As filed with the Securities and Exchange Commission on February 15, 1996.
1933 Act File No. 2-49560
1940 Act File No. 811-2429
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 40
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 28
USAA MUTUAL FUND, INC.
-------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
9800 Fredericksburg Rd., San Antonio, TX 78288
------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (210) 498-0600
Michael D. Wagner, Secretary
USAA MUTUAL FUND, INC.
9800 Fredericksburg Rd.
San Antonio, TX 78288-0227
---------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of this Registration Statement.
It is proposed that this filing will become effective under Rule 485
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
X on May 1, 1996 pursuant to paragraph (a)(2)
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has heretofore registered an indefinite number of
shares of the Aggressive Growth Fund, Growth Fund, Growth &
Income Fund, Income Stock Fund, Income Fund, Short-Term Bond
Fund, and Money Market Fund pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The Registrant filed its Rule
24f-2 notice for the fiscal year ended July 31, 1995 on September
21, 1995. The Registrant now declares its intention to register
an indefinite number of shares of the S&P 500 Index Fund pursuant
to Rule 24f-2(a)(1) under the Act. The S&P 500 Index Fund is a
"master-feeder fund." This Post-Effective Amendment No. 40 includes
a manually executed signature page for the master fund, Equity
500 Index Portfolio.
Exhibit Index on Page 62-63
Page 1 of 102
USAA MUTUAL FUND, INC.
CROSS REFERENCE SHEET
Part A
FORM N-1A ITEM NO. SECTION IN PROSPECTUS
1. Cover Page Same
2. Synopsis. Fees and Expenses
3. Condensed Financial
Information Performance Information
4. General Description
of Registrant Investment Objective and Policies
Description of Shares
Additional Information
5. Management of the Fund Management of the Company and Portfolio
Service Providers
6. Capital Stock and Other
Securities Dividends, Distributions and Taxes
Description of Shares
7. Purchase of Securities
Being Offered Purchase of Shares
Conditions of Purchase and Redemption
Exchanges
Other Services
Share Price Calculation
8. Redemption or Repurchase Redemption of Shares
Conditions of Purchase and Redemption
Exchanges
Other Services
9. Legal Proceedings Not Applicable
USAA MUTUAL FUND, INC.
CROSS REFERENCE SHEET
Part B
FORM N-1A ITEM NO. SECTION IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Same
11. Table of Contents Same
12. General Information and
History Not Applicable
13. Investment Objectives
and Policies Investment Policies
Investment Restrictions
Portfolio Transactions and
Brokerage Commissions
14. Management of the
Registrant Directors and Officers of the Company
Trustees and Officers of the Portfolio
15. Control Persons and
Principal Holders
of Securities Directors and Officers of the Company
Trustees and Officers of the Portfolio
16. Investment Advisory and
Other Services Directors and Officers of the Company
Investment Adviser
Administrator
General Information
17. Brokerage Allocation and
Other Practices Portfolio Transactions and
Brokerage Commissions
18. Capital Stock and Other
Securities Further Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered Valuation of Securities
Additional Information Regarding
Redemption of Shares
Investment Plans
20. Tax Status Tax Considerations
21. Underwriters General Information
22. Calculation of Performance
Data Calculation of Performance Data
23. Financial Statements Not Applicable
Part A
Prospectus for the
S&P 500 Index Fund
is included herein
USAA S&P 500 INDEX FUND
May 1, 1996 PROSPECTUS
USAA S&P 500 Index Fund (the Fund) is one of eight no-
load mutual funds offered by USAA Mutual Fund, Inc. (the
Company). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is to seek to provide investment
results that, before expenses, correspond to the total return
of common stocks publicly traded in the United States, as
represented by the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 or Index). Page 7.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the
net asset value per share without a sales charge. Make
your initial investment directly with the Manager by
mail, in person, or in certain instances, by telephone.
Page 12.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax,
or telegraph on any day that the net asset value is
calculated. Page 14.
This Prospectus, which should be read and retained
for future reference, provides information regarding the
Company and the Fund that you should know before
investing.
SHARES OF THE USAA S&P 500 INDEX 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
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
THE USAA S&P 500 INDEX FUND SEEKS TO ACHIEVE ITS
INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS IN THE EQUITY 500 INDEX PORTFOLIO, WHICH IS A
SEPARATE MUTUAL FUND ADVISED BY BANKERS TRUST COMPANY
WITH AN IDENTICAL INVESTMENT OBJECTIVE. PAGE 10.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Fund, dated May 1,
1996, is available upon request and without charge by
writing to USAA MUTUAL FUND, INC., 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Performance Information 4
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 5
Using Mutual Funds in an Investment Program 6
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 7
Additional Information 22
SHAREHOLDER INFORMATION
Purchase of Shares 12
Redemption of Shares 14
Conditions of Purchase and Redemption 15
Exchanges 16
Other Services 17
Share Price Calculation 18
Dividends, Distributions and Taxes 18
Management of the Company and Portfolio 19
Service Providers 21
Description of Shares 22
Telephone Assistance Numbers 25
FEES AND EXPENSES
The following table provides a summary of expenses
relating to purchases and sales of the shares of the
Fund, and the aggregate annual operating expenses of the
Fund and the Equity 500 Index Portfolio (the Portfolio),
as a percentage of average net assets of the Fund. These expenses
are estimated for the Fund's first year of operations. THE
COMPANY'S DIRECTORS BELIEVE THAT THE AGGREGATE PER SHARE
EXPENSES OF THE FUND AND THE PORTFOLIO WILL BE LESS THAN
OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND
WOULD INCUR IF THE INVESTABLE ASSETS (ASSETS) OF THE FUND
WERE INVESTED DIRECTLY IN THE TYPES OF SECURITIES BEING
HELD BY THE PORTFOLIO.
Shareholder Transaction Expenses
- ----------------------------------------------------------------------------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (AS A PERCENTAGE OF AVERAGE NET ASSETS (ANA))
- ----------------------------------------------------------------------------
Investment Advisory Fees, net of reimbursements .07%
12b-1 Fees None
Other Expenses, net of reimbursements (estimated) .11%
----
Total Operating Expenses, net of reimbursements .18%
====
- ----------------------------------------------------------------------------
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See REDEMPTION OF SHARES
- BANK WIRE.
The Manager has voluntarily agreed to limit the
Fund's annual expenses to .18% of its ANA and will
reimburse the Fund for all expenses in excess of the
limitation. In addition, the investment adviser and the
administrator and servicing agent to the Portfolio,
Bankers Trust Company, has voluntarily agreed to limit
its fees under its agreements with the Portfolio to .10%
of the Portfolio's ANA. The Investment Advisory Fees,
Other Expenses, and Total Operating Expenses reflect all
such expense reimbursements by the Manager and Bankers
Trust. Absent such reimbursements, the amount of
Investment Advisory Fees, Other Expenses and Total
Operating Expenses as a percentage of the Fund's ANA
would be .10%, .33% and .43%, respectively.
In addition to the expenses set forth in the table
above, USAA Shareholder Account Services assesses an
annual account maintenance fee of $10 to allocate part of
the fixed costs of maintaining shareholder accounts
equally to all accounts. This fee is deducted from the
dividends paid to each shareholder at a rate of $2.50 per
quarter. See DIVIDENDS, DISTRIBUTIONS AND TAXES for further
information on this fee.
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. The example
includes the $10 account maintenance fee. For
investments larger than $1,000 an investor's total
expenses will be substantially lower in percentage terms
than this illustration implies.
1 year 3 years
$12 $36
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.
The expense table and the example above are provided to
assist you in understanding the expenses you will bear
directly or indirectly as a shareholder in the Fund. For
more information with respect to the expenses of the Fund
and the Portfolio see Management of the Company and
Portfolio on page 19.
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, such as the
S&P 500, that are referenced in Appendix A to the SAI.
Standard total return results reported by the Fund do not
take into account recurring and nonrecurring charges for
optional services which only certain shareholders elect
and which involve nominal fees, such as the $10 fee for a
delivery of redemption proceeds by wire transfer.
The Fund's average annual total return is computed
by determining the average annual compounded rate of
return for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
Further information concerning the Fund's total
return is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
S&P 500 Index Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA INVESTMENT TRUST
Income Strategy Fund
Growth and Tax Strategy Fund
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth Strategy Fund
Emerging Markets Fund
Gold Fund
International Fund
World Growth Fund
GNMA Trust
Treasury Money Market Trust
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. An
investment adviser 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, S&P 500 Index Fund, Growth & Income Fund,
and Income Stock Fund in such a portfolio. This
portfolio would include stocks of large and small
companies, high-dividend stocks and growth stocks. This
is just one example of how an individual could combine
funds to create a portfolio tailored to his or her own
risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund seeks to provide investment results that, before
expenses, correspond to the total return (i.e., the
combination of capital changes and income) of common
stocks publicly traded in the United States, as
represented by the S&P 5001. The Fund offers investors a
convenient means of diversifying their holdings of common
stocks while relieving those investors of the
administrative burdens typically associated with
purchasing and holding these instruments.
The Company seeks to achieve the investment
objective of the Fund by investing all the Assets of the
Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that
the investment objective of either the Fund or the
Portfolio will be achieved. The investment objective of
each of the Fund and the Portfolio is not a fundamental
policy and may be changed upon notice to but without the
approval of the Fund's shareholders or the Portfolio's
investors, respectively. See SPECIAL INFORMATION
CONCERNING MASTER-FEEDER FUND STRUCTURE on page 10 herein.
EQUITY 500 INDEX PORTFOLIO
The Portfolio is not managed according to traditional
methods of "active" investment management, which involve
the buying and selling of securities based upon economic,
financial, and market analyses and investment judgment.
Instead, the Portfolio, utilizing a "passive" or
"indexing" investment approach, attempts to duplicate,
before expenses, the performance of the S&P 500.
- --------------
1"Standard & Poor's(registered trademark),"
S&P(registered trademark)," "Standard & Poor's 500," S&P
500(registered trademark)," and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed
for use by Bankers Trust Company.
Under normal conditions when the Portfolio's assets
are above $10 million, the Portfolio will invest at least
80% of its assets in equity securities of companies which
compose the S&P 500. In seeking to duplicate the
performance of the S&P 500, Bankers Trust, the
Portfolio's investment adviser, will attempt over time to
allocate the Portfolio's portfolio of investments among
common stocks in approximately the same weightings as the
S&P 500, beginning with the heaviest-weighted stocks that
make up a larger portion of the Index's value. Over the
long term, Bankers Trust seeks a correlation between the
performance of the Portfolio, before expenses, and that
of the S&P 500 of 0.98 or better (0.95 or better if
Portfolio asset levels are below $10 million). A figure
of 1.00 would indicate perfect correlation. In the
unlikely event that the correlation is not achieved, the
Portfolio's Board of Trustees will consider alternative
structures.
Bankers Trust generally will seek to match the
composition of the S&P 500 but usually will not invest
the Portfolio's stock portfolio to mirror the Index
exactly. Because of the difficulty and expense of
executing relatively small stock transactions, the
Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its
portfolio weighted differently from the S&P 500,
particularly if the Portfolio has a low level of assets.
When the Portfolio's size is greater, Bankers Trust
expects to purchase more of the stocks in the S&P 500 and
to match the relative weighting of the S&P 500 more
closely, and anticipates that the Portfolio will be able
to mirror, before expenses, the performance of the S&P
500 with little variance at asset levels of $10 million
or more. In addition, the Portfolio may omit or remove
any S&P 500 stock from the Portfolio if, following
objective criteria, Bankers Trust judges the stock to be
insufficiently liquid or believes the merit of the
investment has been substantially impaired by
extraordinary events or financial conditions. Bankers
Trust will not purchase the stock of Bankers Trust New
York Corporation, which is included in the Index, and
instead will overweight its holdings of companies engaged
in similar businesses.
Under normal conditions, Bankers Trust will attempt
to invest as much of the Portfolio's assets as is
practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 25% of its
assets in short-term debt securities and money market
instruments hedged with stock index futures and options
to meet redemption requests or to facilitate the
investment in common stocks. See ADDITIONAL INFORMATION
for further information.
When the Portfolio has cash from new investments in
the Portfolio or holds a portion of its assets in money
market instruments, it may enter into stock index futures
or options to attempt to increase its exposure to the
stock market. Strategies the Portfolio could use to
accomplish this include purchasing futures contracts,
writing put options, and purchasing call options. When
the Portfolio wishes to sell securities, because of
shareholder redemptions or otherwise, it may use stock
index futures or options to hedge against market risk
until the sale can be completed. These strategies could
include selling and buying futures contracts, writing
call options, and purchasing put options.
Bankers Trust will choose among futures and options
strategies based on its judgment of how best to meet the
Portfolio's goals. In selecting futures and options,
Bankers Trust will assess such factors as current and
anticipated stock prices, relative liquidity and price
levels in the options and futures markets compared to the
securities markets, and the Portfolio's cash flow and cash
management needs. If Bankers Trust judges these factors
incorrectly, or if price changes in the Portfolio's
futures and options positions are not well correlated
with those of its other investments, the Portfolio could
be hindered in the pursuit of its objective and could
suffer losses. The Portfolio could also be exposed to
risk if it could not close out its futures or options
positions because of an illiquid secondary market. A
description of the futures and options that the Portfolio
may use and some of their associated risks is found under
ADDITIONAL INFORMATION.
SHORT-TERM INSTRUMENTS - The Portfolio intends to stay
invested in the securities described above to the extent
practical in light of its objective and long-term
investment perspective. However, the Portfolio's assets
may be invested in short-term instruments with remaining
maturities of 397 days or less to meet anticipated
redemptions and expenses or for day-to-day operating
purposes and when, in Bankers Trust's opinion, it is
advisable to adopt a temporary defensive position because
of unusual and adverse conditions affecting the equity
markets. Short-term instruments consist of: (i) short-
term obligations of the U.S. Government, its agencies,
instrumentalities, authorities or political subdivisions;
(ii) other short-term debt securities rated Aa or higher
by Moody's Investors Service, Inc. (Moody's) or AA or
higher by Standard & Poor's Corporation (S&P) or, if
unrated, of comparable quality in the opinion of Bankers
Trust; (iii) commercial paper; (iv) bank obligations,
including negotiable certificates of deposit, time
deposits and bankers' acceptances; and (v) repurchase
agreements. At the time the Portfolio invests in
commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have
outstanding debt rated Aa or higher by Moody's or AA or
higher by S&P or outstanding commercial paper or bank
obligations rated Prime-1 by Moody's or A-1 by S&P; or,
if no such ratings are available, the instrument must be
of comparable quality in the opinion of Bankers Trust.
ADDITIONAL INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of
the Portfolio may be invested in the securities of one
issuer (other than U.S. Government securities), except
that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will
not invest more than 25% of its assets in the securities
of issuers in any one industry. These are fundamental
investment policies of the Portfolio which may not be
changed without shareholder approval. No more than 15%
of the Portfolio's net assets may be invested in illiquid
or not readily marketable securities (including
repurchase agreements and time deposits maturing in more
than seven days.) Additional investment policies of the
Portfolio are contained in the SAI.
ABOUT THE S&P 500 INDEX
The S&P 500 is a well-known stock market index that
includes common stocks of 500 companies from several
industrial sectors representing a significant portion of
the market value of all common stocks publicly traded in
the United States, most of which are listed on the New
York Stock Exchange Inc. (the NYSE). Stocks in the S&P
500 are weighted according to their market capitalization
(i.e., the number of shares outstanding multiplied by the
stock's current price). Bankers Trust believes that the
performance of the S&P 500 is representative of the
performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by S&P and
is based on such factors as the market capitalization and
trading activity of each stock and its adequacy as a
representation of stocks in a particular industry group,
and may be changed from time to time.
The Fund and the Portfolio are not sponsored,
endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to the
owners of the Fund or the Portfolio or any member of the
public regarding the advisability of investing in
securities generally or in the Fund and the Portfolio
particularly or the ability of the S&P 500 to track
general stock market performance. S&P's only
relationship to the Fund or the Portfolio is the
licensing of certain trademarks and trade names of S&P
and the S&P 500, which is determined, composed and
calculated by S&P without regard to the Fund or the
Portfolio. S&P does not guarantee the accuracy and/or
the completeness of the S&P 500 or any data included therein.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE
RESULTS TO BE OBTAINED BY THE FUND OR THE PORTFOLIO,
OWNERS OF THE FUND OR THE PORTFOLIO, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P 500 OR ANY DATA
INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES AND HEREBY EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500 OR ANY DATA
INCLUDED THEREIN.
The following table shows the performance of the S&P
500 for the ten years from 1986 through 1995. Stock
prices fluctuated widely during the period but were
higher at the end than at the beginning. The results
shown should not be considered as a representation of the
income or capital gain or loss which may be generated by
the S&P 500 in the future. Nor should this be considered
as a representation of the past or future performance of
the Fund.
- ----------------------------------------------------------------
Standard & Poor's 500 Composite Stock Price Index*
- ----------------------------------------------------------------
Year End Price Changes Dividend Total
Year Index Value in Index for Year Reinvestment Return
- ----------------------------------------------------------------
1995
1994 459.27 -1.54% 2.86% 1.32%
1993 466.45 7.06% 3.02% 10.08%
1992 435.69 4.46% 3.16% 7.62%
1991 417.09 26.31% 4.16% 30.47%
1990 330.22 -6.56% 3.46% -3.10%
1989 353.40 27.25% 4.44% 31.69%
1988 277.72 12.40% 4.21% 16.61%
1987 247.08 2.03% 3.07% 5.10%
1986 242.17 14.62% 3.94% 18.56%
- ----------------------------------------------------------------
*Source: Standard & Poor's Corporation. Total returns
for the S&P 500 include the change in price of S&P 500
stocks and assume reinvestment of all dividends paid by
S&P 500 stocks.
RISK FACTORS
By itself, the Fund does not constitute a balanced
investment plan. The Fund is designed as a relatively
low-cost means for investors to diversify their
investment portfolios. As described above, the Portfolio
invests in a portfolio of securities that is
representative of the stock market as a whole. While the
performance of the S&P 500 has fluctuated considerably,
the long-term performance of the S&P 500 has been greater
than inflation. Thus, the Fund may make sense for you if
you can afford to ride out changes in the stock market.
The Fund's share price, yield and total return will
fluctuate and your investment may be worth more or less
than your original cost when you redeem your shares.
The ability of the Fund and the Portfolio to meet
their investment objective depends to some extent on the
cash flow experienced by the Fund and by the other
investors in the Portfolio, since investments and
redemptions by shareholders of the Fund will generally
require the Portfolio to purchase or sell securities.
Bankers Trust will make investment changes to accommodate
cash flow in an attempt to maintain the similarity of the
Portfolio to the S&P 500. You should also be aware that
the performance of the S&P 500 is a hypothetical number which
does not take into account brokerage commissions and other
costs of investing, unlike the Portfolio which must bear these
costs. Finally, since the Portfolio seeks to track the
S&P 500, Bankers Trust generally will not attempt to
judge the merits of any particular stock as an investment.
PORTFOLIO TURNOVER
The frequency of portfolio transactions -- the Portfolio's
portfolio turnover rate -- will vary from year to year
depending on market conditions and the Portfolio's cash
flows. The Portfolio's annual portfolio turnover rate is
not expected to exceed 100%. The Portfolio's portfolio
turnover rate for the years ended December 31, 1995 and
1994 was ____% and 21%, respectively.
SPECIAL INFORMATION
CONCERNING MASTER-FEEDER
FUND STRUCTURE
Unlike other mutual funds which directly acquire and
manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its
Assets in the Portfolio, a separate registered investment
company with the same investment objective as the Fund.
Therefore, an investor's interest in the Portfolio's
securities is indirect, like investments in other
investment companies and pooled investment vehicles. In
addition to selling a beneficial interest to the Fund,
the Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors
will invest in the Portfolio in the same terms and
conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell
their shares at the same public offering price as the
Fund due to variations in sales commissions and other
operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in
differences in returns experienced by investors in the
different funds that invest in the Portfolio. Such
differences in returns are also present in other mutual
fund structures. Information concerning other holders of
interests in the Portfolio is available from Bankers
Trust at (800) 422-6577.
Smaller funds investing in the Portfolio may be
materially affected by the actions of larger funds
investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may
experience higher pro rata operating expenses, thereby
producing lower returns (however, this possibility exists
as well for traditionally structured funds which have
large institutional investors). Additionally, the
Portfolio may become less diverse, resulting in increased
portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting
control of the operations of the Portfolio.
Whenever the Fund is requested to vote on matters
pertaining to the Portfolio, the Fund will hold a meeting
of its shareholders and will cast all of its votes
in the same proportion as the votes of its
shareholders. The percentage of the Fund's votes
representing the Fund's shareholders not voting will be
voted by the Directors or officers of the Company in the
same proportion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment
objective, policies or restrictions may require the Fund
to withdraw its interest in the Portfolio. Any such
withdrawal could result in a distribution "in kind" of
portfolio securities (as opposed to a cash distribution
from the Portfolio). If securities are distributed, the
Fund could incur brokerage, tax or other charges in
converting the securities to cash. In addition, the
distribution in kind may result in a less diversified
portfolio of investments or adversely affect the
liquidity of the Fund.
The Fund may withdraw its investment from the
Portfolio at any time, if the Board of Directors of the
Company determines that it is in the best interest of the
shareholders of the Fund to do so. Upon any such
withdrawal, the Board of Directors of the Company would
consider what action might be taken, including the
investment of all the Assets of the Fund in another
pooled investment entity having the same investment
objective as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with
the investment policies described below with respect to
the Portfolio.
The Fund's investment objective is not a fundamental
policy and may be changed upon notice to but without the
approval of the Fund's shareholders. If there is a
change in the Fund's investment objective, the Fund's
shareholders should consider whether the Fund remains an
appropriate investment in light of their then-current
needs. The investment objective of the Portfolio is also
not a fundamental policy. Shareholders of the Fund will
receive 30 days prior written notice with respect to any
change in the investment objective of the Fund or the Portfolio.
See INVESTMENT OBJECTIVE AND POLICIES - ADDITIONAL INVESTMENT
LIMITATIONS for a description of the fundamental policies of the
Portfolio that cannot be changed without approval by the holders
of "a majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio.
For descriptions of the management of the Portfolio, see
MANAGEMENT OF THE COMPANY AND PORTFOLIO herein and INVESTMENT
ADVISER and ADMINISTRATOR in the SAI. For
descriptions of the expenses of the Portfolio, see
MANANGEMENT OF THE COMPANY AND PORTFOLIO herein.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Company with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
When you make a purchase, your purchase price will be the
net asset value (NAV) per share next determined after the
Fund receives your request in proper form. If the Fund
receives your request prior to the close of the New York
Stock Exchange on a day on which the Exchange is open,
your purchase price will be the NAV per share determined for
that day. If the Fund receives your request after the
time at which the NAV per share is calculated, the
purchase will be effective on the next business day.
Because of the more lengthy clearing process and the need
to convert foreign currency, a check drawn on a foreign
bank will not be deemed received for the purchase of
shares until such time as the check has cleared and the
Manager has received good funds, which may take up to 4
to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
- -------------------
Initial Purchase (non-IRA): $3,000
Additional Purchases: $50
Initial Purchase - IRA: $2,000
Additional Purchases: $50
How to Purchase:
- ----------------
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted from
via a bank account, paycheck, income-producing investment or from
Electronic a USAA money market account. Sign up for these services when
Funds opening an account or call 1-800-531-8448 to add these
Transfer services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge a
fee for the service) to wire the specified amount to the Fund
as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA S&P 500 Index Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open a
1-800-531-8448 new account or if you would like to exchange to another USAA
fund, call for instructions. The new account must have the
same registration as your existing account.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call for instructions.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until
the purchase check or electronic funds transfer has
cleared, which could take up to 15 days from the purchase
date. If you are considering redeeming shares soon after
purchase, you should purchase by bank wire or certified
check to avoid delay.
In addition, the Company may elect to suspend the
redemption of shares or postpone the date of payment
during any period that the New York Stock Exchange is
closed, or trading in the markets the Company normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
- --------------
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio,
TX 78288 * Send a signed fax to 800-292-8177, or send
a telegram to USAA Shareholder Account Services.
Written redemption requests must include the
following: (1) a letter of instruction or stock
assignment, and stock certificate (if issued), specifying
the Fund and the number of shares or dollar amount to be
redeemed; (2) signatures of all owners of the shares
exactly as their names appear on the account; (3) other
supporting legal documents, if required, as in the case
of estates, trusts, guardianships, custodianships,
partnerships, corporations, and pension and profit-
sharing plans; and (4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are
genuine, and if it does not, it may be liable for any
losses due to unauthorized or fraudulent instructions.
Information is obtained prior to any discussion regarding
an account including: (1) USAA number or account number,
(2) the name(s) on the account registration, and (3)
social security number or tax identification number for
the account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
USAA AMA for more information.
Methods of Payment:
- -------------------
Bank Wire * Allows redemptions to be sent directly to your bank account.
Establish this service when you apply for your
account, or later upon request. If your account is at a
savings bank, savings and loan association, or credit
union, please obtain precise wiring instructions from
your institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. The Transfer Agent deducts a wire fee from
the account for the redemption by wire. The fee as of
the date of this Prospectus is $10 ($25 for wires to a
foreign bank) and is subject to change at any time. The
fee is paid to State Street Bank and Trust Company and
the Transfer Agent for their services in connection with
the wire redemption. Your bank may also charge a fee for
receiving funds by wire.
Automatically * Systematic (regular) or intermittent (as-needed)
via EFT 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 * A check payable to the registered shareholder(s) will
Redemption be 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. Should you wish to redeem shares within
the 15 days following a telephone address change, you may
do so by providing written instructions by mail or facsimile.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Company does not receive good funds
either by check or electronic funds transfer, the
cancellation will be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions signed by all
registered owners and supporting documents to change an
account registration due to events such as divorce,
marriage, or death. If a new account needs to be
established, an application must be completed and
returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the
Fund, subject to certain limitations described in
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES in
the SAI.
COMPANY RIGHTS
The Company reserves the right to:
(1) reject purchase or exchange orders when in the best
interest of the Company;
(2) limit or discontinue the offering of shares of any
portfolio of the Company without notice to the
shareholders;
(3) impose a redemption charge of up to 1% of the net
asset value of shares redeemed if circumstances indicate
a charge is necessary for the protection of remaining
investors (for example, if excessive market-timing
share activity unfairly burdens long-term
investors); provided, however, this 1% charge will
not be imposed upon shareholders unless authorized
by the Board of Directors and adequate notice has
been given to shareholders;
(4) require a signature guarantee for purchases,
redemptions, or changes in account information in
those instances where the appropriateness of a
signature authorization is in question. The section
ADDITIONAL INFORMATION REGARDING REDEMPTION OF
SHARES in the SAI contains information on acceptable
guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See REDEMPTION OF SHARES - PHONE.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Short-Term Bond Fund,
Tax Exempt Short-Term Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from an
employer, an income-producing investment, or an account
with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make under the InvesTronic(registered
trademark), Direct Purchase Service, Automatic
Purchase Plan, or Directed Dividends investment
plans, or
iii) a redemption you make under the Systematic
Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Company
intends to consolidate mailings of Annual and Semiannual
Reports to households having multiple accounts with the
same address of record. One copy of each report will be
furnished to that address. You may request additional
reports by notifying the Company.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the NAV per share
determined on the effective date of the purchase or
redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
the Fund's assets (i.e., the value of its investment in
the Portfolio and other assets), deducting liabilities,
and dividing by the number of shares outstanding. The
Portfolio's securities and other assets are valued
primarily on the basis of market quotations or, if
quotations are not readily available, by a method which
the Portfolio's Board of Trustees believes accurately
reflects fair value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
quarterly. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions
are automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-
dividend date. Any income dividend or capital gain
distributions paid by the Fund will reduce the NAV per
share by the amount of the dividend or distribution. An
investor should consider carefully the effects of
purchasing shares of the Fund shortly before any dividend
or distribution. Although in effect a return of
capital, these distributions are subject to taxes.
USAA Shareholder Account Services (SAS)
automatically deducts a $10 annual account maintenance
fee from the dividend income paid to each shareholder account.
The $10 account maintenance fee is deducted at a rate of
$2.50 per quarter from the dividend. If the dividend to
be paid to an account is less than the fee to be
deducted, sufficient shares may be redeemed from an
account to make up the difference. The annual account
maintenance fee may be changed upon not less than 30 days
notice to account holders.
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 NAV per
share. 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 NAV per share.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
In order to qualify as a regulated investment
company under the Code, the Fund must satisfy certain
requirements relating to the sources of its income, the
distribution of its income, and the diversification of
its assets. In satisfying these requirements, the Fund
will treat itself as owning its proportionate share of
the Portfolio's assets and is entitled to the income of
the Portfolio properly attributable to such share. As a
partnership under the Code, the Portfolio does not pay
Federal income or excise taxes.
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.
Redemptions, including exchanges, are subject to capital
gains tax, based on the difference between the cost of shares
held and the price received upon sale.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE COMPANY AND PORTFOLIO
The business affairs of the Company are subject to the
supervision of its Board of Directors, while the business
affairs of the Portfolio are subject to the supervision
of its Board of Trustees. No Director of the Company
also serves as a Trustee of the Portfolio. For more
information with respect to Directors of the Company and
Trustees of the Portfolio, see DIRECTORS AND OFFICERS OF
THE COMPANY and TRUSTEES AND OFFICERS OF THE PORTFOLIO in
the SAI.
INVESTMENT ADVISER
USAA Investment Management Company
The Manager serves as the manager and investment adviser
of the Fund, providing services under a Management
Agreement. Under the Management Agreement, the Manager
is responsible for monitoring the services provided to
the Portfolio by Bankers Trust, subject to the authority
of and supervision by the Board of Directors. The
Manager receives no fee for providing these monitoring
services. In the event the Fund's Board of Directors
determines it is in the best interests of the Fund's
shareholders to withdraw its investment in the portfolio,
the Manager would become responsible for directly managing
the assets of the Fund. In such event, the Fund would pay
the Manager an annual fee of .10% of the Fund's ANA,
accrued daily and paid monthly.
The Manager, USAA Investment Management Company
(IMCO), was organized in May 1970 and is an affiliate of
United Services Automobile Association (USAA), a large
diversified financial services institution. As of the
date of this Prospectus, the Manager had approximately $_____
billion in total assets under management. The Manager's mailing
address is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Officers and employees of the Manager are permitted
to engage in personal securities transactions subject to
restrictions and procedures set forth in the Joint Code
of Ethics adopted by the Company and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
Bankers Trust Company
At the present time, the Company seeks to achieve the
investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has
retained the services of Bankers Trust as investment
adviser. Mr. Frank Salerno, Managing Director of Bankers
Trust, is responsible for the day-to-day management of
the Portfolio. Mr. Salerno has been employed at Bankers
Trust since prior to 1989 and has managed the Portfolio's
assets since the Portfolio commenced operations.
Bankers Trust, a New York banking corporation with
executive offices at 280 Park Avenue, New York, New York
10017, is a wholly owned subsidiary of Bankers Trust New
York Corporation. Bankers Trust is a worldwide merchant
bank that conducts a variety of general banking and trust
activities and is a major wholesale supplier of financial
services to the international and domestic institutional
markets. Investment management is a core business of
Bankers Trust with approximately $185 billion in assets
under management. Of that total, approximately $72
billion are in U.S. equity index assets. When bond and
international funds are included, Bankers Trust manages
over $88 billion in total index assets. This makes
Bankers Trust one of the nation's leading managers of
index funds.
Bankers Trust has been advised by its counsel that,
in counsel's opinion, Bankers Trust currently may perform
the services for the Company and the Portfolio described
in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from
the interpretations of relevant Federal law and banks and
financial institutions may be required to register as
dealers pursuant to state securities laws.
Bankers Trust, subject to the supervision and
direction of the Board of Trustees of the Portfolio,
manages the Portfolio in accordance with the Portfolio's
investment objectives and stated investment policies,
makes investment decisions for the Portfolio, places
orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and
employs professional investment managers and securities
analysts who provide research services to the Portfolio.
Bankers Trust may utilize the expertise of any of its
worldwide subsidiaries and affiliates to assist in its
role as investment adviser. All orders for investment
transactions on behalf of the Portfolio are placed by
Bankers Trust with broker-dealers and other financial
intermediaries that it selects, including those
affiliated with Bankers Trust. A Bankers Trust affiliate
will be used in connection with a purchase or sale of an
investment for the Portfolio only if Bankers Trust
believes that the affiliate's charge for the transaction
does not exceed usual and customary levels. The
Portfolio will not invest in obligations for which
Bankers Trust or any of its affiliates is the ultimate
obligor or accepting bank. The Portfolio may, however,
invest in the obligations of correspondents and customers
of Bankers Trust.
Under its Investment Advisory Agreement, Bankers
Trust receives a fee from the Portfolio, computed daily
and paid monthly, at the annual rate of .10% (before
waiver) of the average daily net assets of the Portfolio.
ADMINISTRATOR
Under its Administration Agreement with the Fund, the
Manager calculates the NAV of the Fund and generally
assists the Board of Directors of the Company in all
aspects of the administration and operation of the
Fund. The Administration Agreement provides for the
Fund to pay the Manager a fee, computed daily and paid
monthly, at the annual rate of .02% of the average daily
net assets of the Fund. Under the Administration
Agreement with the Fund, the Manager may delegate one or
more of its responsibilities to others, at the Manager's
expense.
Under an Administration and Services Agreement with
the Portfolio, Bankers Trust calculates the value of the
assets of the Portfolio and generally assists the Board
of Trustees of the Portfolio in all aspects of the
administration and operation of the Portfolio. The
Administration and Services Agreement provides for the
Portfolio to pay Bankers Trust a fee, computed daily and
paid monthly, at the rate of .05% (before waiver) of the
average daily net assets of the Portfolio. Under the
Administration and Services Agreement, Bankers Trust may
delegate one or more of its responsibilities to others, at
Bankers Trust's expense. For more information see MANAGEMENT
OF THE COMPANY AND PORTFOLIO in the SAI.
OPERATING EXPENSES
The Fund bears its own expenses. Operating expenses for
the Fund generally consist of all costs not specifically
borne by the Manager or Bankers Trust, including
administration and service fees, fees for necessary
professional services, and costs associated with
regulatory compliance and maintaining legal existence and
shareholder relations. The Portfolio bears its own
expenses. Operating expenses for the Portfolio generally
consist of all costs not specifically borne by Bankers
Trust, including investment advisory and administration
and services fees, fees for necessary professional
services, the costs associated with regulatory compliance
and maintaining legal existence and investor relations.
SERVICE PROVIDERS
Underwriter/Distributor
USAA Investment Management Company, 9800 Fredericksburg
Rd., San Antonio, Texas 78288, serves as the distributor
of the Fund's shares.
Transfer Agent
USAA Shareholder Account Services, 9800 Fredericksburg
Rd., San Antonio, Texas 78288, serves as transfer agent
of the Fund's shares.
Custodian
Bankers Trust serves as custodian of the Fund's and the
Portfolio's assets.
Legal Counsel
Goodwin, Procter & Hoar, Exchange Place, Boston,
Massachusetts 02109, serves as counsel to the Fund.
Willkie Farr & Gallagher, One Citicorp Center, 153 East
53rd Street, New York, New York 10022-4669, serves as
counsel to the Portfolio.
Independent Accountants
_________________________ has been selected as Independent
Accountants for the Fund. Coopers & Lybrand L.L.P., 1100
Main Street, Suite 900, Kansas City, Missouri 64105, has been
selected as the Independent Accountants for the Portfolio.
DESCRIPTION OF SHARES
The Company is an open-end management investment company
incorporated under the laws of the State of Maryland on
October 14, 1980. The Company is authorized to issue
shares in separate classes, or Funds. The Fund described
in this Prospectus is being offered to the public. The
Fund is classified as a diversified investment company.
Under the Company's charter, the Board of Directors is
authorized to create new Funds in addition to those
already existing without approval of the shareholders of
the Company.
Under provisions of the Bylaws of the Company, no
annual meeting of shareholders is required. Ordinarily,
no shareholder meeting will be held unless required by
the Investment Company Act of 1940. The Directors may
fill vacancies on the Board or appoint new Directors
provided that immediately after such action at least two-
thirds of the Directors have been elected by shareholders.
Shareholders are entitled to one vote per share
(with proportionate voting for fractional shares)
irrespective of the relative net asset value of the
shares. For matters affecting an individual fund, a
separate vote of the shareholders of that fund is required.
The Portfolio, in which all the Assets of the Fund
will be invested, is organized as a trust under the laws
of the State of New York. The Portfolio's Declaration of
Trust provides that the Fund and other entities investing
in the Portfolio (e.g., other investment companies,
insurance company separate accounts, and common and
commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the
Fund incurring financial loss on account of such
liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself was
unable to meet its obligations. Accordingly, the
Company's Directors believe that neither the Fund nor its
shareholders will be adversely affected by reason of the
Fund's investing in the Portfolio.
ADDITIONAL INFORMATION
Repurchase Agreements - In a repurchase agreement the
Portfolio buys a security and simultaneously agrees to
sell it back at a higher price. In the event of the
bankruptcy of the other party to either a repurchase
agreement or a securities loan, the Portfolio could
experience delays in recovering either its cash or the
securities it lent. To the extent that, in the meantime,
the value of the securities repurchased had decreased or
the value of securities lent had increased, the Portfolio
could experience a loss. In all cases, Bankers Trust
must find the creditworthiness of the other party to the
transaction satisfactory. A repurchase agreement is
considered a collateralized loan under the 1940 Act.
Securities Lending - The Portfolio is permitted to lend
up to 30% of the total value of its securities. These
loans must be secured continuously by cash or equivalent
collateral or by a letter of credit at least equal to the
market value of the securities loaned plus accrued
income. By lending its securities, the Portfolio can
increase its income by continuing to receive income on
the loaned securities as well as by the opportunity to
receive interest on the collateral. Any gain or loss in
the market price of the borrowed securities which occurs
during the term of the loan inures to the Portfolio and
its investors.
Rule 144A Securities - The Portfolio may purchase
securities in the United States that are not registered
for sale under Federal securities laws but which can be
resold to institutions under Securities and Exchange
Commission (SEC) Rule 144A. Provided that a dealer or
institutional trading market in such securities exists,
these restricted securities are treated as exempt from
the Portfolio's 15% limit on illiquid securities. Under
the supervision of the Board of Trustees of the
Portfolio, Bankers Trust determines the liquidity of
restricted securities and, through reports from Bankers
Trust, the Board will monitor trading activity in
restricted securities. Because Rule 144A is relatively
new, it is not possible to predict how these markets will
develop. If institutional trading in restricted
securities were to decline, the liquidity of the
Portfolio could be adversely affected.
When-Issued and Delayed Delivery Securities - The
Portfolio may purchase securities on a when-issued or
delayed delivery basis. Delivery of and payment for
these securities may take place as long as a month or
more after the date of the purchase commitment. The
value of these securities is subject to market
fluctuation during this period and no income accrues to
the Portfolio until settlement takes place. The
Portfolio maintains with the custodian a segregated
account containing high grade liquid securities in an
amount at least equal to these commitments. When
entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party
to consummate the transaction; if the other party fails
to do so, the Portfolio may be disadvantaged.
Options on Stocks - The Portfolio may write and purchase
put and call options on stocks. A call option gives the
purchaser of the option the right to buy, and obligated
the writer to sell, the underlying stock at the exercise
price at any time during the option period. Similarly,
a put option gives the purchaser of the option the right
to sell, and obligates the writer to buy, the underlying
stock at the exercise price at any time during the option
period. A covered call option, which is a call option
with respect to which the Portfolio owns the underlying
stock, sold by the Portfolio exposes the Portfolio during
the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying
stock or the possible continued holding of a stock which
might otherwise have been sold to protect against depreciation
in the market price of the stock. A covered put option sold by
the Portfolio exposes the Portfolio during the term of the option
to a decline in price of the underlying stock. A put option
sold by the Portfolio is covered when, among other
things, cash or liquid securities are place in a
segregated account to fulfill the obligations undertaken.
To close out a position when writing covered
options, the Portfolio may make a "closing purchase
transaction," which involves purchasing an option on the
same stock with the same exercise price and expiration
date as the option which it has previously written on the
stock. The Portfolio will realize a profit or loss for a
closing purchase transaction if the amount paid to
purchase an option is less or more, as the case may be,
than the amount received from the sale thereof. To close
out a position as a purchaser of an option, the Portfolio
may make a "closing sale transaction," which involves
liquidating the Portfolio's position by selling the
option previously purchased.
The Portfolio intends to treat over-the-counter
options (OTC Options) purchased and the assets used to
"cover" OTC Options written as not readily marketable and
therefore subject to the limitations described in
INVESTMENT RESTRICTIONS in the SAI.
Options on Stock Indexes - The Portfolio may purchase and
write put and call options on stock indexes listed on
stock exchanges. A stock index fluctuates with changes
in the market values of the stocks included in the index.
Options on stock indexes are generally similar to
options on stock except that the delivery requirements
are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on
a stock index gives the holder the right to receive a
cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (b) a fixed
"index multiplier." Receipt of this cash amount will
depend upon the closing level of the stock index upon
which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash
received will be equal to such difference between the
closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple.
The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. The
writer may offset its position in stock index options
prior to expiration by entering into a closing
transaction on an exchange or the option may expire unexercised.
Because the value of an index option depends upon
movements in the level of the index rather than the price
of a particular stock, whether the Portfolio will realize
a gain or loss from the purchase or writing of options on
an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of
certain indexes, in an industry or market segment, rather
than movements in the price of a particular stock.
Accordingly, successful use by the Portfolio of options
on stock indexes will be subject to Bankers
Trust's ability to predict correctly movements in the
direction of the stock market generally or of a
particular industry. This requires different skills and
techniques than predicting changes in the price of
individual stocks.
Futures Contracts on Stock Indexes - The Portfolio may
enter into contracts providing for the making and
acceptance of a cash settlement based upon changes in the
value of an index of securities (Futures Contracts).
This investment technique is designed only to hedge
against anticipated future changes in general market
prices which otherwise might either adversely affect the
value of securities held by the Portfolio or adversely
affect the prices of securities which are intended to be
purchased at a later date for the Portfolio. A Futures
Contract may also be entered into to close out or offset
an existing futures position.
In general, each transaction in Futures Contracts
involves the establishing of a position which will move
in a direction opposite to that of the investment being
hedged. If these hedging transactions are successful,
the futures positions taken for the Portfolio will rise
in value by an amount which approximately offsets the
decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market
prices move in an unexpected manner, the full anticipated
benefits of Futures Contracts may not be achieved or a
loss may be realized.
Although Futures Contracts would be entered into for
hedging purposes only, such transactions do involve
certain risks. These risks could include a lack of
correlation between the Futures Contracts and the equity
market being hedged, a potential lack of liquidity in the
secondary market and incorrect assessments of market
trends which may result in poorer overall performance
than if a Futures Contract had not been entered into.
Brokerage costs will be incurred and "margin" will
be required to be posted and maintained as a good-faith
deposit against performance of obligations under Futures
Contracts written for the Portfolio. The Portfolio will
not enter into any Futures Contracts or Options on Futures
Contracts if immediately thereafter its margin deposits on
its outstanding Futures Contracts and premiums paid on
outstanding Options on Futures Contracts owned by the
Portfolio would exceed 5% of the market value of the
Portfolio's total assets.
Options on Futures Contracts - The Portfolio may invest
in options on such Futures Contracts for similar
purposes.
Asset Coverage - To assure that the Portfolio's use of
futures and related options, as well as when-issued and
delayed-delivery securities are not used to achieve
investment leverage, the Portfolio will cover such
transactions, as required under applicable
interpretations of the SEC, either by owning the
underlying securities or by establishing a segregated
account with the Portfolio's custodian containing high
grade liquid debt securities in an amount at all times
equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
Part B
Statement of Additional Information for the
S&P 500 Index Fund
is included herein
(Logo of USAA STATEMENT OF
USAA Eagle MUTUAL ADDITIONAL INFORMATION
appears here) FUND, INC. May 1, 1996
- ----------------------------------------------------------------------------
USAA MUTUAL FUND, INC.
S&P 500 Index Fund
USAA MUTUAL FUND, INC. (the Company) is a registered investment
company offering shares of eight no-load mutual funds, one of
which is described in this Statement of Additional Information
(SAI): the S&P 500 Index Fund. The Fund is classified as a
diversified investment company and has its own investment
objective designed to meet its investment goals.
As described in the Prospectus, the Company seeks to achieve
the investment objective of the Fund by investing all the
investable assets of the Fund in an open-end management
investment company having the same investment objective as the
Fund. The investment company is the Equity 500 Index Portfolio
(the Portfolio) advised by Bankers Trust Company (Bankers Trust).
Since the investment characteristics of the Fund will
correspond directly to those of the Portfolio in which the Fund
invests all of its investable assets, the following includes a discussion
of the various investments of and techniques employed by the Portfolio.
A Prospectus for the Fund dated May 1, 1996, which provides
the basic information you should know before investing in the
Fund, may be obtained without charge upon written request to USAA
Mutual Fund, Inc., 9800 Fredericksburg Rd., San Antonio, TX
78288, or by calling toll free 1-800-531-8181. This SAI is not a
Prospectus and contains information in addition to and more
detailed than that set forth in the Fund's Prospectus. It is
intended to provide you with additional information regarding the
activities and operations of the Company and the Fund, and should
be read in conjunction with the Fund's Prospectus.
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
2 Valuation of Securities
2 Additional Information Regarding Redemption of Shares
3 Investment Plans
4 Investment Policies
8 Investment Restrictions
11 Portfolio Transactions and Brokerage Commissions
12 Further Description of Shares
13 Tax Considerations
14 Directors and Officers of the Company
17 Trustees and Officers of the Portfolio
18 Investment Adviser
19 Administrator
20 General Information
21 Calculation of Performance Data
22 Appendix A - Comparison of Portfolio Performance
24 Appendix B - Dollar-Cost Averaging
VALUATION OF SECURITIES
Shares of the Fund are offered on a continuing best efforts basis
through USAA Investment Management Company (IMCO or the Manager).
The offering price for shares of the Fund is equal to the current
net asset value (NAV) per share. The NAV per share of the Fund
is calculated by adding the value of the Fund's assets (i.e., the
value of its investments in the Portfolio and other assets),
deducting liabilities, and dividing by the number of shares
outstanding.
The Fund's NAV per share is calculated each day, Monday
through Friday, except days on which the New York Stock Exchange
(NYSE) is closed. The NYSE is currently scheduled to be closed
on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas, and on
the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
The Portfolio values its equity and debt securities (other than
short-term debt obligations maturing in 60 days or less), including
listed securities and securities for which price quotations are
available, on the basis of market valuations furnished by a pricing service.
Short-term debt obligations and money market securities maturing in 60 days
or less are valued at amortized cost, which approximates market value.
Other assets are valued at fair value using methods determined in
good faith by the Portfolio's Board of Trustees.
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES
The value of a shareholder's investment at the time of redemption
may be more or less than the cost at purchase, depending on the
value of the securities held in the Portfolio. Requests for
redemption which are subject to any special conditions, or which
specify an effective date other than as provided herein, cannot
be accepted. A gain or loss for tax purposes may be realized on
the sale of shares, depending upon the price when redeemed.
The Fund and the Portfolio each reserve the right, if
conditions exist which make cash payments undesirable, to honor
any request for redemption or repurchase order by making payment
in whole or in part in readily marketable securities chosen by
the Fund, or the Portfolio, as the case may be, and valued as
they are for purposes of computing the Fund's or the Portfolio's
NAV, as the case may be (a redemption in kind). If payment is
made to a Fund shareholder in securities, the shareholder may
incur transaction expenses in converting these securities into
cash. The Fund and the Portfolio each have elected, however, to
be governed by Rule 18f-1 under the 1940 Act as a result of which
the Fund and the Portfolio each are obligated to redeem shares or
beneficial interests, as the case may be, with respect to any one
investor during any 90-day period, solely in cash up to the
lesser of $250,000 or 1% of the NAV of the Fund or the Portfolio,
as the case may be, at the beginning of the period.
The Portfolio has agreed to make a redemption in kind to the
Fund whenever the Fund wishes to make redemption in kind and
therefore shareholders of the Fund that receive redemptions in
kind will receive portfolio securities of such Portfolio, and in
no case will they receive a security issued by the Portfolio.
The Board of Directors may cause the redemption of an
account with a balance of less than 10 shares of the Fund
provided (1) the value of the account has been reduced, for
reasons other than market action, below the minimum initial
investment in such Fund at the time of the establishment of the
account, (2) the account has remained below the minimum level for
six months, and (3) 60 days' prior written notice of the proposed
redemption has been sent to the shareholder. Shares will be
redeemed at the NAV on the date fixed for redemption by the Board
of Directors. Prompt payment will be made by mail to the last
known address of the shareholder.
The Company reserves the right to suspend the right of
redemption or postpone the date of payment (1) for any periods
during which the NYSE is closed, (2) when trading in the markets
the Company normally utilizes is restricted, or an emergency
exists as determined by the Securities and Exchange Commission
(SEC) so that disposal of the Company's investments or
determination of its NAV is not reasonably practicable, or (3)
for such other periods as the SEC by order may permit for
protection of the Company's shareholders.
For the mutual protection of the investor and the Fund, a
guarantee of signature may be required by the Company. If
required, each signature on the account registration must be
guaranteed. Signature guarantees are acceptable from FDIC member
banks, brokers, dealers, municipal securities dealers, municipal
securities brokers, government securities dealers, government
securities brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. A signature guarantee for active duty military
personnel stationed abroad may be provided by an officer of the
United States Embassy or Consulate, a staff officer of the Judge
Advocate General, or an individual's commanding officer.
INVESTMENT PLANS
The following investment plans are made available by the Company
to shareholders of the Fund. At the time you sign up for any of
the following investment plans that utilize the electronic funds
transfer service, you will choose the day of the month (the
effective date) on which you would like to regularly purchase
shares. When this day falls on a weekend or holiday, the
electronic transfer will take place on the last business day
before the effective date. You may terminate your participation
in a plan at any time. Please call the Manager for details and
necessary forms or applications.
Systematic Purchase of Shares
InvesTronic(registered trademark) - an automatic investment
program for the purchase of additional shares through electronic
funds transfer. The investor selects the day(s) each month that
money is transferred from a checking or savings account. By
completing an application, which may be obtained from the
Manager, you invest a specific amount each month ($50 minimum) in
any of your accounts.
Direct Purchase Service - the periodic purchase of shares through
electronic funds transfer from an employer, an income-producing
investment, or an account with a participating financial institution.
Automatic Purchase Plan - the periodic transfer of funds from a
USAA money market fund to purchase shares in another non-money
market USAA mutual fund. There is a minimum investment required
for this program of $5,000, with a monthly transaction minimum of
$50. The minimum initial investment requirement for the other
USAA mutual fund must be satisfied before the first transfer.
Buy/Sell Service - the intermittent purchase or redemption of
shares through electronic funds transfer to or from a checking or
savings account.
Participation in these systematic purchase plans will permit
a shareholder to engage in dollar-cost averaging. For additional
information concerning the benefits of dollar-cost averaging, see
Appendix B.
Systematic Withdrawal Plan
If a shareholder in a single investment account (accounts in
different Funds cannot be aggregated for this purpose) owns
shares having a net asset value of $5,000 or more, the
shareholder may request that enough shares to produce a fixed
amount of money be liquidated from the account monthly or
quarterly. The amount of each withdrawal must be at least $50.
Using the electronic funds transfer service, shareholders may
choose to have withdrawals electronically deposited at their bank
or other financial institution. They may also elect to have
checks mailed to a designated address.
Such a plan may be initiated by depositing shares worth at
least $5,000 with the Transfer Agent and by completing a
Systematic Withdrawal Plan application, which may be requested
from the Manager. The shareholder may terminate participation in
the plan at any time. There is no charge to the shareholder for
withdrawals under the Systematic Withdrawal Plan. The Company
will not bear any expenses in administering the plan beyond the
regular transfer agent and custodian costs of issuing and
redeeming shares. Any additional expenses of administering the
plan will be borne by the Manager.
Withdrawals will be made by redeeming full and fractional
shares on the date selected by the shareholder at the time the
plan is established. Withdrawal payments made under this plan
may exceed dividends and distributions and, to this extent, will
involve the use of principal and could reduce the dollar value of
a shareholder's investment and eventually exhaust the account.
Reinvesting dividends and distributions helps replenish the
account. Because share values and net investment income can
fluctuate, shareholders should not expect withdrawals to be
offset by rising income or share value gains.
Each redemption of shares may result in a gain or loss,
which must be reported on the shareholder's income tax return.
Therefore, a shareholder should keep an accurate record of any
gain or loss on each withdrawal.
Tax-Deferred Retirement Plans
Federal taxes on current income may be deferred if an investor
qualifies for certain types of retirement programs. For the
convenience of the investor, the following plans are made
available by the Manager: IRA (including SEP/IRA) and 403(b)(7)
accounts. The minimum initial investment in each of these plans
is $2,000. Subsequent investments of $50 or more per account may
be made at any time. Investments may be made in one or any
combination of the Funds described in the Prospectus of each Fund
of USAA Mutual Fund, Inc. and USAA Investment Trust (not
available in the Growth and Tax Strategy Fund).
Retirement plan applications for the IRA and 403(b)(7)
programs should be sent directly to USAA Shareholder Account
Services, 9800 Fredericksburg Rd., San Antonio, TX 78288. State
Street Bank serves as Custodian for these tax-deferred retirement
plans under the programs made available by the Manager.
Applications for these retirement plans received by the Manager
will be forwarded to the Custodian for acceptance.
An administrative fee of $20 is deducted from the proceeds
of a distribution closing an account. Exceptions to the fee are:
partial distributions, total transfer within USAA, and
distributions due to disability or death. This charge is subject
to change as provided in the various agreements. There may be
additional charges, as mutually agreed upon between the investor
and the Custodian, for further services requested of the Custodian.
Each employer or individual establishing a tax-deferred
retirement plan is advised to consult with a tax adviser before
establishing the plan. Detailed information about the plans may
be obtained from the Manager.
INVESTMENT POLICIES
The investment objective of the Fund is described in the Fund's
Prospectus. There can, of course, be no assurance that the Fund
will achieve its investment objective.
The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The Company
may withdraw a Fund's investment from the Portfolio at any time if
the Board of Directors of the Company determines that it is in the
best interest of the Fund to do so.
Since the investment characteristics of the Fund will
correspond directly to those of the Portfolio, the
following is a discussion of the various investments of and
techniques employed by the Portfolio.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES.
Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer
agrees to pay the amount deposited plus interest to the bearer of
the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior
to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to
obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an
importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.
COMMERCIAL PAPER. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured promissory notes issued by
corporations in order to finance their current operations. A
variable amount master demand note (which is a type of commercial
paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest
varying amounts.
ILLIQUID SECURITIES. Historically, illiquid securities have
included securities subject to contractual or legal restrictions
on resale because they have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), securities
which are otherwise not readily marketable and repurchase
agreements having a remaining maturity of longer than seven
calendar days. Securities which have not been registered under
the 1933 Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
calendar days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under
the 1933 Act, including repurchase agreements, commercial paper,
foreign securities, municipal securities, and corporate bonds and
notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal
restrictions on resale of such investments to the general public
or to certain institutions may not be indicative of their liquidity.
The SEC has adopted Rule 144A, which allows a broader
institutional trading market for securities otherwise subject to
restriction on their resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the 1933 Act of resales of certain securities to qualified
institutional buyers. Bankers Trust anticipates that the market
for certain restricted securities such as institutional
commercial paper will expand further as a result of this
regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc.
Bankers Trust will monitor the liquidity of Rule 144A
securities in the Portfolio's portfolio holdings under the
supervision of the Portfolio's Board of Trustees. In reaching
liquidity decisions, Bankers Trust will consider, among other
things, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers and other
potential purchasers wishing to purchase or sell the security;
(3) dealer undertakings to make a market in the security; and (4)
the nature of the security and of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
LENDING OF PORTFOLIO SECURITIES. The Portfolio has the
authority to lend portfolio securities to brokers, dealers and
other financial organizations. The Portfolio will not lend
securities to Bankers Trust, Signature Financial Group (SFG),
Sub-Administrator to the Portfolio, or their affiliates. By
lending its securities, a Portfolio can increase its income by
continuing to receive interest on the loaned securities as well
as by either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid by the
borrower when U.S. Government obligations are used as collateral.
There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities
fail financially. The Portfolio will adhere to the following
conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100 percent cash collateral or equivalent
securities from the borrower; (ii) the borrower must increase
this collateral whenever the market value of the securities
including accrued interest rises above the level of the
collateral; (iii) the Portfolio must be able to terminate the
loan at any time; (iv) the Portfolio must receive reasonable
interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities, and any increase in
market value; (v) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the
loaned securities may pass to the borrower; provided, however,
that if a material event adversely affecting the investment
occurs, the Portfolio's Board of Trustees must terminate the loan
and regain the right to vote the securities.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments draws upon
Bankers Trust's skill and experience with respect to such
instruments. In addition, the correlation between movements in
the price of futures contracts or options on futures contracts
and movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce
unanticipated losses.
FUTURES CONTRACTS. The Portfolio may enter into contracts
based on financial indices such as the S&P 500. U.S. futures
contracts have been designed by exchanges which have been
designated "contracts markets" by the Commodity Futures Trading
Commission (CFTC), and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of
exchange markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the
clearing members of the exchange.
At the same time a futures contract is purchased or sold,
the Portfolio must allocate cash or securities as a deposit
payment (initial deposit). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Portfolio would provide or receive cash that reflects any decline
or increase in the contract's value.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Portfolio will incur brokerage fees
when it purchases or sells futures contracts.
The ordinary spreads between prices in the cash and futures
market, due to differences in the nature of those markets, are
subject to distortions. First, all participants in the futures
market are subject to initial deposit and variation margin
requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. In addition, futures contracts entail risks.
Although Bankers Trust believes that use of such contracts will
benefit the Portfolio, if Bankers Trust's investment judgment is
incorrect, the Portfolio's overall performance would be poorer
than if it had not entered into any such contract.
OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase
and write options on futures contracts for hedging purposes. The
purchase of a call option on a futures contract is similar in
some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to the
price of the futures contract upon which it is based, it may or
may not be less risky than ownership of the futures contract. As
with the purchase of futures contracts, when the Portfolio is not
fully invested it may purchase a call option on a futures contract
to hedge against a market advance due to declining interest rates.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security which is deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is
below the exercise price, the Portfolio will retain the full
amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Portfolio's
portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of
the security which is deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is
higher than the exercise price, the Portfolio will retain the
full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the
Portfolio intends to purchase. If a put or call option the
Portfolio has written is exercised, the Portfolio will incur a
loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value
of its futures positions, the Portfolio's losses from existing
options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to
the purchase of protective put options on portfolio securities.
The amount of risk the Portfolio assumes when it purchases
an option on a futures contract is the premium paid for the
option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option also
entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the
option purchased.
The Board of Trustees of the Portfolio has adopted the
requirement that futures contracts and options on futures
contracts be used only as a hedge and not for speculation. In
addition, the Portfolio will not enter into any futures contracts
or options on futures contracts if immediately thereafter the
amount of margin deposits on all the futures contracts of the
Portfolio and premiums paid on outstanding options on futures
contracts owned by the Portfolio would exceed 5% of the market
value of the total assets of the Portfolio.
OPTIONS ON SECURITIES. The Portfolio may write (sell)
covered call and put options to a limited extent on its portfolio
securities (covered options) in an attempt to increase income.
However, the Portfolio may forego the benefits of appreciation on
securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by
the Portfolio.
When the Portfolio writes a covered call option, it gives
the purchaser of the option the right to buy the underlying
security at the price specified in the option (the exercise
price) by exercising the option at any time during the option
period. If the option expires unexercised, the Portfolio will
realize income in an amount equal to the premium received for
writing the option. If the option is exercised, a decision over
which the Portfolio has no control, the Portfolio must sell the
underlying security to the option holder at the exercise price.
By writing a covered call option, the Portfolio foregoes, in
exchange for the premium less the commission (net premium), the
opportunity to profit during the option period from an increase
in the market value of the underlying security above the exercise price.
When the Portfolio writes a covered put option, it gives the
purchaser of the option the right to sell the underlying security
to the Portfolio at the specified exercise price at any time
during the option period. If the option expires unexercised, the
Portfolio will realize income in the amount of the premium
received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must
purchase the underlying security from the option holder at the
exercise price. By writing a covered put option, the Portfolio,
in exchange for the net premium received, accepts the risk of a
decline in the market value of the underlying security below the
exercise price. The Portfolio will only write put options
involving securities for which a determination is made at the
time the option is written that the Portfolio wishes to acquire
the securities at the exercise price.
The Portfolio may terminate its obligation as the writer of
a call or put option by purchasing an option with the same
exercise price and expiration date as the option previously
written. This transaction is called a "closing purchase
transaction." Where the Portfolio cannot effect a closing
purchase transaction, it may be forced to incur brokerage
commissions or dealer spreads in selling securities it receives
or it may be forced to hold underlying securities until an option
is exercised or expires.
When the Portfolio writes an option, an amount equal to the
net premium received by the Portfolio is included in the
liability section of the Portfolio's Statement of Assets and
Liabilities as a deferred credit. The amount of the deferred
credit will be subsequently marked to market to reflect the
current market value of the option written. The current market
value of a traded option is the last sale price or, in the
absence of a sale, the mean between the closing bid and asked
price. If an option expires on its stipulated expiration date or
if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option
was sold), and the deferred credit related to such option will be
eliminated. If a call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security
and the proceeds of the sale will be increased by the premium
originally received. The writing of covered call options may be
deemed to involve the pledge of the securities against which the
option is being written. Securities against which call options
are written will be segregated on the books of the custodian for
the Portfolio.
The Portfolio may purchase call and put options on any
securities in which it may invest. The Portfolio would normally
purchase a call option in anticipation of an increase in the
market value of such securities. The purchase of a call option
would entitle the Portfolio, in exchange for the premium paid, to
purchase a security at a specified price during the option
period. The Portfolio would ordinarily have a gain if the value
of the securities increased above the exercise price sufficiently
to cover the premium and would have a loss if the value of the
securities remained at or below the exercise price during the
option period.
The Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in
its portfolio (protective puts) or securities of the type in
which it is permitted to invest. The purchase of a put option
would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's
portfolio securities, at a specified price during the option
period. The purchase of protective puts is designed merely to
offset or hedge against a decline in the market value of the
Portfolio's portfolio securities. Put options also may be
purchased by the Portfolio for the purpose of affirmatively
benefiting from a decline in the price of securities which the
Portfolio does not own. The Portfolio would ordinarily recognize
a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would
recognize a loss if the value of the securities remained at or
above the exercise price. Gains and losses on the purchase of
protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.
The Portfolio has adopted certain other nonfundamental
policies concerning option transactions which are discussed
below. The Portfolio's activities in options may also be
restricted by the requirements of the Internal Revenue Code of
1986, as amended (the Code), for qualification as a regulated
investment company.
The hours of trading for options on securities may not
conform to the hours during which the underlying securities are
traded. To the extent that the option markets close before the
markets for the underlying securities, significant price and rate
movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible
to predict the volume of trading that may exist in such options,
and there can be no assurance that viable exchange markets will
develop or continue.
The Portfolio may engage in over-the-counter options
transactions with broker-dealers who make markets in these
options. At present, approximately ten broker-dealers make these
markets. The ability to terminate over-the-counter option
positions is more limited than with exchange-traded option
positions because the predominant market is the issuing broker
rather than an exchange, and may involve the risk that
broker-dealers participating in such transactions will not
fulfill their obligations. Bankers Trust will monitor the
creditworthiness of dealers with whom the Portfolio enters into
such options transactions under the general supervision of the
Portfolios' Trustees.
OPTIONS ON SECURITIES INDICES. In addition to options on
securities, the Portfolio may also purchase and write (sell) call
and put options on securities indices. Such options give the
holder the right to receive a cash settlement during the term of
the option based upon the difference between the exercise price and
the value of the index. Such options will be used for the purposes
described above under "Options on Securities."
Options on securities indices entail risks in addition to
the risks of options on securities. The absence of a liquid
secondary market to close out options positions on securities
indices is more likely to occur, although the Portfolio generally
will only purchase or write such an option if Bankers Trust
believes the option can be closed out.
Use of options on securities indices also entails the risk
that trading in such options may be interrupted if trading in
certain securities included in the index is interrupted. The
Portfolio will not purchase such options unless Bankers Trust
believes the market is sufficiently developed such that the risk
of trading in such options is no greater than the risk of trading
in options on securities.
Price movements in a Portfolio's portfolio securities may
not correlate precisely with movements in the level of an index
and, therefore, the use of options on indices cannot serve as a
complete hedge. Because options on securities indices require
settlement in cash, Bankers Trust may be forced to liquidate
portfolio securities to meet settlement obligations.
INVESTMENT RESTRICTIONS
Certain investment restrictions of the Fund and the Portfolio
have been adopted as fundamental policies of the Fund or
Portfolio, as the case may be. A fundamental policy may not be
changed without the approval of a majority of the outstanding
voting securities of the Fund or Portfolio, as the case may be.
Majority of the outstanding voting securities under the
Investment Company Act of 1940, as amended (the 1940 Act), and as
used in this SAI and the Prospectus, means, the lesser of (i) 67%
or more of the outstanding voting securities of the Fund or
Portfolio, as the case may be, present at a meeting, if the
holders of more than 50% of the outstanding voting securities of
the Fund or Portfolio, as the case may be, are present or
represented by proxy or (ii) more than 50% of the outstanding
voting securities of the Fund or Portfolio, as the case may be.
Whenever the Company is requested to vote on a fundamental policy
of the Portfolio, the Company will hold a meeting of the Fund's
shareholders and will cast its vote as instructed by the Fund's
shareholders. The percentage of the Company's votes representing
Fund shareholders not voting will be voted by the Directors of
the Company in the same proportion as the Fund shareholders who
do, in fact, vote.
As a matter of fundamental policy, the Fund may not (except
that no investment restriction of the Fund shall prevent the Fund
from investing all of its investable assets in an open-end
investment company with substantially the same investment objective):
(1) With respect to 75% of its total assets, purchase the
securities of any issuer (except U.S. Government Securities,
as such term is defined in the Investment Company Act of
1940, as amended (1940 Act)) if, as a result, it would own
more than 10% of the outstanding voting securities of such
issuer or it would have more than 5% of the value of its
total assets invested in the securities of such issuer.
(2) Borrow money, except for temporary or emergency purposes in
an amount not exceeding 33 1/3% of its total assets
(including the amount borrowed) less liabilities (other than
borrowings).
(3) Concentrate its investments in any one industry although it
may invest up to 25% of the value of its total assets in any
one industry; provided, this limitation does not apply to
securities issued or guaranteed by the U.S. Government and
its agencies or instrumentalities.
(4) Issue senior securities, except as permitted under the 1940 Act.
(5) Underwrite securities of other issuers, except to the extent
that it may be deemed to act as a statutory underwriter in
the distribution of any restricted securities or not readily
marketable securities.
(6) Lend any securities or make any loan if, as a result, more
than 33 1/3% of its total assets would be lent to other
parties, except that this limitation does not apply to
purchases of debt securities or to repurchase agreements.
As a matter of fundamental policy, the Portfolio may not:
(1) borrow money or mortgage or hypothecate assets of the
Portfolio, except that in an amount not to exceed 1/3 of the
current value of the Portfolio's assets, it may borrow money as a
temporary measure for extraordinary or emergency purposes and
enter into reverse repurchase agreements or dollar roll
transactions, and except that it may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such
borrowings (it is intended that money would be borrowed only from
banks and only either to accommodate requests for the withdrawal
of beneficial interests (redemption of shares) while effecting an
orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a
portfolio security transaction or other similar situations) or
reverse repurchase agreements, provided that collateral
arrangements with respect to options and futures, including
deposits of initial deposit and variation margin, are not
considered a pledge of assets for purposes of this restriction
and except that assets may be pledged to secure letters of credit
solely for the purpose of participating in a captive insurance
company sponsored by the Investment Company Institute; for
additional related restrictions, see clause (i) under the caption
"State and Federal Restrictions" below. (As an operating policy,
the Portfolio may not engage in dollar roll transactions);
(2) underwrite securities issued by other persons except
insofar as the Portfolio may technically be deemed an underwriter
under the 1933 Act in selling a portfolio security;
(3) make loans to other persons except: (a) through the
lending of the Portfolio's portfolio securities and provided that
any such loans not exceed 30% of the Portfolio's net assets
(taken at market value); (b) through the use of repurchase
agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types
distributed publicly or privately (under current regulations, the
Portfolio's fundamental policy with respect to 20% risk weighing
for financial institutions prevent the Portfolio from engaging in
securities lending);
(4) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real
estate or interests therein), interests in oil, gas or mineral
leases, commodities or commodity contracts (except futures and
option contracts) in the ordinary course of business (the
Portfolio) may hold and sell, for the Portfolio's portfolio, real
estate acquired as a result of the Portfolio's ownership of securities;
(5) concentrate its investments in any particular industry
(excluding U.S. Government securities), but if it is deemed
appropriate for the achievement of a Portfolio's investment
objective, up to 25% of its total assets may be invested in any
one industry; and
(6) issue any senior security (as that term is defined in
the 1940 Act) if such issuance is specifically prohibited by the
1940 Act or the rules and regulations promulgated thereunder,
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation
margin, are not considered to be the issuance of a senior
security for purposes of this restriction.
As an operating policy the Portfolio will not invest in
another open-end registered investment company.
STATE AND FEDERAL RESTRICTIONS. In order to comply with
certain state and Federal statutes and policies the Fund and the
Portfolio will not as a matter of operating policy (except that
no operating policy shall prevent the Fund from investing all of
its investable assets in an open-end investment company with
substantially the same investment objective):
(i) borrow money (including through dollar roll
transactions) for any purpose in excess of 10% of the
Fund's (Portfolio's) total assets (taken at cost),
except that the Fund (Portfolio) may borrow for
temporary or emergency purposes up to 1/3 of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in
excess of 10% of the Fund's (Portfolio's) total assets
(taken at market value), provided that collateral
arrangements with respect to options and futures,
including deposits of initial deposit and variation
margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this restriction;
(iii) purchase any security or evidence of interest
therein on margin, except that such short-term
credit as may be necessary for the clearance of
purchases and sales of securities may be obtained
and except that deposits of initial deposit and
variation margin may be made in connection with
the purchase, ownership, holding or sale of futures;
(iv) sell any security which it does not own unless by
virtue of its ownership of other securities it has
at the time of sale a right to obtain securities,
without payment of further consideration,
equivalent in kind and amount to the securities
sold and provided that if such right is
conditional the sale is made upon the same conditions;
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment
company except by purchase in the open market
where no commission or profit to a sponsor or
dealer results from such purchase other than the
customary broker's commission, or except when such
purchase, though not made in the open market, is
part of a plan of merger or consolidation;
provided, however, that securities of any
investment company will not be purchased for the
Fund (Portfolio) if such purchase at the time
thereof would cause (a) more than 10% of the
Fund's (Portfolio's) total assets (taken at the
greater of cost or market value) to be invested in
the securities of such issuers; (b) more than 5%
of the Fund's (Portfolio's) total assets (taken at
the greater of cost or market value) to be
invested in any one investment company; or (c)
more than 3% of the outstanding voting securities
of any such issuer to be held for the Fund
(Portfolio); provided further that, except in the
case of merger or consolidation, the Fund
(Portfolio) shall not purchase any securities of
any open-end investment company;
(vii) invest more than 15% of the Fund's (Portfolio's)
net assets (taken at the greater of cost or market
value) in securities that are illiquid or not
readily marketable (excluding Rule 144A securities
deemed by the Board of Directors of the Company
(Board of Trustees of the Portfolio) to be liquid);
(viii) invest more than 15% of the Fund's (Portfolio's)
total assets (taken at the greater of cost or
market value) in (a) securities (including Rule
144A securities) that are restricted as to resale
under the 1933 Act, and (b) securities that are
issued by issuers which (including predecessors)
have been in operation less than three years
(other than U.S. Government securities), provided,
however, that no more than 5% of the Fund's
(Portfolio's) total assets are invested in
securities issued by issuers which (including
predecessors) have been in operation less than
three years;
(ix) invest more than 10% of the Fund's (Portfolio's)
total assets (taken at the greater of cost or
market value) in securities (excluding Rule 144A
securities) that are restricted as to resale under
the 1933 Act;
(x) purchase securities of any issuer if such purchase at
the time thereof would cause the Fund (Portfolio) to
hold more than 10% of any class of securities of such
issuer, for which purposes all indebtedness of an
issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class,
except that futures or option contracts shall not be
subject to this restriction;
(xi) with respect to 75% of its assets, invest more
than 5% of its total assets in the securities
(excluding U.S. Government securities) of any one issuer;
(xii) purchase or retain in the Fund's (Portfolio's)
portfolio securities any securities issued by an
issuer any of whose officers, directors, trustees
or security holders is an officer or Director of
the Company (or Trustee of the Portfolio), or is
an officer or partner of the Manager (or Bankers
Trust), if after the purchase of the securities of
such issuer for the Fund (Portfolio) one or more
of such persons owns beneficially more than 1/2 of
1% of the shares or securities, or both, all taken
at market value, of such issuer, and such persons
owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5%
of such shares or securities, or both, all taken
at market value;
(xiii) invest more than 5% of the Fund's (Portfolio's)
net assets in warrants (valued at the lower of
cost or market), but not more than 2% of the
Fund's (Portfolio's) net assets may be invested in
warrants not listed on the New York Stock Exchange
Inc. (the "NYSE") or the American Stock Exchange;
(xiv) make short sales of securities or maintain a short
position, unless at all times when a short
position is open it owns an equal amount of such
securities or securities convertible into or
exchangeable, without payment of any further
consideration, for securities of the same issue
and equal in amount to, the securities sold short,
and unless not more than 10% of the Fund's
(Portfolio's) net assets (taken at market value)
is represented by such securities, or securities
convertible into or exchangeable for such
securities, at any one time (the Fund (Portfolio)
has no current intention to engage in short selling);
(xv) with respect to put options written by the Fund
(Portfolio), the obligations underlying such put
options shall not exceed 5% of the Fund's (Portfolio's)
net assets;
(xvi) the aggregate premiums on all options written or
purchased by a Fund (Portfolio) must not exceed
20% of the Fund's (Portfolio's) net assets;
(xvii) the aggregate margin deposits on all futures or
options thereon must not exceed 5% of the Fund's
(Portfolio's) total assets;
(xviii) no more than 5% of the Fund's (Portfolio's) assets
may be invested in options which are not entered
into for hedging purposes, or the obligations of
which are not covered by cash or securities;
(xix) purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value
of the Fund's (Portfolio's) aggregate investment
in such classes of securities will exceed 5% of
its total assets;
(xx) write puts and calls on securities unless each of
the following conditions are met: (a) the security
underlying the put or call is within the
investment policies of the Fund (Portfolio) and
the option is issued by the Options Clearing
Corporation, except for put and call options
issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the
aggregate value of the obligations underlying the
puts determined as of the date the options are
sold shall not exceed 50% of the Fund's
(Portfolio's) net assets; (c) the securities
subject to the exercise of the call written by the
Fund (Portfolio) must be owned by the Fund (Portfolio) at
the time the call is sold and must continue to be
owned by the Fund (Portfolio) until the call has been
exercised, has lapsed, or the Fund (Portfolio) has
purchased a closing call, and such purchase has
been confirmed, thereby extinguishing the Fund's
(Portfolio's) obligation to deliver securities
pursuant to the call it has sold; and (d) at the
time a put is written, the Fund (Portfolio)
establishes a segregated account with its
custodian consisting of cash or short-term U.S.
Government securities equal in value to the amount
the Fund (Portfolio) will be obligated to pay upon
exercise of the put (this account must be
maintained until the put is exercised, has
expired, or the Fund (Portfolio) has purchased a
closing put, which is a put of the same series as
the one previously written); and
(xxi) buy and sell puts and calls on securities, stock
index futures or options on stock index futures,
or financial futures or options on financial
futures unless such options are written by other
persons and: (a) the options or futures are
offered through the facilities of a national
securities association or are listed on a national
securities or commodities exchange, except for put
and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities
exchanges; (b) the aggregate premiums paid on all
such options which are held at any time do not
exceed 20% of the Fund's (Portfolio's) total net
assets; and (c) the aggregate margin deposits
required on all such futures or options thereon
held at any time do not exceed 5% of the Fund's
(Portfolio's) total assets.
The Fund will comply with the state securities laws and
regulations of all states in which it is registered. The
Portfolio will comply with the permitted investments and
investment limitations in the securities laws and regulations of
all states in which the corresponding Fund, or any other
registered investment company investing in the Portfolio, is
registered.
PORTFOLIO TRANSACTIONS and BROKERAGE COMMISSIONS
Bankers Trust is responsible for decisions to buy and sell
securities, futures contracts and options on such securities and
futures for the Portfolio, the selection of brokers, dealers and
futures commission merchants to effect transactions and the
negotiation of brokerage commissions, if any. Broker-dealers may
receive brokerage commissions on portfolio transactions,
including options, futures and options on futures transactions
and the purchase and sale of underlying securities upon the
exercise of options. Orders may be directed to any broker-dealer
or futures commission merchant, including to the extent and in
the manner permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain
portfolio securities on behalf of the Portfolio are frequently
placed by Bankers Trust with the issuer or a primary or secondary
market-maker for these securities on a net basis, without any
brokerage commission being paid by the Portfolio. Trading does,
however, involve transaction costs. Transactions with dealers
serving as market-makers reflect the spread between the bid and
asked prices. Transaction costs may also include fees paid to
third parties for information as to potential purchasers or
sellers of securities. Purchases of underwritten issues may be
made which will include an underwriting fee paid to the
underwriter.
Bankers Trust seeks to evaluate the overall reasonableness of
the brokerage commissions paid (to the extent applicable) in
placing orders for the purchase and sale of securities for the
Portfolio taking into account such factors as price, commission
(negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and
skill required of the executing broker-dealer through familiarity
with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Portfolio to reported
commissions paid by others. Bankers Trust reviews on a routine
basis commission rates, execution and settlement services
performed, making internal and external comparisons.
Bankers Trust is authorized, consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended, when placing
portfolio transactions for the Portfolio with a broker to pay a
brokerage commission (to the extent applicable) in excess of that
which another broker might have charged for effecting the same
transaction on account of the receipt of research, market or
statistical information. The term "research, market or
statistical information" includes advice as to the value of
securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts.
Consistent with the policy stated above, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
and such other policies as the Trustees of the Portfolio may
determine, Bankers Trust may consider sales of shares of the Fund
and of investment company clients of Bankers Trust as a factor in
the selection of broker-dealers to execute portfolio
transactions. Bankers Trust will make such allocations if
commissions are comparable to those charged by nonaffiliated,
qualified broker-dealers for similar services.
Higher commissions may be paid to firms that provide
research services to the extent permitted by law. Bankers Trust
may use this research information in managing the Portfolio's
assets, as well as the assets of other clients.
Except for implementing the policies stated above, there is
no intention to place portfolio transactions with particular
brokers or dealers or groups thereof. In effecting transactions
in over-the-counter securities, orders are placed with the
principal market-makers for the security being traded unless,
after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical
information from brokers and dealers can be useful to the
Portfolio and to Bankers Trust, it is the opinion of the management
of the Portfolio that such information is only supplementary to
Bankers Trust's own research effort, since the information must
still be analyzed, weighed and reviewed by Bankers Trust's staff.
Such information may be useful to Bankers Trust in providing
services to clients other than the Portfolios', and not all such
information is used by Bankers Trust in connection with the
Portfolio. Conversely, such information provided to Bankers Trust
by brokers and dealers through whom other clients of Bankers Trust
effect securities transactions may be useful to Bankers Trust in
providing services to the Portfolio.
In certain instances there may be securities which are
suitable for the Portfolio as well as for one or more of Bankers
Trust's other clients. Investment decisions for the Portfolio
and for Bankers Trust's other clients are made with a view to
achieving their respective investment objectives. It may develop
that a particular security is bought or sold for only one client
even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one
or more clients when one or more clients are selling that same
security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same
investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are
allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have
a detrimental effect on the price or volume of the security as
far as the Portfolio in concerned. However, it is believed that
the ability of the Portfolio to participate in volume
transactions will produce better executions for the Portfolio.
For the years ended December 31, 1995, 1994, and 1993, the
Portfolio paid brokerage commissions in the amount of $________,
$97,069, and $63,408, respectively.
FURTHER DESCRIPTION OF SHARES
The Company is authorized to issue shares in separate classes, or
Funds. Eight such Funds have been established, one of which is
described in this SAI. Under the Articles of Incorporation, the
Board of Directors is authorized to create new Funds in addition
to those already existing without shareholder approval.
The assets of the Fund and all income, earnings, profits,
and proceeds thereof, subject only to the rights of creditors,
are specifically allocated to such Fund. They constitute the
underlying assets of the Fund, are required to be segregated on
the books of account, and are to be charged with the expenses of
such Fund. Any general expenses of the Company not readily
identifiable as belonging to a particular Fund are allocated on
the basis of the Funds' relative net assets during the fiscal
year or in such other manner as the Board determines to be fair
and equitable. Each share of each Fund represents an equal
proportionate interest in that Fund with every other share and is
entitled to such dividends and distributions out of the net
income and capital gains belonging to that Fund when declared by
the Board of Directors.
Under the provisions of the Bylaws of the Company, no annual
meeting of shareholders is required. Thus, there will ordinarily
be no shareholder meeting unless required by the 1940 Act. Under
certain circumstances, however, shareholders may apply for
shareholder information in order to obtain signatures to request
a special shareholder meeting. Moreover, pursuant to the Bylaws
of the Company, any Director may be removed by the affirmative
vote of a majority of the outstanding Company shares; and holders
of 25% or more of the outstanding shares of the Company can
require Directors to call a meeting of shareholders for the
purpose of voting on the removal of one or more Directors. On
any matter submitted to the shareholders, the holder of each Fund
share is entitled to one vote per share (with proportionate
voting for fractional shares) regardless of the relative NAVs of
the Funds' shares. However, on matters affecting an individual
Fund, a separate vote of the shareholders of that Fund is
required. Shareholders of the Fund are not entitled to vote on
any matter which does not affect that Fund but which requires a
separate vote of another Fund. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the
shares voting for the election of Directors can elect 100% of the
Company's Board of Directors, and the holders of less than 50% of
the shares voting for the election of Directors will not be able
to elect any person as a Director.
Shareholders of a particular Fund might have the power to
elect all of the Directors of the Company because that Fund has a
majority of the total outstanding shares of the Company. When
issued, each Fund's shares are fully paid and nonassessable, have
no pre-emptive or subscription rights, and are fully
transferable. There are no conversion rights.
TAX CONSIDERATIONS
The Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the Code). Accordingly, the Fund will not be liable for
federal income taxes on its taxable net investment income and net
capital gains (capital gains in excess of capital losses) that
are distributed to shareholders, provided that the Fund
distributes at least 90% of its net investment income and net
short-term capital gain for the taxable year.
To qualify as a regulated investment company, the Fund must,
among other things, (1) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such
stock, securities, or currencies (the 90% test), (2) derive in
each taxable year less than 30% of its gross income from the sale
or other disposition of stock or securities held less than three
months (the 30% test), and (3) satisfy certain diversification
requirements, at the close of each quarter of the Fund's taxable year.
The Code imposes a nondeductible 4% excise tax on a
regulated investment company that fails to distribute during each
calendar year an amount at least equal to the sum of (1) 98% of
its taxable net investment income for the calendar year, (2) 98%
of its capital gain net income for the twelve month period ending
on October 31, and (3) any prior amounts not distributed. The
Fund intends to make such distributions as are necessary to avoid
imposition of the excise tax.
Taxable distributions are generally included in a
shareholder's gross income for the taxable year in which they are
received. Dividends declared in October, November, or December
and made payable to shareholders of record in such a month will
be deemed to have been received on December 31, if the Fund pays
the dividend during the following January. If a shareholder of
the Fund receives a distribution taxable as long-term capital
gain with respect to shares of the Fund and redeems or exchanges
the shares before he has held them for more than six months, any
loss on the redemption or exchanges that is less than or equal to
the amount of the distribution will be treated as long-term
capital loss.
The Portfolio is not subject to Federal income taxation.
Instead, the Fund and other investors investing in the Portfolio
must take into account, in computing their Federal income tax
liability, their share of the Portfolio's income, gains, losses,
deductions, credits and tax preference items, without regard to
whether they have received any cash distributions from the Portfolio.
Distributions received by the Fund from the Portfolio
generally will not result in the Fund recognizing any gain or
loss for Federal income tax purposes, except that: (i) gain will
be recognized to the extent that any cash distributed exceeds the
Fund's basis in its interest in the Portfolio prior to the
distribution; (ii) income or gain may be realized if the
distribution is made in liquidation of the Fund's entire interest
in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio; and (iii) loss may
be recognized if the distribution is made in liquidation of the
Fund's entire interest in the Portfolio and consists solely of
cash and/or unrealized receivables. The Fund's basis in its
interest in the Portfolio generally will equal the amount of cash
and the basis of any property which the Fund invests in the
Portfolio, increased by the Fund's share of income from the
Portfolio, and decreased by the amount of any cash distributions
and the basis of any property distributed from the Portfolio.
Any gain or loss realized by a shareholder upon the sale or
other disposition of shares of the Fund, or upon receipt of a
distribution in complete liquidation of the Fund, generally will
be a capital gain or loss which will be long-term or short-term,
generally depending upon the shareholder's holding period for the
shares. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced
(including shares acquired pursuant to a dividend reinvestment
plan) within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on a
disposition of shares held by the shareholder for six months or
less will be treated as a long term capital loss to the extent of
any distributions of net capital gains received by the
shareholder with respect to such shares.
DIRECTORS AND OFFICERS OF THE COMPANY
The Board of Directors of the Company consists of seven Directors. Set
forth below are the Directors and officers of the Company, their
respective offices and principal occupations during the last five years.
Unless otherwise indicated, the business address of each is 9800
Fredericksburg Rd., San Antonio, TX 78288.
M. Staser Holcomb 1, 2
Director and Chairman of the Board of Directors
Age: 63
President, Chief Executive Officer, Director and Vice Chairman of
the Board of Directors of USAA Capital Corporation and several of
its subsidiaries and affiliates (1/96-present); Executive Vice
President, Chief Information Officer, United Services Automobile
Association (USAA) (2/94-12/95); Executive Vice President, Chief
Financial Officer, USAA and President, Director and Vice Chairman
of the Board of Directors, USAA Capital Corporation (9/91-1/94);
and Executive Vice President, Property & Casualty Operations,
USAA (1/90-8/91). Mr. Holcomb also will serve as a Trustee and
Chairman of the Board of Trustees of USAA Investment Trust and
USAA State Tax-Free Trust and as a Director and Chairman of the
Boards of Directors of USAA Investment Management Company (IMCO),
USAA Tax Exempt Fund, Inc., USAA Shareholder Account Services,
USAA Federal Savings Bank and USAA Real Estate Company.
Michael J.C. Roth 1, 2
Director, President and Vice Chairman of the Board of Directors
Age: 54
Chief Executive Officer, IMCO (10/93-present); President,
Director and Vice Chairman of the Board of Directors, IMCO (1/90-
present); Director, USAA Federal Savings Bank (12/83-8/91). Mr.
Roth currently serves as President, Trustee and Vice Chairman of
the Boards of Trustees of USAA Investment Trust and USAA State
Tax-Free Trust, as President, Director and Vice Chairman of the
Boards of Directors of USAA Tax Exempt Fund, Inc. and USAA
Shareholder Account Services, as Director of USAA Life Insurance
Company and as Trustee and Vice Chairman of USAA Life Investment
Trust.
John W. Saunders, Jr. 1, 2, 4
Director and Vice President
Age: 61
Senior Vice President, Investments, IMCO (10/85-present);
Director, BHC Financial, Inc. and BHC Securities, Inc. (1/87-
present). Mr. Saunders currently serves as Trustee and Vice
President of USAA Investment Trust and USAA State Tax-Free Trust,
Director and Vice President of USAA Tax Exempt Fund, Inc.,
Director of IMCO, as Senior Vice President of USAA Shareholder
Account Services, and as Vice President of USAA Life Investment
Trust.
George E. Brown 3, 4, 5
5829 Northgap Drive
San Antonio, TX 78239
Director
Age: 77
Retired. Mr. Brown currently serves as a Trustee of USAA
Investment Trust and USAA State Tax-Free Trust and as a Director
of USAA Tax Exempt Fund, Inc.
Howard L. Freeman, Jr. 2, 3, 5
2710 Hopeton
San Antonio, TX 78230
Director
Age: 60
Assistant General Manager for Finance, San Antonio City Public
Service Board (1976-present). Mr. Freeman currently serves as a
Trustee of USAA Investment Trust and USAA State Tax-Free Trust
and as a Director of USAA Tax Exempt Fund, Inc.
Richard A. Zucker 3, 4, 5
407 Arch Bluff
San Antonio, TX 78216
Director
Age: 52
Vice President, Beldon Roofing and Remodeling (1985-present).
Mr. Zucker currently serves as a Trustee of USAA Investment Trust
and USAA State Tax-Free Trust and as a Director of USAA Tax
Exempt Fund, Inc.
Barbara B. Dreeben 3, 5
200 Patterson #1008
San Antonio, TX 78209
Director
Age: 50
President, Postal Addvantage (7/92-present); Consultant, Nancy
Harkins Stationer (8/91-present); Merchandise Manager, Nancy
Harkins Stationer (7/82-8/91). Mrs. Dreeben currently serves as
a Trustee of USAA Investment Trust and USAA State Tax-Free Trust
and as a Director of USAA Tax Exempt Fund, Inc.
Michael D. Wagner 1
Secretary
Age: 47
Vice President, Corporate Counsel, USAA (1982-present). Mr.
Wagner has held various positions in the legal department of USAA
since 1970 and currently serves as Vice President, Secretary and
Counsel, IMCO and USAA Shareholder Account Services, Secretary,
USAA Investment Trust, USAA State Tax-Free Trust, and USAA Tax
Exempt Fund, Inc. and as Vice President, Corporate Counsel for
various other USAA subsidiaries and affiliates.
Alex M. Ciccone 1
Assistant Secretary
Age: 46
Vice President, Compliance, IMCO (12/94-present); Vice President
and Chief Operating Officer, Commonwealth Shareholder Services
(6/94-11/94); Vice President, Compliance, IMCO (12/91-5/94); Vice
President, Compliance, Fund Management Co. (10/89-11/91); and
Vice President, Compliance, AIM Distributors, Inc. (4/82-11/91).
Mr. Ciccone currently serves as Assistant Secretary of USAA
Investment Trust, USAA State Tax-Free Trust, and USAA Tax Exempt
Fund, Inc.
Sherron A. Kirk 1
Treasurer
Age: 50
Vice President, Controller, IMCO (10/92-present); Vice President,
Corporate Financial Analysis, USAA (9/92-10/92); Assistant Vice
President, Financial Plans and Support, USAA (8/91-9/92);
Assistant Vice President, Real Estate Accounting, USAA Real
Estate Company (5/90-7/91). Mrs. Kirk currently serves as
Treasurer of USAA Investment Trust, USAA State Tax-Free Trust,
and USAA Tax Exempt Fund, Inc., and as Vice President, Controller
of USAA Shareholder Account Services.
Dean R. Pantzar 1
Assistant Treasurer
Age: 36
Executive Director, Mutual Fund Accounting, IMCO (10/95-present);
Director, Mutual Fund Accounting, IMCO (12/94-10/95); Senior
Manager, KPMG Peat Marwick LLP (7/88-12/94). Mr. Pantzar
currently serves as Assistant Treasurer of USAA Investment Trust,
USAA State Tax-Free Trust, and USAA Tax Exempt Fund, Inc.
- -----------------
1 Indicates those Directors and officers who are employees of
the Manager or affiliated companies and are considered
"interested persons" under the 1940 Act.
2 Member of Executive Committee
3 Member of Audit Committee
4 Member of Pricing and Investment Committee
5 Member of Corporate Governance Committee
Directors and Officers of the Company, cont.
Between the meetings of the Board of Directors and while the
Board is not in session, the Executive Committee of the Board of
Directors has all the powers and may exercise all the duties of
the Board of Directors in the management of the business of the
Company which may be delegated to it by the Board. The Pricing
and Investment Committee of the Board of Directors acts upon
various investment-related issues and other matters which have
been delegated to it by the Board. The Audit Committee of the
Board of Directors reviews the financial statements and the
auditor's reports and undertakes certain studies and analyses as
directed by the Board. The Corporate Governance Committee of the
Board of Directors maintains oversight of the organization,
performance, and effectiveness of the Board and independent
Directors.
In addition to the previously listed Directors and/or
officers of the Company who also serve as Directors and/or
officers of the Manager, the following individuals are Directors
and/or executive officers of the Manager: Josue Robles, Jr.,
Senior Vice President, Chief Financial Officer/Controller, USAA;
Bradford W. Rich, Senior Vice President, General Counsel and
Secretary, USAA; Harry W. Miller, Senior Vice President,
Investments (Equity); and John J. Dallahan, Senior Vice
President, Investment Services. There are no family
relationships among the Directors, officers, and managerial level
employees of the Company or its Manager.
The following table sets forth information describing the
compensation of the current Directors of the Company for their
services as Directors for the fiscal year ended July 31, 1995.
Name Aggregate Total Compensation
of Compensation from the USAA
Director from the Company Family of Funds (c)
- -------- ---------------- -------------------
C. Dale Briscoe* $4,612 $18,500
George E. Brown (a) 4,612 18,500
Barbara B. Dreeben 4,612 18,500
Howard L. Freeman, Jr. 4,612 18,500
Hansford T. Johnson* None (b) None (b)
Michael J.C. Roth None (b) None (b)
John W. Saunders, Jr. None (b) None (b)
Richard A. Zucker 4,612 18,500
- ----------------
* Effective January 1, 1996, M. Staser Holcomb replaced
Hansford T. Johnson as Director and Chairman of the
Board of Directors and C. Dale Briscoe retired from the
Board of Directors.
(a) The USAA Family of Funds has accrued deferred compensation
for Mr. Brown in an amount (plus earnings thereon) of
$20,481. The compensation was deferred by Mr. Brown
pursuant to a non-qualified Deferred Compensation Plan,
under which deferred amounts accumulate interest quarterly
based on the annualized U.S. Treasury Bill rate in effect on
the last day of the quarter. Amounts deferred and
accumulated earnings thereon are not funded and are general
unsecured liabilities of the USAA Funds until paid. The
Deferred Compensation Plan was terminated in 1988 and no
compensation has been deferred by any Director/Trustee of
the USAA Family of Funds since the Plan was terminated.
(b) Hansford T. Johnson, Michael J.C. Roth, and John W.
Saunders, Jr. are affiliated with the Company's investment
adviser, IMCO, and, accordingly, receive no remuneration
from the Company or any other Fund of the USAA Family of Funds.
(c) At July 31, 1995, the USAA Family of Funds consisted of 4
registered investment companies offering 29 individual
funds. Each Director presently serves as a Director or
Trustee of each investment company in the USAA Family of
Funds. In addition, Michael J.C. Roth presently serves as a
Trustee of USAA Life Investment Trust, a registered
investment company advised by IMCO, consisting of five funds
offered to investors in a fixed and variable annuity
contract with USAA Life Insurance Company. Mr. Roth receives
no compensation as Trustee of USAA Life Investment Trust.
All of the above Directors are also Directors/Trustees of
the other funds for which IMCO serves as investment adviser. No
compensation is paid by any fund to any Director/Trustee who is a
director, officer, or employee of IMCO or its affiliates. No
pension or retirement benefits are accrued as part of fund
expenses. The Company reimburses certain expenses of the
Directors who are not affiliated with the investment adviser. As
of ________________________, the officers and Directors of the Company
and their families as a group owned beneficially or of record
less than 1% of the outstanding shares of the Company.
TRUSTEES AND OFFICERS OF THE PORTFOLIO
The Trustees and officers of the Portfolio and their principal
occupations during the past five years are set forth below.
Their titles may have varied during that period. Unless
otherwise indicated, the address of each Trustee and officer is 6
St. James Avenue, Boston, Massachusetts.
PHILIP SAUNDERS, JR. - Trustee (Age: ); Principal, Philip
Saunders Associates (Consulting); former Director of Financial
Industry Consulting, Wolf & Company; President, John Hancock Home
Mortgage Corporation; and Senior Vice President of Treasury and
Financial Services, John Hancock Mutual Life Insurance Company,
Inc. His address is 445 Glen Road, Weston, Massachusetts 02193.
CHARLES P. BIGGAR - Trustee (Age:_____); Retired; Director
of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler,
Hill Richards Inc.; formerly Vice President of International
Business Machines and President of the National Services and the
Field Engineering Divisions of IBM. His address is 12 Hitching
Post Lane, Chappaqua, New York 10514.
S. LELAND DILL - Trustee (Age:_____); Retired; Director,
Coutts & Co. Trust Holdings Limited and Coutts & Co. (U.S.A.)
International; Director, Zweig Cash Fund and Zweig Series Trust;
formerly, Partner of KPMG Peat Marwick, Mitchell & Co.; Director,
Vintners International Company, Inc.; General Partner of Pemco
(an investment company registered under the 1940 Act). His
address is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP W. COOLIDGE - Trustee and President (Age:_____);
Chairman, Chief Executive Officer and President, Signature Financial
Group (SFG) (since December, 1988) and Signature (since April, 1989).
JOHN R. ELDER - Treasurer (Age: ); Vice President, SFG
(since April, 1995); Treasurer, Phoenix Family of Mutual Funds
(prior to April, 1995); Audit Manager, Price Waterhouse (prior to
1983).
DAVID G. DANIELSON - Assistant Treasurer (Age:_____);
Assistant Manager, SFG (since May, 1991); Graduate Student, Northeastern
University (from April, 1990 to March, 1991); Tax Accountant & Systems
Analyst, Putnam Companies (prior to March, 1990).
JAMES S. LELKO, JR. - Assistant Treasurer (Age:_____); Assistant
Manager, SFG (since January 1993); Senior Tax Compliance Accountant,
Putnam Investments (prior to December 1992).
BARBARA M. O'DETTE - Assistant Treasurer (Age:_____); Assistant
Treasurer, SFG (since December, 1988); Assistant Treasurer, Signature
(since April, 1989).
DANIEL E. SHEA - Assistant Treasurer (Age:_____); Assistant
Manager, SFG (since November 1993); Supervisor and Senior
Technical Advisor, Putnam Investments (prior to November 1993).
THOMAS M. LENZ - Secretary (Age:_____); Vice President
and Associate General Counsel, SFG (since November,
1989); Assistant Secretary, Signature (since February, 1991);
Attorney, Ropes & Gray (prior to November, 1989).
LINDA T. GIBSON - Assistant Secretary (Age:_____); Legal
Counsel and Assistant Secretary, SFG (since May, 1992); Assistant
Secretary, Signature (since October, 1992); student, Boston
University School of Law (September, 1989 to May, 1992); Product
Manager, SFG (January, 1989 to September, 1989).
MOLLY S. MUGLER - Assistant Secretary (Age:_____); Legal
Counsel and Assistant Secretary, SFG (since December, 1988);
Assistant Secretary, Signature (since April, 1989).
ANDRES E. SALDANA - Assistant Secretary (Age:_____); Legal
Counsel, SFG (since November, 1992); Assistant Secretary,
Signature (since September, 1993); Attorney, Ropes & Gray
(September, 1990 to November, 1992); student, Yale Law School
(September, 1987 to May, 1990).
No person who is an officer or director of Bankers Trust is
an officer or Trustee of the Portfolio. No director, officer or
employee of SFG or any of its affiliates will receive any
compensation from the Portfolio for serving as an officer or
Trustee of the Portfolio. The Portfolio and certain other
investment companies advised by Bankers Trust (the Fund Complex)
collectively pay each Trustee who is not a director, officer or
employee of Bankers Trust, SFG, or any of their affiliates an
annual fee of $10,000, respectively, per annum plus $500,
respectively, per meeting attended and reimburses them for travel
and out-of-pocket expenses.
For the year ended December 31, 1995, the Portfolio accrued
Trustees fees equal to $______________.
The following table reflects fees paid to the Trustees of
the Portfolio for the year ended December 31, 1995.
TRUSTEE COMPENSATION TABLE
Pension or
Retirement
Benefits
Accrued as
Name of Aggregate Part of Estimated Annual Total Compensation
Person, Compensation Portfolio Benefits upon from Fund Complex
Position from Portfolio Expenses Retirement Paid to Trustees
- -------- -------------- -------- ---------- ----------------
Philip W. Coolidge none none none none
Trustee
Charles P. Biggar _____ none none $12,000
Trustee
S. Leland Dill _____ none none $12,000
Trustee
Bankers Trust reimbursed the Portfolio for a portion of
their Trustees fees for the period above. See Investment Adviser
and Administrator below.
INVESTMENT ADVISER
As described in the Fund's Prospectus, USAA Investment Management
Company is the Manager and investment adviser, providing the
services under the Management Agreement. The Manager, organized
in May 1970, has served as investment adviser and underwriter for
USAA Mutual Fund, Inc. from its inception.
In addition to the services it provides under the Management Agreement,
the Manager advises and manages the investments for USAA and its affiliated
companies as well as those of USAA Investment Trust, USAA Tax
Exempt Fund, Inc., USAA State Tax-Free Trust, and USAA Life
Investment Trust. As of the date of this SAI, total assets under
management by the Manager were approximately $_____ billion, of
which approximately $______ billion were in mutual fund portfolios.
Under the Management Agreement, the Manager presently monitors the
services provided by Bankers Trust to the Portfolio. The Manager receives
no fee for providing these monitoring services. In the event the Fund's
Board of Directors determines it is in the best interests of the Fund's
shareholders to withdraw its investment in the Portfolio, the Manager would
become responsible for directly managing the assets of the Fund.
In such event, the Fund would pay the Manager an annual fee of
.10% of the Fund's ANA, accrued daily and paid monthly.
The Management Agreement will remain in effect until April
30, 1998 for the Fund and will continue in effect from year to
year thereafter for each Fund as long as it is approved at least
annually by a vote of the outstanding voting securities of the
Fund (as defined by the 1940 Act) or by the Board of Directors
(on behalf of such Fund) including a majority of the Directors
who are not interested persons of the Manager or (otherwise than
as Directors) of the Company, at a meeting called for the purpose
of voting on such approval. The Management Agreement may be
terminated at any time by either the Company or the Manager on 60
days' written notice. It will automatically terminate in the
event of its assignment (as defined by the 1940 Act).
Under the terms of the Management Agreement, the Manager is
required to reimburse the Fund in the event that the total annual
expenses, inclusive of the management fees, but exclusive of the
interest, taxes, brokerage fees and extraordinary items, incurred
by the Fund exceeds any applicable state expense limitation. At
the current time, the most restrictive expense limitation is 2.5%
of the first $30,000,000 of average net assets (ANA), 2% of the
next $70,000,000 ANA, and 1.5% of the remaining ANA.
From time to time the Manager may, without prior notice to
shareholders, waive all or any portion of fees or agree to
reimburse expenses incurred by the Fund. The Manager has
voluntarily agreed to limit the annual expenses of the Fund to
.18% of the Fund's ANA until May 1, 1997 and will reimburse the
Fund for all expenses in excess of such limitation. After May 1,
1997, any such waiver or reimbursement may be terminated by the
Manager at any time without prior notice to the shareholders.
Under the terms of the Portfolio's investment advisory agreement
with Bankers Trust (the Advisory Agreement), Bankers Trust
manages the Portfolio subject to the supervision and direction of
the Board of Trustees of the Portfolio. Bankers Trust will: (i)
act in strict conformity with the Portfolio's Declaration of
Trust, the 1940 Act and the Investment Advisers Act of 1940, as
the same may from time to time be amended; (ii) manage the Portfolio
in accordance with the Portfolio's investment objective, restrictions
and policies; (iii) make investment decisions for the Portfolio; and
(iv) place purchase and sale orders for securities and other financial
instruments on behalf of the Portfolio.
Bankers Trust bears all expenses in connection with the
performance of services under the Advisory Agreement. The Fund
and the Portfolio each bear certain other expenses incurred in
its operation, including: taxes, interest, brokerage fees and
commissions, if any; fees of Trustees of the Portfolio or
Directors of the Company who are not officers, directors or
employees of Bankers Trust, SFG, the Manager or any of their
affiliates; SEC fees and state Blue Sky qualification fees;
charges of custodians and transfer and dividend disbursing
agents; certain insurance premiums; outside auditing and legal
expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation,
telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of
shareholders, officers and Trustees of the Portfolio or Directors
of the Company; and any extraordinary expenses.
For the years ended December 31, 1995 and 1994, Bankers Trust
accrued $_____________ and $428,346, respectively, in compensation for
investment advisory services provided to the Portfolio. During the same
periods, Bankers Trust reimbursed $___________ and $249,230,
respectively, to the Portfolio to cover expenses.
Bankers Trust may have deposit, loan and other commercial
banking relationships with the issuers of obligations which may
be purchased on behalf of the Portfolio, including outstanding
loans to such issuers which could be repaid in whole or in part
with the proceeds of securities so purchased. Such affiliates
deal, trade and invest for their own accounts in such obligations
and are among the leading dealers of various types of such
obligations. Bankers Trust has informed the Portfolio that, in
making its investment decisions, it does not obtain or use
material inside information in its possession or in the
possession of any of its affiliates. In making investment
recommendations for the Portfolio, Bankers Trust will not inquire
or take into consideration whether an issuer of securities
proposed for purchase or sale by the Portfolio is a customer of
Bankers Trust, its parent or its subsidiaries or affiliates and,
in dealing with its customers, Bankers Trust, its parent,
subsidiaries and affiliates will not inquire or take into
consideration whether securities of such customers are held by
any fund managed by Bankers Trust or and such affiliate.
The Fund's prospectus contains disclosure as to the amount
of Bankers Trust's investment advisory and services fees,
including waivers thereof. Bankers Trust may not recoup any of
its waived investment advisory and services fees. Such waivers
by Bankers Trust shall stay in effect for at least 12 months.
ADMINISTRATOR
Under the terms of the Fund's administration agreement with the
Manager, the Manager is obligated on a continuous basis to
provide such administrative services as the Board of Directors of
the Company reasonably deems necessary for the proper
administration of the Fund. The Manager will generally assist in
all aspects of the Fund's operations; supply and maintain office
facilities, statistical and research data, data processing
services, clerical, accounting, bookkeeping and recordkeeping
services (including without limitation the maintenance of such
books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), internal
auditing, executive and administrative services, and stationery
and office supplies; prepare reports to shareholders; prepare and
file tax returns; supply financial information and supporting
data for reports to and filings with the SEC and various state
Blue Sky authorities; supply supporting documentation for
meetings of the Board of Directors; provide monitoring reports
and assistance regarding compliance with its Articles of
Incorporation, by-laws, investment objectives and policies and
with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and
realized capital gains or losses; and negotiate arrangements
with, and supervise and coordinate the activities of, agents and
others to supply services.
Pursuant to a sub-administration agreement between the
Manager, Bankers Trust and Investors Fiduciary Trust Company
(IFTC) (the Sub-Administration Agreement), IFTC performs such
sub-administration duties for the Fund as from time to time may
be agreed upon by the Manager, Bankers Trust and IFTC. The
Sub-Administration Agreement provides that IFTC will receive such
compensation from Bankers Trust as from time to time may be
agreed upon by the Manager, Bankers Trust and IFTC.
Under the administration and services agreement between the
Portfolio and Bankers Trust, Bankers Trust is obligated on a
continuous basis to provide such administrative services as the
Board of Trustees of the Portfolio reasonably deems necessary for
the proper administration of the Portfolio. Bankers Trust will
generally assist in all aspects of the Portfolio's operations;
supply and maintain office facilities (which may be in Bankers
Trust's own offices), statistical and research data, data
processing services, clerical, accounting, bookkeeping and
recordkeeping services (including without limitation the
maintenance of such books and records as are required under the
1940 Act and the rules thereunder, except as maintained by other
agents), internal auditing, executive and administrative
services, and stationery and office supplies; prepare reports to
investors; prepare and file tax returns; supply financial
information and supporting data for reports to and filings with
the SEC and various state Blue Sky authorities; supply supporting
documentation for meetings of the Board of Trustees; provide
monitoring reports and assistance regarding compliance with its
Declaration of Trust, by-laws, investment objectives and policies
and with Federal and state securities laws; arrange for
appropriate insurance coverage; calculate net asset values, net
income and realized capital gains or losses; and negotiate
arrangements with, and supervise and coordinate the activities
of, agents and others to supply services.
Pursuant to a sub-administration agreement between Bankers
Trust and SFG (the Sub-Administration Agreement), SFG performs
such sub-administration duties for the Portfolio as from time to
time may be agreed upon by Bankers Trust and SFG. The
Sub-Administration Agreement provides that Signature will receive
such compensation as from time to time may be agreed upon by SFG
and Bankers Trust. All such compensation will be paid by Bankers Trust.
For the years ended December 31, 1995 and 1994, Bankers
Trust received $_____________ and $214,173, respectively, in
compensation for administrative and other services provided to
the Portfolio.
The Manager has agreed that if in any year the aggregate expenses
of the Fund (including fees pursuant to the investment advisory agreement,
but excluding interest, taxes, brokerage and, if permitted by the
relevant state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction
over the Fund, the Manager will reimburse the Fund for the excess
expense to the extent required by state law. As of the date of
this SAI, the most restrictive annual expense limitation applicable
to the Fund is 2.5% of the Fund's first $30 million of average
annual net assets, 2.0% of the next $70 million of average annual
net assets and 1.5% of the remaining average annual net assets.
GENERAL INFORMATION
Underwriter
The Company has an agreement with the Manager for exclusive
underwriting and distribution of the Funds' shares on a
continuing best efforts basis. This agreement provides that the
Manager will receive no fee or other compensation for such
distribution services.
Transfer Agent
USAA Shareholder Account Services (SAS) performs transfer agent
services for the Company under a Transfer Agency Agreement.
Services include maintenance of shareholder account records,
handling of communications with shareholders, distribution of
Fund dividends, and production of reports with respect to account
activity for shareholders and the Company.
Custodian
The Custodian is responsible for, among other things,
safeguarding and controlling the Company's cash and securities,
handling the receipt and delivery of securities, and collecting
interest on the Company's investment in the Portfolio. Bankers
Trust serves as custodian for both the Fund and the Portfolio.
As custodian, it holds both the Fund's and the Portfolio's
assets. Bankers Trust will comply with the self-custodian
provisions of Rule 17f-2 under the 1940 Act.
Counsel
Goodwin, Procter & Hoar, Exchange Place, Boston, MA 02109, will
review certain legal matters for the Company in connection with
the shares offered by the Prospectus. Willkie Farr & Gallagher,
One Citicorp Center, 153 East 53rd Street, New York, New York
10022-4669, serves as counsel to the Portfolio.
Independent Accountant
_____________________ has been selected as the Independent
Accountants for the Fund. Coopers & Lybrand L.L.P., 1100
Main Street, Suite 900, Kansas City, Missouri 64105, has been
selected as Independent Accountants for the Portfolio.
CALCULATION OF PERFORMANCE DATA
Information regarding the total return of the Fund is provided
under Performance Information in its Prospectus. See Valuation
of Securities herein for a discussion of the manner in which the
Fund's price per share is calculated.
Total Return
The Fund may advertise performance in terms of average annual
total return for 1, 5 and 10 year periods, or for such lesser
periods as the Fund has been in existence. Average annual total
return is computed by finding the average annual compounded rates
of return over the periods that would equate the initial amount
invested to the ending redeemable value, according to the
following formula:
P(1 + T)^n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year periods at the end of the
year or period
The calculation assumes any charges are deducted from the
initial $1,000 payment and assumes all dividends and
distributions by such Fund are reinvested at the price stated in
the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder
accounts.
APPENDIX A - COMPARISON OF FUND PERFORMANCE
Occasionally, we may make comparisons in advertising and sales
literature between the Fund contained in this SAI and other Funds
in the USAA Family of Funds. These comparisons may include such
topics as risk and reward, investment objectives, investment
strategies, and performance.
Fund performance also may be compared to the performance of
broad groups of mutual funds with similar investment goals or
unmanaged indexes of comparable securities. Evaluations of Fund
performance made by independent sources may also be used in
advertisements concerning the Fund, including reprints of, or
selections from, editorials or articles about the Fund. The Fund
or its performance may also be compared to products and services
not constituting securities subject to registration under the
Securities Act of 1933 such as, but not limited to, certificates
of deposit and money market accounts. Sources for performance
information and articles about the Fund may include the following:
AAII Journal, a monthly association magazine for members of the
American Association of Individual Investors.
Arizona Republic, a newspaper which may cover financial and
investment news.
Austin American-Statesman, a newspaper which may cover financial news.
Bank Rate Monitor, a service which publishes rates on various
bank products such as CDs, MMDAs and credit cards.
Barron's, a Dow Jones and Company, Inc. business and financial
weekly that periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically
reports the performance rankings and ratings of a variety of
mutual funds.
Chicago Tribune, a newspaper which may cover financial news.
Consumer Reports, a monthly magazine which from time to time
reports on companies in the mutual fund industry.
Dallas Morning News, a newspaper which may cover financial news.
Denver Post, a newspaper which may quote financial news.
Financial Planning, a monthly magazine which may periodically
review mutual fund companies.
Financial Services Week, a weekly newspaper which covers
financial news.
Financial World, a monthly magazine that periodically features
companies in the mutual fund industry.
Forbes, a national business publication that periodically reports
the performance of companies in the mutual fund industry.
Fortune, a national business publication that periodically rates
the performance of a variety of mutual funds.
Fund Action, a mutual fund news report.
Houston Chronicle, a newspaper which may cover financial news.
Houston Post, a newspaper which may cover financial news.
IBC/Donoghue's Moneyletter, a biweekly newsletter which covers
financial news and from time to time rates specific mutual funds.
IBC's Money Market Insight, a monthly money market industry
analysis prepared by IBC USA, Inc.
Income and Safety, a monthly newsletter that rates mutual funds.
InvesTech, a bimonthly investment newsletter.
Investment Advisor, a monthly publication directed primarily to
the advisor community; includes ranking of mutual funds using a
proprietary methodology.
Investment Company Institute, the national association of the
American investment company industry.
Investor's Business Daily, a newspaper which covers financial news.
Kiplinger's Personal Finance Magazine, a monthly investment
advisory publication that periodically features the performance
of a variety of securities.
Lipper Analytical Services, Inc.'s Fixed Income Fund Performance
Analysis, a monthly publication of industry-wide mutual fund
performance averages by type of fund.
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis, a monthly publication of industry-wide mutual fund
averages by type of fund.
Los Angeles Times, a newspaper which may cover financial news.
Louis Rukeyser's Wall Street, a publication for investors.
Medical Economics, a monthly magazine providing information to
the medical profession.
Money, a monthly magazine that features the performance of both
specific funds and the mutual fund industry as a whole.
Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., reporting on the performance of the nation's
money market funds, summarizing money market fund activity, and
including certain averages as performance benchmarks,
specifically "Donoghue's Taxable First Tier Fund Average."
Morningstar 5 Star Investor, a monthly newsletter which covers
financial news and rates mutual funds produced by Morningstar,
Inc. (a data service which tracks open-end mutual funds).
Mutual Fund Forecaster, a monthly newsletter that ranks mutual funds.
Mutual Fund Investing, a newsletter covering mutual funds.
Mutual Fund Performance Report, a monthly publication of mutual
fund performance and rankings, produced by Morningstar, Inc.
Mutual Funds Magazine, a monthly publication reporting on mutual
fund investing.
Mutual Fund Source Book, an annual publication produced by
Morningstar, Inc. which describes and rates mutual funds.
Mutual Fund Values, a biweekly guidebook to mutual funds produced
by Morningstar, Inc.
Newsweek, a national business weekly.
New York Times, a newspaper which may cover financial news.
No Load Fund Investor, a newsletter covering companies in the
mutual fund industry.
Personal Investor, a monthly magazine which from time to time
features mutual fund companies and the mutual fund industry.
San Antonio Business Journal, a weekly newspaper that
periodically covers mutual fund companies as well as financial news.
San Antonio Express-News, a newspaper which may cover financial news.
San Francisco Chronicle, a newspaper which may cover financial news.
Smart Money, a monthly magazine featuring news and articles on
investing and mutual funds.
USA Today, a newspaper which may cover financial news.
U.S. News and World Report, a national business weekly that
periodically reports mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper
which covers financial news.
Washington Post, a newspaper which may cover financial news.
Weisenberger Mutual Funds Investment Report, a monthly newsletter
that reports on both specific mutual fund companies and the
mutual fund industry as a whole.
Worth, a magazine which covers financial and investment subjects
including mutual funds.
Your Money, a monthly magazine directed toward the novice investor.
In addition to the sources above, performance of the Fund
may also be tracked by Lipper Analytical Services, Inc. The Fund
will be compared to Lipper's appropriate fund category according
to fund objective and portfolio holdings. The S&P 500 Index Fund
will be compared to funds in Lipper's S&P 500 Index Objective category.
Footnotes in advertisements and other marketing literature will
include the time period applicable for any ranking used.
Other sources for total return and other performance data
which may be used by the Fund or by those publications listed
previously are Morningstar, Inc., Schabaker Investment
Management, and Investment Company Data, Inc. These are services
that collect and compile data on mutual fund companies.
APPENDIX B - DOLLAR-COST AVERAGING
Dollar-cost averaging is a systematic investing method which can
be used by investors as a disciplined technique for investing. A
fixed amount of money is invested in a security (such as a stock
or mutual fund) on a regular basis over a period of time,
regardless of whether securities markets are moving up or down.
This practice reduces average share costs to the investor
who acquires more shares in periods of lower securities prices
and fewer shares in periods of higher prices.
While dollar-cost averaging does not assure a profit or
protect against loss in declining markets, this investment
strategy is an effective way to help calm the effect of
fluctuations in the financial markets. Systematic investing
involves continuous investment in securities regardless of
fluctuating price levels of such securities. Investors should
consider their financial ability to continue purchases through
periods of low and high price levels.
As the following chart illustrates, dollar-cost averaging
tends to keep the overall cost of shares lower. This example is
for illustration only, and different trends would result in
different average costs.
HOW DOLLAR-COST AVERAGING WORKS
$100 Invested Regularly for 5 Periods
Market Trend
---------------------------------------------------------------
Down Up Mixed
------------------- ------------------ -----------------
Share Shares Share Shares Share Shares
Investment Price Purchased Price Purchased Price Purchased
------------------- ------------------ -----------------
$100 10 10 6 16.67 10 10
100 9 11.1 7 14.29 9 11.1
100 8 12.5 7 14.29 8 12.5
100 8 12.5 9 11.1 9 11.1
100 6 16.67 10 10 10 10
--- -- ----- -- ----- -- -----
$500 ***41 62.77 ***39 66.35 ***46 54.7
*Avg. Cost: $7.97 *Avg. Cost: $7.54 *Avg. Cost: $9.14
----- ----- -----
**Avg. Price: $8.20 **Avg. Price: $7.80 **Avg. Price: $9.20
----- ----- -----
* Average Cost is the total amount invested divided by
shares purchased.
** Average Price is the sum of the prices paid divided by number
of purchases.
*** Cumulative total of share prices used to compute average prices.
28083-0596
USAA MUTUAL FUND, INC.
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements included in Parts A and B (Prospectuses
and Statement of Additional Information) of this
Registration Statement:
With respect to the S&P 500 Index Fund, the Unaudited Financial
Statements to be included in Part B will be filed by amendment.
With respect to the Equity 500 Index Portfolio, the Audited
Financial Statements to be included in Part B will be filed
by amendment.
(b) Exhibits:
Exhibit No. Description of Exhibits
- ---------- -----------------------
1 (a) Articles of Incorporation dated October 10, 1980 (1)
(b) Articles of Amendment dated January 14, 1981 (1)
(c) Articles Supplementary dated July 28, 1981 (1)
(d) Articles Supplementary dated November 3, 1982 (1)
(e) Articles of Amendment dated May 18, 1983 (1)
(f) Articles Supplementary dated August 8, 1983 (1)
(g) Articles Supplementary dated July 27, 1984 (1)
(h) Articles Supplementary dated November 5, 1985 (1)
(i) Articles Supplementary dated January 23, 1987 (1)
(j) Articles Supplementary dated May 13, 1987 (1)
(k) Articles Supplementary dated January 25, 1989 (1)
(l) Articles Supplementary dated May 2, 1991 (1)
(m) Articles Supplementary dated November 14, 1991 (1)
(n) Articles Supplementary dated April 14, 1992 (1)
(o) Articles Supplementary dated November 4, 1992 (1)
(p) Articles Supplementary dated March 23, 1993 (1)
(q) Articles Supplementary dated May 5, 1993 (1)
(r) Articles Supplementary dated November 8, 1993 (1)
(s) Articles Supplementary dated January 18, 1994 (1)
(t) Articles Supplementary dated November 9, 1994 (1)
(u) Articles Supplementary dated November 8, 1995 (2)
(v) Articles Supplementary dated February 6, 1996 (filed herewith)
2 Bylaws, as amended February 6, 1996 (filed herewith)
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Growth Fund (1)
(b) Income Fund (1)
(c) Money Market Fund (1)
(d) Aggressive Growth Fund (1)
(e) Income Stock Fund (1)
(f) Growth & Income Fund (1)
(g) Short-Term Bond Fund (1)
(h) Form of S&P 500 Index Fund (filed herewith)
5 (a) Advisory Agreement dated September 21, 1990 (1)
(b) Letter Agreement dated June 1, 1993 adding Growth
& Income Fund and Short-Term Bond Fund (1)
6 (a) Underwriting Agreement dated July 25, 1990 (1)
(b) Letter Agreement dated June 1, 1993 adding Growth & Income
Fund and Short-Term Bond Fund (1)
(c) Letter Agreement dated ________________, 1996 adding
S&P 500 Index Fund (to be filed)
7 Not Applicable
8 (a) Custodian Agreement dated November 3, 1982 (1)
(b) Letter Agreement dated April 20, 1987 adding Income
Stock Fund (1)
(c) Amendment No. 1 to the Custodian Contract dated October
30, 1987 (1)
(d) Amendment to the Custodian Contract dated November 3, 1988 (1)
Exhibit No. Description of Exhibits
- ---------- -----------------------
(e) Amendment to the Custodian Contract dated February 6, 1989 (1)
(f) Amendment to the Custodian Contract dated November 8, 1993 (1)
(g) Letter Agreement dated June 1, 1993 adding Growth & Income
Fund and Short-Term Bond Fund (1)
(h) Subcustodian Agreement dated March 24, 1994 (filed herewith)
9 (a) Articles of Merger dated January 30, 1981 (1)
(b) Transfer Agency Agreement dated January 23, 1992 (1)
(c) Letter Agreement dated June 1, 1993 to Transfer Agency
Agreement adding Growth & Income Fund and Short-Term Bond
Fund (1)
(d) Amendments dated May 3, 1995 to the Transfer Agency Agreement
Fee Schedules for Growth Fund, Aggressive Growth Fund, Income
Fund, Growth & Income Fund, Income Stock Fund, Money Market
Fund, and Short-Term Bond Fund (1)
(e) Amendment No. 1 to Transfer Agency Agreement dated November
14, 1995 (2)
(f) Letter Agreement dated ________________, 1996 to Transfer
Agency Agreement adding S&P 500 Index Fund (to be filed)
10 (a) Opinion and Consent of Counsel with respect to the Growth Fund,
Aggressive Growth Fund, Income Fund, Money Market Fund, Income
Stock Fund, Growth & Income Fund, and Short-Term Bond Fund (2)
(b) Opinion and Consent of Counsel with respect to the S&P 500
Index Fund (filed herewith)
11 Other Opinions - Not Applicable
12 Financial Statements omitted from prospectus - Not Applicable
13 (a) Subscription and Investment Letter for Growth & Income Fund
and Short-Term Bond Fund (1)
(b) Form of Subscription and Investment Letter for S&P 500
Index Fund (filed herewith)
14 Prototype Plans
(a) USAA INVESTMENT MANAGEMENT COMPANY IRA Handbook (1)
(b) USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA Handbook (1)
(c) USAA INVESTMENT MANAGEMENT COMPANY 403(b)(7) Handbook (1)
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation (1)
17 Financial Data Schedule - Not Applicable
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron A. Kirk,
John W. Saunders, Jr., George E. Brown, Howard L. Freeman,
Jr., and Richard A. Zucker dated November 8, 1993 (1)
(b) Power of Attorney for Barbara B. Dreeben dated September 12,
1995 (1)
(c) Power of Attorney for M. Staser Holcomb dated February 6, 1996
(filed herewith)
(d) With respect to the S&P 500 Index Fund, Powers of Attorney for
Philip W. Coolidge, John R. Elder, Charles P. Biggar,
S. Leland Dill, and Philip Saunders Jr. dated February 9,
1996 (filed herewith)
- --------------------
(1) Previously filed with Post-Effective Amendment No. 38 of the
Registrant (No. 2-49560) filed with the Securities and
Exchange Commission on September 29, 1995.
(2) Previously filed with Post-Effective Amendment No. 39 of the
Registrant (No. 2-49560) filed with the Securities and
Exchange Commission on November 21, 1995.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Information pertaining to persons controlled by or under
common control with Registrant is hereby incorporated by
reference to the section captioned "Management of the
Company" in the Prospectus and the section captioned
"Directors and Officers of the Company" in the Statement of
Additional Information.
Item 26. Number of Holders of Securities
Set forth below are the number of record holders, as of
December 31, 1995, of each class of securities of the Registrant.
Title of Class Number of Record Holders
-------------- ------------------------
Aggressive Growth Fund 38,590
Growth Fund 84,555
Income Stock Fund 105,571
Income Fund 78,992
Money Market Fund 110,119
Growth & Income Fund 25,059
Short-Term Bond Fund 6,523
Item 27. Indemnification
Protection for the liability of the adviser and
underwriter and for the officers and directors of the
Registrant is provided by two methods:
(a) The Director and Officer Liability Policy. This policy
covers all losses incurred by the Registrant, its
adviser and its underwriter from any claim made against
those entities or persons during the policy period by
any shareholder or former shareholder of the Fund by
reason of any alleged negligent act, error or omission
committed in connection with the administration of the
investments of said Registrant or in connection with
the sale or redemption of shares issued by said Registrant.
(b) Statutory Indemnification Provisions. Under Section 2-
418 of the Maryland General Corporation Law, the
Registrant is authorized to indemnify any past or
present director, officer, agent or employee against
judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him in connection with
any proceeding in which he is a party by reason of
having served as a director, officer, agent or
employee, if he acted in good faith and reasonably
believed that, (i) in the case of conduct in his
official capacity with the Registrant, that his conduct
was in the best interests of the Registrant, or (ii) in
all other cases, that his conduct was at least not
opposed to the best interests of the Registrant. In
the case of any criminal proceeding, said director,
officer, agent or employee must in addition have had no
reasonable cause to believe that his conduct was
unlawful. In the case of a proceeding by or in the
right of the Registrant, indemnification may only be
made against reasonable expenses and may not be made in
respect of any proceeding in which the director,
officer, agent or employee shall have been adjudged to
be liable to the Registrant. The termination of any
proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent
creates a rebuttable presumption that the director,
officer, agent or employee did not meet the requisite
standard of conduct for indemnification. No
indemnification may be made in respect of any
proceeding charging improper personal benefit to the
director, officer, agent or employee whether or not
involving action in such person's official capacity, if
such person was adjudged to be liable on the basis that
improper personal benefit was received. If such
director, officer, agent or employee is successful, on
the merits or otherwise, in defense of any such
proceeding against him, he shall be indemnified against
the reasonable expenses incurred by him (unless such
indemnification is limited by the Registrant's charter,
which it is not). Additionally, a court of appropriate
jurisdiction may order indemnification in certain
circumstances even if the appropriate standard of
conduct set forth above was not met.
Indemnification may not be made unless authorized in
the specific case after determination that the
applicable standard of conduct has been met. Such
determination shall be made by either: (i) the board
of directors by either (x) a majority vote of a quorum
consisting of directors not parties to the proceeding
or (y) if such a quorum cannot be obtained, then by a
majority vote of a committee of the board consisting
solely of two or more directors not at the time parties
to such proceeding who were duly designated to act in
the matter by a majority vote of the full board in
which the designated directors who are parties may
participate; (ii) special legal counsel selected by the
board of directors or a committee of the board by vote
as set forth in (i) above, or, if the requisite quorum
of the board cannot be obtained therefore and the
committee cannot be established, by a majority vote of
the full board in which directors who are parties may
participate; or (iii) the stockholders.
Reasonable expenses may be reimbursed or paid by the
Registrant in advance of final disposition of a
proceeding after a determination, made in accordance
with the procedures set forth in the preceding
paragraph, that the facts then known to those making
the determination would not preclude indemnification
under the applicable standards provided the Registrant
receives (i) a written affirmation of the good faith
belief of the person seeking indemnification that the
applicable standard of conduct necessary for
indemnification has been met, and (ii) a written
undertaking to repay the advanced sums if it is
ultimately determined that the applicable standard of
conduct has not been met.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Articles of
Incorporation or otherwise, the Registrant has been
advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, then the Registrant will,
unless in the opinion of its counsel the matter has
been settled by a controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether indemnification by it is against public policy
as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Information pertaining to business and other
connections of the Registrant's investment adviser is
hereby incorporated by reference to the section of the
Prospectus captioned "Management of the Company" and to
the section of the Statement of Additional Information
captioned "Directors and Officers of the Company".
Item 29. Principal Underwriters
(a) USAA Investment Management Company (the "Adviser") acts
as principal underwriter and distributor of the
Registrant's shares on a best-efforts basis and
receives no fee or commission for its underwriting
services. The Adviser, indirectly wholly-owned by
United Services Automobile Association, also serves as
principal underwriter for USAA Tax Exempt Fund, Inc.,
USAA Investment Trust, and USAA State Tax-Free Trust.
(b) Set forth below is information concerning each director
and executive officer of USAA Investment Management
Company.
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- --------------------
M. Staser Holcomb Director and Chairman Director and
9800 Fredericksburg Rd. of the Board of Chairman of the
San Antonio, TX 78288 Directors Board of Directors
Michael J.C. Roth Chief Executive Officer, President, Director
9800 Fredericksburg Rd. President, Director, and and Vice Chairman of
San Antonio, TX 78288 Vice Chairman of the the Board of Directors
Board of Directors
John W. Saunders, Jr. Senior Vice President, Vice President and
9800 Fredericksburg Rd. Fixed Income Investments, Director
San Antonio, TX 78288 and Director
Harry W. Miller Senior Vice President, None
9800 Fredericksburg Rd. Equity Investments,
San Antonio, TX 78288 and Director
Bradford W. Rich Director None
9800 Fredericksburg Rd.
San Antonio, TX 78288
Josue Robles, Jr. Director None
9800 Fredericksburg Rd.
San Antonio, TX 78288
John J. Dallahan Senior Vice President, None
9800 Fredericksburg Rd. Investment Services
San Antonio, TX 78288
Michael D. Wagner Vice President, Secretary Secretary
9800 Fredericksburg Rd. and Counsel
San Antonio, TX 78288
Sherron A. Kirk Vice President and Treasurer
9800 Fredericksburg Rd. Controller
San Antonio, TX 78288
Alex M. Ciccone Vice President, Assistant
9800 Fredericksburg Rd. Compliance Secretary
San Antonio, TX 78288
(c) Not Applicable
Item 30. Location of Accounts and Records
The following entities prepare, maintain and preserve the
records required by Section 31(a) of the Investment Company
Act of 1940 (the "1940 Act") for the Registrant. These
services are provided to the Registrant through written
agreements between the parties to the effect that such
services will be provided to the Registrant for such periods
prescribed by the Rules and Regulations of the Securities
and Exchange Commission under the 1940 Act and such records
are the property of the entity required to maintain and
preserve such records and will be surrendered promptly on
request:
USAA Investment Management Company
9800 Fredericksburg Rd.
San Antonio, Texas 78288
USAA Shareholder Account Services
10750 Robert F. McDermott Freeway
San Antonio, Texas 78288
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant hereby undertakes to provide each person to
whom a prospectus is delivered a copy of the Registrant's
latest annual report(s) to shareholders upon request and
without charge.
The Registrant hereby undertakes with respect to the S&P
500 Index Fund to file financial statements which need not
be certified within four to six months from the date of the
commencement of operations.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Antonio and State
of Texas on the 6th day of February, 1996.
USAA MUTUAL FUND, INC.
/s/Michael J.C. Roth
---------------------
Michael J.C. Roth
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
(Signature) (Title) (Date)
/s/M. Staser Holcomb Chairman of the February 6, 1996
- ------------------------- Board of Directors
M. Staser Holcomb
/s/Michael J.C. Roth Vice Chairman of the Board February 6, 1996
- ------------------------- of Directors and President
Michael J.C. Roth (Principal Executive Officer)
/s/Sherron A. Kirk Treasurer (Principal February 6, 1996
- ------------------------- Financial and
Sherron A. Kirk Accounting Officer)
/s/John W. Saunders, Jr. Director February 6, 1996
- -------------------------
John W. Saunders, Jr.
/s/George E. Brown Director February 6, 1996
- -------------------------
George E. Brown
/s/Howard L. Freeman, Jr. Director February 6, 1996
- -------------------------
Howard L. Freeman, Jr.
/s/Richard A. Zucker Director February 6, 1996
- -------------------------
Richard A. Zucker
/s/Barbara B. Dreeben Director February 6, 1996
- -------------------------
Barbara B. Dreeben
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Equity 500 Index
Portfolio certifies that it has duly caused this amendment to the
Registration Statement of USAA Mutual Fund, Inc. to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
New York and State of New York on the 9th day of February, 1996.
EQUITY 500 INDEX PORTFOLIO
/s/PHILIP COOLIDGE
---------------------
PHILIP W. COOLIDGE
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
(Signature) (Title) (Date)
/s/Philip Coolidge Trustee and President February 9, 1996
- ------------------------- (Principal Executive Officer)
Philip W. Coolidge
/s/John R. Elder Treasurer and Secretary February 9, 1996
- ------------------------- (Principal Financial and
John R. Elder Accounting Officer)
/s/Charles P. Biggar Trustee February 9, 1996
- -------------------------
Charles P. Biggar
/s/S. Leland Dill Trustee February 9, 1996
- -------------------------
S. Leland Dill
/s/Philip Saunders, Jr. Trustee February 9, 1996
- -------------------------
Philip Saunders, Jr.
Exhibit Index
Exhibit Item Page No. *
- ------- ---- ----------
1 (a) Articles of Incorporation dated October 10, 1980 (1)
(b) Articles of Amendment dated January 14, 1981 (1)
(c) Articles Supplementary dated July 28, 1981 (1)
(d) Articles Supplementary dated November 3, 1982 (1)
(e) Articles of Amendment dated May 18, 1983 (1)
(f) Articles Supplementary dated August 8, 1983 (1)
(g) Articles Supplementary dated July 27, 1984 (1)
(h) Articles Supplementary dated November 5, 1985 (1)
(i) Articles Supplementary dated January 23, 1987 (1)
(j) Articles Supplementary dated May 13, 1987 (1)
(k) Articles Supplementary dated January 25, 1989 (1)
(l) Articles Supplementary dated May 2, 1991 (1)
(m) Articles Supplementary dated November 14, 1991 (1)
(n) Articles Supplementary dated April 14, 1992 (1)
(o) Articles Supplementary dated November 4, 1992 (1)
(p) Articles Supplementary dated March 23, 1993 (1)
(q) Articles Supplementary dated May 5, 1993 (1)
(r) Articles Supplementary dated November 8, 1993 (1)
(s) Articles Supplementary dated January 18, 1994 (1)
(t) Articles Supplementary dated November 9, 1994 (1)
(u) Articles Supplementary dated November 8, 1995 (2)
(v) Articles Supplementary dated February 6, 1996 (filed herewith) 64
2 Bylaws, as amended February 6, 1996 (filed herewith) 67
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Growth Fund (1)
(b) Income Fund (1)
(c) Money Market Fund (1)
(d) Aggressive Growth Fund (1)
(e) Income Stock Fund (1)
(f) Growth & Income Fund (1)
(g) Short-Term Bond Fund (1)
(h) Form of S&P 500 Index Fund (filed herewith) 78
5 (a) Advisory Agreement dated September 21, 1990 (1)
(b) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (1)
6 (a) Underwriting Agreement dated July 25, 1990 (1)
(b) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (1)
(c) Letter Agreement dated _______________, 1996 adding S&P 500
Index Fund (to be filed)
7 Not Applicable
8 (a) Custodian Agreement dated November 3, 1982 (1)
(b) Letter Agreement dated April 20, 1987 adding Income Stock Fund (1)
(c) Amendment No. 1 to the Custodian Contract dated October 30, 1987 (1)
(d) Amendment to the Custodian Contract dated November 3, 1988 (1)
(e) Amendment to the Custodian Contract dated February 6, 1989 (1)
(f) Amendment to the Custodian Contract dated November 8, 1993 (1)
(g) Letter Agreement dated June 1, 1993 adding Growth & Income Fund
and Short-Term Bond Fund (1)
(h) Subcustodian Agreement dated March 24, 1994 (filed herewith) 81
Exhibit Index, cont.
Exhibit Item Page No. *
- ------- ---- ----------
9 (a) Articles of Merger dated January 30, 1981 (1)
(b) Transfer Agency Agreement dated January 23, 1992 (1)
(c) Letter Agreement dated June 1, 1993 to Transfer Agency Agreement
adding Growth & Income Fund and Short-Term Bond Fund (1)
(d) Amendments dated May 3, 1995 to the Transfer Agency Agreement Fee
Schedules for Growth Fund, Aggressive Growth Fund, Income Fund,
Growth & Income Fund, Income Stock Fund, Money Market Fund, and
Short-Term Bond Fund (1)
(e) Amendment No. 1 to Transfer Agency Agreement dated November 14,
1995 (2)
(f) Letter Agreement dated ____________, 1996 to Transfer Agency Agreement
adding S&P 500 Index Fund (to be filed)
10 (a) Opinion and Consent of Counsel with respect to the Growth Fund,
Aggressive Growth Fund, Income Fund, Money Market Fund, Income
Stock Fund, Growth & Income Fund, and Short-Term Bond Fund (2)
(b) Opinion and Consent of Counsel with respect to the S&P 500
Index Fund (filed herewith) 94
11 Other Opinions - Not Applicable
12 Financial Statements omitted from prospectus - Not Applicable
13 (a) Subscription and Investment Letter for Growth & Income Fund
and Short-Term Bond Fund (1)
(b) Form of Subscription and Investment Letter for S&P 500
Index Fund (filed herewith) 96
14 Prototype Plans
(a) USAA INVESTMENT MANAGEMENT COMPANY IRA Handbook (1)
(b) USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA Handbook (1)
(c) USAA INVESTMENT MANAGEMENT COMPANY 403(b)(7) Handbook (1)
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation (1)
17 Financial Data Schedule - Not Applicable
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron A. Kirk,
John W. Saunders, Jr., George E. Brown, Howard L. Freeman, Jr.,
and Richard A. Zucker dated November 8, 1993 (1)
(b) Power of Attorney for Barbara B. Dreeben dated September 12, 1995 (1)
(c) Power of Attorney for M. Staser Holcomb dated February 6, 1996
(filed herewith) 99
(d) With respect to the S&P 500 Index Fund, Powers of Attorney for
Philip W. Coolidge, John R. Elder, Charles P. Biggar,
S. Leland Dill, and Philip Saunders Jr. dated February 9,
1996 (filed herewith) 101
- --------------------
(1) Previously filed with Post-Effective Amendment No. 38 of the
Registrant (No. 2-49560) filed with the Securities and
Exchange Commission on September 29, 1995.
(2) Previously filed with Post-Effective Amendment No. 39 of the
Registrant (No. 2-49560) filed with the Securities and
Exchange Commission on November 21, 1995.
- -------------------------------------------------
* Refers to sequentially numbered pages
EXHIBIT 1(v)
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION (CHARTER)
OF
USAA MUTUAL FUND, INC.
Articles Supplementary dated February 6, 1996, supplementing
the Charter of USAA MUTUAL FUND, INC., a Maryland Corporation, as
heretofore amended.
ARTICLE I
USAA MUTUAL FUND, INC., pursuant to the provisions of its
Charter and Section 2-208 of the Maryland General Corporation
Law, hereby files Articles Supplementary for record evidencing
the classification of 50,000,000 shares of unissued stock into a
new class designated as the S&P 500 INDEX FUND.
ARTICLE II
Section 2.1 Description of Stock. Without limiting the
authority of the Board of Directors, as set forth in the Charter
to which these supplementary articles apply, to establish and
designate any further classes of stock, there is hereby
established and designated a ninth class of stock in addition to
the eight classes already established and designated as the
INCOME STOCK FUND, the SHORT-TERM BOND FUND, the GROWTH & INCOME
FUND, the AGGRESSIVE GROWTH FUND, the INCOME FUND, the GROWTH
FUND, the FEDERAL SECURITIES MONEY MARKET FUND and the MONEY
MARKET FUND. Such ninth class of stock shall be designated the
S&P 500 INDEX FUND and shall have the relative preferences,
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as are
described in Article VI of the Articles of Incorporation of the
USAA MUTUAL FUND, INC.
Section 2.2 Statement of Authority. The stock comprising
the ninth class of stock of the USAA MUTUAL FUND, INC., has been
classified by the Board of Directors of USAA MUTUAL FUND, INC.,
under the authority contained in Article V of the Charter of the
USAA MUTUAL FUND, INC., by vote duly adopted at a meeting of the
Board of Directors on February 6, 1996.
IN WITNESS WHEREOF, USAA MUTUAL FUND, INC. has caused these
Articles Supplementary to be executed by its Vice President and
attested by its Assistant Secretary thereunto duly authorized as
of the day and year first above written.
ATTEST: USAA MUTUAL FUND, INC.
By: /s/Alex M. Ciccone By:/s/John W. Saunders, Jr.
------------------------ ---------------------------
ALEX M. CICCONE JOHN W. SAUNDERS, JR.
Assistant Secretary Vice President
CERTIFICATE
The undersigned JOHN W. SAUNDERS, JR., Vice President of
USAA MUTUAL FUND, INC., who executed this on behalf of said
corporation the foregoing Articles Supplementary, of which this
Certificate is made a part, hereby acknowledges, in the name of
said corporation, the foregoing Articles Supplementary to be the
corporate act of said corporation and certifies that, to the best
of his knowledge, information and belief, that matters and facts
set below therein with respect to the approval thereof are true
in all material respects, under penalties of perjury.
USAA MUTUAL FUND, INC.
/s/John W. Saunders, Jr.
-----------------------
JOHN W. SAUNDERS, JR.
Vice President
EXHIBIT 2
USAA MUTUAL FUND, INC.
BYLAWS
AS AMENDED February 6, 1996
ARTICLE I
OFFICES
SECTION 1.1. Principal Office. The principal office of the
Company in the State of Maryland shall be in the City of
Baltimore, State of Maryland.
SECTION 1.2. Other Offices. The Company may also have
offices at such other places both within and without the State of
Maryland as the Board of Directors may from time to time
determine or the business of the Company may require, including
without limitation offices at San Antonio, Texas.
ARTICLE II
SHAREHOLDERS
SECTION 2.1. Place of Meetings. Meetings of shareholders
shall be held at the offices of the Company in the State of
Maryland, at the offices of the Company in the City of San
Antonio, Texas, or at any other place within the United States as
shall be designated from time to time by the Board of Directors
and stated in the notice of meeting or in a duly executed waiver
of notice thereof.
SECTION 2.2. Annual Meeting. The Company is not required to
hold an annual meeting of its stockholders in any year in which
the election of directors is not required to be acted upon under
the Investment Company Act of 1940 (the "1940 Act"). If the
Company is required by the 1940 Act to hold a meeting of
stockholders to elect directors, such meeting shall be held at a
date and time set by the Board of Directors in accordance with
the 1940 Act and no later than 120 days after the occurrence of
the event requiring the meeting. Any stockholders' meeting held
in accordance with the preceding sentence shall for all purposes
constitute the annual meeting of stockholders for the fiscal year
of the Company in which the meeting is held. Except as the
Charter or statute provides otherwise, any business may be
considered at an annual meeting without the purpose of the
meeting having been specified in the notice. Failure to hold an
annual meeting does not invalidate the Company's existence or
affect any otherwise valid corporate acts.
SECTION 2.3. Special Meetings. Special meetings of the
shareholders may be called by the Board of Directors or by the
President. Special meetings of shareholders shall be called by
the Secretary upon the written request of holders of shares
entitled to cast not less than twenty-five percent of all the
votes entitled to be cast at such meeting. Such request shall
state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. The Secretary shall inform such
requesting shareholders of the reasonably estimated cost of
preparing and mailing such notice of the meeting and, upon
payment to the Company of such costs, the Secretary shall give
notice stating the purpose or purposes of the meeting to all
shareholders entitled to notice of such meeting. No special
meeting need be called to consider any matter which is
substantially the same as a matter voted upon at any special
meeting of the shareholders held during the preceding twelve
months unless requested by the holders of shares entitled to cast
a majority of all votes entitled to be cast at such meeting.
SECTION 2.4. Notice and Purpose. Not less than ten (10) nor
more then ninety (90) days before the date of every shareholders'
meeting, the Secretary shall give to each shareholder entitled to
vote at such meeting, and to each shareholder not entitled to
vote who is entitled by statute to notice, written or printed
notice stating the time and place of the meeting and the purpose
or purposes for which the meeting is called, either by mail or by
presenting it to him personally or by leaving it at his residence
or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail
addressed to the shareholder at his post-office address as it
appears on the records of the Company, with postage thereon
prepaid. Business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
SECTION 2.5. Record Date. The Board of Directors may fix,
in advance, a date as the record date for the purpose of
determining shareholders entitled to notice of, or to vote at,
any meeting of shareholders or any adjournment thereof, or
entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of shareholders
for any other proper purpose. Such date in any case shall be not
more than ninety (90) days, and in case of a meeting of
shareholders, not less than ten (10) days, prior to the date on
which the particular action requiring such determination of
shareholders is to be taken.
SECTION 2.6. Quorum. The holders of a majority of the
shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the shareholders, but, if a
quorum is not represented, a majority in interest of those
represented may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting, at
which a quorum shall be present or represented, any business may
be transacted which might have been transacted at the meeting as
originally notified.
SECTION 2.7. Voting. Any holder of shares of the Company
shall be entitled to vote to the extent provided in subsection
6.2(f) of the Articles of Incorporation, either in person or by
proxy executed in writing by him or by his duly authorized
attorney-in-fact. Any holder of fractional shares of the Company
shall have proportionally the same voting rights as are provided
for a full share. No proxy shall be valid after eleven months
from the date of execution, unless otherwise provided in the
proxy. Each proxy shall be revocable unless expressly provided
therein to be irrevocable or unless otherwise made irrevocable by
law. Proxies shall be delivered to the Secretary of the Company
before or at the time of such meeting. The vote of the holders
of a majority of the shares entitled to vote and represented at a
meeting at which a quorum is present shall be the act of the
shareholders meeting, unless the vote of a greater number is
required by law, the Articles of Incorporation or these Bylaws.
SECTION 2.8. Officers. The President shall preside at and
the Secretary shall keep the records of each meeting of
shareholders, and in the absence of either such officer, his
duties shall be performed by some person appointed by the meeting.
SECTION 2.9. Order of Business. The business shall be
transacted in such order as the presiding officer shall determine.
ARTICLE III
DIRECTORS
SECTION 3.1. General Powers. The business and property of
the Company shall be managed by its Board of Directors, and
subject to the restrictions imposed by law, by the Articles of
Incorporation, or by these Bylaws, they shall exercise all the
powers of the Company.
SECTION 3.2. Delegation. To the extent permitted by law,
the Board of Directors may delegate the duty of management of the
Company's assets and may delegate such other of its powers and
duties as are permitted by the Articles of Incorporation or these
Bylaws, (a) to the Executive Committee or other committees, or
(b) to another party to act as manager, investment adviser or
underwriter pursuant to a written contract or contracts to be
approved in the manner required by the Investment Company Act of 1940.
SECTION 3.3. Number. The Board of Directors shall consist
of seven (7) directors, but the number of directors may be
increased or decreased (provided such decrease does not shorten
the term of any incumbent director) from time to time by the
Board of Directors by amendment of the Bylaws, provided that the
number of directors shall not be more than twenty-one (21) nor
less than three (3).
SECTION 3.4. Election, Resignations, Term of Office and
Vacancies. Until the first meeting of shareholders or until
their successors are duly elected and qualified, the Board of
Directors shall consist of the persons named as such in the
Articles of Incorporation. Cumulative voting is not permitted.
Directors need not be residents of the State of Maryland or
shareholders of the Company. Each director, unless he sooner
resigns or is removed, shall hold office until his successor is
elected and shall have qualified. Any director may resign his
office at any time by delivering his resignation in writing to
the Company. The acceptance of such resignation, unless required
by the terms thereof, shall not be necessary to make such
resignation effective. Subject to compliance with Section 16(a)
of the Investment Company Act of 1940, as amended, any vacancies
occurring in the Board of Directors other than by reason of an
increase in the number of directors may be filled by the
affirmative vote of a majority of the remaining directors, even
though such majority is less than a quorum. A director elected
by the Board of Directors to fill a vacancy shall be elected for
the unexpired term of his predecessor in office. If a special
meeting of shareholders is required to fill a vacancy, the
meeting shall be held within sixty (60) days or such longer
period as may be permitted by the Securities and Exchange Commission.
SECTION 3.5. Place of Meeting. Meetings of the Board of
Directors may be held either within or without the State of
Maryland, at whatever place is specified by the officer calling
the meeting. In the absence of a specific place designation, the
meeting shall be held at the office of the Company in the City of
San Antonio, Texas.
SECTION 3.6. Organizational and Regular Meetings. Any newly
elected Board of Directors may hold its first meeting for the
purpose of organization and the transaction of business, if a
quorum is present, immediately following its election at a
meeting of the shareholders, at the place of such meeting. No
notice of such first meeting need be given to either old or new
members of the Board of Directors. Regular meetings may be held
at such other times as shall be designated by the Board of
Directors and notice of such regular meetings shall not be required.
SECTION 3.7. Special Meetings. Special meetings of the
Board of Directors may be held at any time upon the call of the
President or any two (2) directors of the Company. The Secretary
shall give notice of such special meeting by mailing the same at
least three (3) days or by telegraphing or telephoning the same
at least one (1) day before the meeting to each director. Notice
of the time, place and purpose of such meeting may be waived in
accordance with Article VI of these Bylaws. Attendance of a
director at such meeting shall also constitute a waiver of notice
thereof, except where he attends for the announced purpose of
objecting to the transaction of any business on the ground that
the meeting is not lawfully called or convened. Except as
otherwise herein provided, neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 3.8. Quorum and Manner of Acting. A majority of the
number of directors fixed by these Bylaws as from time to time
amended shall constitute a quorum for the transaction of
business, but a smaller number may adjourn from time to time
until they can secure the attendance of a quorum. The act of a
majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors,
except as otherwise expressly required under the provisions of
the Investment Company Act of 1940, as amended, or where a larger
vote is required by law, the Articles of Incorporation or these
Bylaws. Any regular or special meeting of the Board of Directors
may be adjourned from time to time by those present, whether a
quorum is present or not.
SECTION 3.9. Removal of Directors. Any director may be
removed from office, either for or without cause, at any special
meeting of shareholders by the affirmative vote of a majority of
the outstanding shares entitled to vote for the election of
directors. The notice calling such meeting shall give notice of
the intention to act upon such matter, and if the notice so
provides, the vacancy caused by such removal may be filled at
such meeting by vote of a majority of the shares represented at
such meeting and entitled to vote for the election of directors.
SECTION 3.10. Action Without Meeting. Subject to the
provisions of the Investment Company Act of 1940, as amended, any
action permitted or required by law, these Bylaws or by the
Articles of Incorporation to be taken at a meeting of the Board
of Directors or any committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed
by all the members of the Board of Directors of such committee,
as the case may be. Such consent shall have the same force and
effect as a unanimous vote at a meeting, and may be stated as
such in any document or instrument filed with the Secretary of
State or State Department of Assessments and Taxation of Maryland.
ARTICLE IV
COMMITTEES
SECTION 4.1. Executive Committee. The Board of Directors
may, by resolution adopted by a majority of the entire Board of
Directors, designate an Executive Committee consisting of the
President and one or more of the directors of the Company, and
may delegate to such Executive Committee any of the powers of the
Board of Directors except:
a. the power to declare dividends or distributions on stock;
b. the power to recommend to the shareholders any action
which requires shareholder approval;
c. the power to amend the Bylaws;
d. the power to approve any merger or share exchange
which does not require shareholder approval; or
e. the power to issue stock, except as hereafter provided.
If the Board of Directors has given general authorization for the
issuance of stock of any class, the Executive Committee, in
accordance with a general formula or method specified by the
Board of Directors by resolution, may fix the terms of such class
and the terms on which any stock may be issued, to the extent
permitted by law and the Articles of Incorporation.
The Executive Committee shall keep written minutes of its
proceedings and shall report such minutes to the Board of
Directors. All such proceedings shall be subject to revision or
alteration by the Board of Directors; provided, however, that
third parties shall not be prejudiced by such revision or alteration.
SECTION 4.2. Other Committees. The Board of Directors may,
by resolution or resolutions adopted by a majority of the entire
Board, designate one or more committees, each committee to
consist of two or more of the directors of the Company, which
committee shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the
Company to the extent provided in said resolution or resolutions,
except where action of the Board of Directors is specified by
law. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by
the Board of Directors. The Board of Directors shall have the
power at any time to fill vacancies in, to change the size or
membership of, and to discharge any such committees.
SECTION 4.3. General. A committee shall fix its own rules of
procedure not inconsistent with these Bylaws and with any
directions of the Board of Directors. It shall meet at such
times and places and upon such notice as shall be provided by
such rules or by resolution of the Board of Directors. The
presence of a majority shall constitute a quorum for the
transaction of business, and in every case an affirmative vote of
a majority of the members of the committee present shall be
necessary for the taking of any action. A committee shall keep
regular minutes of its proceedings and report the same to the
Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 5.1. Number. The officers of the Company shall be
chosen by the Board of Directors and shall be a Chairman of the
Board, a President, a Vice President, a Secretary and a
Treasurer. The Board of Directors may also choose additional
Vice Presidents, and one or more Assistant Secretaries and
Assistant Treasurers.
SECTION 5.2. Selection. The Board of Directors annually
shall choose a Chairman of the Board, a President, one or more
Vice Presidents, a Secretary and a Treasurer, none of whom, other
than the Chairman of the Board, need be a member of the Board.
Any two or more offices, except the offices of President and Vice
President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required by law, the Articles of
Incorporation or these Bylaws to be executed, acknowledged or
verified by two or more officers.
SECTION 5.3. Term of Office. The officers of the Company
shall hold office until their successors are chosen and
qualified. Any vacancy occurring in any office of the Company
shall be filled by the Board of Directors.
SECTION 5.4. Selection of Other Officers and Agents. The
Board of Directors may appoint such other officers and agents as
it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 5.5. Salaries. The salaries of all officers and
agents of the Company shall be fixed by the Board of Directors.
No officer shall be disqualified from receiving a salary by
reason of his also being a director of the Company.
SECTION 5.6. Suspension. Except for the Chairman of the
Board and the President of the Company, all officers shall be
subject to peremptory suspension by written order of the
President, subject to subsequent action of the Board of
Directors. The Chairman of the Board and the President of the
Company shall be subject to peremptory suspension by written
order of the Board of Directors.
SECTION 5.7. Removal. Any officer or agent of the Company
may be removed during his term by a majority vote of the Board of
Directors whenever, in its judgment, removal of such person would
serve the best interests of the Company. Such removal shall
terminate all of such person's authority as an officer of agent,
but his right to salary and any contract rights shall depend on
the terms of his employment and the circumstances of his removal.
Election or appointment of an officer or agent shall not of
itself create contract rights.
SECTION 5.8. Chairman of the Board. The Chairman of the
Board shall preside at meetings of the Board of Directors. He
shall have such other powers as are usually incident to the
office of Chairman of the Board and shall exercise such other
specific powers as the Board of Directors may from time to time
assign to him.
SECTION 5.9. President. Subject to the control of the Board
of Directors, the President shall be the chief operating officer
of the Company and shall preside at all meetings of the
shareholders. He shall assume general and active management of
the business of the Company and general and active supervision
and direction over the other officers, agents, and employees of
the Company and shall see that their duties are properly
performed. The foregoing shall not apply to any responsibilities
delegated by the Board of Directors to a manager, investment
adviser, underwriter, custodian, or transfer agent pursuant to
any written contract, as provided for in the Articles of
Incorporation or these Bylaws.
The President, either alone or (if so required by law, these
Bylaws or the Board of Directors) with the Secretary or any other
officer of the Company so authorized by the Board of Directors,
may sign certificates of shares of the Company or any deeds,
mortgages, bonds, contracts or other instruments that the Board
of Directors has authorized for execution, except when the
signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or
agent of the Company or shall be required by law to be otherwise
signed or executed.
The President, in conjunction with the Secretary, may duly
authenticate the Company records or copies thereof for use as
evidence in any action or proceeding to which the Company may be
a party.
In general, the President shall perform all duties incident
to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 5.10. The Vice Presidents. The Vice President, or
if there shall be more than one, the Vice Presidents in the order
determined by the Board of Directors, shall be vested with all
the powers and required to perform all the duties of the
President in his absence or disability or refusal to act, and
when so acting shall have all the powers of and be subject to all
the restrictions upon the President. Each Vice President shall
perform such other duties and have such other powers as the
President or the Board of Directors may from time to time prescribe.
SECTION 5.11. The Secretary and Assistant Secretaries. The
Secretary of the Company shall have the following powers and duties:
a. to keep the minutes of the meetings of shareholders,
of the Board of Directors, and of any committee
thereof in one or more books provided for that purpose;
b. to see that all notices are duly given, in accordance
with these Bylaws or as required by law;
c. to be custodian of the corporate records and the seal
of the Company;
d. to see that the seal of the Company is affixed to all
documents duly authorized for execution under seal on
behalf of the Company;
e. to keep or cause to be kept for the Company the stock
ledger described in Section 7.2 of these Bylaws;
f. to countersign certificates for Company shares, the
issuance of which have been authorized by resolution
of the Board of Directors;
g. to have general charge of the stock transfer books of
the Company;
h. to duly authenticate, in conjunction with the
President, the Company records or copies thereof to be
used as evidence in any action or proceedings to which
the Company may be a party and
i. to perform all duties incidental to the Office of
Secretary and such other duties as, from time to time,
may be assigned to the Secretary by the President or
Board of Directors.
The Assistant Secretary, or if there by more than one, the
Assistant Secretaries in the order determined by the Board of
Directors, shall, in the absence or refusal to act or disability
of the Secretary, perform the duties and exercise the powers of
the Secretary and shall perform such other duties as, from time
to time, may be assigned by the President, the Secretary or the
Board of Directors.
SECTION 5.12. The Treasurer and Assistant Treasurers. The
Treasurer shall:
a. have charge and custody of, and be responsible for,
all the funds and securities of the Company, except
those which the Company has placed in the custody of a
bank or trust company pursuant to a written agreement
designating such bank or trust company as custodian of
the property of the Company;
b. keep full and accurate accounts of the receipts and
disbursements in books belonging to the Company;
c. cause all monies and other valuables to be deposited
to the credit of the Company;
d. receive, and give receipts for, monies due and payable
to the Company from any source whatsoever;
e. disburse the funds of the Company and supervise the
investment of its funds as ordered or authorized by
the Board of Directors, taking proper vouchers
therefore; and
f. in general, perform all the duties incident to the
office of Treasurer and such other duties as from time
to time may be assigned to him by the President, or
the Board of Directors.
The Assistant Treasurer, or if there be more than one, the
Assistant Treasurers in the order determined by the Board of
Directors, shall, in the absence or refusal to act or disability
of the Treasurer, perform such other duties as, from time to
time, may be assigned by the President, the Treasurer or the
Board of Directors.
SECTION 5.13. Other Subordinate Officers. Other subordinate
officers and agents appointed by the Board of Directors shall
exercise such powers and perform such duties as may be assigned
by the President or may be delegated to them by the resolution
appointing them, or by subsequent resolutions adopted from time
to time by the Board of Directors.
SECTION 5.14. Bonding. The Board of Directors may require
any officer, agent or employee to give bond for the faithful
discharge of his duty and for the protection of the Company in
such sum and with such surety or sureties as the Board of
Directors may deem advisable.
ARTICLE VI
WAIVERS OF NOTICE
Whenever, under the provisions of any law, the Articles of
Incorporation of amendments thereto, or these Bylaws, any notice
is required to be given to any shareholder, director or committee
member, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such notice.
Waivers given by telegram, radiogram, or cablegram shall be
deemed waivers in writing within the meaning of these Bylaws.
ARTICLE VII
CAPITAL STOCK
SECTION 7.1. Share Certificates. The Company will issue
upon written request certificates representing all full shares to
which shareholders are entitled. No certificate may be issued
until payment for the shares represented thereby has been made in
full. Such certificates shall be numbered and registered in the
order in which they are issued, shall be signed by the Chairman
of the Board, President or Vice President and countersigned by
the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer, and may bear the seal of the Company or a
facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles, if the certificate is
countersigned by a transfer agent. In case any officer who has
signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Company with the
same effect as if he were such officer at the date of its
issuance. Each share certificate shall include on its face the
name of the Company, the name of the shareholder and the class of
stock and number of shares represented by the certificate. In
addition it shall contain on its face or its back a statement
that the Company will furnish to any of the shareholders upon
request and without charge a full statement of the designations
and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the shares of each class
which the Company is authorized to issue and the authority of the
Board of Directors to designate new classes and determine such
matters with respect thereto.
SECTION 7.2. Stock Ledger and Record of Shareholders. The
Company shall maintain at its offices in the City of San Antonio,
State of Texas, or at the offices of a transfer agent, if one is
appointed, an original or duplicate stock ledger containing the
names and addresses of all shareholders and the number of shares
of each class held by each shareholder, and, if a certificate has
been issued, the certificate number, date of issue and whether it
was original issue or by transfer. The Board of Directors of the
Company may appoint one or more transfer agents of the stock of
the Company. Unless and until such appointment is made, the
Secretary of the Company shall maintain the stock ledger. The
names of shareholders as they appear on the stock ledger shall be
the official list of shareholders of record of the Company for
all purposes. The Company shall be entitled to treat the holder
of record of any shares of the Company as the owner thereof for
all purposes, and shall not be bound to recognize any equitable
or other claim to, or interest in, such shares or any rights
deriving from such shares, on the part of any other person,
including (but without limitation) a purchaser, assignee or
transferee, unless and until such other person becomes the holder
of record of such shares, whether or not the Company shall have
either actual or constructive notice of the interest of such
other person, except as otherwise provided by the laws of Maryland.
SECTION 7.3. Transfers of Shares. The shares of the Company
shall be transferable on the stock certificate books of the
company upon appropriate authorization in person by the holder of
record thereof, or his duly authorized attorney or legal
representative, and, if a certificate was issued, upon
endorsement and surrender for cancellation of the certificate for
such shares. All certificates surrendered for transfer shall be
cancelled, and no new certificates shall be issued to the
transferee until a former certificate or certificates for a like
number of shares shall have been surrendered and cancelled,
except that in the case of a lost, destroyed or mutilated
certificate, a new certificate may be issued therefor upon such
conditions for the protection of the Company and any transfer
agent of the Company as the Board of Directors may prescribe.
SECTION 7.4. Account Maintenance Charges. The Board of
Directors may, in accordance with such terms and conditions as it
may from time to time prescribe, establish an account maintenance
charge to be paid by shareholders of the Company for maintenance
of their accounts. Any account maintenance charge established by
the Board of Directors of the Company may be charged against
income credited to a shareholder account and, to the extent there
is not sufficient income credited to a shareholder account in any
period to cover such charge, the Company may redeem sufficient
shares owned by a shareholder to cover such charges. A
shareholder charged with any maintenance charge pursuant to this
Section 7.4 as a result of having an account with a value less
than a specified amount shall be given prompt written notice at
the time of imposition of such charge.
ARTICLE VIII
CUSTODIAN
SECTION 8.1. Employment of Custodian. All assets of the
Company shall be held by one or more custodian banks or trust
companies meeting the requirements of the Investment Company Act
of 1940, as amended, and having capital, surplus and undivided
profits of at least $2,000,000 and may be registered in the name
of the Company, including a designation of the particular class
to which such assets belong, or any such custodian, or a nominee
of either of them. The terms of any custodian agreement shall be
determined by the Board of Directors, which terms shall be in
accordance with the provisions of the Investment Company Act of
1940, as amended. If so directed by vote of the holders of a
majority of the outstanding shares of a particular class or by
vote of the Board of Directors, the custodian of the assets
belonging to such class shall deliver and pay over such assets as
specified in such vote.
Subject to such rules, regulations and orders as the
Securities and Exchange Commission may adopt, the Company may
direct a custodian to deposit all or any part of the securities
owned by the Company in a system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities
and Exchange Commission, or otherwise in accordance with the
Investment Company Act of 1940, as amended, pursuant to which
system all securities of any particular class of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the Company
or a custodian.
ARTICLE IX
INSPECTION OF BOOKS AND SHAREHOLDER LIST
SECTION 9.1. Inspection of Books. The Directors shall have
the power from time to time to determine whether and to what
extent, and at what times and places, and under what conditions
and regulations the accounts and books of the Company (other than
the stock ledger) or any of them shall be open to the inspection
of the shareholders. No shareholder shall have any right to
inspect any account or book or document of the Company except as
conferred by law or authorized by the Board of Directors or the
shareholders.
SECTION 9.2. Inspection of Shareholder List. Any one or
more persons, who together are and for at least six months have
been shareholders of record of at least 5% of the outstanding
shares of the Company, may submit (unless the Company at the
time of the request maintains a duplicate stock ledger at its
principal office in Maryland) a written request to any officer of
the Company or its resident agent in Maryland for a list of the
shareholders of the Company.
Within 20 days after such request, there shall be prepared and
filed at the Company's principal office in Maryland a list,
verified under oath by an officer of the Company or by its stock
transfer agent or registrar, which sets forth the name and
address of each shareholder and the number of shares of each
class which the shareholder holds.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Fiscal Year. The fiscal year of the Company
(except for the class designated the S&P 500 Index Fund) shall
begin on the first day of August and end on the thirty-first day
of July in each year. The fiscal year of the S&P 500 Index
Fund shall begin on the first day of January and end on the
thirty-first day of December in each year.
SECTION 10.2. Seal. The corporate seal shall have inscribed
thereon the name of the Company, the year of its organization and
the words "Corporate Seal, Maryland." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 10.3. Annual Statement of Affairs. The President or
any Vice President or the Treasurer shall prepare annually a full
and correct statement of the affairs of the Company, to include a
balance sheet and a financial statement of operations for the
preceding fiscal year. The statement of affairs shall be placed
on file at the Company's principal office within 120 days after
the end of the fiscal year.
ARTICLE XI
AMENDMENT
SECTION 11.1. By Shareholders. These Bylaws may be amended,
altered, repealed or added to at any special meeting called for
that purpose by the affirmative vote of a majority of the shares
entitled to vote and represented at such meeting.
SECTION 11.2. By Directors. The Board of Directors may
alter and amend these Bylaws at any regular meeting of the Board,
or at any special meeting of the Board called for that purpose,
by the affirmative vote of a majority of such Board, except where
a vote of shareholders is required by law, the Articles of
Incorporation, or these Bylaws.
EXHIBIT 4(h)
Number USAA MUTUAL FUND, INC. Shares
S&P 500(registered trademark) INDEX FUND
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP ______________
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of the common stock of the
par value of one cent per share of USAA MUTUAL FUND, INC.,
transferable on the books of the Corporation by the holder
thereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Sherron Kirk PICTURE of /s/Michael J.C. Roth
TREASURER USAA MUTUAL FUND, INC. PRESIDENT
SEAL 1980
Countersigned:
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By
-------------------------------
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as jointtenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
_________________________________________________________________________
Please Print or Typewrite Name and Address of Assignee
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
____________________________________________(____________________)_______
shares of the Capital Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint _______________________________
attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated________________ Signature(s)_______________________________________
Signature Guaranteed By__________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Shareholder Account
Services, USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 8(h)
USAA MUTUAL FUND, INC.
SUBCUSTODIAN AGREEMENT
WITH
TEXAS COMMERCE BANK
The undersigned custodian (the "Custodian") for USAA Mutual
Fund, Inc. (the "Company"), an open-end investment company
registered under the Investment Company Act of 1940 (the "1940
Act"), hereby appoints Texas Commerce Bank as subcustodian (the
"Subcustodian") for each of the respective series of the Fund
(the "Funds") and the Subcustodian hereby accepts such
appointment on the following terms and conditions as of the date
set forth below.
1. Qualification. The Custodian and the Subcustodian each
represents to the other and to the Company that it is qualified
to act as a custodian for a registered investment company under
the 1940 Act, and the Custodian represents to the Subcustodian
that it is the duly appointed, qualified and acting Custodian of
the Funds, with all necessary power and authority to enter into
this Agreement.
2. Subcustody. The Subcustodian agrees to maintain one or
more custodial accounts ("Subscription Accounts") for the Funds
in which checks ("Subscription Checks") issued in payment for
purchases of Fund shares shall be deposited by USAA Shareholder
Account Services ("USAA SAS"), transfer agent of the Funds (the
"Transfer Agent"). The Subcustodian further agrees to debit USAA
IMCO account no. 06407080765 (the "Return Item Account") for the
aggregate amount of all Subscription Checks returned to the
Subcustodian for non-payment ("Return Items"), informing USAA SAS
daily of any returned Subscription Checks. In the event that the
available funds in the Return Item Account are insufficient to
cover the amount of the Return Items, Subcustodian will promptly
notify Transfer Agent by telephone of the amount of such insufficiency.
Upon receipt of such telephone notice, Transfer Agent agrees to remit
to Subcustodian the full amount of any such insufficiency.
Each business day the Subcustodian agrees to, based
upon instructions by USAA SAS, remit to the Custodian by wire
transfer amounts of Subscription Checks deposited in the
Subscription Account on the preceding business day
notwithstanding whether the Subcustodian has collected good funds
in respect of such checks. The Funds will compensate the
Subcustodian for (i) estimated earnings lost on amounts wired to
the custodian in payment of Subscription Checks during the period
from the date wire payment is made through the date good funds on
such checks are received by the Subcustodian, (ii) for service
fees charged by the Subcustodian for processing Subscription
Checks as set forth in Schedule 1 to this Agreement (These
amounts will be paid monthly and computed based on an overall
account relationship.), (iii) other miscellaneous fees as
described in Schedule 1, and (iv) Return Items not paid by the
Transfer Agent or the USAA Investment Management Company (USAA
IMCO) within five (5) business days following a request for
payment by Subcustodian pursuant to Paragraph 2 hereof.
3. Instructions: Other Communications. Any one officer
or other authorized representative of the Transfer Agent
designated as hereinafter provided as an officer or other
authorized representative of the Transfer Agent authorized to
give instructions to the Subcustodian with respect to Fund assets
held in Subscription Accounts (an "Authorized Officer"), shall be
authorized to instruct the Subcustodian as to the deposit,
withdrawal or any other action with respect to Fund assets from
time to time by telephone, or in writing signed by such
Authorized Officer and delivered by telecopy, tested telex,
tested computer printout or such other reasonable method as the
Transfer Agent and Subcustodian shall agree; provided, however,
the Subcustodian is authorized to accept and act upon
instructions from the Transfer Agent, whether orally, by
telephone or otherwise, which the Subcustodian reasonably
believes to be given by an authorized person. The Subcustodian
may require that any instructions given orally or by
telecommunications be promptly confirmed in writing.
The Authorized Officers shall be as set forth on
Schedule 2 attached hereto or as otherwise from time to time
certified in writing by the Transfer Agent to the Subcustodian
signed by the President or any Vice President and any Assistant
Vice President, Assistant Secretary or Assistant Treasurer of the
Funds. In addition to a written list of authorized officers, the
Transfer Agent will provide Subcustodian with additional
information and signature cards as reasonably requested by
Subcustodian relating to the authorized officers. The
Subcustodian shall furnish the Transfer Agent, with a copy to the
Funds, by first class mail, or other mutually agreed-upon means
of transmission, (i) prompt telephonic and written notice of
Return Items, (ii) a monthly report on activity in each of the
Subscription Accounts within five (5) days after the end of each
calendar month, and (iii) a daily statement of activity in each
of the Subscription Accounts. The Subcustodian shall also
furnish the Custodian with a copy of item (ii) above.
4. Fees. The service fees charged by the Subcustodian
under the Agreement are set forth in Schedule 1 attached hereto.
Schedule 1 may be amended by the parties in writing provided
written notice is furnished to the Funds thirty (30) days in
advance of any increase in fees.
5. Liabilities.
(i) The Subcustodian shall be held harmless by the
Custodian and Transfer Agent and shall not be liable for any
action taken or omitted to be taken in good faith, or for any
mistake of law or fact, or for anything Subcustodian may do or
refrain from doing in connection with or as required by this
Agreement, except for failure to exercise ordinary care or act in
good faith. Except as otherwise set forth herein, the
Subcustodian shall have no responsibility with respect to Fund
assets. The Subcustodian shall, for the benefit of the Custodian
and the Funds, use the same care with respect to handling of Fund
assets in depository accounts as it uses in respect of its own
assets similarly held. The Subcustodian shall have no
responsibility with respect to any monies or any wire transfer,
checks or other instruments for the payment of money unless and
until actually received or secured by wire transfer by the
Subcustodian. IN NO EVENT WILL THE SUBCUSTODIAN BE LIABLE
TO CUSTODIAN, TRANSFER AGENT OR THE FUNDS FOR ANY INDIRECT
DAMAGES, LOST PROFITS, SPECIAL, PUNITIVE OR CONSEQUENTIAL
DAMAGES WHICH ARISE OUT OF OR IN CONNECTION WITH THE
SERVICES CONTEMPLATED HEREIN.
(ii) The Subcustodian shall indemnify, defend and save
harmless the Custodian and each Fund from and against all loss,
liability, claims and demands incurred by the Custodian or the
Fund arising out of or in connection with the Subcustodian's
willful malfeasance or bad faith in connection with its
obligations and duties under this Agreement.
(iii) The Custodian agrees to indemnify, defend and save
harmless the Subcustodian from and against any and all loss,
liability, claims and demands incurred by the Subcustodian in
connection with the performance by the Subcustodian in good faith
of any activity under this Agreement pursuant to instructions of
the Custodian.
(iv) It is understood and expressly stipulated that neither
the shareholders of any Fund or the members of the Board of such
Fund shall be personally liable hereunder. The obligations of
each Fund hereunder are not personally binding upon, nor shall
resort to the private property of, any of the members of the
Board of the Fund, nor of its shareholders, officers, employees
or agents, but only the Fund's property shall be bound.
6. Termination. Each party may terminate this Agreement
at any time by not less than thirty (30) days' prior written
notice which shall specify the date of such termination; and
further, provided, however, that the Custodian may immediately
terminate this Agreement in the event of the appointment of a
conservator or receiver for the Subcustodian by the Federal
Deposit Insurance Corporation or upon the happening of a like
event at the direction of an appropriate regulatory agency or
court of competent jurisdiction. Upon termination, the
Subcustodian shall make immediate delivery of all Fund assets
held in the Subscription Accounts to the Custodian or to any
third party specified by the Custodian in writing. If any
Subscription Checks are subsequently returned unpaid the Funds
shall direct the Transfer Agent to pay the Subcustodian the
amount thereof on behalf of the Funds promptly upon demand.
7. Communications. All notices to be delivered pursuant
to the terms of this Agreement shall be given in writing, and
shall be deemed given (a) upon delivery in person to the persons
indicated below, or (b) three days after deposit in the United
States Postal Service, postage prepaid, registered, or certified
mail, return receipt requested, or (c) upon receipt by facsimile
(provided that such receipt of such facsimile is confirmed
telephonically by the addressee), or (d) by overnight delivery
service (with receipt of delivery), sent to the addresses shown
below, or to such different address(es) as such party shall be
designated by written notice to the other parties hereto at least
ten (10) days in advance of the date upon which such change of
address shall be effective. All communications required or
permitted to be given under this Agreement, unless otherwise
agreed by the parties, shall be addressed as follows:
(i) to the Subcustodian:
Texas Commerce Bank
1020 N.E. Loop 410
San Antonio, Texas 78209
Attn: Jessica Jones
(ii) to the Custodian:
State Street Bank and Trust Company
One Heritage Drive
Palmer Building P.1-N
Quincy, Massachusetts 02171
Attn: Paul Kaminsky
(iii) to the Transfer Agent: USAA Shareholder Account Services
USAA Building, D-3-E
(As instructed by the Custodian) San Antonio, Texas 78288
Attn: Pat Bauer
8. Access to Records. The Subcustodian will not refuse
any reasonable request for inspection and audit of its books and
records concerning transactions and balances of the Subscription
Accounts by an agent of any Fund or the Custodian.
9. Cooperation. The Subcustodian shall cooperate with
each Fund and the Custodian and their respective independent
public accountants in connection with annual and other audits of
the books and records of the Custodian or the Fund.
10. Miscellaneous. This Agreement (i) shall be governed by
and construed in accordance with the laws of the State of Texas
without regard to conflicts of law rules, (ii) may be executed in
counterparts each of which shall be deemed an original but all of
which shall constitute the same instrument, and (iii) may only be
amended by the parties hereto in writing.
11. Terms and Conditions of Deposit Accounts. The handling
of the Subscription Accounts and the Return Item Account and all
other accounts maintained with Subcustodian in connection with or
relating to this Agreement will be subject to the Subcustodian's
Terms and Conditions of Deposit Accounts, and any and all rules
or regulations now or hereafter promulgated by the Subcustodian
which relate to such accounts and the Uniform Commercial Code, as
adopted by the State of Texas (except in the event any of the
same are contrary to the specific provisions hereof). In the event
of any specific conflict between the provisions hereof and the
provisions of any of the agreements, rules and regulations referenced
in this paragraph, the provisions of this Agreement shall control.
12. Signature Authority. Each of the undersigned
represents and warrants that he/she has the requisite authority
to execute this Agreement on behalf of the party for whom the
undersigned signs; that all necessary action has been taken to
authorize this Agreement; that this Agreement, upon execution and
delivery, shall be a binding obligation of such party.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date set forth below.
Dated: March 24, 1994
STATE STREET BANK & TRUST COMPANY
As Custodian
By: /s/ Ronald E. Logue
---------------------------
Title: Executive Vice President
TEXAS COMMERCE BANK
As Subcustodian
By:/s/ Jessica Jones
------------------------
Title: Vice President
USAA SHAREHOLDER ACCOUNT SERVICES
As Transfer Agent
By:/s/ A. Ray Otte
---------------------
A. Ray Otte
Title: Sr. Vice President-
Chief Financial Officer/Controller
By:/s/ Sherron A. Kirk
--------------------------
Sherron A. Kirk
Title: Vice President-Controller
The Funds each hereby consent and agree to the terms of the
foregoing Subcustodian Agreement; provided, however, that the
same shall not relieve the Custodian of any of its
responsibilities to the Funds as set forth in the Custodian
Agreements between the Funds and the Custodian.
USAA MUTUAL FUND, INC.
By:/s/ John W. Saunders, Jr.
------------------------------
John W. Saunders, Jr.
Title: Vice President
SCHEDULE 1
FEES
Item Processing Pricing
High Volume Corporate Accounts
Effective January 1994
SERVICE PRICE
------- -----
Pre-encoded Deposit
On-Us $ .019/item
Tier I/Local City $ .019/item
Tier II/Local RCPC $ .029/item
Tier III/Texas Fed Cities $ .040/item
Tier IV/Other Texas $ .050/item
Tier V/Other Transit $ .059/item
Rejects $ .03/item
Account Maintenance $ 10.00/account
Debits Posted $ .12/item
Credits Posted $ .45/deposit
FDIC Assessment $ .16/$1,000 ledger bal./mo.
MicroLink Pricing
Effective January 1994
SERVICE PRICE
------- -----
Cash Manager
- ------------
Software Pricing *
Cash Manager Setup Fee $ 325.00
Maintenance *
Cash Manager $ 35.00/customer/month
Bank Account Reporting
TCB
(First 5 Accounts) $ 25.00/account/month
Current Day Reporting **
Transaction Reporting
Previous Day Items $ .15/item
Current Day Items $ .20/item
Automated Payments & Collections (APC)***
- ------------------------------------------
Software Pricing *
APC Setup Fee $ 225.00
Maintenance *
Automated Payments & Collections $ 25.00/customer/month
APC Transactions
First 1-500 Transactions $ .30/transaction
* Fees are for single micro-computer software. Additional
micro-computer software and maintenance charges are
available at 50% off listed fees.
** The charge for Current Day Reporting is in addition to the
account charges.
*** Refer to ACH Price Sheet for additional APC and DTS charges.
TexStar Funds Transfer Pricing
Effective January 1994
SERVICE PRICE
------- -----
TexStar Account Maintenance $ 0.00/account/month
Incoming Transfer
Autopost Domestic $ 4.50/transfer
Notifications
TexStar Direct Access $ No charge
TexStar Direct Access, TexStar EXPRESS,
Automatic Standing Transfer, BatchWire*
Internal $ 1.00/transfer
Outgoing
Repetitive $ 6.00/transfer
* BatchWire supports domestic internal and outgoing repetitive
funds transfers.
Automated Clearing House (ACH)
Origination
(Statewide)
Effective January 1994
SERVICE PRICE
------- -----
MicroLink (APC Module)
Software Setup Fee $ 225.00
Maintenance $ 25.00/customer/month
Initiation
First 1-500 transactions $ .30/transaction
Monthly Maintenance * $ 50.00/customer Tax ID/
month
* One charge for all accounts
International Collection Services Pricing
Effective January 1994
SERVICE PRICE
------- -----
International Collections*
$ 25.00-$ 4,000.00 $ 16.00
$ 4,000.01-$10,000.00 $ 26.00
$10,000.01+ $ 51.00 maximum (1/4 of 1%)
* Charge deducted from the face amount of the check. $8.50
processing fee charged to analysis.
SCHEDULE 2
AUTHORIZED OFFICERS
Michael J.C. Roth
Joseph H.L. Jimenez
Sherron Kirk
Pat Bauer
Jim Sanchez
Lori Polhamus
Delia Flores
EXHIBIT 10(b)
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
CABLE. GOODPROCT. BOSTON
February 14, 1996
USAA Mutual Fund, Inc.
USAA Building
9800 Fredericksburg Road
San Antonio, Texas 78288
Ladies and Gentlemen:
As counsel to USAA Mutual Fund, Inc. (the "Company"), a Maryland
corporation, we have been asked to render our opinion with respect to
the issuance of shares of capital stock, $.01 par value per share, of
the USAA S&P 500 Index Fund (the "Shares"), a class of capital stock
of the Company which have been established and designated in the
Company's Articles of Incorporation and Articles Supplementary to the
Articles of Incorporation, as amended (collectively, the "Articles"),
all as more fully described in the Prospectus and the Statement of
Additional Information contained in Post-Effective Amendment No. 40
(the "Amendment") to the Registration Statement (No. 2-49560) on Form
N-1A (the "Registration Statement") to be filed by the Company with
the Securities and Exchange Commission.
We have examined the Articles, the By-Laws of the Company, as
amended, the minutes of certain meetings of and resolutions adopted by
the Board of Directors of the Company, the Prospectus and Statement of
Additional Information contained in the Amendment and such other
documents, records and certificates as we deemed necessary for the
purposes of this opinion.
Based upon the foregoing, and assuming that not more than
50,000,000 Shares of the USAA S&P 500 Index Fund will be issued and
outstanding at any time, we are of the opinion that the Shares will,
when sold in accordance with the terms of the Prospectus and Statement
of Additional Information in effect at the time of the sale, be
legally issued, fully paid and non-assessable.
We hereby consent to being named in the Prospectus and the
Statement of Additional Information contained in the Amendment and to
a copy of this opinion being filed as an exhibit to the Amendment. In
addition, we hereby consent to the incorporation by reference as an
exhibit to the Amendment of our opinion previously filed with the
Securities and Exchange Commission as an exhibit to Post-Effective
Amendment No. 39 to the Registration Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR
---------------------------
GOODWIN, PROCTER & HOAR
EXHIBIT 13(b)
SUBSCRIPTION
April , 1996
TO: Board of Directors
USAA Mutual Fund, Inc.
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Dear Sirs:
The undersigned hereby subscribes to 10 shares of the S&P
500 Index Fund series with one cent par value, of USAA Mutual
Fund, Inc. at a price of $10.00 per share and agrees to pay
therefore upon demand, cash in the amount of $100 to the named
Fund.
Very truly yours,
USAA INVESTMENT MANAGEMENT COMPANY
/s/
By: MICHAEL J. C. ROTH
President
April , 1996
USAA Mutual Fund, Inc.
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Gentlemen:
In connection with your sale to us today of ten (10) shares
of capital stock representing interests in the S&P 500 Index
Fund, we understand that: (i) the Shares have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act"); (ii) your sale of the Shares to us is made in
reliance on such sale being exempt under Section 4(2) of the 1933
Act as not involving any public offering; and (iii) in part, your
reliance on such exemption is predicated on our representation,
which we hereby confirm, that we are acquiring the Shares for
investment for our own account as the sole beneficial owner
thereof, and not with a view to or in connection with any resale
or distribution of the shares or of any interest therein. We
hereby agree that we will not sell, assign or transfer the Shares
or any interest therein, except upon repurchase or redemption by
the Company, unless and until the Shares have been registered
under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale,
assignment or transfer will not violate the provisions of the
1933 Act or any rules or regulations promulgated thereunder.
Very truly yours,
USAA INVESTMENT MANAGEMENT COMPANY
By:/s/
MICHAEL J. C. ROTH
President
EXHIBIT 19(c)
POWER OF ATTORNEY
Know all men by these presents that the undersigned
Director of USAA MUTUAL FUND, INC., a Maryland Corporation (the
"Company"), constitutes and appoints Michael J.C. Roth, John W.
Saunders, Jr. and Michael D. Wagner, and each of them, as his
true and lawful attorney-in-fact and agent, with full power or
substitution, for him and in his name, place and stead, in any
and all capacities to sign registration statements in his
capacity as a Director of the Fund on any form or forms
filed under the Securities Act of 1933 and the Investment
Company Act of 1940 and any and all amendments thereto, with all
exhibits, instruments, and other documents necessary or
appropriate in connection with such filing and to file them with
the Securities and Exchange Commission or any other regulatory
authority as may be necessary or desirable, hereby ratifying and
confirming all that said attorney-in-fact and agent or his
substitute, may lawfully do or cause to be done by virtue hereof.
/s/M. Staser Holcomb February 6, 1996
- ---------------------------- --------------------
M. Staser Holcomb, Director Date
EXHIBIT 19(d)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Philip W.
Coolidge, Thomas M. Lenz and Linda T. Gibson, and each and any of
them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or
all amendments (including post-effective amendments) to the
Registration Statement of USAA Mutual Fund, Inc., with respect to
its USAA S&P 500 Index Fund, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite
and necessary to be done about the premises, as fully to all intents
and purposes and he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Signature Title Date
- --------- ----- ----
/s/Philip Coolidge Trustee and President February 9, 1996
- ----------------------- of Equity 500 Index
Philip W. Coolidge Portfolio
(Chief Executive Officer)
/s/John R. Elder Treasurer (Chief February 9, 1996
- ----------------------- Financial and
John R. Elder Accounting Officer)
of Equity 500 Index
Portfolio
/s/Charles P. Biggar Trustee of Equity February 9, 1996
- ----------------------- 500 Index Portfolio
Charles P. Biggar
/s/S. Leland Dill Trustee of Equity February 9, 1996
- ----------------------- 500 Index Portfolio
S. Leland Dill
/s/Philip Saunders, Jr. Trustee of Equity February 9, 1996
- ----------------------- 500 Index Portfolio
Philip Saunders, Jr.
