USAA GROWTH FUND
SUPPLEMENT dated SEPTEMBER 20, 1995
to the PROSPECTUS
dated FEBRUARY 1, 1995
On July 12, 1995, the Board of Directors approved a change in the
Growth Fund's investment policy increasing its limitation of
investments 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 from 10% to 30%.
The first sentence of the fourth paragraph under the section
"Investment Policies and Techniques" on page 8 of the Fund's Prospectus
is updated as follows:
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.
27027-0995
USAA GROWTH FUND
February 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 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
or in person. Page 9.
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 11.
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 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.
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 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 9
Redemption of Shares 11
Conditions of Purchase and Redemption 12
Exchanges 13
Other Services 14
Share Price Calculation 15
Dividends, Distributions and Taxes 16
Management of the Company 17
Service Providers 18
Description of Shares 18
Telephone Assistance Numbers 18
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 .75%
12b-1 Fee None
Other Expenses
Transfer Agent Fee*** .22%
Custodian Fee .02%
All Other Expenses .05%
----
Total Other Expenses .29%
----
Total 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 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 - $ 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 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.
TEN-MONTH
PERIOD ENDED
JULY 31, YEAR ENDED SEPTEMBER 30,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 19.76 $ 17.49 $ 16.28 $ 13.25 $ 14.68
Net investment income .19 .19 .36 .46 .41
Net realized and
unrealized gain (loss) (.17) 2.67 1.26 3.03 (1.38)
Distributions from net
investment income (.16) (.32) (.41) (.46) (.46)
Distributions of realized
capital gains (1.99) (.27) - - -
------ ------ ------ ------ ------
Net asset value at
end of period $ 17.63 $ 19.76 $ 17.49 $ 16.28 $ 13.25
====== ====== ====== ====== ======
Total return (%)* .31 16.77 10.17 27.12 (6.78)
Net assets at end of
period ($000) $618,685 $605,457 $432,125 $318,846 $223,051
Ratio of expenses to
average net assets (%) 1.04(a) 1.07 1.07 1.11 1.18
Ratio of net investment
income to average net
assets (%) 1.33(a) 1.07 2.27 3.18 2.95
Portfolio turnover (%) 117.80 96.19 39.39 36.99 55.77
YEAR ENDED SEPTEMBER 30,
1989 1988 1987 1986 1985
---- ---- ---- ---- ----
Net asset value at
beginning of period $ 11.68 $ 19.63 $ 15.94 $ 13.76 $ 13.07
Net investment income .41 .29 .38 .22 .26
Net realized and
unrealized gain (loss) 2.93 (3.99) 5.09 2.54 .65
Distributions from net
investment income (.34) (.37) (.19) (.28) (.22)
Distributions of realized
capital gains - (3.88) (1.59) (.30) -
------ ------ ------ ------ ------
Net asset value at
end of period $ 14.68 $ 11.68 $ 19.63 $ 15.94 $ 13.76
====== ====== ====== ====== ======
Total return (%)* 29.37 (18.28) 37.93 20.66 7.11
Net assets at end of
period ($000) $229,547 $208,129 $272,257 $173,775 $145,191
Ratio of expenses to
average net assets (%) 1.19 1.22 1.09 1.09 1.06
Ratio of net investment
income to average net
assets (%) 3.02 2.40 2.14 1.37 1.86
Portfolio turnover (%) 95.28 109.22 124.26 109.65 128.20
--------------
* 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 in the Company's Statement of
Additional Information. 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 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 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 Company's Statement of
Additional Information.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing the
Fund's assets primarily in 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
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 10% 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.
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. 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 methods described in the following table. A
complete, signed application is required together with a
check (payable to USAA Mutual Fund, Inc., Growth 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
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 Growth 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 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.
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 10 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.
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. 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. 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 may be 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 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 Company's Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed after the end of the fiscal year. 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 theamount 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.
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 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 three-fourths of one
percent (.75%) of ANA (annualized) for the fiscal period
ended July 31, 1994. 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 period ended July 31, 1994, the total
annualized 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 since 01/94
NAME David G. Parsons
EDUCATION BA, Austin College, Texas
MA, Southern Illinois
University
MBA, University of Texas
EXPERIENCE (1) 11 years, investment
management
11 years, IMCO
BUSINESS 11/92-present, Executive
HISTORY Director, Equity
PAST FIVE Investments
YEARS 07/92-11/92, Associate
Portfolio Manager,
Equity Investments
04/88-06/92, Senior
Securities Analyst,
Equity Investments
PROFESSIONAL CFA, 1986
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
[THIS PAGE LEFT BLANK INTENTIONALLY]
[THIS PAGE LEFT BLANK INTENTIONALLY]
