prices tend to fluctuate more than higher-quality securities.
During periods of general economic downturns or rising interest
rates, issuers of such securities may experience financial
difficulties which could affect their ability to make timely
interest and principal payments. The Fund's ability to timely
and accurately value and dispose of lower quality securities may
also be affected by the absence or periodic discontinuance of
liquid trading markets.
INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted by the
Company for and are applicable to each Fund. Except with respect
to the Growth & Income Fund, Income Stock Fund, and Short-Term
Bond Fund, these restrictions may not be changed for any given
Fund without approval by the lesser of (1) 67% or more of the
voting securities present at a meeting of the Fund if more than
50% of the outstanding voting securities of the Fund are present
or represented by proxy or (2) more than 50% of the Fund's
outstanding voting securities. With respect to the Growth &
Income Fund, Income Stock Fund, and Short-Term Bond Fund, only
restrictions 3, 4, 6, 7, 10, 13, 16 and 17 may not be changed
without approval of shareholders, as defined herein. The
investment restrictions of one Fund may be changed without
affecting those of any other Fund.
A Fund:
(1) May not purchase or retain securities of any issuer if any
officer or Director of the Company or its Manager own
individually more than one-half of one percent ( 1/2%) of
the securities of that issuer, and collectively the officers
and Directors of the Company and Manager together own more
than 5% of the securities of that issuer.
(2) May not purchase from or sell to any officer or Director of
the Company or its Manager any securities other than shares
of the capital stock of the Funds.
(3) May not underwrite securities of other issuers, except that
the Company may be deemed to be a statutory underwriter in
the distribution of any restricted securities or not readily
marketable securities.
(4) May not borrow money, except for temporary or emergency
purposes in an amount not exceeding 33 1/3% of its total
assets (including the amount borrowed) less liabilities
(other than borrowings).
(5) May not invest in companies for the purpose of exercising
control or management.
(6) May not with respect to 75% of its total assets, purchase
the securities of any issuer (except Government Securities,
as such term is defined in the 1940 Act) if, as a result,
the Fund would own more than 10% of the outstanding voting
securities of such issuer or the Fund would have more than
5% of the value of its total assets invested in the
securities of such issuer.
(7) May not lend any securities or make any loan if, as a
result, more than 33 1/3% of its total assets would be lent
to other parties, except that this limitation does not apply
to purchases of debt securities or to repurchase agreements.
(8) May not invest in warrants more than 2% of the value of its
assets, taken at the lower of cost or market value.
Warrants initially attached to securities and acquired by
the Fund upon original issuance thereof shall be deemed to
be without value.
(9) May not mortgage, pledge, or hypothecate any of its assets,
except for the Income Stock Fund. A security covered by a
call is not considered pledged.
(10) May not concentrate its investments in any one industry
although it may invest up to 25% of the value of its total
assets in any one industry. Banks are not considered a
single industry for purposes of this policy, nor shall this
limitation apply to securities issued or guaranteed by the
U.S. Government or its corporate instrumentalities.
(11) May not acquire securities of other open-end investment
companies, except in connection with a merger,
consolidation, or acquisition of assets approved by the
shareholders.
(12) May not invest more than 5% of the value of its total assets
in any closed-end investment company and will not hold more
than 3% of the outstanding voting stock of any closed-end
investment company.
(13) May not purchase or sell commodities, commodity contracts,
or real estate, although a Fund may invest in the securities
of real estate investment trusts.
Investment Restrictions, cont.
(14) May not engage in margin transactions or arbitrage or short
sales, or in put, call, straddle, or spread activities,
except the Income Stock Fund may write covered call options
as described under Investment Objective and Policies in the
Prospectus and Investment Policies in this Statement of
Additional Information.
(15) May not allow its Manager or officers or Directors of itself
or its Manager to take long or short positions in shares of
a Fund, except that such persons may purchase shares for
their own account for investment purposes only at the price
available to the public at the moment of such purchase.
(16) May not change the nature of its business so as to cease to
be an investment company.
(17) May not issue senior securities, as defined in the
Investment Company Act of 1940, as amended (the 1940 Act),
except as permitted by Section 18(f)(2) and rules thereunder.
Additional Restrictions
The following restrictions are not considered to be fundamental
policies of the Funds. Nevertheless, the Company and each Fund
will comply with them as long as they are required by any state
where the Funds' shares are offered for sale. These additional
restrictions may be changed by the Board of Directors of the
Company without notice to or approval by the shareholders.
A Fund:
(1) May not invest any part of its assets in interests in oil,
gas, or other mineral explorations, or developmental programs.
(2) May not redeem shares in kind except that the Money Market
Fund may, pursuant to Board of Directors action, redeem
shares in kind at any given time to maintain a $1.00 per
share price for the Money Market Fund.
(3) May not invest more than 15% (10% with respect to the Money
Market Fund) of the value of its net assets in illiquid
securities, including repurchase agreements maturing in more
than seven days.
(4) May not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
(5) May not invest more than 5% of the value of its assets in
securities of companies having a record of less than three
years' continuous operations, except that the Aggressive
Growth Fund may invest up to 75% of its assets in such companies.
(6) May not, on a joint or joint and several basis, participate
in any trading account in securities.
PORTFOLIO TRANSACTIONS
The Manager, pursuant to the Advisory Agreement dated September
21, 1990 and subject to the general control of the Company's
Board of Directors, places all orders for the purchase and sale
of Fund securities. In executing portfolio transactions and
selecting brokers and dealers, it is the Company's policy to seek
the best overall terms available. The Manager shall consider
such factors as it deems relevant, including the breadth of the
market in the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, for the specific transaction or on a
continuing basis. Securities purchased or sold in the over-the-
counter market will be executed through principal market makers,
except when, in the opinion of the Manager, better prices and
execution are available elsewhere.
In the allocation of brokerage business, preference may be
given to those broker-dealers who provide research or other
services to the Manager as long as there is no sacrifice in
obtaining the best overall terms available. Such research and
other services may include, for example: advice concerning the
value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of
securities or the purchasers or sellers of securities; analyses
and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy, and performance of
accounts; and various functions incidental to effecting
securities transactions, such as clearance and settlement. The
Manager continuously reviews the performance of the broker-
dealers with whom it places orders for transactions. The receipt
of research from broker-dealers that execute transactions on
behalf of the Company may be useful to the Manager in rendering
investment management services to other clients (including
affiliates of the Manager), and conversely, such research provided
by broker-dealers who have executed transaction orders on behalf of
other clients may be useful to the Manager in carrying out its
obligations to the Company. While such research is available to and may
be used by the Manager in providing investment advice to all its clients
(including affiliates of the Manager), not all of such research
may be used by the Manager for the benefit of the Company. Such
research and services will be in addition to and not in lieu of
research and services provided by the Manager, and the expenses
of the Manager will not necessarily be reduced by the receipt of
such supplemental research. See The Company's Manager.
Securities of the same issuer may be purchased, held, or
sold at the same time by the Company for any or all of its Funds,
or other accounts or companies for which the Manager acts as the
investment adviser (including affiliates of the Manager). On
occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Company, as well as
the Manager's other clients, the Manager, to the extent permitted
by applicable laws and regulations, may aggregate such securities
to be sold or purchased for the Company with those to be sold or
purchased for other customers in order to obtain best execution
and lower brokerage commissions, if any. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Manager
in the manner it considers to be most equitable and consistent
with its fiduciary obligations to all such customers, including
the Company. In some instances, this procedure may impact the
price and size of the position obtainable for the Company.
Brokerage Commissions
During the last three fiscal years, the Funds paid the following
brokerage fees:
FUND 1993 1994** 1995***
---- ---------- ---------- ----------
Aggressive Growth $ 808,862 $ 575,190 $ 441,669
Growth 1,208,950 1,919,577 1,482,224
Growth & Income 84,342* 108,355 154,393
Income Stock 1,271,007 1,224,292 1,157,186
Income 291,848 60,180 46,000
- -----------
* From date of inception, June 1, 1993 to September 30, 1993.
** For the ten-month period ended July 31, 1994.
*** Includes $110,000, $21,268, $32,512, and $16,000 paid
by the Growth Fund, Growth & Income Fund, Income Stock
Fund, and Income Fund, respectively, to USAA Brokerage
Services, a discount brokerage service of the Manager.
These amounts are 7.4%, 13.8%, 2.8%, and 34.8%,
respectively, of brokerage fees paid by each Fund.
The Manager directed a portion of the Fund's brokerage
transactions to certain broker-dealers that provided the Manager
with research, statistical and other information. Such
transactions amounted to $37,740,213, $278,440,112, $31,695,151,
$157,990,350, and $5,608,970, and the related brokerage
commissions were $66,750, $396,640, $49,855, $234,505, and
$10,000 for the Aggressive Growth, Growth, Growth & Income,
Income Stock, and Income Funds, respectively.
Portfolio Turnover Rates
The rate of portfolio turnover will not be a limiting factor when
the Manager deems changes in the Aggressive Growth, Growth,
Growth & Income, Income Stock, Income, and Short-Term Bond Funds'
portfolios appropriate in view of each Fund's investment
objective. Although no Fund (other than the Income Fund) will
purchase or sell securities solely to achieve short-term trading
profits, a Fund may sell portfolio securities without regard to
the length of time held if consistent with the Fund's investment
objective. The Income Fund may engage in riskless principal and
similar transactions for the purchase and sale of tax-exempt debt
securities. A higher degree of portfolio activity will increase
brokerage costs to a Fund.
The portfolio turnover rate is computed by dividing the
dollar amount of securities purchased or sold (whichever is
smaller) by the average value of securities owned during the
year. Short-term investments such as commercial paper and short-
term U.S. Government securities are not considered when computing
the turnover rate.
Portfolio Transactions, cont.
For the last two fiscal years, the Funds' portfolio turnover
rates were as follows:
FUND 1994* 1995
---- ------ ------
Aggressive Growth 98.99% 138.32%
Growth 117.80% 69.64%
Growth & Income 13.90% 19.45%
Income Stock 24.82% 34.94%
Income** 25.36% 30.86%
Short-Term Bond 142.08% 103.02%
- ---------
* For the ten-month period ended July 31, 1994.
** The Fund may simultaneously purchase and sell the same
securities. These transactions can be high in volume
and dissimilar to other trade activity within the Fund.
If these transactions were excluded from the calculation,
the portfolio turnover rate would be as follows:
TEN-MONTH
PERIOD ENDED YEAR ENDED
JULY 31, 1994 JULY 31, 1995
------------- -------------
Portfolio turnover(%) 16.79 9.09
Purchases and sales of this type are as follows:
Purchases (000) $155,322 $360,943
Sales (000) $155,497 $361,366
FURTHER DESCRIPTION OF SHARES
The Company is authorized to issue shares in separate classes, or
Funds. Seven Funds have been established which are described in
this SAI. Under the Articles of Incorporation, the Board of
Directors is authorized to create new Funds in addition to those
already existing without shareholder approval. The Growth,
Income, and Money Market Funds were established in the Fall of
1980 and commenced public offering of their shares on February 2,
1981. The Aggressive Growth Fund was established by the Board of
Directors on July 8, 1981 and commenced public offering of its
shares on October 19, 1981. The Income Stock Fund was
established by the Board of Directors on January 23, 1987 and
commenced public offering of its shares on May 4, 1987. The
Growth & Income and Short-Term Bond Funds were established by the
Board of Directors on March 23, 1993 and commenced public
offering of their shares on June 1, 1993.
The assets of each Fund and all income, earnings, profits,
and proceeds thereof, subject only to the rights of creditors,
are specifically allocated to such Fund. They constitute the
underlying assets of each Fund, are required to be segregated on
the books of account, and are to be charged with the expenses of
such Fund. Any general expenses of the Company not readily
identifiable as belonging to a particular Fund are allocated on
the basis of the Funds' relative net assets during the fiscal
year or in such other manner as the Board determines to be fair
and equitable. Each share of each Fund represents an equal
proportionate interest in that Fund with every other share and is
entitled to such dividends and distributions out of the net
income and capital gains belonging to that Fund when declared by
the Board.
Under the provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Thus, there will ordinarily
be no shareholder meeting unless required by the 1940 Act. Under
certain circumstances, however, shareholders may apply for
shareholder information in order to obtain signatures to request
a special shareholder meeting. Moreover, pursuant to the Bylaws
of the Company, any Director may be removed by the affirmative
vote of a majority of the outstanding Company shares; and holders
of 25% or more of the outstanding shares of the Company can
require Directors to call a meeting of shareholders for the
purpose of voting on the removal of one or more Directors. On
any matter submitted to the shareholders, the holder of each Fund
share is entitled to one vote per share (with proportionate
voting for fractional shares) regardless of the relative net
asset values of the Funds' shares. However, on matters affecting
an individual Fund, a separate vote of the shareholders of that
Fund is required. Shareholders of a Fund are not entitled to
vote on any matter which does not affect that Fund but which
requires a separate vote of another Fund. Shares do not have
cumulative voting rights, which means that holders of more than
50% of the shares voting for the election of Directors can elect
100% of the Company's Board of Directors, and the holders of less
than 50% of the shares voting for the election of Directors will
not be able to elect any person as a Director.
Shareholders of a particular Fund might have the power to
elect all of the Directors of the Company because that Fund has a
majority of the total outstanding shares of the Company. When
issued, each Fund's shares are fully paid and nonassessable, have
no pre-emptive or subscription rights, and are fully
transferable. There are no conversion rights.
TAX CONSIDERATIONS
Each Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the Code). Accordingly, each Fund will not be liable
for federal income taxes on its taxable net investment income and
net capital gains (capital gains in excess of capital losses)
that are distributed to shareholders, provided that each Fund
distributes at least 90% of its net investment income and net
short-term capital gain for the taxable year.
To qualify as a regulated investment company, a Fund must,
among other things, (1) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such
stock, securities, or currencies (the 90% test), (2) derive in
each taxable year less than 30% of its gross income from the sale
or other disposition of stock or securities held less than three
months (the 30% test), and (3) satisfy certain diversification
requirements, at the close of each quarter of the Fund's taxable year.
The Code imposes a nondeductible 4% excise tax on a
regulated investment company that fails to distribute during each
calendar year an amount at least equal to the sum of (1) 98% of
its taxable net investment income for the calendar year, (2) 98%
of its capital gain net income for the twelve month period ending
on October 31, and (3) any prior amounts not distributed. Each
Fund intends to make such distributions as are necessary to avoid
imposition of the excise tax.
Taxable distributions are generally included in a
shareholder's gross income for the taxable year in which they are
received. Dividends declared in October, November, or December
and made payable to shareholders of record in such a month will
be deemed to have been received on December 31, if the Fund pays
the dividend during the following January. If a shareholder of a
Fund receives a distribution taxable as long-term capital gain
with respect to shares of a Fund and redeems or exchanges the
shares before he has held them for more than six months, any loss
on the redemption or exchanges that is less than or equal to the
amount of the distribution will be treated as long-term capital loss.
DIRECTORS AND OFFICERS OF THE COMPANY
The Board of Directors of the Company consists of eight
Directors. Set forth below are the Directors and officers of the
Company, their respective offices and principal occupations
during the last five years. Unless otherwise indicated, the
business address of each is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Hansford T. Johnson 1, 2
Director and Chairman of the Board of Directors
Age: 59
Director, Vice Chairman and Deputy Attorney-in-Fact, United
Services Automobile Association (USAA) and President, Chief
Executive Officer, Director and Vice Chairman of the Board of
Directors of USAA Capital Corporation and of its various
subsidiaries and affiliates (9/93-present); Chief of Staff, USAA
(1/93-8/93); Executive Vice President, USAA (10/92-12/92);
Commander-in-Chief, CINCTRANS, Department of Defense -Pentagon
(9/89-9/92). Mr. Johnson currently serves as a Trustee and
Chairman of the Boards of Trustees of USAA Investment Trust and
USAA State Tax-Free Trust and as Director and Chairman of the
Boards of Directors of USAA Investment Management Company (IMCO),
USAA Tax Exempt Fund, Inc., USAA Shareholder Account Services,
USAA Federal Savings Bank and USAA Real Estate Company.
Michael J.C. Roth 1, 2
Director, President and Vice Chairman of the Board of Directors
Age: 54
Chief Executive Officer, IMCO (10/93-present); President,
Director and Vice Chairman of the Board of Directors, IMCO (1/90-
present); Director, USAA Federal Savings Bank (12/83-8/91). Mr.
Roth currently serves as President, Trustee and Vice Chairman of
the Boards of Trustees of USAA Investment Trust and USAA State
Tax-Free Trust, as President, Director and Vice Chairman of the
Boards of Directors of USAA Tax Exempt Fund, Inc. and USAA
Shareholder Account Services, as Director of USAA Life Insurance
Company and as Trustee and Vice Chairman of USAA Life Investment Trust.
John W. Saunders, Jr. 1, 2, 4
Director and Vice President
Age: 60
Senior Vice President, Investments, IMCO (10/85-present);
Director, BHC Financial, Inc. and BHC Securities, Inc. (1/87-
present). Mr. Saunders currently serves as Trustee and Vice
President of USAA Investment Trust and USAA State Tax-Free Trust,
Director and Vice President of USAA Tax Exempt Fund, Inc.,
Director of IMCO, as Senior Vice President of USAA Shareholder
Account Services, and as Vice President of USAA Life Investment Trust.
C. Dale Briscoe 4, 5
7829 Timber Top Drive
Boerne, TX 78006
Director
Age: 74
Retired. Mr. Briscoe currently serves as a Trustee of USAA
Investment Trust and USAA State Tax-Free Trust and as a Director
of USAA Tax Exempt Fund, Inc.
George E. Brown 3, 4, 5
5829 Northgap Drive
San Antonio, TX 78239
Director
Age: 77
Retired. Mr. Brown currently serves as a Trustee of USAA
Investment Trust and USAA State Tax-Free Trust and as a Director
of USAA Tax Exempt Fund, Inc.
Howard L. Freeman, Jr. 2, 3, 5
2710 Hopeton
San Antonio, TX 78230
Director
Age: 60
Assistant General Manager for Finance, San Antonio City Public
Service Board (1976-present). Mr. Freeman currently serves as a
Trustee of USAA Investment Trust and USAA State Tax-Free Trust
and as a Director of USAA Tax Exempt Fund, Inc.
Richard A. Zucker 3, 4, 5
407 Arch Bluff
San Antonio, TX 78216
Director
Age: 52
Vice President, Beldon Roofing and Remodeling (1985-present).
Mr. Zucker currently serves as a Trustee of USAA Investment Trust
and USAA State Tax-Free Trust and as a Director of USAA Tax
Exempt Fund, Inc.
Barbara B. Dreeben 3, 5
200 Patterson #1008
San Antonio, TX 78209
Director
Age: 50
President, Postal Addvantage (7/92-present); Consultant, Nancy
Harkins Stationer (8/91-present); Merchandise Manager, Nancy
Harkins Stationer (7/82-8/91). Mrs. Dreeben currently serves as
a Trustee of USAA Investment Trust and USAA State Tax-Free Trust
and as a Director of USAA Tax Exempt Fund, Inc.
Michael D. Wagner 1
Secretary
Age: 47
Vice President, Corporate Counsel, USAA (1982-present). Mr.
Wagner has held various positions in the legal department of USAA
since 1970 and currently serves as Vice President, Secretary and
Counsel, IMCO and USAA Shareholder Account Services, Secretary,
USAA Investment Trust, USAA State Tax-Free Trust, and USAA Tax
Exempt Fund, Inc. and as Vice President, Corporate Counsel for
various other USAA subsidiaries and affiliates.
Alex M. Ciccone 1
Assistant Secretary
Age: 45
Vice President, Compliance, IMCO (12/94-present); Vice President
and Chief Operating Officer, Commonwealth Shareholder Services
(6/94-11/94); Vice President, Compliance, IMCO (12/91-5/94); Vice
President, Compliance, Fund Management Co. (10/89-11/91); and
Vice President, Compliance, AIM Distributors, Inc. (4/82-11/91).
Mr. Ciccone currently serves as Assistant Secretary of USAA
Investment Trust, USAA State Tax-Free Trust, and USAA Tax Exempt
Fund, Inc.
Sherron A. Kirk 1
Treasurer
Age: 50
Vice President, Controller, IMCO (10/92-present); Vice President,
Corporate Financial Analysis, USAA (9/92-10/92); Assistant Vice
President, Financial Plans and Support, USAA (8/91-9/92);
Assistant Vice President, Real Estate Accounting, USAA Real
Estate Company (5/90-7/91). Mrs. Kirk currently serves as
Treasurer of USAA Investment Trust, USAA State Tax-Free Trust,
and USAA Tax Exempt Fund, Inc., and as Vice President, Controller
of USAA Shareholder Account Services.
Dean R. Pantzar 1
Assistant Treasurer
Age: 36
Director, Mutual Fund Accounting, IMCO (12/94-present); Senior
Manager, KPMG Peat Marwick LLP (7/88-12/94). Mr. Pantzar
currently serves as Assistant Treasurer of USAA Investment Trust,
USAA State Tax-Free Trust, and USAA Tax Exempt Fund, Inc.
- -----------------
1 Indicates those Directors and officers who are employees of
the Manager or affiliated companies and are considered
"interested persons" under the 1940 Act.
2 Member of Executive Committee
3 Member of Audit Committee
4 Member of Pricing and Investment Committee
5 Member of Corporate Governance Committee
Directors and Officers of the Company, cont.
Between the meetings of the Board of Directors and while the
Board is not in session, the Executive Committee of the Board of
Directors has all the powers and may exercise all the duties of
the Board of Directors in the management of the business of the
Company which may be delegated to it by the Board. The Pricing
and Investment Committee of the Board of Directors acts upon
various investment-related issues and other matters which have
been delegated to it by the Board. The Audit Committee of the
Board of Directors reviews the financial statements and the
auditor's reports and undertakes certain studies and analyses as
directed by the Board. The Corporate Governance Committee of the
Board of Directors maintains oversight of the organization,
performance, and effectiveness of the Board and independent Directors.
In addition to the previously listed Directors and/or
officers of the Company who also serve as Directors and/or
officers of the Manager, the following individuals are Directors
and/or executive officers of the Manager: Josue Robles, Jr.,
Senior Vice President, Chief Financial Officer/Controller, USAA;
William McCrae, Senior Vice President, General Counsel and
Secretary, USAA; Harry W. Miller, Senior Vice President,
Investments (Equity); and John J. Dallahan, Senior Vice
President, Investment Services. There are no family
relationships among the Directors, officers, and managerial level
employees of the Company or its Manager.
The following table sets forth information describing the
compensation of the current Directors of the Company for their
services as Directors for the fiscal year ended July 31, 1995.
Name Aggregate Total Compensation
of Compensation from the USAA
Director from the Company Family of Funds (c)
- -------- ---------------- -------------------
C. Dale Briscoe $4,612 $18,500
George E. Brown (a) 4,612 18,500
Barbara B. Dreeben 4,612 18,500
Howard L. Freeman, Jr. 4,612 18,500
Hansford T. Johnson None (b) None (b)
Michael J.C. Roth None (b) None (b)
John W. Saunders, Jr. None (b) None (b)
Richard A. Zucker 4,612 18,500
- ----------------
(a) The USAA Family of Funds has accrued deferred compensation
for Mr. Brown in an amount (plus earnings thereon) of
$20,481. The compensation was deferred by Mr. Brown
pursuant to a non-qualified Deferred Compensation Plan,
under which deferred amounts accumulate interest quarterly
based on the annualized U.S. Treasury Bill rate in effect on
the last day of the quarter. Amounts deferred and
accumulated earnings thereon are not funded and are general
unsecured liabilities of the USAA Funds until paid. The
Deferred Compensation Plan was terminated in 1988 and no
compensation has been deferred by any Director/Trustee of
the USAA Family of Funds since the Plan was terminated.
(b) Hansford T. Johnson, Michael J.C. Roth, and John W.
Saunders, Jr. are affiliated with the Company's investment
adviser, IMCO, and, accordingly, receive no remuneration
from the Company or any other Fund of the USAA Family of Funds.
(c) At July 31, 1995, the USAA Family of Funds consisted of 4
registered investment companies offering 29 individual
funds. Each Director presently serves as a Director or
Trustee of each investment company in the USAA Family of
Funds. In addition, Michael J.C. Roth presently serves as a
Trustee of USAA Life Investment Trust, a registered
investment company advised by IMCO, consisting of five funds
offered to investors in a fixed and variable annuity
contract with USAA Life Insurance Company. Mr. Roth
receives no compensation as Trustee of USAA Life Investment Trust.
All of the above Directors are also Directors/Trustees of
the other funds for which IMCO serves as investment adviser. No
compensation is paid by any fund to any Director/Trustee who is a
director, officer, or employee of IMCO or its affiliates. No
pension or retirement benefits are accrued as part of fund
expenses. The Company reimburses certain expenses of the
Directors who are not affiliated with the investment adviser. As
of August 31, 1995, the officers and Directors of the Company and
their families as a group owned beneficially or of record less
than 1% of the outstanding shares of the Company.
As of August 31, 1995, USAA and its affiliates (including
related employee benefit plans) owned 2,051,236 shares (13.7%) of
the Aggressive Growth Fund, 759,415 shares (1.5%) of the Growth
Fund, 2,863,922 shares (3.0%) of the Income Stock Fund,
15,681,734 shares (10.8%) of the Income Fund, and 1,623,033
shares (.1%) of the Money Market Fund, for an aggregate total of
22,979,340 shares (1.2%) of the Company.
The Company knows of no other persons who, as of August 31,
1995, held of record or owned beneficially 5% or more of any
Fund's shares.
THE COMPANY'S MANAGER
As described in each Fund's Prospectus, USAA Investment
Management Company is the Manager and investment adviser,
providing services under the Advisory Agreement. The Manager was
organized in May 1970 and has served as investment adviser and
underwriter for USAA Mutual Fund, Inc. from its inception.
In addition to managing the Company's assets, the Manager
advises and manages the investments for USAA and its affiliated
companies as well as those of USAA Tax Exempt Fund, Inc., USAA
Investment Trust, and USAA State Tax-Free Trust, and USAA Life
Investment Trust. As of the date of this SAI, total assets under
management by the Manager were approximately $____ billion, of
which approximately $____ billion were in mutual fund portfolios.
Advisory Agreement
Under the Advisory Agreement, the Manager provides an investment
program, carries out the investment policy, and manages the
portfolio assets for each Fund. The Manager is authorized,
subject to the control of the Board of Directors of the Company,
to determine the selection, amount, and time to buy or sell
securities for each Fund. In addition to providing investment
services, the Manager pays for office space, facilities, business
equipment, and accounting services (in addition to those provided
by the Custodian) for the Company. The Manager compensates all
personnel, officers, and Directors of the Company if such persons
are also employees of the Manager or its affiliates. For these
services under the Advisory Agreement, the Company has agreed to
pay the Manager a fee computed as described under Management of
the Company in the Prospectus. Management fees are computed and
accrued daily and are payable monthly.
Except for the services and facilities provided by the
Manager, the Funds pay all other expenses incurred in their
operations. Expenses for which the Funds are responsible include
taxes (if any), brokerage commissions on portfolio transactions
(if any), expenses of issuance and redemption of shares, charges
of transfer agents, custodians and dividend disbursing agents,
costs of preparing and distributing proxy material, costs of
printing and engraving stock certificates, auditing and legal
expenses, certain expenses of registering and qualifying shares
for sale, fees of Directors who are not interested persons (not
affiliated) of the Manager, costs of typesetting, printing and
mailing the Prospectus, SAI and periodic reports to existing
shareholders, and any other charges or fees not specifically
enumerated. The Manager pays the cost of printing and mailing
copies of the Prospectus, the SAI, and reports to prospective
shareholders.
The Advisory Agreement will remain in effect until June 30,
1996 for each Fund and will continue in effect from year to year
thereafter for each such Fund as long as it is approved at least
annually by a vote of the outstanding voting securities of such
Fund (as defined by the 1940 Act) or by the Board of Directors
(on behalf of such Fund) including a majority of the Directors
who are not interested persons of the Manager or (otherwise than
as Directors) of the Company, at a meeting called for the purpose
of voting on such approval. The Advisory Agreement may be
terminated at any time by either the Company or the Manager on 60
days' written notice. It will automatically terminate in the
event of its assignment (as defined in the 1940 Act).
Under the terms of the Advisory Agreement, the Manager is
required to reimburse each Fund in the event that the total
annual expenses, inclusive of the management fees, but exclusive
of the interest, taxes and brokerage fees, excess custodian costs
attributable to investments in foreign securities, and extraordinary
items, incurred by that Fund exceeds any applicable state expense
limitation. At the current time, the most restrictive expense
limitation is 2.5% of the first $30,000,000 of average net assets
(ANA), 2% of the next $70,000,000 ANA, and 1.5% of the remaining ANA.
From time to time the Manager may, without prior notice to
shareholders, waive all or any portion of fees or agree to
reimburse expenses incurred by a Fund. The Manager has
voluntarily agreed to continue to limit the annual expenses of
the Short-Term Bond Fund to .50% and the Money Market Fund to
.45%, of the Fund's ANA, respectively, until December 1, 1996 and
will reimburse the Funds for all expenses in excess of such
limitations. After December 1, 1996, any such waiver or
reimbursement may be terminated by the Manager at any time
without prior notice to the shareholders.
For the last three fiscal years, management fees were as follows:
FUND 1993 1994** 1995
---- ---------- ---------- ----------
Aggressive Growth $1,286,313 $1,063,619 $1,343,754
Growth 4,026,390 3,786,405 5,642,341
Growth & Income 75,078* 542,868 976,982
Income Stock 3,693,180 4,766,394 6,261,966
Income 3,920,478 3,683,946 4,032,989
Short-Term Bond 7,231* 86,181 136,870
Money Market 2,064,395 1,752,509 3,056,189
The Company's Manager, cont.
As a result of the Short-Term Bond and Money Market Funds'
expenses exceeding the expense limitations, the Manager did not
receive fees to which it would have been entitled as follows:
FUND 1993 1994** 1995
---- --------- --------- ---------
Short-Term Bond $ 7,231* $ 86,181 $ 136,499
Money Market - - $ 154,109
- --------
* From date of inception, June 1, 1993 to September 30, 1993.
** For the ten-month period ended July 31, 1994.
Underwriter
The Company has an agreement with the Manager for exclusive
underwriting and distribution of the Funds' shares on a
continuing best efforts basis. This agreement provides that the
Manager will receive no fee or other compensation for such
distribution services.
Transfer Agent
USAA Shareholder Account Services performs transfer agent
services for the Company under a Transfer Agency Agreement.
Services include maintenance of shareholder account records,
handling of communications with shareholders, distribution of
Fund dividends, and production of reports with respect to account
activity for shareholders and the Company. For its services
under the Transfer Agency Agreement, USAA Shareholder Account
Services is paid an annual fixed fee per account ranging from
$23.50 to $26.00 by each Fund. This fee is subject to change at
any time.
The fee to the Transfer Agent includes processing of all
transactions and correspondence. Fees are billed on a monthly
basis at the rate of one-twelfth of the annual fee. In addition,
the Funds pay all out-of-pocket expenses of the Transfer Agent
and other expenses which are incurred at the specific direction
of the Company.
GENERAL INFORMATION
Custodian
State Street Bank and Trust Company, P.O. Box 1713, Boston, MA
02105, is the Company's Custodian. The Custodian is responsible
for, among other things, safeguarding and controlling the
Company's cash and securities, handling the receipt and delivery
of securities, and collecting interest on the Company's
investments.
Counsel
Goodwin, Procter & Hoar, Exchange Place, Boston, MA 02109, will
review certain legal matters for the Company in connection with
the shares offered by the Prospectus.
Independent Auditors
KPMG Peat Marwick LLP, 112 East Pecan, Suite 2400, San Antonio,
TX 78205, is the Company's independent auditor. In this
capacity, the firm is responsible for auditing the annual
financial statements of the Funds and reporting thereon.
Financial Statements
The financial statements for each of the Funds of USAA Mutual
Fund, Inc. and the Independent Auditors' Reports thereon for the
fiscal year ended July 31, 1995, are included in the Annual
Reports to Shareholders of that date and are incorporated herein
by reference. A copy of the Fund's Annual Report will be
delivered free of charge with each SAI requested from the Manager
at the address set forth on page 1 of this statement.
CALCULATION OF PERFORMANCE DATA
Information regarding the total return and yield of each Fund is
provided under Performance Information in its Prospectus. See
Valuation of Securities herein for a discussion of the manner in
which each Fund's price per share is calculated.
Yield - Money Market Fund
When the Money Market Fund quotes a current annualized yield, it
is based on a specified recent seven-calendar-day period. It is
computed by (1) determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account
having a balance of one share at the beginning of the period, (2)
dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base
return, then (3) multiplying the base period by 52.14 (365
divided by 7). The resulting yield figure is carried to the
nearest hundredth of one percent.
The calculation includes (1) the value of additional shares
purchased with dividends on the original share, and dividends
declared on both the original share and any such additional
shares, and (2) any fees charged to all shareholder accounts, in
proportion to the length of the base period and Fund's average
account size.
The capital changes excluded from the calculation are
realized capital gains and losses from the sale of securities and
unrealized appreciation and depreciation. The Fund's effective
(compounded) yield will be computed by dividing the seven-day
annualized yield as defined above by 365, adding 1 to the
quotient, raising the sum to the 365th power, and subtracting 1
from the result.
Current and effective yields fluctuate daily and will vary
with factors such as interest rates and the quality, length of
maturities, and type of investments in the portfolio.
Yield For 7-day Period Ended 7/31/95 . . . 5.61%
Effective Yield For 7-day Period Ended 7/31/95 . . . 5.77%
Yield - Income Fund and Short-Term Bond Fund
The Funds may advertise performance in terms of a 30-day yield
quotation. The 30-day yield quotation is computed by dividing
the net investment income per share earned during the period by
the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2((((a - b)/(cd) + 1)^6) - 1)
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day
of the period
The 30-day yields for the year ended July 31, 1995 for the
Income Fund and Short-Term Bond Fund were 6.94% and 6.70%, respectively.
Total Return
The Funds, other than the Money Market Fund, may each advertise
performance in terms of average annual total return for 1, 5 and
10 year periods, or for such lesser periods as any of such Funds
have been in existence. Average annual total return is computed
by finding the average annual compounded rates of return over the
periods that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P(1 + T)^n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year periods at the end of the
year or period
Calculation of Performance Data, cont.
The calculation assumes any charges are deducted from the
initial $1,000 payment and assumes all dividends and
distributions by such Fund are reinvested at the price stated in
the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder
accounts.
Average Annual Total Returns
For Periods Ended 7/31/95
1 5 10 From
Fund year years years Inception*
---- ---- ----- ----- ---------
Aggressive Growth 49.98% 14.75% 10.92% -
Growth 26.46% 13.03% 12.15% -
Growth & Income 20.30% - - 11.64%
Income Stock 18.83% 12.77% - 11.57%
Income 11.64% 9.65% 10.13% -
Short-Term Bond 7.90% - - 4.79%
- -------
* Data from inception is shown for Funds that are less than
five or ten years old. Income Stock Fund commenced
operations on May 4, 1987. Growth & Income and Short-Term
Bond Funds commenced operations on June 1, 1993.
APPENDIX A - LONG-TERM AND SHORT-TERM DEBT RATINGS
1. Long-Term Debt Ratings:
Moody's Investors Service, Inc. (Moody's)
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate, and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Standard & Poor's Ratings Group (S&P)
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues
only in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. This rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. This
rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, these
bonds are not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used
for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
C The rating C typically is applied to debt subordinated to
senior debt which is assigned an actual or implied CCC- debt
rating. This rating may be used to cover a situation where
a bankruptcy petition has been filed, but debt service
payments are continued.
CI The rating CI is reserved for income bonds on which no
interest is being paid.
D Debt rated D is in payment default. This rating category is
used when interest payments or principal payments are not
made on the date due even if the applicable grace period has
not expired, unless S&P believes that such payments will be
made during such grace period. This rating also will be
used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Fitch Investors Service, Inc. (Fitch)
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is
generally rated F-1+.
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds, and
therefore, impair timely payment.
Appendix A, cont.
Duff & Phelps (D&P)
AAA Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of
economic conditions.
A Protection factors are average but adequate. However, risk
factors are variable and greater in periods of economic stress.
BBB Below average protection factors but still considered
sufficient for prudent investment. Considerable variability
in risk during economic cycles.
2. Short-Term Debt Ratings:
Moody's Corporate and Government
Prime-1 Issuers have a superior ability for repayment of senior
short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers have a strong ability for repayment of senior
short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still
appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers (or supporting institutions) have an acceptable
capacity for repayment of short-term promissory
obligations. The effect of industry characteristics
and market composition may be more pronounced.
Variability in earnings and profitability may result in
changes in the level of debt protection measurements
and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Moody's Municipal
MIG 1/VMIG 1 This designation denotes best quality. There is
present strong protection by established cash
flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of
protection are ample although not so large as in
the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All
security elements are accounted for but there is
lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely
to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality.
Protection commonly regarded as required of an investment
security is present and although not distinctly or
predominantly speculative, there is specific risk.
S&P Corporate and Government
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics are
denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is
not as high as for issues designated A-1.
A-3 Designation indicates a satisfactory capacity for timely
payment. Issues with this designation, however, are
somewhat more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
S&P Municipal
SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given
a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse financial and economic changes
over the term of the notes.
Fitch
F-1+ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating
reflect an assurance for timely payment only slightly less
in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F-1+ and F-1 Ratings.
F-3 Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse change is
likely to cause these securities to be rated below investment grade.
Duff & Phelps Inc.
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
ready access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements,
access to capital markets is good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless,
timely payment is expected.
Thompson BankWatch, Inc.
TBW-1 The highest category; indicates a very high likelihood
that principal and interest will be paid on a timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated TBW-1.
TBW-3 The lowest investment grade category; indicates that
while the obligation is more susceptible to adverse
developments (both internal and external) than
obligations with higher ratings, the capacity to
service principal and interest in a timely fashion is
considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
IBCA Inc.
A1 Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong
credit feature, a rating of A1+ is assigned.
A2 Obligations supported by a good capacity for timely repayment.
A3 Obligations supported by a satisfactory capacity for timely repayment.
B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C Obligations for which there is a high risk of default or
which are currently in default.
APPENDIX B - COMPARISON OF PORTFOLIO PERFORMANCE
Occasionally, we may make comparisons in advertising and sales
literature between the Funds contained in this SAI and other
Funds in the USAA Family of Funds. These comparisons may include
such topics as risk and reward, investment objectives, investment
strategies, and performance.
Fund performance also may be compared to the performance of
broad groups of mutual funds with similar investment goals or
unmanaged indexes of comparable securities. Evaluations of Fund
performance made by independent sources may also be used in
advertisements concerning the Fund, including reprints of, or
selections from, editorials or articles about the Fund. The Fund
or its performance may also be compared to products and services
not constituting securities subject to registration under the
Securities Act of 1933 such as, but not limited to, certificates
of deposit and money market accounts. Sources for performance
information and articles about the Fund may include the following:
AAII Journal, a monthly association magazine for members of the
American Association of Individual Investors.
Arizona Republic, a newspaper which may cover financial and investment news.
Austin American-Statesman, a newspaper which may cover financial news.
Bank Rate Monitor, a service which publishes rates on various bank products
such as CDs, MMDAs and credit cards.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.
Chicago Tribune, a newspaper which may cover financial news.
Consumer Reports, a monthly magazine which from time to time reports on
companies in the mutual fund industry.
Dallas Morning News, a newspaper which may cover financial news.
Denver Post, a newspaper which may quote financial news.
Financial Planning, a monthly magazine which may periodically review mutual
fund companies.
Financial Services Week, a weekly newspaper which covers financial news.
Financial World, a monthly magazine that periodically features companies in
the mutual fund industry.
Forbes, a national business publication that periodically reports the
performance of companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Fund Action, a mutual fund news report.
Houston Chronicle, a newspaper which may cover financial news.
Houston Post, a newspaper which may cover financial news.
IBC/Donoghue's Moneyletter, a biweekly newsletter which covers
financial news and from time to time rates specific mutual funds.
IBC's Money Market Insight, a monthly money market industry analysis prepared
by IBC USA, Inc.
Income and Safety, a monthly newsletter that rates mutual funds.
InvesTech, a bimonthly investment newsletter.
Investment Advisor, a monthly publication directed primarily to the advisor
community; includes ranking of mutual funds using a proprietary methodology.
Investment Company Institute, the national association of the American
investment company industry.
Investor's Business Daily, a newspaper which covers financial news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Lipper Analytical Services, Inc.'s Fixed Income Fund Performance Analysis,
a monthly publication of industry-wide mutual fund performance averages by
type of fund.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
monthly publication of industry-wide mutual fund averages by type of fund.
Los Angeles Times, a newspaper which may cover financial news.
Louis Rukeyser's Wall Street, a publication for investors.
Medical Economics, a monthly magazine providing information to
the medical profession.
Money, a monthly magazine that features the performance of both
specific funds and the mutual fund industry as a whole.
Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., reporting on the performance of the nation's
money market funds, summarizing money market fund activity, and
including certain averages as performance benchmarks,
specifically "Donoghue's Taxable First Tier Fund Average."
Morningstar 5 Star Investor, a monthly newsletter by Morningstar,
Inc. which covers financial news and rates mutual funds.
Mutual Fund Forecaster, a monthly newsletter that ranks mutual funds.
Mutual Fund Investing, a newsletter covering mutual funds.
Mutual Fund Performance Report, a monthly publication of mutual
fund performance and rankings, produced by Morningstar, Inc.
Mutual Funds Magazine, a monthly publication reporting on mutual
fund investing.
Mutual Fund Source Book, an annual publication produced by
Morningstar, Inc. which describes and rates mutual funds.
Mutual Fund Values, a biweekly guidebook to mutual funds produced by
Morningstar, Inc. (a data service which tracks open-end mutual funds).
Newsweek, a national business weekly.
New York Times, a newspaper which may cover financial news.
No Load Fund Investor, a newsletter covering companies in the
mutual fund industry.
Personal Investor, a monthly magazine which from time to time
features mutual fund companies and the mutual fund industry.
San Antonio Business Journal, a weekly newspaper that
periodically covers mutual fund companies as well as financial news.
San Antonio Express-News, a newspaper which may cover financial news.
San Francisco Chronicle, a newspaper which may cover financial news.
Smart Money, a monthly magazine featuring news and articles on investing
and mutual funds.
USA Today, a newspaper which may cover financial news.
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper
which covers financial news.
Washington Post, a newspaper which may cover financial news.
Weisenberger Mutual Funds Investment Report, a monthly newsletter
that reports on both specific mutual fund companies and the
mutual fund industry as a whole.
Worth, a magazine which covers financial and investment subjects
including mutual funds.
Your Money, a monthly magazine directed toward the novice investor.
Among the organizations cited above, Lipper Analytical
Services, Inc.'s tracking results may be used. A Fund will be
compared to Lipper's appropriate fund category according to fund
objective and portfolio holdings. The Aggressive Growth Fund
will be compared to funds in Lipper's small company growth funds
category, the Growth Fund to funds in Lipper's growth fund
category, the Growth & Income Fund to Lipper's growth & income
funds category, the Income Stock Fund to Lipper's equity income
category, the Income Fund to funds in Lipper's corporate debt BBB
grade category, the Short-Term Bond Fund to Lipper's short
investment grade debt funds category, and the Money Market Fund
to Lipper's taxable money market funds category. Footnotes in
advertisements and other marketing literature will include the
time period applicable for any ranking used.
Appendix B, cont.
For comparative purposes, unmanaged indexes of comparable securities
or economic data may be cited. Examples include the following:
- Ibbotson Associates, Inc., Stocks, Bonds, Bills, and Inflation Yearbook.
- Lehman Brothers 1-3 year Government/Corporate Index is an
unmanaged index of all the government, agency, and corporate
bonds longer than one year and less than three years.
- Lehman Brothers Aggregate Bond Index is an unmanaged index of
the Government/Corporate Index, the Mortgage Backed Securities
Index, and the Asset-Backed Securities Index.
- NASDAQ Industrials, a composite index of approximately 3000 unmanaged
securities of industrial corporations traded over the counter.
- Russell 2000(registered trademark) Index is an index which
consists of the 2,000 smallest companies in the Russell
3000(registered trademark) Index, a widely regarded small cap index.
- S&P 500 Index, a broadbased composite unmanaged index that
represents the average performance of a group of 500 widely held,
publicly traded stocks.
Other sources for total return and other performance data
which may be used by a Fund or by those publications listed
previously are Morningstar, Inc., Schabaker Investment
Management, and Investment Company Data, Inc. These are services
that collect and compile data on mutual fund companies.
APPENDIX C - DOLLAR-COST AVERAGING
Dollar-cost averaging is a systematic investing method which can
be used by investors as a disciplined technique for investing. A
fixed amount of money is invested in a security (such as a stock
or mutual fund) on a regular basis over a period of time,
regardless of whether securities markets are moving up or down.
This practice reduces average share costs to the investor
who acquires more shares in periods of lower securities prices
and fewer shares in periods of higher prices.
While dollar-cost averaging does not assure a profit or
protect against loss in declining markets, this investment
strategy is an effective way to help calm the effect of
fluctuations in the financial markets. Systematic investing
involves continuous investment in securities regardless of
fluctuating price levels of such securities. Investors should
consider their financial ability to continue purchases through
periods of low and high price levels.
As the following chart illustrates, dollar-cost averaging
tends to keep the overall cost of shares lower. This example is
for illustration only, and different trends would result in
different average costs.
HOW DOLLAR-COST AVERAGING WORKS
$100 Invested Regularly for 5 Periods
Market Trend
--------------------------------------------------------------
Down Up Mixed
---------------- ---------------- ----------------
Share Shares Share Shares Share Shares
Investment Price Purchased Price Purchased Price Purchased
---------------- ---------------- ----------------
$100 10 10 6 16.67 10 10
100 9 11.1 7 14.29 9 11.1
100 8 12.5 7 14.29 8 12.5
100 8 12.5 9 11.1 9 11.1
100 6 16.67 10 10 10 10
--- -- ----- -- ----- -- -----
$500 ***41 62.77 ***39 66.35 ***46 54.7
*Avg. Cost: $7.97 *Avg. Cost: $7.54 *Avg. Cost: $9.14
----- ----- -----
**Avg. Price: $8.20 **Avg. Price: $7.80 **Avg. Price: $9.20
----- ----- -----
* Average Cost is the total amount invested divided by shares purchased.
** Average Price is the sum of the prices paid divided by number
of purchases.
*** Cumulative total of share prices used to compute average prices.
06143-1295
USAA MUTUAL FUND, INC.
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements included in Parts A and B (Prospectuses
and Statement of Additional Information) of this
Registration Statement:
Financial Statements and Independent Auditors' Reports
are incorporated by reference to the USAA Aggressive
Growth, Growth, Growth & Income, Income Stock, Income,
Short-Term Bond, and Money Market Funds' Annual Reports
to Shareholders for fiscal year ended July 31, 1995.
(b) Exhibits:
Exhibit No. Description of Exhibits
- ---------- -----------------------
1(a) Articles of Incorporation dated October 10, 1980 (filed herewith)
(b) Articles of Amendment dated January 14, 1981 (filed herewith)
(c) Articles Supplementary dated July 28, 1981 (filed herewith)
(d) Articles Supplementary dated November 3, 1982 (filed herewith)
(e) Articles of Amendment dated May 18, 1983 (filed herewith)
(f) Articles Supplementary dated August 8, 1983 (filed herewith)
(g) Articles Supplementary dated July 27, 1984 (filed herewith)
(h) Articles Supplementary dated November 5, 1985 (filed herewith)
(i) Articles Supplementary dated January 23, 1987 (filed herewith)
(j) Articles Supplementary dated May 13, 1987 (filed herewith)
(k) Articles Supplementary dated January 25, 1989 (filed herewith)
(l) Articles Supplementary dated May 2, 1991 (filed herewith)
(m) Articles Supplementary dated November 14, 1991 (filed herewith)
(n) Articles Supplementary dated April 14, 1992 (filed herewith)
(o) Articles Supplementary dated November 4, 1992 (filed herewith)
(p) Articles Supplementary dated March 23, 1993 (filed herewith)
(q) Articles Supplementary dated May 5, 1993 (filed herewith)
(r) Articles Supplementary dated November 8, 1993 (filed herewith)
(s) Articles Supplementary dated January 18, 1994 (filed herewith)
(t) Articles Supplementary dated November 9, 1994 (filed herewith)
2 Bylaws, as amended January 10, 1994 (filed herewith)
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Growth Fund (filed herewith)
(b) Income Fund (filed herewith)
(c) Money Market Fund (filed herewith)
(d) Aggressive Growth Fund (filed herewith)
(e) Income Stock Fund (filed herewith)
(f) Growth & Income Fund (filed herewith)
(g) Short-Term Bond Fund (filed herewith)
5(a) Advisory Agreement dated September 21, 1990 (filed herewith)
(b) Letter Agreement dated June 1, 1993 adding Growth & Income
Fund and Short-Term Bond Fund (filed herewith)
6(a) Underwriting Agreement dated July 25, 1990 (filed herewith)
(b) Letter Agreement dated June 1, 1993 adding Growth & Income
Fund and Short-Term Bond Fund (filed herewith)
7 Not Applicable
Exhibit No. Description of Exhibits
- ---------- -----------------------
8(a) Custodian Agreement dated November 3, 1982 (filed herewith)
(b) Letter Agreement dated April 20, 1987 adding Income Stock Fund
(filed herewith)
(c) Amendment No. 1 to the Custodian Contract dated October 30, 1987
(filed herewith)
(d) Amendment to the Custodian Contract dated November 3, 1988
(filed herewith)
(e) Amendment to the Custodian Contract dated February 6, 1989
(filed herewith)
(f) Amendment to the Custodian Contract dated November 8, 1993
(filed herewith)
(g) Letter Agreement dated June 1, 1993 adding Growth & Income
Fund and Short-Term Bond Fund (filed herewith)
9(a) Articles of Merger dated January 30, 1981 (filed herewith)
(b) Transfer Agency Agreement dated January 23, 1992 (filed herewith)
(c) Letter Agreement dated June 1, 1993 adding Growth & Income
Fund and Short-Term Bond Fund (filed herewith)
(d) Amendments dated May 3, 1995 to the Transfer Agency Agreement
Fee Schedules for Growth Fund, Aggressive Growth Fund, Income
Fund, Growth & Income Fund, Income Stock Fund, Money Market Fund,
and Short-Term Bond Fund (filed herewith)
10 Opinion and Consent of Counsel (filed herewith)
11 Independent Auditors' Consent (filed herewith)
12 Financial Statements omitted from prospectus - Not Applicable
13 Subscription and Investment Letter for Growth & Income Fund
and Short-Term Bond Fund (filed herewith)
14 Prototype Plans
(a) USAA INVESTMENT MANAGEMENT COMPANY IRA Handbook (filed herewith)
(b) USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA Handbook (filed herewith)
(c) USAA INVESTMENT MANAGEMENT COMPANY 403(b)(7) Handbook (filed herewith)
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation (filed herewith)
17 Financial Data Schedules
(a) Growth Fund (filed herewith)
(b) Aggressive Growth Fund (filed herewith)
(c) Income Fund (filed herewith)
(d) Money Market Fund (filed herewith)
(e) Income Stock Fund (filed herewith)
(f) Growth & Income Fund (filed herewith)
(g) Short-Term Bond Fund (filed herewith)
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron A. Kirk,
John W. Saunders, Jr., C. Dale Briscoe, George E. Brown,
Howard L. Freeman, Jr., and Richard A. Zucker dated
January 21, 1994 (filed herewith)
(b) Powers of Attorney for Hansford T. Johnson and Barbara B. Dreeben
(filed herewith)
- --------------------
Item 25. Persons Controlled by or Under Common Control with Registrant
Information pertaining to persons controlled by or under
common control with Registrant is hereby incorporated by
reference to the section captioned "Management of the
Company" in the Prospectus and the section captioned
"Directors and Officers of the Company" in the Statement of
Additional Information.
Item 26. Number of Holders of Securities
Set forth below are the number of record holders, as of
August 31, 1995, of each class of securities of the Registrant.
Title of Class Number of Record Holders
-------------- ------------------------
Aggressive Growth Fund 34,251
Growth Fund 81,771
Income Stock Fund 104,451
Income Fund 81,212
Money Market Fund 106,348
Growth & Income Fund 21,950
Short-Term Bond Fund 5,817
Item 27. Indemnification
Protection for the liability of the adviser and
underwriter and for the officers and directors of the
Registrant is provided by two methods:
(a) The Director and Officer Liability Policy. This policy
covers all losses incurred by the Registrant, its
adviser and its underwriter from any claim made against
those entities or persons during the policy period by
any shareholder or former shareholder of the Fund by
reason of any alleged negligent act, error or omission
committed in connection with the administration of the
investments of said Registrant or in connection with
the sale or redemption of shares issued by said Registrant.
(b) Statutory Indemnification Provisions. Under Section 2-
418 of the Maryland General Corporation Law, the
Registrant is authorized to indemnify any past or
present director, officer, agent or employee against
judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him in connection with
any proceeding in which he is a party by reason of
having served as a director, officer, agent or
employee, if he acted in good faith and reasonably
believed that, (i) in the case of conduct in his
official capacity with the Registrant, that his conduct
was in the best interests of the Registrant, or (ii) in
all other cases, that his conduct was at least not
opposed to the best interests of the Registrant. In
the case of any criminal proceeding, said director,
officer, agent or employee must in addition have had no
reasonable cause to believe that his conduct was
unlawful. In the case of a proceeding by or in the
right of the Registrant, indemnification may only be
made against reasonable expenses and may not be made in
respect of any proceeding in which the director,
officer, agent or employee shall have been adjudged to
be liable to the Registrant. The termination of any
proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent
creates a rebuttable presumption that the director,
officer, agent or employee did not meet the requisite
standard of conduct for indemnification. No
indemnification may be made in respect of any
proceeding charging improper personal benefit to the
director, officer, agent or employee whether or not
involving action in such person's official capacity, if
such person was adjudged to be liable on the basis that
improper personal benefit was received. If such
director, officer, agent or employee is successful, on
the merits or otherwise, in defense of any such
proceeding against him, he shall be indemnified against
the reasonable expenses incurred by him (unless such
indemnification is limited by the Registrant's charter,
which it is not). Additionally, a court of appropriate
jurisdiction may order indemnification in certain
circumstances even if the appropriate standard of
conduct set forth above was not met.
Indemnification may not be made unless authorized in
the specific case after determination that the
applicable standard of conduct has been met. Such
determination shall be made by either: (i) the board
of directors by either (x) a majority vote of a quorum
consisting of directors not parties to the proceeding
or (y) if such a quorum cannot be obtained, then by a
majority vote of a committee of the board consisting
solely of two or more directors not at the time parties
to such proceeding who were duly designated to act in
the matter by a majority vote of the full board in
which the designated directors who are parties may
participate; (ii) special legal counsel selected by the
board of directors or a committee of the board by vote
as set forth in (i) above, or, if the requisite quorum
of the board cannot be obtained therefore and the
committee cannot be established, by a majority vote of
the full board in which directors who are parties may
participate; or (iii) the stockholders.
Reasonable expenses may be reimbursed or paid by the
Registrant in advance of final disposition of a
proceeding after a determination, made in accordance
with the procedures set forth in the preceding
paragraph, that the facts then known to those making
the determination would not preclude indemnification
under the applicable standards provided the Registrant
receives (i) a written affirmation of the good faith
belief of the person seeking indemnification that the
applicable standard of conduct necessary for
indemnification has been met, and (ii) a written
undertaking to repay the advanced sums if it is
ultimately determined that the applicable standard of
conduct has not been met.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Articles of
Incorporation or otherwise, the Registrant has been
advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, then the Registrant will,
unless in the opinion of its counsel the matter has
been settled by a controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether indemnification by it is against public policy
as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Information pertaining to business and other
connections of the Registrant's investment adviser is
hereby incorporated by reference to the section of the
Prospectus captioned "Management of the Company" and to
the section of the Statement of Additional Information
captioned "Directors and Officers of the Company".
Item 29. Principal Underwriters
(a) USAA Investment Management Company (the "Adviser") acts
as principal underwriter and distributor of the
Registrant's shares on a best-efforts basis and
receives no fee or commission for its underwriting
services. The Adviser, wholly-owned by United Services
Automobile Association, also serves as principal
underwriter for USAA Tax Exempt Fund, Inc., USAA
Investment Trust, and USAA State Tax-Free Trust.
(b) Set forth below is information concerning each director
and executive officer of USAA Investment Management
Company.
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
- ------------------ --------------------- --------------------
Hansford T. Johnson Director and Chairman Director and
9800 Fredericksburg Rd. of the Board of Chairman of the
San Antonio, TX 78288 Directors Board of Directors
Michael J.C. Roth Chief Executive Officer, President, Director
9800 Fredericksburg Rd. President, Director, and and Vice Chairman of
San Antonio, TX 78288 Vice Chairman of the the Board of Directors
Board of Directors
John W. Saunders, Jr. Senior Vice President, Vice President and
9800 Fredericksburg Rd. Fixed Income Investments, Director
San Antonio, TX 78288 and Director
Harry W. Miller Senior Vice President, None
9800 Fredericksburg Rd. Equity Investments,
San Antonio, TX 78288 and Director
William McCrae Director None
9800 Fredericksburg Rd.
San Antonio, TX 78288
Josue Robles, Jr. Director None
9800 Fredericksburg Rd.
San Antonio, TX 78288
John J. Dallahan Senior Vice President, None
9800 Fredericksburg Rd. Investment Services
San Antonio, TX 78288
Michael D. Wagner Vice President, Secretary Secretary
9800 Fredericksburg Rd. and Counsel
San Antonio, TX 78288
Sherron A. Kirk Vice President and Treasurer
9800 Fredericksburg Rd. Controller
San Antonio, TX 78288
Alex M. Ciccone Vice President, Assistant
9800 Fredericksburg Rd. Compliance Secretary
San Antonio, TX 78288
(c) Not Applicable
Item 30. Location of Accounts and Records
The following entities prepare, maintain and preserve the
records required by Section 31(a) of the Investment Company
Act of 1940 (the "1940 Act") for the Registrant. These
services are provided to the Registrant through written
agreements between the parties to the effect that such
services will be provided to the Registrant for such periods
prescribed by the Rules and Regulations of the Securities
and Exchange Commission under the 1940 Act and such records
are the property of the entity required to maintain and
preserve such records and will be surrendered promptly on request:
USAA Investment Management Company
9800 Fredericksburg Rd.
San Antonio, Texas 78288
USAA Shareholder Account Services
10750 Robert F. McDermott Freeway
San Antonio, Texas 78288
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant hereby undertakes to provide each person to
whom a prospectus is delivered a copy of the Registrant's
latest annual report(s) to shareholders upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Antonio and State
of Texas on the 6th day of September, 1995.
USAA MUTUAL FUND, INC.
/s/ Michael J.C. Roth
----------------------
Michael J.C. Roth
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
(Signature) (Title) (Date)
/s/ Hansford T. Johnson Chairman of the September 6, 1995
- ----------------------- Board of Directors
Hansford T. Johnson
/s/ Michael J.C. Roth Vice Chairman of the Board September 6, 1995
- --------------------- of Directors and President
Michael J.C. Roth (Principal Executive Officer)
/s/ Sherron A. Kirk Treasurer (Principal September 6, 1995
- ------------------- Financial and
Sherron A. Kirk Accounting Officer)
/s/ John W. Saunders, Jr. Director September 6, 1995
- -------------------------
John W. Saunders, Jr.
/s/ C. Dale Briscoe Director September 6, 1995
- -------------------
C. Dale Briscoe
/s/ George E. Brown Director September 6, 1995
- --------------------
George E. Brown
/s/ Howard L. Freeman, Jr. Director September 6, 1995
- --------------------------
Howard L. Freeman, Jr.
/s/ Richard A. Zucker Director September 6, 1995
- ----------------------
Richard A. Zucker
/s/ Barbara B. Dreeben Director September 6, 1995
- -----------------------
Barbara B. Dreeben
Exhibit Index
Page
Exhibit Item No. *
- ------- ---- -----
1(a) Articles of Incorporation dated October 10, 1980 (filed herewith) 204
(b) Articles of Amendment dated January 14, 1981 (filed herewith) 216
(c) Articles Supplementary dated July 28, 1981 (filed herewith) 219
(d) Articles Supplementary dated November 3, 1982 (filed herewith) 222
(e) Articles of Amendment dated May 18, 1983 (filed herewith) 225
(f) Articles Supplementary dated August 8, 1983 (filed herewith) 229
(g) Articles Supplementary dated July 27, 1984 (filed herewith) 232
(h) Articles Supplementary dated November 5, 1985 (filed herewith) 235
(i) Articles Supplementary dated January 23, 1987 (filed herewith) 238
(j) Articles Supplementary dated May 13, 1987 (filed herewith) 241
(k) Articles Supplementary dated January 25, 1989 (filed herewith) 244
(l) Articles Supplementary dated May 2, 1991 (filed herewith) 246
(m) Articles Supplementary dated November 14, 1991 (filed herewith) 249
(n) Articles Supplementary dated April 14, 1992 (filed herewith) 252
(o) Articles Supplementary dated November 4, 1992 (filed herewith) 255
(p) Articles Supplementary dated March 23, 1993 (filed herewith) 258
(q) Articles Supplementary dated May 5, 1993 (filed herewith) 261
(r) Articles Supplementary dated November 8, 1993 (filed herewith) 264
(s) Articles Supplementary dated January 18, 1994 (filed herewith) 267
(t) Articles Supplementary dated November 9, 1994 (filed herewith) 270
2 Bylaws, as amended January 10, 1994 (filed herewith) 273
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Growth Fund (filed herewith) 284
(b) Income Fund (filed herewith) 287
(c) Money Market Fund (filed herewith) 290
(d) Aggressive Growth Fund (filed herewith) 293
(e) Income Stock Fund (filed herewith) 296
(f) Growth & Income Fund (filed herewith) 299
(g) Short-Term Bond Fund (filed herewith) 302
5(a) Advisory Agreement dated September 21, 1990 (filed herewith) 305
(b) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (filed herewith) 313
6(a) Underwriting Agreement dated July 25, 1990 (filed herewith) 315
(b) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (filed herewith) 320
7 Not Applicable
8(a) Custodian Agreement dated November 3, 1982 (filed herewith) 322
(b) Letter Agreement dated April 20, 1987 adding Income Stock Fund
(filed herewith) 343
(c) Amendment No. 1 to the Custodian Contract dated October 30, 1987
(filed herewith) 348
(d) Amendment to the Custodian Contract dated November 3, 1988
(filed herewith) 351
(e) Amendment to the Custodian Contract dated February 6, 1989
(filed herewith) 353
(f) Amendment to the Custodian Contract dated November 8, 1993
(filed herewith) 355
(g) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (filed herewith) 361
9(a) Articles of Merger dated January 30, 1981 (filed herewith) 367
(b) Transfer Agency Agreement dated January 23, 1992 (filed herewith) 373
(c) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (filed herewith) 386
(d) Amendments dated May 3, 1995 to the Transfer Agency Agreement Fee
Schedules for Growth Fund, Aggressive Growth Fund, Income Fund,
Growth & Income Fund, Income Stock Fund, Money Market Fund, and
Short-Term Bond Fund (filed herewith) 390
Exhibit Index, cont.
Page
Exhibit Item No. *
- ------- ---- -----
10 Opinion and Consent of Counsel (filed herewith) 398
11 Independent Auditors' Consent (filed herewith) 400
12 Financial Statements omitted from prospectus - Not Applicable
13 Subscription and Investment Letter for Growth & Income Fund
and Short-Term Bond Fund (filed herewith) 402
14 Prototype Plans
(a) USAA INVESTMENT MANAGEMENT COMPANY IRA Handbook
(filed herewith) 405
(b) USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA Handbook
(filed herewith) 431
(c) USAA INVESTMENT MANAGEMENT COMPANY 403(b)(7) Handbook
(filed herewith) 454
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation
(filed herewith) 477
17 Financial Data Schedules
(a) Growth Fund (filed herewith) 480
(b) Aggressive Growth Fund (filed herewith) 483
(c) Income Fund (filed herewith) 486
(d) Money Market Fund (filed herewith) 489
(e) Income Stock Fund (filed herewith) 492
(f) Growth & Income Fund (filed herewith) 495
(g) Short-Term Bond Fund (filed herewith) 498
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron A. Kirk,
John W. Saunders, Jr., C. Dale Briscoe, George E. Brown,
Howard L. Freeman, Jr., and Richard A. Zucker dated
January 21, 1994 (filed herewith) 501
(b) Powers of Attorney for Hansford T. Johnson and Barbara B.
Dreeben (filed herewith) 503
- -------------------------------------------------
* Refers to sequentially numbered pages
EXHIBIT 1(a)
ARTICLES OF INCORPORATION
OF
USAA MUTUAL FUND, INC.
The undersigned David H. Murphree, whose post office address
is 28 State Street, Boston, Massachusetts, being eighteen years
of age, does hereby form a corporation under the General Laws of
the State of Maryland.
ARTICLE 1
Name
The name of the corporation (hereinafter referred to as the
"Corporation") shall be USAA MUTUAL FUND, INC.
ARTICLE II
Duration
The period of its duration is perpetual.
ARTICLE III
Purpose
The purposes for which the Corporation is formed are:
(a) To engage generally in the business of investing,
reinvesting, owning, holding and trading in securities (as
defined in the Investment Company Act of 1940, as from time
to time amended (referred to herein as the "1940 Act")) or
repurchase agreements, to issue redeemable securities, and to
generally engage in the business of an open-end investment
company of the management type; and
(b) To exercise all rights, powers, and privileges of
ownership or interest in all securities or repurchase
agreements held by the Corporation, including the right to
vote thereon and otherwise act with respect thereto and to do
all acts for the preservation, protection, improvement and
enhancement in the value of all such securities and
repurchase agreements.
(c) To aid by further investment any corporation,
company, trust, association, firm or other business
organization, any obligation of or interest in which is held
by the Corporation or in the affairs of which the Corporation
has any direct or indirect interest, and to do anything
designed to protect, preserve, improve or enhance the value
of such obligation or interest.
(d) To promote or aid the incorporation of any
organization or enterprise under the laws of any country,
state, municipality or other political subdivision, and to
cause the same to be dissolved, wound up, liquidated, merged
or consolidated.
(e) To do everything necessary, suitable or proper for
the accomplishment of any purpose or the attainment of any
object or the furtherance of any power herein set forth,
either alone or in association with others, and to take any
action incidental or appurtenant to or growing out of or
connected with the aforesaid business or purposes, objects or
powers.
(f) In general, to carry on any other lawful business and
to have and exercise all the rights, powers and privileges
conferred upon corporations by the laws of the State of
Maryland as in force from time to time.
The Corporation shall have the power to conduct and carry on
its business, or any part thereof, and to have one or more
offices, and to exercise any or all of its corporate powers and
rights, in the State of Maryland, in any other states,
territories, districts, colonies and dependencies of the United
States, and in any or all foreign countries.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall
not be held to limit or restrict in any manner the general powers
of the Corporation.
ARTICLE IV
Principal Office and Resident Agent
The post office address of the principal office of the
Corporation in this State is c/o The Corporation Trust
Incorporated, First Maryland Building, 25 South Charles Street,
Baltimore, Maryland 21201. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated,
a corporation of this State, and the post office address of the
resident agent is First Maryland Building, 25 South Charles
Street, Baltimore, Maryland 21201.
ARTICLE V
Authorized Capital
The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is one
billion shares, $.01 par value (the "Shares"), and of the
aggregate par value of $10,000,000. Three hundred million of
such Shares may be issued in the following classes, each class
comprising the number of shares and having the designations
indicated; subject, however to the authority herein granted to
the Board of Directors to increase or decrease any such number of
Shares:
Growth Fund 25,000,000 Shares
Income Fund 25,000,000 Shares
Money Market Fund 250,000,000 Shares
The balance of 700,000,000 Shares may be issued by the Board of
Directors in such initial classes, or in any new class or
classes, each comprising such number of Shares and having such
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of
redemption as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such
Shares adopted by the Board of Directors, to whom authority so to
fix and determine the same is hereby expressly granted. In
addition, the Board of Directors is hereby expressly granted
authority to increase or decrease the number of Shares of any
class, but the number of Shares of any class shall not be
decreased by the Board of Directors below the number of Shares
thereof then outstanding.
The Board of Directors may classify or reclassify any
unissued Shares into one or more classes that may be established
and designated from time to time. The Corporation may hold as
treasury Shares, reissue for such consideration and on such terms
as the Board of Directors may determine, or cancel, at their
discretion from time to time, any Shares of any class reacquired
by the Corporation.
ARTICLE VI
Rights and Preferences of Classes
Section 6.1. Procedure for Designation. The establishment
and designation of any class of Shares in addition to those
established and designated in Section 6.2 shall be effective upon
(i) the authorization of such class by vote of a majority of the
Board of Directors, including the establishment and designation
of the preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of redemption of such class, and (ii) the filing for
record of the articles supplementary required by Section 2-208 of
the Maryland General Corporation Law with the State Department of
Assessments and Taxation of Maryland. At any time when there are
no Shares outstanding or subscribed for a particular class
previously established and designated by the Board of Directors,
the class may be liquidated by similar means.
Section 6.2. Establishment and Designation of Classes.
Without limiting the authority of the Board of Directors set
forth herein to establish and designate any further classes,
there are hereby established and designated three classes of
stock to be known as: the Growth Fund, the Income Fund, and the
Money Market Fund. The Shares of said classes and any Shares of
any further class that may from time to time be established and
designated by the Board of Directors (unless provided otherwise
by the Board of Directors with respect to such further class at
the time of establishing and designating such further class)
shall have the following relative preferences, rights, voting
powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption:
(a) Assets Belonging to Classes. All consideration
received by the Corporation for the issue or sale of Shares
of a particular class, together with all assets in which such
consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to that class for all purposes,
subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General
Items allocated to that class as provided in the following
sentence, are herein referred to as "assets belonging to"
that class. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any
particular class (collectively "General Items"), such General
Items shall be allocated by or under the supervision of the
Board of Directors to and among any one or more of the
classes established and designated from time to time in such
manner or on such basis as the Board of Directors, in its
sole discretion, deems fair and equitable; and any General
Items so allocated to a particular class shall belong to that
class. Each such allocation by the Board of Directors shall
be conclusive and binding for all purposes.
(b) Liabilities Belonging to Class. The assets
belonging to each particular class shall be charged with the
liabilities of the Corporation in respect of that class and
all expenses, costs, charges and reserves attributable to
that class, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily
identifiable as belonging to any particular class shall be
allocated and charged by or under the supervision of the
Board of Directors to and among any one or more of the
classes established and designated from time to time in such
manner and on such basis as the Board of Directors, in its
sole discretion, deems fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so
charged to a class are herein referred to as "liabilities
belonging to" that class. Each allocation of liabilities,
expenses, costs, charges and reserves by the Board of
Directors shall be conclusive and binding for all purposes.
(c) Income Belonging to Class. The Board of Directors
shall have full discretion, to the extent not inconsistent
with the Maryland General Corporation Law and the 1940 Act,
to determine which items shall be treated as income and which
items as capital; and each such determination and allocation
shall be conclusive and binding.
Income belonging to a class includes all income, earnings
and profits derived from assets belonging to that class, less
any expenses, costs, charges or reserves belonging to that
class, for the relevant time period, all determined in
accordance with generally accepted accounting principles.
(d) Dividends. Dividends and distributions on Shares of
a particular class may be paid with such frequency, in such
form and in such amount as the Board of Directors may from
time to time determine. Dividends may be daily or otherwise
pursuant to the standing resolution or resolutions adopted
only once or with such frequency as the Board of Directors
may determine, after providing for actual and accrued
liabilities belonging to that class.
All dividends on Shares of a particular class shall be
paid only out of the income belonging to that class and
capital gains distributions on Shares of a particular class
shall be paid only out of the capital gains belonging to that
class. All dividends and distributions on Shares of a
particular class shall be distributed pro rata to the holders
of that class in proportion to the number of Shares of that
class held by such holders at the date and time of record
established for the payment of such dividends or
distributions, except that in connection with any dividend or
distribution program or procedure the Board of Directors may
determine that no dividend or distribution shall be payable
on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times
established by the Board of Directors under such program or
procedure.
The Corporation intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1954,
as amended, or any successor or comparable statue thereto,
and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books
of the Corporation, the Board of Directors shall have the
power, in its sole discretion, to distribute in any fiscal
year as dividends, including dividends designated in whole or
in part as capital gains distributions, amounts sufficient,
in the opinion of the Board of Directors, to enable the
Corporation to qualify as a regulated investment company and
to avoid liability of the Corporation for Federal income tax
in respect of that year. However, nothing in the foregoing
shall limit the authority of the Board of Directors to make
distributions greater than or less than the amount necessary
to qualify as a regulated investment company and to avoid
liability of the Corporation for such tax.
Dividends and distributions may be made in cash, property
or Shares, or a combination thereof, as determined by the
Board of Directors or pursuant to any program that the Board
of Directors may have in effect at the time for the election
by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the
net asset value thereof as defined in subsection 6.2(i).
(e) Liquidation. In the event of the liquidation or
dissolution of the Corporation or of a particular class, the
Shareholders of each class that has been established and
designated and is being liquidated shall be entitled to
receive, as a class, when and as declared by the Board of
Directors, the excess of the assets belonging to that class
over the liabilities belonging to that class. The holders of
Shares of any class shall not be entitled thereby to any
distribution upon liquidation of any other class. The assets
so distributable to the Shareholders of any particular class
shall be distributed among such Shareholders in proportion to
the number of Shares of that class held by them and recorded
on the books of the Corporation. The liquidation of any
particular class in which there are Shares then outstanding
may be authorized by vote of a majority of the Board of
Directors then in office, subject to the approval of a
majority of the outstanding securities of that class, as
defined in the 1940 Act.
(f) Voting. On each matter submitted to a vote of
Shareholders, each holder of a Share shall be entitled to one
vote for each Share standing in his name on the books of the
Corporation, irrespective of the class thereof, and all
Shares of all classes shall vote as a single class ("Single
Class Voting"); provided, however, that (a) as to any matter
with respect to which a separate vote of any class is
required by the 1940 Act or by the Maryland General
Corporation Law, such requirement as to a separate vote by
that class shall apply in lieu of Single Class Voting as
described above; (b) in the event that the separate vote
requirement referred to in (a) above apply with respect to
one or more classes, then, subject to (c) below, the Shares
of all other classes shall vote as a single class; and (c) as
to any matter which does not affect the interest of a
particular class, only the holders of Shares of the one or
more affected classes shall be entitled to vote.
(g) Redemption by Shareholder. Each holder of Shares of
a particular class shall have the right at such times as may
be permitted by the Corporation, but no less frequently than
once each week, to require the Corporation to redeem all or
any part of his Shares of that class at a redemption price
per share equal to the net asset value per Share of that
class next determined (in accordance with subjection (i) of
this Section 6.2) after the Shares are properly tendered for
redemption, less such redemption charge as is determined by
the Board of Directors, which redemption charge shall not
exceed one percent (1%) of said net asset value per share.
Payment of the redemption price shall be in cash; provided,
however, that if the Board of Directors determines, which
determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the
Corporation may make payment wholly or partly in securities
or other assets belonging to the class of which the Shares
being redeemed are part at the value of such securities or
assets used in such determination of net asset value.
Notwithstanding the foregoing, the Corporation may
postpone payment of the redemption price and may suspend the
right of the holders of Shares of any class to require the
Corporation to redeem Shares of that class during any period
or at any time when and to the extent permissible under the
1940 Act.
(h) Redemption by Corporation. The Board of Directors
may cause the Corporation to redeem at net asset value the
Shares of any class from a holder who has, for a period of
more than six months, had less than ten full Shares of that
class (five hundred full Shares in the case of Shares of the
Money Market Fund) in his account, provided that at least
sixty (60) days prior written notice of the proposed
redemption has been given to such holder by postage paid mail
to his last know address. Upon redemption of Shares pursuant
to this subsection, the Corporation shall promptly cause
payment of the full redemption price to be made to the holder
of Shares so redeemed.
(i) Net Asset Value Per Share. The net asset value per
Share of any class shall be the quotient obtained by dividing
the value of the net assets of that class (being the value of
the assets belonging to that class less the liabilities
belonging to that class) by the total number of Shares of
that class outstanding, all determined in accordance with
generally accepted accounting principles and not inconsistent
with the 1940 Act.
The Board of Directors may determine to maintain the net
asset value per Share of any class at a designated constant
dollar amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the
continuing declarations of income attributable to that class
as dividends payable in additional Shares of that class at
the designated constant dollar amount and for the handling of
any losses attributable to that class. Such procedures may
provide that in the event of any loss each Shareholder shall
be deemed to have contributed to the capital of the
Corporation attributable to that class his pro rata portion
of the total number of Shares required to be cancelled in
order to permit the net asset value per Share of that class
to be maintained, after reflecting such loss, at the designed
constant dollar amount. Each Shareholder of the Corporation
shall be deemed to have agreed, by his investment in any
class with respect to which the Board of Directors shall have
adopted any such procedure, to make the contribution referred
to in the preceding sentence in the event of any such loss.
(j) Equality. All Shares of each particular class shall
represent an equal proportionate interest in the assets
belonging to that class (subject to the liabilities belonging
to that class), and each Share of any particular class shall
be equal to each other Share of that class. The Board of
Directors may from time to time divide or combine the Shares
of any particular class into a greater or lesser number of
Shares of that class without thereby changing the
proportionate beneficial interest in the assets belonging to
that Class or in any way affecting the rights of Shares of
any other class.
(k) Conversion or Exchange Rights. Subject to
compliance with the requirements of the 1940 Act, the Board
of Directors shall have the authority to provide that holders
of Shares of any class shall have the right to convert or
exchange said Shares into Shares of one or more other classes
of Shares in accordance with such requirements and procedures
as may be established by the Board of Directors.
ARTICLE VII
Issue of New Stock
Section 7.1. Issuance. The Board of Directors is authorized
to issue and sell or cause to be issued and sold from time to
time (without the necessity of offering the same or any part
thereof to existing shareholders) all or any portion or portions
of the entire authorized but unissued Shares of the Corporation,
and all or any portion or portions of the Shares of the
corporation from time to time in its treasury, for cash or for
any other lawful consideration or considerations and on or for
any terms, conditions, or prices consistent with the provisions
of law and of the Articles of Incorporation at the time in force;
provided, however, that in no event shall Shares of the
corporation having a par value be issued or sold for a
consideration or considerations less in amount or value than the
par value of the shares so issued or sold, and provided further
that in no event shall any Shares of the Corporation be issued or
sold for a consideration (which shall be net to the Corporation
after underwriting discounts or commissions) less in amount or
value than the net asset value of the Shares so issued or sold
determined next after an order to purchase such Shares is
accepted, except that Shares may be sold to an underwriter at (a)
the net asset value determined next after such orders are
received by a dealer with whom such underwriter has a sales
agreement or (b) the next asset value determined at a later time.
Section 7.2. Fractional Shares. The Corporation may issue
and sell fractions of Shares having pro rata all the rights of
full Shares, including, without limitation, the right to vote and
to receive dividends, and wherever the words "share" or "shares"
are used in these Articles or in the Bylaws they shall be deemed
to include fractions of Shares, where the context does not
clearly indicate that only full Shares are intended.
ARTICLE VIII
Directors
The number of directors constituting the Board of Directors
shall be seven, which number may be changed in accordance with
the bylaws of the Corporation but shall never be less than three.
The names of the persons who shall act as directors until the
first annual meeting of the Corporation and until their
successors have been duly chosen and qualified are:
Robert F. McDermott
George H. Ensley
George K. Sykes
Austin W. Betts
Robert I. Ferguson
Howard L. Freeman, Jr.
Carl W. Stapleton
ARTICLE IX
Voting Requirements
9.1. Notwithstanding any provision of law requiring a
greater proportion than a majority of the votes of all classes
(or of any class entitled to vote thereon as a separate class) to
take or authorize any action, in accordance with the authority
granted by Section 2-104 of the Maryland General Corporation Law,
the Corporation is hereby authorized to take such action upon the
concurrence of a majority of the aggregate number of Shares (or a
majority of the aggregate number of Shares of a class entitled to
vote thereon as a separate class) entitled to vote thereon.
9.2. The right to cumulate votes in the election of
directors is expressly prohibited.
ARTICLE X
Transactions With Related Parties
10.1. Subject only to the provisions of the 1940 Act and to
the provisions of this Article X, any director, officer or
employee, individually, or any partnership of which any director,
officer or employee may be a member, or any corporation or
association of which any director, officer or employee may be an
officer, director, trustee, employee or shareholder, may be a
party to, or may be pecuniarily or otherwise interested in, any
contract or transaction of the Corporation, and in the absence of
fraud no contract or other transaction shall be thereby affected
or invalidated; provided that in case a director, or a
partnership, corporation or association of which a director is a
member, officer, director, trustee, employee or shareholder, is
so interested, such fact shall be disclosed or shall have been
known to the Board of Directors or a majority thereof; and any
director of the Corporation who is so interested or who is also a
director, officer, trustee, employee or shareholder of such other
corporation or association, or a member of such partnership which
is so interested, may be counted in determining the existence of
a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or
transaction with like force and effect as if he were not such
director, officer, trustee, employee or shareholder of such
corporation or association, or not so interested or a member of a
partnership so interested, or so interested individually.
10.2. Nothing herein contained shall protect or purport to
protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he
would otherwise be subject by reason of his willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE XI
Indemnification
Section 11.1. Non-Derivative Actions. The Corporation shall
indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director,
officer, agent or employee of the Corporation, or is or was
serving at the request of the Corporation as a director or
officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonable believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any
criminal action or proceeding, did not have reasonable cause to
believe that his conduct was unlawful.
Section 11.2. Derivative Actions. The Corporation shall
indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action,
suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is
or was a director, officer, agent or employee of the Corporation,
or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation;
except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation, unless and only to
the extent that a court shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper.
Section 11.3. Required Indemnification. To the extent that
a person who is or was a director, officer, agent or employee of
the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections
11.1 and 11.2, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 11.4. Determination. Any indemnification under
Sections 11.1 and 11.2 (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
agent or employee is proper in the circumstances because he has
met the applicable standard of conduct set forth in Sections 11.1
and 11.2. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the shareholders.
Section 11.5. Advance Payment. Expenses incurred in
defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of
such action, suit or proceedings as authorized by the Board of
Directors in the specific case upon receipt of an undertaking by
or on behalf of the director, officer, agent or employee to repay
such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in
this Article XI.
Section 11.6. Non-Exclusive Right. The indemnification
provided by this Article XI shall not be deemed exclusive of any
other rights to which a person seeking indemnification may be
entitled under any bylaws, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director, officer, agent or employee and shall
inure to the benefit of the heirs, executors and administrators
of such a person.
Section 11.7. Insurance. The Corporation may purchase and
maintain insurance on its behalf and on behalf of any person who
is or was a director, officer, agent or employee of the
Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against
such liability under the provisions of this Article XI.
ARTICLE XII
Bylaws
Except as may otherwise be provided in the Bylaws, the Board
of Directors of the Corporation is expressly authorized to make,
alter, amend and repeal Bylaws or to adopt new Bylaws of the
Corporation, without any action on the part of the shareholders;
but the Bylaws made by the Board of Directors and the power so
conferred may be altered or repealed by the shareholders.
ARTICLE XIII
Amendment
The Corporation reserves the right from time to time to make
any amendment of these Articles of Incorporation, now or
hereafter authorized by law, including any amendment which alters
contract rights, as expressly set forth in these Articles of
Incorporation, of any outstanding stock. Any amendment to these
Articles of Incorporation may be adopted at either an annual or
special meeting of the shareholders upon receiving an affirmative
majority vote of all outstanding Shares and an affirmative
majority of the outstanding Shares of each class entitled to vote
thereon separately as a class in accordance with subsection
6.2(f) hereof.
In Witness Whereof, the undersigned incorporator of USAA
MUTUAL FUND, INC. who executed the foregoing Articles of
Incorporation hereby acknowledges the same to be his act and
further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material
respects under the penalties of perjury.
Dated the 10th day of October, 1980.
/s/David H. Murphree
--------------------
David H. Murphree
EXHIBIT 1(b)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
(CHARTER)
OF
USAA MUTUAL FUND, INC.
Article One
The name of the Corporation (hereinafter referred to as the
"Corporation") is USAA MUTUAL FUND, INC. The Corporation does
hereby certify that the Charter of the Corporation was amended as
hereinafter described.
Article Two
Article XI is amended by adding a new Section 11.8 to read:
11.8 Limitation. Nothing in this Article XI shall protect
or purport to protect any director or officer of the Corporation
against any liability to the Corporation of its security holders
to which he would otherwise be subject by reason of his willful
misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his office. No
indemnification shall be paid hereunder if, in the opinion of
independent legal counsel, such payment would violate the 1940
Act.
Article Three
The Board of Directors of the Corporation, at a meeting duly
called and held on November 19, 1980 at which a quorum was
present, unanimously adopted a resolution in which was set forth
the foregoing amendment of the Charter, declaring that said
amendment is advisable and directing that it be submitted for
consideration at a special meeting of the stockholders of the
Corporation.
Article Four
The amendment of the Charter of the Corporation as
hereinabove set forth was duly approved by the stockholders of
the Corporation acting by unanimous consent without a formal
meeting as of December 31, 1980.
IN WITNESS WHEREOF, these Articles of Amendment have been
executed by the President and Secretary of USAA Mutual Fund, Inc.
thereunto duly authorized, as of the 14th day of January, 1981.
By:/s/ ROBERT F. McDERMOTT
---------------------------
ROBERT F. McDERMOTT
President
ATTEST:
/s/ LLOYD W. SIELBECK
- ---------------------
LLOYD W. SIELBECK
Secretary
CERTIFICATE
The undersigned Robert F. McDermott, President of USAA Mutual
Fund, Inc., who executed this on behalf of said Corporation the
foregoing Articles of Amendment of which this Certificate is made
a part, hereby acknowledges, in the name of said Corporation, the
foregoing Articles of Amendment to be the corporate act of said
Corporation and certifies that, to the best of his knowledge,
information and belief, the matters set forth therein with
respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/ ROBERT F. McDERMOTT
-----------------------
ROBERT F. McDERMOTT
President
EXHIBIT 1(c)
ARTICLES SUPPLEMENTARY
TO
CHARTER
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated July 28, 1981, supplementing the
Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of 25,000,000 shares of unissued stock into a
new class designated as the SUNBELT ERA FUND.
ARTICLE II
Section 2.1 Description of Stock. Without limiting the
authority of the Board of Directors, as set forth in the Charter
to which these supplementary articles apply, to establish and
designate any further classes of stock, there is hereby
established and designated a fourth class of stock in addition to
the three classes already established and designated as the
GROWTH FUND, the INCOME FUND and the MONEY MARKET FUND. Such
fourth class of stock shall be designated the SUNBELT ERA FUND
and shall have the relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as are described in Article VI
of the Articles of Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The stock comprising
the fourth class of stock of the USAA MUTUAL FUND, INC. has been
classified by the Board of Directors of USAA MUTUAL FUND, INC.
under the authority contained in Article V of the Charter of the
USAA MUTUAL FUND, INC. by vote duly adopted at a meeting of the
Board of Directors on July 8, 1981.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By:/s/ LLOYD W. SIELBECK By:/s/ ROBERT F. McDERMOTT
- ------------------------ ---------------------------
LLOYD W. SIELBECK ROBERT F. McDERMOTT
Secretary President
CERTIFICATE
The undersigned Robert F. McDermott, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, the foregoing Articles Supplementary to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set forth therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
/s/ ROBERT F. McDERMOTT
-----------------------
ROBERT F. McDERMOTT
President
EXHIBIT 1(d)
ARTICLES SUPPLEMENTARY
TO
CHARTER
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated November 3, 1982, supplementing
the Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of 250,000,000 shares of unissued stock into a
new class designated as the FEDERAL SECURITIES MONEY MARKET FUND,
and the classification of an additional 175,000,000 shares of
unissued stock into an existing class of shares of stock
designated as the MONEY MARKET FUND, to increase the number of
shares of that class.
ARTICLE II
Section 2.1 Description of Stock. Without limiting the
authority of the Board of Directors, as set forth in the Charter
to which these supplementary articles apply, to establish and
designate any further classes of stock, there is hereby
established and designated a fifth class of stock in addition to
the four classes already established and designated as the GROWTH
FUND, the INCOME FUND, the MONEY MARKET FUND and the SUNBELT ERA
FUND. Such fifth class of stock shall be designated the FEDERAL
SECURITIES MONEY MARKET FUND and shall have the relative
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of
redemption as are described in Article VI of the Articles of
Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The stock comprising
the fifth class of stock of the USAA MUTUAL FUND, INC., has been
classified by the Board of Directors of USAA MUTUAL FUND, INC.,
under the authority contained in Article V of the charter of the
USAA MUTUAL FUND, INC., by vote duly adopted at a meeting of the
Board of Directors on November 3, 1982.
ARTICLE III
Section 3.1. Increase in Number of Shares of a Class.
Without limiting the authority of the Board of Directors, as set
forth in the Charter to which these Supplementary Articles apply
to increase or decrease the number of shares of any class;
subject, however to the provision that the number of shares of
any class shall not be decreased by the Board of Directors below
the number of shares thereof then outstanding, the number of
shares of the class designated the MONEY MARKET FUND is hereby
increased by an additional 175,000,000 shares of unissued stock,
to equal a total of 425,000,000 shares of stock in the class of
shares designated the MONEY MARKET FUND. Such additional shares
shall have the relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as are described in Article VI
of the Articles of Incorporation of the USAA MUTUAL FUND, INC.
Section 3.2. Statement of Authority. The increase in the
number of shares of the class of shares designated the Money
Market Fund has been performed by the Board of Directors of USAA
Mutual Fund, Inc., under the authority contained in Article V of
the Charter of the USAA Mutual Fund, Inc., by vote duly adopted
at a meeting of the Board of Directors on November 3, 1982.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
/s/ ROBERT L. WORRALL By:/s/ ROBERT F. McDERMOTT
- --------------------- --------------------------
ROBERT L. WORRALL ROBERT F. McDERMOTT
Secretary President
CERTIFICATE
The undersigned Robert F. McDermott, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary, of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, the foregoing Articles Supplementary to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, the matters and facts
set below therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
/s/ ROBERT F. McDERMOTT
-----------------------
ROBERT F. McDERMOTT
President
EXHIBIT 1(e)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
(CHARTER)
OF
USAA MUTUAL FUND, INC.
ARTICLE ONE
The name of the Corporation (hereinafter referred to as the
"Corporation") is USAA Mutual Fund, Inc. The Corporation does
hereby certify that the Charter of the Corporation was amended as
hereinafter described.
ARTICLE TWO
Article V is hereby amended to read as follows:
ARTICLE V
The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is five
billion shares, $.01 par value (the "Shares"), and of the
aggregate par value of $50,000,000. Seven hundred fifty million
of such shares may be issued in the following classes, each class
comprising the number of shares and having the designations
indicated, subject, however, to the authority herein granted to
the Board of Directors to increase or decrease any such number of
shares:
Growth Fund . . . . . . . . . . . 25,000,000 Shares
Income Fund . . . . . . . . . . . 25,000,000 Shares
Money Market Fund . . . . . . . . 425,000,000 Shares
Sunbelt Era Fund. . . . . . . . . 25,000,000 Shares
Federal Securities
Money Market Fund . . . . . . . . 250,000,000 Shares
The balance of 4,250,000,000 shares may be issued by the
Board of Directors in such initial classes, or in any new class
or classes, each comprising such number of shares and having such
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of
redemption as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such
shares adopted by the Board of Directors, to whom authority so to
fix and determine the same is hereby expressly granted. In
addition, the Board of Directors is hereby expressly granted
authority to increase or decrease the number of shares of any
class, but the number of shares of any class shall not be
decreased by the Board of Directors below the number of shares
thereof then outstanding.
ARTICLE THREE
Immediately before the Amendment, the total number of shares
of stock of all classes which the Corporation has authority to
issue was one billion shares. As Amended, the total number of
shares of stock of all classes which the Corporation has
authority to issue is five billion shares.
ARTICLE FOUR
Immediately before the Amendment, the number of shares of
stock of each class was:
Growth Fund . . . . . . . . . . 25,000,000 shares
Income Fund . . . . . . . . . . 25,000,000 shares
Money Market Fund . . . . . . . 425,000,000 shares
Sunbelt Era Fund. . . . . . . . 25,000,000 shares
Federal Securities
Money Market Fund . . . . . . . 250,000,000 shares
The Amendment did not change the number of shares of stock of
each class here and above.
ARTICLE FIVE
The par value of the shares of stock of each class is
unaffected by the Amendment.
ARTICLE SIX
Immediately before the Amendment, the aggregate par value of
all the shares of all classes was $10,000,000. Subsequent to the
Amendment, the aggregate par value of all the shares of all
classes was $50,000,000.
ARTICLE SEVEN
The information required by subsection (b)(2)(i) of section
2-607 of the Maryland General Corporation Law was not changed by
the amendment.
ARTICLE EIGHT
The Board of Directors of the Corporation at a meeting duly
called and held on November 3, 1982 at which a quorum was
present, unanimously adopted a resolution in which was set forth
the foregoing Amendment of the Charter, declaring that said
Amendment is advisable and directing that it be submitted for
consideration at the annual meeting of the stockholders of the
Corporation.
ARTICLE NINE
The Amendment of the Charter of the Corporation as here and
above set forth was duly adopted by the stockholders of the
Corporation during the annual meeting held on January 7, 1983.
IN WITNESS WHEREOF, these Articles of Amendment have been
executed by the President and Secretary of USAA MUTUAL FUND,
INC., thereunto duly authorized, as of the 18th day of May, 1983.
By:/s/ ROBERT F. McDERMOTT
--------------------------
ROBERT F. McDERMOTT
President
ATTEST:
/s/ ROBERT L. WORRALL
- ---------------------
ROBERT L. WORRALL
Secretary
CERTIFICATE
The undersigned, ROBERT F. McDERMOTT, President of USAA
Mutual Fund Inc., who executed this on behalf of said corporation
the foregoing Articles of Amendment of which this Certificate is
made a part, hereby acknowledges, in the name of said Corporation
the foregoing Articles of Amendment to be the corporate act of
said Corporation and certifies that, to the best of his
knowledge, information and belief, that matters set forth therein
with respect to the approval hereof are true in all material
respects, under the penalties of perjury.
/s/ ROBERT F. McDERMOTT
-----------------------
ROBERT F. McDERMOTT
President
EXHIBIT 1(f)
ARTICLES SUPPLEMENTARY
TO
CHARTER
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated August 8, 1983, supplementing
the Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of an additional 325,000,000 shares of
unissued stock into an existing class of shares of stock
designated as the MONEY MARKET FUND to increase the number of
shares of that class, and the classification of an additinal
25,000,000 shares of unissued stock into an existing class of
shares of stock designated as the GROWTH FUND, to increase the
number of shares of that class.
ARTICLE II
Section 2.1 Increase in Number of Shares of a Class.
Without limiting the authority of the Board of Directors, as set
forth in the Charter to which these Supplementary Articles apply
to increase or decrease the number of shares of any class;
subject, however, to the provision that the number of shares of
any class shall not be decreased by the Board of Directors below
the number of shares thereof then outstanding, the number of
shares of the class designated the MONEY MARKET FUND is hereby
increased by an additional 325,000,000 shares of unissued stock,
to equal a total of 750,000,000 shares of stock in the class of
shares designated the MONEY MARKET FUND. The number of shares of
the class designated the GROWTH FUND is hereby increased by an
additional 25,000,000 shares of unissued stock to equal a total
of 50,000,000 shares of stock in the class of shares designated
the GROWTH FUND. Such additional shares shall have the relative
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of
redemption as are described in Article VI of the Articles of
Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The increase in the
number of shares of the class of shares designated the MONEY
MARKET FUND and the increase in the number of shares of the class
of shares designated the GROWTH FUND has been performed by the
Board of Directors of USAA MUTUAL FUND, INC., under the authority
contained in Article V of the Articles of Incorporation of the
USAA MUTUAL FUND, INC., by vote duly adopted at a meeting of the
Board of Directors on July 27, 1983.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By:/s/ MICHAEL D. WAGNER By:/s/ GEORGE K. SYKES
- ------------------------ ----------------------
MICHAEL D. WAGNER GEORGE K. SYKES
Secretary President
CERTIFICATE
The undersigned GEORGE K. SYKES, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, that the foregoing Articles Supplementary are the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set below therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
USAA MUTUAL FUND, INC.
/s/ GEORGE K. SYKES
--------------------
GEORGE K. SYKES
President
EXHIBIT 1(g)
ARTICLES SUPPLEMENTARY
TO
CHARTER
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated July 27, 1984, supplementing the
Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of an additional 750,000,000 shares of
unissued stock into an existing class of shares of stock
designated as the MONEY MARKET FUND to increase the number of
shares of that class.
ARTICLE II
Section 2.1 Increase in Number of Shares of a Class.
Without limiting the authority of the Board of Directors, as set
forth in the Charter to which these Supplementary Articles apply
to increase or decrease the number of shares of any class;
subject, however, to the provision that the number of shares of
any class shall not be decreased by the Board of Directors below
the number of shares thereof then outstanding, the number of
shares of the class designated the MONEY MARKET FUND is hereby
increased by an additional 750,000,000 shares of unissued stock,
to equal a total of 1,500,000,000 shares of stock in the class of
shares designated the MONEY MARKET FUND. Such additional shares
shall have the relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as are described in Article VI
of the Articles of Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The increase in the
number of shares of the class of shares designated the MONEY
MARKET FUND has been performed by the Board of Directors of USAA
MUTUAL FUND, INC., under the authority contained in Article V of
the Articles of Incorporation of the USAA MUTUAL FUND, INC., by
vote duly adopted at a meeting of the Board of Directors on July
27, 1984.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By:/s/ MICHAEL D. WAGNER By:/s/ GEORGE K. SYKES
- ------------------------ ----------------------
MICHAEL D. WAGNER GEORGE K. SYKES
Secretary President
CERTIFICATE
The undersigned GEORGE K. SYKES, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, that the foregoing Articles Supplementary are the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set below therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
USAA MUTUAL FUND, INC.
/s/ GEORGE K. SYKES
-------------------
GEORGE K. SYKES
President
EXHIBIT 1(h)
ARTICLES SUPPLEMENTARY
TO
CHARTER
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated November 5, 1985, supplementing
the Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of an additional 750,000,000 shares of
unissued stock into an existing class of shares of stock
designated as the MONEY MARKET FUND to increase the number of
shares of that class.
ARTICLE II
Section 2.1 Increase in Number of Shares of a Class.
Without limiting the authority of the Board of Directors, as set
forth in the Charter to which these Supplementary Articles apply,
to increase or decrease the number of shares of any class;
subject, however, to the provision that the number of shares of
any class shall not be decreased by the Board of Directors below
the number of shares thereof then outstanding, the number of
shares of the class designated the MONEY MARKET FUND is hereby
increased by an additional 750,000,000 shares of unissued stock,
to equal a total of 2,250,000,000 shares of stock in the class of
shares designated the MONEY MARKET FUND. Such additional shares
shall have the relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as are described in Article VI
of the Articles of Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The increase in the
number of shares of the class of shares designated the MONEY
MARKET FUND has been performed by the Board of Directors of USAA
MUTUAL FUND, INC., under the authority contained in Article V of
the Articles of Incorporation of the USAA MUTUAL FUND, INC., by
vote duly adopted at a meeting of the Board of Directors on
November 5, 1985.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By:/s/ MICHAEL D. WAGNER By:/s/ GEORGE K. SYKES
- ------------------------ ----------------------
MICHAEL D. WAGNER GEORGE K. SYKES
Secretary President
CERTIFICATE
The undersigned GEORGE K. SYKES, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, that the foregoing Articles Supplementary are the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set below therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
USAA MUTUAL FUND, INC.
/s/ GEORGE K. SYKES
--------------------
GEORGE K. SYKES
President
EXHIBIT 1(i)
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION (CHARTER)
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated January 23, 1987, supplementing
the Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of 25,000,000 shares of unissued stock into a
new class designated as the INCOME STOCK FUND.
ARTICLE II
Section 2.1 Description of Stock. Without limiting the
authority of the Board of Directors, as set forth in the Charter
to which these supplementary articles apply, to establish and
designate any further classes of stock, there is hereby
established and designated a sixth class of stock in addition to
the five classes already established and designated as the GROWTH
FUND, the INCOME FUND, the MONEY MARKET FUND, the SUNBELT ERA
FUND and the FEDERAL SECURITIES MONEY MARKET FUND. Such sixth
class of stock shall be designated the INCOME STOCK FUND and
shall have the relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as are described in Article VI
of the Articles of Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The stock comprising
the sixth class of stock of the USAA MUTUAL FUND, INC., has been
classified by the Board of Directors of USAA MUTUAL FUND, INC.,
under the authority contained in Article V of the Charter of the
USAA MUTUAL FUND, INC., by vote duly adopted at a meeting of the
Board of Directors on January 23, 1987.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By:/s/ MICHAEL D. WAGNER By:/s/ JOHN A. KNUBEL
- ------------------------ ---------------------
MICHAEL D. WAGNER JOHN A. KNUBEL
Secretary President
CERTIFICATE
The undersigned JOHN A. KNUBEL, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary, of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, the foregoing Articles Supplementary to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set below therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
USAA MUTUAL FUND, INC.
/s/ JOHN A. KNUBEL
-------------------
JOHN A. KNUBEL
President
EXHIBIT 1(j)
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION (CHARTER)
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated May 13, 1987, supplementing the
Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of an additional 25,000,000 shares of unissued
stock into an existing class of shares of stock designated as the
INCOME FUND to increase the number of shares of that class.
ARTICLE II
Section 2.1 Increase in Number of Shares of a Class.
Without limiting the authority of the Board of Directors, as set
forth in the Charter to which these Supplementary Articles apply
to increase or decrease the number of shares of any class;
subject, however, to the provision that the number of shares of
any class shall not be decreased by the Board of Directors below
the number of shares thereof then outstanding, the number of
shares of the class designated the INCOME FUND is hereby
increased by an additional 25,000,000 shares of unissued stock,
to equal a total of 50,000,000 shares of stock in the class of
shares designated the INCOME FUND. Such additional shares shall
have the relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as are described in Article VI
of the Articles of Incorporation of the USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The increase in the
number of shares of the class of shares designated the INCOME
FUND has been performed by the Board of Directors of USAA MUTUAL
FUND, INC., under the authority contained in Article V of the
Articles of Incorporation of the USAA MUTUAL FUND, INC., by vote
duly adopted at a meeting of the Board of Directors on May 13,
1987.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Assistant Secretary thereunto duly authorized as
of the day and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By:/s/ NORA P. McDANIEL By:/s/ JOHN A. KNUBEL
- ----------------------- ----------------------
NORA P. McDANIEL JOHN A. KNUBEL
Assistant Secretary President
CERTIFICATE
The undersigned JOHN A. KNUBEL, President of USAA MUTUAL
FUND, INC., who executed this on behalf of said corporation the
foregoing Articles Supplementary, of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, that the foregoing Articles Supplementary to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set forth therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
USAA MUTUAL FUND, INC.
/s/ JOHN A. KNUBEL
------------------
JOHN A. KNUBEL
President
EXHIBIT 1(k)
USAA MUTUAL FUND, INC.
ARTICLES OF AMENDMENT
USAA Mutual Fund, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (which is
hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended as
follows:
The name of the class of stock designated as the
"Sunbelt Era Fund" is changed to "Aggressive Growth Fund"
and in connection therewith all references in the Charter
to "Sunbelt Era Fund" are hereby deleted and the words
"Aggressive Growth Fund" shall be substituted therefor
wherever such words appear.
SECOND: The amendment does not increase the authorized stock
of the Corporation.
THIRD: The foregoing amendment to the Charter of the
Corporation has been advised by the Board of Directors and
approved by the stockholders of the Corporation.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on January 25, 1989.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner By /s/ David H. Roe
- ---------------------- ---------------------
Michael D. Wagner David H. Rose
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles of
Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles of Amendment to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
/s/ David H. Roe
-----------------
David H. Roe
President
EXHIBIT 1(l)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income Fund by classifying an additional
25,000,000 shares of the authorized and unissued stock of the
Corporation into the Income Fund.
THIRD: The additional shares of the Income Fund shall have the
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions as are
described in Article VI of the Articles of Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Fund, the total number of shares of stock of all classes that the
Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Fund, there were classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 25,000,000 shares of the Income Stock
Fund, 50,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, and 250,000,000 shares of the Federal
Securities Money Market Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Fund, there are classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 25,000,000 shares of the Income Stock
Fund, 75,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, and 250,000,000 shares of the Federal
Securities Money Market Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Fund,
the aggregate par value of all shares of all classes of stock
authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on May 2, 1991.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- ---------------------- -----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 1(m)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income Fund by classifying an additional
50,000,000 shares of the authorized and unissued stock of the
Corporation into the Income Fund.
THIRD: The additional shares of the Income Fund shall have the
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions as are
described in Article VI of the Articles of Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Fund, the total number of shares of stock of all classes that the
Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Fund, there were classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 25,000,000 shares of the Income Stock
Fund, 75,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, and 250,000,000 shares of the Federal
Securities Money Market Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Fund, there are classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 25,000,000 shares of the Income Stock
Fund, 125,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, and 250,000,000 shares of the Federal
Securities Money Market Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Fund,
the aggregate par value of all shares of all classes of stock
authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on November 14, 1991.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- --------------------- ----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 1(n)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income Stock Fund by classifying an additional
35,000,000 shares of the authorized and unissued stock of the
Corporation into the Income Stock Fund.
THIRD: The additional shares of the Income Stock Fund shall
have the preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions as are described in Article VI of the Articles of
Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Stock Fund, the total number of shares of stock of all classes
that the Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Stock Fund, there were
classified 50,000,000 shares of the Growth Fund, 25,000,000
shares of the Aggressive Growth Fund, 25,000,000 shares of the
Income Stock Fund, 125,000,000 shares of the Income Fund,
2,250,000,000 shares of the Money Market Fund, and 250,000,000
shares of the Federal Securities Money Market Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Stock Fund, there are
classified 50,000,000 shares of the Growth Fund, 25,000,000
shares of the Aggressive Growth Fund, 60,000,000 shares of the
Income Stock Fund, 125,000,000 shares of the Income Fund,
2,250,000,000 shares of the Money Market Fund, and 250,000,000
shares of the Federal Securities Money Market Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Stock
Fund, the aggregate par value of all shares of all classes of
stock authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on April 14, 1992.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- --------------------- ----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
-----------------------
Michael J. C. Roth
President
EXHIBIT 1(o)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income by classifying an additional 35,000,000
shares of the authorized and unissued stock of the Corporation
into the Income Fund.
THIRD: The additional shares of the Income Fund shall have the
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions as are
described in Article VI of the Articles of Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Fund, the total number of shares of stock of all classes that the
Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Fund, there were classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 60,000,000 shares of the Income Stock
Fund, 125,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, and 250,000,000 shares of the Federal
Securities Money Market Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Fund, there are classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 60,000,000 shares of the Income Stock
Fund, 160,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, and 250,000,000 shares of the Federal
Securities Money Market Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Fund,
the aggregate par value of all shares of all classes of stock
authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on November 4, 1992.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- --------------------- ----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 1(p)
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION (CHARTER)
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated March 23, 1993, supplementing
the Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of 25,000,000 shares of unissued stock into a
new class designated as the SHORT-TERM BOND FUND and 25,000,000
shares of unissued stock into an additional new class designated
as the GROWTH & INCOME FUND.
ARTICLE II
Section 2.1. Description of Stock. Without limiting the
authority of the Board of Directors, as set forth in the Charter
to which these supplementary articles apply, to establish and
designate any further classes of stock, there is hereby
established and designated a seventh class and eighth class of
stock in addition to the six classes already established and
designated as the GROWTH FUND, the AGGRESSIVE GROWTH FUND, the
INCOME FUND, the INCOME STOCK FUND, FEDERAL SECURITIES MONEY
MARKET FUND and the MONEY MARKET FUND. Such seventh class of
stock shall be designated the SHORT-TERM BOND FUND and such
eighth class of stock shall be designated the GROWTH & INCOME
FUND and shall have the relative preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption as are described in
Article VI of the Articles of Incorporation of the USAA MUTUAL
FUND, INC.
Section 2.2. Statement of Authority. The stock comprising
the seventh and eighth class of stock of the USAA MUTUAL FUND,
INC., has been classified by the Board of Directors of USAA
MUTUAL FUND, INC., under the authority contained in Article V of
the Charter of the USAA MUTUAL FUND, INC., by vote duly adopted
at a special meeting of the Board of Directors on March 23, 1993.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its President and
attested by its Secretary thereunto duly authorized as of the day
and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
BY:/s/ Michael D. Wagner BY:/s/ Michael J. C. Roth
- ------------------------ --------------------------
MICHAEL D. WAGNER MICHAEL J. C. ROTH
Secretary President
CERTIFICATE
The undersigned Michael J. C. Roth, President of USAA MUTUAL
FUND, INC., who executed on behalf of said corporation the
foregoing Articles Supplementary, of which this Certificate is
made a part, hereby acknowledges, in the name of said
corporation, the foregoing Articles Supplementary to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, the matters and facts
set forth therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
/s/ Michael J. C. Roth
-----------------------
Michael J. C. Roth
President
EXHIBIT 1(q)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income Stock Fund by classifying an additional
35,000,000 shares of the authorized and unissued stock of the
Corporation into the Income Stock Fund.
THIRD: The additional shares of the Income Stock Fund shall
have the preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions as are described in Article VI of the Articles of
Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Stock Fund, the total number of shares of stock of all classes
that the Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Stock Fund, there were
classified 50,000,000 shares of the Growth Fund, 25,000,000
shares of the Aggressive Growth Fund, 60,000,000 shares of the
Income Stock Fund, 160,000,000 shares of the Income Fund,
2,250,000,000 shares of the Money Market Fund, 250,000,000 shares
of the Federal Securities Money Market Fund, 25,000,000 shares of
the Short-Term Bond Fund, and 25,000,000 shares of the Growth &
Income Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Stock Fund, there are
classified 50,000,000 shares of the Growth Fund, 25,000,000
shares of the Aggressive Growth Fund, 95,000,000 shares of the
Income Stock Fund, 160,000,000 shares of the Income Fund,
2,250,000,000 shares of the Money Market Fund, 250,000,000 shares
of the Federal Securities Money Market Fund, 25,000,000 shares of
the Short-Term Bond Fund, and 25,000,000 shares of the Growth &
Income Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Stock
Fund, the aggregate par value of all shares of all classes of
stock authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on May 5, 1993.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- ---------------------- ----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 1(r)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income Fund by classifying an additional
40,000,000 shares of the authorized and unissued stock of the
Corporation into the Income Fund.
THIRD: The additional shares of the Income Fund shall have the
preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions as are
described in Article VI of the Articles of Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Fund, the total number of shares of stock of all classes that the
Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Fund, there were classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 95,000,000 shares of the Income Stock
Fund, 160,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, 250,000,000 shares of the Federal
Securities Money Market Fund, 25,000,000 shares of the Short-Term
Bond Fund, and 25,000,000 shares of the Growth & Income Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Fund, there are classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 95,000,000 shares of the Income Stock
Fund, 200,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, 250,000,000 shares of the Federal
Securities Money Market Fund, 25,000,000 shares of the Short-Term
Bond Fund, and 25,000,000 shares of the Growth & Income Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Fund,
the aggregate par value of all shares of all classes of stock
authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on November 8, 1993.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- --------------------- ------------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 1(s)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has heretofore
authorized the issuance of 5,000,000,000 shares of capital stock
of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Income Stock Fund by classifying an additional
40,000,000 shares of the authorized and unissued stock of the
Corporation into the Income Stock Fund.
THIRD: The additional shares of the Income Stock Fund shall
have the preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions as are described in Article VI of the Articles of
Incorporation.
FOURTH: (a) As of immediately before and after the increase in
the total number of shares classified as shares of the Income
Stock Fund, the total number of shares of stock of all classes
that the Corporation had and has authority to issue was and is
5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Income Stock Fund, there were
classified 50,000,000 shares of the Growth Fund, 25,000,000
shares of the Aggressive Growth Fund, 95,000,000 shares of the
Income Stock Fund, 200,000,000 shares of the Income Fund,
2,250,000,000 shares of the Money Market Fund, 250,000,000 shares
of the Federal Securities Money Market Fund, 25,000,000 shares of
the Short-Term Bond Fund, and 25,000,000 shares of the Growth &
Income Fund.
(c) After the increase in the total number of shares
classified as shares of the Income Stock Fund, there are
classified 50,000,000 shares of the Growth Fund, 25,000,000
shares of the Aggressive Growth Fund, 135,000,000 shares of the
Income Stock Fund, 200,000,000 shares of the Income Fund,
2,250,000,000 shares of the Money Market Fund, 250,000,000 shares
of the Federal Securities Money Market Fund, 25,000,000 shares of
the Short-Term Bond Fund, and 25,000,000 shares of the Growth &
Income Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Income Stock
Fund, the aggregate par value of all shares of all classes of
stock authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on January 18, 1994.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- --------------------- -----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 1(t)
USAA MUTUAL FUND, INC.
Articles Supplementary
USAA Mutual Fund, Inc., a Maryland Corporation, having its
principal office in San Antonio, Texas (the "Corporation"),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the
Maryland General Corporation Law, the Board of Directors has
heretofore authorized the issuance of 5,000,000,000 shares of
capital stock of the Corporation ($.01 par value per share).
(b) In accordance with Section 2-105(c) of the Maryland
General Corporation Law and pursuant to authority expressly
vested in the Board of Directors by the Articles of Incorporation
of the Corporation, the Board of Directors hereby increases the
aggregate number of shares of stock of the class of shares
designated as the Growth Fund by classifying an additional
25,000,000 shares of the authorized and unissued stock of the
Corporation into the Growth Fund.
THIRD: The additional shares of the Growth Fund shall
have the preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions as are described in Article VI of the Articles of
Incorporation.
FOURTH: (a) As of immediately before and after the
increase in the total number of shares classified as shares of
the Growth Fund, the total number of shares of stock of all
classes that the Corporation had and has authority to issue was
and is 5,000,000,000 shares ($.01 par value per share).
(b) Before the increase in the total number of shares
classified as shares of the Growth Fund, there were classified
50,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 135,000,000 shares of the Income Stock
Fund, 200,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, 250,000,000 shares of the Federal
Securities Money Market Fund, 25,000,000 shares of the Short-Term
Bond Fund, and 25,000,000 shares of the Growth & Income Fund.
(c) After the increase in the total number of shares
classified as shares of the Growth Fund, there are classified
75,000,000 shares of the Growth Fund, 25,000,000 shares of the
Aggressive Growth Fund, 135,000,000 shares of the Income Stock
Fund, 200,000,000 shares of the Income Fund, 2,250,000,000 shares
of the Money Market Fund, 250,000,000 shares of the Federal
Securities Money Market Fund, 25,000,000 shares of the Short-Term
Bond Fund, and 25,000,000 shares of the Growth & Income Fund.
(d) As of immediately before and after the increase in the
total number of shares classified as shares of the Growth Fund,
the aggregate par value of all shares of all classes of stock
authorized to be issued by the Corporation was and is
$50,000,000.
IN WITNESS WHEREOF, USAA Mutual Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on November 9, 1994.
WITNESS: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner /s/ Michael J. C. Roth
- --------------------- ----------------------
Michael D. Wagner Michael J. C. Roth
Secretary President
THE UNDERSIGNED, President of USAA Mutual Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
USAA MUTUAL FUND, INC.
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
President
EXHIBIT 2
USAA MUTUAL FUND, INC.
BYLAWS
AS AMENDED January 10, 1994
ARTICLE I
OFFICES
SECTION 1.1. Principal Office. The principal office of the Company in
the State of Maryland shall be in the City of Baltimore, State of Maryland.
SECTION 1.2. Other Offices. The Company may also have offices at such
other places both within and without the State of Maryland as the Board of
Directors may from time to time determine or the business of the Company may
require, including without limitation offices at San Antonio, Texas.
ARTICLE II
SHAREHOLDERS
SECTION 2.1. Place of Meetings. Meetings of shareholders shall be held
at the offices of the Company in the State of Maryland, at the offices of the
Company in the City of San Antonio, Texas, or at any other place within the
United States as shall be designated from time to time by the Board of
Directors and stated in the notice of meeting or in a duly executed waiver of
notice thereof.
SECTION 2.2. Annual Meeting. The Company is not required to hold an
annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act
of 1940 (the "1940 Act"). If the Company is required by the 1940 Act to hold
a meeting of stockholders to elect directors, such meeting shall be held at a
date and time set by the Board of Directors in accordance with the 1940 Act
and no later than 120 days after the occurrence of the event requiring the
meeting. Any stockholders' meeting held in accordance with the preceding
sentence shall for all purposes constitute the annual meeting of stockholders
for the fiscal year of the Company in which the meeting is held. Except as
the Charter or statute provides otherwise, any business may be considered at
an annual meeting without the purpose of the meeting having been specified in
the notice. Failure to hold an annual meeting does not invalidate the
Company's existence or affect any otherwise valid corporate acts.
SECTION 2.3. Special Meetings. Special meetings of the shareholders may
be called by the Board of Directors or by the President. Special meetings of
shareholders shall be called by the Secretary upon the written request of
holders of shares entitled to cast not less than twenty-five per cent of all
the votes entitled to be cast at such meeting. Such request shall state the
purpose or purposes of such meeting and the matters proposed to be acted on
thereat. The Secretary shall inform such requesting shareholders of the
reasonably estimated cost of preparing and mailing such notice of the meeting
and, upon payment to the Company of such costs, the Secretary shall give
notice stating the purpose or purposes of the meeting to all shareholders
entitled to notice of such meeting. No special meeting need be called to
consider any matter which is substantially the same as a matter voted upon at
any special meeting of the shareholders held during the preceding twelve
months unless requested by the holders of shares entitled to cast a majority
of all votes entitled to be cast at such meeting.
SECTION 2.4. Notice and Purpose. Not less than ten (10) nor more then
ninety (90) days before the date of every shareholders' meeting, the Secretary
shall give to each shareholder entitled to vote at such meeting, and to each
shareholder not entitled to vote who is entitled by statute to notice, written
or printed notice stating the time and place of the meeting and the purpose or
purposes for which the meeting is called, either by mail or by presenting it
to him personally or by leaving it at his residence or usual place of
business. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the shareholder at his post-office
address as it appears on the records of the Company, with postage thereon
prepaid. Business transacted at any special meeting of shareholders shall be
limited to the purposes stated in the notice.
SECTION 2.5. Record Date. The Board of Directors may fix, in advance,
a date as the record date for the purpose of determining shareholders entitled
to notice of, or to vote at, any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of shareholders for any other
proper purpose. Such date in any case shall be not more than ninety (90) days,
and in case of a meeting of shareholders, not less than ten (10) days, prior
to the date on which the particular action requiring such determination of
shareholders is to be taken.
SECTION 2.6. Quorum. The holders of a majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of the shareholders, but, if a quorum is not represented, a majority
in interest of those represented may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall
be present or represented. At such adjourned meeting, at which a quorum shall
be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
SECTION 2.7. Voting. Any holder of shares of the Company shall be
entitled to vote to the extent provided in subsection 6.2(f) of the Articles
of Incorporation, either in person or by proxy executed in writing by him or
by his duly authorized attorney-in-fact. Any holder of fractional shares of
the Company shall have proportionally the same voting rights as are provided
for a full share. No proxy shall be valid after eleven months from the date
of execution, unless otherwise provided in the proxy. Each proxy shall be
revocable unless expressly provided therein to be irrevocable or unless
otherwise made irrevocable by law. Proxies shall be delivered to the
Secretary of the Company before or at the time of such meeting. The vote of
the holders of a majority of the shares entitled to vote and represented at a
meeting at which a quorum is present shall be the act of the shareholders
meeting, unless the vote of a greater number is required by law, the Articles
of Incorporation or these Bylaws.
SECTION 2.8. Officers. The President shall preside at and the Secretary
shall keep the records of each meeting of shareholders, and in the absence of
either such officer, his duties shall be performed by some person appointed by
the meeting.
SECTION 2.9. Order of Business. The business shall be transacted in
such order as the presiding officer shall determine.
ARTICLE III
DIRECTORS
SECTION 3.1. General Powers. The business and property of the Company
shall be managed by its Board of Directors, and subject to the restrictions
imposed by law, by the Articles of Incorporation, or by these Bylaws, they
shall exercise all the powers of the Company.
SECTION 3.2. Delegation. To the extent permitted by law, the Board of
Directors may delegate the duty of management of the Company's assets and may
delegate such other of its powers and duties as are permitted by the Articles
of Incorporation or these Bylaws, (a) to the Executive Committee or other
committees, or (b) to another party to act as manager, investment adviser or
underwriter pursuant to a written contract or contracts to be approved in the
manner required by the Investment Company Act of 1940.
SECTION 3.3. Number. The Board of Directors shall consist of eight (8)
directors, but the number of directors may be increased or decreased (provided
such decrease does not shorten the term of any incumbent director) from time
to time by the Board of Directors by amendment of the Bylaws, provided that
the number of directors shall not be more than twenty-one (21) nor less than
three (3).
SECTION 3.4. Election, Resignations, Term of Office and Vacancies.
Until the first meeting of shareholders or until their successors are duly
elected and qualified, the Board of Directors shall consist of the persons
named as such in the Articles of Incorporation. Cumulative voting is not
permitted. Directors need not be residents of the State of Maryland or
shareholders of the Company. Each director, unless he sooner resigns or is
removed, shall hold office until his successor is elected and shall have
qualified. Any director may resign his office at any time by delivering his
resignation in writing to the Company. The acceptance of such resignation,
unless required by the terms thereof, shall not be necessary to make such
resignation effective. Subject to compliance with Section 16(a) of the
Investment Company Act of 1940, as amended, any vacancies occurring in the
Board of Directors other than by reason of an increase in the number of
directors may be filled by the affirmative vote of a majority of the
remaining directors, even though such majority is less than a quorum. A
director elected by the Board of Directors to fill a vacancy shall be elected
for the unexpired term of his predecessor in office. If a special meeting of
shareholders is required to fill a vacancy, the meeting shall be held within
sixty (60) days or such longer period as may be permitted by the Securities
and Exchange Commission.
SECTION 3.5. Place of Meeting. Meetings of the Board of Directors may
be held either within or without the State of Maryland, at whatever place is
specified by the officer calling the meeting. In the absence of a specific
place designation, the meeting shall be held at the office of the Company in
the City of San Antonio, Texas.
SECTION 3.6. Organizational and Regular Meetings. Any newly elected
Board of Directors may hold its first meeting for the purpose of organization
and the transaction of business, if a quorum is present, immediately following
its election at a meeting of the shareholders, at the place of such meeting.
No notice of such first meeting need be given to either old or new members of
the Board of Directors. Regular meetings may be held at such other times as
shall be designated by the Board of Directors and notice of such regular
meetings shall not be required.
SECTION 3.7. Special Meetings. Special meetings of the Board of
Directors may be held at any time upon the call of the President or any two
(2) directors of the Company. The Secretary shall give notice of such special
meeting by mailing the same at least three (3) days or by telegraphing or
telephoning the same at least one (1) day before the meeting to each director.
Notice of the time, place and purpose of such meeting may be waived in
accordance with Article VI of these Bylaws. Attendance of a director at such
meeting shall also constitute a waiver of notice thereof, except where he
attends for the announced purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Except as otherwise herein provided, neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
SECTION 3.8. Quorum and Manner of Acting. A majority of the number of
directors fixed by these Bylaws as from time to time amended shall constitute
a quorum for the transaction of business, but a smaller number may adjourn
from time to time until they can secure the attendance of a quorum. The act
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors, except as otherwise
expressly required under the provisions of the Investment Company Act of 1940,
as amended, or where a larger vote is required by law, the Articles of
Incorporation or these Bylaws. Any regular or special meeting of the Board of
Directors may be adjourned from time to time by those present, whether a
quorum is present or not.
SECTION 3.9. Removal of Directors. Any director may be removed from
office, either for or without cause, at any special meeting of shareholders
by the affirmative vote of a majority of the outstanding shares entitled to
vote for the election of directors. The notice calling such meeting shall
give notice of the intention to act upon such matter, and if the notice so
provides, the vacancy caused by such removal may be filled at such meeting by
vote of a majority of the shares represented at such meeting and entitled to
vote for the election of directors.
SECTION 3.10. Action Without Meeting. Subject to the provisions of the
Investment Company Act of 1940, as amended, any action permitted or required
by law, these Bylaws or by the Articles of Incorporation to be taken at a
meeting of the Board of Directors or any committee may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed
by all the members of the Board of Directors of such committee, as the case
may be. Such consent shall have the same force and effect as a unanimous vote
at a meeting, and may be stated as such in any document or instrument filed
with the Secretary of State or State Department of Assessments and Taxation of
Maryland.
ARTICLE IV
COMMITTEES
SECTION 4.1. Executive Committee. The Board of Directors may, by
resolution adopted by a majority of the entire Board of Directors, designate
an Executive Committee consisting of the President and one or more of the
directors of the Company, and may delegate to such Executive Committee any of
the powers of the Board of Directors except:
a. the power to declare dividends or distributions on stock;
b. the power to recommend to the shareholders any action
which requires shareholder approval;
c. the power to amend the Bylaws;
d. the power to approve any merger or share exchange which
does not require shareholder approval; or
e. the power to issue stock, except as hereafter provided.
If the Board of Directors has given general authorization for the issuance of
stock of any class, the Executive Committee, in accordance with a general
formula or method specified by the Board of Directors by resolution, may fix
the terms of such class and the terms on which any stock may be issued, to
the extent permitted by law and the Articles of Incorporation.
The Executive Committee shall keep written minutes of its proceedings and
shall report such minutes to the Board of Directors. All such proceedings
shall be subject to revision or alteration by the Board of Directors;
provided, however, that third parties shall not be prejudiced by such
revision or alteration.
SECTION 4.2. Other Committees. The Board of Directors may, by
resolution or resolutions adopted by a majority of the entire Board,
designate one or more committees, each committee to consist of two or more of
the directors of the Company, which committee shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the Company to the extent provided in said resolution or resolutions,
except where action of the Board of Directors is specified by law. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. The Board of
Directors shall have the power at any time to fill vacancies in, to change the
size or membership of, and to discharge any such committees.
SECTION 4.3. General. A committee shall fix its own rules of procedure
not inconsistent with these Bylaws and with any directions of the Board of
Directors. It shall meet at such times and places and upon such notice as
shall be provided by such rules or by resolution of the Board of Directors.
The presence of a majority shall constitute a quorum for the transaction of
business, and in every case an affirmative vote of a majority of the members
of the committee present shall be necessary for the taking of any action. A
committee shall keep regular minutes of its proceedings and report the same
to the Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 5.1. Number. The officers of the Company shall be chosen by the
Board of Directors and shall be a Chairman of the Board, a President, a Vice
President, a Secretary and a Treasurer. The Board of Directors may also
choose additional Vice Presidents, and one or more Assistant Secretaries and
Assistant Treasurers.
SECTION 5.2. Selection. The Board of Directors annually shall choose a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer, none of whom, other than the Chairman of the Board, need be a
member of the Board. Any two or more offices, except the offices of President
and Vice President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity if
such instrument is required by law, the Articles of Incorporation or these
Bylaws to be executed, acknowledged or verified by two or more officers.
SECTION 5.3. Term of Office. The officers of the Company shall hold
office until their successors are chosen and qualified. Any vacancy occurring
in any office of the Company shall be filled by the Board of Directors.
SECTION 5.4. Selection of Other Officers and Agents. The Board of
Directors may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors.
SECTION 5.5. Salaries. The salaries of all officers and agents of the
Company shall be fixed by the Board of Directors. No officer shall be
disqualified from receiving a salary by reason of his also being a director of
the Company.
SECTION 5.6. Suspension. Except for the Chairman of the Board and the
President of the Company, all officers shall be subject to peremptory
suspension by written order of the President, subject to subsequent action of
the Board of Directors. The Chairman of the Board and the President of the
Company shall be subject to peremptory suspension by written order of the
Board of Directors.
SECTION 5.7. Removal. Any officer or agent of the Company may be
removed during his term by a majority vote of the Board of Directors whenever,
in its judgment, removal of such person would serve the best interests of the
Company. Such removal shall terminate all of such person's authority as an
officer of agent, but his right to salary and any contract rights shall depend
on the terms of his employment and the circumstances of his removal. Election
or appointment of an officer or agent shall not of itself create contract
rights.
SECTION 5.8. Chairman of the Board. The Chairman of the Board shall
preside at meetings of the Board of Directors. He shall have such other
powers as are usually incident to the office of Chairman of the Board and
shall exercise such other specific powers as the Board of Directors may from
time to time assign to him.
SECTION 5.9. President. Subject to the control of the Board of
Directors, the President shall be the chief operating officer of the Company
and shall preside at all meetings of the shareholders. He shall assume
general and active management of the business of the Company and general and
active supervision and direction over the other officers, agents, and
employees of the Company and shall see that their duties are properly
performed. The foregoing shall not apply to any responsibilities delegated by
the Board of Directors to a manager, investment adviser, underwriter,
custodian, or transfer agent pursuant to any written contract, as provided for
in the Articles of Incorporation or these Bylaws.
The President, either alone or (if so required by law, these Bylaws or
the Board of Directors) with the Secretary or any other officer of the Company
so authorized by the Board of Directors, may sign certificates of shares of
the Company or any deeds, mortgages, bonds, contracts or other instruments
that the Board of Directors has authorized for execution, except when the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Company or
shall be required by law to be otherwise signed or executed.
The President, in conjunction with the Secretary, may duly authenticate
the Company records or copies thereof for use as evidence in any action or
proceeding to which the Company may be a party.
In general, the President shall perform all duties incident to the office
of President and such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 5.10. The Vice Presidents. The Vice President, or if there
shall be more than one, the Vice Presidents in the order determined by the
Board of Directors, shall be vested with all the powers and required to
perform all the duties of the President in his absence or disability or
refusal to act, and when so acting shall have all the powers of and be subject
to all the restrictions upon the President. Each Vice President shall
perform such other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe.
SECTION 5.11. The Secretary and Assistant Secretaries. The Secretary of
the Company shall have the following powers and duties:
a. to keep the minutes of the meetings of shareholders, of the Board of
Directors, and of any committee thereof in one or more books provided
for that purpose;
b. to see that all notices are duly given, in accordance with these Bylaws
or as required by law;
c. to be custodian of the corporate records and the seal of the Company;
d. to see that the seal of the Company is affixed to all documents duly
authorized for execution under seal on behalf of the Company;
e. to keep or cause to be kept for the Company the stock ledger described
in Section 7.2 of these Bylaws;
f. to countersign certificates for Company shares, the issuance of which
have been authorized by resolution of the Board of Directors;
g. to have general charge of the stock transfer books of the Company;
h. to duly authenticate, in conjunction with the President, the Company
records or copies thereof to be used as evidence in any action or
proceedings to which the Company may be a party and
i. to perform all duties incidental to the Office of Secretary and such
other duties as, from time to time, may be assigned to the Secretary
by the President or Board of Directors.
The Assistant Secretary, or if there by more than one, the Assistant
Secretaries in the order determined by the Board of Directors, shall, in the
absence or refusal to act or disability of the Secretary, perform the duties
and exercise the powers of the Secretary and shall perform such other duties
as, from time to time, may be assigned by the President, the Secretary or the
Board of Directors.
SECTION 5.12. The Treasurer and Assistant Treasurers. The Treasurer
shall:
a. have charge and custody of, and be responsible for, all the funds and
securities of the Company, except those which the Company has placed
in the custody of a bank or trust company pursuant to a written
agreement designating such bank or trust company as custodian of the
property of the Company;
b. keep full and accurate accounts of the receipts and disbursements in
books belonging to the Company;
c. cause all monies and other valuables to be deposited to the credit of
the Company;
d. receive, and give receipts for, monies due and payable to the Company
from any source whatsoever;
e. disburse the funds of the Company and supervise the investment of its
funds as ordered or authorized by the Board of Directors, taking
proper vouchers therefore; and
f. in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by
the President, or the Board of Directors.
The Assistant Treasurer, or if there be more than one, the Assistant
Treasurers in the order determined by the Board of Directors, shall, in the
absence or refusal to act or disability of the Treasurer, perform such other
duties as, from time to time, may be assigned by the President, the Treasurer
or the Board of Directors.
SECTION 5.13. Other Subordinate Officers. Other subordinate officers
and agents appointed by the Board of Directors shall exercise such powers and
perform such duties as may be assigned by the President or may be delegated to
them by the resolution appointing them, or by subsequent resolutions adopted
from time to time by the Board of Directors.
SECTION 5.14. Bonding. The Board of Directors may require any officer,
agent or employee to give bond for the faithful discharge of his duty and for
the protection of the Company in such sum and with such surety or sureties as
the Board of Directors may deem advisable.
ARTICLE VI
WAIVERS OF NOTICE
Whenever, under the provisions of any law, the Articles of Incorporation
of amendments thereto, or these Bylaws, any notice is required to be given to
any shareholder, director or committee member, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be equivalent to the giving of such
notice. Waivers given by telegram, radiogram, or cablegram shall be deemed
waivers in writing within the meaning of these Bylaws.
ARTICLE VII
CAPITAL STOCK
SECTION 7.1. Share Certificates. The Company will issue upon written
request certificates representing all full shares to which shareholders are
entitled. No certificate may be issued until payment for the shares
represented thereby has been made in full. Such certificates shall be
numbered and registered in the order in which they are issued, shall be
signed by the Chairman of the Board, President or Vice President and
countersigned by the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer, and may bear the seal of the Company or a facsimile
thereof. The signatures of such officers upon a certificate may be
facsimiles, if the certificate is countersigned by a transfer agent. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Company with the same effect as if he were
such officer at the date of its issuance. Each share certificate shall
include on its face the name of the Company, the name of the shareholder and
the class of stock and number of shares represented by the certificate. In
addition it shall contain on its face or its back a statement that the Company
will furnish to any of the shareholders upon request and without charge a full
statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
class which the Company is authorized to issue and the authority of the Board
of Directors to designate new classes and determine such matters with respect
thereto.
SECTION 7.2. Stock Ledger and Record of Shareholders. The Company shall
maintain at its offices in the City of San Antonio, State of Texas, or at the
offices of a transfer agent, if one is appointed, an original or duplicate
stock ledger containing the names and addresses of all shareholders and the
number of shares of each class held by each shareholder, and, if a certificate
has been issued, the certificate number, date of issue and whether it was
original issue or by transfer. The Board of Directors of the Company may
appoint one or more transfer agents of the stock of the Company. Unless and
until such appointment is made, the Secretary of the Company shall maintain
the stock ledger. The names of shareholders as they appear on the stock
ledger shall be the official list of shareholders of record of the Company
for all purposes. The Company shall be entitled to treat the holder of record
of any shares of the Company as the owner thereof for all purposes, and shall
not be bound to recognize any equitable or other claim to, or interest in,
such shares or any rights deriving from such shares, on the part of any other
person, including (but without limitation) a purchaser, assignee or
transferee, unless and until such other person becomes the holder of record
of such shares, whether or not the Company shall have either actual or
constructive notice of the interest of such other person, except as otherwise
provided by the laws of Maryland.
SECTION 7.3. Transfers of Shares. The shares of the Company shall be
transferable on the stock certificate books of the company upon appropriate
authorization in person by the holder of record thereof, or his duly
authorized attorney or legal representative, and, if a certificate was
issued, upon endorsement and surrender for cancellation of the certificate
for such shares. All certificates surrendered for transfer shall be
cancelled, and no new certificates shall be issued to the transferee until a
former certificate or certificates for a like number of shares shall have been
surrendered and cancelled, except that in the case of a lost, destroyed or
mutilated certificate, a new certificate may be issued therefor upon such
conditions for the protection of the Company and any transfer agent of the
Company as the Board of Directors may prescribe.
SECTION 7.4. Account Maintenance Charges. The Board of Directors may,
in accordance with such terms and conditions as it may from time to time
prescribe, establish an account maintenance charge to be paid by shareholders
of the Company for maintenance of their accounts. Any account maintenance
charge established by the Board of Directors of the Company may be charged
against income credited to a shareholder account and, to the extent there
is not sufficient income credited to a shareholder account in any period to
cover such charge, the Company may redeem sufficient shares owned by a
shareholder to cover such charges. A shareholder charged with any
maintenance charge pursuant to this Section 7.4 as a result of having an
account with a value less than a specified amount shall be given prompt
written notice at the time of imposition of such charge.
ARTICLE VIII
CUSTODIAN
SECTION 8.1. Employment of Custodian. All assets of the Company shall
be held by one or more custodian banks or trust companies meeting the
requirements of the Investment Company Act of 1940, as amended, and having
capital, surplus and undivided profits of at least $2,000,000 and may be
registered in the name of the Company, including a designation of the
particular class to which such assets belong, or any such custodian, or a
nominee of either of them. The terms of any custodian agreement shall be
determined by the Board of Directors, which terms shall be in accordance with
the provisions of the Investment Company Act of 1940, as amended. If so
directed by vote of the holders of a majority of the outstanding shares of a
particular class or by vote of the Board of Directors, the custodian of the
assets belonging to such class shall deliver and pay over such assets as
specified in such vote.
Subject to such rules, regulations and orders as the Securities and
Exchange Commission may adopt, the Company may direct a custodian to deposit
all or any part of the securities owned by the Company in a system for the
central handling of securities established by a national securities exchange
or a national securities association registered with the Securities and
Exchange Commission, or otherwise in accordance with the Investment Company
Act of 1940, as amended, pursuant to which system all securities of any
particular class of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only upon the order of the Company or a custodian.
ARTICLE IX
INSPECTION OF BOOKS AND SHAREHOLDER LIST
SECTION 9.1. Inspection of Books. The Directors shall have the power
from time to time to determine whether and to what extent, and at what times
and places, and under what conditions and regulations the accounts and books
of the Company (other than the stock ledger) or any of them shall be open to
the inspection of the shareholders. No shareholder shall have any right to
inspect any account or book or document of the Company except as conferred by
law or authorized by the Board of Directors or the shareholders.
SECTION 9.2. Inspection of Shareholder List. Any one or more persons,
who together are and for at lease six months have been shareholders of record
of at least 5% of the outstanding shares of the Company, may submit (unless
the Company at the time of the request maintains a duplicate stock ledger at
its principal office in Maryland) a written request to any officer of the
Company or its resident agent in Maryland for a list of the shareholders of
the Company.
Within 20 days after such request, there shall be prepared and filed at the
Company's principal office in Maryland a list, verified under oath by an
officer of the Company or by its stock transfer agent or registrar, which
sets forth the name and address of each shareholder and the number of shares
of each class which the shareholder holds.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Fiscal Year. The fiscal year of the Company shall begin
on the first day of August and end on the thirty-first day of July in each
year.
SECTION 10.2. Seal. The corporate seal shall have inscribed thereon the
name of the Company, the year of its organization and the words "Corporate
Seal, Maryland." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
SECTION 10.3. Annual Statement of Affairs. The President or any Vice
President or the Treasurer shall prepare annually a full and correct statement
of the affairs of the Company, to include a balance sheet and a financial
statement of operations for the preceding fiscal year. The statement of
affairs shall be placed on file at the Company's principal office within
120 days after the end of the fiscal year.
ARTICLE XI
AMENDMENT
SECTION 11.1. By Shareholders. These Bylaws may be amended, altered,
repealed or added to at any special meeting called for that purpose by the
affirmative vote of a majority of the shares entitled to vote and represented
at such meeting.
SECTION 11.2. By Directors. The Board of Directors may alter and amend
these Bylaws at any regular meeting of the Board, or at any special meeting
of the Board called for that purpose, by the affirmative vote of a majority
of such Board, except where a vote of shareholders is required by law, the
Articles of Incorporation, or these Bylaws.
EXHIBIT 4(a)
Number USAA MUTUAL FUND, INC. Shares
GROWTH FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 10 8
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Dyek R. Boles PICTURE of /s/Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By_____________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated__________________Signature(s)_____________________________
Signature Guaranteed By ________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(b)
Number USAA MUTUAL FUND, INC. Shares
INCOME FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 20 7
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By___________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated __________________Signature(s)_______________________
Signature Guaranteed By____________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(c)
Number USAA MUTUAL FUND, INC. Shares
MONEY MARKET FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 30 6
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By____________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated___________________Signature(s)_____________________________
Signature Guaranteed By__________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(d)
Number USAA MUTUAL FUND, INC. Shares
AGGRESSIVE GROWTH FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 40 5
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By___________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated__________________Signature(s)____________________________
Signature Guaranteed By_________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(e)
Number USAA MUTUAL FUND, INC. Shares
INCOME STOCK FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 60 3
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Dyek R. Boles PICTURE of /s/Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By____________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated_________________ Signature(s)________________________________
Signature Guaranteed By____________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(f)
Number USAA MUTUAL FUND, INC. Shares
GROWTH & INCOME FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 80 1
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Sherron Kirk PICTURE of /s/Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated_________________Signature(s)_____________________________
Signature Guaranteed By_________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Shareholder Account
Services, USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(g)
Number USAA MUTUAL FUND, INC. Shares
SHORT-TERM BOND FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 903288 70 2
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Sherron Kirk PICTURE of /s/Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
Please Print or Typewrite Name and Address of Assignee
( )
shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
attorney to transfer the said
stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated_______________ Signature(s)______________________________
Signature Guaranteed By________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Shareholder Account
Services, USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 5(a)
ADVISORY AGREEMENT
AGREEMENT made as of the 21st day of September, 1990 between
USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under
the laws of the State of Delaware and having a place of business
in San Antonio, Texas (the "Manager"), and USAA MUTUAL FUND,
INC., a corporation organized under the laws of the State of
Maryland and having a place of business in San Antonio, Texas
(the "Company").
WHEREAS, the Company is engaged in business as an open-end
management investment company and is so registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business
of rendering investment management services and is registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company is authorized to issue shares of capital
stock (the "Shares") in separate classes with each such class
representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Company presently offers Shares in five classes
designated as the Growth Fund, Aggressive Growth Fund, Income
Stock Fund, Income Fund and Money Market Fund (the "Existing
Funds") (such classes, together with all other classes
subsequently established by the Company with respect to which the
Company desires to retain the Manager to render investment
advisory services hereunder and with respect to which the Manager
is willing so to do, being herein collectively referred to as the
"Funds");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between
the parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Existing Funds. The Company hereby appoints the Manager
to act as manager and investment adviser to each of the
Existing Funds for the period and on the terms herein set
forth. The Manager accepts such appointment and agrees to
render the services herein set forth, for the compensation
herein provided.
(b) Additional Funds. In the event that the Company
establishes one or more classes of Shares other than the
Existing Funds with respect to which it desires to retain the
Manager to render management and investment advisory services
hereunder, it shall so notify the Manager in writing. If the
Manager is willing to render such services it shall notify
the Company in writing, whereupon the Company shall appoint
the Manager to act as manager and investment adviser to each
of such classes of shares for the period and on the terms
herein set forth, the Manager shall accept such appointment
and agree to render the services herein set forth for the
compensation herein provided, and each of such classes of
Shares shall become a Fund hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following
services and facilities to the Company:
(a) Investment Program. The Manager will (i) furnish
continuously an investment program for each Fund, (ii)
determine (subject to the overall supervision and review of
the Board of Directors of the Company) what investments shall
be purchased, held, sold or exchanged by each Fund and what
portion, if any, of the assets of each Fund shall be held
uninvested, and (iii) make changes on behalf of the Company
in the investments of each Fund. The Manager will also
manage, supervise and conduct the other affairs and business
of the Company and of each Fund thereof and matters
incidental thereto, subject always to the control of the
Board of Directors of the Company and to the provisions of
the Company's Articles of Incorporation and Bylaws and the
1940 Act.
(b) Regulatory Reports. The Manager shall furnish to the
Company necessary assistance in:
(i) The preparation of all reports now or hereafter required
by Federal or other laws.
(ii) The preparation of Prospectuses, Registration Statements,
and amendments thereto that may be required by Federal or other
laws or by the rules or regulations of any duly authorized
commission or administrative body.
(c) Office Space, Facilities, and Personnel. The Manager
shall furnish to the Company office space in the offices of
the Manager or in such other place or places as may be agreed
upon from time to time, and all necessary office facilities,
simple business equipment, supplies, utilities, telephone
service and accounting services (in addition to those
provided by the custodian and transfer agent) for managing
the affairs and investments of the Company. These services
are exclusive of the necessary records of any dividend
disbursing agent, transfer agent, registrar or custodian.
The Manager shall compensate all personnel, officers, and
Directors of the Company if such persons are also officers or
employees of the Manager or its affiliates.
(d) Fidelity Bond. The Manager shall provide and maintain a
bond issued by a reputable insurance company authorized to do
business in the place where the bond is issued, against
larceny and embezzlement covering each officer and employee
of the Company who may singly or jointly with others have
access to funds or securities of the Company, with direct or
indirect authority to draw upon such funds or to direct
generally the disposition of such funds. The bond shall be
in such reasonable amount as a majority of the Board of
Directors of the Company who are not officers or employees of
the Company shall determine, with due consideration to the
aggregate assets of the Company to which any such officer or
employee may have access.
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the
Manager set forth in Paragraph 2 above, the Company assumes and
shall pay all expenses for all other Company operations and
activities and shall reimburse the Manager for any such expenses
incurred by the Manager. The expenses to be borne by the Company
shall include, without limitation:
(a) the charges and expenses of any registrar, share transfer
or dividend disbursing agent, custodian, or depository
appointed by the Company for the safekeeping of its cash,
portfolio securities and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions for transactions in the portfolio
securities of the Company;
(d) all taxes, including issuance and transfer taxes, and fees
payable by the Company to Federal, state or other
governmental agencies;
(e) the cost of share certificates representing Shares of the Company;
(f) fees involved in registering and maintaining registrations
of the Company and of its Shares with the Securities and Exchange
Commission and various states and other jurisdictions;
(g) all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing proxy statements,
quarterly reports, semiannual reports, annual reports and
other communications (including Prospectuses) to existing shareholders;
(h) compensation and travel expenses of Directors who are not
"interested persons" within the meaning of the 1940 Act;
(i) the expense of furnishing or causing to be furnished to
each shareholder a statement of his account, including the
expense of mailing;
(j) charges and expenses of legal counsel in connection with
matters relating to the Company, including, without
limitation, legal services rendered in connection with the
Company's legal and financial structure and relations with
its shareholders, issuance of Company Shares, and
registration and qualification of securities under Federal,
state and other laws;
(k) membership or association dues for the Investment Company
Institute or similar organizations;
(l) interest payable on Company borrowings; and
(m) postage.
4. ADVISORY FEE.
(a) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Growth
Fund computed as a percentage of aggregate average net assets
of such Fund, which on an annual basis is equal to three-
fourths of one percent (.75%) of the Monthly Average Net
Assets (defined below) of such Fund for such calendar month.
(b) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Aggressive
Growth Fund computed as a percentage of aggregate average net
assets of such Fund, which on an annual basis is equal to:
(1) one-half of one percent (.50%) on an annual basis of the
first $200,000,000 of the Monthly Average Net Assets (defined
below) of such Fund for such calendar month;
(2) two-fifths of one percent (.40%) on an annual basis for
that portion of Monthly Average Net Assets in excess of
$200,000,000 and not over $300,000,000 of such Fund for such
calendar month; and
(3) one-third of one percent (1/3%) for the portion of such
Monthly Average Net Assets of such Fund in excess of $300,000,000.
(c) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Income
Stock Fund computed as a percentage of aggregate average net
assets of such Fund, which on an annual basis is equal to
one-half of one percent (.50%) of the Monthly Average Net
Assets (defined below) of such Fund for such calendar month.
(d) For the services and facilities to be provided by the
Manager as provided in Paragraph 2 hereof, the Company shall
pay to the Manager a monthly fee with respect to the Income
Fund and Money Market Fund computed as a percentage of
aggregate average net assets of each Fund, which on an annual
basis is equal to twenty-four one-hundredths of one percent
(.24%) of all Monthly Average Net Assets (defined below) of
each Fund for such calendar month.
(e) The "Monthly Average Net Assets" of any Fund of the
Company for any calendar month shall be equal to the quotient
produced by dividing (i) the sum of the net assets of such
Fund, determined in accordance with procedures established
from time to time by or under the direction of the Board of
Directors of the Company in accordance with the Articles of
Incorporation of the Company, as of the close of business on
each day during such month that such Fund was open for
business, by (ii) the number of such days.
(f) The Manager may from time to time and for such periods as
it deems appropriate voluntarily waive fees or otherwise
reduce its compensation hereunder.
5. EXPENSE LIMITATION.
In the event that expenses of any Fund of the Company for any
fiscal year should exceed the expense limitation on investment
company expenses imposed by any statute or regulatory authority
of any jurisdiction in which shares of the Company are qualified
for offer and sale, the compensation due the Manager for such
fiscal year with respect to such Fund shall be reduced by the
amount of such excess by a reduction or refund thereof. In the
event that the expenses of any Fund exceed any expense limitation
which the Manager may, by written notice to such Fund,
voluntarily declare to be effective subject to such terms and
conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary,
the Manager shall assume expenses of such Fund, to the extent
required by such expense limitation.
In the event this Agreement is terminated with respect to any
one or more Funds as of a date other than the last day of the
fiscal year of the Company, the Manager shall pay the Company a
pro rata portion of the amount that the Manager would have been
required to pay, if any, had this Agreement remained in effect
for the full fiscal year.
6. COMPANY TRANSACTIONS.
In connection with the management of the investment and
reinvestment of the assets of the Company, the Manager, acting by
its own officers, directors or employees or by a duly authorized
subcontractor, is authorized to select the brokers or dealers
that will execute purchase and sale transactions for the Company
and is directed to use its best efforts to obtain the best
available price and most favorable execution with respect to all
such purchases and sales of portfolio securities for the Company.
Subject to this primary requirement, and maintaining as its first
consideration the benefits to the Company and its shareholders,
the Manager shall have the right, subject to the control of the
Board of Directors, to follow a policy of selecting brokers and
dealers who furnish statistical, research and other services to
the Company or to the Manager.
The Manager agrees that neither it nor any of its officers or
directors will take any long or short position in the capital
stock of the Company; provided, however, that such prohibition:
(a) shall not prevent the Manager from purchasing shares of
the capital stock of the Company if orders to purchase such
shares are placed upon the receipt by the Manager of purchase
orders for such shares and are not in excess of such purchase
orders received by the Manager; and
(b) shall not prevent the purchase of shares of capital stock
of the Company by any of the persons above described for
their account and for investment at the price at which such
shares are available to the public at the time of purchase or
as part of the initial capital of the Company.
7. RELATIONS WITH COMPANY.
Subject to and in accordance with the Articles of
Incorporation and Bylaws of the Company and of the Manager,
respectively, it is understood that Directors, officers, agents
and shareholders of the Company are or may be interested in the
Manager (or any successor thereof) as directors, officers, or
otherwise, that directors, officers, agents and shareholders of
the Manager are or may be interested in the Company as Directors,
officers, shareholders or otherwise, that the Manager (or any
such successor) is or may be interested in the Company as a
shareholder or otherwise and that the effect of any such interests
shall be governed by said Articles of Incorporation and Bylaws.
8. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect the
Manager against any liability to the Company or its shareholders
to which it might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations and
duties under this Agreement. Nor shall any provision hereof be
deemed to protect any Director or officer of the Company against
any such liability to which he might otherwise be subject by
reason of any willful misfeasance, bad faith or gross negligence
in the performance of his duties or the reckless disregard of his
obligations and duties. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall be executed on the first
date upon which the Agreement shall have been approved by a
majority of the outstanding voting securities (as that term
is defined in the 1940 Act) of any Existing Fund. This
Agreement shall become effective with respect to any Existing
Fund on the date upon which the Agreement shall have been
approved by a majority of the outstanding voting securities
(as that term is defined in the 1940 Act) of such Existing
Fund, and with respect to any additional Fund on the date of
receipt by the Company of notice from the Manager in
accordance with Paragraph 1(b) hereof that the Manager is
willing to serve as Manager with respect to such Fund.
Unless terminated as herein provided, this Agreement shall
remain in full force and effect with respect to each Existing
Fund through June 30, 1991 and, with respect to each
additional Fund, through the first June 30 occurring more
than twelve months after the date on which such Fund becomes
a Fund hereunder, and shall continue in full force and effect
for periods of one year thereafter with respect to each Fund
so long as such continuance with respect to any such Fund is
approved at least annually (a) by either the Directors of the
Company or by vote of a majority of the outstanding voting
shares (as defined in the 1940 Act) of such Fund, and (b) in
either event by the vote of a majority of the Directors of
the Company who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of
voting on such approval.
Any approval of this Agreement by the holders of a majority
of the outstanding shares (as defined in the 1940 Act) of any
Fund shall be effective to continue this Agreement with
respect to any such Fund notwithstanding (A) that this
Agreement has not been approved by the holders of a majority
of the outstanding shares of any other Fund affected thereby,
and (B) that this Agreement has not been approved by the vote
of a majority of the outstanding shares of the Company,
unless such approval shall be required by any other
applicable law or otherwise.
(b) Termination. This Agreement may be terminated at any
time, without payment of any penalty, by vote of the
Directors of the Company or by vote of a majority of the
outstanding shares (as defined in the 1940 Act), or by the
Manager on sixty (60) days' written notice to the other party.
(c) Automatic Termination. This Agreement shall automatically
terminate in the event of its assignment.
10. NAME OF COMPANY.
It is understood that the name "USAA," and any logo
associated with that name, is the valuable property of the United
Services Automobile Association, and that the Company has the
right to include "USAA" as a part of its name only so long as
this Agreement shall continue and the Manager is a wholly owned
subsidiary of the United Services Automobile Association. Upon
termination of this Agreement the Company shall forthwith cease
to use the "USAA" name and logo and shall submit to its
shareholders an amendment to its Articles of Incorporation to
change the Company's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.
12. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Company hereunder are not
to be deemed exclusive, and the Manager shall be free to render
similar services to others so long as its services hereunder are
not impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
USAA MUTUAL FUND, INC. USAA INVESTMENT MANAGEMENT
COMPANY
By:/s/ Michael J. C. Roth By:/s/ Michael J. C. Roth
- ------------------------- -------------------------
President President
ATTEST: ATTEST:
/s/ Michael D. Wagner /s/ Michael D. Wagner
- --------------------- ---------------------
Secretary Secretary
EXHIBIT 5(b)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to Section 1(b) of the Advisory Agreement dated as
of September 21, 1990 between USAA Mutual Fund, Inc. (the
"Company") and USAA Investment Management Company (the
"Manager"), please be advised that the Company has established
two new series of its shares, namely, the Short-Term Bond Fund
and the Growth & Income Fund (the "Funds"), and please be further
advised that the Company desires to retain the Manager to render
management and investment advisory services under the Advisory
Agreement to the Funds at the fees stated below:
Advisory Fee Schedule
Twenty-four one hundredths of one percent (.24%) of the
aggregate average net assets of the Short-Term Bond
Fund and sixty one hundredths of one percent (.60%) of
the aggregate average net assets of the Growth & Income
Fund.
Please state below whether you are willing to render such
services at the fees stated above.
USAA MUTUAL FUND, INC.
Attest:/s/ Michael D. Wagner By:/s/ Michael J. C. Roth
- ---------------------------- -------------------------
Secretary President
Dated: June 1, 1993
We as the sole shareholder of the above named Funds, do
hereby approve the Advisory Service Agreement and are willing to
render management and investment advisory services to the Short-
Term Bond Fund and the Growth & Income Fund and the fees stated above.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest:/s/ Alex M. Ciccone By:/s/ John W. Saunders, Jr.
- --------------------------- -----------------------------
Assistant Secretary Senior Vice President
Dated: June 1, 1993
EXHIBIT 6(a)
UNDERWRITING AGREEMENT
Underwriting Agreement dated as of the 25th day of July, 1990
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation
organized under the laws of the State of Delaware and having a
place of business in San Antonio, Texas (sometimes herein
referred to as the "Underwriter"), and USAA MUTUAL FUND, INC., a
corporation organized under the laws of the State of Maryland and
having a place of business in San Antonio, Texas (sometimes
herein referred to as the "Company") which offers shares of
capital stock (the "Shares") in different classes representing
interests in different portfolios of assets (each class of stock
being referred to herein as a "Fund"). The Underwriter presently
sells and distributes Shares in five classes designated as the
Growth Fund, Aggressive Growth Fund, Income Stock Fund, Income
Fund and Money Market Fund (the "Existing Funds").
WITNESSETH: In consideration of the agreements herein
contained and for other good and valuable consideration, receipt
of which is hereby acknowledged, it is agreed:
1. APPOINTMENT OF UNDERWRITER.
The Company hereby appoints the Underwriter as its exclusive
agent to sell and distribute Shares of each Fund of the Company
at the offering price thereof as from time to time determined in
the manner herein provided. The Underwriter hereby accepts such
appointment and agrees during the term of this Agreement to
provide the services and to assume the obligations herein set
forth without compensation.
2. BASIS OF SALE OF SHARES.
The Underwriter does not agree to sell any specific number of
Shares. Shares will be sold to the Underwriter as agent for the
Company only against orders therefor. Underwriter will not
purchase Shares from anyone other than the Company except as
agent for the Company.
3. OFFERING PRICE.
The offering price for Shares of any Fund of the Company
shall be determined according to the terms of the then current
Prospectus of the Fund. The net asset value per share for each
Fund shall be determined at such time each day as is established
by the Board of Directors of the Company from time to time.
4. MANNER OF OFFERING.
The Underwriter will conform to the securities laws of any
jurisdiction in which it sells, directly or indirectly, any
Shares. The Underwriter also agrees to furnish to the Company
sufficient copies of any agreements, plans or sales literature it
intends to use in connection with any sales of Shares in adequate
time for the Company to file and clear them with the proper
authorities before they are put in use, and not to use them until
so filed and cleared.
5. RESERVATION OF RIGHTS BY THE COMPANY.
The Company reserves the right to issue Shares at any time
directly to existing shareholders and to sell Shares to such
shareholders or to other persons approved by the Underwriter at
not less than net asset value. The Company reserves the right to
suspend the sale of Shares of any or all Funds without prior
notice for any reason deemed adequate by it.
6. ALLOCATION OF EXPENSES.
(a) The Company, either directly or through its manager and
investment adviser, will be responsible for, and shall pay
the expenses of:
(i) providing all necessary services, including fees and
disbursements of counsel, related to the preparation,
setting in type, printing and filing of any Registration
Statement and/or Prospectus required under the Securities
Act of 1933, as amended, or under state securities laws,
covering its Shares, and all amendments and supplements
thereto, and preparing, setting in type, printing and
mailing periodic reports to existing shareholders;
(ii) the cost of all registration or qualification fees;
(iii) the cost of preparing temporary and permanent share
certificates for Shares of the Company;
(iv) all the federal and state (if any) issue and/or
transfer taxes payable upon the issue by or (in the case
of treasury shares) transfer from the Company to the
Underwriter of any and all Shares distributed hereunder.
(b) The Underwriter agrees that, after the Prospectus and
periodic reports have been set in type, it will bear the
expense of printing and distributing any copies thereof which
are to be used in connection with the offering of Shares to
dealers or prospective investors. The Underwriter further
agrees that it will bear the expenses of preparing, printing
and distributing any other literature used by the Underwriter
or furnished by it for use by dealers in connection with the
offering of the Shares for sale to the public, and any
expense of advertising in connection with such offering. The
Underwriter will also pay fees for services rendered by the
transfer agent on behalf of the Underwriter.
7. INDEPENDENT CONTRACTOR.
The Underwriter shall be an independent contractor and
neither the Underwriter nor any of its officers or employees, as
such, is or shall be an employee of the Company. The Underwriter
is responsible for its own conduct, for the employment, control
and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees.
The Underwriter assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all
employer taxes thereunder.
8. INDEMNIFICATION BY UNDERWRITER.
The Underwriter agrees to indemnify and hold harmless the
Company or any such person who has been, is, or may hereafter be,
an officer, director or employee of the Company against any loss,
damage or expense reasonably incurred by any of them in
connection with any claim or in connection with any action, suit
or proceeding to which any of them may be a party, which arises
out of or is alleged to arise out of or is based upon any untrue
statement or alleged untrue statement of a material fact, or the
omission or alleged omission to state a material fact necessary
to make the statements made not misleading, on the part of the
Underwriter or any agent or employee of the Underwriter or any
other person for whose acts the Underwriter is responsible or is
alleged to be responsible, unless such statement or omission was
made in reliance upon written information furnished by the
Company. The Underwriter likewise agrees to indemnify and hold
harmless the Company and each such person in connection with any
claim or in connection with any action, suit or proceeding which
arises out of or is alleged to arise out of the Underwriter's
failure to exercise reasonable care and diligence with respect to
its services, if any, rendered in connection with investment,
reinvestment, automatic withdrawal and other plans for Shares.
The term "expenses" for purposes of this and the next paragraph
includes amounts paid in satisfaction of judgments or in
settlements which are made with the Underwriter's consent. The
foregoing rights of indemnification shall be in addition to any
other rights to which the Company or a director may be entitled
as a matter of law.
9. INDEMNIFICATION BY COMPANY.
The Company agrees to indemnify and hold harmless the
Underwriter and each person who has been, is, or may hereafter be
an officer, director, employee or agent of the Underwriter
against any loss, damage or expense reasonably incurred by any of
them in connection with any claim or in connection with any
action, suit or proceeding to which any of them may be a party,
which arises out of or is alleged to arise out of or is based
upon any untrue or alleged untrue statement of material fact, or
the omission or alleged omission to state a material fact
necessary to make the statements therein not misleading,
contained in a Registration Statement or Prospectus, or any
amendment or supplement thereto, unless such statement or
omission was made in reliance upon written information furnished
by the Underwriter. The foregoing rights of indemnification
shall be in addition to any other rights to which the Underwriter
may be entitled as a matter of law.
10. TERM OF AGREEMENT.
This Agreement shall be executed and become effective with
respect to all Existing Funds on July 25, 1990, and, with respect
to any additional Fund, on the date of receipt by the Company of
notice from the Underwriter in accordance with Paragraph 12
hereof that the Underwriter is willing to serve as Underwriter
with respect to such Fund. Unless terminated as herein provided,
this Agreement shall remain in full force and effect through June
30, 1991, and, with respect to each additional Fund, through the
first June 30 occurring more than twelve months after the date on
which such Fund becomes a Fund hereunder, and shall continue in
full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to
any such Fund is approved at least annually (a) by either the
Directors of the Company or by vote of a majority of the
outstanding voting Shares (as defined in the Investment Company
Act of 1940, as amended) of such Fund, and (b) in either event by
the vote of a majority of the Directors of the Company who are
not parties to this Agreement or "interested persons" (as defined
in the Investment Company Act of 1940, as amended) of any such
party, cast in person at a meeting called for the purpose of
voting on such approval. Written notice of discontinuance of
this Underwriting Agreement may be given by one party hereto to
the other not less than sixty (60) days before expiration of its
initial term or before the expiration of any succeeding annual
period. This Agreement supersedes any prior agreement relating
to the subject matter hereof between the parties.
11. ASSIGNMENT.
This Agreement may not be assigned by the Underwriter and
shall automatically terminate in the event of an attempted
assignment by the Underwriter; provided, however, that the
Underwriter may employ such other person, persons, corporation,
or corporations, as it shall determine, in order to assist it in
carrying out this Agreement.
12. AMENDMENT.
This Agreement may be amended at any time by mutual agreement
in writing of the parties hereto, provided that any such
amendment is approved by a majority of the directors of the
Company who are not "interested persons" of the Underwriter or by
the holders of a majority of the Shares of the Company.
IN WITNESS WHEREOF, this Agreement has been executed for the
Underwriter and the Company by their duly authorized officers as
of the date first set forth above.
USAA MUTUAL FUND, INC. USAA INVESTMENT MANAGEMENT
COMPANY
By:/s/ Michael J. C. Roth By:/s/ Michael J. C. Roth
- ------------------------- -------------------------
President President
ATTEST: ATTEST:
/s/ Michael D. Wagner /s/ Michael D. Wagner
- ---------------------- ----------------------
Secretary Secretary
EXHIBIT 6(b)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to paragraph 12 of the Underwriting Agreement dated
as of July 25, 1990 between USAA Mutual Fund, Inc. (the
"Company") and USAA Investment Management Company (the
"Underwriter"), please be advised that the Company has
established two new series of its shares, namely, the Short-Term
Bond Fund and the Growth & Income Fund (the "Funds"), and please
be further advised that the Company desires to retain the
Underwriter to sell and distribute shares of the Funds and to
render other services to the Funds as provided in the
Underwriting Agreement.
Please state below whether you are willing to render such
services as provided in the Underwriting Agreement.
USAA MUTUAL FUND, INC.
Attest:/s/ Michael D. Wagner By:/s/ Michael J. C. Roth
--------------------- -----------------------
Secretary President
Dated: June 1, 1993
We as the sole shareholder of the above named Funds, do
hereby approve and are willing to render services to the Short-
Term Bond Fund and the Growth & Income Fund as set forth in the
Underwriting Agreement.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest:/s/ Alex M. Ciccone By:/s/ John W. Saunders, Jr.
-------------------- --------------------------
Assistant Secretary Senior Vice President
Dated: June 1, 1993
EXHIBIT 8(a)
CUSTODIAN CONTRACT
Between
USAA MUTUAL FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It . . . .1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian. . . . . . . . . . . . . .2
2.1 Holding Securities . . . . . . . . . . . . . . . . . .2
2.2 Delivery of Securities . . . . . . . . . . . . . . . .3
2.3 Registration of Securities . . . . . . . . . . . . . .6
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . .7
2.5 Payments for Shares. . . . . . . . . . . . . . . . . .7
2.6 Investment and Availability of Federal Funds . . . . .8
2.7 Collection of Income . . . . . . . . . . . . . . . . .8
2.8 Payment of Fund Moneys . . . . . . . . . . . . . . . .9
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . 11
2.10 Payments for Repurchases or Redemptions of
Shares of the Fund. . . . . . . . . . . . . . . . . . . 12
2.11 Appointment of Agents. . . . . . . . . . . . . . . . 13
2.12 Deposit of Fund Assets in Securities System. . . . .13
2.13 Ownership Certificates for Tax Purposes. . . . . . . 16
2.14 Proxies. . . . . . . . . . . . . . . . . . . . . . . 16
2.15 Communications Relating to Fund Portfolio Securities 17
2.16 Proper Instructions. . . . . . . . . . . . . . . . . 17
2.17 Actions Permitted Without Express Authority. . . . . 18
2.18 Evidence of Authority. . . . . . . . . . . . . . . . 19
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . . . . . 19
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5. Opinion of Fund's Independent Accountants . . . . . . . . . 21
6. Reports to Fund by Independent Public Accountants . . . . . 21
7. Compensation of Custodian . . . . . . . . . . . . . . . . . 22
8. Responsibility of Custodian . . . . . . . . . . . . . . . . 22
9. Effective Period, Termination and Amendment . . . . . . . . 23
10. Successor Custodian . . . . . . . . . . . . . . . . . . . 24
11. Interpretive and Additional Provisions. . . . . . . . . . 25
12. Additional Funds. . . . . . . . . . . . . . . . . . . . . 26
13. Massachusetts Law to Apply. . . . . . . . . . . . . . . . 26
14. Prior Contracts . . . . . . . . . . . . . . . . . . . . . 26
CUSTODIAN CONTRACT
This Contract between USAA MUTUAL FUND, INC., a corporation
organized and existing under the laws of Maryland, having its
principal place of business at USAA Building, 9800 Fredricksburg
Road, San Antonio, Texas 78288 hereinafter called the "Fund," and
State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin
Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian,"
WHEREAS, the Fund is authorized to issue shares of beneficial
interest ("Shares") in separate series, with each such series
representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to offer Shares of five series, the
Federal Securities Money Market Fund, the Growth Fund, the Income
Fund, the Money Market Fund and the Sunbelt Era Fund, Inc. (such
series, together with all other series subsequently established
by the Fund and made subject to this Contract in accordance with
paragraph 12, being herein referred to as the "Fund(s)");
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the Custodian of its
assets pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all
securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it
with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or
treasury shares of capital stock, $0.01 par value, ("Shares") of
the Fund as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund
held or received by the Fund and not delivered to the Custodian.
Upon receipt of Proper Instructions, the Custodian shall from
time to time employ one or more sub-custodians, but only in
accordance with an applicable vote by the Directors of the fund,
and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all non-
cash property, including all securities owned by the
Fund, other than securities which are maintained pursuant
to Section 2.12 in a clearing agency which acts as a
securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System."
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Fund held by the
Custodian or in a Securities System account of the
Custodian only upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.12 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities of the Fund;
5) To the Issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian;
6) To the Issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name or
nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) To the broker selling the same for examination in
accordance with the "street delivery" custom;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against receipt
of adequate collateral as agreed upon from time to
time by the Custodian and the Fund, which may be in
the form of cash or obligations issued by the United
States government, its agencies or instrumentalities;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by
the Fund, but only against receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
13) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Directors or of
the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is
to be made, declaring such purposes to be proper
corporate purposes, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered
investment companies having the same investment adviser
as the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Contract shall
be in "street" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of the
Fund, subject only to draft or order by the Custodian
acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by
the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Fund
may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every
such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and
that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved by vote of a majority of the Directors of the
Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from
the distributor for the Fund's Shares or from the
Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon
mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions,
1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal
funds received after a time agreed upon between the
Custodian and the Fund; and
2) make federal funds available to the Fund as of
specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks
received in payment for Shares of the Fund which are
deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect
to registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely
basis all income and other payments with respect to
bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or
agent thereof and shall credit such income, as collected,
to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income
items requiring presentation as and when they become due
and shall collect interest when due on securities held
hereunder.
2.8 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities for the account of the Fund
but only (a) against the delivery of such securities to the
Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified
under the Investment Company Act of 1940, as amended, to act
as a custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of the
Fund or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System,
in accordance with the conditions set forth in Section 2.12
hereof or (c) in the case of repurchase agreements entered
into between the Fund and the Custodian, or another bank, (i)
against delivery of the securities either in certificate form
or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such
securities from the Fund;
2) In connection with conversion, exchange or surrender
of securities owned by the Fund as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Fund as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred
by the Fund, including but not limited to the
following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to
the governing documents of the Fund;
6) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions, a certified
copy of a resolution of the Directors or of the
Executive Committee of the Fund signed by an officer
of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for
purchase of securities for the account of the Fund is
made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had
been received by the Custodian, except that in the case
of repurchase agreements entered into by the Fund with a
bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank
prior to the receipt of written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-
proprietary account of the Custodian maintained with the
Federal Reserve Bank of Boston or of the safe-keeping
receipt, provided that such securities have in fact been
so transferred by book-entry.
2.10 Payments for Repurchases or Redemptions of Shares of the
Fund. From such funds as may be available for the purpose
but subject to the limitations of the Articles of
Incorporation and any applicable votes of the Directors of
the Fund pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove)
any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time
to time direct; provided, however, that the appointment of
any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian
may deposit and/or maintain securities owned by the Fund in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act
of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred
to herein as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian
in the Securities System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for
the account of the Fund upon (i) receipt of advice
from the Securities System that such securities have
been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the
account of the Fund upon (i) receipt of advice from
the Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities
System of transfers of securities for the account of
the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund
at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transactions in the Securities System for the account
of the Fund.
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in
the Securities System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 9 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting from
use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their
employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may
have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against the Securities System or any other person
which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Fund
has not been made whole for any such loss or damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt
of income or other payments with respect to securities of the
Fund held by it and in connection with transfers or securities.
2.14 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Fund or a
nominee of the Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall
promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.15 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith) received by the Custodian from issuers
of the securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall transmit
promptly to the Fund all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making
the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or
any other similar transaction, the Fund shall notify the
Custodian at least three business days prior to the date on
which the Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout
this Article 2 means a writing signed or initialled by one or
more person or persons as the Directors shall have from time
to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved,
including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such
instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the
Directors of the Fund accompanied by a detailed description
of procedures approved by the Directors, Proper Instructions
may include communications effected directly between electro-
mechanical or electronic devices provided that the Directors
and the Custodian are satisfied that such procedures afford
adequate safeguards for the Fund's assets.
2.17 Actions Permitted without Express Authority. The Custodian
may in its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses
of handling securities or other similar items relating
to its duties under this Contract, provided that all
such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of the Fund except as
otherwise directed by the Directors of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of
the Fund. The Custodian may receive and accept a certified
copy of a vote of the Directors of the Fund as conclusive
evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of
any action by the Directors pursuant to the Articles of
Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income. The Custodian
shall cooperate with and supply necessary information to the
entity or entities appointed by the Directors of the Fund to
keep the books of account of the Fund and/or compute the net
asset value per share of the outstanding shares of the Fund
or, if directed in writing to do so by the Fund, shall itself
keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also
calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise
the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer
of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its
various components. The calculations of the net asset value
per share and the daily income of the Fund shall be made at
the time or times described from time to time in the Fund's
currently effective prospectus.
4. Records The Custodian shall create and maintain all records
relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the
Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, applicable federal and state tax laws
and any other law or administrative rules or procedures which
may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the
regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents
of the Fund and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as
shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant. The Custodian
shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable
opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the
preparation of the Fund's Form N-1, and Form N-1R or other
annual reports to the Securities and Exchange Commission and
with respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the Fund
may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, including
securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian
under this Contract; such reports, which shall be of
sufficient scope and in sufficient detail, as may reasonably
be required by the Fund, to provide reasonable assurance that
any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, shall so
state.
7. Compensation of Custodian. The Custodian shall be entitled
to reasonable compensation for its services and expenses as
Custodian, as agreed upon from time to time between the Fund
and the Custodian.
8. Responsibility of Custodian. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian
shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract
and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper
party or parties. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted
by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant
to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions
effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment
of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to
requiring the Custodian to take such action, shall provide
indemnity to the Custodian in an amount and form satisfactory
to it.
9. Effective Period, Termination and Amendment. This Contract
shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of
the parties hereto and may be terminated by either party by
an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery
or mailing; provided, however that the Custodian shall not
act under Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant
Secretary that the Directors of the Fund have approved the
initial use of a particular Securities System and the receipt
of an annual certificate of the Secretary or an Assistant
Secretary that the Directors have reviewed the use by the
Fund of such Securities System, as required in each case by
Rule 17f-4 under the Investment Company Act of 1940, as
amended; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of
the Articles of Incorporation, and further provided, that the
Fund may at any time by action of its Directors (i)
substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a
like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date
of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
10. Successor Custodian. If a successor custodian shall be
appointed by the Directors of the Fund, the Custodian
shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by
it hereunder.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Directors of the Fund, deliver at the
office of the Custodian such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the
Directors shall have been delivered to the Custodian on or
before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract.
Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure
the certified copy of vote referred to or of the Directors to
appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such
period as the Custodian retains possession of such
securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions. In connection
with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions
interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of
Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
12. Additional Funds. In the event that the Fund establishes
one or more series of Shares in addition to the Federal
Securities Money Market Fund, the Growth Fund, the Income
Fund, the Money Market Fund and the Sunbelt Era Fund,
Inc., with respect to which it desires to have the
Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and
if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Fund hereunder.
13. Massachusetts Law to Apply. This Contract shall be
construed and the provisions thereof interpreted under
and in accordance with laws of the Commonwealth of
Massachusetts.
14. Prior Contracts. This Contract supersedes and
terminates, as of the date hereof, all prior contracts
between the Fund and the Custodian relating to the
custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 3rd day of November, 1982.
SEAL
ATTEST USAA MUTUAL FUND, INC.
/s/ Robert L. Worrall By/s/ George K. Sykes
- --------------------- ---------------------
SEAL
ATTEST STATE STREET BANK AND TRUST COMPANY
(illegible signature) By/s/ Dave Hawkes
- ---------------------- ------------------
Assistant Secretary Vice President
EXHIBIT 8(b)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
November 3, 1982 between USAA Mutual Fund, Inc. (the "Company")
and State Street Bank and Trust Company, (the "Custodian") please
be advised that the Company has established a new series of its
shares, namely, the Income Stock Fund (the "Fund"), and please be
further advised that the Company desires to retain the Custodian
to render custody services under the Custodian Contract to the
Fund in accordance with the fee schedule attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as Exhibit A.
USAA MUTUAL FUND, INC.
Attest: /s/ Michael D. Wagner By: /s/ John A. Knubel
---------------------- ---------------------
Secretary President
Dated: April 20, 1987
We are willing to render custody services to the Income Stock Fund
in accordance with the fee schedule attached hereto as Exhibit A.
STATE STREET BANK AND TRUST COMPANY
Attest: /s/ R. Sullivan By: /s/ (illegible signature)
- ------------------------- --------------------------
Vice President
Dated: April 20, 1987
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
USAA INCOME STOCK FUND
I. Administration
Custody, Portfolio and Fund Accounting Service -
Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain
investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare
daily trial balance. Calculate net asset value daily.
Provide selected general ledger reports. Securities
yield or market value quotations will be provided to
State Street by the fund.
The administration fee shown below is an annual charge,
billed and payable monthly, based on average monthly
net assets.
ANNUAL FEES PER PORTFOLIO
Custody, Port-
Fund Net Assets folio & Fund Acct.
--------------- ------------------
First $20 Million 1/ 15 of 1%
Next $80 Million 1/ 30 of 1%
Excess 1/100 of 1%
Phase-In Period
First three months $ 850
Next three months $1,700
Thereafter $2,500
II. Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
All other trades $16.00
III. Options
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue,
per broker $15.00
Option exercised charge, per issue,
per broker $15.00
IV. Lending of Securities
Deliver loaned securities versus cash
collateral $20.00
Deliver loaned securities versus securities
collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of
loaned securities $15.00
Deliver securities collateral versus
receipt of loaned securities $25.00
Loan administration -- mark-to-market per
day, per loan $ 3.00
V. Interest Rate Futures
Transactions -- no security movement $ 8.00
VI. Coupon Bonds
Monitoring for calls and processing
coupons -- for each coupon issue
held -- monthly charge $ 5.00
VII. Holdings Charge
For each issue maintained -- monthly charge $ 5.00
VIII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month.
Out-of-pocket expenses include, but are not limited to
the following:
Telephone
Wire Charges ($4.38 per wire in and $4.23 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
USAA INCOME STOCK FUND STATE STREET BANK AND TRUST CO.
By /s/ James A. Robinson By (illegible signature)
- --------------------------- -----------------------
Title Treasurer Title Vice President
----------- ---------------
Date May 8, 1987 Date April 20, 1987
EXHIBIT 8(c)
AMENDMENT NO. 1 TO THE CUSTODIAN AGREEMENT
AMENDMENT made this 30th day of October 1987 by and between
USAA MUTUAL FUND, INC., a Maryland Corporation (hereinafter
called the "Company") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company (hereinafter called the "Custodian").
WHEREAS, the Company and the Custodian entered into a
Custodian Agreement dated November 3, 1982;
WHEREAS, the Company desires to engage in futures and options
trading in connection with its investment activity;
NOW THEREFORE, the Company and the Custodian pursuant to
Section 11 of the aforementioned Custodian Agreement mutually
agree to the following provisions.
Insert page 5, Section 2.2 "new" paragraphs 12, 13 and
renumber "old" paragraphs 12 and 13 as 14 and 15:
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian as a broker-
dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or
organizations, regarding account deposits in
connection with transactions by the Fund;
Insert page 9, Section 2.8(1), line 1 after..."securities""
options, futures contracts or options on futures contracts,
Insert page 9, Section 2.8(1), line 3 after..."such
securities": , or evidence of title to such options, futures
contracts or options on futures contracts,
Insert page 10, Section 2.8, 1) line 4, after..."or another
bank," "or a broker-dealer which is a member of NASD,"
Insert page 11, Section 2.8 "new" paragraph 6) and renumber
"old" paragraph 6):
6) For payment of the amount of dividends received in
respect of securities sold short;
Insert page 16, "new" Section 2.13 renumbering "old" Sections
2.13, 2.14, 2.15, 2.16 and 2.17:
2.13 Segregated Account. The Custodian shall upon receipt
of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of
the Fund, into which account or accounts may be
transferred cash and/or securities, including
securities maintained in an account by the Custodian
pursuant to Section 2.12 hereof, (i) in accordance
with the provisions of any agreement among the Fund,
the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules
of The Options Clearing Corporation and of any
registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund, (ii) for
purposes of segregating cash or government securities
in connection with options purchased, sold or written
by the Fund or commodity futures contracts or options
thereon purchased or sold by the Fund, (iii) for the
purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666,
or any subsequent release or releases of the
Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered
investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause
(iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee
signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and
declaring such purposes to be proper corporate
purposes.
Insert page 17, Section 2.15 line 4 after..."in connection
therewith": "and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts
purchased or sold by the Fund"
Insert page 21, paragraph 6, line 4, after..."safeguarding
securities,": futures contracts and options on futures
contracts,
IN WITNESS WHEREOF, each of the parties hereto has caused
this Amendment to be executed in its name and on its behalf by a
duly authorized officer as of the aforementioned day and year.
ATTEST USAA MUTUAL FUND, INC.
/s/ Nora P. McDaniel By/s/ Michael J. C. Roth
- --------------------- -------------------------
Assistant Secretary Executive Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Peter H. Larson By/s/ K. Bergeron
- -------------------- --------------------
Assistant Secretary Vice President
EXHIBIT 8(d)
AMENDMENT TO THE
CUSTODIAN CONTRACT
AGREEMENT made this 3rd day of November 1988 by and between
STATE STREET BANK AND TRUST COMPANY ("Custodian") and USAA MUTUAL
FUND, INC. (the "Fund").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a
Custodian Contract dated November 3, 1982 (as amended to date,
the "Contract") which governs the terms and conditions under
which the Custodian maintains custody of the securities and other
assets of the Fund:
NOW THEREFORE, the Custodian and the Fund hereby amend the
terms of the Custodian Contract and mutually agree to the
following:
Replace subsection 7) of Section 2.2 Delivery of Securities
with the following new subsection 7):
7) Upon the sale of such securities for the account of
the Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
IN WITNESS WHEREOF, each of the parties has caused this
Amendment to be executed in its name and on its behalf by a duly
authorized officer as of the day and year first above written.
ATTEST USAA MUTUAL FUND, INC.
/s/ Nora P. McDaniel /s/ Michael J. C. Roth
- ---------------------- -------------------------
Assistant Secretary Executive Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Nancy Grady /s/ Guy R. Sturgeon
- -------------------- --------------------
Assistant Secretary Vice President
EXHIBIT 8(e)
AMENDMENT TO THE
CUSTODIAN CONTRACT
AGREEMENT made this 6th day of February, 1989 by and between
STATE STREET BANK AND TRUST COMPANY ("Custodian") and USAA MUTUAL
FUND, INC. (the "Fund").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a
Custodian Contract dated November 3, 1982 (as amended to date,
the "Contract") which governs the terms and conditions under
which the Custodian maintains custody of the securities and other
assets of the Fund:
NOW THEREFORE, the Custodian and the Fund hereby amend the
terms of the Custodian Contract and mutually agree to the
following:
Insert as the final paragraph under Responsibility of
Custodian:
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection
with the performance of this Contract, except such as may
arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of Fund assets to the
extent necessary to obtain reimbursement, provided that
Custodian shall, with respect to Fund assets as to which
Custodian has perfected its lien and which Custodian proposes
to dispose of pursuant to the foregoing right, give the Fund
notice identifying such assets and the Fund shall have five
business days from receipt of such notice to notify the
Custodian if the Fund wishes the Custodian to dispose of Fund
assets of equal value other than those identified in such
notice; in the absence of any contrary notification from the
Fund, Custodian shall be free to dispose of the Fund assets
initially identified to the extent necessary to realize the
amounts to which it is entitled hereunder.
IN WITNESS WHEREOF, each of the parties has caused this
Amendment to be executed in its name and on its behalf by a duly
authorized officer as of the day and year first above written.
ATTEST USAA MUTUAL FUND, INC.
/s/ Nora P. McDaniel /s/ Michael J. C. Roth
- ---------------------- -----------------------
Assistant Secretary Executive Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Maureen Fitzgerald /s/ K. Bergeron
- ------------------------- --------------------
Assistant Secretary Vice President
EXHIBIT 8(f)
AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust
Company (the "Custodian") and USAA Mutual Fund, Inc. (the
"Fund").
WHEREAS, the Custodian and the Fund are parties to a
custodian contract dated November 3, 1982 (the "Custodian
Contract") governing the terms and conditions under which the
Custodian maintains custody of the securities and other assets of
the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the
Custodian Contract to provide for the maintenance of the Fund's
foreign securities, and cash incidental to transactions in such
securities, in the custody of certain foreign banking
institutions and foreign securities depositories acting as sub-
custodians in conformity with the requirements of Rule 17f-5
under the Investment Company Act of 1940;
NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Custodian and the Fund hereby amend the
Custodian Contract by the addition of the following terms and
conditions;
1. Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to
employ as sub-custodians for the Fund's securities and other
assets maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon receipt of
"Proper Instructions," as defined in Section 2.16 of the
Custodian Contract, together with a certified resolution of the
Fund's Board of Directors, the Custodian and the Fund may agree
to amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more of such sub-custodians for
maintaining custody of the Fund's assets.
2. Assets to be Held
The Custodian shall limit the securities and other assets
maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities," as defined in paragraph (c) (1) of Rule
17f-5 under the Investment Company Act of 1940, and (b) cash and
cash equivalents in such amounts as the Custodian or the Fund may
determine to be reasonably necessary to effect the Fund's foreign
securities transactions.
3. Foreign Securities Depositories
Except as may otherwise be agreed upon in writing by the
Custodian and the Fund, assets of the Fund shall be maintained in
foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-
custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 5 hereof.
4. Segregation of Securities
The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian. Each agreement pursuant to which the Custodian
employs a foreign banking institution shall require that such
institution establish a custody account for the Custodian on
behalf of the Fund and physically segregate in that account,
securities and other assets of the Fund, and, in the event that
such institution deposits the Fund's securities in a foreign
securities depository, that it shall identify on its books as
belonging to the Custodian, as agent for the Fund, the securities
so deposited.
5. Agreements with Foreign Banking Institutions
Each agreement with a foreign banking institution shall
be substantially in the form set forth in Exhibit 1 hereto and
shall provide that: (a) the Fund's assets will not be subject to
any right, charge, security interest, lien or claim of any kind
in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or
administration; (b) beneficial ownership for the Fund's assets
will be freely transferable without the payment of money or value
other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the
Fund; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants
for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its
agreement with the Custodian; and (e) assets of the Fund held by
the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
6. Access of Independent Accountants of the Fund
Upon request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of the Fund to
be afforded access to the books and records of any foreign
banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such
foreign banking institution under its agreement with the
Custodian.
7. Reports by Custodian
The Custodian will supply to the Fund from time to time,
as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Fund's securities and other assets and advice
or notifications of any transfers of securities to or from each
custodial account maintained by a foreign banking institution for
the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical
possession of such securities.
8. Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of
this Section 8, the provisions of Sections 2.2 and 2.8 of the
Custodian Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of the Custodian
Contract to the contrary, settlement and payment for securities
received for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser
or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of the
Custodian Contract, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such
securities.
9. Liability of Foreign Sub-Custodians
Each agreement pursuant to which the Custodian employs a
foreign banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection
with the institution's performance of such obligations. At the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims against a
foreign banking institution as a consequence of any such loss,
damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
10. Liability of Custodian
The Custodian shall be liable for the acts or omissions
of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in the Custodian
Contract and, regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign securities
depository or a banch of a U.S. bank as contemplated by paragraph
13 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of
war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 10, in delegating custody
duties to State Street London Ltd., the Custodian shall not be
relieved of any responsibility to the Fund for any loss due to
such delegation, except such loss as may result from (a)
political risk, (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other
losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable care.
11. Reimbursement for Advances
If the Fund requires the Custodian to advance cash or
securities for any purpose including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in the
event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
12. Monitoring Responsibilities
The Custodian shall furnish annually to the Fund, during
the month of June, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in
connection with the initial approval of this amendment to the
Custodian Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or
in the case of any foreign sub-custodian not the subject of an
exemptive order from the Securities and Exchange Commission is
notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in
each case computed in accordance with generally accepted U.S.
accounting principles).
13. Branches of U.S. Banks
(a) Except as otherwise set forth in this amendment to
the Custodian Contract, the provisions hereof shall not apply
where the custody of the Fund assets is maintained in a foreign
branch of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of the Custodian Contract.
(b) Cash held for the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the
Fund with the Custodian's London Branch, which account shall be
subject to the direction of the Custodian, State Street London
Ltd. or both.
14. Applicability of Custodian Contract
Except as specifically superseded or modified herein, the
terms and provisions of the Custodian Contract shall continue to
apply with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 8th day of November, 1993.
ATTEST: USAA MUTUAL FUND, INC.
/s/ Michael D. Wagner By:/s/ Michael J. C. Roth
- ------------------------ ---------------------------
Secretary President
ATTEST: STATE STREET BANK AND TRUST
COMPANY
(illegible signature) By:/s/ Ronald E. Logue
- --------------------- -----------------------
Assistant Secretary Executive Vice President
SCHEDULE A
17f-5 APPROVAL
The Board of Directors of USAA Mutual Fund, Inc. (Short-Term
Bond Fund and Money Market Fund has approved certain foreign
banking institutions and foreign securities depositories
within State Street's Global Custody Network for use as
subcustodians for the Fund's securities, cash and cash
equivalents held outside of the United States. Board
approval is as indicated by the Fund's Authorized Officer:
Fund
Officer
Initials
/s/ AMC Euroclear/State Street London Limited
-------
Cedel/State Street London Limited
-------
Certified by:
/s/ Alex M. Ciccone 11/15/93
------------------- --------------
Fund's Authorized Officer Date
EXHIBIT 8(g)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
Pursuant to Section 12 of the Custodian Agreement dated as of
February 6, 1989 between USAA Mutual Fund, Inc. (the "Company")
and State Street Bank and Trust Company (the "Custodian"), please
be advised that the Company has established two new series of its
shares, namely, the Short-Term Bond Fund and the Growth & Income
Fund (the "Funds"), and please be further advised that the
Company desires to retain the Custodian to render custody
services under the Custodian Agreement to the Funds in accordance
with the fee schedule attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule.
USAA MUTUAL FUND, INC.
Attest:/s/ Michael D. Wagner By:/s/ Michael J. C. Roth
--------------------- -----------------------
Secretary President
Dated: June 1, 1993
We are willing to render custody services to the Short-Term
Bond Fund and the Growth & Income Fund in accordance with the fee
schedules.
STATE STREET BANK AND TRUST COMPANY
Attest:/s/ Marguerite Summers By:/s/ K. Donelin
----------------------- ------------------
Assistant Vice President Vice President
Dated: June 1, 1993
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
I. Custody, Portfolio and Fund Accounting Services - Maintain
investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger, and
capital stock accounts. Prepare daily trial balance.
Calculate net asset value daily. Provide selected general
ledger reports. Securities yield or market value quotations
will be provided to State Street by the fund or via State
Streets Automated Pricing service.
The administration fee shown below is an annual charge, in
basis points, billed and payable monthly, based on average
monthly net assets.
ANNUAL FEES PER PORTFOLIO
Annual Full Service Fees
-----------------
First 50 Million 3.50 Basis Points
Next 50 Million 2.50 Basis Points
Next 100 Million 1.50 Basis Points
Excess 0.85 Basis Points
Minimum Monthly Charge $2,000.00
II. Portfolio Trades - For Each Line Item Processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $12.00
Boston/New York Physical $25.00
PTC Buy/Sell $20.00
All Other Trades $16.00
Maturity Collections (NY Physical) $ 8.00
Option Charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration/Option exercised $15.00
Interest Rate Futures -- no security movement $ 8.00
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
Principal Reduction Payments Per Paydown $10.00
Interest/Dividend Claim Charges
(For items held at the Request of Traders over record
date in street form) $50.00
III. Holdings Charge
Per Security per Month (Domestic Securities Only) $ 5.00
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
IV. Affirmation Charge
Per Affirmation per Month $ 1.00
V. Global Custody
U.S. Equivalent Market Value 13.75 Basis Points
Euroclear 5.00 Basis Points
VI. Automated Pricing Via NAVigator
Monthly Base Fee:
Funds with International Holdings $375.00
All other Funds $300.00
Monthly Quote Charge:
- Municipal Bonds via Muller Data $ 10.00
- Municipal Bonds via Kenny Information Systems $ 16.00
- Government, Corporate and Convertible Bonds
via Merrill Lynch $ 11.00
- Corporate and Government Bonds via Muller Data $ 11.00
- Options, Futures and Private Placements $ 6.00
- Foreign Equities and Bonds via Extel Ltd. $ 6.00
- Listed Equities, OTC Equities, and Bonds $ 6.00
- Corporate, Municipal, Convertible and
Government Bonds, Adjustable Rate Preferred
Stocks via IDSI $12.00
VII. Shareholder Check-Writing Service
Per check presented for payment
(excluding postage) $ .65
VIII. Advertised Yield Service
Annual Maintenance Fee:
For each portfolio maintained, monthly charge is based on the
number of holdings as followed:
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
Holding per Portfolio Monthly Charge
--------------------- --------------
0 to 50 $250.00
50 to 100 $300.00
over 100 $350.00
IX. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security
shipments and the preparation of special reports will be
subject to negotiation. Fees for yield calculation,
securities lending, and other special items will be
negotiated separately.
X. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month. Out-of-
pocket expenses include, but are not limited to the following:
Telephone/Telex
Wire Charges ($5.25 per wire and $5.00 out)
Postage and Insurance (includes check writing postage)
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
(Bill directly to USAA Transfer Agency Company)
GNMA Transfer - $15 each
PTC Deposit/Withdrawal for same day turnarounds - $50.00
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
USAA TAX EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA TAX EXEMPT TRUST (name struckout)
USAA TAX FREE TRUSTSTATE STREET BANK & TRUST CO.
BY: /s/ Sherron Kirk BY:/s/ Marguerite Summers
--------------------- ---------------------
Sherron Kirk Marguerite Summers
TITLE: TREASURER TITLE: VICE PRESIDENT
- ----------------------- ------------------
DATE: 10-4-94 DATE: 9/28/94
- ----------------- ------------------
EXHIBIT 9(a)
EXHIBIT A
ARTICLES OF MERGER
ARTICLES OF MERGER dated as of January 30, 1981 between USAA
MUTUAL FUND, INC., a Maryland corporation (the "USAA Fund"), USAA
CAPITAL GROWTH FUND, INC., a Texas corporation (the "Growth
Fund") and USAA INCOME FUND, INC., a Texas corporation (the
"Income Fund").
WHEREAS, the USAA Fund, Growth Fund and Income Fund are all
open end, diversified management investment companies registered
under the Investment Company Act of 1940 as amended (the "1940
Act"); and
WHEREAS, the Boards of Directors and shareholders of the
USAA Fund, Growth Fund, and Income Fund have each approved these
Articles of Merger by adoption of resolutions which declare that
the proposed transactions are advisable on substantially the
terms and conditions set forth herein and have authorized
execution of these Articles of Merger by their respective
officers;
NOW THEREFORE, in accordance with the Maryland General
Corporation Law (the "MGCL") and the Texas Business Corporation
Act ("TBCA"), the USAA Fund, Growth Fund and Income Fund do
hereby agree that the Growth Fund and Income Fund shall be merged
into the USAA Fund (the "Merger") and the USAA Fund shall be the
surviving corporation (herein sometimes called the "Surviving
Corporation") in accordance with the terms and conditions hereof:
ARTICLE I
CONSTITUENT CORPORATIONS
1.1 The parties to these Articles of Merger and to the
Merger are USAA Mutual Fund, Inc., USAA Capital Growth Fund, Inc.
and USAA Income Fund, Inc. (herein sometimes referred to as the
"Constituent Corporations").
1.2 USAA Fund is a Maryland corporation incorporated in
1980.
1.3 Growth Fund is a Texas corporation incorporated in 1970
under the general laws of Texas.
1.4 Income Fund is a corporation incorporated in 1973 under
the general laws of Texas.
1.5 USAA Fund's principal office in Maryland is in the City
of Baltimore. None of the Constituent Corporations owns an
interest in land in Maryland.
ARTICLE II
CAPITALIZATION OF CONSTITUENT CORPORATIONS
2.1 The authorized capital of USAA Fund consists of
1,000,000,000 shares of authorized capital stock, $.01 par value
per share (the "Shares"), of which 300,000,000 shares have
initially been divided into three classes with the authorized
number of Shares of each class as follows:
Class Number of Shares
Growth Class . . . . . . . . . . . 25,000,000
Income Class . . . . . . . . . . . 25,000,000
Money Market Class . . . . . . . .250,000,000
As of the date on which these Articles of Merger were approved by
its shareholders, there were, and presently are, issued and
outstanding one Share in each of the Growth Class and the Income
Class of USAA Fund, with an aggregate par value for all classes
of $.02.
2.2 The authorized capital stock of Growth Fund consists of
50,000,000 shares of capital stock of a single class, $1 par
value per share (the "Growth Fund Shares"). As of January 29,
1981, there were issued and outstanding 5,450,832 Growth Fund
Shares, with an aggregate par value of $5,450,832.
.
2.3 The authorized capital stock of Income Fund consists of
50,000,000 shares of capital stock of a single class, $1 par
value per share (the "Income Fund Shares"). As of January 29,
1981, there were issued and outstanding 1,377,980 Income Fund
Shares, with an aggregate par value of $1,377,980.
ARTICLE III
AUTHORIZATION OF MERGER
3.1 The terms and conditions of the Merger as set forth in
these Articles of Merger have been authorized by the Board of
Directors of each of the Constituent Corporations and approved by
the shareholders of each, in the manner required by its Articles
of Incorporation and the laws of Maryland in the case of the USAA
Fund and in the manner required by the Articles of Incorporation
and the laws of Texas in the case of the Growth Fund and the
Income Fund.
3.2 These Articles of Merger were approved by the
shareholders of USAA Fund on December 19, 1980, when both
outstanding Shares were voted in favor of adoption of these
Articles of Merger.
3.3 These Articles of Merger were approved by the
shareholders of Growth Fund on December 19, 1980. On that date
there were outstanding and entitle to vote a total of 5,637,625
Growth Fund Shares, of which 4,050,137 were voted in favor of
adoption of these Articles of Merger and 206,864 were voted
against adoption.
3.4 These Articles of Merger were approved by the
shareholders of Income Fund on December 19, 1980. On that date
there were outstanding and entitled to vote a total of 1,350,498
Income Fund Shares, of which 1,211,939 were voted in favor of
adoption of these Articles of Merger and 13,657 were voted
against adoption.
ARTICLE IV
SURVIVING CORPORATION
4.1 USAA Fund shall be the Surviving Corporation and shall
be governed by the laws of the State of Maryland. The Articles
of Incorporation and By-laws of the USAA Fund as in effect prior
to the Effective Time of the Merger shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation.
4.2 The post office address of the principal office of the
Surviving corporation in the State of Maryland shall be c/o The
Corporation Trust Incorporated, First Maryland Building, 25 South
Charles Street, Baltimore, Maryland. The post office address of
the principal office of the Surviving Corporation in the State of
Texas shall be USAA Building, 9800 Fredericksburg Road, San
Antonio, Texas 78288.
4.3 The Surviving Corporation shall comply with the
provisions of Article 5.07B of the TBCA concerning foreign
corporations and shall file with Secretary of State of Texas such
certificates and agreements as are necessary in order to so
comply.
ARTICLE V
EFFECTIVE TIME
5.1 The Merger shall be effective at 5:00 P.M., local time,
on that date which is the last of the following three dates to
occur: (1) the date on which these Articles of Merger have been
accepted by the State Department of Assessments and Taxation
pursuant to the applicable provisions of the MGCL, (ii) that date
on which a certificate of merger is issued by the Secretary of
State of Texas pursuant to the applicable provisions of the TBCA,
or (iii) January 31, 1981 (the "Effective Time").
ARTICLE VI
CONVERSION OF SHARES
6.1 Each whole or fractional Income Fund Share issued and
outstanding at the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be
converted into and be deemed to be an equal number of whole or
fractional Income Class Shares of the Surviving Corporation;
provided, however, that the provisions of this section shall not
apply to Income Fund Shares with respect to which the holder
thereof has dissented from the Merger in accordance with the
provisions of Articles 5.12 and 5.13 of the TBCA, and the
Surviving Corporation shall not be required to issue any Income
Class Shares to holders who so dissent to the extent that said
exercise of dissenter's rights is permitted under the 1940 Act.
6.2 Each whole or fractional Growth Fund Share issued and
outstanding at the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be
converted into and be deemed to be an equal number of whole or
fractional Growth Class Shares of the Surviving Corporation;
provided, however, that the provisions of this section shall not
apply to Growth Fund Shares with respect to which the holder
thereof has dissented from the Merger in accordance with the
provisions of Articles 5.12 and 5.13 of the TBCA, and the
Surviving Corporation shall not be required to issue any Growth
Class Shares to a holder who so dissents to the extent that said
exercise of dissenter's rights is permitted under the 1940 Act.
6.3 On and after the Effective Time, each holder on the
Effective Time of a certificate or certificates previously
representing issued and outstanding Income Fund Shares or Growth
Fund Shares shall, upon the surrender of such certificate or
certificates to [Shareholders Investor Service Corporation, Los
Angeles, California,] as Exchange Agent ("Exchange Agent"), be
entitled to receive in exchange therefor a certificate or
certificates representing the number of Income Class Shares or
Growth Class Shares into which their Income Fund Shares or Growth
Fund Shares shall have been converted pursuant to these Articles
of Merger. From and after the Effective Time, until so
surrendered, each certificate previously representing Income Fund
Shares or Growth Fund Shares shall be deemed for all corporate
purposes to evidence the number of Income Class Shares or Growth
Class Shares into which they shall have been converted.
6.4 At the Effective Time, the two shares of USAA Fund
theretofore outstanding shall be cancelled.
ARTICLE VII
EFFECT OF MERGER
7.1 From and after the Effective Time, the effect of the
Merger shall be as provided in Section 3-114 of the MGCL and
Article 5.06 of the TBCA; at such time the separate existence of
the Income Fund and Growth Fund shall cease; the Surviving
Corporation shall possess all of the rights, privileges,
immunities, franchises and assets and liabilities of each of the
Constituent Corporations as set forth in Section 3-114 of the
MGCL; provided however, that except to the extent that applicable
law provides otherwise, all rights, privileges, immunities,
franchises and assets and liabilities transferred from the Income
Fund and Growth Fund pursuant to MGCL Section 3-114 Section 3-114
shall be deemed to "belong to" the Income Class and Growth Class,
respectively, of the Surviving Corporation.
7.2 At the Effective Time the Income Fund and Growth Fund
shall cause their stock record and transfer books to be closed
and the holders of record of Income Fund Shares and Growth Fund
Shares as of such time shall be the shareholders entitled to the
conversion of their Income Fund Shares and Growth Fund Shares
into Income Class Shares and Growth Class Shares as provided
herein. Except for any transfer of dissenting shares required to
be effective under Articles 5.12 and 5.13 of the TBCA, no
transfer or assignment of any Income Fund Shares or Growth Fund
Shares shall be effective subsequent to the Effective Time.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC., USAA CAPITAL
GROWTH FUND, INC. and USAA INCOME FUND, INC. have caused these
Articles of Merger to be executed by their respective president
and secretary or assistant secretary thereunto duly authorized as
of the day and year first above written.
USAA MUTUAL FUND, INC.
ATTEST: /s/ Michael D. Wagner By /s/ Robert F. McDermott
--------------------- ---------------------------
President
By /s/ Lloyd W. Sielbeck
--------------------------
Secretary or Assistant Secretary
USAA CAPITAL GROWTH FUND, INC.
ATTEST: /s/ Michael D. Wagner By /s/ Robert F. McDermott
---------------------- ---------------------------
President
By /s/ Lloyd W. Sielbeck
------------------------
Secretary or Assistant Secretary
USAA INCOME FUND, INC.
ATTEST: /s/ Michael D. Wagner By /s/ Robert F. McDermott
---------------------- --------------------------
President
By /s/ Lloyd W. Sielbeck
-------------------------
Secretary or Assistant Secretary
CERTIFICATE
The undersigned, ROBERT F. McDERMOTT, President of USAA
MUTUAL FUND, INC., who executed on behalf of said corporation the
foregoing Articles of Merger, of which this certificate is made a
part, hereby acknowledges in the name of said corporation the
foregoing Articles of Merger to be the corporate act of said
corporation and certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein
with respect to the approval hereof are true in all material
respects, under the penalties of perjury.
/s/ Robert F. McDermott
-----------------------
President
CERTIFICATE
The undersigned, ROBERT F. McDERMOTT, President of USAA
CAPITAL GROWTH FUND, INC., who executed on behalf of said
corporation the foregoing Articles of Merger, of which this
certificate is made a part, hereby acknowledges in the name of
said corporation the foregoing Articles of Merger to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, the matters and facts
set forth therein with respect to the approval hereof are true in
all material respects, under the penalties of perjury.
/s/ Robert F. McDermott
-------------------------
President
CERTIFICATE
The undersigned, ROBERT F. McDERMOTT, President of USAA
INCOME FUND, INC., who executed on behalf of said corporation the
foregoing Articles of Merger, of which this certificate is made a
part, hereby acknowledges in the name of said corporation the
foregoing Articles of Merger to be the corporate act of said
corporation and certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein
with respect to the approval hereof are true in all material
respects, under the penalties of perjury.
/s/ Robert F. McDermott
-------------------------
President
EXHIBIT 9(b)
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 23rd day of January, 1992, by and
between USAA TRANSFER AGENCY COMPANY, a corporation organized
under the laws of the State of Delaware and having a place of
business in San Antonio, Texas (the "USAA Transfer Agency"), and
USAA MUTUAL FUND, INC., a corporation organized under the laws of
the State of Maryland, and having a place of business in San
Antonio, Texas (the "Company"). The Company presently consists
of five separate classes designated as the Growth Fund,
Aggressive Growth Fund, Income Stock Fund, Income Fund and Money
Market Fund ("Existing Funds") (such classes together with all
other classes subsequently established by the Company with
respect to which the Company desires to retain the USAA Transfer
Agency to render transfer agency services hereunder and with
respect to which the USAA Transfer Agency is willing to do, being
herein collectively referred to as the "Funds").
WITNESS THAT: USAA Transfer Agency is hereby appointed
Transfer Agent for the shares of capital stock, $.01 par value
(the "Shares") of the Company and Dividend Disbursing Agent for
the Company and shall act as Plan Agent for shareholders of the
Company under the following terms and conditions:
1. DOCUMENTS.
In connection with the appointment of USAA Transfer Agency
as Transfer Agent, the Company shall file with USAA Transfer
Agency the following documents:
(a) Certified copies of the Articles of Incorporation
of the Company and all amendments thereto;
(b) A certified copy of the Bylaws of the Company as
amended to date;
(c) A copy of the resolution of the Board of Directors
of the Company authorizing this Agreement;
(d) Specimens of all forms of outstanding and new
share certificates in the forms approved by the Board of
Directors of the Company with a certificate of the Secretary
of the Company as to such approval.
(e) All account application forms and other documents
relating to record holders' accounts;
(f) A certified list of record holders of the Company
with the name, address and tax identification number of each
record holder, the number of Shares held by each record
holder, certificate numbers and denominations (if any have
been issued), the plan account number of each record holder
having a plan, lists of any accounts against which stops
have been placed, together with the reasons for said stops,
and the number of Shares redeemed by the Company.
(g) An opinion of counsel for the Company with respect
to the validity of the Shares, the number of Shares
authorized, the status of redeemed Shares and the number of
Shares with respect to which a Registration Statement has
been filed and is in effect.
2. FURTHER DOCUMENTATION.
The Company shall also furnish from time to time the
following documents:
(a) Each resolution of the Board of Directors of the
Company authorizing the original issue of its Shares;
(b) Each Registration Statement filed with the
Securities and Exchange Commission and amendments thereof
and orders relating thereto in effect with respect to the
sale of the Shares of the Company;
(c) A certified copy of each amendment to the Articles
of Incorporation and the Bylaws of the Company;
(d) Certified copies of each vote of the Board of
Directors authorizing officers to give instructions to the
Transfer Agent;
(e) Specimens of all new share certificates
accompanied by the Board of Directors' resolutions approving
such forms;
(f) Such other certificates, documents or opinions
which USAA Transfer Agency may, in its discretion, deem
necessary or appropriate in the proper performance of its
duties.
3. AUTHORIZED SHARES.
The Company certifies to USAA Transfer Agency that as of the
close of business on the date of the Agreement, it has authorized
5,000,000,000 Shares of its capital stock, $.01 par value.
4. TRANSFER AGENT TO REGISTER SHARES.
USAA Transfer Agency shall record issues of Shares of the
Company. Except as specifically agreed in writing between USAA
Transfer Agency and the Company, USAA Transfer Agency shall have
no obligation, when crediting Shares or countersigning and
issuing certificates for Shares, to take cognizance of any other
laws relating to the issue and sale of such Shares.
5. TRANSFER AGENT TO RECORD TRANSFERS.
USAA Transfer Agency, upon receipt of proper request for
transfer and surrender to it of certificates, if any, in proper
form for transfer is authorized to transfer on the records of the
Company maintained by it from time to time, Shares of the
Company, and upon cancellation of surrendered certificates, if
any, to credit a like amount of Shares to the transferee and to
countersign, issue and deliver new certificates if requested.
6. SHARE CERTIFICATES.
The Company shall supply USAA Transfer Agency with a
sufficient supply of blank share certificates and from time to
time shall renew such supply upon request of USAA Transfer
Agency. Such blank share certificates shall be properly signed,
manually or by facsimile, if authorized by the Company, and shall
bear the Company seal or facsimile thereof; and notwithstanding
the death, resignation or removal of any officers of the Company
authorized to sign share certificates, USAA Transfer Agency may
continue to countersign certificates which bear the manual or
facsimile signature of such officer until otherwise directed by
the Company.
7. RECEIPT OF FUNDS.
Upon receipt at the office designated by USAA Transfer
Agency of any check or other order drawn or endorsed to it as
Transfer Agent for the Company or as Plan Agent for any
shareholder of the Company or otherwise identified as being for
the account of the Company and in the case of a new account
accompanied by a new account application or sufficient
information to establish an account, USAA Transfer Agency shall
stamp the check or other order with the date of receipt, shall
forthwith process the same for collection, and compute the number
of Shares to be purchased according to the price of Shares in
effect for such purchases as set forth in the Company's then
current Prospectus. USAA Transfer Agency shall credit the Share
account of the investor with the number of Shares so purchased
and shall promptly mail the investor a notice of such credit and
mail a copy to the Distributor. All such actions are subject to
any instructions which the Company may give to USAA Transfer
Agency with respect to acceptance of orders for Shares so
received by it. USAA Transfer Agency shall deposit the net
amount due the Company in the bank account of the Company
maintained by the Company's custodian bank (the "Custodian") and
shall, on a daily basis, notify the Custodian of the total amount
deposited.
8. ISSUE OF SHARE CERTIFICATES.
If an investor requests a share certificate, USAA Transfer
Agency as Transfer Agent, shall countersign and mail by first
class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Company, subject to any
instructions for delivery of certificates which the Company may
give to USAA Transfer Agency with respect to certificates
representing newly purchased Shares, and subject to the
limitation that no certificates representing newly purchased
Shares shall be mailed until the cash purchase price of such
Shares has been deposited in the bank account of the Company
maintained by the Custodian.
9. RETURNED CHECKS.
In the event that any check or other order for the payment
of money is returned unpaid for any reason, USAA Transfer Agency
shall:
(a) Give prompt notification to the Company of the
nonpayment of said check.
(b) In the absence of other instructions from the
Company take such steps as may be necessary to cancel
promptly any Shares purchased on the basis of such returned
check and shall cancel accumulated dividends for such
account, which are due to that specific purchase.
10. NOTICE OF DISTRIBUTION.
The Company shall promptly inform USAA Transfer Agency of
the declaration of any dividend or distribution on account of its
Shares.
11. DISTRIBUTIONS.
USAA Transfer Agency shall act as Dividend Disbursing Agent
for the Company, and, as such in accordance with the provisions
of the Company's Articles of Incorporation and then current
Prospectus, shall prepare and mail or credit income and capital
gain payments to investors. As the Dividend Disbursing Agent it
shall, on or before the payment date of any such dividend or
distribution, notify the Custodian of the estimated amount
required to pay any portion of said dividend or distribution
which is payable in cash, and the Company agrees that on or
before the payment date of such distribution, it shall instruct
the Custodian to make available to the Dividend Disbursing Agent
sufficient funds for the cash amount to be paid out. If an
investor is entitled to receive additional Shares by virtue of
any such distribution or dividend, appropriate credits will be
made to his account and/or certificates delivered where required.
12. REDEMPTIONS.
USAA Transfer Agency shall receive and shall stamp with the
date of receipt, all certificates delivered to it for redemption
or repurchase as well as all requests for redemptions or
repurchase of Shares and shall process said certificates and
redemption and repurchase requests as follows:
(a) If such certificates, redemption or repurchase
requests comply with the standards for redemption or
repurchase as approved by the Company, USAA Transfer Agency
shall notify the Company of the total number of Shares
presented and covered by such requests received by USAA
Transfer Agency on said date;
(b) On or prior to the seventh calendar day succeeding
any such receipt of certificates or request for redemption
or repurchase, USAA Transfer Agency shall from cash
available in the bank account maintained by the Custodian,
pay the applicable redemption or repurchase price, as the
case may be, to the investor as set forth in the Articles of
Incorporation and then current Prospectus of the Company;
(c) If any such certificate or request for redemption
or repurchase does not comply with the standards for
redemption approved by the Company, USAA Transfer Agency
shall promptly notify the investor of such fact, together
with the reason therefor, and shall effect such redemption
or repurchase at the price applicable to the date and time
of receipt of documents complying with said standards, or in
the case of a repurchase, at such other time as the
Distributor, as agent for the Company, shall so direct.
13. WITHDRAWAL PLANS.
USAA Transfer Agency shall process withdrawal orders in
accordance with the terms of any withdrawal plans instituted by
the Company and duly executed by investors. Payments upon such
withdrawal orders and redemptions of Shares held in withdrawal
plan accounts for the payment of the amounts required shall be
made at such times as the Company may determine with the approval
of USAA Transfer Agency.
14. TAX RETURNS.
USAA Transfer Agency shall prepare, file with the Internal
Revenue Service and with the appropriate State Agencies, and, if
required, mail to investors such returns for reporting dividends
and distributions paid as are required to be so filed and mailed,
and shall withhold such sums as are required to be withheld under
applicable Federal and State income tax laws, rules and
regulations.
15. BOOKS AND RECORDS.
USAA Transfer Agency shall maintain records showing for each
investor's account the following:
(a) Names, addresses and tax identifying numbers;
(b) Number of Shares held;
(c) Historical information regarding the account of
each shareholder, including dividends paid and date and
price for all transactions;
(d) Any stop or restraining order placed against the
account;
(e) Information with respect to withholdings in the
case of a foreign account;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any
shareholder holding certificates;
(h) Any information required in order for USAA
Transfer Agency to perform the calculations contemplated or
required by this Agreement.
Any such records required to be maintained by Rule 31a-1 of
the General Rules and Regulations under the Investment Company
Act of 1940, as amended (the "1940 Act") shall be preserved for
the periods prescribed in Rule 31a-2 of said rules as
specifically noted below. Such record retention shall be at the
expense of the Company and records may be inspected by the
Company at reasonable times. USAA Transfer Agency, may at its
option at any time, and shall forthwith upon the Company's
demand, turn over to the Company and cease to retain in USAA
Transfer Agency files, records and documents created and
maintained by USAA Transfer Agency pursuant to this Agreement,
which are no longer needed by USAA Transfer Agency in performance
of its services or for its protection. If not so turned over to
the Company, such records and documents will be retained by USAA
Transfer Agency for six years from the year of creation, during
the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Company, or
destroyed in accordance with the Company's authorization.
16. INFORMATION TO BE FURNISHED TO COMPANY.
USAA Transfer Agency shall furnish to the Company
periodically as agreed upon the following information:
(a) A copy of the daily transaction register;
(b) Dividend and reinvestment amounts;
(c) The total number of Shares distributed in each
state for "blue sky" purposes as determined according to
instructions delivered from time to time by the Company to
USAA Transfer Agency.
17. OTHER INFORMATION TO THE COMPANY.
USAA Transfer Agency shall furnish to the Company such other
information, including shareholder lists, and statistical
information as may be agreed upon from time to time.
18. CORRESPONDENCE.
USAA Transfer Agency shall answer that correspondence from
shareholders relating to their Share accounts and such other
correspondence as may from time to time be mutually agreed upon.
19. PROXIES.
USAA Transfer Agency shall mail such proxy cards and other
material supplied to it by the Company in connection with
shareholder meetings of the Company and shall receive, examine
and tabulate returned proxies and certify the vote of the
Company.
20. FEES AND CHARGES.
USAA Transfer Agency shall receive such compensation from
the Company for its services as the Company's Transfer and
Dividend Disbursing Agent, as Plan Agent for shareholders of the
Company, and for its other duties pursuant hereto as may be
agreed from time to time, and shall be reimbursed for the cost of
any and all forms, including blank checks and proxies, used by it
in communicating with shareholders of the Company, or especially
prepared for use in connection with its actions hereunder, as
well as the cost of postage, telephone (including facsimile
transmission) and telegraph used in communicating with
shareholders of the Company, it being agreed that USAA Transfer
Agency, prior to ordering any forms in such supply as it
estimates will be adequate for more than two years' use, shall
obtain the written consent of the Company. All forms for which
USAA Transfer Agency has received reimbursement from the Company
shall be and remain the property of the Company until used. The
cost of microfilm and microfiche for record retention shall be
reimbused by the Company. USAA Transfer Agency shall also
receive from the Company reimbursement for all counsel fees
incurred by USAA Transfer Agency in connection with the
performance of its duties under this Agreement, unless such fees
are incurred on a matter involving USAA Transfer Agency's willful
misconduct or gross negligence.
21. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The Company assumes full responsibility for the preparation,
contents and distribution of each Prospectus of the Company for
complying with all applicable requirements of the Securities Act
of 1933, as amended, the Investment Company Act of 1940, as
amended, and any laws, rules and regulations of governmental
authorities having jurisdiction.
22. REFERENCES TO USAA TRANSFER AGENCY COMPANY.
The Company shall not circulate any printed matter which
contains any reference to USAA Transfer Agency without the prior
written approval of USAA Transfer Agency, excepting solely such
printed matter as merely identifies USAA Transfer Agency as
Transfer Agent and Dividend Disbursing Agent for the Company and
Plan Agent for the shareholders of the Company. The Company
shall submit printed matter requiring approval to USAA Transfer
Agency in draft form, allowing sufficient time for review by USAA
Transfer Agency and its counsel prior to any deadline for
printing.
23. FORCE MAJEURE.
USAA Transfer Agency shall not be liable for loss of data,
occurring by reason of circumstance beyond its control, including
but not limited to acts of civil or military authority, national
emergencies, fire, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of transportation,
communication or power supply. USAA Transfer Agency shall use
its best efforts to minimize the likelihood of all damage, loss
of data, delays and errors resulting from uncontrollable events,
and if such damage, loss of data, delays or errors occur, USAA
Transfer Agency shall use its best efforts to mitigate the
effects of such occurrence.
24. STANDARD OF CARE.
USAA Transfer Agency shall at all times act in good faith
and agrees to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this
Agreement, but assumes no responsibility and shall not be liable
for loss or damage due to errors unless said error is caused by
its gross negligence, bad faith or willful misconduct or that of
its employees.
25. INDEMNIFICATION.
The Company shall indemnify and hold USAA Transfer Agency
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with its
acceptance of this Agreement, any action or omission by it in the
performance of its duties hereunder, or the functions of Transfer
and Dividend Disbursing Agent and Plan Agent, or as a result of
acting upon any instruction believed by it to have been executed
by a duly authorized officer of the Company, or upon any
information, data, records or documents provided USAA Transfer
Agency or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Company, provided that this
indemnification shall not apply to actions or omissions of USAA
Transfer Agency in cases of its own willful misconduct or gross
negligence, and further provided, that prior to confessing any
claim against it which may be the subject of this
indemnification, USAA Transfer Agency shall give the Company
reasonable opportunity to defend against said claim in its own
name or in the name of USAA Transfer Agency.
26. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
27. AMENDMENT AND TERMINATION.
This Agreement shall be executed and become effective with
respect to all Existing Funds on January 23, 1992, and, with
respect to any additional Fund, on the date of receipt by the
Company of notice from the USAA Transfer Agency in accordance
with this paragraph that the USAA Transfer Agency is willing to
serve as Transfer Agent with respect to such Fund. Unless
terminated as herein provided, this Agreement shall remain in
full force and effect through June 30, 1992, and, with respect to
each additional Fund, through the first June 30 occurring more
than twelve months after the date on which such Fund becomes a
Fund hereunder, and shall continue in full force and effect for
periods of one year thereafter with respect to each Fund so long
as such continuance with respect to any such Fund is approved at
least annually (a) by either the Directors of the Company or by
vote of a majority of the outstanding voting Shares (as defined
in the 1940 Act) of such Fund, and (b) in either event by the
vote of a majority of the Directors of the Company who are not
parties to this Agreement or "interested persons" (as defined in
the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. This
Agreement may be modified or amended from time to time by mutual
agreement between the parties hereto. The Agreement may be
terminated at any time after the expiration of such one year by
sixty (60) days' written notice given by one party to the other.
Upon termination hereof, the Company shall pay to USAA Transfer
Agency such compensation as may be due as of the date of such
termination, and shall likewise reimburse USAA Transfer Agency
for its costs, expenses and disbursements. This Agreement
supersedes any prior agreement relating to the subject matter
hereof between the parties.
EXECUTED under seal as of the day and year first above written.
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- ------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Senior Vice President
ATTEST: ATTEST:
/s/ Michael D. Wagner /s/ Michael D. Wagner
- ---------------------- -----------------------
Secretary Secretary
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Money Market Fund
- ---------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Money Market Fund - charge per account $12.15
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Money Market Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- ------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: October 1, 1992 Date: October 1, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Growth Fund
- -----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Growth Fund - charge per account $19.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Growth Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: November 1, 1992 Date: November 1, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
- ---------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Aggressive Growth Fund - charge per account $19.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Aggressive Growth Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- --------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: November 1, 1992 Date: November 1, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Income Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Income Fund - charge per account $20.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Income Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- -------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: November 1, 1992 Date: November 1, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Income Stock Fund
- --------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Income Stock Fund - charge per account $20.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Income Stock Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- -------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: January 18, 1994 Date: January 18, 1994
EXHIBIT 9(c)
USAA Transfer Services
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to Section 27 of the Transfer Agency Agreement
dated as of January 23, 1992 between USAA Mutual Fund, Inc. (the
"Company") and USAA Transfer Services, a service of USAA
Investment Management Company, (the "Transfer Agent") please be
advised that the Company has established two new series of its
shares, namely, the Short-Term Bond Fund and the Growth & Income
Fund (the "Funds"), and please be further advised that the
Company desires to retain the Transfer Agent to render transfer
agency services under the Transfer Agency Agreement to the Funds
in accordance with the fee schedules attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedules.
USAA MUTUAL FUND, INC.
Attest:/s/ Michael D. Wagner By:/s/ Michael J. C. Roth
- ------------------------------ ---------------------------
Secretary President
Dated: June 1, 1993
We as the sole shareholder of the above named Funds, do
hereby approve the Transfer Agency Agreement and are willing to
render transfer agency services to the Short-Term Bond Fund and
the Growth & Income Fund in accordance with the fee schedules.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest:/s/ Alex M. Ciccone By:/s/ John W. Saunders, Jr.
- -------------------------- ----------------------------
Assistant Secretary Senior Vice President
Dated: June 1, 1993
USAA TRANSFER AGENCY COMPANY
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Short-Term Bond Fund
- ------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Short-Term Bond Fund - charge per account $20.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Short-Term Bond Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- --------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: June 1, 1993 Date: June 1, 1993
USAA TRANSFER AGENCY COMPANY
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Growth & Income Fund
- --------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Growth & Income Fund - charge per account $19.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Growth & Income Fund
By:/s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: June 1, 1993 Date: June 1, 1993
EXHIBIT 9(d)
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Growth Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Growth Fund - charge per account $23.50
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Growth Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
--------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
- -------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Aggressive Growth Fund - charge per account $23.50
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Aggressive Growth Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Income Fund
- --------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Income Fund - charge per account $26.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Income Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Growth & Income Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Growth & Income Fund - charge per account $23.50
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Growth & Income Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Income Stock Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Income Stock Fund - charge per account $23.50
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Income Stock Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- ------------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Money Market Fund
- --------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Money Market Fund - charge per account $26.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Money Market Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ----------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA TRANSFER AGENCY COMPANY
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA MUTUAL FUND, INC.
Short-Term Bond Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Short-Term Bond Fund - charge per account $26.00
USAA MUTUAL FUND, INC. USAA TRANSFER AGENCY COMPANY
Short-Term Bond Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
--------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 227-8591
CABLE.GOODPROCT,BOSTON
September 18, 1995
USAA Mutual Fund, Inc.
USAA Building
9800 Fredericksburg Road
San Antonio, Texas 78288
Ladies and Gentlemen:
As counsel to USAA Mutual Fund, Inc. (the "Company"), a Maryland
corporation, we have been asked to render our opinion with respect to
the issuance of shares of capital stock, $.01 par value per share, of
the Aggressive Growth Fund, Growth Fund, Growth & Income Fund, Income
Stock Fund, Income Fund, Short-Term Bond Fund and Money Market Fund (the
"Shares"), seven classes of capital stock of the Company which have been
established and designated in the Company's Articles of Incorporation
and Articles Supplementary to the Articles of Incorporation, as amended
(collectively, the "Articles"), all as more fully described in certain
Prospectuses and the Statement of Additional Information contained in
Post-Effective Amendment No. 38 (the "Amendment") to the Registration
Statement (No. 2-49560) on Form N-1A (the "Registration Statement") to
be filed by the Company with the Securities and Exchange Commission.
We have examined the Articles, the By-Laws of the Company, as
amended, the minutes of certain meetings of the Board of Directors of
the Company, the Prospectuses and Statement of Additional Information
contained in the Amendment and such other documents, records and
certificates as we deemed necessary for the purposes of this opinion.
Based upon the foregoing, and assuming that not more than
25,000,000 Shares of the Aggressive Growth Fund, 75,000,000 Shares of
the Growth Fund, 25,000,000 Shares of the Growth & Income Fund,
135,000,000 Shares of Income Stock Fund, 200,000,000 Shares of the
Income Fund, 25,000,000 Shares of the Short-Term Bond Fund and
2,250,000,000 Shares of the Money Market Fund will be issued and
outstanding at any time, we are of the opinion that the Shares will,
when sold in accordance with the terms of the Prospectuses and Statement
of Additional Information in effect at the time of the sale, be legally
issued, fully paid and non-assessable.
We hereby consent to being named in each of the Prospectuses and
the Statement of Additional Information contained in the Amendment and
to a copy of this opinion being filed as an exhibit to the Amendment.
Very truly yours,
/s/Goodwin, Procter & Hoar
--------------------------
GOODWIN, PROCTER & HOAR
EXHIBIT 11
The Shareholders and Board of Directors
USAA Mutual Fund, Inc.:
We consent to the use of our reports dated September 5, 1995 on
the financial statements of the Aggressive Growth, Growth, Growth
& Income, Income Stock, Income, Short-Term Bond, and Money Market
Funds, separate Funds of the USAA Mutual Fund, Inc. (the
Company), as of and for the year ended July 31, 1995 included in
the Company's Annual Report to Shareholders for the fiscal year
ended July 31, 1995 incorporated herein by reference and to the
references to our firm under the headings "Financial Highlights"
and "Independent Auditors" as part of Post-Effective Amendment
No. 38 under the Securities Act of 1933, as amended, and
Amendment No. 26 under the Investment Company Act of 1940, as
amended, to the Company's Registration Statement on Form N-1A.
/s/ KPMG Peat Marwick LLP
-------------------------
San Antonio, Texas
September 25, 1995
EXHIBIT 13
SUBSCRIPTION
March 23, 1993
TO: Board of Directors
USAA Mutual Fund, Inc.
USAA Building
San Antonio, TX 78288
Dear Sir:
The undersigned hereby subscribes to 10 shares of the Short-
Term Bond Fund and 10 shares of the Growth & Income Fund series
one cent par value, of USAA Mutual Fund, Inc. at a price of
$10.00 per share and agrees to pay therefore upon demand, cash in
the amount of $100 to the named Funds.
Very truly yours,
USAA INVESTMENT MANAGEMENT
COMPANY
/s/ Michael J. C. Roth
-----------------------
BY: MICHAEL J. C. ROTH
President
March 23, 1993
USAA Mutual Fund, Inc.
USAA Building
San Antonio, TX 78288
Gentlemen:
In connection with your sale to us today of ten (10) shares
of capital stock representing interests in the Short-Term Bond
Fund and ten (10) shares of capital stock representing interests
in the Growth & Income Fund, we understand that: (i) the Shares
have not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) your sale of the Shares to us is
made in reliance on such sale being exempt under Section 4(2) of
the 1933 Act as not involving any public offering; and (iii) in
part, your reliance on such exemption is predicated on our
representation, which we hereby confirm, that we are acquiring
the Shares for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection
with any resale or distribution of the shares or of any interest
therein. We hereby agree that we will not sell, assign or
transfer the Shares or any interest therein, except upon
repurchase or redemption by the Company, unless and until the
Shares have been registered under the 1933 Act or you have
received an opinion of your counsel indicting to your
satisfaction that said sale, assignment or transfer will not
violate the provisions of the 1933 Act or any rules or
regulations promulgated thereunder.
Very truly yours,
USAA INVESTMENT MANAGEMENT
COMPANY
By: /s/ Michael J. C. Roth
----------------------------
MICHAEL J. C. ROTH
President
EXHIBIT 14(a)
[A picture of the USAA Eagle Logo is here]
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
IRA HANDBOOK
Page 1
Contents
Your Personal Retirement Plan 2
Which USAA Funds are Best For Me? 3
Questions and Answers 5
How to Apply 7
Checklist 8
Custodial Agreement 9
Disclosure Statement 16
Page 2
Your Personal Retirement Plan
An Individual Retirement Account (IRA) offers you many benefits. It would be
wise to consider establishing an account today for tomorrow's needs. Most
financial experts agree an IRA should be a part of every investor's financial
plan.
IRAs are still an important tax-saving investment. All dividends, interest,
and capital gains accumulate in your IRA on a tax-deferred basis. IRA earnings
are not federally taxed until you start making withdrawals (except for non-
deductible IRA contributions which are returned tax-free). This tax-deferred
accumulation in your IRA has a dramatic effect on your retirement income.
(see chart below)
Key reasons for opening an IRA:
* tax-deferred earnings
* supplemental retirement income
* Social Security may prove to be inadequate
* control of your financial future
* flexible investment
THE DRAMATIC DIFFERENCE IRA TAX SAVINGS CAN MAKE
[$2,000 annual investment at 8% over 5 years]*
[A graph is shown here which is a comparison of Taxable Returns at 8% to a
Tax-Deferred IRA Return at 8%, assuming $2,000 annual investments over 5
years. The ending taxable figure is $8,582.86 and the ending tax-deferred
IRA figure is $12,733.27.]
* Based on a hypothetical 8% annual rate of return compounded monthly.
Assumes a 28% tax bracket. This chart is for illustration purposes only.
It is not an indication of past or future results of an investment in any of
the funds managed and distributed by USAA Investment Management Company.
Management and administrative fees not included.
Page 3
Which USAA Funds Are Best For Me?
THE MUTUAL FUND ALTERNATIVE
Mutual fund IRAs offer managed investments and diversification through a
variety of stock, bond, income, and money market instruments which have
historically outperformed fixed-rate investments when held over an extended
period of time. What's more, you have flexibility to exchange shares from
fund to fund. That's very important if you want your investment to respond to
economic changes over the next ten, 20, or even 30 years.
USAA Investment Management Company (IMCO) manages and distributes a variety
of mutual fund IRAs to meet your own personal investment objectives. Here are
some of the many advantages of investing in a USAA mutual fund for your IRA:
PROFESSIONAL MANAGEMENT
USAA mutual funds are managed by investment professionals with the education,
knowledge, and experience to make sound investment decisions with your money
- -- decisions you might not have the time, interest, or training to make.
NO SALES CHARGE
USAA's funds are totally "no-load," which means you pay no sales commission,
redemption or 12b-l fees.
INVESTMENT FLEXIBILITY
USAA IMCO currently manages a family of mutual funds suitable for your IRA
with investment objectives ranging from conservative to aggressive (see chart
on next page).
DIVERSIFICATION
Each USAA mutual fund invests in a wide selection of securities (stocks,
bonds, etc.) suited to its particular investment objective, diversified by
economic sector, industry, and companies within a single industry, or it
invests in a variety of short-term money market instruments.
EXCHANGE PRIVILEGE
The family of funds managed by USAA IMCO offers a free exchange privilege
whereby you may control your investment by exchanging shares of one fund for
shares of another fund.
PERFORMANCE RESULTS
These are readily available every day in the financial section of most major
newspapers, as well as in the annual and semiannual reports sent directly to
you.
FINANCIAL REPORTS
You will receive a statement of your IRA account status when you open it and
whenever you make a transaction. In addition, you'll receive annual and
semiannual performance reports for the funds in which you invest.
USAA MUTUAL FUNDS SUITABLE FOR YOUR IRA
Aggressive Growth Fund Income Stock Fund
Cornerstone Fund International Fund
Emerging Markets Fund Money Market Fund
GNMA Trust Short-Term Bond Fund
Gold Fund Treasury Money
Growth Fund Market Trust
Growth & Income Fund World Growth Fund
Income Fund
If you did not request a prospectus for some of the funds listed here and
would like more complete information, including management fees charged and
expenses, please call us toll free at 1-800-531-8181. Please read the
prospectus carefully before you invest or send money. Everyone's investment
situation differs. Your age, income, net worth, comfort with risk, as well
as current market conditions, are all factors to consider in deciding which
investment is best for you.
Which funds are right for your IRA? You might want to take the following
factors into account when making your decision:
AGE
If you are older and close to retirement, you might want current income and
relative safety. If you are younger, you might be willing to accept a degree
of risk in hopes of larger long-term gains.
Page 4
Which USAA Funds Are Best For Me?
MARKET CONDITIONS
Fluctuating market conditions can affect all mutual funds -- aggressive and
conservative. Current market conditions, therefore, must be a primary
consideration when you select a fund for your IRA.
For example, when interest rates are high, money market funds are popular
with investors. But if the rates appear to be declining, some investors may
choose to switch to a growth or income fund. The flexibility to exchange
funds during periods of market swings is one of the best features of a mutual
fund. However, many fund managers and investment advisers insist there is no
foolproof system for calling the market's turns.
RISK TOLERANCE
If safety is a strong consideration, you're better off in the conservative or
moderate funds. If you're willing to accept risk, the aggressive funds may be
your best investment decision. You must be comfortable with the idea that the
value of your investment is likely to fluctuate depending on the market
situation.
PRIMARY RELATIVE
FUND INVESTMENT IMPORTANCE
TYPE/NAME OBJECTIVE INVESTS IN... VOLATILITY OF INCOME
- -----------------------------------------------------------------------------
AGGRESSIVE GROWTH
- -----------------
AGGRESSIVE Capital appreciation Stocks Very high Low
GROWTH FUND
EMERGING Capital appreciation Emerging Very high Low
MARKETS FUND markets
stocks
GROWTH
- -------
GROWTH FUND Capital appreciation Stocks Moderate Moderate
to high
INTERNATIONAL Capital appreciation Foreign Moderate Low
FUND*** stocks to high
WORLD Capital appreciation Foreign Moderate Low
GROWTH FUND*** stocks & to high
domestic
stocks
GROWTH & INCOME
- -----------------
GROWTH & Capital growth & Dividend Moderate Moderate
INCOME FUND current income paying common
stocks,
convertible
bonds
INCOME
- ------
INCOME Current income Bonds Moderate High
FUND (BONDS) and conservation
of capital
INCOME STOCK Current income, Stocks Moderate High
FUND (STOCKS) increasing dividend
income, capital
appreciation
GNMA TRUST Current income & Government Low to High
conservation of National moderate
capital Mortgage
Association
certificates
SHORT-TERM High current income Investment- Low High
BOND FUND with preservation of grade
principal securities,
bonds
PRECIOUS METALS
- ---------------
GOLD FUND Capital Gold mining & Very high Low
appreciation precious metals
stocks
MONEY MARKET
- -------------
MONEY Current income Money market Very low High
MARKET FUND+ plus stable instruments
principal
TREASURY Current income & U.S. Treasury Very low High
MONEY MARKET conservation of securities
TRUST+ capital with the
highest degree of
safety
DIVERSIFIED
- ------------
CORNERSTONE Achieve a positive Gold mining, Moderate Moderate
FUND inflation-adjusted real estate,
rate of return foreign & basic
value stocks,
government
securities
*** Foreign investing is subject to certain risks, which are discussed in the
Fund's prospectus. + An investment in any Money Market Fund or Treasury Money
Market Trust is neither insured nor guaranteed by the U.S. government and
there is no assurance the fund will be able to maintain a stable net asset
value of $1 per share.
Page 5
Some Basic IRA Questions and Answers
Q Who is eligible for an IRA?
A Any individual under age 70 1/2 with earned income is eligible to set up
an IRA. You may also qualify for an IRA if you receive taxable alimony or
separate maintenance payments according to a valid divorce or separation
agreement.
Q How much may I contribute to an IRA each year?
A You may contribute up to $2,000 to a regular IRA each year. For married
couples where only one spouse has earned income, or where both spouses have
earned income and one spouse elects to be treated as if he or she does not
have earned income, up to $2,250 may be split between a spousal IRA and a
regular IRA (no more than $2,000 may be deposited in either account). If each
person has earned income of at least $2,000, both may open an account and
contribute up to $2,000 for a maximum of $4,000.
The Tax Reform Act limits the deductibility of IRA contributions for certain
individuals. However, you may still make voluntary contributions to an IRA
regardless of deductibility status.
The amount of the contribution to a regular or spousal IRA which is deductible
depends on whether you (or your spouse) are an active participant in an
employer-sponsored retirement plan.
Q Why would a person want to open an IRA if the contribution isn't tax
deductible?
A Even if you are covered by a "qualified retirement plan" and cannot
deduct your contribution, you should still consider having an IRA. The
earnings will be tax-deferred until withdrawal. Earnings from most forms of
savings are taxed in the year in which they are earned. The effect is to
reduce the net yield on your money. Therefore, an IRA will continue to be an
excellent way to prepare for the financial needs of your retirement years.
Q When are employees considered to be covered by a "qualified retirement
plan"?
A Employees are considered covered by a qualified retirement plan if they
are active participants in any employer-maintained retirement plan, such as a
pension plan, savings and investment plan, a profit-sharing plan, a stock
bonus plan, a SEP plan, or a Section 401(k) or 403(b)(7) plan. Please ask your
employer if you have questions about being covered by a qualified retirement
plan.
Q Can married individuals filing separately who are not covered by a
qualified retirement plan deduct their IRA contribution?
A Yes, up to present law limitations ($2,000 for individual and $2,250 for
spousal IRAs) regardless of their level of income, but only if they live apart
from their spouses at all times during the year.
Q Are all individuals who are covered by a qualified retirement plan
automatically ineligible to deduct their IRA contribution?
A No. Single individuals who have an adjusted gross income of $25,000 or
less ($40,000 on joint returns) may deduct their IRA contribution even if
covered by another retirement plan. If adjusted gross income of a single
individual is between $25,000 and $35,000 ($40,000 and $50,000 on joint
returns), deductions for IRA contributions are allowed on a pro rata basis.
Once adjusted gross income of single individuals equals or exceeds $35,000
($50,000 on joint returns), their IRA deductions are not permitted if they
are covered by another qualified retirement plan.
Q How much is the initial investment to open a USAA mutual fund IRA?
A To open one of our regular mutual fund accounts for your IRA, the
minimum investment is $1,000 ($250 for Spousal IRAs).
Q What does your IRA pay?
A Unlike some other types of IRA instruments, we cannot promise or
guarantee a stated rate of return on your mutual fund IRA. With a mutual fund
IRA, however, you are not locked into a fixed rate of return on your
investment. Your return varies depending on which fund you select, interest
rates, dividend income, and individual stock and bond prices.
Q When may I make contributions?
A At your convenience. You are not asked to adhere to a set contribution
schedule. The amounts of your contribution may vary, as long as the total
annual contribution doesn't exceed the maximums and deadline for contributions.
Q When may I begin to receive distributions from my IRA?
A You may start withdrawals without tax penalties anytime after age 59 1/2
or if you become permanently disabled.
Q What is the latest date I may begin withdrawals from my IRA?
A The law requires that you begin to receive distributions from your IRA
no later than April 1 following the calendar year in which you reach age
70 1/2. If you make withdrawals at that time in installments, certain
minimum distributions (based on your life expectancy or the joint life
expectancies of you and your beneficiary) must begin. A 50% penalty tax will
be imposed if the amount actually distributed to you after age 70 1/2 is less
than the amount required by law to be distributed.
Q Are there penalties if I withdraw my money early?
A Unless you are permanently disabled, any money received from your IRA (in
a form other than a life annuity) before age 59 1/2 must be rolled over into
another tax-qualified plan or IRA within 60 days. Otherwise, any premature
distributions will be assessed a 10% penalty on the amount withdrawn, in
addition to ordinary income tax on the amount withdrawn.
Q If I have an IRA with another financial institution, must I leave it
there?
A No. If you decide it's in your best interest to change, you may
transfer your account from your present custodian directly to a USAA mutual
fund plan. Of course, such a transfer would be subject to the rules of your
existing account. One word of caution: Depending on the financial
institution involved, custodian-to-custodian transfer can take several weeks
to complete. So if you wish to transfer, we suggest you start early.
Q How is a rollover different from a transfer?
A A rollover is a transaction in which you receive a distribution of assets
from one tax-qualified retirement program and reinvest all (or part) of the
funds in an IRA within 60 days of receipt of the distribution. A transfer is a
transaction where you arrange for funds to be transferred directly from one
financial institution to another without handling the funds yourself. You may
transfer at any time; but you may make only one rollover in any one-year
period. This one per year rule applies separately to each IRA you own. As of
January 1, 1993 if you're planning to change jobs or retire you could be
affected by an IRS rule. If you roll over a lump-sum distribution from your
tax-qualified pension plan (for example, a 403(b)(7), 401(k) or Keogh plan),
20% of your money could be withheld to pay taxes. Fortunately, with proper
planning, you should be able to avoid this tax by notifying your employer that
you want to use the "direct rollover" procedure. In a direct rollover the
employer sends your retirement funds to the financial institution of your
choice.
Make sure you don't take possession ("constructive receipt") of the funds if
you want to avoid the 20% withholding. If you have any questions regarding
this IRS rule or if you are considering taking a distribution from your
retirement plan in the future, we suggest you contact your employer's plan
administrator for more information about a "direct rollover."
Q What happens to my IRA when I die?
A The value of your IRA will be paid to your designated beneficiary upon
your death. If you should fail to designate a beneficiary in writing or if
your beneficiary predeceases you, the value of your IRA, upon your death, will
be paid to your estate.
Page 7
How To Apply
Opening a mutual fund IRA might seem complicated. But it's rather simple if
you follow the instructions we've provided below.
OPEN YOUR IRA
- -------------
Fill out the enclosed IRA Application and Adoption Agreement and return it
with a check to USAA Shareholder Account Services. Be sure to specify which
fund you choose for your IRA.
FOR SPOUSAL IRA
- ---------------
The spouse without earned income (or who is considered not to have earned
income) for the year will complete a separate application in his or her name
and check the Spousal IRA block if the maximum contribution of $2,250 is
submitted. If both spouses work and want to set up IRAs, each must fill out
an application, and neither will check the Spousal IRA block. A second
application is enclosed for your spouse's use. A transaction statement will
be mailed to you when your application is accepted.
CONTRIBUTIONS
- -------------
INITIAL CONTRIBUTIONS: The minimum initial contribution is $1,000. ($250 for
spousal IRA)
MAXIMUM INDIVIDUAL CONTRIBUTIONS: Your IRA contributions (not including
rollover contributions) for any one tax year cannot exceed $2,000. If your
spouse works, he or she can also open an IRA for $2,000 if he or she has that
much income.
MAXIMUM SPOUSAL CONTRIBUTIONS: If your spouse doesn't have earned income (or
is not considered to have earned income) you may split a contribution of
$2,250 between your two accounts, provided that neither contribution exceeds
$2,000 for the tax year.
FEES
- ----
ANNUAL MAINTENANCE FEE: There are no annual IRA maintenance fees.
WITHDRAWAL FEES: $20.00 fee for total distribution. Exceptions to the fee are:
partial distributions, total transfer within USAA, and distributions due to
disability or death.
TRANSFER AN EXISTING IRA TO A USAA MUTUAL FUND IRA
- --------------------------------------------------
Complete the IRA Transfer Request and mail with the IRA Application and
Adoption Agreement to USAA Shareholder Account Services. You will not handle
the IRA funds; they will be sent directly from your current financial
institution to USAA Shareholder Account Services.
MAKE ROLLOVER CONTRIBUTIONS TO YOUR IRA
- ---------------------------------------
If this is a rollover contribution, check the appropriate block. Send a check
for the amount of the rollover to USAA Shareholder Account Services with the
IRA Application and Adoption Agreement. Rollovers must be made into the new
account within 60 days of receipt of a distribution from the old account.
Refer to the disclosure statement at the end of this booklet for more
information about rollover IRAs.
ADD MONEY TO YOUR IRA
- ---------------------
Complete the tear-off stub attached to your IRA statement when you receive it
and return it with a check to USAA Shareholder Account Services. Be sure to
indicate the tax year on your contribution.*
ARRANGE FOR AUTOMATIC BANK-DEBIT INVESTING
- ------------------------------------------
You may make automatic contributions to your IRA from a bank account through
IMCO's InvesTronic (registered trademark) automatic investment plan. Complete
the Monthly Automatic Investing section on the application.
MOVE YOUR IRA FUNDS FROM ONE USAA FUND TO ANOTHER
- -------------------------------------------------
You may call toll free and request a transfer of funds at any time or write
USAA Shareholder Account Services.
TAKE MONEY OUT OF YOUR IRA
- --------------------------
Write USAA Shareholder Account Services with your fund account number and tell
them you're ready to begin receiving IRA distributions. They will send you a
form about your distribution options. Age 59 1/2 is the earliest you can
ordinarily receive IRA distributions without penalty.
* If you do not indicate the tax year your contribution is for, we will
assume that the contribution is for the year we receive it.
Page 8
Checklist
Make Sure You Read: - IRA Custodial Agreement
- IRA Disclosure Statement
Make Sure You Sign: - IRA Application section "Signature and Custodian
Acceptance"
- IRA Transfer Request (if necessary)
For Spousal IRA: - If you intend to contribute for your spouse, he or
she must complete a separate IRA Application and
Adoption Agreement if the maximum contribution of
$2,250 is submitted.
Designation Of Beneficiary: - Be sure to complete this section to expedite
transfer of funds in the event of your death.
Contributions: - Your IRA contributions may not exceed $2,000 per
account for any one tax year. PLEASE MAKE SURE YOU
INCLUDE YOUR CHECK PAYABLE TO THE APPROPRIATE FUND
FOR YOUR INITIAL CONTRIBUTION.
Mailing Instructions: - Mail completed form(s) with your checks in the
enclosed envelope marked:
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, TX 78284-9855
Toll-Free Telephone Numbers
For Information Before If you have any investment questions about mutual
You Open An Account: funds or if you want to request an application or
prospectus for other funds managed by USAA Investment
Management Company, call toll free 1-800-531-8181
(in San Antonio, 456-7211).
For Information After NET ASSET VALUE PER SHARE:
You Open An Account: For a recorded message giving the Funds' current
status, call toll free 1-800-531-8066 (in San
Antonio, 498-8066).
ACCOUNT SERVICING: For general account service,
questions on existing accounts exchanges, or
redemptions, please call toll free 1-800-531-8448
(in San Antonio, 456-7202).
Page 9
Custodial Agreement
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including
the incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of beneficiary or
beneficiaries, either
Page 10
Custodial Agreement
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries, starting
by December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the
close of business on December 31 of the preceding year by the life expectancy
of the Depositor (or the joint life and last survivor expectancy of the
Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of
distributions under paragraph (3), determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of distribution in accordance with
paragraph (4) (b) (ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
Page 11
Custodial Agreement
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the Depositor may from time to time
specify. The Depositor's instructions may relate to current contributions or
to amounts previously contributed (including earnings thereon) or to both. In
the event that the Custodian receives a contribution from the Depositor with
respect to which no investment direction is specifically applicable, or if
any such investment direction is, in the opinion of the Custodian, unclear,
the Custodian may hold such amounts uninvested or return any such
contributions without liability for any loss, including any loss of income or
appreciation, and without liability for interest or any tax liability incurred
by Depositor pending receipt of instructions or clarification. For all
purposes of this Agreement, the term "Designated Investment Company" shall
mean USAA INVESTMENT TRUST or USAA MUTUAL FUND, INC. and any other regulated
investment company for which USAA INVESTMENT MANAGEMENT COMPANY (or any
affiliate thereof) acts as investment advisor and which is designated by USAA
INVESTMENT MANAGEMENT COMPANY as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions
made under this Agreement shall be deposited in the form of cash and shall be
made to the Custodian in accordance with such rules as the Custodian may
establish. Any contribution so made with respect to a tax year of the
Depositor shall be made prior to the due date of the Depositor's tax return
(not including extensions). Unless otherwise indicated in writing by the
Depositor, contributions shall be credited to the tax year in which they are
received by the Custodian. The Custodian, upon receipt of written instructions
from the Depositor, may exchange or cause to be exchanged shares of a
Designated Investment Company sold held by the Custodian on behalf of the
Depositor for any other shares of a Designated Investment Company available
for investment hereunder, subject to and in accordance with the terms and
conditions of the exchange privilege, as outlined in the current prospectuses
of any such Designated Investment Company and as may be agreed upon, in
writing, from time to time between the Custodian and USAA Investment
Management Company. The Depositor shall be the beneficial owner of the assets
held in the Account. All dividends and capital gains distributions received
on shares of a Designated Investment Company held in the Depositor's Account
shall, unless received in additional shares, be reinvested in shares of the
Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election
of the Depositor in additional shares or in cash or other property, the
Custodian shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time
upon thirty (30) days' notice in writing to the Custodian, and the Custodian
may resign at any time upon thirty (30) days' notice in writing to USAA
INVESTMENT MANAGEMENT COMPANY. Upon such resignation or removal, USAA
INVESTMENT MANAGEMENT COMPANY shall appoint a successor custodian, which
successor custodian shall be a "bank" as defined in Section 408(n) of the Code
or another person found qualified to act as a custodian of an Individual
Retirement Account by the Secretary of the Treasury or his delegate. Upon
receipt by the Custodian of written acceptance of such appointment by the
successor custodian or trustee, the Custodian shall transfer and pay over to
such successor the assets of the Account
Page 12
Custodial Agreement
and all records pertaining thereto. The Custodian is authorized, however, to
reserve such sum of money as it may deem advisable for payment of all its
fees, compensation, costs, and expenses or for payment of any other
liabilities constituting a charge on or against the assets of the Account or
on or against the Custodian, with any balance of such reserve remaining after
the payment of all such items to be paid over to the successor custodian or
trustee. If within the thirty (30) day period provided for above, USAA
Investment Management Company has not appointed a successor custodian or
trustee which has accepted such appointment, the Custodian shall, unless it
elects to terminate the Custodial Account, appoint a successor custodian
itself.
4. The Custodian shall deliver, or cause to be delivered, to the Depositor
all notices, prospectuses, financial statements, proxies and proxy soliciting
materials relating to Designated Investment Companies' shares held for
Depositor. The Custodian shall not vote any of the shares held hereunder
except in accordance with the written instructions of the Depositor.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor (or the Depositor's beneficiary
if the Depositor is deceased), make distributions out of the Account to the
Depositor in the manner and amounts as may be specified in such instructions.
All such instructions shall be deemed to constitute a certification by the
Depositor (or the Depositor's beneficiary if the Depositor is deceased) that
the distribution directed is one that the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) is permitted to receive.
Notwithstanding the provision of Article IV above, the Custodian assumes (and
shall have) no responsibility to make any distribution to the Depositor (or
the Depositor's beneficiary if the Depositor is deceased) unless and until
such written instructions specify the occasion for such distribution, the
elected manner of distribution and any declaration required by Article IV.
Prior to making any such distribution from the Account, the Custodian shall
be furnished with any and all applications, certificates, tax waivers,
signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by the Custodian,
but the Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if not
satisfied such instructions are genuine, and assumes no duty of further
inquiry. Upon receipt of proper written instructions as required above, the
Custodian shall cause the assets of the Account to be distributed in cash
and/or in kind, as specified in such written order.
(b) Distribution of the assets of the Account shall be made in accordance with
the provisions of Article IV as the Depositor (or the Depositor's beneficiary
if the Depositor is deceased) shall elect by written instructions to the
Custodian; subject, however to the provisions of Sections 401(a)(9), 408(a)(6)
and 408(b)(3) of the Code, the regulations promulgated thereunder, and the
following:
(i) No distribution from the Account shall be made in the form of an annuity
contract.
(ii) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election of the
Depositor. The recalculation of life expectancy of the surviving spouse shall
only be made at the written election of the surviving spouse.
(iii) If the Depositor dies before his/her entire interest in the Account has
been distributed, and if the designated beneficiary of the Depositor is the
Depositor's surviving spouse, the spouse may treat the Account as his/her own
individual retirement arrangement. This election will be deemed to have been
made if the surviving spouse makes regular IRA contribution to the Account,
makes a rollover to or from such Account, or fails to receive a payment from
the Account within the appropriate time period applicable to the deceased
Depositor under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the Depositor provided for in this
Agreement shall be effective if sent by regular mail to him at his last
address of record.
7. The Depositor hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of
the Agreement and hereby consents to such amendments, provided they shall
comply with all applicable provisions of the Code, the regulations thereunder
and with any other governmental law, regulation or ruling. Any such amendments
shall be effective as of the date specified in a written notice sent by first-
class mail to the address of the Depositor indicated by the Custodian's
records. Notwithstanding the foregoing, no amendment which increases the
burdens of the Custodian shall take effect without its prior written consent.
Nothing in this paragraph 7 shall be construed to restrict the Custodian's
freedom to change or substitute fee schedules in accordance with the
provisions of the adoption agreement, and no such change or substitution shall
be deemed to be an amendment to this Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been
received in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the Depositor. The Depositor and the Depositor's legal
representatives, as appropriate, shall always fully indemnify the Custodian
and USAA Investment Management Company and save each of them harmless from any
and all liability whatsoever which may arise in connection with this
Agreement and matters which the Agreement contemplates, except that which
arises due to the Custodian's gross negligence, willful misconduct or lack of
good faith. The Custodian shall not be obligated or expected to commence or
defend any legal action or proceeding in connection with this Agreement or
such matters unless agreed upon by the Custodian and the Depositor or said
legal representatives and unless fully indemnified for so doing to the
Custodian's satisfaction.
(b) The Custodian shall be an agent for the Depositor to perform the duties
conferred on it by the Depositor. The parties do not intend to confer any
fiduciary duties on the Custodian and none shall be implied. The Custodian
shall not be liable (and does not assume any responsibility for) the
collection of contributions, the deductibility of any contribution or the
propriety of any contributions under this Agreement, the selection of any
shares of any Designated Investment Company for the Account, or the purpose or
propriety of any distribution ordered in accordance with Article IV or
paragraph 5 of the Article VIII, which matters are the sole responsibility of
the Depositor or the Depositor's beneficiary, as the case may be.
(c) The Custodian and USAA Investment Management Company shall not be
responsible for any losses, penalties or other consequences to the Depositor
or to any other person a rising out of the making of any contribution or
withdrawal.
Page 14
Custodial Agreement
10. This Agreement together with the Application and Adoption Agreement
attached hereto and by this reference made a part hereof, constitutes the
entire agreement between the parties, and it shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
11. The Depositor shall have the right by written notice to the Custodian on
a form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such Depositor may be entitled in event of his
death prior to the complete distribution of such benefit. If no such
designation is in effect at the time of the Depositor's death, or if the
designated beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate. The last designation filed with the
Custodian shall be controlling, and, whether or not it fully disposes the
Account, shall revoke all such other designations previously filed by the
Depositor.
12. (a) The Custodian shall have the right to receive rollover contributions
as described in the Code and if any property is so transferred to it as a
rollover contribution, such property shall be sold by the Custodian and the
proceeds less any expenses, fees or commissions reinvested as provided in
paragraph 1 of this Article VIII. The Custodian reserves the right to refuse
to accept any property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably require,
shall transfer the assets held under this Agreement (reduced by any amounts
referred to in paragraph 3 of this Article VIII) to a successor individual
retirement account, or individual retirement annuity (other than an endowment
contract for the Depositor's benefit or to an exempt employee's trust
established under a plan which satisfies the qualification requirements of
Section 401(a) of the Code. Any amounts received or transferred by the
Custodian under this paragraph 12 shall be accompanied by such records and
other documents as the Custodian deems necessary to establish the nature,
value, and extent of the assets, and of the various interests therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in
the Account by the Depositor as security for a loan, or any loan or other
extension of credit from the Account to the Depositor shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except
that the Designated Investment Company shares must be registered in the name
of the Custodian or its nominee. No such delegation or subsequent change
herein shall be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall
cause to be mailed to the Depositor in respect of each tax year an account of
all transactions affecting the Account during such year and a statement
showing the Account as of the end of such year. If, within sixty (60) days
after such mailing, the Depositor has not given the Custodian written notice
of any exception or objection thereto, the annual accounting shall be deemed
to have been approved, and in such case, or upon the written approval of the
Depositor, the Custodian shall be released, relieved and discharged with
respect to all matters and statements set forth in such accounting as though
the account had been settled by judgment or
Page 15
Custodial Agreement
decree of a court of competent jurisdiction.
16. (a) The Custodian may charge the Depositor reasonable fees, including an
annual maintenance fee, for services hereunder according to standard with the
Agreement. Upon thirty (30) days' prior written notice, the Custodian may
substitute a fee schedule differing from that schedule initially provided.
(b) Custodian's fees, any income (including unrelated business income tax),
gift,,estate and inheritance taxes and other taxes of any kind whatsoever,
including transfer taxes incurred in connection with the investment or
reinvestment of the assets of the Account, that may be levied or incurred by
the Custodian in the performance of its duties may be charged to the Account,
with the right to liquidate shares of any Designated Investment Company for
this purpose, or (at Custodian's option) to the Depositor.
Page 16
Disclosure Statement
This disclosure statement outlines the basic provisions of an Individual
retirement account (IRA) as well as certain features unique to USAA mutual
fund IRAs. This is merely a general summary for your information. For an
interpretation of the applicable IRA and tax laws, contact your tax adviser
district IRS office. IRS Publication 590, "Tax Information on Individual
retirement Accounts," contains more detailed information on IRAs.
ONE
REVOCATION
An IRA which is established on the date of receipt of this Disclosure
Statement, or within seven days thereafter, may be revoked at any time within
seven days after the date of establishment of such IRA. An IRA established at
least seven days after the date of the receipt of this Disclosure Statement
may not be revoked (although it may be terminated). Revocation must be made by
telephone and confirmed in writing to USAA Shareholder Account Services, 9800
Fredericksburg Road, San Antonio, Texas 78288. Call 1-800-531-8448 (in San
Antonio, 456-7202). Mailed notice will be deemed given on the date that it is
postmarked (or, if sent by certified or registered mail, on the date of
certification or registration) if it is deposited in the mail in the United
States in an envelope or other appropriate wrapper, first class postage
pre-paid, properly addressed. In the event that you decide to revoke your IRA
and do so within such seven day period, you are entitled to a return of the
entire amount of your IRA contributions, without adjustment for such items as
administrative expenses or fluctuations in market value.
TWO
THE CUSTODIAL ACCOUNT
The USAA mutual fund IRA is a custodial account established for your exclusive
benefit or that of your named beneficiaries, as described in Section 408 of the
Internal Revenue Code. All amounts contributed to your IRA custodial account
will not be forfeitable. The custodial account is established through the use
of IRS Form 5305-A which has been approved as to form by the Internal Revenue
Service. IRS approval is determined only as to form of the account and does not
represent a determination of the merits of such an account.
THREE
CONTRIBUTIONS
A. FORM OF CONTRIBUTIONS Contributions must be made in cash and may be made
at any time from the beginning of the tax year, either periodically or in a
lump sum, until April 15 of the following year -- the deadline for filing your
tax return. If you receive a tax return extension, you must still make your
IRA contribution by April 15 in order to claim the deduction. You do not have
to contribute to an IRA every year. Additionally, regardless of your age, you
may also transfer funds from another IRA or certain qualified plan
distributions to a "rollover" IRA, which is described in paragraph 6 of this
Disclosure Statement. If you intend to report contributions made between
January 1 and April 15 as contributions for your prior tax year, you should
notify us in writing that such contributions have been made on account of such
prior tax year. Otherwise, the Custodian will assume the payment is for the
current tax year.
No part of your IRA account can be used to buy a life insurance policy. Your
account's assets cannot be combined with other property, except in a common
trust fund or common investment fund. Your IRA account may not be invested in
collectibles, such as gems or art, U.S. gold and silver coins and certain
state coins are permitted.
B. LIMITS ON ANNUAL CONTRIBUTIONS
You are eligible to make contribution to an IRA if you are under age 70 1/2
and if, at any time during the year, you receive compensation.
Contributions to your IRA for any taxable year may not exceed the lesser of
$2,000 or 100% of your compensation or earned income. If you and your spouse
both work and have compensation that is includible in your gross income, each
of you can annually contribute to your own IRA up to the lesser of $2,000 or
100% of compensation or earned income.
If your spouse earns no income, or earns $250 or less and elects to be treated
as earning no income, you can establish a "spousal IRA" with two separate
accounts if you file a joint Federal tax return. The aggregate annual amount
contributed to both IRAs each year cannot exceed the lesser of $2,250, or 100%
of your earned income or compensation. This amount is divided between the two
accounts as you direct, but not more than $2,000 may be contributed to one
account each year. Wages, salaries, tips, professional fees, net earnings from
self-employment, bonuses and other amounts you get for providing personal
service (and taxable alimony payments) are compensation. Dividend, interest,
rental, or capital gains income is not compensation. You may not make any
contribution (other than a rollover contribution) to your IRA with respect to
the tax year in which you reach age 70 1/2 or any subsequent year. However,
you may continue to make contributions to your spouse's spousal IRA and deduct
the deductible portion of such payments until the year in which your spouse
reaches age 70 1/2.
C. Simplified Employee Pension Plan
Contributions. A separate IRA may be established for use by your employer as
part of a SEP arrangement. Your employer may contribute to your SEP-IRA up to
a maximum of 15% of your compensation or $22,500, which-ever is less. If your
SEP-IRA is used as part of a salary reduction SEP, you may elect to reduce
your annual compensation, up to a maximum of 15% of your compensation or
$7,000 (indexed to reflect cost-of-living adjustments), whichever is less, and
have your employer contribute that amount to your SEP-IRA. If your employer
maintains both a salary reduction SEP and a regular SEP, the annual
contribution limit to both SEPs together is 15% of your compensation or
$22,500, whichever is less. You may contribute, in addition to the amount
contributed by your employer to your SEP-IRA, an amount not in excess of the
limits referred to under "Limits on Annual Contributions" above. It is your
and your employer's responsibility to see that contributions in excess of
normal IRA limits are made under a valid SEP and are, therefore, proper.
D. EXCESS CONTRIBUTIONS
An excess contribution is the amount paid to your IRA that is in excess of the
limit on annual contributions. You must pay a non-deductible 6% federal excise
tax on the excess amount for the tax year in which it is made, and for each
later year until the excess is eliminated either by:
(1) withdrawal or (2) application to a succeeding year's contribution.
You will not have to pay the 6% excise tax if you withdraw the excess
(together with its earnings) by the date your tax return is due (including
extensions). You must include in your gross income, for the year in which they
were received, the earnings made from the excess payment. You may also have to
pay the additional 10% tax on premature distributions on the amount of the
earnings.
However, the excess contribution itself will not be included in your taxable
income and will not be subject to the 10% premature distribution tax. You can
also remove any non-deductible IRA contributions by following this procedure.
Under similar rules, you can also withdraw amounts that are not excess
contributions (because they do not exceed $2,000) but are not deductible
(because they exceed the deductible limits).
Under certain circumstances, you may withdraw excess payments from your IRA
after the due date for filing your tax return (including extensions) and not
include it in your taxable gross income. You may do this: (1) if the total
payment (other than rollover contributions) for the year is $2,250 or less
and (2) you did not deduct the excess amount (or the deduction was disallowed
by the IRS). The excess payment you remove is thus not subject to the 10% tax
on premature distributions. But you will have to pay the 6% excise tax for
each year that the excess remains in the account at the end of the year.
If you pay more than $2,250 to your IRA for any year, and do not withdraw the
excess by the due date (including extensions) for filing your income tax
return, you must include in your taxable gross income any excess payment you
withdraw, even if you did not originally deduct it. You may also have to pay
the 10% tax on premature distributions on the amount you withdraw.
You may also eliminate an excess contribution from your IRA by not
contributing the maximum allowable amount in a later year. The subsequent
year's contribution would be reduced by the excess amount contributed in the
prior year. By using this method, you can avoid paying the 10% premature
distribution tax on withdrawals.
FOUR
SPOUSAL IRA AND DIVORCE
A. SPOUSAL IRA
If you and your spouse each earn compensation, you can each make contributions
to separate IRAs. But even if your spouse does not have any earned
compensation (or earns $250 or less and elects to be treated as having no
earned income), you may be eligible to establish an additional but separate
and independent IRA for your spouse. To qualify, you must be married at the
end of the tax year, and you and your spouse must file a joint return. The
maximum contribution to your IRA and to a Spousal IRA may not exceed the
lesser of $2,250 or 100% of your compensation, as defined under Section 3 B.
The contribution does not have to be equally divided between the two accounts;
however, the maximum contribution made to either account is $2,000. An excess
contribution to either account is not tax deductible and will be subject to a
penalty tax, as described in Section 3 C.
You may not claim a deduction for Spousal IRA contributions in the year your
unemployed spouse reaches the age of 70 1/2. If, however, you have not yet
attained the age of 70 1/2, you may continue to make contributions under the
original IRA rules. Distributions from a Spousal IRA do not have to begin until
April 1 of the year following the year in which the spouse for whom the
account or sub-account is maintained reaches age 70 1/2. With the exception of
the contribution limitations, all rules which apply to the regular IRA apply to
each spouse with respect to his or her own Spousal IRA.
B. DIVORCE OR LEGAL SEPARATION
If all or any portion of your IRA is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an IRA in the
receiving spouse's name. The transaction can be processed without tax
implications to you provided a written instrument executed by a court incident
to the divorce or legal separation in accordance with Section 408(d)(6) of the
Code is received by the Custodian and specifically directs such transfer.
FIVE
TAX DEDUCTION
You may deduct the full amount of your IRA contribution up to the annual
maximum if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return, you
will be deemed to be an active participant in an employer-sponsored retirement
plan if either you or your spouse is an active participant in such a plan. For
this purpose, a husband and wife who file separate tax returns for any year
and who live apart at all times during the year are not considered to be
married. In addition, even if you are an active participant in such a plan,
you may deduct the full amount of your IRA contribution if you have adjusted
gross income equal to or below a specified level ($40,000 for married
taxpayers filing joint returns and $25,000 for single taxpayers). If your
adjusted gross income exceeds this specified level, or if you are married and
file a separate tax return, the amount of your IRA contribution which is
deductible is phased out on the basis of:
Adjusted gross income between $25,000 and $35,000 if you are a single
taxpayer;
Adjusted gross income of up to $10,000 if you are a married taxpayer who files
a separate return;
Adjusted gross income between $40,000 and $50,000 if you are married and you
and your spouse file a joint return.
Adjusted gross income is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the IRA
deduction, adjusted gross income is modified to take into account deductions
for IRA contributions, taxable benefits under the Social Security Act and the
Railroad Retirement Act, and passive loss limitations under Code Section 86.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
adjusted gross income in excess of the phase out amount ($25,000 for single
taxpayers, $40,000 for married taxpayers who file joint returns and $0 for
married taxpayers who file separate returns). However, if you contribute to
a Spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000
of adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next lowest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your adjusted gross income is within the phase-out range and
your reduced deduction limit is more than $0 but less than $200, you are
permitted to deduct up to $200 of your IRA contribution.
If your adjusted gross income exceeds the applicable level specified above and
you are an active participant in an employer-sponsored retirement plan (or
your spouse is an active participant in such a plan if you file joint
returns), then you may not deduct any portion of your IRA contribution.
Special rules apply for purposes of determining whether or not you are an
active participant in an employer-sponsored retirement plan. Your Form W-2 for
the year should indicate your participation status. You should consult your
own tax or financial adviser if you have any questions. You can estimate your
deduction limit using the following formula:
[$10,000 - Excess AGI/$10,000] x Maximum Allowable Deduction = Deduction
Limit
* Excess AGI means adjusted gross income above the Specified Level.
* Maximum Allowable Deduction means $2,000 ($2,250 for "Spousal IRA").
Example 1: You are single, an active participant and have an adjusted gross
income of $32,000. You would calculate your deductible IRA contribution as
follows:
The Excess AGI is $32,000 - $25,000 = $7,000
Your IRA deduction limit is:
[$10,000 - $7,000/$10,000] x $2,000 = $600
Example 2: You are married and file a joint tax return. You and your spouse
individually earn more than $2,000 and one is an active participant. Your
combined adjusted gross income is $45,120. Each may contribute to an IRA and
calculate deductible contributions to each IRA as follows:
The Excess AGI is $45,120 - $40,000 = $ 5,120
Your IRA deduction limit is:
[$10,000 - $5,120/$10,000] x $2,000 = $ 976 (rounded up to $980)
Example 3: If, in Example 2, your spouse did not earn any compensation, or
elected to be treated as earning no compensation, you could establish a
Spousal IRA (consisting of an account for you and your spouse). The amount of
deductible contributions which could be made to the two IRAs is calculated
as follows:
[$10,000 - $5,120/$10,000] x $2,250 = $1,098 (rounded up to $1,100)
The $1,100 can be divided between your IRA and your spouse's IRA, but neither
IRA may have a deductible contribution of more than $980.
Example 4: You are married, file a separate tax return and are an active
participant. You have $1,400 of compensation and want to make a deductible
contribution to your IRA.
Your Excess AGI is $1,400 - $0 = $1,400
Your IRA deduction limit is:
[$10,000 - $1,400/$10,000] x $2,000 = $1,720
Though your IRA deduction limit as calculated above is $1,720, you may not
deduct an amount in excess of your adjusted gross income of $1,400.
Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
nondeductible contribution. Of course, the combined total of deductible and
nondeductible contributions must not exceed your annual maximum amount. Any
earnings on all your IRA contributions (deductible and non-deductible)
accumulate tax-free until you withdraw them.
SIX
ROLLOVER IRA
A rollover is a tax-free transfer of assets from one tax-qualified retirement
program to another. There are two kinds of rollover payments to an IRA. In
one, you rollover amounts from one IRA to another. With the other, you
rollover amounts from a qualified pension or profit-sharing plan to an IRA.
You cannot deduct a rollover payment on your tax return.
In addition, please note that the IRA you set up to receive rollover amounts
should be separate from an IRA you set up to receive annual contributions; and
if you establish a rollover IRA during the year in which you reach age 70 1/2,
you must begin receiving distributions from such IRA no later than April 1 of
such following year. Since strict limitations apply to rollovers, and a
variety of tax and financial planning issues should be considered in
determining whether to make a rollover contribution, it would be wise to check
with your tax adviser or local IRS district office for information concerning
your specific situation before proceeding with a rollover IRA.
However, please be aware that if you transfer the funds in your IRA from one
IRA trustee or custodian to another, either at your request, or at the
trustee's request, this is not a rollover. It is a transfer that is not
affected by the one-year waiting period described below.
A. ROLLOVER FROM ONE IRA TO ANOTHER
You may withdraw part or all of the assets from one IRA and reinvest them in
another IRA tax free once a year. To take advantage of this tax free
treatment, you must transfer the entire amount you receive to your new IRA by
the 60th day after the date the property is distributed from your first IRA or
other tax-qualified plans. Partial rollovers are taxed on the amount retained.
B. ROLLOVER FROM A TAX-QUALIFIED PLAN TO AN IRA
If you become entitled to receive all or any part of an "eligible rollover
distribution" from a tax-qualified plan such as a 401(k) plan, a profit
sharing plan, a Keogh plan, or a 403(b) tax-sheltered annuity, you may direct
the plan to make a direct rollover to your IRA and thus avoid the mandatory
20% Federal withholding tax. To do a direct rollover, the assets should
either be transferred directly to the IRA custodian, or the distribution check
can be made payable to the IRA custodian. If you choose to receive a
distribution directly from a tax-qualified plan, you may still rollover the
distribution (plus the amount of the withholding tax) to your IRA as long as
you do so within 60 days of the date you receive the distribution. An
"eligible rollover distribution" is any distribution from a tax-qualified
plan other than (a) a distribution that is one of a series of periodic
payments for the employee's life or over a period of 10 years or more, (b) a
required distribution after you attain 70 1/2 and (c) certain corrective
distributions.
Please remember that amounts subject to the post-70 1/2 minimum distribution
requirement and your prior non-deductible contributions are not eligible for
rollover treatment.
If you receive an eligible rollover distribution from your employer's plan and
roll it over into an IRA, you may later roll over those assets into a new
employer's plan, if you kept those assets in a separate account. Your
surviving spouse may also roll over into an IRA all or part of an eligible
rollover distribution (although amounts up to $5,000 which qualify for the
death benefit exclusion need not be rolled over) received from your employer's
plan because of your death.
SEVEN
DISTRIBUTIONS
A. TAX TREATMENT
Any money or property you receive from your IRA account is a distribution and
must be included in your gross income as ordinary taxable income in the year
received. The exceptions are rollovers and tax-free withdrawals of excess
payments as described above.
Generally, amounts distributed to you are includible in your gross income in
the taxable year you receive them and are taxed as ordinary income without
the special tax treatment available for lump-sum distributions.
Federal income tax will be withheld from distributions you receive from an
IRA unless you elect not to have tax withheld. However, if IRA distributions
are to be delivered outside of the United States, this withholding tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%.
If you withdraw an amount from any IRA during a taxable year and you have
previously made both deductible and nondeductible IRA contributions, then
part of the amount withdrawn is excludible from ordinary income and not
subject to taxation. The amount excludible for the taxable year is the
portion of the amount withdrawn which bears the same ratio to the amount
withdrawn for the taxable year as your aggregate non-deductible IRA
contributions remaining in all of your IRAs bear to the aggregate balance of
all your IRAs at the end of the year plus the amount of the distribution
during the year.
For example, an individual withdraws $1,000 from an IRA to which both
deductible and non-deductible contributions were made. At the end of the year,
the account balance is $4,000, of which $2,500 was nondeductible
contributions. The amount excludible from income is $500 ($2,500/$5,000
x $1,000).
In general, if, during any calendar year you receive distributions from your
IRAs, Section 403 annuities and qualified plans which, in the aggregate,
exceed $150,000, you maybe subject to a 15% penalty tax on the amount in
excess of $150,000. If the total amount of your benefits payable from such
plans at your death exceeds a certain permissible level, a similar 15% estate
tax is imposed on the amount in excess of the permissible level. Special rules
apply in certain circumstances and you should consult your tax adviser if you
have any questions regarding this tax.
B. METHODS OF DISTRIBUTION
1. IRA Distributions
You can withdraw money from your IRA account in either of the following ways:
a. a lump-sum withdrawal of the entire balance.
b. periodic payments (monthly, quarterly, annually) spread over a period of
years.
The following conditions apply to IRA distributions:
a. You may begin receiving distributions without any penalty any time after
you are 59 1/2.
b. You must begin receiving distributions from your IRA by April 1 following
the calendar year in which you become 70 1/2, the Required Distribution Date.
c. If you are disabled, you may receive distributions from your IRA
regardless of your age without paying any penalties. You must be certified as
disabled by a physician. For more information on disability, contact the IRS
and get a copy of IRS Publication 522, "Disability Payments."
d. If you request a withdrawal prior to your attainment of age 59 1/2, you
must furnish the Custodian with a written statement explaining how you intend
to dispose of the amount distributed. This requirement does not apply to a
distribution which is part of a series of substantially equal periodic
payments made over your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary.
2. Tax and Penalties on Premature Distribution
If you withdraw any of the funds in your IRA before age 59 1/2, the amount
includible in your gross income is subject to a 10% nondeductible penalty tax
unless: (1) the withdrawal is made because of your death or permanent
disability; (2) the withdrawal is an exempt withdrawal of an excess
contribution; or (3) the withdrawal is rolled over into another qualified plan
or IRA. You can also withdraw funds held in your IRA without any tax penalty
before you reach age 59 1/2 if you choose to receive installment payments in
substantially equal amounts over a period that does not exceed your life
expectancy or the joint life and last survivor expectancy of you and your
designated beneficiary. You should be aware, however, that the 10% penalty tax
will be applied retroactively to all installment payments if you alter the
method of distribution before you attain age 59 1/2 to a method that does not
qualify for the exception. This 10% penalty tax will also apply retroactively
if you do not receive the installment payments under a method that qualifies
for the exception for at least five years.
The 10% penalty tax discussed above does not apply to the portion of your IRA
distribution which is not includible in your gross income.
3. Penalties on Excess Accumulations Amounts you contribute to your IRA are
not to be kept indefinitely. The law requires that you begin to receive
distributions from your IRA no later than your "Required Distribution Date."
There is a minimum amount which you must withdraw by the Required Distribution
Date, December 31 of the calendar year containing the Required Distribution
Date, and December 31 of each calendar year thereafter. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) may be
recalculated each year if you elect to do so by filing a form with the
Custodian no later than your Required Distribution Date. Additionally, if your
bene-ficiary is not your spouse, the minimum distribution must be calculated
by reference to the "minimum distribution incidental benefit" rule of the
Internal Revenue Code. If the amount distributed during a taxable year is less
than the minimum amount required to be distributed, you will be subject to a
penalty tax equal to 50% of the deficiency unless you can prove that the
failure to make such minimum distribution was due to reasonable cause, or
demonstrate that reasonable steps are being taken to remedy the shortfall. If
you maintain more than one IRA, you must calculate the amount of your minimum
distribution in any year by considering the aggregate balances in all your
IRAs. Once the minimum amount is so determined, you may choose to withdraw it
from any one IRA. IRS Publication 590 contains a worksheet for figuring the
minimum amount that should be distributed from your IRA, so that you may avoid
the 50% excise tax.
You should consult your own tax or financial advisor with regard to the
calculation of the amount of minimum distribution each year because it is your
responsibility to make sure that this requirement is met. The Custodian is
not responsible to advise you in this matter and will only make distributions
to you from your IRA in accordance with your specific instructions.
C. DISTRIBUTION ON DEATH
Your beneficiaries include your estate, dependents, and anyone you choose to
have the benefits of your IRA after you die. You may designate your
beneficiaries on the IRA Application and Adoption Agreement when you open your
IRA and change them at any time by writing to the Custodian. Distribution to
your beneficiary may be made at any time in the event of your death either in
a lump sum or periodically as selected by your beneficiary but subject to the
following rules:
1. If distribution from your IRA has commenced after your Required
Distribution Date, the funds remaining in your account must continue to be
distributed to your designated beneficiary at least as rapidly as under the
method of distribution in effect prior to your death.
Subject to the foregoing, the remaining funds in the account will be
distributed to your designated beneficiary either outright or periodically,
as selected by such beneficiary. The Custodian will make distributions to your
beneficiary in accordance with his or her specific instructions. Your
beneficiary should be aware that he or she is subject to minimum distribution
rules and it is his or her responsibility to make sure that the rules are met.
2. If distribution from your IRA has not commenced prior to your Required
Distribution Date, then the entire account balance must generally be
completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death. However, there are
exceptions to this five-year distribution rule. First, the five-year
distribution rule does not apply if the funds in your IRA will be payable to
your designated beneficiary over a fixed period that is not longer than the
life expectancy of the beneficiary and if the distribution commences no later
than December 31 of the year containing the fifth anniversary of your death.
Second, if your beneficiary is your surviving spouse, he or she may elect
within the five-year period commencing with your death to receive the funds
in your IRA over a fixed period that is not longer than his or her life
expectancy and commencing at any date prior to the date you would have
attained age 70 1/2. Third, if your beneficiary is your surviving spouse, he
or she may elect to roll over the funds in your IRA into his or her own
account or to treat your IRA as his or her own by making regular or rollover
deposits into such IRA.
The designation of a beneficiary to receive funds from your IRA at your death
is not considered a transfer subject to federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your federal gross
estate.
HOW TO FILE IRA INFORMATION
WITH THE IRS
IRA Contributions. Deductible and nondeductible IRA contributions are reported
on IRS Form 1040 or Form 1040A. To the extent your contribution is deductible,
you can claim a deduction on your federal tax return. To the extent your
contribution is not deductible, you must designate it as a nondeductible
contribution on your federal tax return. You may choose to file your federal
income tax return before it is due (without extensions) and report your IRA
contributions before they are made. You must, however, make the contributions
by the due date (without extensions) of such return. To the extent your
contribution is deductible, you claim a deduction on your tax return. To the
extent your contribution is not deductible, you must designate it on Form
8606. There is a $100 penalty each time you overstate the amount of your
nondeductible contributions unless you can prove that the overstatement was
due to reasonable cause.
IRA Distributions. Report IRA distributions, whether taxable or not, including
taxable premature distributions on IRS Form 1040. You will also be required to
give additional information on Form 8606 in years you make a withdrawal from
your IRA. If you fail to file a required Form 8606, there is a $50 penalty for
each such failure unless you can prove that the failure was due to reasonable
cause.
Other Reporting Requirements. During those years when you have tax on excess
payments, premature distributions, prohibited transactions, and excess
accumulations, you must file Form 5329, "Return for Individual Retirement
Accounts."
Rollovers. Report any rollover from a qualified plan to an IRA on Form 1040.
Enter the amount of the distribution and the taxable amount. (Special Note:
This Disclosure Statement discusses the effect and requirements of the Federal
tax laws. You should check with your tax adviser with regard to the applicable
tax laws of your state.)
EIGHT
PROHIBITED TRANSACTIONS
Generally, a prohibited transaction is any improper use of your IRA account or
annuity. Some examples are: (1) the sale, exchange, or leasing of any property
between your IRA account and you; (2) the lending of money or other extension
of credit between your IRA account and you; (3) the furnishing of goods,
services, or facilities between your IRA account and you; or (4) the transfer
of assets of your IRA account for your use or for your benefit.
If you or your beneficiary engage in a prohibited transaction at any time
during the year, you generally must include the fair market value of all of
the IRA's assets in your taxable gross income for that year. You will also be
subject to the 10% tax on premature distributions if you are under the age of
59 1/2.
Additionally, if you pledge your IRA as security for a loan, or invest your
IRA in "collectibles" such as art, antiques, gems, or coins (other than United
States gold and silver coins or certain state coins), the amount so pledged or
invested is considered to have been distributed to you and will be taxed as
ordinary income during the year in which you make such pledge or investment.
You may also have to pay the 10% penalty tax on premature distributions.
NINE
OTHER INFORMATION
A. FUND PROSPECTUS
The annual earnings under USAA mutual fund IRAs consist of all dividends and
distributions on the mutual fund shares held in your account. The dividends
and distributions received from a given fund accumulate tax free and are
reinvested in shares of the fund credited to your account.
For complete information about advisory fees, other expenses, the method of
calculating the price per share, etc., of USAA's mutual funds, ask for and
read the funds' Statement of Additional Information. The growth in value of
the investments included in your IRA is neither guaranteed nor projected.
B. AMENDMENTS
USAA Investment Management Company will make any amendments that may be
required by the Internal Revenue Service and will provide a copy of these
amendments to you.
The Custodian reserves the right to amend the Application and Adoption
Agreement with respect to the Custodian compensation thirty days after
mailing of written notice to the investor.
C. CUSTODIAN'S FEES
There are no annual IRA maintenance fees. The Custodian charges a $20 fee for
total distribution.
Exceptions to the fee are: partial distributions, total transfer within USAA,
and distributions due to disability or death.
D. THE CUSTODIAN
The sponsor of your IRA is USAA Investment Management Company. The Custodian
is State Street Bank and Trust Company, or any successor Custodian selected
by the sponsor.
E. INTERNAL REVENUE SERVICE
You may obtain further information regarding an IRA from any district office
of the Internal Revenue Service.
Exhibit 14(b)
[A picture of the USAA Logo is here]
USAA
USAA INVESTMENT MANAGEMENT COMPANY
SEP-IRA
Handbook
Retirement Planning For Small Business Owners And The Self-Employed
CONTENTS
What Is A SEP-IRA? 3
Benefits Of A SEP-IRA 3
Why Choose A USAA Investment Management Company SEP-IRA? 6
Which USAA Mutual Funds Are Best For Me? 7
Questions And Answers 10
Checklist 13
Custodial Agreement 15
Disclosure Statement 22
Dear Business Owner:
Data from the U.S. Department of Labor and the Small Business Administration
shows that fewer than one in five individuals working for a small business
have an employer-sponsored pension plan. This compares to five out of six
people working in larger companies with 500 or more employees. Small
businesses such as yours are the lifeblood of the American economy. Attracting
and keeping excellent employees may depend on whether or not you offer a tax-
advantaged retirement plan.
The Simplified Employee Pension-Individual Retirement Account (SEP-IRA) plan
may be the right choice for your business. It allows the small employer as
well as the self-employed person to set up an easy, practical retirement
program without the administrative costs and complexities associated with
typical employer plans.
Today's lower interest rates on savings accounts and bank CDs make mutual
funds a sound alternative. At USAA Investment Management Company, we can
design a mutual fund investment portfolio to suit your company's retirement
needs.
If you would like more information after reading this handbook, please call
us at 1-800-531-6624 -- in San Antonio, call 445-7211. Let us help you map
out a plan to build a more secure future for you and your employees.
Sincerely,
/s/Michael J.C. Roth
- ----------------------
Michael J.C. Roth, CFA
President
USAA Investment Management Company
Certificates of Deposit offer a guaranteed interest rate and FDIC insurance
up to $100,000.
YOUR PERSONAL RETIREMENT PLAN
WHAT IS A SEP-IRA?
A SEP-IRA is a retirement program set up by the employer (or the self-employed
person) to which the employer makes tax deductible contributions for both
employer and employees. It was designed precisely for the small business owner
who does not need a full-scale corporate pension plan.
HOW DOES IT DIFFER FROM AN IRA?
An IRA is a personal retirement plan set up by any individual with earned
income. The maximum contribution amount is $2000 and it may or may not be
deductible from annual taxes, depending on the individual's level of income
and coverage by a pension plan. On the other hand, contributions to SEP-IRAs
can be much larger than for IRAs up to 15% of each employee's salary, for a
maximum of $22,500 annually.
WHO IS ELIGIBLE?
If you're an employer, you must cover all employees who have worked for you
three out of the past five years, have reached the age of 21, and have earned
at least $396* from your payroll during the year. Part-time employees are
also included.
*This is the amount in effect for 1995. This is adjusted periodically.
BENEFITS OF A SEP-IRA:
1 Tax-Deferred Earnings. All earnings - dividends, interest and capital
appreciation - accumulate in the account on a tax-deferred basis. This means
you pay no taxes until you start withdrawing funds. Because employer
contributions are tax deductible for your business, a SEP-IRA can mean
substantial tax benefits. (See graph on page 4 for an example of the impact
tax savings can have on the growth of your money for retirement.)
2 Income At Retirement. By investing in a SEP-IRA, you have the opportunity
to put aside money on a regular basis for yourself and your employees.
That's important, since you don't have to pay taxes on your earnings each
year. More money will be working for you and your employees' futures.
3 Tax-Deductible Contributions. All contributions to SEP-IRAs are tax-
deductible to the employer and are subject to the 15% decution limit. In
addition, the amount contributed to employees' accounts are not included
in the employees' taxable income.
4 You're In Control. The employer decides the amount and frequency of
contributions. If business conditions preclude making contributions in any
given year, contributions that year can be skipped.
5 Professional Investment Management. Once you have worked with your team of
account representatives on your investment decision, your responsibility
stops. Our mutual funds are managed by professional money managers who have
access to a wealth of resources. With these professionals carefully
analyzing the best investment opportunities for the funds, you receive
expertise at a low cost.
6 Enhanced Employee Benefits. SEP-IRAs may be established by self-employed
persons, partnerships and corporations.
7 Ease of the Plan. By establishing a SEP-IRA, you have an easy and practical
retirement program without the administrative costs and complexities such
as lots of paper work, annual management fees and IRS reporting associated
with typical employer plans.
WITH A SEP-IRA
The chart illustrates how $20,000 contributed each year for 20 years (the
maximum allowable contribution is $22,500 for combined employer and employee
contributions) to your SEP-IRA grows. If you are in the 31% tax bracket and
your account earns 8% each year, under a SEP-IRA tax-deferred plan your
account would have a value of $915,239.*
WITHOUT A SEP-IRA
This is what happens if you don't take advantage of investing in a SEP-IRA
retirement plan. If you are in the 31% tax bracket and you invest $20,000 of
taxable income earnings for 20 years, your $20,000 investment actually
represents $13,800* of "after-tax" dollars for your retirement plan. As a
result, in 20 years your final value without the tax-deferred, compounded
earnings would only be $631,515.*
[A graph appears here comparing a $20,000 annual contribution over 20 years
with a SEP-IRA and without a SEP-IRA. The horizontal axis shows the dollar
amount and the vertical axis shows the time period. The ending value with a
SEP-IRA is $915,239 and the ending value without a SEP-IRA is $631,515.]
* Annual contribution multiplied by one minus your tax bracket (31% in this
example).
** Based on hypothetical 8% annual rate of return compounded monthly. Assumes
a 31% tax bracket. This chart is for illustration purposes only. It is not
an indication of past or future results of an investment in any of the funds
managed and distrubited by USAA Investment Management Company. Management
and administrative fees not included.
ADDITIONAL BENEFITS TO EMPLOYEES
1 The Money Belongs To The Employees. The money deposited and accumulated in
a SEP-IRA belongs to your employees, even if they stop working for you.
2 Employers' Contributions Excluded From The Employee's Taxable Income.
Employers' contributions to SEP-IRAs are not included in employees' income
for income tax or Social Security tax purposes.
3 Ease of Distributions to Beneficiaries. In case of death, the assets in a
SEP-IRA will transfer to a designated beneficiary.
4 SEP-IRA Contributions Continues Until An Employee Retires. SEP-IRA
contributions can continue until an employee retires, but they must start
withdrawing assets in a SEP-IRA when they reach age 70 1/2.
SALARY REDUCTION SEPS
Salary Reduction SEPs (SAR-SEPs) offer another option. SAR-SEPs allow your
employees to make their own contributions to their retirement account through
tax-deductible salary deferrals. This means the contributions made by the
employee are deferred from taxes. A company may establish a SAR-SEP if it has
25 or fewer employees in lieu of salary and if at least half of them
participate in the program. Under this plan, employees can contribute up to
15% of their pay or $9,240* annually, whichever is less.
A company may have both SEP-IRA and SAR-SEP plans for its employees but the
total annual contribution per individual account cannot exceed $22,500. The
total annual contribution for all employees cannot exceed 15% of the taxable
compensation paid to the employees during the year.
*This amount is in effect for 1995. This amount is adjusted peridocally.
WHY CHOOSE A USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA?
THE MUTUAL FUND ALTERNATIVE
Mutual fund SEP-IRAs offer managed investments and diversification through a
variety of stock, bond, income, and money market instruments. By investing in
mutual funds you also have the advantage of investing in growth-oriented
funds and that's important when planning for your retirement future. What's
more, you have the option to transfer shares from fund to fund at no charge.
This gives your investment the maximum flexibility over the next ten, 20, or
even 30 years.
USAA Investment Management Company (IMCO) manages and distributes a variety
of mutual fund SEP-IRAs to meet your own personal investment objectives. For
your retirement funds to grow, they must be invested wisely. Here are some of
the benefits of investing in a USAA Investment Management Company mutual fund:
Professional Management. USAA (IMCO) mutual funds are managed by investment
professionals with the education, knowledge and experience to make sound
investment decisions with your money -- decisions you may not have the time,
interest or experience to make.
Low Costs. Our IRAs have no annual IRA maintenance fees and USAA IMCO's funds
are totally no-load, which means you pay no sales commission, redemption or
12b-1 fees. A fee of $20 will be charged for all total distributions except
when due to disability, death or within USAA.
Diversification. Each USAA IMCO mutual fund invests in a wide range of
securities (stocks, bonds, etc.) suited to its particular investment
objective, diversified by economic sector, industry, and companies within a
single industry, or it invests in variety of short-term money market
instruments.
Exchange Privileges. Our free exchange privilege allows you to exchange shares
of one fund for shares of another mutual fund. You are allowed six exchanges
per calendar year per fund.
Performance Results. These are readily available every day in the financial
section of most major newspapers, but they will also be sent directly to you
in annual and semiannual reports from our company.
Unique Investor Service. When you become a shareholder, you will be assisted
by your own team of account representatives, a small group of expert
professionals, instead of speaking to a different person each time you call.
WHICH USAA MUTUAL FUNDS ARE BEST FOR ME?
PRIMARY RELATIVE
FUND INVESTMENT IMPORTANCE
TYPE/NAME OBJECTIVE INVESTS IN... VOLATILITY OF INCOME
- -----------------------------------------------------------------------------
AGGRESSIVE GROWTH
- -----------------
AGGRESSIVE Capital appreciation Stocks Very high Low
GROWTH FUND
EMERGING Capital appreciation Emerging Very high Low
MARKETS FUND* markets
stocks
GROWTH
- -------
GROWTH FUND Capital appreciation Stocks Moderate Moderate
to high
INTERNATIONAL Capital appreciation Foreign Moderate Low
FUND* stocks to high
WORLD Capital appreciation Foreign Moderate Low
GROWTH FUND* stocks & to high
domestic
stocks
GROWTH & INCOME
- -----------------
GROWTH & Capital growth & Dividend Moderate Moderate
INCOME FUND current income paying common
stocks,
convertible
bonds
INCOME
- ------
INCOME Current income Bonds Moderate High
FUND (BONDS) and conservation
of capital
INCOME STOCK Current income, Stocks Moderate High
FUND (STOCKS) increasing dividend
income, capital
appreciation
GNMA TRUST Current income & Government Low to High
conservation of National moderate
capital Mortgage
Association
certificates
SHORT-TERM High current income Investment- Low High
BOND FUND with preservation of grade
capital securities,
bonds
PRECIOUS METALS
- ---------------
GOLD FUND Capital Gold mining & Very high Low
appreciation precious metals
stocks
MONEY MARKET
- -------------
MONEY Current income Money market Very low High
MARKET FUND+ plus stable instruments
principal
TREASURY Current income & U.S. Treasury Very low High
MONEY MARKET conservation of securities
TRUST+ capital with the
highest degree of
safety
DIVERSIFIED
- ------------
CORNERSTONE Achieve a positive Gold mining, Moderate Moderate
FUND inflation-adjusted real estate,
rate of return foreign & basic
value stocks,
government
securities
If you would like more complete information on any of the funds listed,
including management fees and expenses, please call us at 1-800-531-8181
(456-7211 in San Antonio) and we will send you informative materials including
a prospectus. Please read them carefully before you invest or send any money.
*Foreign investing is subject to certain risks, such as currency fluctuations,
market illiquidity and political instability, which are discussed in the Fund's
prospectus. An investment in the Money Market Fund or Treasury Money Market
Fund is neither insured nor guaranteed by the U.S. Government and there is no
assurance the fund will be able to maintain a stable net asset value of $1 per
share.
EVERYONE'S INVESTMENT SITUATION IS DIFFERENT
Your age, income, net worth, risk tolerance, as well as current market
conditions, are all factors to consider in deciding which investment is best
for you.
Age. If you are close to retirement, you might want current income and
relative safety. If retirement is 5 years or more away, you may be willing to
accept a higher degree of risk with the objective of achieving larger long-
term gains.
Risk Tolerance. If safety of principal is a strong consideration, you are
better off opting for lower volatility and lower risk funds. For people who
can accept fluctuation in their retirement fund, the more aggressive stock
funds could be an attractive alternative. However, you must be comfortable
with the idea that the value of your investment is likely to fluctuate
depending on market conditions.
Market Conditions. Fluctuating economic conditions can affect mutual funds.
Therefore, the prevailing market environment must be a primary consideration
when you select a fund for your SEP-IRA. Your investment portfolio can easily
be constructed and kept in balance using a family of no-load mutual funds. Of
course, every person's ideal investment mixture is different. By speaking to
one of our knowledgeable account representatives, we can guide you in your
decisions and help you build a portfolio of mutual funds that pursues the
return you seek, balanced with a comfortable exposure to risk.
However, there is no foolproof system for calling the market's turns. So when
investing for the long-term, dollar-cost averaging1 may help you erase the
timing dilemma of "When do I get in ? When do I get out?" With dollar-cost
averaging, you invest a constant amount in a fund at regular intervals over a
period of time, regardless of the fund's price. When the price is low, you
purchase more shares; when the price is high, you purchase fewer shares.
Chances are that over time the average price you pay per share is lower than
the average selling price for those same shares.
1Dollar-cost averaging does not assure a profit or protect against a loss in
declining markets. Investors should consider their financial ability to
continue purchases through periods of low and high price levels.
QUESTIONS ABOUT SEP-IRAs
1 Must employers contribute to their employees' retirement accounts under
SEP-IRA? Whether or not an employer makes a contribution to the SEP-IRA
is entirely within the employer's discretion. However, if contributions
are made, the employer must make them for all eligible employees. Plans
that accept only employee contributions, such as SAR-SEPs, may allow for
up to 50% non-participation.
2 How much may an employer contribute? Under a SEP-IRA plan, the employer
determines the amount of the contribution each year. Please note that all
contributions to each eligible employee's account must be based on the
same percentage. For example, a 15% contribution given to an individual
earning $30,000 a year would be $4,500. The same percentage of an $18,000
salary would be $2,700. However, the maximum is limited to $22,500 per
year for the combined employer/employee contribution.
3 May the employee also contribute to an IRA outside of his/her Plan? Yes.
An employee is still allowed to contribute up to $2,000 to an IRA. The
amount that may be deductible is subject to various limitations.
4 Does an employer have to include every employee in the SEP-IRA or SAR-SEP
Plan? The employer must have a plan to cover all employees who are at
least 21 years of age and who have worked for the employer for at least
three of the past five calendar years. The employer may choose to
establish less restrictive eligibility requirements.
5 Do employees have the option not to participate? Yes, employees have the
option not to participate in a plan involving employer contributions.
However, for the plan to remain in compliance with the IRS, all employees
who are eligible must participate in the SEP-IRA plan.
6 Are employer SEP-IRA contributions subject to Social Security taxes? No.
The employer's contributions are not included as income on the W-2 form
and are not considered wages for the purpose of determining Social
Security taxes. Employee contributions to a SAR-SEP IRA are not included
as income on the W-2 form but are considered wages for the purpose of
determining Social Security taxes.
7 How much can an employee put into a SAR-SEP IRA? An employee may
contribute up to $9,240 (as adjusted for increases in the cost of living)
provided that when combined with the SEP-IRA contribution of his employer
the total amount contributed does not exceed 15 % of salary or $22,500,
whichever is less. Limits for highly compensated employees are different.
8 What is the definition of a highly compensated employee? An individual
who at any time during the current year or preceding calendar year:
- was a 5% owner of the business
- received compensation in excess of $100,000*;
- ranked in the top 20% of employees by compensation and received
compensation in excess of $66,000*;
- received compensation in excess of $60,000* (as adjusted annually for
increases in the cost of living) as an officer of the business or was the
highest paid ranking officer if no employee was paid more than $60,000*.
The contribution percentage of a highly compensated employee in any year may
not exceed 1.25 times the average contribution rate of the non-highly
compensated employee.
*This is the amount in effect for 1995. This amount is adjusted periodically.
9 When can money be withdrawn? Money in a SEP-IRA account like standard IRA
money, can be withdrawn at age 59 1/2 without penalty. With only a few
exceptions, the same penalties apply to SEP-IRA distributions. The most
notable penalty is 10% for taking an IRA distribution before age 59 1/2.
Exceptions to the early distribution penalty include distributions made to
a beneficiary on the death of the SEP-IRA owner or the owner's total
disability. Note: The IRS allows a special exception so some people can
take non-penalty IRA distributions before 59 1/2. To take this advantage
of this, you can take distributions of an IRA-approved series of
"substantially equal payments" over your life expectancy. See your tax
advisor if you are interested in this exception.
10 Can an employer contribute for participants who are older than 70 1/2?
Yes.
11 How are the withdrawals taxed? All withdrawals are subject to ordinary
income taxes.
12 Can employees move their funds from a SEP-IRA to a regular IRA? Yes. There
is no limit to the number of direct transfers from one custodian to
another, as long as the employee does not take possession of the funds.
If you take possession of the funds, you must then deposit your money into
a new IRA account within 60 days after you receive it or you lose your
rollover privileges and the entire amount is subject to the IRA 10%
withdrawal penalty. An IRA rollover can only be utilized once per year and
is not taxable but must be reported on your tax return.
13 Who can withdraw from an established SEP-IRA? Only the employee or the
beneficiaries, if applicable.
14 What is the difference between Internal Revenue Service Forms 5305A,
5305-SEP and 5305A-SEP (SAR-SEP)? Form 5305A must be completed by the
owner when opening a new IRA account. A 5305-SEP Form is used by employers
to establish a SEP-IRA plan for themselves and their employees. A
5305A-SEP (SAR-SEP) is the form filled out by employees in order to permit
employees to make SEP contributions through salary deductions. However,
non-profit organizations and state and local governments cannot establish
SAR-SEPs.
CHECKLIST
OPENING A SEP-IRA
- - The plan may be established by signing IRS Form 5305-SEP or Form 5305-A SEP.
This form is not filed with the IRS. Keep this form for your records.
- - Distribute a copy of your completed Form 5305-SEP, including all the
instructions and questions and answers to employees who are eligible to
participate in your SEP-IRA plan. (For eligibility requirements, refer to
"Who May Participate" on the Form 5305-SEP or Form 5305-A-SEP).
- - After a copy of the form is delivered to employees, make sure they read the
IRA Custodial Agreement and IRA Disclosure Statement (in this booklet).
- - Make sure you have each eligible employee complete and sign:
- IRA Application and Adoption Agreement
- IRA Transfer Request (if necessary)
- Salary Reduction Agreement in the case of a SAR-SEP.
- - Be sure to have all employees complete the Designation of Beneficiary
section on the application to expedite transfer of funds in the event of
death.
- - Your SEP-IRA contributions may be as much as 15% of a plan participant's
annual compensation, to a maximum of $22,500 (employer and employee) per
plan participant per year. PLEASE MAKE SURE YOU INCLUDE YOUR CHECK PAYABLE
TO THE APPROPRIATE FUND FOR YOUR INITIAL CONTRIBUTION.
- - Mail completed form(s) with your check(s) in the enclosed postage-paid
envelope.
- - Once all documents are in order, the only ongoing administrative requirement
of the employer is to report to each of the employees their SEP
contributions. If you are self-employed, simply make the contributions into
your own SEP-IRA. However, in the case of SAR-SEP, the employer must
determine each year whether the contributions made by the highly compensated
employees are within the permissible limits. If excess contributions are
made, they should be refunded. If you are self-employed, simply make the
contributions into your own SEP-IRA.
TOLL-FREE TELEPHONE NUMBERS
For more information before you open an account:
Call 1-800-531-8181 (in San Antonio 456-7211)
For information after you open an account: Account Servicing:
call 1-800-531-8448 (in San Antonio 456-7202).
24-Hour Access :
call 1-800-531-8777 (in San Antonio 498-8777)
For automated telephone information about your accounts through
TouchLine(registered trademark).***
Call 1-800-531-8066 (in San Antonio 498-8066) For a recorded
message giving the Funds' current net asset value.
***TouchLine(registered trademark) is a registered service mark of USAA.
Custodial Agreement
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(b)(8), or 408(d)(3) or an employer contribution to a simplified employee
pension plan as described in section 408(k). Rollover contributions before
January 1, 1993, include rollovers described in section 402(a)(5), 402(a)(6),
402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
simplified employee pension plan as described in section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary
or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or beneficiaries,
starting by December 31 of the year following the year of the Depositor's
death. If, however, the beneficiary is the Depositor's surviving spouse,
then this distribution is not required to begin before December 31 of the
year in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial account
as of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph (3), determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of distribution in accordance with
paragraph (4)(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
Custodial Agreement
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the Depositor may from time to time
specify. The Depositor's instructions may relate to current contributions or
to amounts previously contributed (including earnings thereon) or to both. In
the event that the Custodian receives a contribution from the Depositor with
respect to which no investment direction is specifically applicable, or if
any such investment direction is, in the opinion of the Custodian, unclear,
the Custodian may hold such amounts uninvested or return any such
contributions without liability for any loss, including any loss of income
or appreciation, and without liability for interest or any tax liability
incurred by Depositor pending receipt of instructions or clarification. For
all purposes of this Agreement, the term "Designated Investment Company" shall
mean USAA INVESTMENT TRUST or USAA MUTUAL FUND, INC. and any other regulated
investment company for which USAA INVESTMENT MANAGEMENT COMPANY (or any
affiliate thereof) acts as investment advisor and which is designated by USAA
INVESTMENT MANAGEMENT COMPANY as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions
made under this Agreement shall be deposited in the form of cash and shall be
made to the Custodian in accordance with such rules as the Custodian may
establish. Any contribution so made with respect to a tax year of the
Depositor shall be made prior to the due date of the Depositor's tax return
(not including extensions). Unless otherwise indicated in writing by the
Depositor, contributions shall be credited to the tax year in which they are
received by the Custodian. The Custodian, upon receipt of written
instructions from the Depositor, may exchange or cause to be exchanged shares
of a Designated Investment Company sold held by the Custodian on behalf of the
Depositor for any other shares of a Designated Investment Company available
for investment hereunder, subject to and in accordance with the terms and
conditions of the exchange privilege, as outlined in the current prospectuses
of any such Designated Investment Company and as may be agreed upon, in
writing, from time to time between the Custodian and USAA Investment
Management Company. The Depositor shall be the beneficial owner of the assets
held in the Account. All dividends and capital gains distributions received
on shares of a Designated Investment Company held in the Depositor's Account
shall, unless received in additional shares, be reinvested in shares of the
Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election
of the Depositor in additional shares or in cash or other property, the
Custodian shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time
upon thirty (30) days' notice in writing to the Custodian, and the Custodian
may resign at any time upon thirty (30) days' notice in writing to USAA
INVESTMENT MANAGEMENT COMPANY. Upon such resignation or removal, USAA
INVESTMENT MANAGEMENT COMPANY shall appoint a successor custodian, which
successor custodian shall be a "bank" as defined in Section 408(n) of the
Code or another person found qualified to act as a custodian of an Individual
Retirement Account by the Secretary of the Treasury or his delegate. Upon
receipt by the Custodian of written acceptance of such appointment by the
successor custodian or trustee, the Custodian shall transfer and pay over to
such successor the assets of the Account and all records pertaining thereto.
Custodial Agreement
The Custodian is authorized, however, to reserve such sum of money as it may
deem advisable for payment of all its fees, compensation, costs, and expenses
or for payment of any other liabilities constituting a charge on or against
the assets of the Account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over to
the successor custodian or trustee. If within the thirty (30) day period
provided for above, USAA Investment Management Company has not appointed a
successor custodian or trustee which has accepted such appointment, the
Custodian shall, unless it elects to terminate the Custodial Account, appoint
a successor custodian itself.
4. The Custodian shall deliver, or cause to be delivered, to the Depositor
all notices, prospectuses, financial statements, proxies and proxy soliciting
materials relating to Designated Investment Companies' shares held for
Depositor. The Custodian shall not vote any of the shares held hereunder
except in accordance with the written instructions of the Depositor.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor (or the Depositor's beneficiary
if the Depositor is deceased), make distributions out of the Account to the
Depositor in the manner and amounts as may be specified in such instructions.
All such instructions shall be deemed to constitute a certification by the
Depositor (or the Depositor's beneficiary if the Depositor is deceased) that
the distribution directed is one that the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) is permitted to receive.
Notwithstanding the provision of Article IV above, the Custodian assumes
(and shall have) no responsibility to make any distribution to the Depositor
(or the Depositor's beneficiary if the Depositor is deceased) unless and
until such written instructions specify the occasion for such distribution,
the elected manner of distribution and any declaration required by Article IV.
Prior to making any such distribution from the Account, the Custodian shall
be furnished with any and all applications, certificates, tax waivers,
signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by the Custodian,
but the Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if not
satisfied such instructions are genuine, and assumes no duty of further
inquiry. Upon receipt of proper written instructions as required above, the
Custodian shall cause the assets of the Account to be distributed in cash
and/or in kind, as specified in such written order.
(b) Distribution of the assets of the Account shall be made in accordance
with the provisions of Article IV as the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) shall elect by written instructions
to the Custodian; subject, however to the provisions of Sections 401(a)(9),
408(a)(6) and 408(b)(3) of the Code, the regulations promulgated there-under,
and the following:
(i) No distribution from the Account shall be made in the form of an
annuity contract.
(ii) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election of the
Depositor. The recalculation of life expectancy of the surviving spouse
shall only be made at the written election of the surviving spouse.
(iii) If the Depositor dies before his/her entire interest in the Account
has been distributed, and if the designated beneficiary of the Depositor is
the Depositor's surviving spouse, the spouse may treat the Account as his/her
own individual retirement arrangement. This election will be deemed to have
been made if the surviving spouse makes a regular IRA contribution to the
Account, makes a rollover to or from such Account, or fails to receive a
payment from the Account within the appropriate time period applicable to the
deceased Depositor under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the Depositor provided for in this
Agreement shall be effective if sent by regular mail to him at his last
address of record.
7. The Depositor hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of
the Agreement and hereby consents to such amendments, provided they shall
comply with all applicable provisions of the Code, the regulations thereunder
and with any other governmental law, regulation or ruling. Any such amendments
shall be effective as of the date specified in a written notice sent by first-
class mail to the address of the Depositor indicated by the Custodian's
records. Notwithstanding the foregoing, no mendment which increases the
burdens of the Custodian shall take effect without its prior written consent.
Nothing in this paragraph 7 shall be construed to restrict the Custodian's
freedom to change or substitute fee schedules in accordance with the
provisions of the adoption agreement, and no such change or substitution shall
be deemed to be an amendment to this Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been
received in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the Depositor. The Depositor and the Depositor's legal
representatives, as appropriate, shall always fully indemnify the Custodian
and USAA Investment Management Company and save each of them harmless from any
and all liability whatsoever which may arise in connection with this Agreement
and matters which the Agreement contemplates, except that which arises due to
the Custodian's gross negligence, willful misconduct or lack of good faith.
The Custodian shall not be obligated or expected to commence or defend any
legal action or proceeding in connection with this Agreement or such matters
unless agreed upon by the Custodian and the Depositor or said legal
representatives and unless fully indemnified for so doing to the Custodian's
satisfaction.
(b) The Custodian shall be an agent for the Depositor to perform the
duties conferred on it by the Depositor. The parties do not intend to confer
any fiduciary duties on the Custodian and none shall be implied. The Custodian
shall not be liable (and does not assume any responsibility for) the
collection of contributions, the deductibility of any contribution or the
propriety of any contributions under this Agreement, the selection of any
shares of any Designated Investment Company for the Account, or the purpose or
propriety of any distribution ordered in accordance with Article IV or
paragraph 5 of the Article VIII, which matters are the sole responsibility of
the Depositor or the Depositor's beneficiary,as the case may be.
(c) The Custodian and USAA Investment Management Company shall not be
responsible for any losses, penalties or other consequences to the Depositor
or to any other person arising out of the making of any contribution or
withdrawal.
10. This Agreement together with the Application and Adoption Agreement
attached hereto and by this reference made a part hereof, constitutes the
entire agreement between the parties, and it shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
11. The Depositor shall have the right by written notice to the Custodian on
a form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such Depositor may be entitled in event of his
death prior to the complete distribution of such benefit. If no such
designation is in effect at the time of the Depositor's death, or if the
designated beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate. The last designation filed with the
Custodian shall be controlling, and, whether or not it fully disposes the
Account, shall revoke all such other designations previously filed by the
Depositor.
Custodial Agreement
12. (a) The Custodian shall have the right to receive rollover contributions
as described in the Code and if any property is so transferred to it as a
rollover contribution, such property shall be sold by the Custodian and the
proceeds less any expenses, fees or commissions reinvested as provided in
paragraph 1 of this Article VIII. The Custodian reserves the right to refuse
to accept any property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably require,
shall transfer the assets held under this Agreement (reduced by any amounts
referred to in paragraph 3 of this Article VIII) to a successor individual
retirement account, or individual retirement annuity (other than an endowment
contract) for the Depositor's benefit or to an exempt employee's trust
established under a plan which satisfies the qualification requirements of
Section 401(a) of the Code. Any amounts received or transferred by the
Custodian under this paragraph 12 shall be accompanied by such records and
other documents as the Custodian deems necessary to establish the nature,
value, and extent of the assets, and of the various interests therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in
the Account by the Depositor as security for a loan, or any loan or other
extension of credit from the Account to the Depositor shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except
that the Designated Investment Company shares must be registered in the name
of the Custodian or its nominee. No such delegation or subsequent change
herein shall be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall
cause to be mailed to the Depositor in respect of each tax year an account
of all transactions affecting the Account during such year and a statement
showing the Account as of the end of such year. If, within sixty (60) days
after such mailing, the Depositor has not given the Custodian written notice
of any exception or objection thereto, the annual accounting shall be deemed
to have been approved, and in such case, or upon the written approval of the
Depositor, the Custodian shall be released, relieved and discharged with
respect to all matters and statements set forth in such accounting as though
the account had been settled by judgment or decree of a court of competent
jurisdiction.
16. (a) The Custodian may charge the Depositor reasonable fees, including
an annual maintenance fee, for services hereunder according to standard
schedules of rates which may be in effect from time to time. Initially, the
fees payable to the Custodian shall be in the schedule amount provided with
the Agreement. Upon thirty (30) days' prior written notice, the Custodian may
substitute a fee schedule differing from that schedule initially provided.
Custodial Agreement
(b) Custodian's fees, any income (including unrelated business income
tax), gift, estate and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Account, that may be levied
or incurred by the Custodian in the performance of its duties may be charged
to the Account, with the right to liquidate shares of any Designated
Investment Company for this purpose, or (at Custodian's option) to the
Depositor.
Disclosure Statement
This disclosure statement outlines the basic provisions of an Individual
retirement account (IRA) as well as certain features unique to USAA mutual
fund IRAs. This is merely a general summary for your information. For an
interpretation of the applicable IRA and tax laws, contact your tax adviser
district IRS office. IRS Publication 590, "Tax Information on Individual
retirement Accounts," contains more detailed information on IRAs.
ONE
REVOCATION
An IRA which is established on the date of receipt of this Disclosure
Statement, or within seven days thereafter, may be revoked at any time within
seven days after the date of establishment of such IRA. An IRA established at
least seven days after the date of the receipt of this Disclosure Statement
may not be revoked (although it may be terminated). Revocation must be made
by telephone and confirmed in writing to USAA Shareholder Account Services,
9800 Fredericksburg Road, San Antonio, Texas 78288. Call 1-800-531-8448 (in
San Antonio, 456-7202). Mailed notice will be deemed given on the date that
it is postmarked (or, if sent by certified or registered mail, on the date of
certification or registration) if it is deposited in the mail in the United
States in an envelope or other appropriate wrapper, first class postage
pre-paid, properly addressed. In the event that you decide to revoke your IRA
and do so within such seven day period, you are entitled to a return of the
entire amount of your IRA contributions, without adjustment for such items as
administrative expenses or fluctuations in market value.
TWO
THE CUSTODIAL ACCOUNT
The USAA mutual fund IRA is a custodial account established for your exclusive
benefit or that of your named beneficiaries, as described in Section 408 of
the Internal Revenue Code. All amounts contributed to your IRA custodial
account will not be forfeitable. The custodial account is established through
the use of IRS Form 5305-A which has been approved as to form by the Internal
Revenue Service. IRS approval is determined only as to form of the account and
does not represent a determination of the merits of such an account.
THREE
CONTRIBUTIONS
A. FORM OF CONTRIBUTIONS Contributions must be made in cash and may be made
at any time from the beginning of the tax year, either periodically or in a
lump sum, until April 15 of the following year - the deadline for filing your
tax return. If you receive a tax return extension, you must still make your
IRA contribution by April 15 in order to claim the deduction. You do not have
to contribute to an IRA every year. Additionally, regardless of your age, you
may also transfer funds from another IRA or certain qualified plan
distributions to a "rollover" IRA, which is described in paragraph 6 of this
Disclosure Statement. If you intend to report contributions made between
January 1 and April 15 as contributions for your prior tax year, you should
notify us in writing that such contributions have been made on account of such
prior tax year. Otherwise, the Custodian will assume the payment is for the
current tax year.
No part of your IRA account can be used to buy a life insurance policy. Your
account's assets cannot be combined with other property, except in a common
trust fund or common investment fund. Your IRA account may not be invested in
collectibles, such as gems or art; U.S. gold and silver coins and certain
state coins are permitted.
B. LIMITS ON ANNUAL CONTRIBUTIONS
You are eligible to make contribution to an IRA if you are under age 70 1/2
and if, at any time during the year, you receive compensation. Contributions
to your IRA for any taxable year may not exceed the lesser of $2,000 or 100%
of your compensation or earned income. If you and your spouse both work and
have compensation that is includible in your gross income, each of you can
annually contribute to your own IRA up to the lesser of $2,000 or 100% of
compensation or earned income.
Disclosure Statement
If your spouse earns no income, or earns $250 or less and elects to be treated
as earning no income, you can establish a "spousal IRA" with two separate
accounts if you file a joint Federal tax return. The aggregate annual amount
contributed to both IRAs each year cannot exceed the lesser of $2,250, or 100%
of your earned income or compensation. This amount is divided between the two
accounts as you direct, but not more than $2,000 may be contributed to one
account each year. Wages, salaries, tips, professional fees, net earnings from
self-employment, bonuses and other amounts you get for providing personal
service (and taxable alimony payments) are compensation. Dividend, interest,
rental, or capital gains income is not compensation You may not make any
contribution (other than a rollover contribution) to your IRA with respect to
the tax year in which you reach age 70 1/2 or any subsequent year. However,
you may continue to make contributions to your spouse's spousal IRA and deduct
the deductible portion of such payments until the year in which your spouse
reaches age 70 1/2.
C SIMPLIFIED EMPLOYEE PENSION PLAN CONTRIBUTIONS
A separate IRA may be established for use by your employer as part of a SEP
arrangement. Your employer may contribute to your SEP-IRA up to a maximum of
15% of your compensation or $22,500, whichever is less. If your SEP-IRA is
used as part of a salary reduction SEP, you may elect to reduce your annual
compensation, up to a maximum of 15% of your compensation or $7,000 (indexed
to reflect cost-of-living adjustments), whichever is less, and have your
employer contribute that amount to your SEP-IRA. If your employer maintains
both a salary reduction SEP and a regular SEP, the annual contribution limit
to both SEPs together is 15% of your compensation or $22,500, whichever is
less. You may contribute, in addition to the amount contributed by your
employer to your SEP-IRA, an amount not in excess of the limits referred to
under "Limits on Annual Contributions" above. It is your and your employer's
responsibility to see that contributions in excess of normal IRA limits are
made under a valid SEP and are, therefore, proper.
D. EXCESS CONTRIBUTIONS
An excess contribution is the amount paid to your IRA that is in excess of the
limit on annual contributions. You must pay a non-deductible 6% federal excise
tax on the excess amount for the tax year in which it is made, and for each
later year until the excess is eliminated either by: (1) withdrawal or
(2) application to a succeeding year's contribution.
You will not have to pay the 6% excise tax if you withdraw the excess
(together with its earnings) by the date your tax return is due (including
extensions). You must include in your gross income, for the year in which they
were received, the earnings made from the excess payment. You may also have to
pay the additional 10% tax on premature distributions on the amount of the
earnings.
However, the excess contribution itself will not be included in your taxable
income and will not be subject to the 10% premature distribution tax.
You can also remove any non-deductible IRA contributions by following this
procedure.
Under similar rules, you can also withdraw amounts that are not excess
contributions (because they do not exceed $2,000) but are not deductible
(because they exceed the deductible limits).
Disclosure Statement
Under certain circumstances, you may withdraw excess payments from your IRA
after the due date for filing your tax return (including extensions) and not
include it in your taxable gross income. You may do this: (1) if the total
payment (other than a rollover contribution) for the year is $2,250 or less
and (2) you did not deduct the excess amount (or the deduction was disallowed
by the IRS). The excess payment you remove is thus not subject to the 10% tax
on premature distributions. But you will have to pay the 6% excise tax for
each year that the excess remains in the account at the end of the year.
If you pay more than $2,250 to your IRA for any year, and do not withdraw the
excess by the due date (including extensions) for filing your income tax
return, you must include in your taxable gross income any excess payment you
withdraw, even if you did not originally deduct it. You may also have to pay
the 10% tax on premature distributions on the amount you withdraw.
You may also eliminate an excess contribution from your IRA by not
contributing the maximum allowable amount in a later year. The subsequent
year's contribution would be reduced by the excess amount contributed in the
prior year. By using this method, you can avoid paying the 10% premature
distribution tax on withdrawals.
FOUR
SPOUSAL IRA AND DIVORCE
A SPOUSAL IRA
If you and your spouse each earn compensation, you can each make contributions
to separate IRAs. But even if your spouse does not have any earned
compensation (or earns $250 or less and elects to be treated as having no
earned income), you may be eligible to establish an additional but separate
and independent IRA for your spouse. To qualify, you must be married at the
end of the tax year, and you and your spouse must file a joint return. The
maximum contribution to your IRA and to a Spousal IRA may not exceed the
lesser of $2,250 or 100% of your compensation, as defined under Section 3 B.
The contribution does not have to be equally divided between the two accounts;
however, the maximum contribution made to either account is $2,000. An excess
contribution to either account is not tax deductible and will be subject to a
penalty tax, as described in Section 3 C.
You may not claim a deduction for Spousal IRA contributions in the year your
unemployed spouse reaches the age of 70 1/2 . If, however, you have not yet
attained the age of 70 1/2 , you may continue to make contributions under the
original IRA rules. Distributions from a Spousal IRA do not have to begin
until April 1 of the year following the year in which the spouse for whom the
account or sub-account is maintained reaches age 70 1/2 . With the exception
of the contribution limitations, all rules which apply to the regular IRA
apply to each spouse with respect to his or her own Spousal IRA.
B. DIVORCE OR LEGAL SEPARATION
If all or any portion of your IRA is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an IRA in the
receiving spouse's name. The transaction can be processed without tax
implications to you provided a written instrument executed by a court incident
to the divorce or legal separation in accordance with Section 408(d)(6) of the
Code is received by the Custodian and specifically directs such transfer.
FIVE
TAX DEDUCTION
You may deduct the full amount of your IRA contribution up to the annual
maximum if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return,
you will be deemed to be an active participant in an employer-sponsored
retirement plan if either you or your spouse is an active participant in such
a plan. For this purpose, a husband and wife who file separate tax returns
for any year and who live apart at all times during the year are not
considered to be married.
Disclosure Statement
In addition, even if you are an active participant in such a plan, you may
deduct the full amount of your IRA contribution if you have adjusted gross
income equal to or below a specified level ($40,000 for married taxpayers
filing joint returns and $25,000 for single taxpayers). If your adjusted
gross income exceeds this specified level, or if you are married and file a
separate tax return, the amount of your IRA contribution which is deductible
is phased out on the basis of:
Adjusted gross income between $25,000 and $35,000 if you are a single
taxpayer;
Adjusted gross income of up to $10,000 if you are a married taxpayer who
files a separate return;
Adjusted gross income between $40,000 and $50,000 if you are married and you
and your spouse file a joint return.
Adjusted gross income is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the
IRA deduction, adjusted gross income is modified to take into account
deductions for IRA contributions, taxable benefits under the Social
Security Act and the Railroad Retirement Act, and passive loss
limitations under Code Section 86.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
adjusted gross income in excess of the phase out amount ($25,000 for single
taxpayers, $40,000 for married taxpayers who file joint returns and $0 for
married taxpayers who file separate returns). However, if you contribute to a
Spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next lowest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your adjusted gross income is within the phase-out range and
your reduced deduction limit is more than $0 but less than $200, you are
permitted to deduct up to $200 of your IRA contribution.
If your adjusted gross income exceeds the applicable level specified above and
you are an active participant in an employer-sponsored retirement plan (or
your spouse is an active participant in such a plan if you file joint
returns), then you may not deduct any portion of your IRA contribution.
Special rules apply for purposes of determining whether or not you are an
active participant in an employer-sponsored retirement plan. Your Form W-2 for
the year should indicate your participation status. You should consult your
own tax or financial adviser if you have any questions. You can estimate your
deduction limit using the following formula:
$10,000 - Excess AGI x Maximum Allowable Deduction
- --------------------
$10,000 = Deduction Limit
*Excess AGI means adjusted gross income above the Specified Level.
*Maximum Allowable Deduction means $2,000 ($2,250 for "Spousal IRA").
Example 1: You are single, an active participant and have an adjusted gross
income of $32,000. You would calculate your deductible IRA contribution as
follows:
The Excess AGI is $32,000 - $25,000 = $7,000 Your IRA deduction limit is:
$10,000 - $7,000 x $2,000 = $600
- ----------------
$10,000
Example 2: You are married and file a joint tax return. You and your spouse
individually earn more than $2,000 and one is an active participant. Your
combined adjusted gross income is $45,120. Each may contribute to an IRA and
calculate deductible contributions to each IRA as follows:
The Excess AGI is $45,120 - $40,000 = $ 5,120
Your IRA deduction limit is:
$10,000 - $5,120 x $2,000 = $ 976 (rounded up to $980)
- ----------------
$10,000
Example 3: If, in Example 2, your spouse did not earn any compensation, or
elected to be treated as earning no compensation, you could establish a
Spousal IRA (consisting of an account for you and your spouse). The amount of
deductible contributions which could be made to the two IRAs is calculated
as follows:
$10,000 - $5,120 x $2,250 = $1,098
- ----------------
$10,000 (rounded up to $1,100)
Disclosure Statement
The $1,100 can be divided between your IRA and your spouse's IRA, but neither
IRA may have a deductible contribution of more than $980.
Example 4: You are married, file a separate tax return and are an active
participant. You have $1,400 of compensation and want to make a deductible
contribution to your IRA.
Your Excess AGI is $1,400 - $0 = $1,400
Your IRA deduction limit is:
$10,000 - $1,400 x $2,000 = $1,720
- ----------------
$10,000
Though your IRA deduction limit as calculated above is $1,720, you may not
deduct an amount in excess of your adjusted gross income of $1,400.
Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up
to your annual maximum amount with all or part of the contribution being a
nondeductible contribution. Of course, the combined total of deductible and
nondeductible contributions must not exceed your annual maximum amount. Any
earnings on all your IRA contributions (deductible and non-deductible)
accumulate tax-free until you withdraw them.
SIX
ROLLOVER IRA
A rollover is a tax-free transfer of assets from one tax-qualified retirement
program to another. There are two kinds of rollover payments to an IRA. In
one, you rollover amounts from one IRA to another. With the other, you
rollover amounts from a qualified pension or profit-sharing plan to an IRA.
You cannot deduct a rollover payment on your tax return.
In addition, please note that the IRA you set up to receive rollover amounts
should be separate from an IRA you set up to receive annual contributions;
and if you establish a rollover IRA during the year in which you reach age
70 1/2, you must begin receiving distributions from such IRA no later than
April 1 of such following year. Since strict limitations apply to rollovers,
and a variety of tax and financial planning issues should be considered in
determining whether to make a rollover contribution, it would be wise to check
with your tax adviser or local IRS district office for information concerning
your specific situation before proceeding with a rollover IRA.
However, please be aware that if you transfer the funds in your IRA from one
IRA trustee or custodian to another, either at your request, or at the
trustee's request, this is not a rollover. It is a transfer that is not
affected by the one-year waiting period described below.
A. ROLLOVER FROM ONE IRA TO ANOTHER
You may withdraw part or all of the assets from one IRA and reinvest them in
another IRA tax free once a year. To take advantage of this tax free
treatment, you must transfer the entire amount you receive to your new IRA
by the 60th day after the date the property is distributed from your first
IRA or other tax-qualified plans. Partial rollovers are taxed on the amount
retained.
B. ROLLOVER FROM A TAX-QUALIFIED PLAN TO AN IRA
If you become entitled to receive all or any part of an "eligible rollover
distribution" from a tax-qualified plan such as a 401(k) plan, a profit
sharing plan, a Keogh plan, or a 403(b) tax-sheltered annuity, you may direct
the plan to make a direct rollover to your IRA and thus avoid the mandatory
20% Federal withholding tax. To do a direct rollover, the assets should
either be transferred directly to the IRA custodian, or the distribution
check can be made payable to the IRA custodian. If you choose to receive a
distribution directly from a tax-qualified plan, you may still rollover the
distribution (plus the amount of the withholding tax) to your IRA as long as
you do so within 60 days of the date you receive the distribution. An
"eligible rollover distribution" is any distribution from a tax-qualified
plan other than (a) a distribution that is one of a series of periodic
payments for the employee's life or over a period of 10 years or more,
(b) a required distribution after you attain 70 1/2 and (c) certain corrective
distributions.
Please remember that amounts subject to the post-70 1/2 minimum distribution
requirement and your prior non-deductible contributions are not eligible for
rollover treatment.
If you receive an eligible rollover distribution from your employer's plan and
roll it over into an IRA, you may later roll over those assets into a new
employer's plan, if you kept those assets in a separate account. Your
surviving spouse may also roll over into an IRA all or part of an eligible
rollover distribution (although amounts up to $5,000 which qualify for the
death benefit exclusion need not be rolled over) received from your employer's
plan because of your death.
Disclosure Statement
SEVEN
DISTRIBUTIONS
A. TAX TREATMENT
Any money or property you receive from your IRA account is a distribution
and must be included in your gross income as ordinary taxable income in the
year received. The exceptions are rollovers and tax-free withdrawals of
excess payments as described above.
Generally, amounts distributed to you are includible in your gross income
in the taxable year you receive them and are taxed as ordinary income
without the special tax treatment available for lump-sum distributions.
Federal income tax will be withheld from distributions you receive from an
IRA unless you elect not to have tax withheld. However, if IRA distributions
are to be delivered outside of the United States, this withholding tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%.
If you withdraw an amount from any IRA during a taxable year and you have
previously made both deductible and nondeductible IRA contributions, then
part of the amount withdrawn is excludible from ordinary income and not
subject to taxation. The amount excludible for the taxable year is the
portion of the amount withdrawn which bears the same ratio to the amount
withdrawn for the taxable year as your aggregate non-deductible IRA
contributions remaining in all of your IRAs bear to the aggregate balance
of all your IRAs at the end of the year plus the amount of the distribution
during the year. For example, an individual withdraws $1,000 from an IRA to
which both deductible and non-deductible contributions were made. At the end
of the year, the account balance is $4,000, of which $2,500 was nondeductible
contributions. The amount excludible from income is $500 ($2,500/$5,000 x
$1,000).
In general, if, during any calendar year you receive distributions from your
IRAs, Section 403 annuities and qualified plans which, in the aggregate,
exceed $150,000, you maybe subject to a 15% penalty tax on the amount in
excess of $150,000. If the total amount of your benefits payable from such
plans at your death exceeds a certain permissible level, a similar 15% estate
tax is imposed on the amount in excess of the permissible level. Special rules
apply in certain circumstances and you should consult your tax adviser if you
have any questions regarding this tax.
B. METHODS OF DISTRIBUTION
1. IRA Distributions
You can withdraw money from your IRA account in either of the following ways:
a. a lump-sum withdrawal of the entire balance.
b. periodic payments (monthly, quarterly, annually) spread over a period
of years.
The following conditions apply to IRA distributions:
a. You may begin receiving distributions withoutany penalty any time after
you are 59 1/2.
b. You must begin receiving distributions from your IRA by April 1 following
the calendar year in which you become 70 1/2, the "Required Distribution
Date."
c. If you are disabled, you may receive distributions from your IRA
regardless of your age without paying any penalties. You must be certified as
disabled by a physician. For more information on disability, contact the IRS
and get a copy of IRS Publication 522, "Disability Payments."
d. If you request a withdrawal prior to your attainment of age 59 1/2, you
must furnish the Custodian with a written statement explaining how you intend
to dispose of the amount distributed. This requirement does not apply to a
distribution which is part of a series of substantially equal periodic
payments made over your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary.
2. Tax and Penalties on Premature Distribution
If you withdraw any of the funds in your IRA before age 59 1/2, the amount
includible in your gross income is subject to a 10% nondeductible penalty tax
unless: (1) the withdrawal is made because of your death or permanent
disability; (2) the withdrawal is an exempt withdrawal of an excess
contribution; or (3) the withdrawal is rolled over into another qualified plan
or IRA. You can also withdraw funds held in your IRA without any tax penalty
before you reach age 59 1/2 if you choose to receive installment payments in
substantially equal amounts over a period that does not exceed your life
expectancy or the joint life and last survivor expectancy of you and your
designated beneficiary. You should be aware, however, that the 10% penalty
tax will be applied retroactively to all installment payments if you alter
the method of distribution before you attain age 59 1/2 to a method that does
not qualify for the exception. This 10% penalty tax will also apply
retroactively if you do not receive the installment payments under a method
that qualifies for the exception for at least five years.
The 10% penalty tax discussed above does not apply to the portion of your IRA
distribution which is not includible in your gross income.
3. Penalties on Excess Accumulations
Amounts you contribute to your IRA are not to be kept indefinitely. The law
requires that you begin to receive distributions from your IRA no later than
your "Required Distribution Date." There is a minimum amount which you must
withdraw by the Required Distribution Date, December 31 of the calendar year
containing the Required Distribution Date, and December 31 of each calendar
year thereafter. This minimum amount is determined by your life expectancy or
the joint life and last survivor expectancy of you and your designated
beneficiary, subject to the minimum distribution incidental death benefit
rule. Your life expectancy (and your spouse's life expectancy if your spouse
is your designated beneficiary) may be recalculated each year if you elect to
do so by filing a form with the Custodian no later than your Required
Distribution Date. Additionally, if your beneficiary is not your spouse, the
minimum distribution must be calculated by reference to the "minimum
distribution incidental benefit" rule of the Internal Revenue Code. If the
amount distributed during a taxable year is less than the minimum amount
required to be distributed, you will be subject to a penalty tax equal to
50% of the deficiency unless you can prove that the failure to make such
minimum distribution was due to reasonable cause, or demonstrate that
reasonable steps are being taken to remedy the shortfall. If you maintain
more than one IRA, you must calculate the amount of your minimum distribution
in any year by considering the aggregate balances in all your IRAs. Once the
minimum amount is so determined, you may choose to withdraw it from any one
IRA. IRS Publication 590 contains a worksheet for figuring the minimum amount
that should be distributed from your IRA, so that you may avoid the 50%
excise tax. You should consult your own tax or financial advisor with regard
to the calculation of the amount of minimum distribution each year because
it is your responsibility to make sure that this requirement is met. The
Custodian is not responsible to advise you in this matter and will only make
distributions to you from your IRA in accordance with your specific
instructions.
Disclosure Statement
C. DISTRIBUTION ON DEATH
Your beneficiaries include your estate, dependents, and anyone you choose to
have the benefits of your IRA after you die. You may designate your
beneficiaries on the IRA Application and Adoption Agreement when you open
your IRA and change them at any time by writing to the Custodian. Distribution
to your beneficiary may be made at any time in the event of your death either
in a lump sum or periodically as selected by your beneficiary but subject to
the following rules:
1. If distribution from your IRA has commenced after your Required
Distribution Date, the funds remaining in your account must continue to be
distributed to your designated beneficiary at least as rapidly as under the
method of distribution in effect prior to your death. Subject to the
foregoing, the remaining funds in the account will be distributed to your
designated beneficiary either outright or periodically, as selected by such
beneficiary. The Custodian will make distributions to your beneficiary in
accordance with his or her specific instructions. Your beneficiary should
be aware that he or she is subject to minimum distribution rules and it is
his or her responsibility to make sure that the rules are met.
2. If distribution from your IRA has not commenced prior to your Required
Distribution Date, then the entire account balance must generally be
completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death. However, there are
exceptions to this five-year distribution rule. First, the five-year
distribution rule does not apply if the funds in your IRA will be payable to
your designated beneficiary over a fixed period that is not longer than the
life expectancy of the beneficiary and if the distribution commences no
later than December 31 of the year containing the fifth anniversary of your
death. Second, if your beneficiary is your surviving spouse, he or she may
elect within the five-year period commencing with your death to receive the
funds in your IRA over a fixed period that is not longer than his or her life
expectancy and commencing at any date prior to the date you would have
attained age 70 1/2. Third, if your beneficiary is your surviving spouse, he
or she may elect to roll over the funds in your IRA into his or her own
account or to treat your IRA as his or her own by making regular or rollover
deposits into such IRA.
The designation of a beneficiary to receive funds from your IRA at your death
is not considered a transfer subject to federal gift taxes. However, any
funds remaining in your IRA at your death would be includible in your federal
gross estate.
HOW TO FILE IRA
INFORMATION WITH THE IRS
IRA Contributions. Deductible and nondeductible IRA contributions are reported
on IRS Form 1040 or Form 1040A. To the extent your contribution is deductible,
you can claim a deduction on your federal tax return. To the extent your
contribution is not deductible, you must designate it as a nondeductible
contribution on your federal tax return. You may choose to file your Federal
income tax return before it is due (without extensions) and report your IRA
contributions before they are made. You must, however, make the contributions
by the due date (without extensions) of such return. To the extent your
contribution is deductible, you claim a deduction on your tax return. To the
extent your contribution is not deductible, you must designate it on Form 8606.
There is a $100 penalty each time you overstate the amount of your
nondeductible contributions unless you can prove that the overstatement was due
to reasonable cause.
IRA Distributions. Report IRA distributions, whether taxable or not, including
taxable premature distributions on IRS Form 1040. You will also be required to
give additional information on Form 8606 in years you make a withdrawal from
your IRA. If you fail to file a required Form 8606, there is a $50 penalty for
each such failure unless you can prove that the failure was due to reasonable
cause.
Disclosure Statement
Other Reporting Requirements. During those years when you have tax on excess
payments, premature distributions, prohibited transactions, and excess
accumulations, you must file Form 5329, "Return for Individual Retirement
Accounts."
Rollovers. Report any rollover from a qualified plan to an IRA on Form 1040.
Enter the amount of the distribution and the taxable amount. (Special Note:
This Disclosure Statement discusses the effect and requirements of the
Federal tax laws. You should check with your tax adviser with regard to
the applicable tax laws of your state.)
EIGHT
PROHIBITED TRANSACTIONS
Generally, a prohibited transaction is any improper use of your IRA account or
annuity. Some examples are: (1) the sale, exchange, or leasing of any property
between your IRA account and you; (2) the lending of money or other extension
of credit between your IRA account and you; (3) the furnishing of goods,
services, or facilities between your IRA account and you; or (4) the transfer
of assets of your IRA account for your use or for your benefit.
If you or your beneficiary engage in a prohibited transaction at any time
during the year, you generally must include the fair market value of all of
the IRA's assets in your taxable gross income for that year. You will also
be subject to the 10% tax on premature distributions if you are under the
age of 59 1/2.
Additionally, if you pledge your IRA as security for a loan, or invest your
IRA in "collectibles" such as art, antiques, gems, or coins (other than
United States gold and silver coins or certain state coins), the amount so
pledged or invested is considered to have been distributed to you and will
be taxed as ordinary income during the year in which you make such pledge or
investment. You may also have to pay the 10% penalty tax on premature
distributions.
NINE
OTHER INFORMATION
A. FUND PROSPECTUS
The annual earnings under USAA mutual fund IRAs consist of all dividends and
distributions on the mutual fund shares held in your account. The dividends
and distributions received from a given fund accumulate tax free and are
reinvestedin shares of the fund credited to your account.
For complete information about advisory fees, other expenses, the method of
calculating the price per share, etc., of USAA's mutual funds, ask for and
read the funds' Statement of Additional Information. The growth in value of
the investments included in your IRA is neither guaranteed nor projected.
B. AMENDMENTS
USAA Investment Management Company will make any amendments that may be
required by the Internal Revenue Service and will provide a copy of these
amendments to you.
The Custodian reserves the right to amend the Application and Adoption
Agreement with respect to the Custodian compensation thirty days after
mailing of written notice to the investor.
C. CUSTODIAN'S FEES
There are no annual IRA maintenance fees. The Custodian charges a $20 fee
for total distribution. Exceptions to the fee are: partial distributions,
total transfer within USAA, and distributions due to disability or death.
D. THE CUSTODIAN
The sponsor of your IRA is USAA Investment Management Company. The Custodian
is State Street Bank and Trust Company, or any successor Custodian selected
by the sponsor.
E. INTERNAL REVENUE SERVICE
You may obtain further information regarding an IRA from any district office
of the Internal Revenue Service.
Exhibit 14(c)
[A picture of the USAA logo is here]
403(b)(7) Handbook
Tax-Sheltered Custodial Account And Retirement Plan
USAA INVESTMENT MANAGEMENT COMPANY
Retirement Planning For Employees of Tax-Exempt Organizations and Educational
Institutions
Table Of Contents
What Is A 403(b)(7) Plan? 2
Benefits Of A 403(b)(7) 3
Why Choose A USAA Investment Management Company
Custodial Account? 5
Which USAA Mutual Funds Are Best For Me? 6
Questions And Answers About USAA 403(b)(7) Mutual Funds 9
Checklist 12
Toll-Free Telephone Numbers 13
Custodial Agreement 14
What Is A 403(b)(7) Plan?
The 403(b)(7) plan, also known as a Tax-Sheltered Custodial
Account, is a retirement plan designed to provide retirement
savings and investments for employees of:
1) tax-exempt organizations described in section 501(c)(3)
of the IRS Code, or
2) educational institutions described in section
170(b)(1)(a)(ii) of the IRS Code.
Under a 403(b)(7) plan, an employer makes regular
contributions to an employee's tax-sheltered account based
on a salary reduction agreement between the employer and
employee. The money is managed by a financial institution
also known as the custodian.
Many institutions such as hospitals, religious
organizations, scientific research institutes, public
schools and state universities are eligible for 403(b)(7)
plans. Check with your organization's personnel department
to see if yours qualifies.
What Makes A 403(b)(7) Unique from an IRA?
An Individual Retirement Account (IRA) is a personal
retirement plan set up by any individual with earned income.
The maximum contribution amounts are $2,000 for individual
and $2,250 for spousal IRAs and it may or may not be tax
deductible, depending on the individual's level of income
and coverage by a pension plan.
Now let's look at what distinguishes the 403(b)(7) plan from
an IRA.
1 When you invest in a 403(b)(7) plan, you may make a
larger tax-deferred annual contribution of up to $9,500 or
15 to 20 percent of your gross income. You will save more on
your taxes each year you contribute to your plan, and
regardless of your level of income, it's always deductible.
2 Since your contributions are invested each pay period,
accumulated earnings may compound over a longer period of
time.
3 By choosing a 403(b)(7) plan, you will be able to
invest in USAA Investment Management Company's no-load
mutual funds, which means you pay no set-up fees or 12b-1
fees. A true no-load investment.
4 By investing in a 403(b)(7) plan, you'll enjoy the
convenience of regular, systematic investing through a
salary reduction agreement.
What Is A Salary Reduction Agreement?
A Salary Reduction Agreement enables you to save for your
retirement in an easy and taxed-favored manner. Here is how
it works: you authorize your employer to reduce your salary
by a certain amount, which your employer then contributes to
your 403(b)(7) account. The exact amount you're allowed to
put into a 403(b)(7) depends on a number of factors, but
most people can typically allocate as much as 15 to 20
percent of their gross compensation or up to a maximum of
$9,500* per year, whichever is lower.
* This is the amount in effect for 1995. This amount is
adjusted periodically.
Benefits Of A 403(b)(7)
1 A Better Way To Invest.
For eligible individuals, a 403(b)(7) offers the
possibility to invest a greater amount than through most
other tax-sheltered retirement investment vehicles. This
could mean higher retirement benefits when distribution time
comes around.
2 Tax-Deferred Savings And Earnings.
The money in your 403(b)(7) account is not subject to
taxes until you start withdrawals. This means that your
savings and all subsequent investment earnings - interest,
dividends and capital gains - accumulate on a tax-deferred
basis for as long as you leave them in the account.
3 You Pay Less In Taxes Right Away.
Since your contributions to the plan are deducted by
your employer before you pay taxes, your taxable income is
reduced by the amount of the contribution. As a result, you
will be paying less in taxes right away.
4 You're In Control.
You decide how much you want deducted from your salary
(up to the permitted limit) and you define the investment
objectives.
(See graph on page 4 for an example of the impact tax
savings can have on the growth of your money for
retirement.)
Benefits Of A 403 (b)(7)
With A Tax-Sheltered Custodial Account
The chart illustrates a hypothetical monthly contribution
sum of $400 ($4,800 each year) for 30 years to a tax-
sheltered custodial account. If you are in the 28% tax
bracket and your account earns 6% each year, under a tax-
sheltered custodial account plan your account would have a
value of $403,815* after 30 years.
Without A Tax-Sheltered Custodial Account
This is what happens if you don't take advantage of
investing in a tax-sheltered custodial account.
Assume you are in the 28% tax bracket and invest $4,800 of
taxable income each year for 30 years. Your $4,800 annual
investment actually represents $3,456 of "after-tax" dollars
for your retirement plan. As a result, in 30 years your
account value, without the tax-deferred compounded earnings,
would only grow to $290,747.*
[A graph is shown here comparing the account value if $4,800
of taxable income is invested each year for 30 years with a
403(b)(7) and without a retirement plan. The vertical
axis shows the dollar amount and the horizontal axis shows
the time frame. The ending account value after 30 years
with a 403(b)(7) is $403,815 and without a retirement plan
is $290,747.]
* Based on a hypothetical 6% annual interest rate compounded
monthly. Assumes a 28% tax bracket. This chart is for
illustration purposes only. It is not an indication of past
or future results of an investment in any of the funds
managed and distributed by USAA Investment Management
Company. Management and administrative fees are not
included.
Why Choose A USAA Investment Management Company Custodial
Account?
The Mutual Fund Alternative.
USAA's 403(b)(7) mutual funds offer managed investments and
diversification through a variety of stock, bond, income and
money market instruments. By investing in mutual funds you
also have the advantage of investing in growth-oriented
funds and that's important when planning for your future
retirement. What's more, you have the option to transfer
shares from fund to fund at no charge. This gives your
investment the maximum flexibility over the next ten, 20, or
even 30 years.
USAA Investment Management Company (IMCO) manages and
distributes a variety of mutual funds to meet your own
personal investment objectives. For your retirement funds to
grow, they must be invested wisely. Here are some of the
benefits of investing in a USAA Investment Management
Company mutual fund:
Professional Management.
USAA IMCO mutual funds are managed by investment
professionals with the education, knowledge, and experience
to make sound investment decisions for your money -
decisions you may not have the time, interest or experience
to make.
Low Costs.
Our tax-sheltered custodial accounts have no annual
maintenance fees and USAA IMCO's funds are totally no-load,
which means you pay no sales commission or 12b-1 fees. 100%
of your hard-earned dollars go to work for you immediately.
The Custodian charges a $20 fee for total distributions.
Exceptions to the fee are: partial distributions, total
transfer within USAA, and distributions due to disability or
death.
Unique Investor Service.
When you become a shareholder, you will be assisted by your
own team of account representatives, a small group of expert
professionals who are qualified to help you make sound
investment choices customized to your individual needs.
Diversification.
Each USAA IMCO mutual fund invests in a wide range of
securities (stocks, bonds, etc.) suited to its particular
investment objective. The funds are diversified by economic
sector, industry, and companies within a single industry,
and it may invest in a variety of short-term money market
instruments.
Exchange Privileges.
Our free exchange privilege allows you to exchange shares of
one fund for shares of another mutual fund with the same
registration. You may exchange six times per calendar year.
Performance Results.
These are readily available every day in the financial
section of most major newspapers, but they will also be sent
directly to you in annual and semiannual reports from our
company.
Which USAA Mutual Funds Are Best For Me?
PRIMARY RELATIVE
FUND INVESTMENT IMPORTANCE
TYPE/NAME OBJECTIVE INVESTS IN... VOLATILITY OF INCOME
- -----------------------------------------------------------------------------
AGGRESSIVE GROWTH
- -----------------
AGGRESSIVE Capital appreciation Stocks Very high Low
GROWTH FUND
EMERGING Capital appreciation Emerging Very high Low
MARKETS FUND* markets
stocks
GROWTH
- -------
GROWTH FUND Capital appreciation Stocks Moderate Moderate
to high
INTERNATIONAL Capital appreciation Foreign Moderate Low
FUND* stocks to high
WORLD Capital appreciation Foreign Moderate Low
GROWTH FUND* & domestic to high
stocks
GROWTH & INCOME
- -----------------
GROWTH & Capital growth & Dividend Moderate Moderate
INCOME FUND current income paying common
stocks,
convertible
bonds
INCOME
- ------
INCOME Current income Bonds Moderate High
FUND (BONDS) and conservation
of capital
INCOME STOCK Current income, Dividend Moderate High
FUND (STOCKS) increasing dividend paying stocks
income, capital
appreciation
GNMA TRUST Current income & Government Low to High
conservation of National moderate
capital Mortgage
Association
certificates
SHORT-TERM High current income Investment- Low High
BOND FUND with preservation of grade
principal securities,
bonds
DIVERSIFIED
- ------------
CORNERSTONE Achieve a positive Gold mining, Moderate Moderate
FUND inflation-adjusted Government
rate of return Securities,
Real Estate,
Foreign and Basic
Value Stocks
PRECIOUS METALS
- ---------------
GOLD FUND Capital Gold mining & Very high Low
appreciation precious metals
stocks
MONEY MARKET
- -------------
MONEY Current income Money market Very low High
MARKET FUND+ plus stable instruments
principal
TREASURY Current income & U.S. Treasury Very low High
MONEY MARKET conservation of securities
TRUST+ capital with the
highest degree of
safety
If you would like more complete information on any of the
funds listed, including management fees and expenses, please
call us at 1-800-531-8000, extension 8-4539, (in San Antonio
498-4539) and we will send you informative materials
including a prospectus. Please read them carefully before
you invest or send any money.
*Foreign investing is subject to certain risks, such as
currency fluctuations, market illiquidity and political
instability, which are discussed in the Fund's prospectus.
An investment in the Money Market Fund or Treasury Money
Market Trust is neither insured nor guaranteed by the U.S.
Government and there is no assurance the fund will be able
to maintain a stable net asset value of $1 per share.
Everyone's Investment Situation Is Different
Your age, income, net worth, risk tolerance, as well as
current market conditions, are all factors to consider in
deciding which investment is best for you.
Age.
If you are close to retirement, you may need current income
and relative safety. If retirement is five years or more
away, you may be willing to accept a higher degree of risk
with the objective of achieving higher long-term gains.
Risk Tolerance.
If you are highly concerned about maintaining the safety of
your principal, you may be better off opting for lower
volatility and lower-risk funds. Remember, however, that
saving vehicles which guarantee your principal may be
subject to a less obvious risk - the loss of purchasing
power due to inflation. For those who can accept some
fluctuation in their retirement fund, the more aggressive
stock funds could be an attractive alternative. However, you
must be comfortable with the idea that the value of your
investment is likely to fluctuate depending on market
conditions.
Market Conditions.
Fluctuating economic conditions can affect mutual funds. For
example, the up or down direction of interest rates will
affect both the price and the yield of an income-oriented
mutual fund. Your investment portfolio can easily be
constructed and kept in balance using a family of no-load
mutual funds. Of course, every person's ideal investment
mixture is different. As a free service to you, one of our
knowledgeable account representatives will guide you in your
decisions and help you build a portfolio of mutual funds
that pursues the return you seek, balanced with a
comfortable exposure to risk.
Remember, there is no foolproof system for calling the
market's turns. So when investing for the long-term, dollar-
cost averaging1 may help you erase the timing dilemma of,
"When do I get in? How much should I invest?" With dollar-
cost averaging, you invest a constant amount in a fund at
regular intervals over a period of time, regardless of the
fund's price. When the price is low, you purchase more
shares; when the price is high, you purchase fewer shares.
Chances are that over time the average price you pay per
share is lower than the average selling price for those same
shares.
1Dollar-cost averaging does not assure a profit or protect
against a loss in declining markets. Investors should
consider their financial ability to continue purchases
through periods of low and high price levels.
Questions And Answers About 403(b)(7) USAA Mutual Funds
When is the best time to start investing for retirement?
The best time is now. The sooner you start investing for
your retirement years, the better your chances will be to
achieve a comfortable retirement income.
Why should I have a tax-sheltered custodial plan?
There are several ways to save for retirement, but a TSCA -
also known as the 403(b)(7) - provides an excellent
opportunity to build a retirement nest egg by allowing you
to set aside a sizable portion of your current income in a
tax-sheltered account. The money you contribute during your
working years, as well as the earnings generated, accumulate
on a tax-deferred basis until withdrawal.
Who is eligible for a 403(b)(7)?
Federal law mandates that employees of non-profit
organizations described in the 501(c)(3) section of the IRS
Code and those working for educational institutions
described in the 170(b)(1)(a)(ii) section of the Code are
eligible. These definitions include a wide range of people,
including many who work in hospitals, research institutes,
religious and charitable organizations, as well as in public
schools, state universities and other state-affiliated
educational institutions. If you are not sure whether you
qualify, check with the personnel or administrative
department at your place of employment.
How much can I put into a 403(b)(7)?
That depends on several factors, but most people are able to
allocate 15 to 20 percent of their gross compensation
without exceeding IRS limits. The maximum you can
contribute, however, is $9,500 per year or 15 to 20 percent,
whichever is lower. If you are considering a substantial
amount, we will help you compute your personal Maximum
Exclusion Allowance(MEA).
What if I leave my current job?
If you leave your current job, your 403(b)(7) mutual fund
account will continue earning dividends and compounding as
before, or you may withdraw the entire value of the account.
Any premature distributions (before age 59 1/2) will be
assessed a 10% penalty on the amount withdrawn, in addition
to ordinary income tax on the entire amount withdrawn.
However, if you leave your job, you will not be able to make
further annual contributions unless your new employer is
approved by law for this type of plan.
If your new employer is approved, all you have to do to
continue with your current contract is fill out a salary
reduction agreement form and get your new employer to agree
to send us your contributions.
How can I change the amount of my salary reduction
agreement?
It's simple. You will need to fill out a new Salary
Reduction Agreement Form.
Who chooses the funds to which my money will be allocated?
You do, according to your own investment objectives and
tolerance of risk. We will, of course, provide our guidance
as you request it.
Why should I invest in a mutual fund 403(b)(7)?
Mutual funds offer the advantages of diversification and
professional investment management. What's more, USAA IMCO
funds are all "no load," meaning you don't pay any
commissions or sales charges. All of your money starts
working for you from day one.
Can I transfer my 403(b)(7) account to a regular IRA?
Yes you can, but you must either be terminated from service
or be 59 1/2. There is no limit to the number of direct
transfers from one custodian to another, as long as the
employee does not take possession of the funds. If you take
possession of the funds, you must then deposit your money
into a IRA account within 60 days after you receive it or
you lose your rollover privileges and the entire amount is
subject to the IRA 10% penalty. An IRA rollover can only be
used once per year and is not taxable but must be reported
on your tax return.
How will I keep track of my account?
You will receive a confirmation statement every time your
employer makes a contribution and whenever there is any
activity within the account. You will also receive a
quarterly consolidated statement plus a year-end statement
summarizing all activity throughout the year.
When can I start withdrawals?
Money can be withdrawn at age 59 1/2 without penalty. Unless
you become disabled, earlier withdrawals are subject to
penalty. You may delay withdrawals but not later than age
70 1/2. After age 70 1/2, if you make withdrawals in
installments, certain minimum distributions (based on life
expectancy or joint life expectancies of you and your
beneficiary) must begin. A 50% penalty tax will be imposed
if the amount actually distributed to you after 70 1/2 is
less than the amount required by law to be distributed.
How are the withdrawals taxed?
All withdrawals are subject to ordinary income taxes in the
year received.
Checklist
Here's how simple it is to open a 403(b)(7):
To begin investing in a USAA Investment Management Company
403(b)(7) mutual fund, please follow the steps outlined
below:
* Read the prospectus(es) for the fund(s) you've selected.
* Complete the following forms:
- Account Application
- Salary Reduction Agreement
* Both you and your employer must sign and date the
Salary Reduction Agreement and both of you should keep a
copy for your records. USAA does not require a copy of this
agreement.
* If your account is to be opened with a lump-sum
contribution from another plan, complete the Account
Transfer Form as well.
* On the Application, specify the fund(s) you want
to invest in, in either a dollar amount or a percentage
amount that you wish to allocate to each fund.
* Mail completed forms in the enclosed postage-paid
envelope.
Upon acceptance of your application and receipt of money
from your employer, you will receive a confirmation
statement and a copy of each form signed by USAA Investment
Management Company, the custodian. Generally, it takes about
two weeks to process your application after we receive your
deposit. The first deduction from your paycheck will
normally take place within four to six weeks after you give
your employer the salary reduction form.
Your annual 403(b)(7) contributions are typically limited to
15 to 20 percent of your gross compensation or $9,500,
whichever is lower. But since your personal contribution
maximum may be higher or lower, you may want to talk with
your benefits office about the calculation of your personal
Maximum Exclusion Allowance(MEA) or we will be happy to help
you compute it.
Toll-Free Telephone Numbers
For more information before you open an account:
Call 1-800-531-8000
extension 8-4539
(in San Antonio 498-4539).
For information after you open an account:
Account Servicing:
call 1-800-531-8448
(in San Antonio 456-7202).
24-Hour Access:
call 1-800-531-8777
(in San Antonio 498-8777),
For automated telephone information about your accounts
through TouchLine(registered trademark).*
Call 1-800-531-8066
(in San Antonio 498-8066),
For a recorded message giving the Funds' current net asset
value.
*TouchLine(registered trademark) is a registered service
mark of USAA.
Custodial Agreement
Introduction To The USAA Mutual Funds Section 403(b)(7)
Custodial Account
The attached documents are intended to establish an
arrangement that satisfies Section 403(b) of the Internal
Revenue Code of 1986, as amended from time to time (the
"Code"). However, no Internal Revenue Service ruling has
been requested with respect to the tax consequences of the
attached documents and neither USAA INVESTMENT MANAGEMENT
COMPANY nor State Street Bank and Trust Company makes any
representation with respect to such matters. Arrangements
such as those reflected in the attached documents should not
be entered into by any Employer or Employee who has not
first obtained competent independent professional advice on
the tax and other consequences.
This material is not authorized for distribution unless
preceded or accompanied by an effective prospectus
containing further information about the mutual funds in
which the assets of the account are to be invested.
Eligibility
Employees of organizations qualified under Section 501(c)(3)
of the Code or employees of an educational institution
(including public school systems) are eligible to arrange
for tax-sheltered contributions to a Section 403(b)(7)
Custodial Account, investing in mutual funds.
Contributions
Each year, approximately 20 percent of an eligible
Employee's includible compensation (up to a maximum of
$9,500, which dollar amount may be adjusted upwards in the
future to reflect inflation) may be contributed to a 403(b)
account for that employee. It is also possible to make
additional catch-up contributions in certain limited
circumstances. Contributions must be made by the Employer
and are arranged through a "salary reduction agreement" such
as the one enclosed. If your Employer has another standard
form which is used for all employees, it may be used instead
of our form. The $9,500 limit discussed above applies to the
aggregate of all "elective" contributions made for the
Employee under all 403(b) accounts plus certain elective
contributions under other tax qualified plans. If you exceed
this limit for any year, you may be subject to serious
adverse tax consequences. Accordingly, you should take care
and consult with your tax advisor to assure that the limit
is not exceeded.
In addition to the $9,500 per year limit on 403(b)
"elective" contributions, all 403(b) contributions are
subject to annual contribution limits which are quite
complicated and depend on a variety of factors, including
your age, your years of service with an eligible employer,
your participation in other retirement programs, etc.
If you choose, we will make all calculations for you.
Requests for this service may be made by calling 1-800-531-
8000, extension 84539 and asking for a Tax-Sheltered Annuity
representative.
Eligible contributions are not taxable as current income,
giving you the benefit of investing money which would
otherwise have been paid in federal income taxes. Your
employer should exclude these amounts from your federal
gross income on your W-2, and you do not have to separately
deduct them on your annual federal income tax return.
Amounts distributed from a 403(b) account will be included
in taxable gross income at that time. (Contributions to the
account may be subject to social security taxes or state and
local income taxes.)
Distribution
The IRS requirements for mutual fund custodial accounts
provide for distribution to be made under several
conditions. In general, you may begin to receive assets held
in your account at the time of termination of service,
retirement, death, attainment of age 59 1/2, or if you incur
a "financial hardship." A financial hardship will be present
only if the Employee is faced with immediate and heavy
financial needs and does not have other resources reasonably
available to meet these needs. The determination that a
financial hardship exists and the amount needed to meet the
hardship must be made by an independent person or persons
designated by the Employer. The Custodian will not make any
distribution based on financial hardship until it has
received the requisite written notice from the independent
person or persons.
Beginning in 1989, if you incur a "financial hardship," you
will only be able to receive from the 403(b) account the
"elective" contributions which the Employer has made on your
behalf under a "salary reduction agreement" and not any of
the earnings in the 403(b) account.
In general, any distribution to you from the 403(b) account
before you reach age 59 1/2 may be subject to a 10 percent
penalty tax in addition to regular income tax. In addition,
there are other special taxes which may apply to your
distribution. Further, in certain cases, your distribution
may be subject to mandatory 20% federal income tax
withholding, if it is not rolled over directly to an IRA or
another Section 403(b) arrangement. You should consult your
tax advisor in conjunction with any election you make with
regard to distributions of amounts in your account.
Introduction
The Employer, the Employee and the Custodian, by signing the
Application, have established this tax-sheltered Custodial
Account under Section 403(b)(7) of the Internal Revenue
Code. The Application is hereby made a part of this
Agreement. The Employer will make an initial contribution to
the Account as indicated on the Application. The Employer,
the Employee and the Custodian agree that the terms and
conditions of the Custodial Account are as set forth in this
Agreement.
This Agreement shall take effect upon acceptance by the
State Street Bank and Trust Company of Boston,
Massachusetts, of its appointment to serve as Custodian in
accordance herewith. As provided more fully in Article IV
below, the Custodian is to invest all contributions to the
Custodial Account in shares of one or more Designated
Investment Companies.
Article I/Definitions
As used in this Agreement, the following terms shall have
the meaning hereinafter set forth, unless a different
meaning is plainly required by the context.
1. "Application" means the agreement between the Employer,
the Employee and the Custodian which incorporates this
Agreement in order to establish a USAA Mutual Funds Section
403(b)(7) Custodial Account for the Employee.
2. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
References to the Code shall be deemed to include any
Treasury Regulations issued thereunder.
3. "Custodial Account" means the Section 403(b)(7) Custodial
Account established under this Agreement, and when the
context so implies, refers to the assets, if any, then held
by the Custodian hereunder.
4. "Custodian" means State Street Bank and Trust Company, or
any successor thereto as provided in Article IX hereof.
5. "Designated Investment Company" means USAA MUTUAL FUND,
INC., USAA INVESTMENT TRUST, and any other regulated
investment company (within the meaning of Section 851(a) of
the Code) for which USAA INVESTMENT MANAGEMENT COMPANY (or
any affiliate thereof) acts as investment advisor and which
is designated by USAA INVESTMENT MANAGEMENT COMPANY as
eligible for investment under this Agreement.
6. "Employee" means any person employed by the Employer on a
full or part time basis for whom the Employer and the
Employee have agreed to execute an Application. This term
also includes any person formerly employed by the Employer
and who has assets in his Custodial Account.
7. "Employer" means the Employer named in the Application.
The Employer shall be an organization that is (i) described
in Section 501(c)(3) of the Code and exempt from tax under
Section 501(a) of the Code, or (ii) an educational
organization described in Section 170(b)(1)(A)(ii) of the
Code and which is a State, political subdivision of a State,
or an agency or instrumentality of one or more of the
foregoing.
8. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
9. "Excess Contribution" means the amount of any
contribution made by the Employer on behalf of the Employee
for any year which is an "excess contribution" as that term
is defined in Section 4973(c) of the Code.
10. "Excess Deferral" means the amount of any contribution
made by the Employer on behalf of the Employee for any year
which is an "excess deferral" as that term is defined in
Section 402(g) of the Code.
11. "Rollover Contribution" means any amount distributed
from an individual retirement account or an individual
retirement annuity described in Section 408 of the Code, the
entire amount of which is attributable to a tax- sheltered
annuity contract described in Section 403(b) of the Code, or
directly from such a tax-sheltered annuity contract and then
transferred to the Custodial Account in accordance with
Section 403(b)(8) or 408(d)(3)(A)(iii) of the Code.
12. "Sponsor" means USAA INVESTMENT MANAGEMENT COMPANY.
Article II/Establishment Of Custodial Account
The Custodian shall open and maintain a Custodial Account
for the benefit of the Employee. The Custodian may evidence
its acceptance of its appointment by sending to the Employee
a confirmation of the Custodian's receipt of the first
contribution to the Custodial Account. The Employee shall be
the beneficial owner of all Designated Investment Company
shares held in his Custodial Account. The name, address and
social security number of the Employee are set forth in the
Application, and it shall be the obligation of the Employee
to notify the Custodian of any address changes. The
Custodian shall notify the Employee of the identification
number of the Custodial Account maintained for his benefit
hereunder.
Article III/Contributions
1. Employer Contributions. The Employer shall make
contributions in cash to the Custodian either in accordance
with a salary reduction agreement between the Employer and
the Employee or otherwise. The initial contribution shall be
submitted to the Custodian with the executed Application.
The aggregate contribution by the Employer on behalf of the
Employee during the first 12 months following the
establishment of the Custodial Account shall be at least
$250; the Custodian shall not accept any contribution to the
Custodial Account of less than $25.
2. Transfers From And To Other Accounts. The Employer or the
Employee may cause the transfer of assets acceptable to the
Custodian from an existing custodial account established
under Section 403(b)(7) of the Code on behalf of the
Employee and/or from an existing annuity contract
established under Section 403(b) of the Code on behalf of
the Employee to his Custodial Account hereunder. Such
transferred assets shall be treated as an Employer
contribution for purposes of this Agreement and shall be
invested, distributed and otherwise dealt with as such;
provided, however, that such transferred amounts shall be
disregarded in applying the limitations on the amount of
Employer contributions which can be made hereunder. The
Employee may cause the transfer of assets from the
Employee's Custodial Account hereunder to another custodial
account established under Section 403(b)(7) of the Code
and/or to an annuity contract qualified under Section 403(b)
of the Code. It shall be the responsibility of the person
who causes a transfer under this Paragraph (i.e., the
Employer or Employee), and not the responsibility of the
Custodian, the Sponsor, or any Designated Investment
Company, to determine and ensure that such transfer complies
with all applicable tax law requirements.
3. Limitations on Contributions. The Employee shall compute
the maximum amount that may be contributed on his behalf by
the Employer for each tax year in accordance with his
"exclusion allowance" as that term is defined in Section
403(b)(2) of the Code. The Employee shall also determine the
applicable limitation(s) on contributions under Section 415
of the Code, and the Employee shall have the right to avail
himself of and make any of the elections provided under such
section.
In addition, the Employee shall determine the applicable
limitation on "elective" contributions to the Custodial
Account under Section 402(g) of the Code. Such computations
and determinations shall be made at least annually, and the
Employee shall communicate the results to the Employer.
Neither the Custodian, the Sponsor nor any Designated
Investment Company shall have any duty or responsibility to
determine that the amount of the initial or any subsequent
contribution made by the Employer on behalf of the Employee
is consistent with the terms of any applicable salary
reduction agreement entered into by and between the Employer
and the Employee or to verify that such amount is not in
excess of the Employee's exclusion allowance under Section
403(b)(2) of the Code or the applicable limitations under
Sections 402(g) and 415 of the Code.
4. Rollover Contributions. The Custodian may also accept
Rollover Contributions in cash as a deposit to the Custodial
Account, provided, however, that any such Rollover
Contribution shall be held by the Custodian in a separate
Custodial Account for the benefit of the Depositor that
consists only of Rollover Contributions and the earnings
thereof. Once transferred into the Employee's Custodial
Account, such assets shall be treated as an Employer
contribution for purposes of this Agreement and shall be
invested, distributed and otherwise dealt with as such;
provided, however, that such Rollover Contributions shall be
disregarded in applying the limitations on the amount of
Employer contributions which can be made hereunder. The
Employee shall execute such forms and provide such
information as the Custodian may require with respect to the
source of Rollover Contributions. It shall be the
responsibility of the Employee, and not the responsibility
of the Custodian, the Sponsor, or any Designated Investment
Company, to determine and ensure that such Rollover
Contribution complies with all applicable tax law
requirements.
A Rollover Contribution also may be made in Designated
Investment Company shares and/or in other securities,
provided that the Custodian reserves the right to refuse to
accept any property which is not in the form of cash or
Designated Investment Company shares. If securities, other
than Designated Investment Company shares, are accepted by
the Custodian, they shall be sold by the Custodian and the
proceeds, after deduction of all expenses and charges
involved in the sale, shall be reinvested in accordance with
Article IV.
Article IV/Investment Of Account Assets
1. Contributions. All contributions to the Custodial Account
shall be invested in such shares of one or more Designated
Investment Companies as the Employee may direct. Such
Designated Investment Company shares shall be acquired by
the Custodian at the price and in the manner in which such
shares are then being publicly offered by such Designated
Investment Company. If such investment instructions are not
received by the Custodian, or are received but are, in the
opinion of the Custodian, unclear, the Custodian may hold or
return all or a portion of the contribution uninvested
without liability for loss of income or appreciation, and
without liability for interest, pending receipt of proper
instructions or clarification. The Custodian shall advise
the Employee of the form and manner in which investment
instructions must be given and shall not be required to act
or be held liable for failure to act upon improperly given
instructions.
2. Changes in Investment. The Employee may from time to time
direct the Custodian to redeem any or all Designated
Investment Company shares acquired by the Custodian under
this Agreement and to reinvest the proceeds in such other
Designated Investment Company shares as the Employee may
specify. Any such transaction must conform with the
provisions of the current prospectus(es) of the applicable
Designated Investment Company(ies).
3. Dividends. All dividends or other distributions received
by the Custodian on shares of any Designated Investment
Company held in the Custodial Account shall (unless received
in additional shares of such Designated Investment Company)
be reinvested in additional shares of the Designated
Investment Company from which the distribution is made. If
any distribution on shares of a Designated Investment
Company may be received at the election of the shareholder
in additional shares or cash or other property, the
Custodian shall elect to receive such distribution in
additional shares.
4. Registration and Voting. All Designated Investment
Company shares acquired by the Custodian hereunder shall be
registered in the name of the Custodian or of its nominee.
The Custodian shall deliver, or cause to be executed and
delivered, to the Employee all notices, prospectuses,
financial statements, proxies, and proxy soliciting
materials relating to the Designated Investment Company
shares held in the Custodial Account. The Custodian shall
not vote any of the shares held hereunder except in
accordance with written instructions received from the
Employee. Voting instructions which have not been timely
received by the Custodian shall not be voted by the
Custodian.
Article V/Distributions
1. Time of Distributions.
(a) Subject to the remaining provisions of this Article V,
distribution of assets held in the Employee's Custodial
Account shall begin at such times as the Employee (or his
beneficiary, if applicable) shall elect by written notice to
the Custodian at any time after the occurrence of the
earliest of these events:
(1) The Employee's
(a) Separation from service with the Employer;
(b) disability (within the meaning of Section 72(m)(7) of the Code);
(c) death;
(d) attainment of age 59 1/2
(2) a financial hardship of the Employee, as determined by
an independent person or persons designated by the Employer.
"Financial hardship" shall include a financial need of
the Employee because of sickness, temporary disability, or
any other immediate and heavy financial need of the
Employee, provided, however, that the term financial
hardship shall be limited so as to conform to the
requirements of Section 403(b)(7) of the Code. No
distribution based on financial hardship may exceed the
amount determined to be required to meet the immediate
financial need created by the hardship and not reasonably
available from other resources of the Employee.
Effective in 1989, a distribution because of financial
hardship is limited to an Employee's "elective"
contributions not previously distributed, and the earnings
on such contributions will not be distributable on account
of financial hardship. Any distribution prior to age 59 1/2
even on account of a financial hardship, may subject the
Employee to a 10 percent penalty tax on the distribution.
No distribution based on financial hardship shall be
made by the Custodian until its receipt of written notice
from such independent person (or persons) that a qualifying
hardship has been determined and stating the amount required
to be distributed to meet that hardship.
(b) If, and only if, contributions have been made to the
Custodial Account under this Agreement after December 31,
1986 then, subject to the provisions of Paragraph 2(f), the
distribution to an Employee of amounts under this Agreement
shall begin no later than the April 1 following the close of
the calendar year in which the Employee attains age 70 1/2
(the "Required Distribution Date"). Notwithstanding the
foregoing, the Required Distribution Date for any Employee
who attained age 70 1/2 before January 1, 1988 shall be no
earlier than the April 1 next following the calendar year in
which the Employee terminates employment.
(c) The Custodian shall not be responsible for making any
distributions until such time as it has received written
instructions from the Employee (or his beneficiary, if
applicable) to begin making distributions, and, in the case
of financial hardship, it has received the written notice of
the designated independent person or persons.
(d) At any time before the commencement of distributions,
the Employee (or his beneficiary, if applicable, subject to
the restrictions in paragraph 4) shall instruct the
Custodian of the method of distribution. Upon receipt by the
Custodian of any and all certificates and other documents
requested by the Custodian, the Custodian will comply with
the written instructions of the Employee (or his
beneficiary, if applicable) to make distribution in
accordance with one of the methods of distribution set
forth. In the event that the Employee (or his beneficiary,
if applicable) fails to properly elect a method of
distribution of his Custodial Account, installment payments
pursuant to sub-paragraph (b) of paragraph 2 shall be made
to the Employee (or his beneficiary) on a monthly basis over
a 10-year period if a systematic withdrawal plan is
available for the Designated Investment Company shares held
in the Custodial Account and if the assets in such Account
are determined sufficient by the Sponsor. If such a plan is
unavailable and/or if such assets are insufficient, the
value of the shares held in the Custodial Account will be
distributed in a single lump sum in cash.
2. Methods of Distribution.
(a) The value of the Custodial Account may be distributed
in one of the following ways:
(1) A single sum payment, in cash and/or in kind,
consisting of the entire balance in the Custodial Account;
or a single sum payment, in cash and/or in kind, consisting
of part of the balance in the Custodial Account with the
remainder distributed pursuant to sub-paragraph (b) or (c);
(2) In installments, in cash and/or in kind, over a
period of years not to exceed the life expectancy of the
Employee or the joint life and last survivor expectancy of
the Employee and his beneficiary. The installment payments
shall be made in approximately equal amounts or
approximately equal fractions of the Employee's Custodial
Account and may be paid in monthly or other regular
increments as elected by the Employee and as agreed to by
the Custodian.
(3) By the purchase and distribution of an annuity
contract, utilizing all available assets of the Custodial
Account, from an insurance company designated by the
Employee, with either fixed or variable annuity payments for
the life of the Employee or, if the Employee so elects, for
the lives of the Employee and his beneficiary. Such policy
may provide for installment payments over a period measured
by the life expectancy of the Employee or the joint life
expectancy of the Employee and his beneficiary and the
survivor, or over a shorter period.
If the Employee elects the method of distribution
described in (3) above, the annuity contract must satisfy
the requirements of Section 401(a)(9) of the code. If the
Employee elects the method of distribution described in (2),
the annual payment required to be made by the Employee's
Required Distribution Date is for the calendar year the
Employee reached age 70 1/2. Annual payments for subsequent
years, including the year the Employee's Required
Distribution Date occurs, must be made by December 31 of
that year.
(b) If, and only if, contributions have been made to the
Custodial Account under this Agreement after December 31,
1986, the method of distribution
(1) may not extend the payment of such Employee's
benefits beyond the life expectancy of the Employee or the
joint life and last survivor expectancy of the Employee and
his beneficiary (determined using attained ages as of the
calendar year in which payments commence under Section 1.72-
9 of the Treasury Regulations) and
(2) if someone other than the Employee's spouse is the
beneficiary, then the period of years over which installment
payments are to be paid shall be such that any period of
years remaining as of the calendar year in which the
Employee attains age 70 1/2 or any subsequent calendar year
shall meet the minimum distribution incidental benefit
requirement which shall be determined in accordance with the
regulations promulgated under Section 401(a)(9) of the Code.
(c) Notwithstanding the foregoing, if the value of the
Custodial Account at the time distribution is to be made or
commenced is less than $250, the full amount in the
Custodial Account shall be distributed as a single-sum
payment in cash.
(d) The Employee (or his beneficiary, if applicable) shall
be responsible for insuring that distributions are made in
accordance with this Agreement and with all requirements of
applicable law. The Custodian shall have no responsibility
regarding the method and timing of distributions other than
to follow the written instructions of the Employee (or his
beneficiary, if applicable).
(e) In the case of distributions to be made over the life
expectancy of the Employee (or over the joint lives of the
Employee and his beneficiary or the life expectancy of the
beneficiary) in equal or substantially equal annual
payments, to determine the minimum annual payments, to
determine the minimum annual payment for each year, divide
the Employee's entire interest in the Custodial Account as
of the close of business on December 31 of the preceding
year by the life expectancy of the Employee (or the joint
life and last survivor expectancy of the Employee and his
beneficiary, or the life expectancy of the beneficiary,
whichever applies). In the case of distributions under
paragraph 2, determine the initial life expectancy (or joint
life and last survivor expectancy) using the attained ages
of the Employee and beneficiary as of their birthdays in the
year the Employee reaches age 70 1/2. In the case of
distributions in accordance with paragraph 4, determine life
expectancy using the attained age of the beneficiary as of
the beneficiary's birthday in the year distributions are
required to commence. The recalculation of the life
expectancy of the Employee and/or the Employee's spouse
shall only be made at the written election of the Employee.
The recalculation of the life expectancy of the Employee's
surviving spouse shall only be made at the written election
of the surviving spouse. Any recalculation of the Employee's
and/or spouse's life expectancy will be done annually using
their attained ages as of their birthdays in the year for
which the minimum annual payment is being determined. The
life expectancy of a beneficiary (other than the spouse)
will not be recalculated. The minimum annual payment may be
made in a series of installments (e.g., monthly, quarterly,
etc.) as long as the total payments for the year made by the
date required are not less than the minimum amounts
required.
(f) If the Employee maintains one or more 403(b) accounts
or annuities with any institution other than the Custodian,
the Employee may elect to withdraw the minimum distribution
required under sub-paragraph (e) above from such other
accounts or annuities.
3. Designation of Beneficiary.
The Employee may designate and change his beneficiary or
beneficiaries under this Agreement on a form acceptable to
the Custodian for such purpose. A designation of beneficiary
hereunder shall not become effective until it has been filed
with the Custodian. If no such designation is in effect at
the time of the Employee's death, the beneficiary shall be
the Employee's surviving spouse, or, if there is no
surviving spouse, then the estate of the Employee.
The balance in the Custodial Account at the death of the
Employee shall be distributed to such beneficiary of
beneficiaries. Such beneficiary shall have the right to
determine the timing and method of distribution, subject to
any applicable restrictions contained in this Article V.
4. Death Benefits.
If the Employee dies before his entire interest is
distributed to him, the entire remaining interest will be
distributed as follows:
(a) If the Employee dies on or after his Required
Distribution Date, distribution must continue to be made in
accordance with paragraph 2.
(b) If the Employee dies before his Required Distribution
Date, the entire remaining interest will, at the election of
the beneficiary, either (i) be distributed by the December
31 of the year containing the fifth anniversary of the
Employee's death, or (ii) be distributed in equal or
substantially equal payments over the life or life
expectancy of the beneficiary or (iii) by the purchase of an
annuity contract. The election of either (i), (ii) or (iii)
must be made by December 31 of the year following the year
of the Employee's death. If the beneficiary does not elect
either of the distribution options described in (i), (ii)
and (iii), distribution will be made in accordance with (ii)
if the beneficiary is the Employee's surviving spouse and in
accordance with (i) if the beneficiary is anyone other than
the surviving spouse. In the case of distributions under
(ii) or (iii), distributions must commence by December 31 of
the year following the year of the Employee's death. If the
Employee's spouse is the beneficiary, distributions need not
commence until December 31 of the year the Employee would
have attained age 70 1/2, if later.
(c) Following the death of the Employee and until
distribution of the Custodial Account has been completed,
the beneficiary shall have the right to control the
investment of the assets of the Custodial Account to the
same extent as the Employee had such right under Article IV.
(d) If the beneficiary dies before receiving the entire
balance of the Custodial Account, such balance shall be paid
to the executor of the beneficiary's estate.
5. Distribution of Excess Contributions and Excess Deferrals.
Any provision herein to the contrary notwithstanding, if the
Employee notifies the Custodian in writing within the time
prescribed by law (if any) that all or any portion of a
contribution made on behalf of the Employee was an Excess
Contribution or an Excess Deferral, then the Custodian may
distribute, within the time prescribed by law (if any), to
the Employee Designated Investment Company shares and/or
cash representing the amount of such Excess Contribution or
Excess Deferral, and in either case, the net income
attributable thereto, reduced by any administrative charges
allocable to the Excess Contribution or Excess Deferral.
Articles VI/Protection of Employee Benefits
1. Non-forfeitable. The Custodial Account has been created
for the exclusive benefit of the Employee and his
beneficiaries. The interest of the Employee in the balance
in the Custodial Account shall at all times be non-
forfeitable, but shall be subject to the fees, expenses and
charges described in Article VII.
2. Non-alienable. Except as provided in Article V, no
interest, right or claim in or to any part of the Custodial
Account or any payment therefrom shall be assignable,
transferable, or subject to sale, mortgage, pledge,
hypothecation, commutation, anticipation, garnishment,
attachment, execution, or levy of any kind, and the
Custodian shall not recognize any attempt to assign,
transfer, sell, mortgage, pledge, hypothecate, commute,
anticipate, garnish, attach, execute upon or levy upon the
same, except to the extent required by law.
Article VII/Reporting, Custodian Fees And Expenses Of The
Account
1. Furnishing of Data. The Employee agrees to provide at
such times and in such manner as may be requested by the
Custodian, such information as may be necessary for the
Custodian to prepare any reports required by the Internal
Revenue Service, the Department of Labor or any other
governmental agency.
2. Reports by Custodian. The Custodian agrees to submit
reports to the Internal Revenue Service, other government
agencies, and the Employee at such times and in such manner
and containing such information as may be prescribed as the
responsibility of the Custodian by applicable statues and
regulations thereunder.
3. Custodian Fees and Expenses of Account. The Custodian
shall advise the Employer and the Employee of its fee
schedule at the time of the execution of the initial
Application. All fees of the Custodian in the performance of
its duties hereunder may be charged against the Custodial
Account in such manner as may be determined by the
Custodian, or at the Custodian's option, may be paid by the
Employer or the Employee directly. Upon thirty (30) days'
prior written notice, the Custodian may substitute a
different fee schedule. The Custodian's fees, any income or
other taxes of any kind that may be levied or assessed in
respect to the assets of the Custodial Account, and all
other administrative expenses incurred by the Custodian in
the performance of its duties, including fees for legal
services rendered to the Custodian, may be reserved by the
Custodian and charged to the Custodial Account, with the
right to liquidate Designated Investment Company shares for
this purpose.
Article VIII/Concerning The Custodian
1. Annual Report. The Custodian shall keep adequate records
of transactions it is required to perform hereunder. Not
later than sixty (60) days after the close of each calendar
year or after the Custodian's resignation or removal
pursuant to Article IX, the Custodian shall render to the
Employee a written report or reports reflecting the
transactions effected by it during such period and the
assets of the Custodial Account at the close of the period.
Sixty (60) days after rendering such reports(s), the
Custodian shall, to the extent permitted by applicable law,
be forever released and discharged from all liability and
accountability to anyone with respect to its acts and
transactions shown in or reflected by such report(s), except
with respect to those as to which the recipient of such
report(s) shall have filed written objections with the
Custodian within the later such sixty (60) day period.
2. ERISA Requirements. Certain ERISA requirements will
apply if the Custodial Account and this Agreement are
determined to constitute, or to be a part of, an "employee
pension benefit plan" subject to Title I of ERISA. This may
occur if, for example, the Employer makes any contributions
on behalf of an Employee other than the elective
contributions contemplated herein. If the Custodial Account
becomes subject to Title I of ERISA, the Employer shall be
responsible for assuring that the Custodial Account complies
with all requirements of the provisions of Title I. The
Custodian, the Employer and the Employee shall furnish to
one another such information relevant to the Custodial
Account as may be required in that respect.
3. Delegation of Authority. The Custodian may perform any of
its administrative duties through such other persons or
entities as may be designated from time to time by the
Custodian, with the prior approval of the Sponsor, except
that Designated Investment Company shares must be registered
as provided in paragraph 4 of Article IV. No such delegation
or subsequent change therein shall be considered an
amendment of this Agreement. The Custodian shall not be
liable (and assumes no responsibility) for the collection of
contributions, the tax exclusion of any contribution or its
propriety under this Agreement, or the purpose, propriety,
or timeliness of any distribution ordered in accordance with
Article V.
4. Liability of Custodian. The Custodian's liability under
this Agreement and matters which it contemplates shall be
limited to matters arising from the Custodian's negligence
or willful misconduct. The Custodian shall not be obligated
or expected to commence or defend any legal action or
proceeding in connection with this Agreement unless agreed
upon by the Custodian, the Employer and the Employee and
unless fully indemnified for so doing to the Custodian's
satisfaction.
5. Reliance on Documents. The Custodian may conclusively
rely upon and shall be protected in acting upon any written
order from the Employer or the Employee or his beneficiary
or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed and, so long as it acts in good
faith, in taking or omitting to take any other action in
reliance thereon.
6. Cash Balances. The Custodian shall not be liable for
interest on any cash balances maintained in the Custodial
Account.
Article IX/Resignation Or Removal Of Custodian
1. With Respect to a Custodial Account. Except as otherwise
provided in paragraph 2 of this Article IX, the Custodian
may resign at any time upon thirty (30) days' notice in
writing to the Employer and the Employee, and may be removed
by the Employee at any time upon thirty (30) days' notice in
writing to the Custodian and the Employer. Upon such
resignation or removal, the Employee shall appoint a
successor custodian or trustee, which successor shall be a
"bank" as defined in Section 401(d)(1) of the Code. Upon
receipt by the Custodian of written acceptance of such
appointment by the successor custodian or trustee, the
Custodian shall transfer and pay over to such successor the
assets of the Custodial Account and all records pertaining
thereto. The Custodian is authorized, however, to reserve
such sum of money as it may deem advisable for payment of
all its fees, compensation, costs, and expenses or for
payment of any other liabilities constituting a charge on or
against the assets of the Custodial Account or on or against
the Custodian, with any balance of such reserve remaining
after the payment of all such items to be paid over to the
successor custodian or trustee. If within the thirty (30)
day period provided for, the Employee has not appointed a
successor custodian or trustee which has accepted such
appointment, the Custodian shall, unless it elects to
terminate this Agreement, appoint a successor custodian
itself.
2. With Respect to All Custodial Accounts. The Sponsor may
remove the Custodian at any time upon thirty (30) days'
notice in writing to the Custodian and the Custodian may
resign at anytime upon thirty (30) days' notice in writing
to the Sponsor. Upon such resignation or removal, the
Sponsor shall appoint a successor custodian, which successor
custodian shall be a "bank" as defined in Section 401(d)(1)
of the Code and the provisions of paragraph 1 of this
Article IX shall apply with respect to the transfer of
custodianship to such successor custodian. The provisions of
this paragraph 2 shall apply if, and only if, the
resignation or removal of the Custodian relates to all
Section 403(b)(7) Custodial Accounts established pursuant to
agreements comparable to this Agreement.
Article X/Amendment
1. By Sponsor. The Employee also delegates to the Sponsor
the Employee's rights so to amend, provided that the Sponsor
amends in the same manner all agreements comparable to this
one under which such power has been delegated to it. Such an
amendment by the Sponsor shall be communicated in writing to
the Employee, the Employer and the Custodian.
2. Changes in Custodian's Fee Schedule. This Article X shall
not be construed to restrict the Custodian's freedom to
change or substitute fee schedules in the manner provided by
paragraph 3 of Article VII, and no such change or
substitution shall be deemed to be an amendment of this
Agreement.
3. Limitations on Amendments. Notwithstanding the foregoing,
no amendment shall be made which would:
(a) cause or permit any part of the assets in the Custodial
Account to be diverted to purposes other than for the
exclusive benefit of the Employee and/or his beneficiaries,
or cause or permit any portion of such assets to revert to
or become the property of the Employer:
(b) increase the burdens of the Custodian without its prior
written consent; or
(c) retroactively deprive the Employee of any benefit to
which he was entitled under the Agreement by reason of
contributions made by the Employer, unless such modification
or amendment is necessary to conform the Agreement to, or
satisfy the conditions of, any law, governmental regulation
or ruling, and to permit the Agreement and Custodial Account
to meet the requirements of Section 403(b) of the Code, or
any similar statute enacted in lieu thereof, and any such
retroactive modification or amendment must be pursuant to an
opinion of counsel that it is necessary or advisable to
conform the Agreement to the requirements for qualification
under Section 403(b) of the Code.
Article XI/Termination Of Custodial Account
1. Voluntary Termination. With respect to amounts not yet
earned by the Employee the salary reduction agreement
between the Employee and the Employer may be terminated by
either the Employee or the Employer by giving written notice
to the other. Copies of such notice shall be sent forthwith
to the Custodian. Unless otherwise mutually agreed upon by
the Employer and the Employee, any such termination shall
take effect as of the last day of the month next following
the month in which such written notice shall have been
given, the Employee's compensation level shall be increased
by the amount by which it otherwise would be reduced
pursuant to any applicable salary reduction agreement and
the obligations under this Agreement of the Employer with
respect to future pay periods shall cease.
2. No Successor Custodian. If, within the time specified in
paragraph 1 of Article IX after the Custodian's resignation
or removal, the Employee has not appointed a successor
Custodian which has accepted such appointment, termination
of the Custodial Account may be effected by the Custodian by
distributing all assets thereof in a lump sum in kind to the
Employee (or his beneficiary, if applicable), subject to the
Custodian's right to reserve funds as provided in Article
VII. Upon such termination of the Custodial Account, this
Agreement shall terminate and have no further force and
effect, and the Custodian shall be relieved from all further
liability with respect to this Agreement, the Custodial
Account, and all assets thereof so distributed.
3. Termination on Disqualification. The Agreement shall
terminate as to the Employee if, the Internal Revenue
Service declares that this Custodial Account does not
constitute a tax-qualified custodial account under Section
403(b)(7) of the Code. On such termination of this
Agreement, all assets in the Custodial Account shall be
distributed in kind by the Custodian to the Employee (or his
beneficiary, if applicable), subject to the Custodian's
right to reserve funds as provided in Article VII.
4. Termination on Distribution. This Agreement shall
terminate as to the Employee when all assets held in the
Custodial Account for the Employee have been distributed.
Article XII/Miscellaneous
1. Applicable Law. This Agreement shall be construed,
administered and enforced according to the laws of the
Commonwealth of Massachusetts; provided, however, that it is
intended that this Agreement create a tax-qualified
custodial account under Section 403(b)(7) of the Code and
this Agreement shall be so construed and limited and the
powers here under exercised so as to accomplish the purpose.
2. Pronouns. Whenever used in this Agreement, the masculine
pronoun is to be deemed to include feminine. The singular
form, whenever used herein, shall mean or include the plural
form where applicable, and vice versa.
3. Notices. Any notices, accounting or other communication
which the Custodian may give the Employer or the Employee
shall be deemed given when mailed to the Employer or
Employee at the latest address which has been furnished to
the Custodian. Any notice or other communication which the
Employer or Employee may give to the Custodian shall not
become effective until actual receipt of said notice by the
Custodian.
4. Separability. If any provision of this Agreement shall be
for any reason invalid or unenforceable, the remaining
provisions shall, nevertheless, continue in effect and shall
not be invalidated thereby unless they are rendered
unconscionable, inadequate, or incapable of being
interpreted as a result of the deletion of the invalid or
unenforceable portions of the Agreement.
5. Successors. This Agreement shall be binding upon and
shall inure to the benefit of the successor in interest of
the parties hereto.
6. No Employment Contract. This Agreement shall not be
deemed to constitute a contract of employment between the
Employer and the Employee, nor shall any provision hereof
restrict the right of the Employer to discharge the Employee
or of the Employee to terminate his employment.
7. If the Custodial Account and this Agreement are
determined to constitute, or to be a part of, an "employee
pension benefit plan" subject to Title I of ERISA and, as a
result, the Employer adopts a written plan document which
has provisions which are inconsistent with the provisions of
this Agreement, then provided such plan document complies
with the requirements of the Code and ERISA, the provisions
of such plan document shall control, to the extent necessary
to comply with ERISA; provided, however, that nothing in
such plan document may be construed to increase the
responsibilities of the Custodian or the Sponsor, and,
consistent with Paragraph 2 of Article VIII, the Employer
shall ensure compliance with applicable ERISA requirements.
(BACK COVER)
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288-9856
10095-0995
Recycled Paper
(Registered Trademark)1995 USAA. All rights reserved.
EXHIBIT 16
TOTAL RETURN CALCULATION
Formula used for the calculation of average annual total return: P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeeming value of a hypothetical $1,000
initial investment. The ERV assumes reinvestment
of all dividends and distributions at the net
asset value on reinvestment date.
GROWTH FUND - For the Period Ended 9/30/88
1 Year Total Return: 1000(1+T)1 = $ 817.20
T = (18.28)%
5 Year Total Return: 1000(1+T)5 = $ 1,247.37
T = 4.52%
10 Year Total Return: 1000(1+T)10 = $ 2,791.52
T = 10.81%
AGGRESSIVE GROWTH FUND - For the Period Ended 9/30/88
1 Year Total Return: 1000(1+T)1 = $ 902.70
T = (9.73)%
5 Year Total Return: 1000(1+T)5 = $ 1,135.83
T = 2.58%
84 Months Total Return: 1000(1+T)7 = $ 2,000.30
T = 10.41%
INCOME STOCK FUND - For the Period Ended 9/30/88
1 Year Total Return: 1000(1+T)1 = $ 999.00
T = ( .10)%
17 Months Total Return: 1000(1+T)1.42 = $ 1,076.01
T = 5.27%
INCOME FUND - For the Period Ended 9/30/88
1 Year Total Return: 1000(1+T)1 = $ 1,158.70
T = 15.87%
5 Year Total Return: 1000(1+T)1 = $ 1,774.17
T = 12.15%
10 Year Total Return: 1000(1+T)10 = $ 2,809.88
T = 10.88%
YIELD CALCULATION
Formula used for the calculation of 30-day yield quotation:
YIELD = 2 [(((a-b)/(cd)) + 1)6 - 1 ]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day
of the period
30-Day Yield Calculation for Period Ended 9/30/88
INCOME FUND:
Yield = 2 [(((2,346,221 - 129,783)/(25,059,270 x 11.20)) + 1) 6 - 1]
Yield = 9.67%
EXHIBIT 19(a)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Antonio and State
of Texas on the 8th day of November, 1993.
USAA MUTUAL FUND, INC.
/s/Michael J.C. Roth
-----------------------
Michael J.C. Roth
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Know all men by these presents that each person whose signature appears
below constitutes and appoints Michael J.C. Roth, John W. Saunders, Jr. and
Michael D. Wagner, and each of them, as his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place
and stead, in any and all capacities to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute, may lawfully do
or cause to be done by virtue hereof.
(Signature) (Title) (Date)
/s/Hansford T. Johnson Chairman of the Board November 8, 1993
- -------------------------- of Directors
Hansford T. Johnson
/s/Michael J.C. Roth Vice Chairman of the November 8, 1993
- -------------------------- Board of Directors and
Michael J.C. Roth President (Principal
Executive Officer)
/s/Sherron A. Kirk Treasurer (Principal November 8, 1993
- -------------------------- Financial and
Sherron A. Kirk Accounting Officer)
/s/John W. Saunders, Jr. Director November 8, 1993
- --------------------------
John W. Saunders, Jr.
/s/C. Dale Briscoe Director November 8, 1993
- --------------------------
C. Dale Briscoe
/s/George E. Brown Director November 8, 1993
- --------------------------
George E. Brown
/s/Howard L. Freeman, Jr. Director November 8, 1993
- --------------------------
Howard L. Freeman, Jr.
/s/Richard A. Zucker Director November 8, 1993
- --------------------------
Richard A. Zucker
EXHIBIT 19(b)
POWER OF ATTORNEY
Know all men by these presents that the undersigned
Director of USAA MUTUAL FUND, INC., a Maryland Corporation (the
"Company"), constitutes and appoints Michael J.C. Roth, John W.
Saunders, Jr. and Michael D. Wagner, and each of them, as his
true and lawful attorney-in-fact and agent, with full power or
substitution, for him and in his name, place and stead, in any
and all capacities to sign registration statements on any form or
forms filed under the Securities Act of 1933 and the Investment
Company Act of 1940 and any and all amendments thereto, with all
exhibits, instruments, and other documents necessary or
appropriate in connection therewith and to file them with the
Securities and Exchange Commission or any other regulatory
authority as may be necessary or desirable, hereby ratifying and
confirming all that said attorney-in-fact and agent or his
substitute, may lawfully do or cause to be done by virtue hereof.
/s/ Hansford T. Johnson September 6, 1995
- --------------------------------- ---------------------
Hansford T. Johnson, Director Date
POWER OF ATTORNEY
Know all men by these presents that the undersigned
Director of USAA MUTUAL FUND, INC., a Maryland Corporation (the
"Company"), constitutes and appoints Michael J.C. Roth, John W.
Saunders, Jr. and Michael D. Wagner, and each of them, as her
true and lawful attorney-in-fact and agent, with full power or
substitution, for her and in her name, place and stead, in any
and all capacities to sign registration statements in her capacity
as an independent Director for the Fund on any form or
forms filed under the Securities Act of 1933 and the Investment
Company Act of 1940 and any and all amendments thereto, with all
exhibits, instruments, and other documents necessary or
appropriate in connection with such filing and to file them with
the Securities and Exchange Commission or any other regulatory
authority as may be necessary or desirable, hereby ratifying and
confirming all that said attorney-in-fact and agent or her
substitute, may lawfully do or cause to be done by virtue hereof.
/s/ Barbara B. Dreeben September 12, 1995
- --------------------------------- ---------------------
Barbara B. Dreeben, Director Date
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<GROSS-EXPENSE> 7,815
<AVERAGE-NET-ASSETS> 753,215
<PER-SHARE-NAV-BEGIN> 17.63
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 3.95
<PER-SHARE-DIVIDEND> (0.27)
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<INVESTMENTS-AT-VALUE> 369,855
<RECEIVABLES> 2,546
<ASSETS-OTHER> 467
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 372,868
<PAYABLE-FOR-SECURITIES> 7,139
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,339
<TOTAL-LIABILITIES> 9,478
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 241,709
<SHARES-COMMON-STOCK> 14,840
<SHARES-COMMON-PRIOR> 14,031
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<DIVIDEND-INCOME> 581
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<EXPENSES-NET> 2,456
<NET-INVESTMENT-INCOME> (800)
<REALIZED-GAINS-CURRENT> 22,333
<APPREC-INCREASE-CURRENT> 101,239
<NET-CHANGE-FROM-OPS> 122,772
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 22,048
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 85,382
<NUMBER-OF-SHARES-REDEEMED> 93,573
<SHARES-REINVESTED> 21,904
<NET-CHANGE-IN-ASSETS> 114,437
<ACCUMULATED-NII-PRIOR> (5)
<ACCUMULATED-GAINS-PRIOR> 13,166
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,344
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,456
<AVERAGE-NET-ASSETS> 289,233
<PER-SHARE-NAV-BEGIN> 17.74
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 8.35
<PER-SHARE-DIVIDEND> 0
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<INVESTMENTS-AT-COST> 1,745,901
<INVESTMENTS-AT-VALUE> 1,734,823
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<DIVIDEND-INCOME> 18,581
<INTEREST-INCOME> 110,422
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<EXPENSES-NET> 6,892
<NET-INVESTMENT-INCOME> 122,111
<REALIZED-GAINS-CURRENT> (204)
<APPREC-INCREASE-CURRENT> 62,076
<NET-CHANGE-FROM-OPS> 183,983
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<DISTRIBUTIONS-OF-INCOME> 122,518
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 200,959
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<ACCUMULATED-GAINS-PRIOR> 248
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<NAME> MONEY MARKET FUND
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<NAME> INCOME STOCK FUND
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<NAME> USAA MUTUAL FUND, INC.
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<NAME> GROWTH & INCOME FUND
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<NAME> SHORT-TERM BOND FUND
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