USAA MONEY MARKET FUND
SUPPLEMENT DATED MAY 8, 1995
TO THE PROSPECTUS DATED FEBRUARY 1, 1995
Effective May 3, 1995, the Manager has voluntarily agreed to limit the
Fund's annual expenses to .45% of its annual average net assets (ANA). The
Manager will waive fees or reimburse the Fund for all expenses in excess of
the limitation. This expense limitation will be effective until December 1,
1995.
26575-0595
USAA MONEY MARKET FUND
February 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 or in person. Page 13.
HOW DO YOU SELL?
You may redeem shares of the Fund 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
of the Company, dated February 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 Statement of
Additional Information 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)
- ------------------------------------------------------------------------------
Management Fee .24%
12b-1 Fee None
Other Expenses
Transfer Agent Fee*** .12%
Custodian Fee .03%
All Other Expenses .07%
---
Total Other Expenses .22%
---
Total Operating Expenses .46%
---
---
- -----------------------------------------------------------------------------
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares - Bank
Wire Redemption.
** Based upon the ten-month period ended July 31, 1994.
*** The Fund pays USAA Shareholder Account Services an annual fixed fee per
account for its services. See Transfer Agent in the Statement of
Additional Information, page 23.
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 - $ 15
5 years - $ 26
10 years - $ 58
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
the ten-month period ended July 31, 1994 and each period in the nine-year period
ended September 30, 1993, 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.
<TABLE>
<CAPTION>
TEN-MONTH
PERIOD ENDED
JULY 31, YEAR ENDED SEPTEMBER 30,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .03 .03 .04 .07 .08
Distributions from net
investment income (.03) (.03) (.04) (.07) (.08)
---------- ---------- ---------- ----------- ----------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
Total return (%)* 2.74 3.09 4.32 6.71 8.12
Net assets at end of
period ($000) $1,006,020 $ 813,784 $ 900,312 $ 984,404 $ 980,917
Ratio of expenses to
average net assets (%) .46(a) .48 .48 .54 .62
Ratio of net investment
income to average net
assets (%) 3.28(a) 3.05 4.25 6.52 7.86
- --------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1989 1988 1987 1986 1985
---- ---- ---- ---- ----
<C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
.09 .07 .06 .07 .08
(.09) (.07) (.06) (.07) (.08)
---------- ---------- ---------- ----------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
8.87 6.94 6.12 6.92 8.43
$ 882,694 $ 679,979 $ 507,195 $ 286,632 $ 263,166
.68 .72 .79 .88 .77
8.55 6.75 6.01 6.72 8.20
</TABLE>
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 in the Company's
Statement of Additional Information. 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
Company's Statement of Additional Information.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a variety of portfolios, each
with different objectives and policies. In combination, these portfolios are
designed to provide investors with the opportunity to formulate their own
investment program. An investor in any one portfolio may exchange into any
other portfolio. For more complete information about the portfolios 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
Balanced Portfolio Fund
Cornerstone 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 portfolio funds, the
Balanced Portfolio and Cornerstone Funds. Both of 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 a
portfolio 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 Company's Statement of Additional Information.
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) Mortgage-backed securities;
(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 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
Corporation, Fitch Investors Service, Inc., Duff & Phelps Inc., Thompson
BankWatch, Inc., and IBCA Inc. For a description of debt ratings, see Appendix
A in the Statement of Additional Information.
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.
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 7 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. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation 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 5% of the value of its assets in securities
which are illiquid or not readily marketable.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without shareholder approval:
a. The Fund may borrow only from banks, and then not to purchase portfolio
securities, but only for temporary or emergency purposes. Such borrowing
will be in amounts not more than 5% of the market value of the Fund's
assets or not more than 10% of the value of its total assets taken at cost,
whichever amount is less.
b. The Fund may not purchase securities (including commercial paper) of any
issuer if such purchase would at that time (i) cause more than 5% of the
value of the Fund's assets to be invested in securities of any one issuer
other than the U.S. Government or its corporate instrumentalities or
(ii) cause the Fund to own more than 10% of the outstanding voting
securities of any issuer.
c. 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 methods described
in the following table. A complete, signed application is required together
with a check (payable to USAA Mutual Fund, Inc., Money Market Fund) 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
The purchase of shares will be effective on the day on which a completed
application and check are received by the Manager at its principal office in
San Antonio, TX, if received before the time the net asset value (NAV) per
share is calculated. If an application, check, or funds are received in
San Antonio after the time at which the NAV 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
INITIAL PURCHASES:
Minimum $1,000 - (Except Spousal Individual Retirement Accounts at $250).
Mail
Send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
In Person
Bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway
San Antonio, TX
InveStart(registered trademark)
An investment plan with a $100 minimum initial investment and regular
subsequent monthly investments of at least $50 through automatic electronic
funds transfer. For more details and to request an application, call our
telephone assistance numbers.
Exchange
Call our telephone assistance numbers. The new account must have the same
registration as the account from which you are exchanging.
ADDITIONAL PURCHASES: Minimum $50
Mail
Send your check and the "Invest By Mail" stub, which accompanies your Fund's
transaction confirmation, to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Bank Wire
Purchase
Instruct your bank (which may charge a fee for the service) to wire the
specified amount to the Company 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 Account Number
Electronic
Funds
Transfer (EFT)
You can pay for purchases electronically via electronic funds transfer.
Systematic (regular) purchases can be deducted from your bank account, payroll,
income-producing investment, or from a USAA money market account. Intermittent
(as-needed) purchases can be deducted from your bank account through our
Buy/Sell Service.
Establish any of our electronic investing services when you apply for your
account, or later upon request.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the methods described in the
following table on any day the NAV 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 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 upon 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,
the Manager suggests you 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.
Redemption
of Shares
Any of the following methods may be used to authorize the Transfer Agent to
redeem shares from your account based on instructions received.
Written,
Fax, or
Telegraph
Send your written instructions to:
USAA Shareholder Account Services
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.
Telephone
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 to shares
represented by stock certificates.
(continued)
Methods of
Payment
Any of the following methods of payment may be used with your redemption
request.
Bank Wire
Redemption
The wire redemption privilege allows redemptions of $1,000 or more 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. USAA
Shareholder Account Services deducts a wire fee from the account for the
redemption by wire. The fee as of the date of this Prospectus is $10 and is
subject to change at any time. The fee is paid to State Street Bank and Trust
Company (SSB) 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.
Electronic
Funds
Transfer (EFT)
You can request electronic redemptions via electronic funds transfer.
Systematic (regular) or intermittent (as-needed) redemptions 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
Redemption
You may request a redemption to be paid by check to the registered
shareholder(s) and 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
You may request that checks 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 Company, 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 Statement of Additional
Information 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 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 Company's
Statement of Additional Information.
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 Company's
Statement of Additional Information contains information on acceptable
guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when you complete your
application. You may exchange shares among portfolios 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 portfolios 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 - Telephone.
EXCHANGE LIMITATIONS, EXCESSIVE TRADING
To minimize Fund costs and to protect the portfolios and their shareholders
from unfair expense burdens, the Funds restrict excessive exchanges. Exchanges
out of any portfolio 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
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 Company's Statement of Additional Information.
InveStart(registered trademark) - an optional purchase plan may be authorized
by signing an agreement to make the minimum initial investment of $100 with
regular subsequent monthly investments of at least $50 using automatic
electronic funds transfer. Participation may be discontinued by stopping your
electronic funds transfer. If this plan is discontinued prior to the account
reaching 500 shares, the account is subject to review and redemption at the
discretion of the Board of Directors. See Additional Information Regarding
Redemption of Shares in the Company's Statement of Additional Information.
InvesTronic(registered trademark) - the periodic purchase of shares through
electronic funds transfer from a checking or savings 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.
Federal taxes on current income may be deferred if an investor qualifies.
SHAREHOLDER STATEMENTS AND REPORTS
You will receive a confirmation after each account transaction except
reinvested dividends, redemption exchanges, or CWP transactions. If you had
activity other than reinvested dividends, 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 reflecting all of your mutual fund
accounts, regardless of account activity. The fourth quarter consolidated
statement mailed to each shareholder will reflect annual account history 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.
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.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms, a copy of the
Company's Statement of Additional Information, 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 buy and sell Fund shares at NAV without a sales charge.
HOW
The NAV 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 Company's
Statement of Additional Information.
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.
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 to the Fund 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, 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 in excess of $24.5 billion in total assets under management.
The Manager has offices at 9800 Fredericksburg Rd., San Antonio, TX 78288,
which is also home office of USAA and other affiliates.
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 portfolios, 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 management fee for the
Fund was computed and paid at twenty-four one hundredths of one percent (.24%)
of ANA (annualized) for the fiscal period ended July 31, 1994.
OPERATING EXPENSES
For the fiscal period ended July 31, 1994, the total annualized operating
expenses for the Fund as a percentage of the Fund's ANA equaled .46%.
PORTFOLIO MANAGER since 03/94
NAME J. Eric Thorderson
EDUCATION BA, Wayne State
University, Michigan
MBA, University of Illinois
EXPERIENCE (1) 7 years, investment
management
3 1/2 years, IMCO
BUSINESS 03/94-present, Executive
HISTORY Director, Fixed
PAST FIVE Income Investments
YEARS 02/93-03/94, Senior
Securities Analyst,
Fixed Income Research
05/91-02/93, Securities
Analyst, Fixed Income
Research
05/86-09/89, Investment
Analyst, Alexander
Hamilton Life Insurance,
Michigan
PROFESSIONAL CFA, 1989
DESIGNATIONS (1)
PROFESSIONAL AIMR
MEMBERSHIPS (1) SAFAS
- -----------
(1) Abbreviations of designations and organizations used in the above table:
IMCO - USAA Investment Management Company (the Manager)
CFA - Chartered Financial Analyst
AIMR - Association for Investment Management and Research
SAFAS - San Antonio Financial Analysts Society, Inc.
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 portfolios. The portfolio
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 portfolios 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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