Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Statement of Assets and Liabilities 7
Portfolio of Investments in Securities 8
Notes to Portfolio of Investments in Securities 10
Statement of Operations 11
Statement of Changes in Net Assets 12
Notes to Financial Statements 13
================================================================================
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are "streamlined." One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a Mutual Fund Representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA Science &
Technology Fund, managed by USAA Investment Management Company (IMCO). It may be
used as sales literature only when preceded or accompanied by a current
prospectus which gives further details about the Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(Copyright)1998, USAA. All rights reserved.
Message from the President
"We are now ready
to move to another plateau."
[PHOTOGRAPH OF MICHAEL J.C. ROTH, CFA, PRESIDENT AND VICE CHAIRMAN OF THE BOARD]
Back in 1980 we began to craft a family of mutual funds that would allow an
investor to create a diversified portfolio suited to an individual's appetite
for risk. In 1984 we started a brokerage service because we thought some members
might want that. The two have grown beyond our dreams. Our fund family now
offers 35 investment choices and our Brokerage Service has become a very
significant presence in its industry. We are now ready to move to another
plateau.
As I write this message, the USAA Investment Management Company is in the
process of ending our long and mutually rewarding relationship with BHC
Securities, and taking on all of the responsibilities of running our Brokerage
Service. The term for this is "self-clearing." It includes our own seat on the
Chicago Stock Exchange. Shortly after we achieve self-clearing, we shall also
move our mutual fund accounts off of an internal system and onto the facilities
of DST Systems, a Kansas City company that processes very much of the mutual
fund industry's transactions. These two moves will greatly improve our ability
to offer you better service.
Our goal is to give you a single investment account which can hold, track and
report to you on almost any type of investment you wish to make. It will offer
features such as low-cost loans based upon your investments,(1) easy movement of
funds,(2) and a single statement. It will also be tied to other USAA services
such as banking, fixed and variable annuities and property and casualty and life
insurance. We will make this the only investment account you will need. You'll
be hearing more on this in coming months.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company (IMCO), including charges and expenses,
please call for a prospectus. Read it carefully before you invest.
USAA Brokerage Services is a discount brokerage service of USAA IMCO, a member
of the NASD.
(1) Margin borrowing allows you to buy securities using funds that we will loan
you for payment. It can serve as a low-interest loan which can be used for
any purpose. Not all securities can be margined, however. Margin borrowing
involves additional risks.
(2) Investment trading of funds may be subject to value fluctuations.
Investment Review
SCIENCE & TECHNOLOGY FUND
OBJECTIVE: Long-term capital appreciation.
TYPES OF INVESTMENTS: Primarily common stocks.
1/31/98
-------------------------------------------------------------------
Net Assets $69.1 Million
Net Asset Value Per Share 9.45
AVERAGE ANNUAL TOTAL RETURN AS OF 1/31/98
-------------------------------------------------------------------
Since inception on August 1, 1997 -5.50%*
* Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
The performance data quoted represents past performance and is not an indication
of future results. Investment return and principal value of an investment will
fluctuate, and an investor's shares, when redeemed, may be worth more or less
than their original cost.
- -----------------------------------
CUMULATIVE PERFORMANCE COMPARISON
- -----------------------------------
A chart in the form of a line graph appears here, illustrating the comparison of
a $10,000 hypothetical investment in the USAA Science & Technology Fund to the
S&P 500 Index and the Lipper Science & Technology Funds Average from 8/1/97
through 1/31/98. The data points from the graph are as follows:
USAA Science & S&P 500 Lipper Science &
Technology Fund Index Technology Funds Average
8/1/97 10,000 10,000 10,000
9/97 9,800 9,956 10,561
10/97 9,200 9,624 9,562
11/97 9,240 10,069 9,454
12/97 9,070 10,243 9,124
1/98 9,450 10,355 9,339
The graph compares a $10,000 hypothetical investment in the USAA Science &
Technology Fund to the S&P 500 Index and the Lipper Science & Technology Funds
Average, an average performance level of all science & technology funds, as
reported by Lipper Analytical Services, an independent organization that
monitors the performance of mutual funds. The S&P 500 Index is an unmanaged
index representing the average performance of a group of 500 widely held,
publicly traded stocks. It is not possible to invest in the S&P 500 Index.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER, CURT ROHRMAN, CFA IS HERE]
STRATEGY
Nearly all aspects of our lives today are impacted in some way by scientific and
technological change. Sometimes it's obvious - personal computers are common in
the workplace and cellular phones are as handy on grocery store trips as
business trips. Sometimes it isn't obvious - advances in biotechnology make the
corn-on-the-cob we eat less expensive while the mortgage rates we pay are
reduced by software designed to accurately score credit risks.
Most Science & Technology funds emphasize traditional computer technology in
their investments. Your USAA Science & Technology Fund acknowledges the
pervasiveness of technological change. Investments include companies engaged in
such diverse areas as speech recognition, digital color printing, drug
development, minimally invasive surgical procedures, and traditional computer
technology.
We look for companies that possess, or are developing, leadership positions in
the market within which they compete. These companies must offer revenue and
earnings growth prospects above market rates of growth. We believe an
increasingly global economy favors large companies with complete product lines
over smaller, point-product companies. We prefer to own relatively few stocks,
currently less than 50, while monitoring very closely each company's near-term
earnings outlook and long-term strategic positioning.
FUND PERFORMANCE
Frankly, the launch of the USAA Science & Technology Fund could not have been
timed much worse. The Fund started August 1, 1997, unknowingly four days before
the S&P 500 Index(1) culminated a 29% high from its April 14, 1997, low. A
rather volatile S&P 500 managed to inch only 2.7% higher over the past six
months. Technology stocks fared much worse. As represented by the Morgan Stanley
High-Technology 35 Index,(2) these stocks declined 8% since August 1, 1997. In
this difficult environment, our broad-based technology approach has served us
well. The Fund's total return declined 5.5% since inception, underperforming the
broad market, but holding up materially better than technology stocks as a
whole.
(1) The S&P 500 Index is an unmanaged index representing the performance of a
group of 500 widely held, publicly traded stocks. It is not possible to
invest in the S&P 500 Index.
(2) The Morgan Stanley High-Technology 35 Index is the first listed
broad-market technology barometer dedicated exclusively to the
electronics-based technology industry with components selected from nine
technology subsectors.
Past performance is no guarantee of future results. Yields and
returns fluctuate.
OUTLOOK
Our outlook for science and technology stocks is bullish over the near term.
First, turmoil in overseas economies is causing many Asian companies to cut back
on capacity expansion. Many of these companies were responsible for the excess
supply and pricing pressures that exist today in semiconductor and other
technology markets. Second, a stronger dollar allows U.S. companies to acquire
distribution and production assets overseas at significant discounts, setting
the stage for potentially profitable market share gains longer term. Third, a
record number of new drugs and medical devices will be introduced in 1998, the
benefit of expedited approvals from the Federal Drug Administration and
significant research and development spending. Yet, pharmaceutical company
pipelines remain full on account of increasingly efficient drug discovery
techniques.
The long-term outlook is exciting as well. Companies in the U.S. as a whole
remain the most competitive in the world, with technology companies being
stellar examples. Our country's knowledge capital in software, hardware, voice
and data networking, drug discovery, and medical device development is simply
unmatched. The gap is widening as evidenced by continual gains in worldwide
market share. "Miniaturization" and "digitization" are unstoppable trends
driving demand for electronics.
Healthcare needs, pharmaceutical use in particular, will clearly expand as baby
boomers age in the United States and worldwide standards of living improve.
Minimally invasive techniques will increase patient populations by making
previously cost-prohibitive surgical procedures economical and vastly improving
the odds in surgeries previously considered life-threatening.
Top 10 Equity Holdings
(% of Net Assets)
Cisco Systems 3.8
Applied Graphics Technologies 3.7
SmithKline Beecham plc ADR 3.2
Pfizer 3.1
Analog Devices 3.0
Medtronic 3.0
Arbor Drugs 2.9
Dell Computer 2.9
Intel 2.7
Guidant 2.6
Top 10 Industries
(% of Net Assets)
Electronics - Semiconductors 14.0
Drugs 10.3
Computer Software & Service 9.5
Medical Products & Supplies 8.0
Computer- Networking 7.4
Services - Data Processing 6.3
Computer - Hardware 5.4
Healthcare - Diversified 4.7
Banks - Major Regional 4.3
Communication Equipment 4.1
See page 8 for a complete listing of the Portfolio of Investments in Securities.
<TABLE>
SCIENCE & TECHNOLOGY FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 1998
(Unaudited)
<S> <C>
ASSETS
Investments in securities, at market value (identified cost of $69,755) $70,473
Cash 101
Receivables:
Capital shares sold 263
Dividends 14
Securities sold 1,939
-------
Total assets 72,790
-------
LIABILITIES
Securities purchased 3,478
Capital shares redeemed 75
USAA Investment Management Company 40
USAA Transfer Agency Company 20
Accounts payable and accrued expenses 37
-------
Total liabilities 3,650
-------
Net assets applicable to capital shares outstanding $69,140
=======
REPRESENTED BY:
Paid-in capital $71,232
Accumulated net investment loss (155)
Accumulated net realized loss on investments (2,655)
Net unrealized appreciation of investments 718
-------
Net assets applicable to capital shares outstanding $69,140
=======
Capital shares outstanding 7,313
=======
Net asset value, redemption price, and offering price per share $ 9.45
=======
See accompanying notes to financial statements.
</TABLE>
SCIENCE & TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES
January 31, 1998
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------- -------- -----
COMMON STOCKS (97.8%)
Biotechnology (0.9%)
18,000 Pathogenesis Corp. $ 648
- --------------------------------------
Chemicals (1.9%)
27,000 Monsanto Co. 1,281
- --------------------------------------
Communication
Equipment (4.1%)
19,000 Lucent Technologies,
Inc. 1,681
64,000 Pairgain Technologies,
Inc.* 1,176
- --------------------------------------
2,857
- --------------------------------------
Computer - Hardware (5.4%)
20,000 Dell Computer Corp.* 1,989
29,000 Hewlett-Packard Co. 1,740
- ---------------------------------------
3,729
- ---------------------------------------
Computer - Networking (7.4%)
56,000 Bay Networks, Inc. 1,522
42,000 Cisco Systems, Inc.* 2,649
50,000 Xylan Corp.* 925
- ---------------------------------------
5,096
- ---------------------------------------
Computer - Peripherals (1.0%)
30,000 Seagate Technology,
Inc.* 696
- ---------------------------------------
Computer Software
& Service (9.5%)
26,000 J.D. Edwards & Co.* 859
5,000 Lernout & Hauspie Speech
Products N.V. 294
11,000 Microsoft Corp.* 1,641
29,000 Networks Associates,
Inc.* 1,566
22,000 Onsale, Inc. 552
46,000 Sterling Commerce,
Inc.* 1,671
- ---------------------------------------
6,583
- ---------------------------------------
Drugs (10.3%)
24,000 Eli Lilly & Co. 1,620
10,000 Merck & Co., Inc. 1,173
26,000 Pfizer, Inc. 2,130
35,000 SmithKline Beecham
plc ADR "A" 2,207
- ---------------------------------------
7,130
- ---------------------------------------
Electronics -
Semiconductors (14.0%)
44,000 Altera Corp. 1,507
71,000 Analog Devices, Inc.* 2,095
23,000 Intel Corp. 1,863
24,000 Linear Technology
Corp. 1,590
55,000 Taiwan Semiconductor
Manufacturing Co.
Ltd. 1,306
24,000 Texas Instruments,
Inc. 1,311
- ---------------------------------------
9,672
- ---------------------------------------
Equipment -
Semiconductors (2.4%)
44,000 Applied Materials,
Inc.* 1,444
40,000 Tegal Corp. 180
- ---------------------------------------
1,624
- ---------------------------------------
Finance - Diversified (2.3%)
35,000 Federal Home Loan
Mortgage Corp. 1,557
- ---------------------------------------
Healthcare -
Diversified (4.7%)
16,500 Bristol-Myers Squibb
Co. 1,645
24,000 Johnson & Johnson,
Inc. 1,606
- ---------------------------------------
3,251
- ---------------------------------------
Healthcare - Specialized
Services (3.3%)
69,000 Medpartners, Inc. 686
42,000 Quintiles Transnational
Corp. 1,598
- ---------------------------------------
2,284
- ---------------------------------------
Hospitals (2.2%)
45,000 Tenet Healthcare
Corp.* 1,553
- ---------------------------------------
Insurance - Multi-Line
Companies (2.4%)
15,000 American International
Group, Inc. 1,655
- --------------------------------------
Major Regional Banks (4.3%)
12,000 First Security Corp. 419
12,000 First Tennessee National
Corp. 706
24,000 First Union Corp. 1,153
4,000 Fleet Financial Group,
Inc. 287
7,000 Union Planters Corp. 430
- --------------------------------------
2,995
- --------------------------------------
Medical Products
& Supplies (8.0%)
32,000 Boston Scientific
Corp.* 1,624
28,000 Guidant Corp. 1,799
41,000 Medtronic, Inc. 2,094
- --------------------------------------
5,517
- --------------------------------------
Oil & Gas -
Drilling/Equipment (1.7%)
16,000 Schlumberger Ltd. 1,179
- --------------------------------------
Retail - Drug (2.9%)
97,500 Arbor Drugs, Inc. 2,005
- --------------------------------------
Services - Data
Processing (6.3%)
48,000 Applied Graphics
Technologies, Inc.* 2,568
60,000 Sungard Data Systems,
Inc. 1,781
- --------------------------------------
4,349
- --------------------------------------
Telecommunications -
Long Distance (2.8%)
10,000 MCI Communications
Corp. 464
42,000 Worldcom, Inc.* 1,504
- --------------------------------------
1,968
- --------------------------------------
Total common stocks
(cost: $66,911) 67,629
- --------------------------------------
Principal Market
Amount Value
(000) Security (000)
----- -------- -----
SHORT-TERM (4.1%)
Discount Note
$ 2,845 Federal Home Loan Mortgage
Corp., 5.57%, 2/02/98
(cost: $2,844) $2,844
- -------------------------------------
Total investments
(cost: $69,755) $70,473
=====================================
SCIENCE & TECHNOLOGY FUND
NOTES TO PORTFOLIO OF INVESTMENTS IN SECURITIES
January 31, 1998
(Unaudited)
GENERAL NOTES
Market values of securities are determined by procedures and practices discussed
in note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
Investments in foreign securities were 6.8% of net assets at January 31, 1998.
ADR - American Depositary Receipts are receipts issued by a U.S. bank evidencing
ownership of foreign shares. Dividends are paid in U.S. dollars.
SPECIFIC NOTES
* Non-income producing.
See accompanying notes to financial statements.
SCIENCE & TECHNOLOGY FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 1998*
(Unaudited)
Net investment loss:
Income:
Dividends $ 87
Interest 87
-------
Total income 174
-------
Expenses:
Management fees 170
Transfer agent's fees 79
Custodian's fees 19
Postage 6
Shareholder reporting fees 2
Directors' fees 2
Registration fees 34
Professional fees 16
Other 1
-------
Total expenses 329
-------
Net investment loss (155)
-------
Net realized and unrealized gain (loss) on investments:
Net realized loss (2,655)
Change in net unrealized appreciation/depreciation 718
-------
Net realized and unrealized loss (1,937)
-------
Decrease in net assets resulting from operations $(2,092)
=======
* Fund commenced operations August 1, 1997.
See accompanying notes to financial statements
SCIENCE & TECHNOLOGY FUND
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 1998*
(Unaudited)
From operations:
Net investment loss $ (155)
Net realized loss on investments (2,655)
Change in net unrealized appreciation/depreciation
of investments 718
-------
Decrease in net assets resulting from operations (2,092)
-------
From capital share transactions:
Proceeds from shares sold 76,340
Cost of shares redeemed (5,108)
-------
Increase in net assets from capital
share transactions 71,232
-------
Net increase in net assets 69,140
Net assets:
Beginning of period -
-------
End of period $69,140
=======
Undistributed net investment loss included in net assets:
End of period $ (155)
=======
Change in shares outstanding:
Shares sold 7,866
Shares redeemed (553)
-------
Increase in shares outstanding 7,313
=======
Authorized shares of $.01 par value 25,000
=======
* Fund commenced operations August 1, 1997.
See accompanying notes to financial statements.
SCIENCE & TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUND, INC. (the Company), registered under the Investment Company
Act of 1940, as amended, is a diversified, open-end management investment
company incorporated under the laws of Maryland consisting of ten separate
funds. The information presented in this semiannual report pertains only to the
Science & Technology Fund (the Fund), which commenced operations on August 1,
1997. The Fund's investment objective is long-term capital appreciation. USAA
Investment Management Company (the Manager) seeks to achieve this objective by
investing at least 80% of the Fund's assets in equity securities that are
expected to benefit from the development and use of scientific and technological
advances and improvements.
A. Security valuation - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are valued at the last sales price on that
exchange.
2. Over-the-counter securities are priced at the last sales price or, if not
available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less are stated at
amortized cost which approximates market value.
4. Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the Manager under the general supervision of the Board of Directors.
B. Federal taxes - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required.
C. Investments in securities - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Dividend
income, less foreign taxes, if any, is recorded on the ex-dividend date. If the
ex-dividend date has passed, certain dividends from foreign securities are
recorded upon notification. Interest income is recorded on the accrual basis.
Discounts and premiums on short-term securities are amortized over the life of
the respective securities.
D. Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in two joint short-term revolving
loan agreements totaling $850 million, one with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($750 million uncommitted), and one with
NationsBank of Texas, N.A. ($100 million committed). The purpose of the
agreements is to meet temporary or emergency cash needs, including redemption
requests that might otherwise require the untimely disposition of securities.
Subject to availability under its agreement with CAPCO, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at CAPCO's borrowing rate
with no markup. Subject to availability under its agreement with NationsBank,
the Fund may borrow from NationsBank an amount which, when added to outstanding
borrowings under the CAPCO agreement, does not exceed 25% of the Fund's total
assets at NationsBank's borrowing rate plus a markup. The Fund had no borrowings
under either of these agreements during the six-month period ended January 31,
1998.
(3) DISTRIBUTIONS
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made in the succeeding fiscal year
or as otherwise required to avoid the payment of federal taxes.
(4) INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term securities, for the
six-month period ended January 31, 1998 were $87,313,240 and $17,747,071,
respectively.
Gross unrealized appreciation and depreciation of investments as of January 31,
1998 was $4,363,287 and $3,645,580, respectively.
(5) TRANSACTIONS WITH MANAGER
A. Management fees - The investment policies of the Fund and management of the
Fund's portfolio are carried out by USAA Investment Management Company . The
Fund's management fees are computed at .75% of its annual average net assets.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Fund based on an annual charge of $23.50 per shareholder account plus
out-of-pocket expenses.
C. Underwriting services - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
D. Brokerage services - USAA Brokerage Services, a discount brokerage service of
the Manager, may execute portfolio transactions for the Fund. The amount of
brokerage commissions paid to USAA Brokerage Services during the six-month
period ended January 31, 1998 was $1,640.
(6) TRANSACTIONS WITH AFFILIATES
USAA Investment Management Company is indirectly wholly owned by United Services
Automobile Association (the Association), a large, diversified financial
services institution. At January 31, 1998, the Association and its affiliates
owned 2,000,010 shares (27.4%) of the Fund.
Certain directors and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated directors or Fund officers
received any compensation from the Fund.
January 31, 1998
(Unaudited)
(7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout the period is
as follows:
Six-month
Period Ended
January 31,
1998*
----
Net asset value at
beginning of period $ 10.00
Net investment loss (.03)(a)
Net realized and
unrealized loss (.52)
-------
Net asset value at
end of period $ 9.45
=======
Total return (%) (5.50)
Net assets at
end of period (000) $69,140
Ratio of expenses to
average net assets (%) 1.43(b)
Ratio of net investment
loss to average net assets (%) (.67)(b)
Portfolio turnover (%) 41.72
Average commission
rate paid per share+ $ .0497
* Fund commenced operations August 1, 1997.
+ Calculated by aggregating all commissions paid on the purchase and sale of
securities and dividing by the actual number of shares purchased or sold for
which commissions were charged.
(a) Calculated using weighted average shares.
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
USAA Family of Funds Summary
Fund Minimum
Type/Name Volatility Investment*
--------- ---------- ----------
CAPITAL APPRECIATION
================================================================
Aggressive Growth Very high $3,000
Emerging Markets(1) Very high $3,000
First Start Growth Moderate to high $3,000
Gold(1) Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International(1) Moderate to high $3,000
S&P 500 Index(2) Moderate $3,000
Science
& Technology(5) Very high $3,000
World Growth(1) Moderate to high $3,000
ASSET ALLOCATION
================================================================
Balanced Strategy(1) Moderate $3,000
Cornerstone Strategy(1) Moderate $3,000
Growth and Tax
Strategy(3) Moderate $3,000
Growth Strategy(1) Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME - TAXABLE
================================================================
GNMA Low to moderate $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Short-Term Bond Low $3,000
INCOME - TAX EXEMPT
================================================================
Long-Term(3) Moderate $3,000
Intermediate-Term(3) Low to moderate $3,000
Short-Term(3) Low $3,000
State Bond Income(3)** Moderate $3,000
MONEY MARKET
================================================================
Money Market(4) Very low $3,000
Tax Exempt
Money Market(3),(4) Very low $3,000
Treasury Money
Market Trust(4) Very low $3,000
State Money Market(3),(4)** Very low $3,000
(1) Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
(2) S&P 500(Registered Trademark) is a trademark of The McGraw-Hill Companies,
Inc. and has been licensed for use. The Product is not sponsored, sold or
promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in the Product.
(3) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
(4) An investment in a money market fund is neither insured nor guaranteed by
the U.S. government, and there is no assurance that any of the funds will
be able to maintain a stable net asset value of $1 per share.
(5) This Fund may be more volatile than a fund that diversifies across many
industries.
* The InveStart(Registered Trademark) program is available for investors
without the $3,000 initial investment required to open an IMCO mutual fund
account. A mutual fund account can be opened with no initial investment if
you elect to have monthly automatic investments of at least $50 from a bank
account. InveStart is not available on tax-exempt funds or the S&P 500
Index Fund. The minimum initial investment for IRAs is $250, except for the
$2,000 minimum required for the S&P 500 Index Fund. IRAs are not available
for tax-exempt funds. The Growth and Tax Strategy Fund is not available as
an investment for your IRA because the majority of its income is tax
exempt.
** California, Florida, New York, Texas, and Virginia funds available
to residents only.
Non-deposit investment products offered by USAA Investment Management Company
are not insured by the FDIC, are not deposits or other obligations of, or
guaranteed by, USAA Federal Savings Bank, and are subject to investment risks,
and may lose value.
For more complete information about the mutual funds managed and distributed by
USAA IMCO, including charges and expenses, please call 1-800-531-8181 for a
prospectus. Read it carefully before you invest.
Directors
Robert G. Davis, Chairman of the Board
Michael J.C. Roth, President and Vice Chairman of the Board
John W. Saunders, Jr., Vice President
Barbara B. Dreeben
Howard L. Freeman, Jr.
Robert L. Mason
Richard A. Zucker
Investment Adviser, Underwriter and Distributor
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
Transfer Agent
USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Auditors
KPMG Peat Marwick LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
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Telephone Assistance
Call toll free - Central Time
Monday - Friday 8:00 a.m. to 8:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
For Additional Information On Mutual Funds
1-800-531-8181, (in San Antonio) 456-7211
For account servicing, exchanges or redemptions
1-800-531-8448, (in San Antonio) 456-7202
Recorded Mutual Fund Price Quotes
24-Hour Service (from any phone)
1-800-531-8066, (in San Antonio) 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) 498-8777
