As filed with the Securities and Exchange Commission on September 26, 1995.
1933 Act File No. 2-91069
1940 Act File No. 811-4019
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. 21
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 23
USAA INVESTMENT TRUST
(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 INVESTMENT TRUST
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)
X on October 1, 1995 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)
on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has heretofore registered an indefinite number of
shares of the 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, and Treasury Money Market Trust pursuant
to Rule 24f-2 under the Investment Company Act of 1940. The
Registrant filed its Rule 24f-2 notice for the Growth and Tax
Strategy Fund, Cornerstone Strategy Fund, Gold Fund, International
Fund, World Growth Fund, GNMA Trust, and Treasury Money Market Trust
for the fiscal year ended May 31, 1995 on July 19, 1995.
Exhibit Index on Page 245-246
Page 1 of 519
USAA INVESTMENT TRUST
CROSS REFERENCE SHEET
Part A
FORM N-1A ITEM NO. SECTION IN PROSPECTUS
1. Cover Page Same
2. Synopsis. Fees and Expenses
3. Condensed Financial
Information Financial Highlights
Performance Information
4. General Description
of Registrant Investment Objective and Policies
Description of Shares
5. Management of the Fund Management of the Trust
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 INVESTMENT TRUST
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
Special Risk Considerations
Investment Restrictions
Portfolio Transactions
14. Management of the
Registrant Trustees and Officers of the Trust
15. Control Persons and
Principal Holders
of Securities Trustees and Officers of the Trust
16. Investment Advisory and
Other Services Trustees and Officers of the Trust
The Trust's Manager
General Information
17. Brokerage Allocation and
Other Practices Portfolio Transactions
18. Capital Stock and Other
Securities Further Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered Valuation of Securities
Additional Information Regarding
Redemption of Shares
Investment Plans
20. Tax Status Tax Considerations
21. Underwriters The Trust's Manager
22. Calculation of Performance
Data Calculation of Performance Data
23. Financial Statements General Information
Part A
Prospectuses for the
Growth and Tax Strategy, Cornerstone Strategy, Emerging Markets,
Gold, International, and World Growth Funds,
GNMA Trust and Treasury Money Market Trust
are included herein
Not included in this Post-Effective Amendment
are the Prospectuses for the
Balanced Strategy, Growth Strategy and Income Strategy Funds
Part A
Prospectus for the
Growth and Tax Strategy Fund
is included herein
USAA GROWTH AND TAX STRATEGY FUND
October 1, 1995 PROSPECTUS
USAA Growth and Tax Strategy Fund (the Fund) is one of
eleven no-load mutual funds offered by USAA Investment
Trust (the Trust). The Fund is managed by USAA
Investment Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is to seek a conservative
balance for the investor between income, the majority of
which is exempt from federal income tax, and the potential
for long-term growth of capital to preserve purchasing power.
This objective is to be achieved through an asset allocation
strategy. Page 10.
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 14.
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 16.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA Growth and Tax Strategy Fund are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market
risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Asset Allocation Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 10
SHAREHOLDER INFORMATION
Purchase of Shares 14
Redemption of Shares 16
Conditions of Purchase and Redemption 17
Exchanges 18
Other Services 19
Share Price Calculation 20
Dividends, Distributions and Taxes 20
Management of the Trust 22
Description of Shares 23
Service Providers 24
Telephone Assistance Numbers 24
FEES AND EXPENSES
The following summary is provided to assist you in understanding
the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .50%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .14%
Custodian Fees .06%
All Other Expenses .10%
---
Total Other Expenses .30%
---
Total Fund Operating Expenses .80%
===
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of
Shares - Bank Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee
per account for its services. See Transfer Agent in the SAI, page 19.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 8
3 years - $ 26
5 years - $ 44
10 years - $ 99
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout each of the periods in the seven year period ended May 31, 1995,
has been derived from financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the financial statements and
related notes that appear in the Fund's Annual Report. Further performance
information is contained in the Annual Report and is available upon
request without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
Net asset value at
beginning of period $ 12.32 $ 13.00 $ 12.00 $ 11.51
Net investment income .49 .29 .46 .48
Net realized and
unrealized gain (loss) .76 (.27) 1.01 .50
Distributions from net
investment income (.48) (.33) (.46) (.49)
Distributions of realized
capital gains (.27) (.37) (.01) -
-------- ------- ------- --------
Net asset value at
end of period $ 12.82 $ 12.32 $ 13.00 $ 12.00
======== ======== ======== ========
Total return (%)** 10.73 .13 12.57 8.74
Net assets at end of
period (000) $134,538 $128,077 $118,532 $ 82,840
Ratio of expenses to
average net assets (%) .80 .84(a) .86 .92
Ratio of net investment
income to average net
assets (%) 4.02 3.56(a) 3.81 4.31
Portfolio turnover (%) 314.57(b) 171.35(b) 98.83 106.83
YEAR ENDED SEPTEMBER 30,
1991 1990 1989*
Net asset value at
beginning of period $ 10.59 $ 11.08 $ 10.00
Net investment income .53 .52 .27
Net realized and
unrealized gain (loss) .93 (.49) .96
Distributions from net
investment income (.54) (.50) (.15)
Distributions of realized
capital gains - (.02) -
-------- -------- --------
Net asset value at
end of period $ 11.51 $ 10.59 $ 11.08
======== ======== ========
Total return (%)** 14.19 .19 12.38
Net assets at end of
period (000) $ 53,535 $ 37,599 $ 23,823
Ratio of expenses to
average net assets (%) 1.00(c) 1.00(c) 1.29(a)(c)
Ratio of net investment
income to average net
assets (%) 4.91(c) 5.05(c) 4.90(a)(c)
Portfolio turnover (%) 81.22 105.78 119.76
- --------------
* Fund commenced operations January 11, 1989.
** Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) The Fund may simultaneously purchase and sell the same securities.
These transactions can be high in volume and dissimilar to other trade
activity within the Fund. If these transactions were excluded from
the calculation, the portfolio turnover rate would be as follows:
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, 1995 MAY 31, 1994
------------ ------------
Portfolio turnover(%) 131.28 93.56
Purchases and sales of this type are as follows:
Purchases (000) $234,367 $98,639
Sales (000) $234,669 $98,761
(c) The information contained in this table is based on actual expenses for
the period, after giving effect to reimbursements of expenses by the
Manager. Absent such reimbursements the Fund's ratios would have been:
YEAR ENDED SEPTEMBER 30,
1991 1990 1989*
---- ---- ----
Ratio of expenses to average net assets (%) 1.06 1.24 1.48(a)
Ratio of net investment income to average
net assets (%) 4.85 4.81 4.71(a)
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Trust may quote the Fund's yield or total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return and yield results reported by the Fund do not take
into account recurring and nonrecurring charges for
optional services which only certain shareholders elect
and which involve nominal fees, such as the $10 fee for a
delivery of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
The Fund may advertise performance in terms of a 30-day
yield quotation. The yield quotation is computed by
dividing the net investment income per share earned
during the period by the offering price per share on the
last day of the period. This income is then annualized.
Further information concerning the Fund's yield and
total return is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
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 ASSET ALLOCATION PROGRAM
I. THE IDEA BEHIND ASSET ALLOCATION
If you have money to invest and hear that stocks may be a
good investment, is it a wise idea to use your entire
savings to buy one stock? Most people wouldn't - it
would be fortunate if it works, but this strategy holds a
great deal of risk. Surprising news could be reported
tomorrow on your stock, and its price could soar or plummet.
Careful investors understand this concept of risk and
lower that risk by diversifying their holdings among a
number of securities. That way bad news for one security
may be counterbalanced by good news regarding other
securities. But there is still a question of risk here.
History tells us that stocks are generally more volatile
than bonds and that long-term bonds are generally more
volatile than short-term bonds. History also tells us
that over many years investments having higher risks tend
to have higher returns than investments that carry lower
risks. And past performance doesn't necessarily
guarantee future results. From these observations comes
the idea of asset allocation.
Asset allocation is a straightforward concept that
involves dividing your money among several different
types of investments - for example, stocks, bonds and
short-term investments such as money market instruments -
and keeping that allocation until your objectives or the
financial markets significantly change. That way you're
not pinning all your financial success on the fortunes of
one kind of investment. Money spread across different
investment categories can help you reduce market risk and
likely will provide more stability to your total return.
Asset allocation can work because different kinds of
investments generally follow different up-and-down cycles.
With a variety of investments in your portfolio, some are
probably doing well, even when others are struggling.
II. USING ASSET ALLOCATION IN AN INVESTMENT PROGRAM
Most investors understand the concept of diversification,
but asset allocation goes beyond diversifying your
portfolio; it's much more of an active process. You must
evaluate your lifestyle, finances, circumstances, long-
and short-term financial goals and tolerance for
investment risk. Once you have structured your
allocation, you'll need to review it regularly since your
objectives will change over time.
III. USAA'S SERIES OF ASSET STRATEGY FUNDS
USAA's series of asset allocation funds, our Asset
Strategy Funds, are designed for the long-term investor
and are in line with the Manager's investment philosophy
for its customers, specifically "don't try to time the
market," and "buy and hold for the long-term." As shown
on the next page, each of USAA's Asset Strategy Funds has
its own different mix of assets and objectives.
Fund Investment Objective Invests In
- ------------------------------------------------------------------
Income
Strategy
Fund Seek high current return, with Bonds and stocks
reduced risk over time, through an
asset allocation strategy which
emphasizes income and gives
secondary emphasis to long-term
growth of capital.
- -------------------------------------------------------------------
Growth and Tax
Strategy Fund Seek a conservative balance between Short- and long-term
income, the majority of which is tax exempt bonds and
tax-exempt, and the potential for basic value stocks
long-term growth of capital to
preserve purchasing power. This
objective is to be achieved through
an asset allocation strategy.
- -------------------------------------------------------------------
Balanced
Strategy
Fund Seek high total return, with reduced Stocks and bonds
risk over time, through an asset
allocation strategy that seeks a
combination of long-term growth of
capital and current income.
- --------------------------------------------------------------------
Cornerstone
Strategy
Fund Achieve a positive inflation-adjusted Foreign & basic
rate of return and a reasonably stable value stocks,
value of Fund shares. This objective government
is to be achieved through an asset securities, real
allocation strategy. estate stocks and
gold stocks
- ---------------------------------------------------------------------
Growth
Strategy
Fund Seek high total return, with reduced Small & large
risk over time, through an asset cap stocks, bonds,
allocation strategy which emphasizes and international
capital appreciation and gives stocks
secondary emphasis to income.
- ----------------------------------------------------------------------
An important feature of USAA's Asset Strategy Funds is
the quarterly rebalancing of each portfolio. In this
asset allocation technique, the Funds' Managers buy or
sell securities each quarter so that the investment
categories of each Fund are brought within their target
ranges. For example, if a portfolio holds 65% of its
securities in stocks, 30% in bonds, and 5% in money
market instruments at the beginning of a quarter, then
due to market returns holds 75% of its securities in
stocks, 20% in bonds, and 5% in money market instruments
at the end of a quarter, the Manager would rebalance the
portfolio by reducing its holdings of stocks and
increasing its holdings of bonds to return the
portfolio's investments in stocks and bonds into the
target ranges. See Investment Objective and Policies -
Investment Policies and Techniques for further
information on the Fund's target ranges.
For more complete information about the other USAA Asset
Strategy Funds, including charges and expenses, call the
Manager for a Prospectus. Be sure to read it carefully
before you invest or send money.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek a
conservative balance for the investor between income, the
majority of which is exempt from federal income tax, and
the potential for long-term growth of capital to preserve
purchasing power. This objective is to be achieved
through an asset allocation strategy.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies, restrictions
and risks is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Fund provides a professionally managed diversified
investment program within one mutual fund. The Manager
seeks to attain the objective by allocating the Fund's
assets in each of the following investment categories
within the indicated ranges:
Percentage
Target Range
Investment Category of Net Assets
- ------------------- -------------
Short-Term Tax-Exempt Securities
(Maturities two years or less) 20 - 40%
Long-Term Tax-Exempt Securities
(Maturities ten years or more) 20 - 40%
Basic Value Stocks 36 - 44%
The target ranges may be revised by the Board of
Trustees upon 60 days' prior written notice to
shareholders. However, the Manager reserves the right,
without shareholder approval, to revise the ranges on a
temporary defensive basis when, in its opinion, such
changes are believed to be in the best interest of the
Fund and its shareholders.
The ranges allow for a variance in each investment
category. Should market action cause investment
categories to move outside the ranges, the Manager will
make adjustments to rebalance the portfolio. In general,
the Manager will rebalance the portfolio at least once
during each calendar quarter to bring each category
within its range. These portfolio adjustments may cause
the Fund to sell securities in investment categories
which have appreciated in value and to buy securities in
investment categories which have depreciated in value.
Such adjustments may also cause the Fund to incur a
higher proportion of short-term capital gains than a fund
that does not have a similar policy.
The investment categories and their weightings have
been specifically selected to provide investors with a
diversified investment in a single mutual fund. Short
and long-term tax-exempt securities provide income exempt
from federal income tax. The short-term category seeks
to add stability of net asset value while the long-term
category seeks higher income. The Basic Value Stocks
have been selected for their potential to provide long-
term capital growth.
It is a fundamental policy of the Fund that during
normal market conditions the Fund's assets will be
invested so that at least 50% of the Fund's annual income
will be exempt from federal personal income tax and
excluded from the calculation of federal alternative
minimum taxes for individual taxpayers.
Long-Term and Short-Term Tax-Exempt Securities - In
general, interest rates for long-term tax-exempt
securities have exceeded those for short-term tax-exempt
securities. By investing in short-term tax-exempt
securities (maturities of two years or less) and in long-
term tax-exempt securities (maturities of ten years or
longer), the Manager believes that price volatility will
be lower than that of a portfolio of all long-term
maturities. Portfolio yields will generally be lower
under this investment policy than they would be in a
portfolio comprised of all long-term maturities. The
Manager believes that the trade-off in yield, if any, for
expected lower volatility is in the best interest of
shareholders.
Tax-exempt securities include general obligation bonds,
which are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and
interest; revenue bonds, which are payable from the
revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source, but
not from the general taxing power; and certain types of
industrial development bonds issued by or on behalf of
public authorities to obtain funds for privately-operated
facilities, provided that the interest paid on such
securities qualifies as exempt from federal income taxes.
Under normal market conditions, the Manager will invest
the combined assets of the Long-Term and Short-Term Tax-
Exempt Securities categories so that approximately 75% of
the total market value of the tax-exempt securities is
rated within the three highest long-term rating
categories (at least A) by Moody's Investors Service,
Inc. (Moody's), Standard & Poor's Ratings Group (S&P), or
Fitch Investors Service, Inc. (Fitch), in the highest
short-term rating category by Moody's, S&P, or Fitch, or,
if a security is not rated by those rating agencies, it
must be of equivalent investment quality as determined by
the Manager.
The Manager will not purchase a security if, as a
result of such purchase, more than 25% of the combined
total market value of the tax-exempt securities of both
categories would be invested in securities which do not
meet these quality standards. In no event will a security
be purchased in the tax-exempt securities categories unless
it is rated at least investment grade; i.e., rated by
Moody's, S&P, or Fitch at least in the fourth highest
rating category for long-term securities, in the second
highest rating category for short-term securities, or, if
not rated by those rating agencies, determined by the
Manager to be of equivalent investment quality.
Securities rated in the lowest level of investment grade
have some speculative characteristics since adverse
economic conditions and changing circumstances are more
likely to have an adverse impact on such securities.
If the rating of a security is downgraded, the Manager
will determine whether it is in the best interest of the
Fund's shareholders to continue to hold such security in
the Fund's portfolio. For a more complete description of
tax-exempt securities and their ratings, see Appendix A
to the SAI.
Within the Short-Term Tax-Exempt Securities investment
category (maturities two years or less), the Fund may, on
a temporary basis due to market or other conditions,
invest in short-term securities which are not exempt from
federal income tax. These securities may consist of
obligations of the U.S. Government and its agencies or
instrumentalities, and repurchase agreements secured by
such instruments; certificates of deposit of domestic
banks having capital, surplus and undivided profits in
excess of $100 million; banker's acceptances of similar
banks; commercial paper; and other corporate debt
obligations.
Basic Value Stocks - Approximately 40% of the Fund's
assets will be invested in common stocks for their long-
term potential to increase in value. Within this
category, investments will consist of common stocks,
preferred stocks or securities which are convertible into
or which carry the right to buy common stocks of U.S.
companies which the Manager believes are undervalued in
relation to such factors as the company's assets and
current or prospective earnings. In most cases, these
securities will be listed on the New York Stock Exchange.
The Basic Value Stocks category will include common
stocks of companies with one or more of the following
characteristics when purchased: (1) the price earnings
ratio is lower than the price earnings ratio of the S&P
500; (2) the price per share is lower than the book value
per share; (3) the dividend yield is higher than the
dividend yield of the S&P 500; or (4) the company has
assets with a perceived market value in excess of book
value. Loss of these characteristics will not
necessarily result in the sale of securities in this
investment category. The Manager believes that these
common stock investments in Basic Value Stocks will
provide an investor in the Fund the potential for long-
term increases in capital. Such potential does not
generally exist in a portfolio which is invested totally
in fixed income securities.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations backed
by the full faith and credit of the U.S. Government or by
its agencies or instrumentalities. A repurchase
agreement is a transaction in which a security is
purchased with a simultaneous commitment to sell the
security back to the seller (a commercial bank or
recognized securities dealer) at an agreed upon price on
an agreed upon date, usually not more than seven days
from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. The obligation of
the seller to pay the agreed upon price is in effect
secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security declines,
the Fund may incur a loss and may incur expenses in selling
the collateral. If the seller seeks relief under the
bankruptcy laws, the disposition of the collateral may be
delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates (coupons) which
are adjusted periodically to market rates. These
interest rate adjustments can both raise and lower the
income generated by such securities. These changes will
have the same effect on the income earned by a Fund
depending on the proportion of such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller the
impact of interest rate fluctuations on the value of
these securities. The market value of variable rate
securities usually tends toward par (100% of face value)
at interest rate adjustment time.
Put Bonds - The Fund may invest in tax-exempt securities
(including securities with variable interest rates) which
may be redeemed or sold back (put) to the issuer of the
security or other guarantor not affiliated with the
issuer at face value prior to stated maturity (Put
Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer. Under the Fund's portfolio
allocation procedure, maturity for put bonds is deemed to
be the date on which the put becomes exercisable.
Municipal Lease Obligations - The Fund may invest in a
variety of instruments commonly referred to as municipal
lease obligations, including leases, installment purchase
contracts and certificates of participation in such
leases and contracts. In evaluating a potential
investment in a municipal lease obligation, the Manager
will consider: (1) the credit quality of the obligor,
(2) whether the underlying property is essential to a
governmental function, and (3) whether the lease
obligation contains covenants prohibiting the obligor
from substituting similar property if the obligor fails
to make appropriations for the lease obligation. For
a description of the risks associated with these
obligations, see Investment Policies - Municipal Lease
Obligations in the SAI.
Liquidity - The Fund may not invest more than 15% of the
market value of its total assets in securities which are
illiquid or not readily marketable.
Municipal Lease Obligations, Rule 144A Securities and
certain Put Bonds that are subject to restrictions on
transfer may be determined to be liquid in accordance
with guidelines established by the Board of Trustees for
purposes of complying with the Fund's investment
restriction applicable to investments in illiquid
securities.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not invest more than 25% of its total
assets in one industry.
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
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 Trust with a social security number or tax identification
number to avoid possible withholding requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next determined
after the Fund receives your request in proper form.
If the Fund receives your request prior to the close of
the New York Stock Exchange on a day on which the Exchange
is open, your purchase price will be the NAV per share
determined for that day. If the Fund receives your request
after the time at which the NAV per share is calculated, the
purchase will be effective on the next business day. A check
drawn on a foreign bank will not be deemed received for the
purchase of shares until such time as the check has cleared
and the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the
effectiveness of your purchase, the Manager suggests that
you convert your foreign check to U.S. dollars prior to
investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $3,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
Initial Purchase - IRA: Not Available
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448
Transfer to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston,
MA 02101
ABA#011000028
Attn: USAA Growth and Tax Strategy Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number______________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases can
be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If
you are considering redeeming shares soon after purchase,
you should purchase by bank wire or certified check to
avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a
telegraph to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered
Redemption shareholder(s) will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases, redemptions,
or changes in account information. The section Additional
Information Regarding Redemption of Shares in the SAI
contains information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Direct
Purchase Service, Automatic Purchase Plan, or
Directed Dividends investment plans, or
iii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange. If
no sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
quarterly. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-
dividend date. Any income dividend or capital gain
distributions paid by the Fund will reduce the per share
net asset value by the amount of the dividend or distribution.
An investor should consider carefully the effects of purchasing
shares of the Fund shortly before any dividend or
distribution. Although in effect a return of capital,
these distributions are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are taxable
as long-term capital gains whether received in cash or
reinvested in additional shares, and regardless of the
length of time the investor has held the shares of the Fund.
Distributions to shareholders derived from tax-exempt
interest received by the Fund will be excluded from a
shareholder's gross income for federal income tax
purposes, provided the Fund meets certain requirements.
Tax-exempt interest from private activity bonds (for
example, industrial development revenue bonds) issued
after August 7, 1986, although otherwise exempt from
federal tax, is treated as a tax preference item for
purposes of the alternative minimum tax. For
corporations, all tax-exempt interest will be considered
in calculating the alternative minimum tax as part of
the adjusted current earnings. Distributions of
tax-exempt income are taken into consideration in
computing the portion, if any, of Social Security and
railroad retirement benefits subject to federal and, in
some cases, state taxes.
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 - The Fund will report annually to their
shareholders the federal tax status of dividends and
distributions paid or declared by the Fund during the
preceding calendar year including the portion of the
dividends constituting interest on private activity
bonds, and the percentage and source, on a state-by-state
basis, of interest income earned on tax-exempt securities,
if any, held by the Fund during the preceding year.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory Agreement.
Under the Advisory Agreement, the Manager is responsible for
the management of the Funds, business affairs, and placement
of brokerage orders, subject to the authority of and
supervision by the Board of Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at one-half of one percent
(.50%) of ANA for the fiscal year ended May 31, 1995.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled .80%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Trustees has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGERS
The following individuals are primarily responsible for
managing the Fund.
John W. Saunders, Jr., Senior Vice President of Fixed
Income Investments since October of 1985, has been the
Fund's asset allocation manager since its inception in
January 1989. He has 26 years investment management
experience and has worked for IMCO 26 years. Mr.
Saunders earned the Chartered Financial Analyst (CFA)
designation in 1976 and is a member of the Association
for Investment Management and Research (AIMR) and the San
Antonio Financial Analysts Society, Inc. (SAFAS). He
holds a BS from Portland State University, Oregon.
Harry W. Miller, Senior Vice President of Equity
Investments since October of 1987, has managed the Basic
Value Stocks investment category since February 1995.
Mr. Miller has 38 years of experience in investment
management and has worked for IMCO 21 years. Mr. Miller
earned the CFA designation in 1968 and is a member of the
AIMR and SAFAS. He holds an MBA from the University of
Southern California and a BS from Rider College, New
Jersey.
Kenneth E. Willmann, Vice President of Fixed Income
Investments since December of 1986, has managed the Long-
Term Tax-Exempt Securities investment category since its
inception in January 1989. He has 21 years investment
management experience and has worked for IMCO 19 years.
Mr. Willmann earned the CFA designation in 1978 and is a
member of the AIMR, SAFAS and the National Federation of
Municipal Analysts (NFMA). He holds an MBA and a BA from
the University of Texas.
Clifford A. Gladson, Assistant Vice President of Fixed
Income Investments since November of 1994, has managed
the Short-Term Tax-Exempt investment category since April
1994. He has eight years investment management
experience and has worked for IMCO five years where he
has held various positions in Fixed Income Investments.
Mr. Gladson earned the CFA designation in 1990 and is a
member of the AIMR, SAFAS and NFMA. He holds an MS from
the University of Wisconsin, Milwaukee and a BS from
Marquette University.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the
Trust will assist shareholders in communicating with
other shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement
provides for indemnification out of the Trust's property
for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus,
the possibility of a shareholder incurring financial loss
on account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
Part A
Prospectus for the
Cornerstone Strategy Fund
is included herein
USAA CORNERSTONE STRATEGY FUND
October 1, 1995 PROSPECTUS
USAA Cornerstone Strategy Fund (the Fund) is one of
eleven no-load mutual funds offered by USAA Investment
Trust (the Trust). The Fund is managed by USAA
Investment Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is to achieve a positive,
inflation-adjusted rate of return and a reasonably stable
value of Fund shares, thereby preserving purchasing
power of shareholders' capital. This objective is to be
achieved through an asset allocation strategy. Inflation
is measured by the Consumer Price Index. Page 10.
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 15.
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 17.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA Cornerstone Strategy Fund are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market
risks. Because this Fund invests in foreign securities,
it involves a higher degree of risk and may not be
appropriate for some investors. See Special Risk
Considerations, page 14.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg Rd.,
San Antonio, TX 78288, or by calling 1-800-531-8181. The SAI
has been filed with the Securities and Exchange Commission
and is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Asset Allocation Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 10
SHAREHOLDER INFORMATION
Purchase of Shares 15
Redemption of Shares 17
Conditions of Purchase and Redemption 18
Exchanges 19
Other Services 20
Share Price Calculation 21
Dividends, Distributions and Taxes 22
Management of the Trust 23
Description of Shares 24
Service Providers 25
Telephone Assistance Numbers 25
FEES AND EXPENSES
The following summary is provided to assist you in understanding the
expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .75%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .25%
Custodian Fees .06%
All Other Expenses .07%
---
Total Other Expenses .38%
----
Total Fund Operating Expenses 1.13%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares - Bank
Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee
per account for its services. See Transfer Agent in the SAI, page 19.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 11
3 years - $ 36
5 years - $ 62
10 years - $137
The above example should not be considered a representation of past
or future expenses and actual expenses may be greater or less than
those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout each of the periods in the ten-year period ended May 31, 1995,
has been derived from financial statements audited by KPMG Peat Marwick
LLP. This table should be read in conjunction with the financial
statements and related notes that appear in the Fund's Annual Report.
Further performance information is contained in the Annual Report and is
available upon request without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
Net asset value at
beginning of period $ 23.24 $ 23.43 $ 19.94 $ 18.62 $ 17.19
Net investment income .68 .40 .60 .65 .65
Net realized and
unrealized gain (loss) .67 .29 3.52 1.26 1.43
Distributions from net
investment income (.58) (.59) (.63) (.59) (.65)
Distributions of realized
capital gains (1.38) (.29) - - -
-------- -------- -------- -------- --------
Net asset value at
end of period $ 22.63 $ 23.24 $ 23.43 $ 19.94 $ 18.62
======== ======== ======== ======== ========
Total return (%)* 6.43 3.00 21.35 10.53 12.61
Net assets at end of
period (000) $874,587 $814,869 $707,795 $567,212 $580,088
Ratio of expenses to
average net assets (%) 1.13 1.11(a) 1.18 1.18 1.18
Ratio of net investment
income to average net
assets (%) 3.16 2.68(a) 2.92 3.25 3.58
Portfolio turnover (%) 33.17 30.87 45.18 32.71 28.02
YEAR ENDED SEPTEMBER 30,
1990 1989 1988 1987 1986
Net asset value at
beginning of period $ 19.31 $ 16.71 $ 19.76 $ 14.49 $ 10.58
Net investment income .63 .69 .59 .60 .45
Net realized and
unrealized gain (loss) (2.04) 2.57 (3.26) 5.18 3.83
Distributions from net
investment income (.71) (.66) (.36) (.30) (.32)
Distributions of realized
capital gains - - (.02) (.21) (.05)
-------- -------- -------- -------- --------
Net asset value at
end of period $ 17.19 $ 19.31 $ 16.71 $ 19.76 $ 14.49
======== ======== ======== ======== ========
Total return (%)* (7.64) 20.17 (13.39) 41.26 41.77
Net assets at end of
period (000) $535,308 $522,031 $544,118 $822,748 $ 28,947
Ratio of expenses to
average net assets (%) 1.21 1.21 1.21 1.07 1.50
Ratio of net investment
income to average net
assets (%) 3.50 3.57 3.54 3.41 3.68
Portfolio turnover (%) 40.89 33.19 27.78 14.86 70.06
- --------------
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is reported.
Historical performance should not be considered as representative
of the future performance of the Fund.
The Trust may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified 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 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
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 ASSET ALLOCATION PROGRAM
I. THE IDEA BEHIND ASSET ALLOCATION
If you have money to invest and hear that stocks may be a
good investment, is it a wise idea to use your entire
savings to buy one stock? Most people wouldn't - it
would be fortunate if it works, but this strategy holds a
great deal of risk. Surprising news could be reported
tomorrow on your stock, and its price could soar or plummet.
Careful investors understand this concept of risk and
lower that risk by diversifying their holdings among a
number of securities. That way bad news for one security
may be counterbalanced by good news regarding other
securities. But there is still a question of risk here.
History tells us that stocks are generally more volatile
than bonds and that long-term bonds are generally more
volatile than short-term bonds. History also tells us
that over many years investments having higher risks tend
to have higher returns than investments that carry lower
risks. And past performance doesn't necessarily
guarantee future results. From these observations comes
the idea of asset allocation.
Asset allocation is a straightforward concept that
involves dividing your money among several different
types of investments - for example, stocks, bonds and
short-term investments such as money market instruments -
and keeping that allocation until your objectives or the
financial markets significantly change. That way you're
not pinning all your financial success on the fortunes of
one kind of investment. Money spread across different
investment categories can help you reduce market risk and
likely will provide more stability to your total return.
Asset allocation can work because different kinds of
investments generally follow different up-and-down
cycles. With a variety of investments in your portfolio,
some are probably doing well, even when others are struggling.
II. USING ASSET ALLOCATION IN AN INVESTMENT PROGRAM
Most investors understand the concept of diversification,
but asset allocation goes beyond diversifying your
portfolio; it's much more of an active process. You must
evaluate your lifestyle, finances, circumstances, long-
and short-term financial goals and tolerance for investment
risk. Once you have structured your allocation, you'll need
to review it regularly since your objectives will change
over time.
III. USAA'S SERIES OF ASSET STRATEGY FUNDS
USAA's series of asset allocation funds, our Asset
Strategy Funds, are designed for the long-term investor
and are in line with the Manager's investment philosophy
for its customers, specifically "don't try to time the
market," and "buy and hold for the long-term." As shown
on the next page, each of USAA's Asset Strategy Funds has
its own different mix of assets and objectives.
Fund Investment Objective Invests In
- ------------------------------------------------------------------
Income
Strategy
Fund Seek high current return, with Bonds and stocks
reduced risk over time, through an
asset allocation strategy which
emphasizes income and gives
secondary emphasis to long-term
growth of capital.
- -------------------------------------------------------------------
Growth and Tax
Strategy Fund Seek a conservative balance between Short- and long-term
income, the majority of which is tax exempt bonds and
tax-exempt, and the potential for basic value stocks
long-term growth of capital to
preserve purchasing power. This
objective is to be achieved through
an asset allocation strategy.
- -------------------------------------------------------------------
Balanced
Strategy
Fund Seek high total return, with reduced Stocks and bonds
risk over time, through an asset
allocation strategy that seeks a
combination of long-term growth of
capital and current income.
- --------------------------------------------------------------------
Cornerstone
Strategy
Fund Achieve a positive inflation-adjusted Foreign & basic
rate of return and a reasonably stable value stocks,
value of Fund shares. This objective government
is to be achieved through an asset securities, real
allocation strategy. estate stocks and
gold stocks
- ---------------------------------------------------------------------
Growth
Strategy
Fund Seek high total return, with reduced Small & large
risk over time, through an asset cap stocks, bonds,
allocation strategy which emphasizes and international
capital appreciation and gives stocks
secondary emphasis to income.
- ----------------------------------------------------------------------
An important feature of USAA's Asset Strategy Funds is
the quarterly rebalancing of each portfolio. In this
asset allocation technique, the Funds' Managers buy or
sell securities each quarter so that the investment
categories of each Fund are brought within their target
ranges. For example, if a portfolio holds 65% of its
securities in stocks, 30% in bonds, and 5% in money
market instruments at the beginning of a quarter, then
due to market returns holds 75% of its securities in
stocks, 20% in bonds, and 5% in money market instruments
at the end of a quarter, the Manager would rebalance the
portfolio by reducing its holdings of stocks and
increasing its holdings of bonds to return the
portfolio's investments in stocks and bonds into the
target ranges. See Investment Objective and Policies -
Investment Policies, Techniques and Risk Factors for
further information on the Fund's target ranges.
For more complete information about the other USAA Asset
Strategy Funds, including charges and expenses, call the
Manager for a Prospectus. Be sure to read it carefully
before you invest or send money.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to achieve a positive,
inflation-adjusted rate of return and a reasonably stable
value of Fund shares, thereby preserving purchasing power
of shareholders' capital. This objective is to be
achieved through an asset allocation strategy. Inflation
is measured by the Consumer Price Index.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies, restrictions
and risks is provided in the SAI.
INVESTMENT POLICIES,
TECHNIQUES AND RISK FACTORS
The Fund provides a professionally managed diversified
investment program within one mutual fund. The Manager
seeks to attain the objective by allocating the Fund's
assets in each of the following investment categories
within the indicated ranges:
Percentage
Target Range
Investment Category of Net Assets
- ------------------- -------------
Basic Value Stocks 22 - 28%
U.S. Government Securities 22 - 28%
Foreign Stocks 22 - 28%
Real Estate Stocks 22 - 28%
Gold Stocks 0 - 10%
The target ranges may be revised by the Board of
Trustees upon 60 days' prior written notice to
shareholders. However, the Manager reserves the right,
without shareholder notification, to revise the ranges on
a temporary defensive basis when, in its opinion, such
changes are believed to be in the best interest of the
Fund and its shareholders.
The ranges allow for a variance in each investment
category. Should market action cause investment
categories to move outside the ranges, the Manager will
make adjustments to rebalance the portfolio. In general,
the Manager will rebalance the portfolio at least once
during each calendar quarter to bring each category
within its range. These portfolio adjustments may cause
the Fund to sell securities in investment categories
which have appreciated in value and to buy securities in
investment categories which have depreciated in value.
Such adjustments may also cause the Fund to incur a
higher proportion of short-term capital gains than a fund
that does not have a similar policy.
The Basic Value Stocks category was selected to provide
appreciation during rising stock market conditions and to
stabilize the value of the Fund during adverse market
conditions. The U.S. Government Securities category was
selected to provide safety of principal in periods of
deflation. The Foreign Stocks category was selected to
provide the potential for appreciation during periods of
adverse economic and market conditions in the United
States. The Real Estate and Gold Stocks categories were
selected to provide a positive total return during
inflationary periods.
Characteristics and associated risks of each investment
category are as follows:
Basic Value Stocks - In this category, investments will
consist of common stocks, preferred stocks or securities
which are convertible into or which carry the right to
buy common stocks of U.S. companies which the Manager
believes are undervalued in relation to such factors as
the company's assets and current or prospective earnings.
In most cases, these securities will be listed on the New
York Stock Exchange.
The Basic Value Stocks category will include common
stocks of companies with one or more of the following
characteristics when purchased: (1) the price earnings
ratio is lower than the price earnings ratio of the S&P
500; (2) the price per share is lower than the book value
per share; (3) the dividend yield is higher than the
dividend yield of the S&P 500; or (4) the company has
assets with a perceived market value in excess of book
value. Loss of these characteristics will not necessarily
result in the sale of securities in this investment category.
U.S. Government Securities - In this category, investments
will consist of securities, without specific maturity
requirements or limits, issued or guaranteed as to both
principal and interest by the U.S. Government or by its
agencies or instrumentalities. Examples of these securities
are Treasury bills, notes and bonds, and securities issued
by the Federal Farm Credit Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, and
Government National Mortgage Association.
Within this investment category, the Fund may also
invest in repurchase agreements secured by securities of
the U.S. Government or by its agencies or instrumentalities.
The U.S. Government Securities investment category is
intended to provide both liquidity and interest income
with limited risk. Changes in interest rates may affect
the value of investments within this category. In
periods of rising interest rates, fixed coupon securities
will generally decline in market value. To minimize such
changes in value, the Manager may shorten maturities in
periods of rising interest rates, although there is no
assurance that this action will totally protect principal
from erosion. Conversely, the Manager may extend
maturities in periods of declining interest rates to
capitalize on the resulting impact on principal.
Foreign Stocks - In this category, investments will
consist of common stocks, preferred stocks or securities
which are convertible into or which carry the right to
buy common stocks of companies organized and operating
principally outside the United States, other than companies
whose principal business is gold exploration, mining, or
processing. A company is deemed to be operating principally
outside the United States if at least 50% of its revenues
are derived from operations outside the United States or if
its primary production or operating facilities are located
outside the United States.
The Manager believes that international diversification
may have a balancing impact with regard to investments in
the United States. For a discussion of the risks
associated with investments in foreign issuers, see
Special Risk Considerations.
Real Estate Stocks - In this category, investments will
consist of common stocks, preferred stocks or securities
which are convertible into or which carry the right to
buy common stocks of U.S. Real Estate Investment Trusts
(REITs) and U.S. companies which operate as real estate
corporations or which have a significant portion of their
assets in real estate. The Manager will evaluate the
nature of a company's real estate holdings in determining
whether the Fund's investment in the company's common
stock will be included in this category. The Fund's
investments in REITs may subject the Fund to many of the
same risks associated with the direct ownership of real
estate. In addition, REITs are dependent upon the
capabilities of the REIT manager(s) and have limited
diversification. The Fund will not acquire any direct
ownership of real estate.
The Manager believes that diversified investments
linked to real estate are a good hedge during an
inflationary environment.
Gold Stocks - In this category, at least 80% of the
investments will consist of common stocks, preferred
stocks or securities which are convertible into or which
carry the right to buy common stocks of companies
principally engaged in gold exploration, mining, or
processing. The remaining investments in this category
will consist of common stocks, preferred stocks or
securities which are convertible into or which carry the
right to buy common stocks of companies similarly engaged
in other precious metals and minerals. Gold stocks have
been selected for their perceived potential to increase
in value during inflationary periods. For a discussion
of risks associated with investments in this category,
see Special Risk Considerations.
Forward Currency Contracts - The Fund may hold securities
denominated in foreign currencies. As a result, the
value of the securities will be affected by changes in
the exchange rate between the dollar and foreign
currencies. In managing the currency exposure, the Fund
may enter into forward currency contracts. A forward
currency contract involves an agreement to purchase or
sell a specified currency at a specified future date or
over a specified time period at a price set at the time
of the contract.
The Fund may enter into forward currency contracts
under two circumstances. First, when the Fund enters into
a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. Second, when
management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S.
dollar, it may enter into a forward contract to sell that
currency. The Fund may not hedge with respect to a
particular currency for an amount greater than the
aggregate market value (determined at the time of making
any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward currency contracts to protect the
value of a Fund's assets against a decline in the value
of a currency does not eliminate fluctuations in the
value of the Fund's underlying security holdings. In
addition, although the use of forward currency contracts
can minimize the risk of loss due to a decline in value
of the foreign currency, the use of such contracts will
tend to limit any potential gain resulting from an
increase in the relative value of the foreign currency to
the U.S. dollar. Under certain circumstances, a fund
that has entered into forward currency contracts to hedge
its currency risks may be in a less favorable position
than a fund that had not entered into such contracts.
The projection of short-term currency market movements is
extremely difficult and successful execution of a short-
term hedging strategy is highly uncertain.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations backed
by the full faith and credit of the U.S. Government or by
its agencies or instrumentalities. A repurchase
agreement is a transaction in which a security is
purchased with a simultaneous commitment to sell the
security back to the seller (a commercial bank or
recognized securities dealer) at an agreed upon price on
an agreed upon date, usually not more than seven days
from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. The obligation of
the seller to pay the agreed upon price is in effect
secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security
declines, the Fund may incur a loss and may incur
expenses in selling the collateral. If the seller seeks
relief under the bankruptcy laws, the disposition of the
collateral may be delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates (coupons) which
are adjusted periodically to market rates. These
interest rate adjustments can both raise and lower the
income generated by such securities. These changes will
have the same effect on the income earned by a Fund
depending on the proportion of such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller the
impact of interest rate fluctuations on the value of these
securities. The market value of variable rate securities
usually tends toward par (100% of face value) at interest
rate adjustment time.
Liquidity - The Fund may not invest more than 15% of the
market value of its total assets in securities which are
illiquid or not readily marketable. Rule 144A Securities
may be determined to be liquid in accordance with guidelines
established by the Board of Trustees for purposes of
complying with the Fund's investment restriction applicable
to investments in illiquid securities.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not invest more than 25% of its total
assets in one industry. The Foreign Stocks, U.S.
Government Securities, and Basic Value Stocks
investment categories are not considered industries
for this purpose.
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities - The Fund may purchase
foreign securities in foreign or U.S. markets or it may
purchase American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), or similar forms of ownership
interest in securities of foreign issuers deposited with
a depositary. Investing in foreign securities presents
certain risks not present in domestic investments. Such
risks may include currency exchange rate fluctuations,
foreign market illiquidity, increased price volatility,
exchange control regulations, different accounting,
reporting and disclosure requirements, political or social
instability, and difficulties in obtaining judgments or
effecting collections thereon. Brokerage commissions and
custodial services may be more costly, and stock trade
settlements may be more lengthy, more costly and more
difficult than in domestic markets. These investments may
be subject to foreign withholding taxes which may reduce
the effective rates of return. The Fund values its
securities and other assets in U.S. dollars.
Information which may impact the market value of
securities of a foreign issuer may not be available to
the Manager on a timely basis. The Manager will endeavor
to ascertain such information on as timely a basis as is
practicable, however, any impact on the net asset value
will be deemed to have occurred upon authentication by
the Manager.
A developing country can be considered to be a country
which is in the initial stages of its industrialization
cycle. Investments in developing countries involve
exposure to economic structures that are generally less
diverse and mature than in the United States, and to
political systems which may be less stable. Due to
illiquidity and lack of hedging instruments, it is
presently difficult or in some cases impossible to hedge
the currency risk in these markets. In the past, markets
of developing countries have been more volatile than the
markets of developed countries.
Political risk includes a greater potential for coup
d'etats, insurrections and expropriation by governmental
organizations. For example, the Fund may invest in
Eastern Europe and former states of the Soviet Union
(also known as the CIS or the Commonwealth of Independent
States). These countries were under communist systems
which had nationalized private industry. There is no
guarantee that nationalization may not occur again in
this region or others in which the Fund invests, in which
case the Fund may lose all or part of its investment in
that country's issuers.
Volatility of Mining Stocks - Gold mining stocks involve
additional risk because of gold's price volatility and
the increased impact such volatility has on the
profitability of gold mining companies. However, since
the market action of such securities has tended to move
independently of the broader financial markets, the
addition of gold mining stocks to an investor's portfolio
may reduce overall fluctuations in portfolio value.
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 Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per
share determined for that day. If the Fund receives your
request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000 or minimum $100 with a minimum $50
monthly electronic investment $250 for
spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448
Transfer to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Cornerstone Strategy Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number_______________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days after
the effective date of redemption. Payment for redemption
of shares purchased by check or electronic funds transfer
will not be disbursed until the purchase check or electronic
funds transfer has cleared, which could take up to 15 days
from the purchase date. If you are considering redeeming
shares soon after purchase, you should purchase by bank wire
or certified check to avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a
telegraph to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered
Redemption shareholder(s) will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. With this program you can
make initial investments as low as $100 and automatic
monthly additions of $50 to the account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange.
Portfolio securities traded primarily on foreign
securities exchanges are generally valued at the closing
values of such securities on the exchange where primarily
traded. If no sale is reported, the latest bid price is
generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-dividend
date. Any income dividend or capital gain distributions
paid by the Fund will reduce the per share net asset value
by the amount of the dividend or distribution. An investor
should consider carefully the effects of purchasing shares
of the Fund shortly before any dividend or distribution.
Although in effect a return of capital, these distributions
are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - Information concerning the status of
dividends and distributions for federal income tax
purposes will be mailed to shareholders annually.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business affairs,
and placement of brokerage orders, subject to the authority
of and supervision by the Board of Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA), accrued
daily and paid monthly. The Fund's management fees were
computed and paid at three-fourths of one percent (.75%) of
ANA for the fiscal year ended May 31, 1995. This fee is
higher than that charged to most other mutual funds, but is
comparable to fees charged to other mutual funds with similar
investment objectives and policies.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled 1.13%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Trustees has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGERS
The following individuals are primarily responsible for
managing the Fund.
Harry W. Miller, Senior Vice President of Equity
Investments since October of 1987, is the asset
allocation manager for the Fund. He has been the
portfolio manager for the Basic Value Stocks investment
category since February 1995. Mr. Miller has 38 years of
experience in investment management and has worked for
IMCO 21 years. Mr. Miller earned the Chartered Financial
Analyst (CFA) designation in 1968 and is a member of the
Association for Investment Management and Research (AIMR)
and the San Antonio Financial Analysts Society, Inc.
(SAFAS). He holds an MBA from the University of Southern
California and a BS from Rider College, New Jersey.
John W. Saunders, Jr., Senior Vice President of Fixed
Income Investments since October of 1985, has managed the
U.S. Government Securities investment category since
October 1985. Mr. Saunders has 26 years investment
management experience and has worked for IMCO 26 years.
Mr. Saunders earned the CFA designation in 1976 and is a
member of the AIMR and SAFAS. He holds a BS from
Portland State University, Oregon.
David G. Peebles, Vice President of Equity Investments
since February of 1988, has managed the Foreign Stocks
investment category since December 1994. He has 30 years
investment management experience and has worked for IMCO
12 years. Mr. Peebles earned the CFA designation in 1971
and is a member of the AIMR and SAFAS. He holds an MBA
and BS from Texas Christian University.
Mark W. Johnson, Assistant Vice President of Equity
Investments since March of 1995, has managed the Gold
Stocks and Real Estate Stocks investment categories since
January 1994. He has 21 years investment management
experience and has worked for IMCO seven years. Mr.
Johnson earned the CFA designation in 1978 and is a
member of the AIMR and SAFAS. He holds an MBA and a BBA
from the University of Michigan.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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.
Shareholders holding an aggregate of at least 10% of the
outstanding shares of the Trust may request a meeting of
shareholders at any time for the purpose of voting to
remove one or more of the Trustees, and the Trust will
assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement
provides for indemnification out of the Trust's property
for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust.
Thus, the possibility of a shareholder incurring
financial loss on account of shareholder liability is
remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the
Emerging Markets Fund
is included herein
USAA EMERGING MARKETS FUND
October 1, 1995 PROSPECTUS
USAA Emerging Markets Fund (the Fund) is one of eleven
no-load mutual funds offered by USAA Investment Trust
(the Trust). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is capital appreciation.
Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 13.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 15.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA Emerging Markets Fund are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market
risks. Because this Fund invests in foreign securities,
it involves a higher degree of risk and may not be
appropriate for some investors. See Special Risk
Considerations, page 11.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Fund, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 5
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 13
Redemption of Shares 15
Conditions of Purchase and Redemption16
Exchanges 17
Other Services 18
Share Price Calculation 19
Dividends, Distributions and Taxes 19
Management of the Trust 21
Description of Shares 22
Service Providers 23
Telephone Assistance Numbers 23
Appendix A - Corporate Ratings 24
FEES AND EXPENSES
The following summary is provided to assist you in understanding the
expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets (ANA))
Management Fees, net of reimbursements .90%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .42%
Custodian Fees .47%
All Other Expenses .71%
---
Total Other Expenses 1.60%
----
Total Fund Operating Expenses, net of reimbursements 2.50%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares - Bank
Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee per
account for its services. See Transfer Agent in the SAI, page 19.
The Manager voluntarily limited the annual expenses of the Fund for the
period ended May 31, 1995 to 2.50% of its ANA and reimbursed the Fund for
all expenses in excess of this limitation. The Management Fees and Total
Fund Operating Expenses reflect all such expense reimbursements by the
Manager. Absent such reimbursements, the amount of the Management Fees and
Total Fund Operating Expenses as a percentage of ANA would have been 1.00%
and 2.60%, respectively.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the periods
shown.
1 year - $ 25 3 years - $ 78
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout the seven-month period ended May 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP. This table should be
read in conjunction with the financial statements and related notes that
appear in the Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon request without charge.
SEVEN-MONTH
PERIOD ENDED
MAY 31,
1995*
----
Net asset value at
beginning of period $ 10.00
Net investment income .03(b)
Net realized and
unrealized loss (.26)
-------
Net asset value at
end of period $ 9.77
=======
Total return (%) (2.30)
Net assets at end of
period (000) $22,914
Ratio of expenses to
average net assets (%) 2.50(a)(c)
Ratio of net investment
income to average net
assets (%) .53(a)(c)
Portfolio turnover (%) 34.87
- --------------
* Fund commenced operations November 7, 1994.
(a) Annualized. The ratio is not necessarily indicative of 12 months
of operations.
(b) Calculated using weighted average shares.
(c) The information contained in this table is based on actual expenses
for the period, after giving effect to reimbursements of expenses
by the Manager. Absent such reimbursements the Fund's ratios would
have been:
SEVEN-MONTH
PERIOD ENDED
MAY 31,
1995*
----
Ratio of expenses to average net assets (%) 2.60(a)
Ratio of net investment income to average net assets (%) .43(a)
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is reported.
Historical performance should not be considered as representative
of the future performance of the Fund.
The Trust may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified 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 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT
PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wishes to diversify
internationally. He or she could do this by adding
positions in the Emerging Markets, Gold, International,
or World Growth Funds to holdings in domestic funds.
This would give the investor exposure to the
opportunities of investment in many foreign countries and
to currency changes. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies, restrictions
and risks is provided in the SAI.
INVESTMENT POLICIES,
TECHNIQUES AND RISK FACTORS
The Manager will pursue the objective by investing at
least 65% of the Fund's total assets in common stocks,
preferred stocks or securities which are convertible into
or which carry the right to buy common stocks of emerging
market companies. An issuer is deemed to be an emerging
market company if:
1. it is organized under the laws of an emerging
market country (as defined below);
2. the principal trading market for its stock is in
an emerging market country; or
3. at least 50% of its revenues or profits are
derived from operations within an emerging market
country or if at least 50% of its assets are
located within an emerging market country.
Emerging market countries are defined for the purposes
of this Prospectus as all countries of the world
excluding the following which are referred to as the
developed countries:
ASIA: Australia, Japan, New Zealand
AMERICAS: Canada, the United States
EUROPE: Austria, Belgium, Denmark, Finland, France,
Germany, Holland, Italy, Luxembourg, Norway,
Spain, Sweden, Switzerland, the United Kingdom
The economic and political systems of emerging market
countries can be described as possessing two or more of
the following attributes:
1. The countries in which these stock markets are
found have a less-developed economy than the
developed countries.
2. Economies of these countries are likely to be
undergoing rapid growth or some major structural
change, such as a change in economic systems,
rapid development of an industrial or value-added
economic sector, or attainment of significantly
better terms of trade for primary goods, to name a
few examples.
3. Sustainable economic growth rates are higher, or
potentially higher, than developed countries.
4. Economies of these countries may be benefitting
from the rapid growth of neighboring countries
and/or may be significantly influenced by growth
of demand in the developed markets.
5. Personal income levels and consumption are
generally lower than those in developed countries,
but may be growing at a faster rate.
6. The political system is likely to be or appear to
be in greater flux than the above-mentioned
developed countries.
The countries in which the Fund expects to invest or
may invest include, but are not limited to:
ASIA: China, Hong Kong, India, Indonesia, Korea,
Malaysia, Pakistan, Philippines, Singapore,
Taiwan, Thailand
AMERICAS: Argentina, Brazil, Chile, Colombia, Ecuador,
Mexico, Peru, Venezuela
AFRICA/MIDDLE EAST: Ghana, Morocco,South Africa, Turkey,
Zimbabwe
EUROPE/OTHER: Czech Republic, Greece, Hungary, Poland,
Portugal, Russia, Slovakia
The remainder of the Fund's assets may be invested in
marketable debt securities having remaining maturities of
less than one year issued or guaranteed as to both
principal and interest by the U.S. Government or its
agencies or instrumentalities and in repurchase
agreements collateralized by such securities. The Fund
may on a temporary defensive basis invest its assets
without limitation in such securities. The Fund may also
invest part of its cash position in short-term sovereign
debt securities of emerging market countries for the
purpose of obtaining a higher yield.
In addition, the remainder may be invested in stocks of
selected issuers which have favorable growth prospects,
but may not be organized or otherwise situated in
emerging markets. The Fund may also invest in public and
private sector debt and fixed income instruments of
emerging market issuers, including Brady Bonds of
selected countries, which the Manager believes have the
potential for significant capital appreciation (due, for
example, to the Manager's assessment of prospects for the
issuer or its domicile country), irrespective of any
interest or dividend yields payable pursuant to such
securities. These latter investments may be considered
to be speculative in nature.
There are no restrictions as to the type of businesses
or operations of companies in which the Fund may invest
except that the Fund may not invest 25% or more of its
total assets in one industry. The Fund's investments
will be diversified in four or more countries.
The Manager believes that attractive investment
opportunities exist in many emerging markets, and that
while investing a person's assets solely in an emerging
market fund may not be suitable, inclusion of an emerging
market fund in a well-diversified portfolio may
significantly enhance returns. The Fund combines the
advantages of diversified investment in emerging markets
with the convenience and liquidity of a mutual fund based
in the United States. Risks are higher in these markets
than developed international markets or the United
States. For further discussion, see Special Risk
Considerations.
Forward Currency Contracts - The Fund may hold securities
denominated in foreign currencies. As a result, the
value of the securities will be affected by changes in
the exchange rate between the dollar and foreign
currencies. In managing currency exposure, the Fund may
enter into forward currency contracts. A forward
currency contract involves an agreement to purchase or
sell a specified currency at a specified future date or
over a specified time period at a price set at the time
of the contract.
The Fund may enter into forward currency contracts
under two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. Second, when
management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S.
dollar, it may enter into a forward contract to sell that
currency. The Fund may not hedge with respect to a
particular currency for an amount greater than the
aggregate market value (determined at the time of making
any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward currency contracts to protect the
value of a Fund's assets against a decline in the value
of a currency does not eliminate fluctuations in the
value of the Fund's underlying security holdings. In
addition, although the use of forward currency contracts
can minimize the risk of loss due to a decline in value
of the foreign currency, the use of such contracts will
tend to limit any potential gain resulting from an
increase in the relative value of the foreign currency
to the U.S. dollar. Under certain circumstances, a fund
that has entered into forward currency contracts to hedge
its currency risks may be in a less favorable position
than a fund that had not entered into such contracts.
The projection of short-term currency market movements
is extremely difficult and successful execution of a
short-term hedging strategy is highly uncertain.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations backed
by the full faith and credit of the U.S. Government or by
its agencies or instrumentalities. A repurchase
agreement is a transaction in which a security is
purchased with a simultaneous commitment to sell the
security back to the seller (a commercial bank or
recognized securities dealer) at an agreed upon price on
an agreed upon date, usually not more than seven days
from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. The obligation of
the seller to pay the agreed upon price is in effect
secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security
declines, the Fund may incur a loss and may incur
expenses in selling the collateral. If the seller seeks
relief under the bankruptcy laws, the disposition of the
collateral may be delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Brady Bonds and Emerging Market Debt and Fixed Income
Instruments - The Fund may invest in Brady Bonds and
public and private sector debt and fixed income
instruments of emerging market issuers. Brady Bonds are
securities created through a restructuring plan
introduced by former U.S. Treasury Secretary Nicholas
Brady. The Brady Plan made provisions whereby existing
commercial bank loans to both public and private entities
in selected developing countries are exchanged for Brady
Bonds. These bonds may be denominated in other
currencies, but are usually denominated in U.S. dollars.
Brady Bonds are actively traded in over-the-counter
markets. As the markets for these securities are
relatively new, however, and since they have from time to
time been subject to disruption, the Manager will
monitor, on a continuous basis, the liquidity of Brady
Bonds held in the Fund's portfolio.
Liquidity - The Fund may not invest more than 15% of the
market value of its net assets in securities which are
illiquid or not readily marketable. Rule 144A Securities
may be determined to be liquid in accordance with
guidelines established by the Board of Trustees for
purposes of complying with the Fund's investment
restriction applicable to investments in illiquid
securities.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not invest 25% or more of its total
assets in one industry.
b. With respect to 75% of its assets, the Fund will
not purchase securities of any issuer (except U.S.
Government Securities, as such term is defined in
the Investment Company Act of 1940) if, as a
result, the Fund would own more than 10% of the
outstanding voting securities of such issuer or
the Fund would have more than 5% of the value of
its total assets invested in the securities of
such issuer.
c. The Fund will not borrow money, except for
temporary or emergency purposes in an amount not
exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than
borrowings), nor will it purchase securities when
its borrowings exceed 5% of its total assets.
SPECIAL RISK CONSIDERATIONS
The Fund will purchase securities of emerging market
issuers in foreign or U.S. markets or it may purchase
American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs), or similar forms of ownership interests
in securities of foreign issuers deposited with a
depositary.
Investing in foreign securities presents certain risks
not present in domestic investments. Such risks may
include currency exchange rate fluctuations, foreign
market illiquidity, increased price volatility, exchange
control regulations, foreign ownership limits, different
accounting, reporting and disclosure requirements, and
difficulties in obtaining judgments or effecting
collections thereon. Brokerage commissions and custodial
services may be more costly, and stock trade settlements
may be more lengthy, more costly and more difficult than
in domestic markets. Some investments may be subject to
foreign withholding taxes which may reduce the effective
rates of return. In the past, equity and debt instruments
of foreign markets have been more volatile than equity and
debt instruments of U.S. securities markets.
A developing country can be considered to be a country
which is in the initial stages of its industrialization
cycle. Investing in emerging markets poses additional
risks beyond those noted above. Economic structures are
generally less diverse and mature than in the developed
markets. Due to illiquidity and lack of hedging
instruments, it is presently difficult or in some cases
impossible to hedge the currency risk in many of the
markets in which the Fund may invest.
Political risk includes a greater potential for coup
d'etats, insurrections and expropriation by governmental
organizations. For example, the Fund may invest in
Eastern Europe and former states of the Soviet Union
(also known as the CIS or the Commonwealth of Independent
States). These countries were under communist
systems which had nationalized private industry. There
is no guarantee that nationalization may not occur again
in this region or others in which the Fund invests, in
which case the Fund may lose all or part of its
investment in that country's issuers.
The Fund may invest in the securities of South African
issuers. The market prices of these securities and the
ability of the Fund to hold such investments in the
future could be affected by the unstable political and
social conditions in South Africa and other African
countries.
Information which may impact the market value of
securities of an emerging market issuer may not be
available to the Manager on a timely basis. The Manager
will endeavor to ascertain such information on as timely
a basis as is practicable, however, any impact on the net
asset value will be deemed to have occurred upon
authentication by the Manager.
High Yield, High Risk Securities - All or a large portion
of the Fund's investments in emerging market public and
private sector debt and fixed income instruments may be
either rated below investment grade, including securities
having the lowest ratings, as determined by nationally
recognized statistical rating organizations such as
Moody's Investors Service, Inc. ("Moody's") or Standard
and Poor's Ratings Group ("S&P"), or unrated but judged
by the Fund's Manager to be of comparable (i.e., below
investment grade) quality ("high yield, high risk
securities", commonly referred to as "junk bonds"). See
Appendix A, page 24. Such securities are deemed to be
predominantly speculative in terms of the issuer's
capacity to make timely payments of interest and
principal. Securities assigned the lowest credit quality
ratings, or judged to be of comparable quality, are
deemed to have extremely poor prospects of ever obtaining
any real investment standing. Such securities may include
those in default of the payment of interest or repayment of
principal, or presenting an imminent risk of default with
respect to such payments, at the time of their
acquisition by the Fund. Once in default, issuers of
such securities may fail to resume principal as well as
interest payments, in which case the Fund may lose its
entire investment. In light of these risks, the Fund
will limit its investments in defaulted securities, at
time of acquisition, to 10% of the value of its assets.
These securities present unique risk exposures in that
their market valuations are especially subject to adverse
changes in general economic, political or social
conditions or in the industries within which their
issuers operate; to adverse changes in the overall
financial condition of their issuers; and to interest
rate fluctuations. During, for example, periods of
general economic downturns or rising interest rates,
issuers of such securities may experience pronounced
financial difficulties which could adversely affect their
ability to make timely interest and principal payments.
Such conditions would increase the possibility of their
defaulting upon these securities with the Fund having no
adequate means of effecting collection or other legal
recourse. The Fund's ability to timely and accurately
value, as well as dispose of, these securities may also
be detrimentally affected by the entire absence, or
periodic discontinuance, of liquid trading markets for
such securities.
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 Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per
share determined for that day. If the Fund receives your
request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest
by Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing
Electronic investment or from a USAA money market account. Sign up
Funds for these services when opening an account or call
Transfer 1-800-531-8448 to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Emerging Markets Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If you
are considering redeeming shares soon after purchase,
you should purchase by bank wire or certified
check to avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a
telegraph to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s)
Redemption will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share,
without a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange.
Portfolio securities traded primarily on foreign securities
exchanges are generally valued at the closing values of such
securities on the exchange where primarily traded. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-dividend
date. Any income dividend or capital gain distributions
paid by the Fund will reduce the per share net asset value
by the amount of the dividend or distribution. An investor
should consider carefully the effects of purchasing shares
of the Fund shortly before any dividend or distribution.
Although in effect a return of capital, these distributions
are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. It
is not expected that the dividends of the Fund will
qualify for the 70% corporate dividends received
deduction.
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.
Foreign Taxes - The Fund may be subject to foreign
withholding or other taxes. If more than 50% of the
value of the Fund's total assets at the close of any
taxable year consists of securities of foreign
corporations, the Fund may file an election with the
Internal Revenue Service (the Foreign Election) that
would permit shareholders to take a credit (or a
deduction) for foreign income taxes paid by the Fund.
If the Foreign Election is made, shareholders would
include in their gross income both dividends received
from the Fund and foreign income taxes paid by the Fund.
Shareholders of the Fund would be entitled to treat
the foreign income taxes withheld as a credit against
their U.S. federal income taxes, subject to the
limitations set forth in the Code with respect to
the foreign tax credit generally. Alternatively,
shareholders could, if to their advantage, treat the
foreign income taxes withheld as an itemized deduction
in computing taxable income rather than as a tax credit.
Shareholders will not be entitled to a foreign tax credit
for taxes paid to certain countries; however, if the Fund
otherwise qualifies for the Foreign Election, a deduction
for such taxes will be available to shareholders of the
Fund. It is anticipated that the Fund will make the
Foreign Election.
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 TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of
Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees are computed and paid at one percent (1.00%) of ANA.
For the fiscal period ended May 31, 1995, the fees paid
to the Manager, net of the reimbursement, were .90% of ANA.
This fee is higher than that charged to most other
mutual funds, but in the opinion of the Manager is
comparable to fees charged to other mutual funds with
similar investment objectives and policies.
OPERATING EXPENSES
For the fiscal period ended May 31, 1995, the Manager
voluntarily limited total operating expenses to 2.50%
of the Fund's ANA. The Manager reimbursed the Fund
$8,091 for expenses in excess of this limitation.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
W. Travis Selmier, II, Executive Director of Equity
Investments since March of 1995, has managed the Fund
since its inception in November 1994. Mr. Selmier has
nine years investment management experience and has
worked for IMCO five years. He has held various
positions in Equity Investments since January 1991. From
January 1987 to May 1990 he was employed as an Investment
Analyst with Daiwa Securities America Inc., New York, New
York. Mr. Selmier earned the Chartered Financial Analyst
designation in 1990 and is a member of the Association
for Investment Management and Research, San Antonio
Financial Analysts Society, Inc. and the International
Society of Financial Analysts. He holds an MBA from
Indiana University, a Certificate of Proficiency from
Sophia University Japanese Language Institute, Japan and
a BA from the University of California at Santa Barbara.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Trustees has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the
Trust will assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement provides
for indemnification out of the Trust's property for all
losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the
possibility of a shareholder incurring financial loss on
account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
APPENDIX A - CORPORATE RATINGS
Moody's Corporate Ratings
Baa Bonds which are rated Baa are considered as medium
grade obligations. Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba Bonds which are rated Ba are judged to have
speculative elements; their future cannot be
considered as well assured. Often the protection of
interest and principal payments may be very moderate,
and thereby not well safeguarded during other good and
bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present
elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations
which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class
of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
S&P Corporate Ratings
BBB Debt rated BBB is regarded as having adequate
capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category
than in higher rated categories.
BB Debt rated BB has less near-term vulnerability to
default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely
interest and principal payments. This rating category
is also used for debt subordinated to senior debt that
is assigned an actual or implied BBB- rating.
B Debt rated B has a greater vulnerability to
default but currently has the capacity to meet interest
payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay
principal. This rating category is also used for debt
subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions
to meet timely payment of interest and repayment of
principal. In the event of adverse business,
financial, or economic conditions, these bonds are not
likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for
debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC The rating CC is typically applied to debt
subordinated to senior debt that is assigned an actual
or implied CCC rating.
C The rating C typically is applied to debt
subordinated to senior debt which is assigned an actual
or implied CCC- debt rating. This rating may be used
to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
CI The rating CI is reserved for income bonds on
which no interest is being paid.
D Debt rated D is in payment default. This rating
category is used when interest payments or principal
payments are not made on the date due even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such
grace period. This rating also will be used upon the
filing of a bankruptcy petition if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from BBB to CCC may
be modified by the addition of a plus or minus sign to
show relative standing within the major rating
categories.
A description of ratings "A" or better assigned to debt
obligations by Moody's and S&P is included in Appendix A
of the SAI.
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Part A
Prospectus for the
Gold Fund
is included herein
USAA GOLD FUND
October 1, 1995 PROSPECTUS
USAA Gold Fund (the Fund) is one of eleven no-load mutual
funds offered by USAA Investment Trust (the Trust). The
Fund is managed by USAA Investment Management Company
(the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's primary investment objective is to seek long-
term capital appreciation and to protect the purchasing
power of shareholders' capital against inflation.
Current income is a secondary objective. Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 12.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 14.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA Gold Fund are not deposits or other
obligations of, or guaranteed by the USAA Federal Savings
Bank, are not insured by the FDIC or any other Government
Agency, and are subject to market risks. Because this
Fund invests in foreign securities, it involves a higher
degree of risk and may not be appropriate for some
investors. See Special Risk Considerations, page 11.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 12
Redemption of Shares 14
Conditions of Purchase and Redemption 15
Exchanges 16
Other Services 17
Share Price Calculation 18
Dividends, Distributions and Taxes 18
Management of the Trust 20
Description of Shares 21
Service Providers 22
Telephone Assistance Numbers 22
FEES AND EXPENSES
The following summary is provided to assist you in understanding the
expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .75%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .36%
Custodian Fees .05%
All Other Expenses .12%
----
Total Other Expenses .53%
----
Total Fund Operating Expenses 1.28%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares -
Bank Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee
per account for its services. See Transfer Agent in the SAI, page 19.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the periods
shown.
1 year - $ 13
3 years - $ 41
5 years - $ 70
10 years - $155
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout each of the periods in the ten-year period ended May 31, 1995,
has been derived from financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the financial statements and
related notes that appear in the Fund's Annual Report. Further performance
information is contained in the Annual Report and is available upon request
without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
Net asset value at
beginning of period $ 8.83 $ 7.95 $ 6.53 $ 6.40 $ 8.08
Net investment income .01 .01 .02 .07 .10
Net realized and
unrealized gain (loss) .17 .88 1.44 .14 (1.72)
Distributions from net
investment income (.01) (.01) (.04) (.08) (.06)
Distributions of realized
capital gains - - - - -
-------- -------- -------- -------- --------
Net asset value at
end of period $ 9.00 $ 8.83 $ 7.95 $ 6.53 $ 6.40
======== ======== ======== ======== ========
Total return (%)* 2.05 11.19 22.53 3.30 (20.10)
Net assets at end of
period (000) $160,223 $176,527 $150,793 $114,073 $121,204
Ratio of expenses to
average net assets (%) 1.28 1.26(a) 1.41 1.43 1.45
Ratio of net investment
income to average net
assets (%) .10 .15(a) .25 1.02 1.55
Portfolio turnover (%) 34.76 34.75 81.08 19.01 13.38
YEAR ENDED SEPTEMBER 30,
1990 1989 1988 1987 1986
Net asset value at
beginning of period $ 8.84 $ 8.21 $ 17.07 $ 8.27 $ 6.83
Net investment income .08 .17 .05 .10 .10
Net realized and
unrealized gain (loss) (.69) .59 (8.35) 8.80 1.46
Distributions from net
investment income (.15) (.13) (.05) (.10) (.12)
Distributions of realized
capital gains - - (.51) - -
-------- -------- ------- -------- --------
Net asset value at
end of period $ 8.08 $ 8.84 $ 8.21 $ 17.07 $ 8.27
======== ======== ======== ======== ========
Total return (%)* (7.16) 9.37 (48.89) 108.77 23.53
Net assets at end of
period (000) $156,573 $165,026 $174,380 $309,931 $ 29,486
Ratio of expenses to
average net assets (%) 1.43 1.34 1.42 1.14 1.50
Ratio of net investment
income to average net
assets (%) .93 1.92 .50 .73 1.49
Portfolio turnover (%) 41.91 17.49 26.83 53.56 62.11
- --------------
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Trust may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified 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 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT
PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wishes to diversify
internationally. He or she could do this by adding
positions in the Emerging Markets, Gold, International,
or World Growth Funds to holdings in domestic funds.
This would give the investor exposure to the opportunities
of investment in many foreign countries and to currency
changes. This is just one example of how an individual
could combine funds to create a portfolio tailored to
his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's primary investment objective is to seek long-
term capital appreciation and to protect the purchasing
power of shareholders' capital against inflation.
Current income is a secondary objective.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies, restrictions
and risks is provided in the SAI.
INVESTMENT POLICIES,
TECHNIQUES AND RISK FACTORS
The Manager will pursue the objective by investing under
normal circumstances at least 80% of the Fund's assets in
common stocks, preferred stocks or securities which are
convertible into or which carry the right to buy common
stocks of companies principally engaged in gold
exploration, mining, or processing.
The remainder of the Fund's assets may be invested in
common stocks, preferred stocks or securities which are
convertible into or which carry the right to buy common
stocks of companies similarly engaged in other precious
metals and minerals and in marketable debt securities
having maturities of less than one year issued or
guaranteed as to both principal and interest by the U.S.
Government or by its agencies or instrumentalities and in
repurchase agreements collateralized by such securities.
If the Manager believes the outlook for gold is
unattractive, the Fund may on a temporary defensive basis
invest its assets without limitation in marketable
securities having remaining maturities of less than one
year issued or guaranteed as to both principal and
interest by the U.S. Government or by its agencies or
instrumentalities and in repurchase agreements
collateralized by such securities.
Since the Fund will normally maintain at least 80%
of its total assets in securities of companies principally
engaged in gold exploration, mining, or processing, the
Fund may be subject to greater risks and greater market
fluctuations than other funds with a portfolio of securities
representing a broader range of investment objectives.
An investment in the Fund, by itself, should not be
considered a balanced investment program. See Special
Risk Considerations.
Forward Currency Contracts - The Fund may hold securities
denominated in foreign currencies. As a result, the
value of the securities will be affected by changes in
the exchange rate between the dollar and foreign
currencies. In managing the currency exposure, the Fund
may enter into forward currency contracts. A forward
currency contract involves an agreement to purchase or
sell a specified currency at a specified future date or
over a specified time period at a price set at the time
of the contract.
The Fund may enter into forward currency contracts
under two circumstances. First, when the Fund enters into
a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. Second, when
management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S.
dollar, it may enter into a forward contract to sell that
currency. The Fund may not hedge with respect to a
particular currency for an amount greater than the
aggregate market value (determined at the time of making
any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward currency contracts to protect the
value of a Fund's assets against a decline in the value
of a currency does not eliminate fluctuations in the
value of the Fund's underlying security holdings. In
addition, although the use of forward currency contracts
can minimize the risk of loss due to a decline in value
of the foreign currency, the use of such contracts will
tend to limit any potential gain resulting from an
increase in the relative value of the foreign currency to
the U.S. dollar. Under certain circumstances, a fund
that has entered into forward currency contracts to hedge
its currency risks may be in a less favorable position
than a fund that had not entered into such contracts.
The projection of short-term currency market movements is
extremely difficult and successful execution of a short-
term hedging strategy is highly uncertain.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations backed
by the full faith and credit of the U.S. Government or by
its agencies or instrumentalities. A repurchase
agreement is a transaction in which a security is
purchased with a simultaneous commitment to sell the
security back to the seller (a commercial bank or
recognized securities dealer) at an agreed upon price on
an agreed upon date, usually not more than seven days
from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. The obligation of
the seller to pay the agreed upon price is in effect
secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security declines,
the Fund may incur a loss and may incur expenses in
selling the collateral. If the seller seeks relief under
the bankruptcy laws, the disposition of the collateral
may be delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Liquidity - The Fund may not invest more than 15% of the
market value of its total assets in securities which are
illiquid or not readily marketable. Rule 144A Securities
may be determined to be liquid in accordance with
guidelines established by the Board of Trustees for
purposes of complying with the Fund's investment
restriction applicable to investments in illiquid
securities.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not invest more than 25% of its total
assets in one industry, except that the Fund will
concentrate at least 80% of its investments in
gold mining securities.
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities - The Fund may purchase
foreign securities in foreign or U.S. markets or it may
purchase American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), or similar forms of ownership
interest in securities of foreign issuers deposited with
a depositary. Investing in foreign securities presents
certain risks not present in domestic investments. Such
risks may include currency exchange rate fluctuations,
foreign market illiquidity, increased price volatility,
exchange control regulations, different accounting,
reporting and disclosure requirements, political or
social instability, and difficulties in obtaining
judgments or effecting collections thereon. Brokerage
commissions and custodial services may be more costly,
and stock trade settlements may be more lengthy, more
costly and more difficult than in domestic markets.
These investments may be subject to foreign withholding
taxes which may reduce the effective rates of return.
The Fund values its securities and other assets in
U.S. dollars.
Information which may impact the market value of
securities of a foreign issuer may not be available to
the Manager on a timely basis. The Manager will endeavor
to ascertain such information on as timely a basis as is
practicable, however, any impact on the net asset value
will be deemed to have occurred upon authentication by
the Manager.
A developing country can be considered to be a country
which is in the initial stages of its industrialization
cycle. Investments in developing countries involve
exposure to economic structures that are generally less
diverse and mature than in the United States, and to
political systems which may be less stable. Due to
illiquidity and lack of hedging instruments, it is
presently difficult or in some cases impossible to hedge
the currency risk in these markets. In the past, markets
of developing countries have been more volatile than the
markets of developed countries.
Political risk includes a greater potential for coup
d'etats, insurrections and expropriation by governmental
organizations. For example, the Fund may invest in
Eastern Europe and former states of the Soviet Union
(also known as the CIS or the Commonwealth of Independent
States). These countries were under communist systems
which had nationalized private industry. There is no
guarantee that nationalization may not occur again in
this region or others in which the Fund invests, in which
case the Fund may lose all or part of its investment in
that country's issuers.
The Fund may invest in the securities of South African
issuers. The market prices of these securities and the
ability of the Fund to hold such investments in the future
could be affected by the unstable political and social
conditions in South Africa and its neighboring countries.
Volatility of Mining Stocks - Gold mining stocks involve
additional risk because of gold's price volatility and
the increased impact such volatility has on the
profit-ability of gold mining companies. However, since
the market action of such securities has tended to move
independently of the broader financial markets, the
addition of gold mining stocks to an investor's portfolio
may reduce overall fluctuations in portfolio value.
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 Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per
share determined for that day. If the Fund receives your
request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not
be deemed received for the purchase of shares until such
time as the check has cleared and the Manager has received
good funds, which may take up to 4 to 6 weeks. Furthermore,
a bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest
by Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448 to
Transfer add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Gold Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If
you are considering redeeming shares soon after purchase,
you should purchase by bank wire or certified check
to avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a
telegraph to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s)
Redemption will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange.
Portfolio securities traded primarily on foreign securities
exchanges are generally valued at the closing values of such
securities on the exchange where primarily traded. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-dividend
date. Any income dividend or capital gain distributions
paid by the Fund will reduce the per share net asset value
by the amount of the dividend or distribution. An investor
should consider carefully the effects of purchasing shares
of the Fund shortly before any dividend or distribution.
Although in effect a return of capital, these distributions
are subject to taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Foreign Taxes - The Fund may be subject to foreign
withholding or other taxes. If more than 50% of the
value of the Fund's total assets at the close of any
taxable year consists of securities of foreign
corporations, the Fund may file an election with the
Internal Revenue Service (the Foreign Election) that
would permit shareholders to take a credit (or a
deduction) for foreign income taxes paid by the Fund.
If the Foreign Election is made, shareholders would
include in their gross income both dividends received
from the Fund and foreign income taxes paid by the Fund.
Shareholders of the Fund would be entitled to treat the
foreign income taxes withheld as a credit against their
U.S. federal income taxes, subject to the limitations
set forth in the Code with respect to the foreign tax
credit generally. Alternatively, shareholders could,
if to their advantage, treat the foreign income taxes
withheld as an itemized deduction in computing taxable
income rather than as a tax credit. Shareholders will
not be entitled to a foreign tax credit for taxes paid
to certain countries; however, if the Fund otherwise
qualifies for the Foreign Election, a deduction for such
taxes will be available to shareholders of the Fund. It
is anticipated that the Fund will make the Foreign Election.
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 TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the Investment
Company Institute and comply with Securities and Exchange
Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory Agreement.
Under the Advisory Agreement, the Manager is responsible for
the management of the Funds, business affairs, and placement
of brokerage orders, subject to the authority of and
supervision by the Board of Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at three-fourths of one
percent (.75%) of ANA for the fiscal year ended May 31,
1995. This fee is higher than that charged to most other
mutual funds, but is comparable to fees charged to other
mutual funds with similar investment objectives and
policies.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled 1.28%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Trustees has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
Mark W. Johnson, Assistant Vice President of Equity
Investments since March of 1995, has managed the Fund
since January 1994. He has 22 years investment
management experience and has worked for IMCO seven
years. Mr. Johnson earned the Chartered Financial
Analyst designation in 1978 and is a member of the
Association for Investment Management and Research and
the San Antonio Financial Analysts Society, Inc. He
holds an MBA and a BBA from the University of Michigan.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the
Trust will assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement provides
for indemnification out of the Trust's property for all
losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the
possibility of a shareholder incurring financial loss on
account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the
International Fund
is included herein
USAA INTERNATIONAL FUND
October 1, 1995 PROSPECTUS
USAA International Fund (the Fund) is one of eleven no-
load mutual funds offered by USAA Investment Trust (the
Trust). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's primary investment objective is capital
appreciation. Current income is a secondary objective.
Page 9.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 12.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 14.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA International Fund are not deposits
or other obligations of, or guaranteed by the USAA
Federal Savings Bank, are not insured by the FDIC or any
other Government Agency, and are subject to market risks.
Because this Fund invests in foreign securities, it
involves a higher degree of risk and may not be
appropriate for some investors. See Special Risk
Considerations, page 11.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 6
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 7
Using Mutual Funds in an Investment Program 8
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 9
SHAREHOLDER INFORMATION
Purchase of Shares 12
Redemption of Shares 14
Conditions of Purchase and Redemption 15
Exchanges 16
Other Services 17
Share Price Calculation 18
Dividends, Distributions and Taxes 18
Management of the Trust 20
Description of Shares 21
Service Providers 22
Telephone Assistance Numbers 22
FEES AND EXPENSES
The following summary is provided to assist you in understanding
the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .75%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .19%
Custodian Fees .14%
All Other Expenses .09%
---
Total Other Expenses .42%
----
Total Fund Operating Expenses 1.17%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares -
Bank Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee
per account for its services. See Transfer Agent in the SAI, page 19.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 12
3 years - $ 37
5 years - $ 64
10 years - $142
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout each of the periods in the eight-year period ended May 31, 1995,
has been derived from financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the financial statements
and related notes that appear in the Fund's Annual Report. Further
performance information is contained in the Annual Report and is available
upon request without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
Net asset value at
beginning of period $ 16.36 $ 14.48 $ 12.09 $ 11.57 $ 9.89
Net investment income .10 - .07 .10 .13
Net realized and
unrealized gain (loss) .29 2.23 2.45 .51 1.66
Distributions from net
investment income - - (.13) (.09) (.06)
Distributions of realized
capital gains (.97) (.35) - - (.05)
-------- -------- -------- -------- --------
Net asset value at
end of period $ 15.78 $ 16.36 $ 14.48 $ 12.09 $ 11.57
======== ======== ======== ======== ========
Total return (%)** 2.49 15.67 21.11 5.30 18.21
Net assets at end of
period (000) $346,033 $184,792 $ 88,757 $ 42,868 $ 28,931
Ratio of expenses to
average net assets (%) 1.17 1.31(a) 1.50 1.69 1.82
Ratio of net investment
income to average net
assets (%) .81 .04(a) .72 1.05 1.26
Portfolio turnover (%) 64.30 44.39 52.52 34.27 63.56
YEAR ENDED SEPTEMBER 30,
1990 1989 1988*
Net asset value at
beginning of period $ 11.74 $ 9.64 $ 10.00
Net investment income .07 .04 .07
Net realized and
unrealized gain (loss) (1.45) 2.11 (.43)
Distributions from net
investment income (.02) (.05) -
Distributions of realized
capital gains (.45) - -
-------- ------- -------
Net asset value at
end of period $ 9.89 $ 11.74 $ 9.64
======== ======= =======
Total return (%)** (12.09) 22.38 (3.60)
Net assets at end of
period (000) $ 21,451 $13,111 $ 4,084
Ratio of expenses to
average net assets 2.09 2.30 2.14(a)
Ratio of net investment
income to average net
assets (%) .81 .48 3.16(a)
Portfolio turnover (%) 69.95 94.99 -
- -----------------
* Fund commenced operations July 11, 1988.
** Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12
months of operations.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be considered
as representative of the future performance of the Fund.
The Trust may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified 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 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT
PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wishes to diversify
internationally. He or she could do this by adding
positions in the Emerging Markets, Gold, International,
or World Growth Funds to holdings in domestic funds.
This would give the investor exposure to the
opportunities of investment in many foreign countries and
to currency changes. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's primary investment objective is capital
appreciation with current income as a secondary objective.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies, restrictions
and risks is provided in the SAI.
INVESTMENT POLICIES,
TECHNIQUES AND RISK FACTORS
The Manager will pursue the objective by investing at
least 80% of the Fund's assets in common stocks,
preferred stocks or securities which are convertible into
or which carry the right to buy common stocks of
companies organized and operating principally outside the
United States. A company is deemed to be operating
principally outside of the United States if at least 50%
of its revenues are derived from operations outside the
United States or if its primary production or operating
facilities are located outside the United States. These
investments will be diversified in four or more
countries. There are no restrictions as to the types of
businesses or operations of companies in which the Fund
may invest. The remainder of the Fund's assets may be
invested in marketable securities having remaining
maturities of less than one year issued or guaranteed as
to both principal and interest by the U.S. Government or
by its agencies or instrumentalities and in repurchase
agreements collateralized by such securities. However,
the Fund may on a temporary defensive basis invest its
assets without limitation in such securities.
The Manager believes that attractive investment
opportunities exist in several nations of the world, and
that investing internationally can improve overall
results at moderate risk. The Fund combines the
advantages of investment in diversified international
markets with the convenience and liquidity of a mutual
fund based in the United States. For a discussion of
risks associated with investments in foreign issuers, see
Special Risk Considerations.
Forward Currency Contracts - The Fund may hold securities
denominated in foreign currencies. As a result, the
value of the securities will be affected by changes in
the exchange rate between the dollar and foreign
currencies. In managing the currency exposure, the Fund
may enter into forward currency contracts. A forward
currency contract involves an agreement to purchase or
sell a specified currency at a specified future date or
over a specified time period at a price set at the time
of the contract.
The Fund may enter into forward currency contracts
under two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. Second, when
management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S.
dollar, it may enter into a forward contract to sell that
currency. The Fund may not hedge with respect to a
particular currency for an amount greater than the
aggregate market value (determined at the time of making
any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward currency contracts to protect the
value of a Fund's assets against a decline in the value
of a currency does not eliminate fluctuations in the
value of the Fund's underlying security holdings. In
addition, although the use of forward currency contracts
can minimize the risk of loss due to a decline in value
of the foreign currency, the use of such contracts will
tend to limit any potential gain resulting from an
increase in the relative value of the foreign currency to
the U.S. dollar. Under certain circumstances, a fund
that has entered into forward currency contracts to hedge
its currency risks may be in a less favorable position
than a fund that had not entered into such contracts.
The projection of short-term currency market movements is
extremely difficult and successful execution of a short-
term hedging strategy is highly uncertain.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations backed
by the full faith and credit of the U.S. Government or by
its agencies or instrumentalities. A repurchase
agreement is a transaction in which a security is
purchased with a simultaneous commitment to sell the
security back to the seller (a commercial bank or
recognized securities dealer) at an agreed upon price on
an agreed upon date, usually not more than seven days
from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. The obligation of
the seller to pay the agreed upon price is in effect
secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security declines,
the Fund may incur a loss and may incur expenses in selling
the collateral. If the seller seeks relief under the
bankruptcy laws, the disposition of the collateral may be
delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Liquidity - The Fund may not invest more than 15% of the
market value of its total assets in securities which are
illiquid or not readily marketable. Rule 144A Securities
may be determined to be liquid in accordance with
guidelines established by the Board of Trustees for
purposes of complying with the Fund's investment
restriction applicable to investments in illiquid
securities.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not invest more than 25% of its total
assets in one industry.
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities - The Fund may purchase
foreign securities in foreign or U.S. markets or it may
purchase American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), or similar forms of ownership
interest in securities of foreign issuers deposited with
a depositary. Investing in foreign securities presents
certain risks not present in domestic investments. Such
risks may include currency exchange rate fluctuations,
foreign market illiquidity, increased price volatility,
exchange control regulations, different accounting,
reporting and disclosure requirements, political or
social instability, and difficulties in obtaining
judgments or effecting collections thereon. Brokerage
commissions and custodial services may be more costly,
and stock trade settlements may be more lengthy, more
costly and more difficult than in domestic markets.
These investments may be subject to foreign withholding
taxes which may reduce the effective rates of return.
The Fund values its securities and other assets in
U.S. dollars.
Information which may impact the market value of
securities of a foreign issuer may not be available to
the Manager on a timely basis. The Manager will endeavor
to ascertain such information on as timely a basis as is
practicable, however, any impact on the net asset value
will be deemed to have occurred upon authentication by
the Manager.
A developing country can be considered to be a country
which is in the initial stages of its industrialization
cycle. Investments in developing countries involve
exposure to economic structures that are generally less
diverse and mature than in the United States, and to
political systems which may be less stable. Due to
illiquidity and lack of hedging instruments, it is
presently difficult or in some cases impossible to hedge
the currency risk in these markets. In the past, markets
of developing countries have been more volatile than the
markets of developed countries.
Political risk includes a greater potential for coup
d'etats, insurrections and expropriation by governmental
organizations. For example, the Fund may invest in
Eastern Europe and former states of the Soviet Union
(also known as the CIS or the Commonwealth of Independent
States). These countries were under communist systems
which had nationalized private industry. There is no
guarantee that nationalization may not occur again in
this region or others in which the Fund invests, in which
case the Fund may lose all or part of its investment in
that country's issuers.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the close
of the New York Stock Exchange on a day on which the
Exchange is open, your purchase price will be the NAV per
share determined for that day. If the Fund receives your
request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum
$50 monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest
by Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing
Electronic investment or from a USAA money market account. Sign up
Funds for these services when opening an account or call
Transfer 1-800-531-8448 to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA International Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If you
are considering redeeming shares soon after purchase, you
should purchase by bank wire or certified check to
avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph
to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s)
Redemption will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange.
Portfolio securities traded primarily on foreign securities
exchanges are generally valued at the closing values of such
securities on the exchange where primarily traded. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-
dividend date. Any income dividend or capital gain
distributions paid by the Fund will reduce the per share
net asset value by the amount of the dividend or
distribution. An investor should consider carefully the
effects of purchasing shares of the Fund shortly before
any dividend or distribution. Although in effect a
return of capital, these distributions are subject to
taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. It
is not expected that the dividends of the Fund will
qualify for the 70% corporate dividends received
deduction.
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.
Foreign Taxes - The Fund may be subject to foreign
withholding or other taxes. If more than 50% of the
value of the Fund's total assets at the close of any
taxable year consists of securities of foreign
corporations, the Fund may file an election with the
Internal Revenue Service (the Foreign Election) that
would permit shareholders to take a credit (or a
deduction) for foreign income taxes paid by the Fund.
If the Foreign Election is made, shareholders would
include in their gross income both dividends received
from the Fund and foreign income taxes paid by the Fund.
Shareholders of the Fund would be entitled to treat the
foreign income taxes withheld as a credit against their
U.S. federal income taxes, subject to the limitations
set forth in the Code with respect to the foreign tax
credit generally. Alternatively, shareholders could,
if to their advantage, treat the foreign income taxes
withheld as an itemized deduction in computing taxable
income rather than as a tax credit. Shareholders
will not be entitled to a foreign tax credit for taxes
paid to certain countries; however, if the Fund
otherwise qualifies for the Foreign Election, a
deduction for such taxes will be available to
shareholders of the Fund. It is anticipated that
the Fund will make the Foreign Election.
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 TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the Investment
Company Institute and comply with Securities and Exchange
Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory Agreement.
Under the Advisory Agreement, the Manager is responsible for
the management of the Funds, business affairs, and placement
of brokerage orders, subject to the authority of and
supervision by the Board of Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at three-fourths of one
percent (.75%) of ANA for the fiscal year ended May 31,
1995. This fee is higher than that charged to most other
mutual funds, but is comparable to fees charged to other
mutual funds with similar investment objectives and
policies.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled 1.17%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Trustees has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
David G. Peebles, Vice President of Equity Investments
since February of 1988, has managed the Fund since its
inception in July 1988. He has 30 years investment
management experience and has worked for IMCO 12 years.
Mr. Peebles earned the Chartered Financial Analyst
designation in 1971 and is a member of the Association
for Investment Management and Research and the San
Antonio Financial Analysts Society, Inc. He holds an MBA
and a BS from Texas Christian University.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the Trust
will assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement provides
for indemnification out of the Trust's property for all
losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the
possibility of a shareholder incurring financial loss
on account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the
World Growth Fund
is included herein
USAA WORLD GROWTH FUND
October 1, 1995 PROSPECTUS
USAA World Growth Fund (the Fund) is one of eleven no-
load mutual funds offered by USAA Investment Trust (the
Trust). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is capital appreciation.
Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 11.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 13.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA World Growth Fund are not deposits
or other obligations of, or guaranteed by the USAA
Federal Savings Bank, are not insured by the FDIC or any
other Government Agency, and are subject to market risks.
Because this Fund invests in foreign securities, it
involves a higher degree of risk and may not be
appropriate for some investors. See Special Risk
Considerations, page 10.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 5
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 11
Redemption of Shares 13
Conditions of Purchase and Redemption 14
Exchanges 15
Other Services 16
Share Price Calculation 17
Dividends, Distributions and Taxes 17
Management of the Trust 19
Description of Shares 20
Service Providers 21
Telephone Assistance Numbers 21
FEES AND EXPENSES
The following summary is provided to assist you in understanding
the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .75%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .26%
Custodian Fees .14%
All Other Expenses .13%
---
Total Other Expenses .53%
----
Total Fund Operating Expenses 1.28%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares -
Bank Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee
per account for its services. See Transfer Agent in the SAI, page 19.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 13
3 years - $ 41
5 years - $ 70
10 years - $155
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share
outstanding throughout each of the periods in the three-
year period ended May 31, 1995, has been derived from
financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the
financial statements and related notes that appear in the
Fund's Annual Report. Further performance information is
contained in the Annual Report and is available upon
request without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED YEAR ENDED
MAY 31, MAY 31, SEPTEMBER 30,
1995 1994 1993
Net asset value at
beginning of period $ 12.71 $ 11.80 $ 10.00
Net investment income .07 .04(b) .05
Net realized and
unrealized gain .46 .93 1.75
Distributions from net
investment income - (.01) -
Distributions of realized
capital gains (.28) (.05) -
-------- -------- --------
Net asset value at
end of period $ 12.96 $ 12.71 $ 11.80
======== ======== ========
Total return (%)* 4.26 8.25 18.00
Net assets at end of
period (000) $200,745 $143,367 $ 68,818
Ratio of expenses to
average net assets (%) 1.28 1.28(a) 1.70
Ratio of net investment
income to average net
assets (%) .69 .42(a) .75
Portfolio turnover (%) 58.88 37.64 45.57
- --------------
* Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Trust may quote the Fund's total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return results reported by the Fund do not take into
account recurring and nonrecurring charges for optional
services which only certain shareholders elect and which
involve nominal fees, such as the $10 fee for a delivery
of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified 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 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT
PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wishes to diversify
internationally. He or she could do this by adding
positions in the Emerging Markets, Gold, International,
or World Growth Funds to holdings in domestic funds.
This would give the investor exposure to the
opportunities of investment in many foreign countries and
to currency changes. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies, restrictions
and risks is provided in the SAI.
INVESTMENT POLICIES,
TECHNIQUES AND RISK FACTORS
The Manager will pursue this objective by investing at
least 65% of the Fund's assets in common stocks,
preferred stocks and other equity securities of both
foreign and domestic issuers, including securities which
are convertible into or which carry the right to buy
common stocks and U.S. Real Estate Investment Trusts
(REITs).
Under normal conditions investments will be made in at
least three countries. There are no restrictions as to
the types of businesses or operations of companies in
which the Fund may invest. The Fund's investments in
REITs may subject the Fund to many of the same risks
associated with the direct ownership of real estate. In
addition, REITs are dependent upon the capabilities of
the REIT manager(s) and have limited diversification.
The remainder of the Fund's assets may be invested in
marketable securities having remaining maturities of less
than one year issued or guaranteed as to both principal
and interest by the U.S. Government or by its agencies
or instrumentalities and in repurchase agreements
collateralized by such securities. The Fund may on a
temporary defensive basis invest its assets without
limitation in such securities. For a discussion of risks
associated with investments in foreign issuers, see
Special Risk Considerations.
Forward Currency Contracts - The Fund may hold securities
denominated in foreign currencies. As a result, the
value of the securities will be affected by changes in
the exchange rate between the dollar and foreign
currencies. In managing the currency exposure, the Fund
may enter into forward currency contracts. A forward
currency contract involves an agreement to purchase or
sell a specified currency at a specified future date or
over a specified time period at a price set at the time
of the contract.
The Fund may enter into forward currency contracts
under two circumstances. First, when the Fund enters into
a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. Second, when
management of the Fund believes that the currency of a
specific country may deteriorate relative to the U.S.
dollar, it may enter into a forward contract to sell that
currency. The Fund may not hedge with respect to a
particular currency for an amount greater than the
aggregate market value (determined at the time of making
any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a
substantial correlation to, such currency.
The use of forward currency contracts to protect the
value of a Fund's assets against a decline in the value
of a currency does not eliminate fluctuations in the
value of the Fund's underlying security holdings. In
addition, although the use of forward currency contracts
can minimize the risk of loss due to a decline in value of
the foreign currency, the use of such contracts will tend
to limit any potential gain resulting from an increase in
the relative value of the foreign currency to the U.S.
dollar. Under certain circumstances, a fund that has
entered into forward currency contracts to hedge its
currency risks may be in a less favorable position than a
fund that had not entered into such contracts. The
projection of short-term currency market movements is
extremely difficult and successful execution of a short-
term hedging strategy is uncertain.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are collateralized by obligations backed
by the full faith and credit of the U.S. Government or by
its agencies or instrumentalities. A repurchase
agreement is a transaction in which a security is
purchased with a simultaneous commitment to sell the
security back to the seller (a commercial bank or
recognized securities dealer) at an agreed upon price on
an agreed upon date, usually not more than seven days
from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. The obligation of
the seller to pay the agreed upon price is in effect
secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security
declines, the Fund may incur a loss and may incur
expenses in selling the collateral. If the seller seeks
relief under the bankruptcy laws, the disposition of the
collateral may be delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Liquidity - The Fund may not invest more than 15% of the
market value of its total assets in securities which are
illiquid or not readily marketable. Rule 144A Securities
may be determined to be liquid in accordance with
guidelines established by the Board of Trustees for
purposes of complying with the Fund's investment
restriction applicable to investments in illiquid
securities.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund may not invest more than 25% of its total
assets in one industry.
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities - The Fund may purchase
foreign securities in foreign or U.S. markets or it may
purchase American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), or similar forms of ownership
interest in securities of foreign issuers deposited with
a depositary. Investing in foreign securities presents
certain risks not present in domestic investments. Such
risks may include currency exchange rate fluctuations,
foreign market illiquidity, increased price volatility,
exchange control regulations, different accounting,
reporting and disclosure requirements, political or
social instability, and difficulties in obtaining
judgments or effecting collections thereon. Brokerage
commissions and custodial services may be more costly,
and stock trade settlements may be more lengthy, more
costly and more difficult than in domestic markets. These
investments may be subject to foreign withholding taxes
which may reduce the effective rates of return. The Fund
values its securities and other assets in U.S. dollars.
Information which may impact the market value of
securities of a foreign issuer may not be available to
the Manager on a timely basis. The Manager will endeavor
to ascertain such information on as timely a basis as is
practicable, however, any impact on the net asset value
will be deemed to have occurred upon authentication by
the Manager.
A developing country can be considered to be a country
which is in the initial stages of its industrialization
cycle. Investments in developing countries involve
exposure to economic structures that are generally less
diverse and mature than in the United States, and to
political systems which may be less stable. Due to
illiquidity and lack of hedging instruments, it is
presently difficult or in some cases impossible to hedge
the currency risk in these markets. In the past, markets
of developing countries have been more volatile than the
markets of developed countries.
Political risk includes a greater potential for coup
d'etats, insurrections and expropriation by governmental
organizations. For example, the Fund may invest in
Eastern Europe and former states of the Soviet Union
(also known as the CIS or the Commonwealth of Independent
States). These countries were under communist systems
which had nationalized private industry. There is no
guarantee that nationalization may not occur again in
this region or others in which the Fund invests, in which
case the Fund may lose all or part of its investment in
that country's issuers.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the following methods. A complete, signed application is
required together with a check for each new account.
TAX ID NUMBER
We require that each shareholder named on the account
provide the Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which
the Exchange is open, your purchase price will be the NAV
per share determined for that day. If the Fund receives
your request after the time at which the NAV per share is
calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $1,000
After January 31, 1996 $3,000 or minimum $100 with a minimum
$50 monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest
by Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448
Transfer to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA World Growth Fund
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If
you are considering redeeming shares soon after purchase,
you should purchase by bank wire or certified check to
avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph
to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s)
Redemption will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Automatic
Purchase Plan, or Direct Purchase Service
investment plans, or
ii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions concerning
any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities, except as otherwise
noted, traded primarily on a domestic securities exchange
are valued at the last sales price on that exchange.
Portfolio securities traded primarily on foreign securities
exchanges are generally valued at the closing values of such
securities on the exchange where primarily traded. If no
sale is reported, the latest bid price is generally used.
Over-the-counter securities are generally priced at the
last sales price or, if not available, at the average of
the bid and asked prices.
Debt securities purchased with maturities of 60 days or
less are stated at amortized cost which approximates
market value. Other debt securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income will be distributed to shareholders
annually. Any net capital gain generally will be
distributed at least annually. The Fund intends to make
such additional distributions as may be necessary to
avoid the imposition of any federal income or excise tax.
All income dividends and capital gain distributions are
automatically reinvested, unless the shareholder
specifies otherwise. The share price will be the net
asset value of the Fund shares computed on the ex-
dividend date. Any income dividend or capital gain
distributions paid by the Fund will reduce the per share
net asset value by the amount of the dividend or
distribution. An investor should consider carefully the
effects of purchasing shares of the Fund shortly before
any dividend or distribution. Although in effect a
return of capital, these distributions are subject to
taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. A
portion of these dividends may qualify for the 70%
dividends received deduction available to corporations.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Foreign Taxes - The Fund may be subject to foreign
withholding or other taxes. If more than 50% of the
value of the Fund's total assets at the close of any
taxable year consists of securities of foreign
corporations, the Fund may file an election with the
Internal Revenue Service (the Foreign Election) that
would permit shareholders to take a credit (or a
deduction) for foreign income taxes paid by the Fund.
If the Foreign Election is made, shareholders would
include in their gross income both dividends received
from the Fund and foreign income taxes paid by the Fund.
Shareholders of the Fund would be entitled to treat the
foreign income taxes withheld as a credit against their
U.S. federal income taxes, subject to the limitations
set forth in the Code with respect to the foreign tax
credit generally. Alternatively, shareholders could,
if to their advantage, treat the foreign income taxes
withheld as an itemized deduction in computing
taxable income rather than as a tax credit. Shareholders
will not be entitled to a foreign tax credit for taxes
paid to certain countries; however, if the Fund otherwise
qualifies for the Foreign Election, a deduction for such
taxes will be available to shareholders of the Fund.
It is anticipated that the Fund will make the Foreign
Election.
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 TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the Investment
Company Institute and comply with Securities and Exchange
Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of
Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at three-fourths of one
percent (.75%) of ANA for the fiscal year ended May 31,
1995. This fee is higher than that charged to most other
mutual funds, but is comparable to fees charged to other
mutual funds with similar investment objectives and
policies.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled 1.28%.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities for the Fund's
portfolio may be accomplished through USAA Brokerage
Services, a discount brokerage service of the Manager.
The Board of Trustees has adopted procedures to ensure
that any commissions paid to USAA Brokerage Services are
reasonable and fair.
PORTFOLIO MANAGERS
The following individuals are primarily responsible for
managing the Fund.
David G. Peebles, Vice President of Equity Investments
since February of 1988, is the asset allocation manager
for the Fund. He has been the portfolio manager for the
Foreign Stocks investment category since its inception in
October 1992. He has 30 years investment management
experience and has worked for IMCO 12 years. Mr. Peebles
earned the Chartered Financial Analyst (CFA) designation
in 1971 and is a member of the Association for Investment
Management and Research (AIMR) and the San Antonio
Financial Analysts Society, Inc. (SAFAS). He holds an
MBA and BS from Texas Christian University.
R. David Ullom, Assistant Vice President of Equity
Investments since September of 1994, has managed the
Domestic Stocks investment category since February 1995.
Mr. Ullom has 21 years investment management experience
and has worked for IMCO ten years where he has held
various positions in Equity Investments. Mr. Ullom
earned the CFA designation in 1980 and is a member of the
AIMR and SAFAS. He holds an MBA from Washington
University, Missouri and a BS from Oklahoma State
University.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the
Trust will assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement provides
for indemnification out of the Trust's property for all
losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the
possibility of a shareholder incurring financial loss on
account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the
GNMA Trust
is included herein
USAA GNMA TRUST
October 1, 1995 PROSPECTUS
USAA GNMA Trust (the Fund) is one of eleven no-load
mutual funds offered by USAA Investment Trust (the
Trust). The Fund is managed by USAA Investment
Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide investors a
high level of current income consistent with preservation
of principal by investing in securities backed by the full
faith and credit of the U.S. Government. Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or certain instances, by telephone. Page 11.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 13.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA GNMA Trust are not deposits or other
obligations of, or guaranteed by the USAA Federal Savings
Bank, are not insured by the FDIC or any other Government
Agency, and are subject to market risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 5
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 11
Redemption of Shares 13
Conditions of Purchase and Redemption 14
Exchanges 15
Other Services 16
Share Price Calculation 17
Dividends, Distributions and Taxes 18
Management of the Trust 19
Description of Shares 20
Service Providers 21
Telephone Assistance Numbers 21
FEES AND EXPENSES
The following summary is provided to assist you in understanding
the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .125%
12b-1 Fees None
Other Expenses
Transfer Agent Fees** .091%
Custodian Fees .045%
All Other Expenses .060%
----
Total Other Expenses .196%
----
Total Fund Operating Expenses .321%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares -
Bank Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee
per account for its services. See Transfer Agent in the SAI, page 19.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 3
3 years - $ 10
5 years - $ 18
10 years - $ 41
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout each of the periods in the five-year period ended May 31, 1995,
has been derived from financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the financial statements and
related notes that appear in the Fund's Annual Report. Further performance
information is contained in the Annual Report and is available upon
request without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991*
Net asset value at
beginning of period $ 9.82 $ 10.37 $ 10.47 $ 10.19 $ 10.00
Net investment income .72 .49 .79 .82 .53
Net realized and
unrealized gain (loss) .27 (.55) (.10) .28 .19
Distributions from net
investment income (.72) (.49) (.79) (.82) (.53)
-------- -------- -------- -------- --------
Net asset value at
end of period $ 10.09 $ 9.82 $ 10.37 $ 10.47 $ 10.19
======== ======== ======== ======== ========
Total return (%)** 10.54 (.66) 6.79 11.18 7.48
Net assets at end of
period (000) $265,571 $261,251 $288,879 $218,544 $ 69,431
Ratio of expenses to
average net assets (%) .32 .31(a) .32 .375(b) .375(a)(b)
Ratio of net investment
income to average net
assets (%) 7.34 7.20(a) 7.53 7.92(b) 8.35(a)(b)
Portfolio turnover (%) 93.78 90.05 81.44 36.11 5.39
- --------------
* Fund commenced operations February 1, 1991.
** Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) The information contained in this table is based on actual expenses for
the period, after giving effect to reimbursements of expenses by the
Manager. Absent such reimbursements the Fund's ratios would have been:
YEAR ENDED SEPTEMBER 30,
1992 1991*
---- -----
Ratio of expenses to average net assets (%) .40 .91(a)
Ratio of net investment income to average net assets (%) 7.89 7.82(a)
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be
considered as representative of the future performance of
the Fund.
The Trust may quote the Fund's yield or total return in
advertisements and reports to shareholders or prospective
investors. The Fund's performance may also be compared
to that of other mutual funds with a similar investment
objective and to stock or relevant indexes that are
referenced in Appendix B to the SAI. Standard total
return and yield results reported by the Fund do not take
into account recurring and nonrecurring charges for
optional services which only certain shareholders elect
and which involve nominal fees, such as the $10 fee for a
delivery of redemption proceeds by wire transfer.
The Fund's average annual total return is computed by
determining the average annual compounded rate of return
for a specified period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
The Fund may advertise performance in terms of a 30-day
yield quotation. The yield quotation is computed by
dividing the net investment income per share earned
during the period by the offering price per share on the
last day of the period. This income is then annualized.
Further information concerning the Fund's yield and
total return is included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT
PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wishes to diversify
internationally. He or she could do this by adding
positions in the Emerging Markets, Gold, International,
or World Growth Funds to holdings in domestic funds.
This would give the investor exposure to the
opportunities of investment in many foreign countries and
to currency changes. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide investors a
high level of current income consistent with preservation
of principal by investing in securities backed by the
full faith and credit of the U.S. Government.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue this objective by investing at
least 65% of the Fund's total assets in Government
National Mortgage Association (GNMA) pass through
certificates. GNMA certificates represent ownership in a
pool of mortgage loans or a single mortgage loan. Each
mortgage loan is either insured by the Federal Housing
Administration or guaranteed by the Veterans
Administration. Once approved by GNMA, each mortgage or
pool of mortgages is additionally guaranteed by GNMA as
to the timely payment of principal and interest
(regardless of whether the mortgagors actually make their
payments). The guarantee represents a general obligation
of the U.S. Treasury. Securities which are backed by the
full faith and credit of the U.S. Government (payment of
principal and interest is guaranteed by the U.S.
Treasury) are considered to be of the highest credit
quality available.
GNMA securities differ from conventional bonds in that
principal is paid back to the certificate holders over
the life of the loan rather than at maturity. As a
result, the Fund will receive monthly scheduled payments
of principal and interest. In addition, the Fund may
receive unscheduled principal payments representing
prepayments on the underlying mortgages. Because the
Fund will reinvest these scheduled and unscheduled
principal payments at a time when prevailing interest
rates may be higher or lower than the Fund's current
yield, an investment in the Fund may not be an effective
means of "locking in" long-term interest rates.
GNMA certificates evidence interests in a pool of
underlying mortgages which generally have maximum lives
of either 15, 20, or 30 years. However, due to both
scheduled and unscheduled principal payments, GNMA
certificates have a shorter average life and, therefore,
less principal volatility than a bond of comparable
maturity. Since prepayment rates vary widely, it is not
possible to accurately predict the average life of a
particular GNMA pool. However, it is standard industry
practice to treat new issues of GNMA certificates as 30-
year mortgage-backed securities having an average life of
no greater than 12 years. Because the expected average
life is a better indicator of the maturity
characteristics of GNMA certificates, principal
volatility and yield may be more comparable to 10-year
Treasury bonds.
The Manager may invest up to 35% of the Fund's total
assets in other obligations backed by the full faith and
credit of the U.S. Government, including U.S. Treasury
bills, notes and bonds and securities issued by the
Federal Housing Administration, the Department of Housing
and Urban Development, the Export-Import Bank, the
Farmer's Home Administration, the General Services
Administration, the Maritime Administration, and the
Small Business Administration. The Fund will not invest
in the securities of any U.S. Government agencies which
do not carry the full faith and credit of the U.S.
Government, such as Fannie Mae (FNMA) or Freddie Mac
(FHLMC) securities.
The Fund may invest up to 35% of its total assets in
repurchase agreements which must be collateralized by
U.S. Treasury securities or by obligations backed by the
full faith and credit of the U.S. Government. The types
of securities to be purchased in the GNMA Trust have
historically involved little credit risk. However, the
market value of these securities is not guaranteed and
will fluctuate inversely with changes in prevailing
interest rates, increasing in value when interest rates
decline and decreasing in value when interest rates rise.
The Manager may, however, on a temporary defensive
basis, invest the Fund's assets without limitation in
short-term securities backed by the full faith and credit
of the U.S. Government, including repurchase agreements
collateralized by such obligations.
The portfolio turnover rate for the Fund is not
expected to exceed 100%, however, it will not be a
limiting factor when the Manager deems changes in the
Fund's portfolio appropriate in view of its investment
objective.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are exclusively collateralized by
obligations backed by the full faith and credit of the
U.S. Government. A repurchase agreement is a transaction
in which a security is purchased with a simultaneous
commitment to sell the security back to the seller (a
commercial bank or recognized securities dealer) at an
agreed upon price on an agreed upon date, usually not
more than seven days from the date of purchase. The
resale price reflects the purchase price plus an agreed
upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. The
obligation of the seller to pay the agreed upon price is
in effect secured by the value of the underlying security.
In these transactions, the securities purchased by a Fund
will have a total value equal to or in excess of the
amount of the repurchase obligation and will be held by
the Fund's custodian until repurchased. If the seller
defaults and the value of the underlying security
declines, the Fund may incur a loss and may incur
expenses in selling the collateral. If the seller seeks
relief under the bankruptcy laws, the disposition of the
collateral may be delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates (coupons) which
are adjusted periodically to market rates. These
interest rate adjustments can both raise and lower the
income generated by such securities. These changes will
have the same effect on the income earned by a Fund
depending on the proportion of such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller the
impact of interest rate fluctuations on the value of
these securities. The market value of variable rate
securities usually tends toward par (100% of face value)
at interest rate adjustment time.
Liquidity - The Fund may not invest more than 15% of the
value of its net assets in securities which are illiquid
or not readily marketable.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund will not purchase any security if
immediately after the purchase 25% or more of the
value of its total assets will be invested in
securities of issuers principally engaged in a
particular industry (except that such limitation
does not apply to obligations issued or guaranteed
by the U.S. Government or its agencies or
instrumentalities).
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
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 Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the close
of the New York Stock Exchange on a day on which the Exchange
is open, your purchase price will be the NAV per share
determined for that day. If the Fund receives your request
after the time at which the NAV per share is calculated, the
purchase will be effective on the next business day. A check
drawn on a foreign bank will not be deemed received for the
purchase of shares until such time as the check has cleared
and the Manager has received good funds, which may take up to
4 to 6 weeks. Furthermore, a bank charge may be assessed
in the clearing process, which will be deducted from the
amount of the purchase. To avoid a delay in the effectiveness
of your purchase, the Manager suggests that you convert your
foreign check to U.S. dollars prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $3,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest
by Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing
Electronic investment or from a USAA money market account. Sign up
Funds for these services when opening an account or call
Transfer 1-800-531-8448 to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each
pay period with no initial investment) can be made by
any employee of USAA, its subsidiaries or affiliated
companies.
Bank Wire * To add to an account, instruct your bank (which may
charge a fee for the service) to wire the specified
amount to the Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA GNMA Trust
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If you
are considering redeeming shares soon after purchase,
you should purchase by bank wire or certified check to
avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph
to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited
to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s)
Redemption will 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.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each transaction in
your account except:
i) a reinvested dividend, or
ii) a payment you make after January 31, 1996 under
the InvesTronic(registered trademark), Direct
Purchase Service, Automatic Purchase Plan, or
Directed Dividends investment plans, or
iii) a redemption you make after January 31, 1996 under
the Systematic Withdrawal Plan.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Portfolio securities are valued each
business day at their current market value as determined
by a pricing service approved by the Board of Trustees.
Securities purchased with maturities of 60 days or less
are stated at amortized cost which approximates market
value. 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
Trustees.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and is paid on the
last business day of each month. 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 capital gain distribution paid by the
Fund will reduce the per share net asset value by the
amount of the distribution. An investor should consider
carefully the effects of purchasing shares of the Fund
shortly before any distribution which would decrease the
Fund's net asset value per share. Although in effect a
return of capital, these distributions are subject to
taxes.
Any dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - The Fund will report annually to its
shareholders the federal tax status of dividends and
distributions paid or declared by the Fund during the
preceding calendar year.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of
Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees were computed and paid at one-eighth of one percent
(.125%) of ANA for the fiscal year ended May 31, 1995.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the total
operating expenses for the Fund as a percentage of the
Fund's ANA equaled .321%.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
Kenneth E. Willmann, Vice President of Fixed Income
Investments since December of 1986, has managed the Fund
since February 1995. He has 21 years investment
management experience and has worked for IMCO 19 years.
Mr. Willmann earned the Chartered Financial Analyst
designation in 1978 and is a member of the Association
for Investment Management and Research, San Antonio
Financial Analysts Society, Inc. and the National
Federation of Municipal Analysts. He holds an MBA and a
BA from the University of Texas.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the Trust
will assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement provides
for indemnification out of the Trust's property for all
losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the
possibility of a shareholder incurring financial loss
on account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
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Part A
Prospectus for the
Treasury Money Market Trust
is included herein
USAA TREASURY MONEY MARKET TRUST
October 1, 1995 PROSPECTUS
USAA Treasury Money Market Trust (the Fund) is one of
eleven no-load mutual funds offered by USAA Investment
Trust (the Trust). The Fund is managed by USAA
Investment Management Company (the Manager).
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide investors
maximum current income while maintaining the highest degree
of safety and liquidity. Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail, in
person, or in certain instances, by telephone. Page 10.
HOW DO YOU SELL?
You may redeem Fund shares by mail, telephone, fax, or
telegraph on any day that the net asset value is
calculated. Page 12.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA Treasury Money Market Trust are not
deposits or other obligations of, or guaranteed by the
USAA Federal Savings Bank, are not insured by the FDIC or
any other Government Agency, and are subject to market
risks.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Trust, dated October
1, 1995, is available upon request and without charge by
writing to USAA INVESTMENT TRUST, 9800 Fredericksburg
Rd., San Antonio, TX 78288, or by calling 1-800-531-8181.
The SAI has been filed with the Securities and Exchange
Commission and is incorporated by reference into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT
THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
TABLE OF CONTENTS
Page
SUMMARY DATA
Fees and Expenses 3
Financial Highlights 4
Performance Information 5
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 6
Using Mutual Funds in an Investment Program 7
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 10
Redemption of Shares 12
Conditions of Purchase and Redemption 14
Exchanges 15
Other Services 15
Share Price Calculation 16
Dividends, Distributions and Taxes 17
Management of the Trust 18
Description of Shares 19
Service Providers 20
Telephone Assistance Numbers 20
FEES AND EXPENSES
The following summary is provided to assist you in understanding
the expenses you will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee* None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets (ANA))
Management Fees, net of reimbursements .012%
12b-1 Fees None
Other Expenses, net of reimbursements
Transfer Agent Fees** .038%
Custodian Fees .083%
All Other Expenses .242%
----
Total Other Expenses .363%
----
Total Fund Operating Expenses, net of reimbursements .375%
====
* A shareholder who requests delivery of redemption proceeds by wire
transfer will be subject to a $10 fee. See Redemption of Shares -
Bank Wire.
** The Fund pays USAA Shareholder Account Services an annual fixed fee per
account for its services. See Transfer Agent in the SAI, page 19.
During the year, the Manager voluntarily limited the annual expenses of
the Fund to .375% of its ANA and reimbursed the Fund for all expenses in
excess of this limitation. The Management Fees, Other Expenses, and
Total Fund Operating Expenses reflect all such expense reimbursements by
the Manager. Absent such reimbursements, the amount of the Management Fees,
Other Expenses, and Total Fund Operating Expenses as a percentage of ANA
would have been .125%, .363%, and .488%, respectively. The Manager has
voluntarily agreed to continue to limit the Fund's annual expenses until
October 1, 1996, to .375% of its ANA and will reimburse the Fund for all
expenses in excess of such limitation.
Example of Effect of Fund Expenses
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of the
periods shown.
1 year - $ 4
3 years - $ 12
5 years - $ 21
10 years - $ 47
The above example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share operating performance for a share outstanding
throughout each of the periods in the five-year period ended May 31, 1995,
has been derived from financial statements audited by KPMG Peat Marwick LLP.
This table should be read in conjunction with the financial statements and
related notes that appear in the Fund's Annual Report. Further performance
information is contained in the Annual Report and is available upon request
without charge.
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991*
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .05 .02 .03 .04 .04
Distributions from net
investment income (.05) (.02) (.03) (.04) (.04)
------- ------- ------- ------- -------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return (%)** 4.88 1.96 2.84 4.05 3.51
Net assets at end of
period (000) $67,876 $37,984 $30,448 $25,393 $13,409
Ratio of expenses to
average net assets (%) .375(b) .375(a)(b) .375(b) .375(b) .375(a)(b)
Ratio of net investment
income to average net
assets (%) 4.91(b) 2.94(a)(b) 2.81(b) 3.89(b) 5.27(a)(b)
- --------------
* Fund commenced operations February 1, 1991.
** Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) The information contained in this table is based on actual expenses for
the period, after giving effect to reimbursements of expenses by the
Manager. Absent such reimbursements the Fund's ratios would have been:
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991*
---- ---- ---- ---- ----
Ratio of expenses to average
net assets (%) .49 .62(a) .54 .72 1.31(a)
Ratio of net investment income
to average net assets (%) 4.80 2.69(a) 2.65 3.55 4.33(a)
PERFORMANCE INFORMATION
Performance information should be considered in light of
the Fund's investment objective and policies and market
conditions during the time periods for which it is
reported. Historical performance should not be considered
as representative of the future performance of the Fund.
The Trust may quote the Fund's yield in advertisements
and reports to shareholders or prospective investors.
The Fund's performance may also be compared to that of
other mutual funds with a similar investment objective
and to stock or relevant indexes that are referenced in
Appendix B to the SAI. Yield results reported by the
Fund do not take into account recurring and nonrecurring
charges for optional services which only certain
shareholders elect and which involve nominal fees, such
as the $10 fee for a delivery of redemption proceeds by
wire transfer.
The Fund may advertise its yield and effective yield.
The yield of the Fund refers to the income generated by
an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This
income is then annualized, that is, the amount of
income generated by the investment during the week is
assumed to be generated each week over a 52-week period
and is shown as a percentage of the investment.
The effective yield is calculated similarly, but when
annualized, the income earned by an investment in the
Fund is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
Further information concerning the Fund's yield is
included in the SAI.
USAA FAMILY OF NO-LOAD MUTUAL FUNDS
The USAA Family of No-Load Mutual Funds includes a
variety of Funds, each with different objectives and
policies. In combination, these Funds are designed to
provide investors with the opportunity to formulate their
own investment program. You may exchange any shares you
hold in any one USAA Fund for shares in any other USAA
Fund. For more complete information about the Funds in
the USAA Family of Funds, including charges and expenses,
call the Manager for a Prospectus. Be sure to read it
carefully before you invest or send money.
USAA 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 MUTUAL FUND, INC.
Aggressive Growth Fund
Growth Fund
Growth & Income Fund
Income Stock Fund
Income Fund
Short-Term Bond Fund
Money Market Fund
USAA TAX EXEMPT FUND, INC.
Long-Term Fund
Intermediate-Term Fund
Short-Term Fund
Tax Exempt Money Market Fund
California Bond Fund*
California Money Market Fund*
New York Bond Fund*
New York Money Market Fund*
Virginia Bond Fund*
Virginia Money Market Fund*
USAA STATE TAX-FREE TRUST
Florida Tax-Free Income Fund*
Florida Tax-Free Money Market Fund*
Texas Tax-Free Income Fund*
Texas Tax-Free Money Market Fund*
* Available for sale only to residents of these specific states.
USING MUTUAL FUNDS IN AN INVESTMENT PROGRAM
I. THE IDEA BEHIND MUTUAL FUNDS
Mutual funds were conceived as a vehicle that could give
small investors some of the advantages enjoyed by wealthy
investors. A relatively small investment buys part of a
widely diversified portfolio. That portfolio is managed
by investment professionals, relieving the shareholder of
the need to make individual stock or bond selections.
The investor also enjoys conveniences, such as daily
pricing, liquidity, and in the case of the USAA Family of
Funds, no sales charge. The portfolio, because of its
size, has lower transaction costs on its trades than most
individuals would have. As a result each shareholder
owns an investment that in earlier times would have been
available only to very wealthy people.
II. USING FUNDS IN AN INVESTMENT
PROGRAM
In choosing a mutual fund as an investment vehicle, the
shareholder is foregoing some investment decisions, but
must still make others. The decisions foregone are those
involved with choosing individual securities. The Fund
Manager will perform that function. In addition, the
Manager will arrange for the safekeeping of securities,
auditing the annual financial statements, and daily
valuation of the Fund, as well as other functions.
The shareholder, however, retains at least part of the
responsibility for an equally important decision. This
decision includes determining a portfolio of mutual funds
that balances the investor's investment goals with his or
her tolerance for risk. It is likely that this decision
may involve the use of more than one fund of the USAA
Family of Funds.
For example, assume a shareholder wishes to diversify
internationally. He or she could do this by adding
positions in the Emerging Markets, Gold, International,
or World Growth Funds to holdings in domestic funds.
This would give the investor exposure to the
opportunities of investment in many foreign countries and
to currency changes. This is just one example of how an
individual could combine funds to create a portfolio
tailored to his or her own risk and reward goals.
III. USAA'S FAMILY OF FUNDS
The Manager offers investors another alternative in its
asset strategy funds, the Income Strategy, Growth and Tax
Strategy, Balanced Strategy, Cornerstone Strategy, and
Growth Strategy Funds. These unique mutual funds provide
a professionally managed diversified investment portfolio
within a mutual fund. These Funds are designed for the
shareholder who prefers to delegate the asset allocation
process to an investment manager. The Funds are
structured to achieve diversification across a number of
investment categories.
Whether you prefer to create your own mix of mutual
funds or use an asset strategy fund, the USAA Family of
Funds provides a broad range of choices covering just
about any investor's investment objectives. Our sales
representatives stand ready to inform you of your choices
and to help you craft a portfolio which meets your needs.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide investors
maximum current income while maintaining the highest
degree of safety and liquidity.
The investment objective of the Fund cannot be changed
without shareholder approval. In view of the risks
inherent in all investments in securities, there is no
assurance that this objective will be achieved.
The investment policies and techniques used to pursue
the Fund's objective may be changed without shareholder
approval, except as otherwise noted. Further information
regarding the Fund's investment policies and restrictions
is provided in the SAI.
INVESTMENT POLICIES AND
TECHNIQUES
The Manager will pursue the objective by investing the
Fund's assets exclusively in securities with maturities
of 397 days or less that are backed by the full faith and
credit of the U.S. Government and repurchase agreements
collateralized by such securities. The Fund will under
normal circumstances invest at least 65% of its total
assets in U.S. Treasury bills, notes, and bonds and
repurchase agreements collateralized by such obligations.
Up to 35% of the Fund's total assets may be invested in
other obligations backed by the full faith and credit of
the U.S. Government, including securities issued by the
General Services Administration, Government National
Mortgage Association, Rural Electrification
Administration, Small Business Administration, Federal
Financing Bank and repurchase agreements collateralized
by such obligations.
Consistent with regulatory requirements, the Fund will
maintain a dollar-weighted average portfolio maturity of
90 days or less and will endeavor to maintain a constant
net asset value of $1.00 per share, although there is no
assurance that it will be able to do so.
Under federal law, the income derived from obligations
issued by the U.S. Government and certain of its agencies
and instrumentalities is exempt from state personal
income taxes. Many states that tax personal income
permit mutual funds to pass-through this tax exemption to
shareholders. It is anticipated that a substantial
portion of the dividends paid to shareholders of the Fund
residing in these states will qualify for this exemption
from state taxation.
Repurchase Agreements - The Fund may invest in repurchase
agreements which are exclusively collateralized by
obligations backed by the full faith and credit of the
U.S. Government. A repurchase agreement is a transaction
in which a security is purchased with a simultaneous
commitment to sell the security back to the seller (a
commercial bank or recognized securities dealer) at an
agreed upon price on an agreed upon date, usually not
more than seven days from the date of purchase. The
resale price reflects the purchase price plus an agreed
upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. The
obligation of the seller to pay the agreed upon price is
in effect secured by the value of the underlying
security. In these transactions, the securities
purchased by the Fund will have a total value equal to or
in excess of the amount of the repurchase obligation and
will be held by the Fund's custodian until repurchased.
If the seller defaults and the value of the underlying
security declines, the Fund may incur a loss and may
incur expenses in selling the collateral. If the seller
seeks relief under the bankruptcy laws, the disposition
of the collateral may be delayed or limited.
When-Issued Securities - The Fund may invest in new
issues of debt securities offered on a when-issued basis;
that is, delivery and payment take place after the date
of the commitment to purchase, normally within 45 days.
Both price and interest rate are fixed at the time of
commitment. The Fund does not earn interest on the
securities until settlement, and the market value of the
securities may fluctuate between purchase and settlement.
Such securities can be sold before settlement date.
Cash or high quality liquid debt securities equal to
the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities
are valued at market, and daily adjustments are made to
keep the value of the cash and segregated securities at
least equal to the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its
obligations from then available cash, sale of segregated
securities, sale of other securities, or sale of the
when-issued securities themselves.
Variable Rate Securities - The Fund may invest in
securities that bear interest at rates (coupons) which
are adjusted periodically to market rates. These
interest rate adjustments can both raise and lower the
income generated by such securities. These changes will
have the same effect on the income earned by a Fund
depending on the proportion of such securities held.
The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in
value when interest rates decline and decreasing in value
when interest rates rise. The value of variable rate
securities, however, is less affected by changes in
prevailing interest rates because of the periodic
adjustment of their coupons to a market rate. The
shorter the period between adjustments, the smaller
the impact of interest rate fluctuations on the value of
these securities. The market value of variable rate
securities usually tends toward par (100% of face value)
at interest rate adjustment time.
Liquidity - The Fund may not invest more than 10% of the
value of its net assets in securities which are illiquid
or not readily marketable.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed without
shareholder approval:
a. The Fund will not purchase any security if
immediately after the purchase 25% or more of the
value of its total assets will be invested in
securities of issuers principally engaged in a
particular industry (except that such limitation
does not apply to obligations issued or guaranteed
by the U.S. Government or its agencies or
instrumentalities).
b. The Fund will not purchase securities of any one
issuer (except the United States Government, its
agencies and instrumentalities), if as a result of
such purchase more than 5% of the market value of
the total assets of the Fund would be invested in
securities of such issuer. The Fund will not
purchase more than 10% of any class of securities
or of the outstanding voting securities of any issuer.
c. The Fund will not borrow money, except from banks
for temporary or emergency purposes and then only
in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of
such borrowing.
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 Trust with a social security number or tax
identification number to avoid possible tax withholding
requirements.
EFFECTIVE DATE
Generally, when you make a purchase, your purchase price
will be the net asset value (NAV) per share next
determined after the Fund receives your request in proper
form. If the Fund receives your request prior to the
close of the New York Stock Exchange on a day on which
the Exchange is open, your purchase price will be the NAV
per share determined for that day. If the Fund receives
your request after the time at which the NAV per share
is calculated, the purchase will be effective on the next
business day. A check drawn on a foreign bank will not be
deemed received for the purchase of shares until such time
as the check has cleared and the Manager has received good
funds, which may take up to 4 to 6 weeks. Furthermore, a
bank charge may be assessed in the clearing process, which
will be deducted from the amount of the purchase. To avoid
a delay in the effectiveness of your purchase, the Manager
suggests that you convert your foreign check to U.S. dollars
prior to investment in the Fund.
Purchase of Shares
Minimum Investments
Initial Purchase (non-IRA): $3,000
After January 31, 1996 $3,000 or minimum $100 with a minimum $50
monthly electronic investment
Initial Purchase - IRA: $1,000
$250 for spousal account
After January 31, 1996 $250 or minimum $100 with a minimum $50
monthly electronic investment
Additional Purchases: $50 - (Except transfers from brokerage accounts).
How to Purchase:
Mail * To open an account, send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
* To add to your account, send your check and the "Invest by
Mail" stub that accompanies your fund's transaction
confirmation to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
* To exchange by mail, call 1-800-531-8448 for instructions.
In Person * To open an account, bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway, San Antonio
Automatically * Additional purchases on a regular basis can be deducted
via from a bank account, paycheck, income-producing investment
Electronic or from a USAA money market account. Sign up for these
Funds services when opening an account or call 1-800-531-8448
Transfer to add these services.
(EFT) * Purchases through payroll deduction ($25 minimum each pay
period with no initial investment) can be made by any
employee of USAA, its subsidiaries or affiliated companies.
Bank Wire * To add to an account, instruct your bank (which may charge
a fee for the service) to wire the specified amount to the
Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA#011000028
Attn: USAA Treasury Money Market Trust
USAA AC-69384998
Shareholder(s) Name(s)_________________
Shareholder(s) Account Number___________________
Phone * If you have an existing USAA account and would like to open
a new account, call 1-800-531-8448. New accounts by phone
must have the same registration as your existing account.
* To exchange to another USAA fund, call 1-800-531-8448. The
new account must have the same registration as the account
from which you are exchanging.
* To add to an account, intermittent (as-needed) purchases
can be deducted from your bank account through our Buy/Sell
Service. Call 1-800-531-8448.
Through a * To open a new account through your USAA Asset Management
USAA AMA Account, call USAA Brokerage Services at 1-800-531-8343.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the following
methods on any day the NAV per share is calculated.
Redemptions will be effective on the day on which
instructions are received in accordance with the
requirements set forth below. However, if instructions
are received after the NAV per share calculation,
redemption will be effective on the next business day.
REDEMPTION PROCEEDS
Redemption proceeds are distributed within seven days
after the effective date of redemption. Payment for
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds transfer has cleared, which
could take up to 15 days from the purchase date. If
you are considering redeeming shares soon after purchase,
you should purchase by bank wire or certified check to
avoid delay.
In addition, the Trust 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 Trust normally
utilizes is restricted, or during any period that
redemption is otherwise permitted to be suspended by the
Securities and Exchange Commission.
How to Redeem:
Written, * Send your written instructions to:
Fax, or USAA Shareholder Account Services
Telegraph 9800 Fredericksburg Rd., San Antonio, TX 78288
* Send a signed fax to 210-498-2889, or send a telegraph
to USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Phone * Call toll free 1-800-531-8448, in San Antonio,
210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
Through a * Call USAA Brokerage Services at 1-800-531-8343
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
via EFT (as-needed) redemptions can be credited to
your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check * A check payable to the registered shareholder(s)
Redemption will 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.
Checkwriting * Checks can be issued for your Treasury Money
Market Trust account.
To establish your checkwriting privilege (CWP),
complete the signature card which accompanies the
application form or Shareholder Services Guide, or
request and complete the signature card separately. A
one-time $5 checkwriting fee is charged to each account
by the Transfer Agent for the establishment of the
privilege. There is no charge for the use of checks nor
for subsequent reorders. This privilege is subject to
SSB's rules and regulations governing checking accounts.
Checks must be written for an amount of at least $250.
Checks written for less than $250 will be returned.
Checkwriting may not be used to close an account because
the value of the account changes daily as dividends are
accrued.
When a check is presented to the Transfer Agent for
payment, a sufficient number of full and fractional
shares in the investor's account will be redeemed to
cover the amount of the check. Checks will be returned
if there are insufficient shares to cover the amount of
the check. Presently, there is a $15 processing fee
assessed against an account for any redemption check not
honored by a clearing or paying agent. A check paid
during the month will be returned to the shareholder by
separate mail. Checkwriting fees are subject to change
at any time. The Trust, the Transfer Agent and SSB each
reserve the right to change or suspend the checkwriting
privilege upon 30 days' written notice to participating
shareholders. See the SAI for further information.
You may request that the Transfer Agent stop payment on
a check. The Transfer Agent will use its best efforts to
execute stop payment instructions, but does not guarantee
that such efforts will be effective. A $10 charge will
be made for each stop payment requested by a shareholder.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust 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 Trustees may cause the redemption of an
account with less than $900, subject to certain
limitations described in Additional Information Regarding
Redemption of Shares in the SAI.
TRUST RIGHTS
The Trust reserves the right to:
(1) reject purchase or exchange orders when in the
best interest of the Trust;
(2) limit or discontinue the offering of shares of any
portfolio of the Trust without notice to the
shareholders;
(3) require a signature guarantee when deemed
appropriate by the Manager for purchases,
redemptions, or changes in account information.
The section Additional Information Regarding
Redemption of Shares in the SAI contains
information on acceptable guarantors.
EXCHANGES
EXCHANGE PRIVILEGE
The Exchange Privilege is automatically established when
you complete your application. You may exchange shares
among Funds in the USAA Family of Funds, provided you do
not hold these shares in stock certificate form and that
the shares to be acquired are offered in your state of
residence. Exchange redemptions and purchases will be
processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between Funds is
a taxable event. Accordingly, a capital gain or loss may
be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares -
Phone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the Funds and their
shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any Fund
in the USAA Family of Funds are limited for each account
to six per calendar year except that there is no
limitation on exchanges out of the Tax Exempt Short-Term
Fund, Short-Term Bond Fund, or any of the money market
funds in the USAA Family of Funds.
OTHER SERVICES
INVESTMENT PLANS
InveStart(registered trademark) - an investment program
for beginning or first-time investors. Like more
experienced investors, InveStart(registered trademark)
customers may choose to establish a systematic investment
plan for their portfolio.
Systematic Investment Plans - you may establish a
systematic investment plan by completing the appropriate
forms. At the time you sign up for any of the following
investment plans that utilize the electronic funds
transfer service, you will choose the day of the month
(the effective date) on which you would like to regularly
purchase shares. When this day falls on a weekend or
holiday, the electronic transfer will take place on the
last business day before the effective date. Call the
Manager to obtain instructions. More information about
these preauthorized plans is contained in the SAI.
* InvesTronic(registered trademark) - an automatic
investment program for the purchase of additional shares
through electronic funds transfer. The investor selects
the day(s) each month that money is transferred from a
checking or savings account. Effective January 31, 1996,
with this program you can make initial investments as low
as $100 and automatic monthly additions of $50 to the
account.
* Direct Purchase Service - the periodic purchase of
shares through electronic funds transfer from a non-
governmental employer, an income-producing investment, or
an account with a participating financial institution.
* Automatic Purchase Plan - the periodic transfer of
funds from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
* Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
* Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
* Retirement Plans - plans are available for IRA
(including SEP/IRA) and 403(b)(7) accounts. Federal
taxes on current income may be deferred if an investor
qualifies.
* Directed Dividends - If you own shares in more than one
of the Funds in the USAA Family of Funds, you may direct
that dividends and/or capital gain distributions earned
in one fund be used to automatically purchase shares in
another fund.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation for purchases or
redemptions by check and exchanges. If your account had
activity other than reinvested dividends, such as wire
purchases or redemptions or purchases under the
InvesTronic(registered trademark), Direct Purchase
Service, Automatic Purchase Plan or Directed Dividends
investment plans, you will receive a monthly statement
that will reflect quarter-to-date account activity.
At the end of each quarter you will receive a
consolidated statement for all of your mutual fund
accounts, regardless of account activity. The fourth
quarter consolidated statement will reflect all account
activity for the prior tax year. There will be a $10 fee
charged for copies of historical statements for other
than the prior tax year for any one account. You will
receive the Fund's financial statements with a summary of
its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the Trust 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 Trust.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the SAI, the most recent Annual Report and/or
Semiannual Report, or if you have any questions
concerning any of the services offered.
SHARE PRICE CALCULATION
The price at which shares of the Fund are purchased and
redeemed by shareholders is equal to the net asset value
(NAV) per share determined on the effective date of the
purchase or redemption.
WHEN
The NAV per share for the Fund is calculated at the close
of the regular trading session of the New York Stock
Exchange, which is usually 4:00 p.m. Eastern time. You
may buy and sell Fund shares at the NAV per share without
a sales charge.
HOW
The NAV per share is calculated by adding the value of
all securities and other assets in the Fund, deducting
liabilities, and dividing by the number of shares
outstanding. Securities are stated at amortized cost
which approximates market value.
For additional information, see Valuation of Securities
in the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and is paid on the
last business day of each month. 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 dividend or distribution payment returned to the
Manager as not deliverable will be invested in the
shareholder's Fund account at the then-current net asset
value. If any check for the payment of dividends or
distributions is not cashed within six months from the
date on the check, it becomes void. The amount of the
check will then be invested in the shareholder's account
at the then-current net asset value.
FEDERAL TAXES
The following discussion relates only to generally
applicable federal income tax provisions in effect as of
the date of this Prospectus. Therefore, shareholders are
urged to consult their own tax advisers about the status
of distributions from the Fund in their own states and
localities.
Fund - The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By
complying with the applicable provisions of the Code, the
Fund will not be subject to federal income tax on its net
investment income and net capital gains (capital gains in
excess of capital losses) distributed to shareholders.
Shareholder - Dividends from taxable net investment
income and distributions of net short-term capital gains
are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares.
Distributions of net long-term capital gains are
taxable as long-term capital gains whether received in
cash or reinvested in additional shares, and regardless
of the length of time the investor has held the shares of
the Fund.
Withholding - The Fund is required by federal law to
withhold and remit to the U.S. Treasury a portion of the
income dividends and capital gain distributions and
proceeds of redemptions paid to any non-corporate
shareholder who fails to furnish the Fund with a correct
tax identification number, who underreports dividend or
interest income, or who fails to certify that he is not
subject to withholding. To avoid this withholding
requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that
your tax identification number is correct and that you
are not currently subject to backup withholding.
Reporting - The Fund will report annually to its
shareholders the federal tax status of dividends and
distributions paid or declared by the Fund during the
preceding calendar year.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are subject to the
supervision of the Board of Trustees.
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
$27 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 Trust and the Manager. Such
restrictions and procedures include substantially all of
the recommendations of the Advisory Group of the
Investment Company Institute and comply with Securities
and Exchange Commission rules and regulations.
ADVISORY AGREEMENT
The Manager serves as the manager and investment adviser
of the Trust, providing services under an Advisory
Agreement. Under the Advisory Agreement, the Manager is
responsible for the management of the Funds, business
affairs, and placement of brokerage orders, subject to
the authority of and supervision by the Board of
Trustees.
For its services under the Advisory Agreement, the Fund
pays the Manager an annual fee which is computed as a
percentage of the Fund's average net assets (ANA),
accrued daily and paid monthly. The Fund's management
fees are computed at one-eighth of one percent (.125%) of
ANA. For the fiscal year ended May 31, 1995, the fees
paid to the Manager, net of the reimbursement, were .012%
of ANA.
OPERATING EXPENSES
For the fiscal year ended May 31, 1995, the Manager
limited total operating expenses to .375% of the Fund's
ANA. The Manager reimbursed the Fund $54,428 for
expenses in excess of the limitation. The Manager has
voluntarily agreed to continue to limit the Fund's annual
expenses until October 1, 1996, to .375% of its ANA and
will reimburse the Fund for all expenses in excess of the
limitation.
PORTFOLIO MANAGER
The following individual is primarily responsible for
managing the Fund.
J. Eric Thorderson, Executive Director of Fixed Income
Investments since March of 1994, has managed the Fund
since March 1994. Mr. Thorderson has eight years
investment management experience and has worked for IMCO
five years where he has held various positions in Fixed
Income Investments since May 1991. Mr. Thorderson earned
the Chartered Financial Analyst designation in 1989 and
is a member of the Association for Investment Management
and Research and the San Antonio Financial Analysts
Society, Inc. He holds an MBA from the University of
Illinois and a BA from Wayne State University of
Michigan.
DESCRIPTION OF SHARES
MASTER TRUST AGREEMENT
The Trust is an open-end management investment company
established as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to the First
Amended and Restated Master Trust Agreement (Master Trust
Agreement) dated June 2, 1995, as amended. The Trust is
authorized to issue an unlimited number of shares of
beneficial interest of separate series or Funds, without
par value. The Fund described in this Prospectus is
being offered to the public. The Fund is classified as a
diversified investment company. Under the Master Trust
Agreement, the Trustees are authorized to create new
Funds in addition to those already existing without
shareholder approval.
Under the Master Trust Agreement, no annual or regular
meeting of shareholders is required. Ordinarily, no
shareholder meeting will be held unless required by the
1940 Act. The Trustees may fill vacancies on the Board
or appoint new Trustees provided that immediately after
such action at least two-thirds of the Trustees 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. Shareholders holding an aggregate of at least
10% of the outstanding shares of the Trust may request a
meeting of shareholders at any time for the purpose of
voting to remove one or more of the Trustees, and the
Trust will assist shareholders in communicating with other
shareholders in connection with such a meeting.
Under Massachusetts law, shareholders of any Fund
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Trust or the Trustees. The Master Trust Agreement
provides for indemnification out of the Trust's property
for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus,
the possibility of a shareholder incurring financial loss
on account of shareholder liability is remote.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 9800 Fredericksburg Rd., San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
TELEPHONE ASSISTANCE
(Call toll free - Central Time)
Monday-Friday 8:00 a.m. to 8:00 p.m.
Saturday: 8:30 a.m. to 5:00 p.m.
For further information on mutual funds:
1-800-531-8181
In San Antonio 210-456-7211
For account servicing, exchanges or redemptions:
1-800-531-8448
In San Antonio 210-456-7202
RECORDED 24 HOUR SERVICE
MUTUAL FUND PRICE QUOTES
(From any phone)
1-800-531-8066
In San Antonio 210-498-8066
MUTUAL FUND TOUCHLINE(registered trademark)
(From Touchtone phones only)
For account balance, last transaction or fund prices:
1-800-531-8777
In San Antonio 210-498-8777
Part B
Statement of Additional Information for the
Growth and Tax Strategy, Cornerstone Strategy, Emerging Markets,
Gold, International, and World Growth Funds,
GNMA Trust and Treasury Money Market Trust
is included herein
Not included in this Post-Effective Amendment
is the Statement of Additional Information for the
Balanced Strategy, Growth Strategy and Income Strategy Funds
(Picture of USAA STATEMENT OF
the USAA INVESTMENT ADDITIONAL INFORMATION
Logo is TRUST October 1, 1995
here)
USAA INVESTMENT TRUST
USAA INVESTMENT TRUST (the Trust) is a registered investment
company offering shares of eleven no-load mutual funds, eight of
which are described in this Statement of Additional Information
(SAI): the Growth and Tax Strategy Fund, Cornerstone Strategy
Fund, Emerging Markets Fund, Gold Fund, International Fund, World
Growth Fund, GNMA Trust, and Treasury Money Market Trust
(collectively, the Funds). Each Fund is classified as a
diversified investment company and has its own investment
objective designed to meet different investment goals.
A Prospectus for each Fund dated October 1, 1995, which provides
the basic information you should know before investing in the
Funds, may be obtained without charge upon written request to
USAA Investment Trust, 9800 Fredericksburg Rd., San Antonio, TX
78288, or by calling toll free 1-800-531-8181. This SAI is not a
Prospectus and contains information in addition to and more
detailed than that set forth in each Fund's Prospectus. It is
intended to provide you with additional information regarding the
activities and operations of the Trust and the Funds, and should
be read in conjunction with each Fund's Prospectus.
TABLE OF CONTENTS
Page
2 Valuation of Securities
3 Additional Information Regarding Redemption of Shares
4 Investment Plans
5 Investment Policies
8 Special Risk Considerations
8 Investment Restrictions
11 Portfolio Transactions
13 Further Description of Shares
13 Tax Considerations
15 Trustees and Officers of the Trust
18 The Trust's Manager
19 General Information
20 Calculation of Performance Data
21 Appendix A - Tax-Exempt Securities and Their Ratings
24 Appendix B - Comparison of Portfolio Performance
28 Appendix C - Dollar-Cost Averaging
VALUATION OF SECURITIES
Shares of each Fund are offered on a continuing best efforts
basis through USAA Investment Management Company (IMCO or the
Manager). The offering price for shares of each Fund is equal to
the current net asset value (NAV) per share. The net asset value
per share of each Fund is calculated by adding the value of all
its portfolio securities and other assets, deducting its
liabilities, and dividing by the number of shares outstanding.
A Fund's NAV per share is calculated each day, Monday
through Friday, except days on which the New York Stock Exchange
(NYSE) is closed. The NYSE is currently scheduled to be closed
on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas, and on
the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
The value of securities of the Growth and Tax Strategy,
Cornerstone Strategy, Emerging Markets, Gold, International, and
World Growth Funds and the GNMA Trust is determined by one or
more of the following methods:
(1) Portfolio securities, except as otherwise noted, traded
primarily on a domestic securities exchange are valued at
the last sales price on that exchange. Portfolio securities
traded primarily on foreign securities exchanges are
generally valued at the closing values of such securities on
the exchange where primarily traded. If no sale is
reported, the latest bid price is generally used depending
upon local custom or regulation.
(2) Over-the-counter securities are priced at the last sales
price or, if not available, at the average of the bid and
asked prices at the time trading closes on the NYSE.
(3) Debt securities purchased with maturities of 60 days or less
are stated at amortized cost which approximates market
value. Repurchase agreements are valued at cost.
(4) Other debt and government securities are valued each
business day by a pricing service (the Service) approved by
the Board of Trustees. The Service uses the mean between
quoted bid and asked prices or the last sales price to price
securities when, in the Service's judgment, these prices are
readily available and are representative of the securities'
market values. For many securities, such prices are not
readily available. The Service generally prices those
securities based on methods which include consideration of
yields or prices of securities of comparable quality,
coupon, maturity and type, indications as to values from
dealers in securities, and general market conditions.
(5) Securities which cannot be valued by the methods set forth
above, and all other assets, are valued in good faith at
fair value using methods determined by the Manager under the
general supervision of the Board of Trustees.
Securities trading in foreign markets may not take place on all
days on which the NYSE is open. Further, trading takes place in
various foreign markets on days on which the NYSE is not open.
The calculation of a Fund's net asset value therefore may not
take place contemporaneously with the determination of the prices
of securities held by a Fund. Events affecting the values of
portfolio securities that occur between the time their prices are
determined and the close of normal trading on the NYSE on a day a
Fund's NAV is calculated will not be reflected in a Fund's NAV,
unless the Manager determines that the particular event would
materially affect NAV. In such a case, the Fund's Manager, under
the supervision of the Board of Trustees, will use all relevant
available information to determine a fair value for the affected
portfolio securities.
The value of the Treasury Money Market Trust's securities is
stated at amortized cost which approximates market value. This
involves valuing a security at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates. While
this method provides certainty in valuation, it may result in
periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price the Trust would
receive upon the sale of the instrument.
The valuation of the Treasury Money Market Trust's portfolio
instruments based upon their amortized cost is subject to the
Fund's adherence to certain procedures and conditions.
Consistent with regulatory requirements, the Manager will
purchase securities with remaining maturities of 397 days or less
and will maintain a dollar-weighted average portfolio maturity of
no more than 90 days. The Manager will invest only in securities
that have been determined to present minimal credit risk and that
satisfy the quality and diversification requirements of
applicable rules and regulations of the Securities and Exchange
Commission (SEC).
The Board of Trustees has established procedures designed to
stabilize the Treasury Money Market Trust's price per share, as
computed for the purpose of sales and redemptions, at $1.00.
There can be no assurance, however, that the Fund will at all times
be able to maintain a constant $1.00 NAV per share. Such procedures
include review of the Fund's holdings at such intervals as is deemed
appropriate to determine whether the Fund's NAV calculated by
using available market quotations deviates from $1.00 per share
and, if so, whether such deviation may result in material
dilution or is otherwise unfair to existing shareholders. In the
event that it is determined that such a deviation exists, the
Board of Trustees will take such corrective action as it regards
as necessary and appropriate. Such action may include selling
portfolio instruments prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, withholding
dividends, or establishing a NAV per share by using available
market quotations.
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES
The value of a shareholder's investment at the time of redemption
may be more or less than the cost at purchase, depending on the
value of the securities held in each Fund's portfolio. Requests
for redemption which are subject to any special conditions, or
which specify an effective date other than as provided herein,
cannot be accepted. A gain or loss for tax purposes may be
realized on the sale of shares, depending upon the price when
redeemed.
The Board of Trustees may cause the redemption of an account
with a balance of less than $900, provided that (1) the value of
such account has been reduced below the minimum initial
investment required in such Fund at the time of the establishment
of the account to less than $900 entirely for reasons other than
market action, (2) the account has remained below the minimum
initial investment 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 Trustees. Prompt payment
will be made by mail to the last known address of the
shareholder.
The Trust 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 Trust normally utilizes is restricted, or an emergency exists
as determined by the SEC so that disposal of the Trust's
investments or determination of its net asset value is not
reasonably practicable, or (3) for such other periods as the SEC
by order may permit for protection of the Trust's shareholders.
For the mutual protection of the investor and the Funds, a
guarantee of signature may be required by the Trust. If
required, each signature on the account registration must be
guaranteed. Signature guarantees are acceptable from FDIC member
banks, brokers, dealers, municipal securities dealers, municipal
securities brokers, government securities dealers, government
securities brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. A signature guarantee for active duty military
personnel stationed abroad may be provided by an officer of the
United States Embassy or Consulate, a staff officer of the Judge
Advocate General, or an individual's commanding officer.
Redemption By Check
Shareholders in the Treasury Money Market Trust may request that
checks be issued for their accounts. A one-time $5 checkwriting
fee is charged to each account by the Transfer Agent for the use
of the privilege. Checks must be written in the amount of at
least $250.
Checks issued to shareholders of the Treasury Money Market
Trust will be sent only to the person in whose name the account
is registered and only to the address of record. The checks must
be manually signed by the registered owner(s) exactly as the
account is registered. For joint accounts the signature of
either or both joint owners will be required on the check,
according to the election made on the signature card. Dividends
will continue to be earned by the shareholder until the shares
are redeemed by the presentation of a check.
When a check is presented to the Transfer Agent for payment,
a sufficient number of full and fractional shares in the
investor's account will be redeemed to cover the amount of a
check. If an investor's account is not adequate to cover the
amount of a check, the check will be returned unpaid. Because
the value of the account changes as dividends are accrued on a
daily basis, checks may not be used to close an account.
After clearance, checks paid during the month will be
returned to the shareholder by separate mail. The checkwriting
privilege will be subject to the customary rules and regulations
of State Street Bank and Trust Company (State Street Bank or the
Custodian) governing checking accounts. Other than the initial
one-time fee, there is no charge to the shareholder for the use
of the checks or for subsequent reorders of checks.
The Trust reserves the right to assess a processing fee
against a shareholder's account for any redemption check not
honored by a clearing or paying agent. Currently, this fee is
$15 and is subject to
Additional Information Regarding Redemption of Shares, cont.
change at any time. Some examples of such dishonor are improper
endorsement, checks written for an amount less than the minimum
check amount, and insufficient or uncollectible funds.
The Trust, the Transfer Agent, and State Street Bank each
reserve the right to change or suspend the checkwriting privilege
upon 30 days' written notice to participating shareholders.
INVESTMENT PLANS
The following investment plans are made available by the Trust to
shareholders of all the Funds. At the time you sign up for any
of the following investment plans that utilize the electronic
funds transfer service, you will choose the day of the month (the
effective date) on which you would like to regularly purchase
shares. When this day falls on a weekend or holiday, the
electronic transfer will take place on the last business day
before the effective date. You may terminate your participation
in a plan at any time. Please call the Manager for details and
necessary forms or applications.
Systematic Purchase of Shares
InvesTronic(registered trademark) - an automatic investment
program for the purchase of additional shares through electronic
funds transfer. The investor selects the day(s) each month that
money is transferred from a checking or savings account.
Direct Purchase Service - the periodic purchase of shares through
electronic funds transfer from a non-governmental employer, an
income-producing investment, or an account with a participating
financial institution.
Automatic Purchase Plan - the periodic transfer of funds from a
USAA money market fund to purchase shares in another non-money
market USAA mutual fund. There is a minimum investment required
for this program of $5,000, with a monthly transaction minimum of
$50. The minimum initial investment requirement for the other
USAA mutual fund must be satisfied before the first transfer.
Buy/Sell Service - the intermittent purchase or redemption of
shares through electronic funds transfer to or from a checking or
savings account.
Participation in these systematic purchase plans will permit
a shareholder to engage in dollar-cost averaging. For additional
information concerning the benefits of dollar-cost averaging, see
Appendix C.
Systematic Withdrawal Plan
If a shareholder in a single investment account (accounts in
different Funds cannot be aggregated for this purpose) owns
shares having a net asset value of $5,000 or more, the
shareholder may request that enough shares to produce a fixed
amount of money be liquidated from the account monthly or
quarterly. The amount of each withdrawal must be at least $50.
Using the electronic funds transfer service, shareholders may
choose to have withdrawals electronically deposited at their bank
or other financial institution. They may also elect to have
checks mailed to a designated address.
Such a plan may be initiated by depositing shares worth at
least $5,000 with the Transfer Agent and by completing a
Systematic Withdrawal Plan application, which may be requested
from the Manager. The shareholder may terminate participation in
the plan at any time. There is no charge to the shareholder for
withdrawals under the Systematic Withdrawal Plan. The Trust 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 (not available in the Growth and
Tax Strategy Fund)
Federal taxes on current income may be deferred if an investor
qualifies for certain types of retirement programs. For the
convenience of the investor, the following plans are made
available by the Manager: IRA (including SEP/IRA) and 403(b)(7)
accounts. The minimum initial investment in each of these plans
is $1,000 for each Fund with the exception of spousal IRAs for
which the minimum investment is $250. Subsequent investments of
$50 or more per account may be made at any time. Effective after
January 31, 1996, the minimum initial investment for these plans
will decrease to $250 or minimum $100 with a minimum $50 monthly
electronic investment. Investments may be made in one or any
combination of the portfolios described in the Prospectus of each
Fund of USAA Investment Trust and USAA Mutual Fund, Inc.
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 of these tax-deferred retirement
plans under the programs made available by the Manager.
Applications for these retirement plans received by the Manager
will be forwarded to the Custodian for acceptance.
An administrative fee of $20 is deducted from the proceeds
of a distribution closing an account. Exceptions to the fee are:
partial distributions, total transfer within USAA, and
distributions due to disability or death. This charge is subject
to change as provided in the various agreements. There may be
additional charges, as mutually agreed upon between the investor
and the Custodian, for further services requested of the
Custodian.
Each employer or individual establishing a tax-deferred
retirement plan is advised to consult with a tax adviser before
establishing the plan. Detailed information about the plans may
be obtained from the Manager.
INVESTMENT POLICIES
The section captioned Investment Objective and Policies in each
Fund's Prospectus describes the fundamental investment objective
and the investment policies applicable to each Fund and the
following is provided as additional information.
Rule 144A Securities
Each Fund, except the GNMA Trust and the Treasury Money Market
Trust, may purchase restricted securities eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the
Securities Act of 1933 (Rule 144A Securities). Rule 144A
provides a non-exclusive safe harbor from the registration
requirements of the Securities Act of 1933 for resales of certain
securities to institutional investors.
Municipal Lease Obligations
The Growth and Tax Strategy Fund may invest in municipal lease
obligations, installment purchase contract obligations, and
certificates of participation in such obligations (collectively,
lease obligations). A lease obligation does not constitute a
general obligation of the municipality for which the
municipality's taxing power is pledged, although the lease
obligation is ordinarily backed by the municipality's covenant to
budget for the payments due under the lease obligation.
Certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to
make lease obligation payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-
appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure
might prove difficult.
Liquidity Determinations
The Board of Trustees has established guidelines pursuant to
which municipal lease obligations, Rule 144A Securities, and
certain restricted debt securities that are subject to
unconditional put or demand features exercisable within seven
days (Restricted Put Bonds) may be determined to be liquid for
purposes of complying with the Funds' investment restriction
applicable to investments in illiquid securities. In determining
the liquidity of municipal lease obligations and Rule 144A
Securities, the Manager will consider the following factors,
among others, established by the Board of Trustees: (1) the
frequency of trades and quotes for the security, (2) the number
of dealers willing to purchase or sell the security and the
number of other potential purchasers, (3) dealer undertakings
to make a market in the security, and (4) the nature of the
security and the nature of the marketplace trades, including
the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer. Additional
factors considered by the Manager in determining the liquidity of
a municipal lease obligation are: (1) whether the lease
obligation is of a size that will be attractive to institutional
investors, (2) whether the lease obligation contains a non-
appropriation clause and the likelihood that the obligor will
fail to make an appropriation therefor, and (3) such other
factors as the Manager may determine to be relevant to such
determination. In determining the liquidity
Investment Policies, cont.
of Restricted Put Bonds, the Manager will evaluate the credit
quality of the party (the Put Provider) issuing (or
unconditionally guaranteeing performance on) the unconditional
put or demand feature of the Restricted Put Bond. In evaluating
the credit quality of the Put Provider, the Manager will consider
all factors that it deems indicative of the capacity of the Put
Provider to meet its obligations under the Restricted Put Bond
based upon a review of the Put Provider's outstanding debt and
financial statements and general economic conditions.
Certain foreign securities may be eligible for resale
pursuant to Rule 144A in the United States and may also trade
without restriction in one or more foreign markets. Such
securities may be determined to be liquid based upon these
foreign markets without regard to their eligibility for resale
pursuant to Rule 144A. In such cases, these securities will not
be treated as Rule 144A securities for purposes of the liquidity
guidelines established by the Board of Trustees and will not be
considered "restricted securities" for purposes of a Fund's
investment restriction.
Calculation of Maturity for Fixed Income Securities
A fixed income security's maturity is typically determined on a
stated final maturity basis, although there are some exceptions
to the rule.
If the issuer of the security has committed to take
advantage of a maturity shortening device, such as a call,
refunding, or redemption provision, the date on which the
instrument will be called, refunded, or redeemed will be
considered to be its maturity date. Maturities of securities
subject to sinking fund arrangements are determined on a weighted
average life basis, which is the average time for principal to be
repaid. The weighted average lives of these securities will be
shorter than their stated final maturities. A security will be
treated as having a maturity earlier than its stated maturity
date if the security has technical features, such as a put or
demand feature which, in the judgement of the Manager, will
result in the security being valued in the market as though it
has the earlier maturity.
Lending of Securities
Each Fund may lend its securities. A lending policy may be
authorized by the Trust's Board of Trustees and implemented by
the Manager, but securities may be loaned only to qualified
broker-dealers or institutional investors that agree to maintain
cash collateral with the Trust equal at all times to at least
100% of the value of the loaned securities. The Trustees will
establish procedures and monitor the creditworthiness of any
institution or broker-dealer during such times as any loan is
outstanding. The Trust will continue to receive interest on the
loaned securities and will invest the cash collateral in short-
term obligations of the U.S. Government or of its agencies or
instrumentalities or in repurchase agreements, thereby earning
additional interest.
No loan of securities will be made if, as a result, the
aggregate of such loans would exceed 5% (33 1/3%, with respect to
the Emerging Markets Fund) of the value of a Fund's total assets.
The Trust may terminate such loans at any time.
Forward Currency Contracts
The Cornerstone Strategy, Emerging Markets, Gold, International,
and World Growth Funds may enter into forward currency contracts
in order to protect against uncertainty in the level of future
foreign exchange rates.
A forward contract involves an agreement to purchase or sell
a specific currency at a specified future date or over a
specified time period at a price set at the time of the contract.
These contracts are usually traded directly between currency
traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirements, and no
commissions are charged.
The Funds may enter into forward currency contracts under
two circumstances. First, when a Fund enters into a contract for
the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into such a contract, a Fund will be able
to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and
the foreign currency from the date the security is purchased or
sold to the date on which payment is made or received. Second,
when management of a Fund believes that the currency of a
specific country may deteriorate relative to the U.S. dollar, it
may enter into a forward contract to sell that currency. A Fund
may not hedge with respect to a particular currency for an amount
greater than the aggregate market value (determined at the time
of making any sale of forward currency) of the securities held in
its portfolio denominated or quoted in, or bearing a substantial
correlation to, such currency.
The use of forward contracts involves certain risks. The
precise matching of contract amounts and the value of securities
involved generally will not be possible since the future value of
such securities in currencies more than likely will change
between the date the contract is entered into and the date it
matures. The projection of short-term currency market movements
is extremely difficult and successful execution of a short-term
hedging strategy is uncertain. Under normal circumstances,
consideration of the prospect for currency parities will be
incorporated into the longer term investment strategies. The
Manager believes it is important, however, to have the
flexibility to enter into such contracts when it determines it is
in the best interest of the Funds to do so. It is impossible to
forecast what the market value of portfolio securities will be at
the expiration of a contract. Accordingly, it may be necessary
for a Fund to purchase additional currency (and bear the expense
of such purchase) if the market value of the security is less
than the amount of currency the Funds are obligated to deliver,
and if a decision is made to sell the security and make delivery
of the currency. Conversely, it may be necessary to sell some of
the foreign currency received on the sale of the portfolio
security if its market value exceeds the amount of currency the
Funds are obligated to deliver.
The Funds are not required to enter into such transactions
and will not do so unless deemed appropriate by the Manager.
Although the Funds value their assets each business day in
terms of U.S. dollars, they do not intend to convert their
foreign currencies into U.S. dollars on a daily basis. They will
do so from time to time, and shareholders should be aware of
currency conversion costs. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based
on the difference (spread) between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
When-Issued Securities
Each Fund may invest in new issues of debt securities offered on
a when-issued basis; that is, delivery of and payment for the
securities take place after the date of the commitment to
purchase, normally within 45 days. The payment obligation and
the interest rate that will be received on the securities are
each fixed at the time the buyer enters into the commitment. A
Fund may sell these securities before the settlement date if it
is deemed advisable.
Debt securities purchased on a when-issued basis are subject
to changes in value in the same way that other debt securities
held in the Funds' portfolios are; that is, both experience
appreciation when interest rates decline and depreciation when
interest rates rise. The value of such securities will also be
affected by the public's perception of the creditworthiness of
the issuer and anticipated changes in the level of interest
rates. Purchasing securities on a when-issued basis involves a
risk that the yields available in the market when the delivery
takes place may actually be higher than those obtained in the
transaction itself. Cash or high quality liquid debt securities
equal to the amount of the when-issued commitments are segregated
at the Fund's custodian bank. The segregated securities are
valued at market, and daily adjustments are made to keep the
value of the cash and segregated securities at least equal to the
amount of such commitments by the Fund.
On the settlement date of the when-issued securities, the
Fund will meet its obligations from then available cash, sale of
segregated securities, sale of other securities, or from sale of
the when-issued securities themselves (which may have a value
greater or less than the Trust's payment obligations). Sale of
securities to meet such obligations carries with it a greater
potential for the realization of capital gains.
Investments in Real Estate Investment Trusts (REITs)
Because the Cornerstone Strategy and World Growth Funds may
invest a substantial portion of their assets in REITs, the Funds
may also be subject to certain risks associated with direct
investments in REITs. REITs may be affected by changes in the
value of their underlying properties and by defaults by borrowers
or tenants. Furthermore, REITs are dependent upon specialized
management skills of their managers and may have limited geographic
diversification, thereby, subjecting them to risks inherent in
financing a limited number of projects. REITs depend generally
on their ability to generate cash flow to make distributions to
shareholders, and certain REITs have self-liquidation provisions
by which mortgages held may be paid in full and distributions of
capital returns may be made at any time.
Put and Call Options, Financial Futures Contracts, Options on
Financial Futures Contracts
Although the GNMA Trust and Emerging Markets Fund are permitted
to purchase and sell these contracts or options, the Funds have
no current intention of doing so in the coming year and will not
engage in such transactions without first notifying shareholders
and supplying further information in each Fund's Prospectus.
SPECIAL RISK CONSIDERATIONS
Currency Exchange Rate Fluctuations
Significant portions of the Cornerstone Strategy, Emerging
Markets, Gold, International, and World Growth Funds' assets may
be invested in securities of foreign issuers. Any such
investments will be made in compliance with U.S. and foreign
currency restrictions, tax laws, and laws limiting the amount and
types of foreign investments. Pursuit of the Funds' investment
objectives will involve currencies of the United States and of
foreign countries. Consequently, changes in exchange rates,
currency convertibility, and repatriation requirements may
favorably or adversely affect the Funds.
Unpredictable Political, Economic and Social Conditions
For the Cornerstone Strategy, Emerging Markets, Gold,
International, and World Growth Funds, investing in securities of
foreign issuers presents certain other risks not present in
domestic investments, including different accounting, reporting,
and disclosure requirements for foreign issuers, possible
political or social instability, including policies of foreign
governments which may affect their respective equity markets, and
foreign taxation requirements including withholding taxes.
INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted by the
Trust for and are applicable to each Fund as stated. These
restrictions may not be changed for any given Fund without
approval by the lesser of (1) 67% or more of the voting
securities present at a meeting of the Fund if more than 50% of
the outstanding voting securities of the Fund are present or
represented by proxy or (2) more than 50% of that Fund's
outstanding voting securities. The investment restrictions of
one Fund may thus be changed without affecting those of any other
Fund.
Under the restrictions, each of the Growth and Tax Strategy,
Cornerstone Strategy, Gold, International, and World Growth Funds
may not:
(1) Purchase securities of any one issuer (except the United
States Government, its agencies and instrumentalities), if
as a result of such purchase more than 5% of the market
value of the total assets of that Fund would be invested in
securities of such issuer.
(2) Purchase more than 10% of any class of securities or of the
outstanding voting securities of any issuer.
(3) Borrow money, except from banks for temporary or emergency
purposes and then only in an aggregate amount not in excess
of 5% of the market value of its total assets at the time of
such borrowing. The Trust will repay all borrowings before
making additional investments and the interest paid on such
borrowings will reduce income.
(4) Make loans to other persons, except that it may purchase or
hold publicly held debt securities and may purchase or hold
repurchase agreements in accordance with its investment
policies and as provided under Investment Policies herein.
(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) Purchase securities on margin or sell securities short,
except that it may obtain such short-term credits as are
necessary for the clearance of securities transactions.
(7) Invest in put, call, straddle, or spread options or interests
in oil, gas or other mineral exploration or development programs,
except that it may purchase securities of issuers whose principal
business activities fall within such areas in accordance with its
investment objectives and policies.
(8) Invest more than 2% of the market value of its total assets
in marketable warrants to purchase common stock. Warrants
initially attached to securities and acquired by a Fund upon
original issuance thereof shall be deemed to be without value.
(9) Purchase or sell real estate or partnership interests
therein, except that the Cornerstone Strategy Fund may
purchase securities secured by real estate interests or
interests therein, or issued by companies or investment
trusts which invest in real estate or interests therein.
(10) Purchase or sell commodities or commodity contracts.
(11) Purchase securities of other open-end investment companies,
except a Fund may invest up to 10% of the market value of
its total assets in such securities through purchases in the
open market involving only customary broker's commissions or
in connection with a merger, consolidation, reorganization,
or acquisition of assets approved by the shareholders.
(12) Invest more than 5% of the market value of its total assets
in any closed-end investment company and will not hold more
than 3% of the outstanding voting stock of any closed-end
investment company.
(13) Change the nature of its business so as to cease to be an
investment company.
(14) Issue senior securities as defined in the Investment Company
Act of 1940, as amended (the 1940 Act), except as permitted
by Section 18(f)(2) and rules thereunder.
In addition, the Cornerstone Strategy Fund may not concentrate
investments in any one industry, although it may invest up to 25%
of the value of its total assets in one industry; the Basic Value
Stocks, Foreign Stocks, and U.S. Government Securities investment
categories are not considered industries for this purpose.
For purposes of restriction 9 above, interests in publicly
traded Real Estate Investment Trusts (REITs) are not deemed to be
real estate or partnership interests therein.
Each of the GNMA and Treasury Money Market Trusts may not:
(1) Purchase securities of any one issuer (except the United
States Government, its agencies and instrumentalities), if
as a result of such purchase more than 5% of the market
value of the total assets of that Trust would be invested in
securities of such issuer.
(2) Purchase more than 10% of any class of securities or of the
outstanding voting securities of any issuer.
(3) Borrow money, except from banks for temporary purposes and
then only in an aggregate amount not in excess of 5% of the
market value of its total assets at the time of such borrowing.
(4) Make loans to other persons, except that it may purchase or
hold publicly held debt securities and may purchase or hold
repurchase agreements in accordance with its investment
policies and as provided under Investment Policies herein.
(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) Change the nature of its business so as to cease to be an
investment company.
(7) Issue senior securities as defined in the Investment Company
Act of 1940, as amended (the 1940 Act), except as permitted
by Section 18(f)(2) and rules thereunder.
(8) Purchase or sell real estate, commodities or commodity
contracts, except that the GNMA Trust may invest in
financial futures contracts and options thereon.
(9) Purchase any security if immediately after the purchase 25%
or more of the value of its total assets will be invested in
securities of issuers principally engaged in a particular
industry (except that such limitation does not apply to
obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities).
The Emerging Markets Fund may not:
(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 that it may borrow money 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), nor will it purchase
securities when its borrowings exceed 5% of its total assets.
(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 or
its corporate 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.
Additional Restrictions
The following restrictions are not considered to be fundamental
policies of the Funds. Nevertheless, the Trust and each Fund
will comply with them as long as they are required by any state
where the Funds' shares are offered for sale. These additional
restrictions may be changed by the Board of Trustees of the Trust
without notice to or approval by the shareholders.
Under the additional restrictions, each of the Growth and
Tax Strategy, Cornerstone Strategy, Gold, International, and
World Growth Funds may not:
(1) Invest more than 5% of the market value of its total assets
in securities of any issuer which, together with its
predecessors, has a record of less than three years'
continuous operation.
(2) Purchase or retain the securities of any issuer if any
officer of the Manager or officer or Trustee of the Trust
own individually more than 1/2 of 1% of the outstanding
securities of such issuer, and together beneficially own
more than 5% of such outstanding securities.
Investment Restrictions, cont.
(3) Pledge, mortgage, or hypothecate its assets to any extent
greater than 10% of the market value of its total assets.
(4) Invest more than 15% of the market value of its total assets
in securities which are illiquid or not readily marketable
(including repurchase agreements maturing in more than seven
days).
(5) Invest in issuers for the purpose of exercising control or
management, except in connection with a merger,
consolidation, acquisition, or reorganization.
(6) Participate on a joint or joint and several basis in any
trading account in securities.
Each of the GNMA and Treasury Money Market Trusts may not:
(1) Purchase securities on margin or sell securities short,
except that it may obtain such short-term credits as are
necessary for the clearance of securities transactions.
(2) Invest in put, call, straddle, or spread options or
interests in oil, gas or other mineral exploration or
development programs, except that the GNMA Trust may write
covered call and put options and purchase call and put
options.
(3) Invest more than 2% of the market value of its total assets
in marketable warrants to purchase common stock. Warrants
initially attached to securities and acquired by a Trust
upon original issuance thereof shall be deemed to be without
value.
(4) Purchase securities of other open-end investment companies,
except a Trust may invest up to 10% of the market value of
its total assets in such securities through purchases in the
open market involving only customary broker's commissions or
in connection with a merger, consolidation, reorganization,
or acquisition of assets approved by the shareholders.
(5) Invest more than 5% of the market value of its total assets
in any closed-end investment company and will not hold more
than 3% of the outstanding voting stock of any closed-end
investment company.
(6) Purchase or retain the securities of any issuer if any
officer of the Manager or officer or Trustee of the Trust
own individually more than 1/2 of 1% of the outstanding
securities of such issuer, and together beneficially own
more than 5% of such outstanding securities.
(7) Pledge, mortgage or hypothecate its assets to any extent
greater than 10% of the market value of its total assets. A
security covered by a call is not considered pledged.
(8) Invest more than 15% (10% with respect to the Treasury Money
Market Trust) of the market value of its net assets in
securities which are illiquid or not readily marketable
(including repurchase agreements maturing in more than seven
days).
(9) Invest in issuers for the purpose of exercising control or
management, except in connection with a merger,
consolidation, acquisition, or reorganization.
The Emerging Markets Fund may not:
(1) Pledge, mortgage or hypothecate its assets to any extent
greater than 33 1/3% of the value of its total assets.
(2) Purchase or retain securities of any issuer if any officer
or Trustee of the Trust or its Manager owns individually
more than one-half of one percent ( 1/2%) of the securities
of that issuer, and collectively the officers and Trustees
of the Trust and Manager together own more than 5% of the
securities of that issuer.
(3) Invest more than 15% of the value of its net assets in
illiquid securities (including repurchase agreements
maturing in more than seven days).
(4) Purchase securities on margin or sell securities short
except that it may obtain short-term credits necessary for
the clearance of securities transactions and make short
sales against the box; for purposes of the restriction the
deposit or repayment of initial or variation margin in
connection with financial futures contracts or related
options will not be deemed to be a purchase of securities on
margin by a Fund.
(5) Purchase securities of other investment companies except to
the extent permitted by applicable law.
(6) Purchase or sell puts, calls, straddles or spreads or any
combination thereof, except to the extent permitted by
applicable law.
(7) Purchase interests in oil, gas, or other mineral exploration
or development programs, except that it may purchase
securities of issuers whose principal business activities
fall within such areas.
(8) Purchase warrants if as a result warrants taken at the lower
of cost or market value would represent more than 5% of the
value of the Fund's net assets or more than 2% of its net
assets in warrants that are not listed on the New York or
American Stock Exchanges (for this purpose, warrants
attached to securities will be deemed to have no value).
(9) Invest more than 5% of the value of its assets in securities
of companies having a record of less than three years'
continuous operations except (a) securities guaranteed or
backed by an affiliate of the issuer with three years of
continuous operations, (b) securities issued or guaranteed
as to principal or interest by the U.S. Government, or its
agencies or instrumentalities, or a mixed-ownership
Government corporation and (c) securities issued by a
holding company with at least 50% of its assets invested in
companies with three years of continuous operations
including predecessors.
(10) Purchase or sell commodities or commodity contracts, except
that the Fund may invest in financial futures contracts,
options thereon and similar instruments.
(11) Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall
not prevent investments in securities secured by real estate
or interests therein).
(12) Invest more than 15% of its total assets in restricted
securities of all types (including not more than 5% of its
total assets in restricted securities which are not eligible
for resale pursuant to Rule 144A).
(13) Invest, at the time of acquisition, more than 10% of the
value of its assets in debt or fixed income securities in
default of the timely payment of interest or repayment of
principal.
PORTFOLIO TRANSACTIONS
The Manager, pursuant to the Advisory Agreement dated September
21, 1990 and subject to the general control of the Trust's Board
of Trustees, places all orders for the purchase and sale of Fund
securities. In executing portfolio transactions and selecting
brokers and dealers, it is the Trust's policy to seek the best
overall terms available. The Manager shall consider such factors
as it deems relevant, including the breadth of the market in the
security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any,
for the specific transaction or on a continuing basis. Securities
purchased or sold in the over-the-counter market will be executed
through principal market makers, except when, in the opinion of the
Manager, better prices and execution are available elsewhere.
In the allocation of brokerage business used to purchase
securities for the Growth and Tax Strategy, Cornerstone Strategy,
Emerging Markets, Gold, International, and World Growth Funds,
preference may be given to those broker-dealers who provide
research or other services to the Manager as long as there is no
sacrifice in obtaining the best overall terms available. Such
research and other services may include, for example: advice
concerning the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of
securities or the purchasers or sellers of securities; analyses
and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy, and performance of
accounts; and various functions incidental to effecting
securities transactions, such as clearance and settlement. The
Manager continuously reviews the performance of the broker-
dealers with whom it places orders for transactions. The receipt
of research from broker-dealers that execute transactions on
behalf of the Trust may be useful to the Manager in rendering
investment management services to other clients (including
affiliates of the Manager), and conversely, such research
provided by broker-dealers who have executed transaction orders
on behalf of other clients may be useful to the Manager in
carrying out its obligations to the Trust. While such research
is available to and may be used by the Manager in providing
investment advice to all its clients (including affiliates of the
Manager), not all of such research may be used by the Manager for
the benefit of the Trust. Such research and services will be in
addition to and not in lieu of research and services provided by
the Manager, and the expenses of the Manager will not necessarily
be reduced by the receipt of such supplemental research. See The
Trust's Manager.
Securities of the same issuer may be purchased, held, or
sold at the same time by the Trust for any or all of its Funds,
or other accounts or companies for which the Manager acts as the
investment adviser (including affiliates of the Manager). On
occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Trust, as well as the
Manager's other clients, the Manager, to the extent permitted by
applicable laws and regulations, may aggregate such securities to
be sold or purchased for the Trust with those to be sold or
purchased for other customers in order to obtain best execution
and lower brokerage commissions, if any. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Manager
in the manner it considers to be most equitable and consistent
with its fiduciary obligations to all such customers, including
the Trust. In some instances, this procedure may impact the
price and size of the position obtainable for the Trust. The
Trust pays no brokerage commissions as such for debt securities.
The market for such securities is typically a "dealer" market in
which investment dealers buy and sell the securities for their
own accounts, rather than for customers, and the price may
reflect a dealer's mark-up or mark-down. In addition, some
securities may be purchased directly from issuers.
Portfolio Transactions, cont.
Brokerage Commissions
During the last three fiscal years, the Funds paid the following
brokerage fees:
FUND 1993 1994* 1995
---- ---- ---- ----
Growth and Tax Strategy $ 45,668 $ 39,132 $ 30,774**
Cornerstone Strategy $ 999,350 $1,109,515 $1,278,398**
Emerging Markets - - $ 140,877
Gold $ 638,604 $ 300,325 $ 299,874
International $ 241,871 $ 497,303 $1,422,707
World Growth $ 206,374 $ 301,922 $ 599,043**
- ---------
* For the eight-month period ended May 31, 1994.
** Includes $1,400, $2,120, and $7,576 paid by the Growth and Tax
Strategy, Cornerstone Strategy and World Growth Funds, respectively,
to USAA Brokerage Services, a discount brokerage service of the
Manager. These amounts are 4.55%, .17%, and 1.26% of brokerage fees
paid by the Funds, respectively.
The Manager directed a portion of the Funds' brokerage
transactions to certain broker-dealers that provided the Manager
with research, statistical and other information. Such
transactions amounted to $4,617,429, $23,338,337, $217,347,
$8,778,555, and $18,928,582, and the related brokerage
commissions were $8,225, $44,688, $650, $17,478, and $27,708 for
the Growth and Tax Strategy, Cornerstone Strategy, Emerging
Markets, International and World Growth Funds, respectively.
Portfolio Turnover Rates
The rate of portfolio turnover in any of the Funds (other than
the Treasury Money Market Trust) will not be a limiting factor
when the Manager deems changes in a Fund's portfolio appropriate
in view of its investment objective. Although no Fund (other
than the Growth and Tax Strategy Fund) will purchase or sell
securities solely to achieve short-term trading profits, a Fund
may sell portfolio securities without regard to the length of
time held if consistent with the Fund's investment objective.
The Growth and Tax Strategy Fund may engage in riskless principal
and similar transactions for the purchase and sale of tax-exempt
debt securities. A higher degree of equity portfolio activity
will increase brokerage costs to a Fund. The Growth and Tax
Strategy Fund may experience a portfolio turnover rate in excess
of 100%. It is not anticipated however, that the portfolio
turnover rates of the Cornerstone Strategy, Emerging Markets,
Gold, International, and World Growth Funds or the GNMA Trust
will exceed 100%.
The portfolio turnover rate is computed by dividing the
dollar amount of securities purchased or sold (whichever is
smaller) by the average value of securities owned during the
year. Short-term investments such as commercial paper and short-
term U.S. Government securities are not considered when computing
the turnover rate.
For the last two fiscal years, the Funds' portfolio turnover
rates were as follows:
FUND 1994* 1995
---- ---- ----
Growth and Tax Strategy1 171.35% 314.57
Cornerstone Strategy 30.87% 33.17
Emerging Markets - 34.87**
Gold 34.75% 34.76
International 44.39% 64.30
World Growth 37.64% 58.88
GNMA Trust 90.05% 93.78
- ---------
* For the eight-month period ended May 31, 1994.
** For the seven-month period ended May 31, 1995.
1 The Fund may simultaneously purchase and sell the same securities.
These transactions can be high in volume and dissimilar to other
trade activity within the Fund. If these transactions were
excluded from the calculation, the portfolio turnover rate would
be as follows:
EIGHT-MONTH
PERIOD ENDED YEAR ENDED
MAY 31, 1994 MAY 31, 1995
------------ ------------
Portfolio turnover(%) 93.56 131.28
Purchases and sales of this type are as follows:
Purchases (000) $98,639 $234,367
Sales (000) $98,761 $234,669
FURTHER DESCRIPTION OF SHARES
The Trust is authorized to issue shares of beneficial interest in
separate series or Funds. Eleven such Funds have been
established, eight of which are described in this SAI. Under the
First Amended and Restated Master Trust Agreement (Master Trust
Agreement), dated June 2, 1995, as amended, the Board of Trustees
is authorized to create new Funds in addition to those already
existing without the approval of the shareholders of the Trust.
The Cornerstone Strategy and Gold Funds were established May 9,
1984 by the Board of Trustees and commenced public offering of
their shares on August 15, 1984. The International Fund,
established on November 4, 1987, commenced public offering of its
shares on July 11, 1988. The Growth and Tax Strategy Fund was
established on November 3, 1988, and commenced public offering of
its shares on January 11, 1989. On November 7, 1990, the Board
of Trustees established the GNMA Trust and Treasury Money Market
Trust and commenced public offering of their shares on February
1, 1991. The World Growth Fund was established on July 21, 1992,
and commenced public offering of its shares on October 1, 1992.
The Emerging Markets Fund was established on September 7, 1994
and commenced public offering of its shares on November 7, 1994.
The assets of each Fund, and all income, earnings, profits
and proceeds thereof, subject only to the rights of creditors,
are specifically allocated to each Fund. They constitute the
underlying assets of each Fund, are required to be segregated on
the books of account, and are to be charged with the expenses of
such Fund. Any general expenses of the Trust 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 Trustees determine 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 Trustees. Upon liquidation of that Fund, shareholders are
entitled to share pro rata in the net assets belonging to such
Fund available for distribution.
Under the Trust's Master Trust Agreement, no annual or
regular meeting of shareholders is required. Thus, there will
ordinarily be no shareholder meeting unless otherwise required by
the 1940 Act. Under certain circumstances, however, shareholders
may apply to the Trustees for shareholder information in order to
obtain signatures to request a shareholder meeting. Moreover,
pursuant to the Master Trust Agreement, any Trustee may be
removed by the vote of two-thirds of the outstanding Trust shares
and holders of 10% or more of the outstanding shares of the Trust
can require Trustees to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. On any
matter submitted to the shareholders, the holder of any share is
entitled to one vote per share (with proportionate voting for
fractional shares) regardless of the relative net asset values of
the Funds' shares. However, on matters affecting an individual
Fund, a separate vote of the shareholders of that Fund is
required. For example, the Advisory Agreement must be approved
separately by each Fund and only becomes effective with respect
to a Fund when a majority of the outstanding voting securities of
that Fund approves it. Shareholders of a Fund are not entitled
to vote on any matter which does not affect that Fund but which
requires a separate vote of another Fund. For example, a
proposed change in the investment objectives of a particular Fund
would require the affirmative vote of a majority of the
outstanding voting securities of only that Fund.
Shares do not have cumulative voting rights, which means
that in situations in which shareholders elect Trustees, holders
of more than 50% of the shares voting for the election of
Trustees can elect 100% of the Board of Trustees, and the holders
of less than 50% of the shares voting for the election of
Trustees will not be able to elect any person as a Trustee.
When issued, each portfolio's shares are fully paid and
nonassessable by the Trust, have no preemptive or subscription
rights, and are fully transferable. There are no conversion
rights.
TAX CONSIDERATIONS
Taxation of the Funds
Each Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the Code). Accordingly, each Fund will not be liable
for federal income taxes on its taxable net investment income and
net capital gains (capital gains in excess of capital losses)
that are distributed to shareholders, provided that each Fund
distributes at least 90% of its net investment income and net
short-term capital gain for the taxable year.
To qualify as a regulated investment company, a Fund must,
among other things, (1) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such
stock, securities, or currencies (the 90% test); (2)
Tax Considerations, cont.
derive in each taxable year less than 30% of its gross income
from the sale or other disposition of stock or securities, and
certain options, futures contracts, forward contracts, and
foreign currencies held for 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. In the
case of the Growth and Tax Strategy Fund, in order to be entitled
to pay exempt-interest dividends to shareholders, at the close of
each quarter of its taxable year, at least 50% of the value of
the Fund's total assets must consist of obligations the interest
of which is exempt from federal income tax. The Growth and Tax
Strategy Fund intends to satisfy this requirement.
The Code imposes a nondeductible 4% excise tax on a
regulated investment company that fails to distribute during each
calendar year an amount at least equal to the sum of (1) 98% of
its taxable net investment income for the calendar year, (2) 98%
of its capital gain net income for the twelve month period ending
on October 31, and (3) any prior amounts not distributed. Each
Fund intends to make such distributions as are necessary to avoid
imposition of excise tax.
The Cornerstone Strategy, Emerging Markets, Gold,
International, and World Growth Funds' ability to make certain
investments may be limited by provisions of the Code that require
inclusion of certain unrealized gains or losses in the Fund's
income for purposes of the 90% test, the 30% test, and the
distribution requirements of the Code, and by provisions of the
Code that characterize certain income or loss as ordinary income
or loss rather than capital gain or loss. Such recognition,
characterization and timing rules generally apply to investments
in certain forward currency contracts, foreign currencies and
debt securities denominated in foreign currencies, as well as
certain other investments.
If the Cornerstone Strategy, Emerging Markets, Gold,
International, or World Growth Funds invest in an entity that is
classified as a "passive foreign investment company" (PFIC) for
federal income tax purposes, the application of certain
provisions of the Code applying to PFICs could result in the
imposition of certain federal income taxes on the Fund. It is
anticipated that any taxes on a Fund with respect to investments
in PFICs would be insignificant.
Taxation of the Shareholders
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 a Fund pays the dividend
during the following January. If a shareholder of a Fund
receives a distribution taxable as long-term capital gain with
respect to shares of a Fund and redeems or exchanges the shares
before he has held them for more than six months, any loss on the
redemption or exchange that is less than or equal to the amount
of the distribution will be treated as long-term capital loss,
except as noted below.
In the case of the Growth and Tax Strategy Fund, if a
shareholder receives an exempt-interest dividend with respect to
any share and such share has been held for six months or less,
any loss on the sale or exchange of such share will be disallowed
to the extent of such exempt-interest dividend. Shareholders who
are recipients of Social Security benefits should be aware that
exempt-interest dividends received from the Growth and Tax
Strategy Fund are includible in their "modified adjusted gross
income" for purposes of determining the amount of such Social
Security benefits, if any, that are required to be included in
their gross income.
The Growth and Tax Strategy Fund may invest in private
activity bonds. Interest on certain private activity bonds
issued after August 7, 1986, is an item of tax preference for
purposes of the federal Alternative Minimum Tax (AMT), although
the interest continues to be excludable from gross income for
other purposes. AMT is a supplemental tax designed to ensure
that taxpayers pay at least a minimum amount of tax on their
income, even if they make substantial use of certain tax
deductions and exclusions (referred to as tax preference items).
Interest from private activity bonds is one of the tax preference
items that is added to income from other sources for the purposes
of determining whether a taxpayer is subject to AMT and the
amount of any tax to be paid.
Opinions relating to the validity of the tax-exempt
securities purchased for the Growth and Tax Strategy Fund and the
exemption of interest thereon from federal income tax are
rendered by recognized bond counsel to the issuers. Neither the
Manager's nor the Fund's counsel makes any review of proceedings
relating to the issuance of tax-exempt securities or the basis of
such opinions.
The exemption of interest income for federal income tax
purposes does not necessarily result in exemption under the
income or other tax laws of any state or local taxing authority.
Shareholders of a Fund may be exempt from state and local taxes
on distributions of tax-exempt interest income derived from
obligations of the state and/or municipalities of the state in
which they are a resident, but generally are subject to tax on
income derived from obligations of other jurisdictions.
Shareholders should consult their tax advisers about the status
of distributions from a Fund in their own states and localities.
TRUSTEES AND OFFICERS OF THE TRUST
The Board of Trustees of the Trust consists of eight Trustees.
Set forth below are the Trustees and officers of the Trust, and
their respective offices and principal occupations during the
last five years. Unless otherwise indicated, the business
address of each is 9800 Fredericksburg Rd., San Antonio, TX 78288.
Hansford T. Johnson 1, 2
Trustee and Chairman of the Board of Trustees
Age: 59
Director, Vice Chairman and Deputy Attorney-in-Fact, United
Services Automobile Association (USAA) and President, Chief
Executive Officer, Director and Vice Chairman of the Board of
Directors of USAA Capital Corporation and of its various
subsidiaries and affiliates (9/93-present); Chief of Staff, USAA
(1/93-8/93); Executive Vice President, USAA (10/92-12/92);
Commander-in-Chief, CINCTRANS, Department of Defense -Pentagon
(9/89-9/92). Mr. Johnson currently serves as a Trustee and
Chairman of the Board of Trustees of USAA State Tax-Free Trust
and as Director and Chairman of the Boards of Directors of USAA
Investment Management Company (IMCO), USAA Mutual Fund, Inc.,
USAA Tax Exempt Fund, Inc., USAA Shareholder Account Services,
USAA Federal Savings Bank and USAA Real Estate Company.
Michael J. C. Roth 1, 2
Trustee, President and Vice Chairman of the Board of Trustees
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 Board of Trustees of USAA State Tax-Free Trust, as President,
Director and Vice Chairman of the Boards of Directors of USAA
Mutual Fund, Inc., 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
Trustee and Vice President
Age: 60
Senior Vice President, Investments, IMCO (10/85-present);
Director, BHC Financial, Inc. and BHC Securities, Inc. (1/87-
present). Mr. Saunders currently serves as a Trustee and Vice
President of USAA State Tax-Free Trust, as a Director of IMCO,
Director and Vice President of USAA Mutual Fund, Inc., and USAA
Tax Exempt Fund, Inc., as Senior Vice President of USAA
Shareholder Account Services, and as Vice President of USAA Life
Investment Trust.
C. Dale Briscoe 4, 5
7829 Timber Top Drive
Boerne, TX 78006
Trustee
Age: 74
Retired. Mr. Briscoe currently serves as a Trustee of USAA State
Tax-Free Trust and as a Director of USAA Mutual Fund, Inc. and
USAA Tax Exempt Fund, Inc.
George E. Brown 3, 4, 5
5829 Northgap Drive
San Antonio, TX 78239
Trustee
Age: 77
Retired. Mr. Brown currently serves as a Trustee of USAA State
Tax-Free Trust and as a Director of USAA Mutual Fund, Inc. and
USAA Tax Exempt Fund, Inc.
Howard L. Freeman, Jr. 2, 3, 5
2710 Hopeton
San Antonio, TX 78230
Trustee
Age: 60
Assistant General Manager for Finance, San Antonio City Public
Service Board (1976-present). Mr. Freeman currently serves as a
Trustee of USAA State Tax-Free Trust and as a Director of USAA
Mutual Fund, Inc. and USAA Tax Exempt Fund, Inc.
Trustees and Officers of the Trust, cont.
Richard A. Zucker 3, 4, 5
407 Arch Bluff
San Antonio, TX 78216
Trustee
Age: 52
Vice President, Beldon Roofing and Remodeling (1985-present).
Mr. Zucker currently serves as a Trustee of USAA State Tax-Free
Trust and as a Director of USAA Mutual Fund, Inc. and USAA Tax
Exempt Fund, Inc.
Barbara B. Dreeben 3, 5
200 Patterson #1008
San Antonio, TX 78209
Trustee
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 State Tax-Free Trust and as a Director of USAA
Mutual Fund, Inc. and 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 State Tax-Free Trust, USAA Mutual Fund, Inc., and USAA Tax
Exempt Fund, Inc.; and as Vice President, Corporate Counsel, for
various other USAA subsidiaries and affiliates.
Alex M. Ciccone 1
Assistant Secretary
Age: 45
Vice President, Compliance, IMCO (12/94-present); Vice President
and Chief Operating Officer, Commonwealth Shareholder Services
(6/94-11/94); Vice President, Compliance, IMCO (12/91-5/94); Vice
President, Compliance, Fund Management Co. (10/89-11/91); and
Vice President, Compliance, AIM Distributors, Inc. (4/82-11/91).
Mr. Ciccone currently serves as Assistant Secretary of USAA State
Tax-Free Trust, USAA Mutual Fund, Inc. 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 State Tax-Free Trust, USAA Mutual Fund, Inc.,
and USAA Tax Exempt Fund, Inc., and as Vice President, Controller
of USAA Shareholder Account Services.
Dean R. Pantzar 1
Assistant Treasurer
Age: 36
Director, Mutual Fund Accounting, IMCO (12/94-present); Senior
Manager, KPMG Peat Marwick LLP (7/88-12/94). Mr. Pantzar
currently serves as Assistant Treasurer of USAA Mutual Fund,
Inc., USAA State Tax-Free Trust, and USAA Tax Exempt Fund, Inc.
- -------
1 Indicates those Trustees 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
Between the meetings of the Board of Trustees and while the
Board is not in session, the Executive Committee of the Board of
Trustees has all the powers and may exercise all the duties of
the Board of Trustees in the management of the business of the
Trust which may be delegated to it by the Board. The Pricing and
Investment Committee of the Board of Trustees 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 Trustees 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
Trustees maintains oversight of the organization, performance,
and effectiveness of the Board and independent Trustees.
In addition to the previously listed Trustees and/or
officers of the Trust who also serve as Directors and/or officers
of the Manager, the following individuals are Directors and/or
executive officers of the Manager: Josue Robles, Jr., Senior
Vice President, Chief Financial Officer/Controller, USAA; William
McCrae, Senior Vice President, General Counsel and Secretary,
USAA; Harry W. Miller, Senior Vice President, Investments (Equity);
and John J. Dallahan, Senior Vice President, Investment Services.
There are no family relationships among the Trustees, officers and
managerial level employees of the Trust or its Manager.
The following table sets forth information describing the
compensation of the current Trustees of the Trust for their
services as Trustees for the fiscal year ended May 31, 1995.
Name Aggregate Total Compensation
of Compensation from the USAA
Trustee from the Trust Family of Funds (c)
- ------- -------------- -------------------
C. Dale Briscoe $4,660 $18,500
George E. Brown (a) 4,660 18,500
Barbara B. Dreeben 4,660 18,500
Howard L. Freeman, Jr. 4,660 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 4,660 18,500
- ----------------
(a) The USAA Family of Funds has accrued deferred compensation
for Mr. Brown in an amount (plus earnings thereon) of
$20,395. 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 Trustee/Director 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 Trust's investment
adviser, IMCO, and, accordingly, receive no remuneration
from the Trust or any other Fund of the USAA Family of Funds.
(c) At May 31, 1995, the USAA Family of Funds consisted of 4
registered investment companies offering 29 individual
funds. Each Trustee presently serves as a Trustee or
Director 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 Trustees are also Trustees/Directors of the
other funds for which IMCO serves as investment adviser. No
compensation is paid by any fund to any Trustee/Director 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 Trust also reimburses certain expenses of the
Trustees who are not affiliated with the investment adviser. As
of August 31, 1995, the officers and Trustees of the Trust and
their families as a group owned beneficially or of record less
than 1% of the outstanding shares of the Trust.
As of August 23, 1995, USAA and its affiliates (including
related employee benefit plans) owned 13,786 shares (.1%) of the
Growth and Tax Strategy Fund, 407 shares (.0%) of the Cornerstone
Strategy Fund, 401,616 shares (16%) of the Emerging Markets Fund,
5,962,356 shares (27.7%) of the International Fund, 1,053,585
shares (6.7%) of the World Growth Fund, and 346,318 shares (1.3%)
of the GNMA Trust, for an aggregate total of 7,778,068 shares
(3.8%) of the Funds.
The following table identifies all other persons known to
hold of record or own beneficially more than 5% of the voting
stock of any Fund's shares as of August 23, 1995.
Name and address
Title of Class of beneficial owner Percent of Class
-------------- ------------------- ----------------
Treasury Money Lana Dena Corporation 6.7%
Market Trust 5088 Granada CT
Alta Loma, CA 91737
THE TRUST'S MANAGER
As described in each Fund's Prospectus, USAA Investment
Management Company is the Manager and investment adviser,
providing the services under the Advisory Agreement. The
Manager, organized in May 1970, has served as investment adviser
and underwriter for USAA Investment Trust from its inception.
In addition to managing the Trust's assets, the Manager
advises and manages the investments for USAA and its affiliated
companies as well as those of USAA Mutual Fund, Inc., 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 $27 billion, of
which approximately $15 billion were in mutual fund portfolios.
Advisory Agreement
Under the Advisory Agreement, the Manager provides an investment
program, carries out the investment policy and manages the
portfolio assets for each Fund. The Manager is authorized,
subject to the control of the Board of Trustees of the Trust, to
determine the selection, amount, and time to buy or sell
securities for each Fund. In addition to providing investment
services, the Manager pays for office space, facilities, business
equipment, and accounting services (in addition to those provided
by the Custodian) for the Trust. The Manager compensates all
personnel, officers, and Trustees of the Trust if such persons
are also employees of the Manager or its affiliates. For these
services under the Advisory Agreement, each Fund has agreed to
pay the Manager a fee computed as described under Management of
the Trust in its Prospectus. Management fees are computed and
accrued daily and are payable monthly.
Except for the services and facilities provided by the
Manager, the Funds pay all other expenses incurred in their
operations. Expenses for which the Funds are responsible include
taxes (if any), brokerage commissions on portfolio transactions,
expenses of issuance and redemption of shares, charges of
transfer agents, custodians and dividend disbursing agents, costs
of preparing and distributing proxy material, costs of printing
and engraving stock certificates, auditing and legal expenses,
certain expenses of registering and qualifying shares for sale,
fees of Trustees who are not interested (not affiliated) persons
of the Manager, costs of typesetting, printing and mailing the
Prospectus, SAI and periodic reports to existing shareholders,
and any other charges or fees not specifically enumerated. The
Manager pays the cost of printing and mailing copies of the
Prospectus, the SAI and reports to prospective shareholders.
The Advisory Agreement will remain in effect until June 30,
1996 for each Fund and will continue in effect from year to year
thereafter for each Fund as long as it is approved at least
annually by a vote of the outstanding voting securities of such
Fund (as defined by the 1940 Act) or by the Board of Trustees (on
behalf of such Fund) including a majority of the Trustees who are
not interested persons of the Manager or (otherwise than as
Trustees) of the Trust, at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be
terminated at any time by either the Trust 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 Advisory Agreement, the Manager is
required to reimburse each Fund in the event that the total
annual expenses, inclusive of the management fees, but exclusive
of the interest, taxes, brokerage fees, excess custodian costs
attributable to investments in foreign securities, and extraordinary
items, incurred by that Fund exceeds any applicable state expense
limitation. At the current time, the most restrictive expense
limitation is 2.5% of the first $30,000,000 of average net assets
(ANA), 2% of the next $70,000,000 ANA, and 1.5% of the remaining ANA.
From time to time the Manager may, without prior notice to
shareholders, waive all or any portion of fees or agree to
reimburse expenses incurred by a Fund. The Manager has
voluntarily agreed to continue to limit the annual expenses of
the Treasury Money Market Trust to .375% of its ANA until October
1, 1996 and will reimburse the Fund for all expenses in excess of
such limitation. After October 1, 1996, any such waiver or
reimbursement may be terminated by the Manager at any time
without prior notice to the shareholders.
For the last three fiscal years, management fees were as follows:
FUND 1993 1994* 1995
Growth and Tax Strategy $ 502,560 $ 422,542 $ 646,528
Cornerstone Strategy $4,653,046 $3,858,194 $6,268,976
Emerging Markets - - $ 80,503**
Gold $1,038,150 $ 863,578 $1,224,603
International $ 412,122 723,783 $2,171,329
World Growth $ 266,991 $ 539,899 $1,310,951
GNMA Trust $ 325,767 $ 229,184 $ 318,921
Treasury Money Market Trust $ 34,915 $ 26,970 $ 59,980
As a result of the Funds' actual expenses exceeding an expense
limitation, the Manager did not receive fees to which it would
have been entitled as follows:
FUND 1993 1994* 1995
---- ---- ---- ----
Emerging Markets - - $ 8,091**
Treasury Money Market Trust $ 34,915 $ 26,970 $ 54,428
- ---------
* For the eight-month period ended May 31, 1994.
** For the seven-month period ended May 31, 1995.
Underwriter
The Trust has an agreement with the Manager for exclusive
underwriting and distribution of the Funds' shares on a
continuing best efforts basis. This agreement provides that the
Manager will receive no fee or other compensation for such
distribution services.
Transfer Agent
USAA Shareholder Account Services performs transfer agent
services for the Trust 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 Trust. For its services under
the Transfer Agency Agreement, USAA Shareholder Account Services
is paid an annual fixed fee per account ranging from $23.50 to
$26.00 by each Fund. This fee is subject to change at any time.
The fee to the Transfer Agent includes processing of all
transactions and correspondence. Fees are billed on a monthly
basis at the rate of one-twelfth of the annual fee. In addition,
the Funds pay all out-of-pocket expenses of the Transfer Agent
and other expenses which are incurred at the specific direction
of the Trust.
GENERAL INFORMATION
Custodian
State Street Bank and Trust Company, P.O. Box 1713, Boston, MA
02105, is the Trust's Custodian. The Custodian is responsible
for, among other things, safeguarding and controlling the Trust's
cash and securities, handling the receipt and delivery of
securities, and collecting interest on the Trust's investments.
In addition, assets of the Cornerstone Strategy, Emerging
Markets, Gold, International, and World Growth Funds may be held
by certain foreign banks and foreign securities depositories as
agents of the Custodian in accordance with the rules and
regulations established by the SEC.
Counsel
Goodwin, Procter & Hoar, Exchange Place, Boston, MA 02109, will
review certain legal matters for the Trust in connection with the
shares offered by the Prospectus.
Independent Auditors
KPMG Peat Marwick LLP, 112 East Pecan, Suite 2400, San Antonio,
TX 78205, is the Trust's independent auditor. In this capacity,
the firm is responsible for auditing the annual financial
statements of the Funds and reporting thereon.
Financial Statements
The financial statements for each of the Funds of USAA Investment
Trust and the Independent Auditors' Reports thereon for the
fiscal year ended May 31, 1995, are included in the Annual
Reports to Shareholders of that date and are incorporated herein
by reference. A copy of the Fund's Annual Report will be
delivered free of charge with each SAI requested from the Manager
at the address set forth on page 1 of this statement.
CALCULATION OF PERFORMANCE DATA
Information regarding the total return and yield of each Fund is
provided under Performance Information in its Prospectus. See
Valuation of Securities herein for a discussion of the manner in
which each Fund's price per share is calculated.
Yield - Treasury Money Market Trust
When the Treasury Money Market Trust quotes a "current
annualized" yield, it is based on a specified recent seven-
calendar-day period. It is computed by (1) determining the net
change, exclusive of capital changes, in the value of a
hypothetical preexisting account having a balance of one share at
the beginning of the period, (2) dividing the net change in
account value by the value of the account at the beginning of the
base period to obtain the base return, then (3) multiplying the
base period by 52.14 (365 divided by 7). The resulting yield
figure is carried to the nearest hundredth of one percent.
The calculation includes (1) the value of additional shares
purchased with dividends on the original share, and dividends
declared on both the original share and any such additional
shares, and (2) any fees charged to all shareholder accounts, in
proportion to the length of the base period and the Trust's
average account size.
The capital changes excluded from the calculation are
realized capital gains and losses from the sale of securities and
unrealized appreciation and depreciation. The Trust's effective
(compounded) yield will be computed by dividing the seven-day
annualized yield as defined above by 365, adding 1 to the
quotient, raising the sum to the 365th power, and subtracting 1
from the result.
Current and effective yields fluctuate daily and will vary
with factors such as interest rates and the quality, length of
maturities, and type of investments in the portfolio.
Yield For 7-day Period ended 5/31/95 . . . . . 5.61%
Effective Yield For 7-day Period ended 5/31/95 . . . . . 5.77%
Yield - Growth and Tax Strategy Fund and GNMA Trust
These Funds may advertise performance in terms of 30-day yield
quotation. The 30-day yield quotation is computed by dividing
the net investment income per share earned during the period by
the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2((((a - b)/(cd) + 1)^6) - 1)
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last
day of the period
The 30-day yields for the period ended May 31, 1995 for the Growth
and Tax Strategy Fund and GNMA Trust were 4.14% and 6.78%, respectively.
Total Return
The Funds, other than the Treasury Money Market Trust, may each
advertise performance in terms of average annual total return for
1, 5 and 10 year periods, or for such lesser periods as any of
such Funds have been in existence. Average annual total return
is computed by finding the average annual compounded rates of
return over the periods that would equate the initial amount
invested to the ending redeemable value, according to the
following formula:
P(1 + T)^n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods at the end of the year or period
The calculation assumes any charges are deducted from the initial
$1,000 payment and assumes all dividends and distributions by
such Fund are reinvested at the price stated in the Prospectus on
the reinvestment dates during the period, and includes all
recurring fees that are charged to all shareholder accounts.
Average Annual Total Returns
For Periods Ended 5/31/95
1 5 10 From
Fund year years years Inception*
---- ------ ----- ----- ----------
Growth and Tax Strategy 10.73% 8.57% - 9.04%
Cornerstone Strategy 6.43% 8.82% 11.94% -
Emerging Markets - - - (2.30%)
Gold 2.05% 3.20% 2.49% -
International 2.49% 8.11% - 9.32%
World Growth 4.26% - - 11.27%
GNMA Trust 10.54% - - 8.09%
* Data from inception is shown for Funds that are less than five
or ten years old. Growth and Tax Strategy Fund commenced
operations on January 11, 1989. Emerging Markets Fund commenced
operations on November 7, 1994. International Fund commenced
operations on July 11, 1988. World Growth Fund commenced
operations on October 1, 1992. GNMA Trust commenced operations
on February 1, 1991.
APPENDIX A - TAX-EXEMPT SECURITIES AND THEIR RATINGS
Tax-Exempt Securities
Tax-exempt securities generally include debt obligations issued
by states and their political subdivisions, and duly constituted
authorities and corporations, to obtain funds to construct,
repair, or improve various public facilities such as airports,
bridges, highways, hospitals, housing, schools, streets, and
water and sewer works. Tax-exempt securities may also be issued
to refinance outstanding obligations as well as to obtain funds
for general operating expenses and for loans to other public
institutions and facilities.
The two principal classifications of tax-exempt securities
are "general obligations" and "revenue" or "special tax" bonds.
General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of
principal and interest. Revenue or special tax bonds are payable
only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a
special excise or other tax, but not from general tax revenues.
The Funds may also invest in tax-exempt private activity bonds,
which in most cases are revenue bonds and generally do not have
the pledge of the credit of the issuer. The payment of the
principal and interest on such industrial revenue bonds is
dependent solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. There are, of course, many variations
in the terms of, and the security underlying tax-exempt
securities. Short-term obligations issued by states, cities,
municipalities or municipal agencies, include Tax Anticipation
Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes, and Short-Term Discount Notes.
The yields of tax-exempt securities depend on, among other
things, general money market conditions, conditions of the Tax-
Exempt Bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The
ratings of Moody's Investors Service, Inc. (Moody's), Standard &
Poor's Ratings Group (S&P), Fitch Investors Service, Inc.
(Fitch), and Duff & Phelps Inc. represent their opinions of the
quality of the securities rated by them. It should be emphasized
that such ratings are general and are not absolute standards of
quality. Consequently, securities with the same maturity,
coupon, and rating may have different yields, while securities of
the same maturity and coupon but with different ratings may have
the same yield. It will be the responsibility of the Manager to
appraise independently the fundamental quality of the tax-exempt
securities included in a Fund's portfolio.
Appendix A, cont.
Ratings
Excerpts from Moody's Bond (Tax-Exempt Securities) Ratings:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Note: Those bonds in the Aa, A, and Baa groups which Moody's
believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, and Baa1.
A description of ratings Ba and below assigned to debt
obligations by Moody's is included in Appendix A of the Emerging
Markets Fund Prospectus.
Excerpts of Moody's Ratings of Short-Term Loans (State and Tax-
Exempt Notes):
Moody's ratings for state and tax-exempt notes and other short-
term obligations are designated Moody's Investment Grade (MIG).
Symbols used will be as follows:
MIG-1 This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support or demonstrated broadbased
access to the market for refinancing.
MIG-2 This designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.
Excerpts of Moody's Rating of Commercial Paper:
Prime-1 Issuers have a superior ability for repayment of senior
short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following
characteristics:
* Leading market positions in well-established industries.
* High rates of return on funds employed.
* Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
* Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
* Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers have a strong ability for repayment of senior
short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still
appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Excerpts from S&P's Bond Ratings:
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues
only in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
A description of ratings BB and below assigned to debt
obligations by S&P is included in Appendix A of the Emerging
Markets Fund Prospectus.
Excerpts of S&P's Ratings of Tax-Exempt Notes:
SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given
a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse financial and economic changes
over the term of the notes.
Excerpts of S&P's Rating of Commercial Paper:
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics are
denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is
not as high as for issues designated A-1.
Excerpts of Fitch's Ratings of Bonds:
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is
generally rated F-1+.
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds, and
therefore, impair timely payment.
Plus (+) and Minus (-): Plus and Minus signs are used with a
rating symbol to indicate the relative position of a credit
within the rating category. Plus and minus signs, however, are
not used in the AAA category.
Excerpts of Fitch's Ratings to Commercial Paper, Certificates of
Deposit, and Tax-Exempt Notes:
F-1+ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F-1+ and F-1
ratings.
Appendix A, cont.
Excerpts from Duff & Phelps Long-Term Rating Scale:
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors
A are variable and greater in periods of economic stress.
A-
BBB+ Below average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.
Excerpts from Duff & Phelps Commercial Paper Rating Scale:
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
ready access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements,
access to capital markets is good. Risk factors are small.
APPENDIX B - COMPARISON OF PORTFOLIO PERFORMANCE
Occasionally, we may make comparisons in advertising and sales
literature between the Funds contained in this SAI and other
Funds in the USAA Family of Funds. These comparisons may include
such topics as risk and reward, investment objectives, investment
strategies, and performance.
Fund performance 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.
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 Services Week, a weekly newspaper which covers
financial news.
Financial Planning, a monthly magazine that periodically features
companies in the mutual fund industry.
Financial World, a monthly magazine which may periodically review
mutual fund companies.
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.
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 weekly and quarterly publication of industry-wide
mutual fund performance 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.
Morningstar 5 Star Investor, a monthly newsletter by Morningstar,
Inc. which covers financial news and rates mutual funds.
Mutual Fund Forecaster, a monthly newsletter that ranks mutual
funds.
Mutual Fund Investing, a newsletter covering mutual funds.
Mutual Fund Performance Report, a monthly publication of mutual
fund performance and rankings, produced by Morningstar, Inc.
Mutual Funds Magazine, a monthly publication reporting on mutual
fund investing.
Mutual Fund Source Book, an annual publication produced by
Morningstar, Inc. which describes and rates mutual funds.
Mutual Fund Values, a biweekly guidebook to mutual funds,
produced by Morningstar, Inc. (a data service which tracks open-
end mutual funds).
Appendix B, cont.
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 on 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.
World Monitor, The Christian Science Monitor Monthly.
Worth, a magazine which covers financial and investment subjects
including mutual funds.
Your Money, a monthly magazine directed toward the novice
investor.
In addition, the Cornerstone Strategy, Emerging Markets,
Gold, International, and World Growth Funds may be cited for
performance information and articles in International Reports,
a publication providing insights on world financial markets
and economics.
The GNMA and Treasury Money Market Trusts may be cited in:
The Bond Buyer, a daily newspaper which covers bond market news.
IBC/Donoghue's 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 100% U.S. Treasury
Money Fund Average."
IBC's Money Market Insight, a monthly money market industry
analysis prepared by IBC USA, Inc.
Among the organizations cited above, Lipper Analytical
Services, Inc.'s tracking results may be used. A Fund will be
compared to Lipper's appropriate fund category according to
objective and portfolio holdings. The Cornerstone Strategy Fund
will be compared to funds in Lipper's global flexible portfolio fund
category, the Gold Fund to funds in Lipper's gold oriented fund
category, the International Fund to Lipper's international fund
category, the Growth and Tax Strategy Fund to Lipper's balanced
fund category, the World Growth Fund to Lipper's global fund
category, the Treasury Money Market Trust to Lipper's short-term
U.S. Government funds category, the GNMA Trust to Lipper's GNMA
funds category, and the Emerging Markets Fund to Lipper's
emerging markets fund category. Footnotes in advertisements and
other sales literature will include the time period applicable
for any rankings used.
For comparative purposes, unmanaged indexes of comparable
securities or economic data may be cited. Examples include the
following:
- Bond Buyer Indices, indices of debt of varying maturities
including revenue bonds, general obligation bonds, and U.S.
Treasury bonds which can be found in The Bond Buyer.
- Consumer Price Index, a measure of U.S. inflation in prices
on consumer goods.
- Financial Times Gold Mines Index, an index that includes
gold mining companies if they: a) have sustainable, attributable
gold production of at least 300,000 ounces a year; b) draw at
least 75% of revenue from mined gold sales; and c) have at least
10% of their capital available to the investing public.
- Ibbotson Associates, Inc., Stocks, Bonds, Bills, and
Inflation Yearbook.
- IFC Investable Index (IFCI) and IFC Global Index (IFCG),
premier benchmarks for international investors. Both index
series cover 25 discrete markets, regional indexes, and a
composite index, providing the most accurate representation of
the emerging markets universe available.
- Lehman Brothers Inc. GNMA 30 Year Index.
- Lehman Brothers Municipal Bond Index, a total return
performance benchmark for the long-term investment grade tax-
exempt bond market.
- London Gold, a traditional index that prices London gold.
- London Gold PM Fix Price, the evening gold prices as set by
London dealers.
- Morgan Stanley Capital Index (MSCI) - EAFE, an unmanaged
index which reflects the movements of stock markets in Europe,
Australia, and the Far East by representing a broad selection of
domestically listed companies within each market.
- Morgan Stanley Capital Index (MSCI) - World, an unmanaged
index which reflects the movements of world stock markets by
representing a broad selection of domestically listed companies
within each market.
- NAREIT Equity Index (National Association of Real Estate
Investment Trusts, Inc.), a broad based listing of all tax-
qualified REITs (only common shares issued by the REIT) listed on
the NYSE, American Stock Exchange and NASDAQ.
- Philadelphia Gold/Silver Index (XAU), an index representing
nine holdings in the gold and silver sector.
- S&P 500 Index, a broadbased composite unmanaged index that
represents the average performance of a group of 500 widely held,
publicly traded stocks.
- Shearson Lehman Hutton Bond Indices - indices of fixed-rate
debt issues rated investment grade or higher which can be found
in the Bond Market Report.
Other sources for total return and other performance data
which may be used by a Fund or by those publications listed
previously are Morningstar, Inc., Schabaker Investment
Management, and Investment Company Data, Inc. These are services
that collect and compile data on mutual fund companies.
APPENDIX C - DOLLAR-COST AVERAGING
Dollar-cost averaging is a systematic investing method which can
be used by investors as a disciplined technique for investing. A
fixed amount of money is invested in a security (such as a stock
or mutual fund) on a regular basis over a period of time,
regardless of whether securities markets are moving up or down.
This practice reduces average share costs to the investor
who acquires more shares in periods of lower securities prices
and fewer shares in periods of higher prices.
While dollar-cost averaging does not assure a profit or
protect against loss in declining markets, this investment
strategy is an effective way to help calm the effect of
fluctuations in the financial markets. Systematic investing
involves continuous investment in securities regardless of
fluctuating price levels of such securities. Investors should
consider their financial ability to continue purchases through
periods of low and high price levels.
As the following chart illustrates, dollar-cost averaging
tends to keep the overall cost of shares lower. This example is
for illustration only, and different trends would result in
different average costs.
HOW DOLLAR-COST AVERAGING WORKS
$100 Invested Regularly for 5 Periods
Market Trend
---------------------------------------------------------------
Down Up Mixed
------------------- ------------------ -----------------
Share Shares Share Shares Share Shares
Investment Price Purchased Price Purchased Price Purchased
------------------- ------------------ -----------------
$100 10 10 6 16.67 10 10
100 9 11.1 7 14.29 9 11.1
100 8 12.5 7 14.29 8 12.5
100 8 12.5 9 11.1 9 11.1
100 6 16.67 10 10 10 10
--- -- ----- -- ----- -- -----
$500 ***41 62.77 ***39 66.35 ***46 54.7
*Avg. Cost: $7.97 *Avg. Cost: $7.54 *Avg. Cost: $9.14
----- ----- -----
**Avg. Price: $8.20 **Avg. Price: $7.80 **Avg. Price: $9.20
----- ----- -----
* Average Cost is the total amount invested divided by
shares purchased.
** Average Price is the sum of the prices paid divided by number
of purchases.
*** Cumulative total of share prices used to compute average prices.
06088-1095
USAA INVESTMENT TRUST
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements included in Parts A and B
(Prospectuses and Statement of Additional Information)
of this Registration Statement:
Financial Statements and Independent Auditors' Reports
are incorporated by reference to the USAA Growth and
Tax Strategy (formerly named Balanced Portfolio),
Cornerstone Strategy (formerly named Cornerstone),
Emerging Markets, Gold, International, and World Growth
Funds', and GNMA and Treasury Money Market Trusts'
Annual Reports to Shareholders for the fiscal year
ended May 31, 1995.
(b) Exhibits:
Exhibit No. Description of Exhibits
- ---------- -----------------------
1(a) First Amended and Restated Master Trust Agreement,
June 2, 1995 (1)
(b) Amendment No. 1 dated July 12, 1995 (filed herewith)
2 By-laws, as amended January 18, 1994 (1)
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Cornerstone Strategy Fund (filed herewith)
(b) Gold Fund (filed herewith)
(c) International Fund (filed herewith)
(d) Growth and Tax Strategy Fund (filed herewith)
(e) GNMA Trust (filed herewith)
(f) Treasury Money Market Trust (filed herewith)
(g) World Growth Fund (filed herewith)
(h) Emerging Markets Fund (filed herewith)
(i) Balanced Strategy Fund (filed herewith)
(j) Growth Strategy Fund (filed herewith)
(k) Income Strategy Fund (filed herewith)
5(a) Advisory Agreement dated September 21, 1990 (1)
(b) Letter Agreement dated January 24, 1991 adding GNMA Trust
and Treasury Money Market Trust (1)
(c) Letter Agreement dated July 21, 1992 adding World Growth Fund (1)
(d) Letter Agreement dated September 7, 1994 adding Emerging Markets
Fund (1)
(e) Letter Agreement dated September 1, 1995 adding Balanced Strategy,
Growth Strategy and Income Strategy Funds (filed herewith)
6(a) Underwriting Agreement dated July 9, 1990 (filed herewith)
(b) Letter Agreement dated January 24, 1991 adding GNMA Trust
and Treasury Money Market Trust (filed herewith)
(c) Letter Agreement dated July 21, 1992 adding World Growth
Fund (filed herewith)
(d) Letter Agreement dated September 7, 1994 adding Emerging Markets
Fund (filed herewith)
(e) Letter Agreement dated September 1, 1995 adding Balanced Strategy,
Growth Strategy and Income Strategy Funds (filed herewith)
7 Not Applicable
8(a) Custodian Agreement dated July 27, 1984 (filed herewith)
(b) Amendment to Custodian Contract dated May 13, 1985 (filed
herewith)
(c) Amendment to Custodian Contract dated May 1, 1986 (filed
herewith)
(d) Amendment to Amendment to Custodian Contract dated May 1, 1986
(filed herewith)
(e) Amendment to the Custodian Agreement dated November 3, 1988
(filed herewith)
(f) Letter Agreement dated May 26, 1988 adding International Fund
(filed herewith)
(g) Letter Agreement dated January 3, 1989 adding Growth and Tax
Strategy Fund (formerly Balanced Portfolio Fund) (filed herewith)
Exhibit No. Description of Exhibits
- ---------- -----------------------
(h) Letter Agreement dated January 24, 1991 adding GNMA Trust
and Treasury Money Market Trust (filed herewith)
(i) Letter Agreement dated July 21, 1992 adding World Growth Fund
(filed herewith)
(j) Letter Agreement dated September 7, 1994 adding Emerging Markets
Fund (filed herewith)
(k) Letter Agreement dated September 1, 1995 adding Balanced
Strategy, Growth Strategy and Income Strategy Funds
(filed herewith)
9(a) Transfer Agency Agreement dated January 23, 1992 (filed herewith)
(b) Letter Agreement dated July 21, 1992 adding World Growth Fund
(filed herewith)
(c) Letter Agreement dated September 7, 1994 adding Emerging Markets
Fund (filed herewith)
(d) Amendments dated May 3, 1995 to the Transfer Agency Agreement Fee
Schedules for Gold Fund, Cornerstone Strategy Fund (formerly
Cornerstone Fund), International Fund, Growth and Tax Strategy
Fund (formerly Balanced Portfolio Fund), GNMA Trust, Treasury
Money Market Trust, World Growth Fund, and Emerging Markets
Fund (filed herewith)
(e) Letter Agreement dated September 1, 1995 adding Balanced
Strategy, Growth Strategy and Income Strategy Funds (filed
herewith)
10(a) Opinion and Consent of Counsel with respect to the Balanced
Strategy, Growth Strategy and Income Strategy Funds (1)
(b) Opinion and Consent of Counsel with respect to the Growth and
Tax Strategy Fund, Cornerstone Strategy Fund, Emerging Markets
Funds Gold Fund, International Fund, World Growth Fund,
GNMA Trust, and Treasury Money Market Trust (filed herewith)
11 Independent Auditors' Consent (filed herewith)
12 Financial statements omitted from prospectus - Not Applicable
13 Subscriptions and Investment Letters
(a) GNMA Trust and Treasury Money Market Trust (filed herewith)
(b) World Growth Fund (filed herewith)
(c) Emerging Markets Fund (filed herewith)
(d) Growth Strategy Fund, Income Strategy Fund, and Balanced Strategy
Fund (filed herewith)
14 Prototype Plans
(a) USAA INVESTMENT MANAGEMENT COMPANY IRA Handbook
(filed herewith)
(b) USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA Handbook (filed
herewith)
(c) USAA INVESTMENT MANAGEMENT COMPANY 403(b)(7) Handbook (filed
herewith)
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation (filed
herewith)
17 Financial Data Schedules
(a) Cornerstone Strategy Fund (formerly Cornerstone Fund) (filed
herewith)
(b) Gold Fund (filed herewith)
(c) International Fund (filed herewith)
(d) Growth and Tax Strategy Fund (formerly Balanced Portfolio Fund)
(filed herewith)
(e) GNMA Trust (filed herewith)
(f) Treasury Money Market Trust (filed herewith)
(g) World Growth Fund (filed herewith)
(h) Emerging Markets Fund (filed herewith)
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron A. Kirk,
John W. Saunders, Jr., C. Dale Briscoe, George E. Brown,
Howard L. Freeman, Jr., and Richard A. Zucker dated
January 21, 1994 (filed herewith)
(b) Powers of Attorney for Hansford T. Johnson and
Barbara B. Dreeben (1)
- ---------------------
(1) Previously filed with Post-Effective Amendment No. 20 of the
Registrant (No. 2-91069) filed with the Securities and Exchange
Commission on June 15, 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 Trust"
in the Prospectus and the section captioned "Trustees and
Officers of the Trust" in the Statement of Additional Information.
Item 26. Number of Holders of Securities
-------------------------------
Set forth below are the number of record holders, as of
August 31, 1995, of each class of securities of the Registrant.
Title of Class Number of Record Holders
-------------- ------------------------
Growth and Tax Strategy Fund 8,713
Cornerstone Strategy Fund 97,708
Emerging Markets Fund 4,410
Gold Fund 24,166
International Fund 28,268
World Growth Fund 25,327
GNMA Trust 11,272
Treasury Money Market Trust 2,472
Item 27. Indemnification
---------------
Protection for the liability of the adviser and underwriter
and for the officers and trustees 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 any 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. The Trust will not pay for such insurance
to the extent that payment therefor is in violation of
the Investment Company Act of 1940 or the Securities
Act of 1933.
(b) Indemnification Provisions under Agreement and Declaration
of Trust. Under Article VI of the Registrant's Agreement and
Declaration of Trust, each of its trustees and officers
or any person serving at the Registrant's request as a
director, officer or trustee of another entity in which
the Registrant has any interest as a shareholder,
creditor or otherwise ("Covered Person") shall be
indemnified against all liabilities, including but not
limited to amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court
or administrative or legislative body, in which such
person may be or may have been threatened, while in
office or thereafter, by reason of being or having been
such an officer, director or trustee, except with
respect to any matter as to which it has been
determined that such Covered Person (i) did not act in
good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best
interests of the Trust or (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct
described in (i) and (ii) being referred to hereafter
as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be
made by (i) a final decision on the merits by a court
or other body before whom the proceeding was brought
that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court
action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct,
or (iii) a reasonable determination, based upon a review of
the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum
of trustees who are neither "interested persons" of the
Registrant as defined in section 2(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) an independent legal
counsel in a written opinion.
Expenses, including accountants and counsel fees so
incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from
time to time by the Fund of the Registrant in question
in advance of the final disposition of any such action,
suit or proceeding, provided that the covered person
shall have undertaken to repay the amounts so paid to
the Fund of Registrant in question if it is ultimately
determined that indemnification of such expenses is not
authorized under Article VI of the Agreement and
Declaration of Trust and (i) the Covered Person shall
have provided security for such undertaking, (ii) the
Registrant shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a
quorum of the disinterested trustees who are not a
party to the proceeding, or an independent legal
counsel in a written opinion, shall have determined,
based on a review of readily available facts (as
opposed to full trial-type inquiry), that there is
reason to believe that the Covered Person ultimately
will be found entitled to indemnification. As to any
matter disposed of by a compromise payment by any such
Covered Person pursuant to a consent decree or
otherwise, no such indemnification either for said
payment or for any other expenses shall be provided
unless such indemnification shall be approved (a) by a
majority of the disinterested trustees of the
Registrant who are not a party to the proceeding or (b)
by an independent legal counsel in a written opinion.
Approval by the trustees pursuant to clause (a) or by
independent legal counsel pursuant to clause (b) shall
not prevent the recovery form any Covered Person of any
amount paid to such Covered Person in accordance with
any of such clauses as indemnification if such Covered
Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's
action was in or not opposed to the best interests of
the Registrant or to have been liable to the Registrant
or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered
Person's office.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the
Registrant pursuant to the Registrant's Agreement and
Declaration of the Trust 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 trustee, officer or controlling person of
the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee,
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 Trust" and to the section of the
Statement of Additional Information captioned "Trustees and
Officers of the Trust".
Item 29. Principal Underwriters
----------------------
(a) USAA Investment Management Company (the "Adviser") acts
as principal underwriter and distributor of the
Registrant's shares on a best-efforts basis and
receives no fee or commission for its underwriting
services. The Adviser, wholly-owned by United Services
Automobile Association, also serves as principal
underwriter for USAA Tax Exempt Fund, Inc., USAA Mutual
Fund, Inc., and USAA State Tax-Free Trust.
(b) Set forth below is information concerning each director
and executive officer of USAA Investment Management
Company.
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
- ----------------- -------------------- --------------------
Hansford T. Johnson Director and Chairman Trustee and
9800 Fredericksburg Rd. of the Board of Directors Chairman of the
San Antonio, TX 78288 Board of Trustees
Michael J.C. Roth Chief Executive Officer, President, Trustee
9800 Fredericksburg Rd. President, Director, and and Vice Chairman of
San Antonio, TX 78288 Vice Chairman of the the Board of Trustees
Board of Directors
John W. Saunders, Jr. Senior Vice President, Vice President and
9800 Fredericksburg Rd. Fixed Income Investments, Trustee
San Antonio, TX 78288 and Director
Harry W. Miller Senior Vice President None
9800 Fredericksburg Rd. Equity Investments,
San Antonio, TX 78288 and Director
William McCrae Director None
9800 Fredericksburg Rd.
San Antonio, TX 78288
Josue Robles, Jr. Director None
9800 Fredericksburg Rd.
San Antonio, TX 78288
John J. Dallahan Senior Vice President, None
9800 Fredericksburg Rd. Investment Services
San Antonio, TX 78288
Michael D. Wagner Vice President, Secretary Secretary
9800 Fredericksburg Rd. and Counsel
San Antonio, TX 78288
Sherron A. Kirk Vice President and Treasurer
9800 Fredericksburg Rd. Controller
San Antonio, TX 78288
Alex M. Ciccone Vice President, Assistant
9800 Fredericksburg Rd. Compliance Secretary
San Antonio, TX 78288
(c) Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
The following entities prepare, maintain and preserve
the records required by Section 31(a) of the Investment
Company Act of 1940 (the "1940 Act") for the
Registrant. These services are provided to the
Registrant through written agreements between the
parties to the effect that such services will be
provided to the Registrant for such periods prescribed
by the Rules and Regulations of the Securities and
Exchange Commission under the 1940 Act and such records
are the property of the entity required to maintain and
preserve such records and will be surrendered promptly
on request.
USAA Investment Management Company
9800 Fredericksburg Rd.
San Antonio, Texas 78288
USAA Shareholder Account Services
10750 Robert F. McDermott Freeway
San Antonio, Texas 78288
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Item 31. Management Services
-------------------
Not Applicable.
Item 32. Undertaking
-----------
The Registrant hereby undertakes to provide each person
to whom a prospectus is delivered a copy of the
Registrant's latest annual report(s) to shareholders
upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San
Antonio and State of Texas on the 6th day of September, 1995.
USAA INVESTMENT TRUST
/s/ Michael J.C. Roth
---------------------
Michael J.C. Roth
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated.
(Signature) (Title) (Date)
/s/ Hansford T. Johnson Chairman of the September 6, 1995
- -------------------------- Board of Trustees
Hansford T. Johnson
/s/ Michael J.C. Roth Vice Chairman of the Board September 6, 1995
- -------------------------- of Trustees and President
Michael J.C. Roth (Principal Executive Officer)
/s/ Sherron A. Kirk Treasurer (Principal September 6, 1995
- -------------------------- Financial and
Sherron A. Kirk Accounting Officer)
/s/ John W. Saunders, Jr. Trustee September 6, 1995
- --------------------------
John W. Saunders, Jr.
/s/ C. Dale Briscoe Trustee September 6, 1995
- --------------------------
C. Dale Briscoe
/s/ George E. Brown Trustee September 6, 1995
- --------------------------
George E. Brown
/s/ Howard L. Freeman, Jr. Trustee September 6, 1995
- --------------------------
Howard L. Freeman, Jr.
/s/ Richard A. Zucker Trustee September 6, 1995
- --------------------------
Richard A. Zucker
/s/ Barbara B. Dreeben Trustee September 6, 1995
- --------------------------
Barbara B. Dreeben
Exhibit Index
Exhibit Item Page No. *
- ------- ---- ----------
1 (a) First Amended and Restated Master Trust Agreement,
June 2, 1995 (1)
(b) Amendment No. 1 dated July 12, 1995 (filed herewith) 247
2 By-laws, as amended January 18, 1994 (1)
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Cornerstone Strategy Fund (filed herewith) 253
(b) Gold Fund (filed herewith) 256
(c) International Fund (filed herewith) 259
(d) Growth and Tax Strategy Fund (filed herewith) 262
(e) GNMA Trust (filed herewith) 265
(f) Treasury Money Market Trust (filed herewith) 268
(g) World Growth Fund (filed herewith) 271
(h) Emerging Markets Fund (filed herewith) 274
(i) Balanced Strategy Fund (filed herewith) 277
(j) Growth Strategy Fund (filed herewith) 280
(k) Income Strategy Fund (filed herewith) 283
5 (a) Advisory Agreement dated September 21, 1990 (1)
(b) Letter Agreement dated January 24, 1991 adding GNMA Trust
and Treasury Money Market Trust (1)
(c) Letter Agreement dated July 21, 1992 adding World
Growth Fund (1)
(d) Letter Agreement dated September 7, 1994 adding
Emerging Markets Fund (1)
(e) Letter Agreement dated September 1, 1995 adding
Balanced Strategy, Growth Strategy and Income Strategy
Funds (filed herewith) 286
6 (a) Underwriting Agreement dated July 9, 1990 (filed herewith) 288
(b) Letter Agreement dated January 24, 1991 adding GNMA Trust
and Treasury Money Market Trust (filed herewith) 293
(c) Letter Agreement dated July 21, 1992 adding World Growth
Fund (filed herewith) 295
(d) Letter Agreement dated September 7, 1994 adding Emerging
Markets Fund (filed herewith) 297
(e) Letter Agreement dated September 1, 1995 adding Balanced
Strategy, Growth Strategy and Income Strategy Funds
(filed herewith) 299
7 Not Applicable
8 (a) Custodian Agreement dated July 27, 1984 (filed herewith) 301
(b) Amendment to Custodian Contract dated May 13, 1985
(filed herewith) 324
(c) Amendment to Custodian Contract dated May 1, 1986
(filed herewith) 332
(d) Amendment to Amendment to Custodian Contract dated
May 1, 1986 (filed herewith) 336
(e) Amendment to the Custodian Agreement dated November 3, 1988
(filed herewith) 339
(f) Letter Agreement dated May 26, 1988 adding International
Fund (filed herewith) 341
(g) Letter Agreement dated January 3, 1989 adding Growth and
Tax Strategy Fund (formerly Balanced Portfolio Fund)
(filed herewith) 345
(h) Letter Agreement dated January 24, 1991 adding GNMA Trust
and Treasury Money Market Trust (filed herewith) 349
(i) Letter Agreement dated July 21, 1992 adding World Growth
Fund (filed herewith) 351
(j) Letter Agreement dated September 7, 1994 adding Emerging
Markets Fund (filed herewith) 355
(k) Letter Agreement dated September 1, 1995 adding Balanced
Strategy, Growth Strategy and Income Strategy Funds
(filed herewith) 361
Exhibit Index, cont.
Exhibit Item Page No. *
- ------- ----
9 (a) Transfer Agency Agreement dated January 23, 1992
(filed herewith) 367
(b) Letter Agreement dated July 21, 1992 adding World Growth
Fund (filed herewith) 383
(c) Letter Agreement dated September 7, 1994 adding Emerging
Markets Fund (filed herewith) 386
(d) Amendments dated May 3, 1995 to the Transfer Agency
Agreement Fee Schedules for Gold Fund, Cornerstone
Strategy Fund (formerly Cornerstone Fund), International
Fund, Growth and Tax Strategy Fund (formerly Balanced
Portfolio Fund), GNMA Trust, Treasury Money Market Trust,
World Growth Fund, and Emerging Markets Fund
(filed herewith) 389
(e) Letter Agreement dated September 1, 1995 adding Balanced
Strategy, Growth Strategy and Income Strategy Funds
(filed herewith) 398
10 (a) Opinion and Consent of Counsel with respect to the Balanced
Strategy, Growth Strategy and Income Strategy Funds (1)
(b) Opinion and Consent of Counsel with respect to the Growth
and Tax Strategy Fund, Cornerstone Strategy Fund, Emerging
Markets Funds Gold Fund, International Fund, World Growth
Fund, GNMA Trust, and Treasury Money Market Trust (filed
herewith) 403
11 Independent Auditors' Consent (filed herewith) 406
12 Financial statements omitted from prospectus - Not Applicable
13 Subscriptions and Investment Letters
(a) GNMA Trust and Treasury Money Market Trust (filed herewith) 408
(b) World Growth Fund (filed herewith) 411
(c) Emerging Markets Fund (filed herewith) 414
(d) Growth Strategy Fund, Income Strategy Fund, and Balanced
Strategy Fund (filed herewith) 417
14 Prototype Plans
(a) USAA INVESTMENT MANAGEMENT COMPANY IRA Handbook
(filed herewith) 420
(b) USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA Handbook
(filed herewith) 446
(c) USAA INVESTMENT MANAGEMENT COMPANY 403(b)(7) Handbook
(filed herewith) 469
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation
(filed herewith) 492
17 Financial Data Schedules
(a) Cornerstone Strategy Fund (formerly Cornerstone Fund)
(filed herewith) 494
(b) Gold Fund (filed herewith) 497
(c) International Fund (filed herewith) 500
(d) Growth and Tax Strategy Fund (formerly Balanced
Portfolio Fund) (filed herewith) 503
(e) GNMA Trust (filed herewith) 506
(f) Treasury Money Market Trust (filed herewith) 509
(g) World Growth Fund (filed herewith) 512
(h) Emerging Markets Fund (filed herewith) 515
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron A. Kirk,
John W. Saunders, Jr., C. Dale Briscoe, George E. Brown,
Howard L. Freeman, Jr., and Richard A. Zucker dated
January 21, 1994 (filed herewith) 518
(b) Powers of Attorney for Hansford T. Johnson and
Barbara B. Dreeben (1)
- ---------------------
(1) Previously filed with Post-Effective Amendment No. 20
of the Registrant (No. 2-91069) filed with the
Securities and Exchange Commission on June 15, 1995.
* Refers to sequentially numbered pages
EXHIBIT 1(b)
USAA INVESTMENT TRUST
AMENDMENT NO. 1
TO
FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to the First Amended and Restated Master
Trust Agreement of USAA Investment Trust (the "Trust") dated June
2, 1995 (the "Agreement"), made as of the 12th day of July, 1995.
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Agreement provides that the
Agreement may be amended at any time, so long as such amendment
does not adversely affect the rights of any shareholder and so
long as such amendment is not in contravention of applicable law,
including the Investment Company Act of 1940, by an instrument in
writing signed by a majority of the then Trustees or by an
officer of the Trust pursuant to a vote of a majority of the
Trustees; and
WHEREAS, A majority of the Trustees desire to amend Section
4.2 of the Agreement to change the name of the series of shares
designated as the "Balanced Portfolio Fund" and the "Cornerstone
Fund" to the "Growth & Tax Strategy Fund" and the "Cornerstone
Strategy Fund," respectively; and
WHEREAS, A majority of the Trustees desire to amend Sections
4.2(d) and 7.2 of the Agreement to permit the Trustees to
liquidate, merge or otherwise reorganize Sub-Trusts, other than
the Balanced Portfolio Fund, Cornerstone Fund, Emerging Markets
Fund, Gold Fund, International Fund, World Growth Fund, GNMA
Trust and Treasury Money Market Trust, without shareholder
approval as set forth herein.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Amendment to Section 4.2. Section 4.2 of the Agreement
is hereby deleted in its entirety and the following is
substituted therefor:
"Section 4.2 Establishment and Designation of Sub-
Trusts. Without limiting the authority of the Trustees
set forth in Section 4.1 to establish and designate any
further Sub-Trusts, the Trustees hereby establish and
designate eleven Sub-Trusts; the "Gold Fund," the
"Cornerstone Strategy Fund," the "International Fund,"
the "Growth & Tax Strategy Fund," the "Treasury Money
Market Trust," the "GNMA Trust," the "World Growth
Fund," the "Emerging Markets Fund," the "Growth
Strategy Fund," the "Income Strategy Fund," and the
"Balanced Strategy Fund." The Gold Fund, Cornerstone
Strategy Fund, International Fund, Growth & Tax
Strategy Fund, Treasury Money Market Trust, GNMA Trust,
World Growth Fund, Emerging Markets Fund, Growth
Strategy Fund, Income Strategy Fund, and Balanced
Strategy Fund, and any Shares of any further Sub-Trusts
that may from time to time be established and
designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Sub-
Trust at the time of establishing and designating the
same) have the following relative rights and
preferences:"
2. Amendment to Section 4.2(d). The last sentence of
Section 4.2(d) of the Agreement is hereby deleted and the
following is substituted therefor:
The liquidation of any particular Sub-Trust may be
authorized by vote of majority of the Trustees then in
office without the approval of shareholders of such Sub-
Trust; provided, however, that the liquidation of the Growth
& Tax Strategy Fund, Cornerstone Strategy Fund, Emerging
Markets Fund, Gold Fund, International Fund, World Growth
Fund, GNMA Trust and Treasury Money Market Trust shall be
subject to the approval of a majority of the outstanding
voting Shares of the Sub-Trust, as defined in the 1940 Act.
3. Amendment to Section 7.2. Section 7.2 of the Agreement
is hereby deleted in its entirety and the following is
substituted therefor:
Section 7.2 Reorganization. The Trustees may sell,
convey, merge and transfer the assets of the Trust, or the
assets belonging to any one or more Sub-Trusts, to another
trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the
Trust to be held as assets belonging to another Sub-Trust of
the Trust, in exchange for cash, shares or other securities
(including, in the case of a transfer to another Sub-Trust
of the Trust, Shares of such other Sub-Trust) with such
transfer either (1) being made subject to, or with the
assumption by the transferee of, the liabilities belonging
to each Sub-Trust the assets of which are so transferred, or
(2) not being made subject to, or not with the assumption
of, such liabilities without the approval of shareholders of
such Sub-Trust; provided, however that with respect to the
Growth & Tax Strategy Fund Fund, Cornerstone Strategy Fund,
Emerging Markets Fund, Gold Fund, International Fund, World
Growth Fund, GNMA Trust and Treasury Money Market Trust, no
assets belonging to any such Sub-Trust shall be so
transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by
the affirmative vote of the holders of a majority of the
outstanding voting Shares, as defined in the 1940 Act, of
that Sub-Trust. Following such transfer, the Trustees shall
distribute such cash, shares or other securities (giving due
effect to the assets and liabilities belonging to and any
other differences among the various Sub-Trusts the assets
belonging to which have so been transferred) among the
Shareholders of the Sub-Trust the assets belonging to which
have been so transferred; and if all of the assets of the
Trust have been so transferred, the Trust shall be
terminated.
The Trust, or any one or more Sub-Trusts, may, either
as the successor, survivor, or non-survivor, (1) consolidate
with one or more other trusts, partnerships, associations or
corporations organized under the laws of the Commonwealth of
Massachusetts or any other state of the United States, to
form a new consolidated trust, partnership, association or
corporation under the laws of which any one of the
constituent entities is organized, or (2) merge into one or
more other trusts, partnerships, associations or
corporations organized under the laws of the Commonwealth of
Massachusetts or any other state of the United States, or
have one or more such trusts, partnership associations or
corporation merged into it, any such consolidation to merger
to be upon such terms and conditions as are specified in an
agreement and plan of reorganization entered into by the
Trust, or one or more Sub-Trusts as the case may be, in
connection therewith. The terms "merge" or "merger" as used
herein shall also include the purchase or acquisition of any
assets of any other trust, partnership, association or
corporation which is an investment company organized under
the laws of the Commonwealth of Massachusetts or any other
state of the United States. The Trustees may effect any
such consolidation or merger without the approval of
shareholders of a particular Sub-Trust; provided, however,
that with respect to the Growth & Tax Strategy Fund,
Cornerstone Strategy Fund, Emerging Markets Fund, Gold Fund,
International Fund, World Growth Fund, GNMA Trust and
Treasury Money Market Trust any such consolidation or merger
shall require the affirmative vote of the holders of a
majority of the outstanding voting Shares, as defined in the
1940 Act, of each Sub-Trust affected thereby.
4. Effective Date. This Amendment and the changes to the
Agreement effected hereby shall be effective September 1, 1995.
IN WITNESS WHEREOF, the undersigned, constituting a majority
of the Trustees of the Trust, have hereunto set their hands as of
the day and year first above written.
/s/ Hansford T. Johnson
-----------------------
Hansford T. Johnson
/s/ Michael J. C. Roth
----------------------
Michael J. C. Roth
/s/ John W. Saunders, Jr.
--------------------------
John W. Saunders, Jr.
/s/ C. Dale Briscoe
---------------------
C. Dale Briscoe
/s/ George E. Brown
---------------------
George E. Brown
/s/ Barbara B. Dreeben
------------------------
Barbara B. Dreeben
/s/ Howard L. Freeman, Jr.
----------------------------
Howard L. Freeman, Jr.
/s/ Richard A. Zucker
------------------------
Richard A. Zucker
STATE OF TEXAS )
)ss
COUNTY OF BEXAR )
On this 12th day of July, 1995, personally before me
appeared the above-named Hansford T. Johnson, Michael J. C. Roth,
John W. Saunders, Jr., C. Dale Briscoe, George E. Brown, Barbara
B. Dreeben, Howard L. Freeman, Jr., and Richard A. Zucker, each
of whom acknowledged the foregoing instrument to be his or her
free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
/s/ Susan A. Anz
----------------------
NOTARY PUBLIC,
My Commission Expires: August 18, 1996
(Notarial Seal)
EXHIBIT 4(a)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
CORNERSTONE STRATEGY FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 20 9
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of CORNERSTONE STRATEGY FUND, a Series of
Shares established and designated under the Master Trust
Agreement of USAA INVESTMENT TRUST, a Massachusetts business
trust (the "Trust") dated May 9, 1984 as amended from time to
time (the "Trust Agreement"). The terms of the Trust Agreement, a
copy of which is on file with the Secretary of the Commonwealth
of Massachusetts, are hereby incorporated by reference as fully
as if set forth herein in their entirety. As provided in the
Trust Agreement, the beneficial interest in the Trust has been
divided into Shares of such Series as may be established and
designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate
part of the assets belonging to the above-designated Series
subject to the liabilities belonging to such Series. Such Series
and other Series have the relative rights and preferences set
forth in the Trust Agreement, and the Trust will furnish to the
holder of this certificate upon request and without charge a
statement of such relative rights and preferences. THE SHARES
EVIDENCED HEREBY ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant
to the procedures that may be determined by the Trustees in
accordance with the Trust Agreement. This certificate is issued
by the Trustees of USAA INVESTMENT TRUST not individually or
personally but as Trustees under the Trust Agreement, and
represents Shares of the above-designated Series and does not
bind any of the Shareholders, Trustees, Officers, Employees or
Agents of the Trust personally but only the assets and property
of the Trust. Subject to the provisions of the Trust Agreement,
the Shares represented by this certificate are transferable upon
the books of the Trust by the registered holder hereof in person
or by his duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Sherron Kirk PICTURE of /s/ Michael J.C. Roth
------------------ -----------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:___________________
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Shareholder Account
Services, USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(b)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
GOLD FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 10 0
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of GOLD FUND, a Series of Shares established
and designated under the Master Trust Agreement of USAA
INVESTMENT TRUST, a Massachusetts business trust (the "Trust")
dated May 9, 1984 as amended from time to time (the "Trust
Agreement"). The terms of the Trust Agreement, a copy of which is
on file with the Secretary of the Commonwealth of Massachusetts,
are hereby incorporated by reference as fully as if set forth
herein in their entirety. As provided in the Trust Agreement, the
beneficial interest in the Trust has been divided into Shares of
such Series as may be established and designated from time to
time, and the Shares evidenced hereby represent the beneficial
interest in an undivided proportionate part of the assets
belonging to the above-designated Series subject to the
liabilities belonging to such Series. Such Series and other
Series have the relative rights and preferences set forth in the
Trust Agreement, and the Trust will furnish to the holder of this
certificate upon request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE
SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures
that may be determined by the Trustees in accordance with the
Trust Agreement. This certificate is issued by the Trustees of
USAA INVESTMENT TRUST not individually or personally but as
Trustees under the Trust Agreement, and represents Shares of the
above-designated Series and does not bind any of the
Shareholders, Trustees, Officers, Employees or Agents of the
Trust personally but only the assets and property of the Trust.
Subject to the provisions of the Trust Agreement, the Shares
represented by this certificate are transferable upon the books
of the Trust by the registered holder hereof in person or by his
duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
------------------- ---------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:________________
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By____________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(c)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
INTERNATIONAL FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 30 8
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of INTERNATIONAL FUND, a Series of Shares
established and designated under the Master Trust Agreement of
USAA INVESTMENT TRUST, a Massachusetts business trust (the
"Trust") dated May 9, 1984 as amended from time to time (the
"Trust Agreement"). The terms of the Trust Agreement, a copy of
which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as
if set forth herein in their entirety. As provided in the Trust
Agreement, the beneficial interest in the Trust has been divided
into Shares of such Series as may be established and designated
from time to time, and the Shares evidenced hereby represent the
beneficial interest in an undivided proportionate part of the
assets belonging to the above-designated Series subject to the
liabilities belonging to such Series. Such Series and other
Series have the relative rights and preferences set forth in the
Trust Agreement, and the Trust will furnish to the holder of this
certificate upon request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE
SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures
that may be determined by the Trustees in accordance with the
Trust Agreement. This certificate is issued by the Trustees of
USAA INVESTMENT TRUST not individually or personally but as
Trustees under the Trust Agreement, and represents Shares of the
above-designated Series and does not bind any of the
Shareholders, Trustees, Officers, Employees or Agents of the
Trust personally but only the assets and property of the Trust.
Subject to the provisions of the Trust Agreement, the Shares
represented by this certificate are transferable upon the books
of the Trust by the registered holder hereof in person or by his
duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
------------------- ---------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:______________
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By__________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(d)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
GROWTH AND TAX STRATEGY FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 40 7
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of GROWTH AND TAX STRATEGY FUND, a Series of
Shares established and designated under the Master Trust
Agreement of USAA INVESTMENT TRUST, a Massachusetts business
trust (the "Trust") dated May 9, 1984 as amended from time to
time (the "Trust Agreement"). The terms of the Trust Agreement, a
copy of which is on file with the Secretary of the Commonwealth
of Massachusetts, are hereby incorporated by reference as fully
as if set forth herein in their entirety. As provided in the
Trust Agreement, the beneficial interest in the Trust has been
divided into Shares of such Series as may be established and
designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate
part of the assets belonging to the above-designated Series
subject to the liabilities belonging to such Series. Such Series
and other Series have the relative rights and preferences set
forth in the Trust Agreement, and the Trust will furnish to the
holder of this certificate upon request and without charge a
statement of such relative rights and preferences. THE SHARES
EVIDENCED HEREBY ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant
to the procedures that may be determined by the Trustees in
accordance with the Trust Agreement. This certificate is issued
by the Trustees of USAA INVESTMENT TRUST not individually or
personally but as Trustees under the Trust Agreement, and
represents Shares of the above-designated Series and does not
bind any of the Shareholders, Trustees, Officers, Employees or
Agents of the Trust personally but only the assets and property
of the Trust. Subject to the provisions of the Trust Agreement,
the Shares represented by this certificate are transferable upon
the books of the Trust by the registered holder hereof in person
or by his duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Sherron Kirk PICTURE of /s/ Michael J.C. Roth
------------------- ----------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:___________________
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Shareholder Account
Services, USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(e)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
GNMA TRUST
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 50 6
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of GNMA TRUST, a Series of Shares established
and designated under the Master Trust Agreement of USAA
INVESTMENT TRUST, a Massachusetts business trust (the "Trust")
dated May 9, 1984 as amended from time to time (the "Trust
Agreement"). The terms of the Trust Agreement, a copy of which is
on file with the Secretary of the Commonwealth of Massachusetts,
are hereby incorporated by reference as fully as if set forth
herein in their entirety. As provided in the Trust Agreement, the
beneficial interest in the Trust has been divided into Shares of
such Series as may be established and designated from time to
time, and the Shares evidenced hereby represent the beneficial
interest in an undivided proportionate part of the assets
belonging to the above-designated Series subject to the
liabilities belonging to such Series. Such Series and other
Series have the relative rights and preferences set forth in the
Trust Agreement, and the Trust will furnish to the holder of this
certificate upon request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE
SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures
that may be determined by the Trustees in accordance with the
Trust Agreement. This certificate is issued by the Trustees of
USAA INVESTMENT TRUST not individually or personally but as
Trustees under the Trust Agreement, and represents Shares of the
above-designated Series and does not bind any of the
Shareholders, Trustees, Officers, Employees or Agents of the
Trust personally but only the assets and property of the Trust.
Subject to the provisions of the Trust Agreement, the Shares
represented by this certificate are transferable upon the books
of the Trust by the registered holder hereof in person or by his
duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
----------------- ----------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:________________
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By____________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(f)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
TREASURY MONEY MARKET TRUST
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 60 5
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of TREASURY MONEY MARKET TRUST, a Series of
Shares established and designated under the Master Trust
Agreement of USAA INVESTMENT TRUST, a Massachusetts business
trust (the "Trust") dated May 9, 1984 as amended from time to
time (the "Trust Agreement"). The terms of the Trust Agreement, a
copy of which is on file with the Secretary of the Commonwealth
of Massachusetts, are hereby incorporated by reference as fully
as if set forth herein in their entirety. As provided in the
Trust Agreement, the beneficial interest in the Trust has been
divided into Shares of such Series as may be established and
designated from time to time, and the Shares evidenced hereby
represent the beneficial interest in an undivided proportionate
part of the assets belonging to the above-designated Series
subject to the liabilities belonging to such Series. Such Series
and other Series have the relative rights and preferences set
forth in the Trust Agreement, and the Trust will furnish to the
holder of this certificate upon request and without charge a
statement of such relative rights and preferences. THE SHARES
EVIDENCED HEREBY ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant
to the procedures that may be determined by the Trustees in
accordance with the Trust Agreement. This certificate is issued
by the Trustees of USAA INVESTMENT TRUST not individually or
personally but as Trustees under the Trust Agreement, and
represents Shares of the above-designated Series and does not
bind any of the Shareholders, Trustees, Officers, Employees or
Agents of the Trust personally but only the assets and property
of the Trust. Subject to the provisions of the Trust Agreement,
the Shares represented by this certificate are transferable upon
the books of the Trust by the registered holder hereof in person
or by his duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Dyek R. Boles PICTURE of /s/ Michael J.C. Roth
------------------ ---------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:__________________
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(g)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
WORLD GROWTH FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 70 4
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of WORLD GROWTH FUND, a Series of Shares
established and designated under the Master Trust Agreement of
USAA INVESTMENT TRUST, a Massachusetts business trust (the
"Trust") dated May 9, 1984 as amended from time to time (the
"Trust Agreement"). The terms of the Trust Agreement, a copy of
which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as
if set forth herein in their entirety. As provided in the Trust
Agreement, the beneficial interest in the Trust has been divided
into Shares of such Series as may be established and designated
from time to time, and the Shares evidenced hereby represent the
beneficial interest in an undivided proportionate part of the
assets belonging to the above-designated Series subject to the
liabilities belonging to such Series. Such Series and other
Series have the relative rights and preferences set forth in the
Trust Agreement, and the Trust will furnish to the holder of this
certificate upon request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE
SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures
that may be determined by the Trustees in accordance with the
Trust Agreement. This certificate is issued by the Trustees of
USAA INVESTMENT TRUST not individually or personally but as
Trustees under the Trust Agreement, and represents Shares of the
above-designated Series and does not bind any of the
Shareholders, Trustees, Officers, Employees or Agents of the
Trust personally but only the assets and property of the Trust.
Subject to the provisions of the Trust Agreement, the Shares
represented by this certificate are transferable upon the books
of the Trust by the registered holder hereof in person or by his
duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Cathy A. McMichael PICTURE of /s/ Michael J.C. Roth
---------------------- ----------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:____________________
USAA TRANSFER AGENCY COMPANY
(San Antonio) TRANSFER AGENT
By________________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust with full power of substitution in the premises.
Dated_______________ Signature(s)_______________________________________
Signature Guaranteed By_________________________________________________
(The signature(s) to this assignment must correspond with
the name as written upon the face of this certificate, in
every particular, without alteration or enlargement, or any
change whatsoever.)
This certificate is transferable or redeemable at the
offices of the Transfer Agent, USAA Transfer Agency Company,
USAA Building, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(h)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
EMERGING MARKETS FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 80 3
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of EMERGING MARKETS FUND, a Series of Shares
established and designated under the Master Trust Agreement of
USAA INVESTMENT TRUST, a Massachusetts business trust (the
"Trust") dated May 9, 1984 as amended from time to time (the
"Trust Agreement"). The terms of the Trust Agreement, a copy of
which is on file with the Secretary of the Commonwealth of
Massachusetts, are hereby incorporated by reference as fully as
if set forth herein in their entirety. As provided in the Trust
Agreement, the beneficial interest in the Trust has been divided
into Shares of such Series as may be established and designated
from time to time, and the Shares evidenced hereby represent the
beneficial interest in an undivided proportionate part of the
assets belonging to the above-designated Series subject to the
liabilities belonging to such Series. Such Series and other
Series have the relative rights and preferences set forth in the
Trust Agreement, and the Trust will furnish to the holder of this
certificate upon request and without charge a statement of such
relative rights and preferences. THE SHARES EVIDENCED HEREBY ARE
SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures
that may be determined by the Trustees in accordance with the
Trust Agreement. This certificate is issued by the Trustees of
USAA INVESTMENT TRUST not individually or personally but as
Trustees under the Trust Agreement, and represents Shares of the
above-designated Series and does not bind any of the
Shareholders, Trustees, Officers, Employees or Agents of the
Trust personally but only the assets and property of the Trust.
Subject to the provisions of the Trust Agreement, the Shares
represented by this certificate are transferable upon the books
of the Trust by the registered holder hereof in person or by his
duly authorized attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Sherron Kirk PICTURE of /s/ Michael J.C. Roth
----------------- ----------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:___________________
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust 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, 9800 Fredericksburg Rd., San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(i)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
BALANCED STRATEGY FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 88 6
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of BALANCED STRATEGY FUND, a Series of Shares
established and designated under the First Amended and Restated
Master Trust Agreement of USAA INVESTMENT TRUST, a Massachusetts
business trust (the "Trust") dated June 2, 1995, and as amended
from time to time (the "Trust Agreement"). The terms of the Trust
Agreement, a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts, are hereby incorporated by
reference as fully as if set forth herein in their entirety. As
provided in the Trust Agreement, the beneficial interest in the
Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares
evidenced hereby represent the beneficial interest in an
undivided proportionate part of the assets belonging to the
above-designated Series subject to the liabilities belonging to
such Series. Such Series and other Series have the relative
rights and preferences set forth in the Trust Agreement, and the
Trust will furnish to the holder of this certificate upon request
and without charge a statement of such relative rights and
preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust
Agreement. This certificate is issued by the Trustees of USAA
INVESTMENT TRUST not individually or personally but as Trustees
under the Trust Agreement, and represents Shares of the above-
designated Series and does not bind any of the Shareholders,
Trustees, Officers, Employees or Agents of the Trust personally
but only the assets and property of the Trust. Subject to the
provisions of the Trust Agreement, the Shares represented by this
certificate are transferable upon the books of the Trust by the
registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Sherron Kirk PICTURE of /s/ Michael J.C.Roth
------------------ --------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:___________________
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust 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,
10750 Robert F. McDermott Freeway, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(j)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
GROWTH STRATEGY FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 87 8
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of GROWTH STRATEGY FUND, a Series of Shares
established and designated under the First Amended and Restated
Master Trust Agreement of USAA INVESTMENT TRUST, a Massachusetts
business trust (the "Trust") dated June 2, 1995, and as amended
from time to time (the "Trust Agreement"). The terms of the Trust
Agreement, a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts, are hereby incorporated by
reference as fully as if set forth herein in their entirety. As
provided in the Trust Agreement, the beneficial interest in the
Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares
evidenced hereby represent the beneficial interest in an
undivided proportionate part of the assets belonging to the
above-designated Series subject to the liabilities belonging to
such Series. Such Series and other Series have the relative
rights and preferences set forth in the Trust Agreement, and the
Trust will furnish to the holder of this certificate upon request
and without charge a statement of such relative rights and
preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust
Agreement. This certificate is issued by the Trustees of USAA
INVESTMENT TRUST not individually or personally but as Trustees
under the Trust Agreement, and represents Shares of the above-
designated Series and does not bind any of the Shareholders,
Trustees, Officers, Employees or Agents of the Trust personally
but only the assets and property of the Trust. Subject to the
provisions of the Trust Agreement, the Shares represented by this
certificate are transferable upon the books of the Trust by the
registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Sherron Kirk PICTURE of /s/ Michael J.C. Roth
------------------ ---------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:___________________
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust 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,
10750 Robert F. McDermott Freeway, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 4(k)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
INCOME STRATEGY FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP 903287 86 0
See Reverse Side for
Certain Definitions
THIS CERTIFIES that
is the owner of
fully paid and nonassessable shares of beneficial interest
(without par value) of INCOME STRATEGY FUND, a Series of Shares
established and designated under the First Amended and Restated
Master Trust Agreement of USAA INVESTMENT TRUST, a Massachusetts
business trust (the "Trust") dated June 2, 1995, and as amended
from time to time (the "Trust Agreement"). The terms of the Trust
Agreement, a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts, are hereby incorporated by
reference as fully as if set forth herein in their entirety. As
provided in the Trust Agreement, the beneficial interest in the
Trust has been divided into Shares of such Series as may be
established and designated from time to time, and the Shares
evidenced hereby represent the beneficial interest in an
undivided proportionate part of the assets belonging to the
above-designated Series subject to the liabilities belonging to
such Series. Such Series and other Series have the relative
rights and preferences set forth in the Trust Agreement, and the
Trust will furnish to the holder of this certificate upon request
and without charge a statement of such relative rights and
preferences. THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust
Agreement. This certificate is issued by the Trustees of USAA
INVESTMENT TRUST not individually or personally but as Trustees
under the Trust Agreement, and represents Shares of the above-
designated Series and does not bind any of the Shareholders,
Trustees, Officers, Employees or Agents of the Trust personally
but only the assets and property of the Trust. Subject to the
provisions of the Trust Agreement, the Shares represented by this
certificate are transferable upon the books of the Trust by the
registered holder hereof in person or by his duly authorized
attorney upon surrender of this certificate.
WITNESS the facsimile signatures of the President and
Treasurer of the Trust and the signature of its duly authorized agent.
Dated:
/s/ Sherron Kirk PICTURE of /s/ Michael J.C. Roth
----------------- ---------------------
TREASURER USAA INVESTMENT TRUST PRESIDENT
SEAL 1984
Countersigned:___________________
USAA SHAREHOLDER ACCOUNT SERVICES
(San Antonio) TRANSFER AGENT
By_______________________________
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -. . .Custodian. . .
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and Act . . . . . . . . . . . .
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
Please Insert Social Security or Other
Taxpayer Identification Number of Assignee
- ----------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Please Print or Typewrite Name and Address of Assignee
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
( )
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
attorney to transfer the said Shares on the books
of the within named Trust 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,
10750 Robert F. McDermott Freeway, San Antonio, TX 78288.
The Signature Guarantee must be by an authorized person of a
commercial bank or trust company which is a member of the FDIC, a
savings bank or savings and loan association which is a member of
the FSLIC, a credit union which is a member of the NCUA, or by a
member firm of a domestic stock exchange. A NOTARIZATION BY A
NOTARY PUBLIC IS NOT ACCEPTABLE.
EXHIBIT 5(e)
USAA Investment Management Company
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Ladies and Gentlemen:
Pursuant to Section 1(b) of the Advisory Agreement dated as
of September 21, 1990 between USAA Investment Trust (the
"Investment Trust") and USAA Investment Management Company (the
"Manager"), please be advised that the Investment Trust has
established three new series of its shares, namely, the Growth
Strategy Fund, the Income Strategy Fund and the Balanced Strategy
Fund (the "Funds"), and please be further advised that the
Investment Trust desires to retain the Manager to render
management and investment advisory services under the Advisory
Agreement to the Funds at fees stated below:
Advisory Fee Schedule
----------------
Three-fourths of one percent (3/4%) of the aggregate average net assets of the
Growth Strategy Fund
One half of one percent ( 1/2%) of the aggregate average net assets of the
Income Strategy Fund
Three-fourths of one percent (3/4%) of the aggregate average net assets of the
Balanced Strategy Fund
Please state below whether you are willing to render such services at the fees
stated above.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
---------------------- ----------------------
Secretary President
Dated: September 1, 1995
We as the sole shareholder of the above named Funds, do hereby approve
the Advisory Service Agreement and are willing to render management and
investment advisory services to the Growth Strategy Fund, the Income Strategy
Fund and the Balanced Strategy Fund at the fees stated above.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest: /s/ Alex M. Ciccone By: /s/ John W. Saunders, Jr.
--------------------- -------------------------
Assistant Secretary Senior Vice President
Dated: September 1, 1995
EXHIBIT 6(a)
UNDERWRITING AGREEMENT
Underwriting Agreement dated as of the 9th day of July, 1990
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized
under the laws of the State of Delaware and having a place of
business in San Antonio, Texas (sometimes herein referred to as the
"Underwriter"), and USAA INVESTMENT TRUST, a Massachusetts business
trust organized under the laws of the Commonwealth of Massachusetts
and having a principal place of business in San Antonio, Texas
(sometimes herein referred to as the "Trust") which offers shares of
beneficial interest, without par value (the "Shares") in different
series or Sub-Trusts representing interests in different portfolios
of assets (each series of Shares (or Sub-Trusts) being referred to
herein as a "Fund"). The Underwriter presently sells and
distributes Shares in four series designated as the Cornerstone
Fund, Gold Fund, International Fund and Balanced Portfolio Fund (the
"Existing Funds").
WITNESSETH: In consideration of the agreements herein
contained and for other good and valuable consideration, receipt of
which is hereby acknowledged, it is agreed:
1. APPOINTMENT OF UNDERWRITER.
The Trust hereby appoints the Underwriter as its exclusive
agent to sell and distribute Shares of each Fund of the Trust at the
offering price thereof as from time to time determined in the manner
herein provided. The Underwriter hereby accepts such appointment
and agrees during the term of this Agreement to provide the services
and to assume the obligations herein set forth without compensation.
2. BASIS OF SALE OF SHARES.
The Underwriter does not agree to sell any specific number of
Shares. Shares will be sold to the Underwriter as agent for the
Trust only against orders therefor. The Underwriter will not
purchase Shares from anyone other than the Trust except as agent for
the Trust.
3. OFFERING PRICE.
The offering price for Shares of any Fund of the Trust shall
be determined according to the terms of the then current Prospectus
of the Fund. The net asset value per share for each Fund shall be
determined at such time each day as is established by the Board of
Trustees of the Trust from time to time.
4. MANNER OF OFFERING.
The Underwriter will conform to the securities laws of any
jurisdiction in which it sells, directly or indirectly, any Shares.
The Underwriter also agrees to furnish to the Trust sufficient
copies of any agreements, plans or sales literature it intends to
use in connection with any sales of Shares in adequate time for the
Trust to file and clear them with the proper authorities before they
are put in use, and not to use them until so filed and cleared.
5. RESERVATION OF RIGHTS BY THE TRUST.
The Trust reserves the right to issue Shares at any time
directly to existing shareholders and to sell Shares to such
shareholders or to other persons approved by the Underwriter at not
less than net asset value. The Trust reserves the right to suspend
the sale of Shares of any or all Funds without prior notice for any
reason deemed adequate by it.
6. ALLOCATION OF EXPENSES.
(a) The Trust, either directly or through its manager and
investment adviser, will be responsible for, and shall pay the
expenses of:
(i) providing all necessary services, including fees and
disbursements of counsel, related to the preparation,
setting in type, printing and filing of any Registration
Statement and/or Prospectus required under the Securities
Act of 1933, as amended, or under state securities laws,
covering its Shares, and all amendments and supplements
thereto, and preparing, setting in type, printing and
mailing periodic reports to existing shareholders;
(ii) the cost of all registration or qualification fees;
(iii) the cost of preparing temporary and permanent share
certificates for Shares of the Trust;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury
shares) transfer from the Trust to the Underwriter of any
and all Shares distributed hereunder.
(b) The Underwriter agrees that, after the Prospectus and
periodic reports have been set in type, it will bear the
expense of printing and distributing any copies thereof
which are to be used in connection with the offering of
Shares to dealers or prospective investors. The
Underwriter further agrees that it will bear the expenses
of preparing, printing and distributing any other
literature used by the Underwriter or furnished by it for
use by dealers in connection with the offering of the
Shares for sale to the public, and any expense of
advertising in connection with such offering. The
Underwriter will also pay fees for services rendered by
the transfer agent on behalf of the Underwriter.
7. INDEPENDENT CONTRACTOR.
The Underwriter shall be an independent contractor and neither
the Underwriter nor any of its officers or employees, as such, is
or shall be an employee of the Trust. The Underwriter is
responsible for its own conduct, for the employment, control and
conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The
Underwriter assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
8. INDEMNIFICATION BY UNDERWRITER.
The Underwriter agrees to indemnify and hold harmless the
Trust or any such person who has been, is, or may hereafter be, an
officer, trustee or employee of the Trust against any loss, damage
or expense reasonably incurred by any of them in connection with any
claim or in connection with any action, suit or proceeding to which
any of them may be a party, which arises out of or is alleged to
arise out of or is based upon any untrue statement or alleged untrue
statement of a material fact, or the omission or alleged omission to
state a material fact necessary to make the statements made not
misleading, on the part of the Underwriter or any agent or employee
of the Underwriter or any other person for whose acts the
Underwriter is responsible or is alleged to be responsible, unless
such statement or omission was made in reliance upon written
information furnished by the Trust. The Underwriter likewise agrees
to indemnify and hold harmless the Trust and each such person in
connection with any claim or in connection with any action, suit or
proceeding which arises out of or is alleged to arise out of the
Underwriter's failure to exercise reasonable care and diligence with
respect to its services, if any, rendered in connection with
investment, reinvestment, automatic withdrawal and other plans for
Shares. The term "expenses" for purposes of this and the next
paragraph includes amounts paid in satisfaction of judgments or in
settlements which are made with the Underwriter's consent. The
foregoing rights of indemnification shall be in addition to any
other rights to which the Trust or a trustee may be entitled as a
matter of law.
9. INDEMNIFICATION BY TRUST.
The Trust agrees to indemnify and hold harmless the
Underwriter and each person who has been, is, or may hereafter be an
officer, director, employee or agent of the Underwriter against any
loss, damage or expense reasonably incurred by any of them in
connection with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out of
or is alleged to arise out of or is based upon any untrue or alleged
untrue statement of material fact, or the omission or alleged
omission to state a material fact necessary to make the statements
therein not misleading, contained in a Registration Statement or
Prospectus, or any amendment or supplement thereto, unless such
statement or omission was made in reliance upon written information
furnished by the Underwriter. The foregoing rights of
indemnification shall be in addition to any other rights to which
the Underwriter may be entitled as a matter of law.
10. TERM OF AGREEMENT.
This Agreement shall be executed and become effective with
respect to all Existing Funds on July 9, 1990, and, with respect to
any additional Fund, on the date of receipt by the Trust of notice
from the Underwriter in accordance with Paragraph 12 hereof that the
Underwriter is willing to serve as Underwriter with respect to such
Fund. Unless terminated as herein provided, this Agreement shall
remain in full force and effect through June 30, 1991, and, with
respect to each additional Fund, through the first June 30 occurring
more than twelve months after the date on which such Fund becomes a
Fund hereunder, and shall continue in full force and effect for
periods of one year thereafter with respect to each Fund so long as
such continuance with respect to any such Fund is approved at least
annually (a) by either the Trustees of the Trust or by vote of a
majority of the outstanding voting Shares (as defined in the
Investment Company Act of 1940, as amended) of such Fund, and (b) in
either event by the vote of a majority of the Trustees of the Trust
who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act of 1940, as amended) of any
such party, cast in person at a meeting called for the purpose of
voting on such approval. Written notice of discontinuance of this
Underwriting Agreement may be given by one party hereto to the other
not less than sixty (60) days before expiration of its initial term
or before the expiration of any succeeding annual period. This
Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
11. ASSIGNMENT.
This Agreement may not be assigned by the Underwriter and
shall automatically terminate in the event of an attempted
assignment by the Underwriter; provided, however, that the
Underwriter may employ such other person, persons, corporation, or
corporations, as it shall determine, in order to assist it in
carrying out this Agreement.
12. AMENDMENT.
This Agreement may be amended at any time by mutual agreement
in writing of the parties hereto, provided that any such amendment
is approved by a majority of the trustees of the Trust who are not
"interested persons" of the Underwriter or by the holders of a
majority of the Shares of the Trust.
13. LIMITATION OF LIABILITY.
The Master Trust Agreement dated May 9, 1984, as amended from
time to time, establishing the Trust, which is hereby referred to
and a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts, provides that the name USAA
Investment Trust means the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement. It
is expressly acknowledged and agreed that the obligations of the
Trust hereunder shall not be binding upon any of the shareholders,
Trustees, officers, employees or agents of the Trust, personally,
but shall bind only the trust property of the Trust, as provided in
its Master Trust Agreement. The execution and delivery of this
Agreement have been authorized by the Trustees of the Trust and
signed by the President of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery
by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Trust as provided in
its Master Trust Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for the
Underwriter and the Trust by their duly authorized officers as of
the date first set forth above.
USAA INVESTMENT TRUST USAA INVESTMENT
MANAGEMENT COMPANY
By:/s/ Michael J.C. Roth By:/s/ Michael J.C. Roth
--------------------- ----------------------
President President
ATTEST: ATTEST:
/s/ Michael D. Wagner /s/ Michael D. Wagner
- --------------------- ---------------------
Secretary Secretary
EXHIBIT 6(b)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to paragraph 12 of the Underwriting Contract dated as
of July 9, 1990 between USAA Investment Trust (the "Investment
Trust") and USAA Investment Management Company (the "Underwriter"),
please be advised that the Investment Trust has established two new
series of its shares, namely, the Treasury Money Market Trust and
GNMA Trust (the "Trusts"), and please be further advised that the
Investment Trust desires to retain the Underwriter to sell and
distribute shares of the Trusts and to render other services to the
Trusts as provided in the Underwriting Contract.
Please state below whether you are willing to render such
services as provided in the Underwriting Contact.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
---------------------- ------------------------
Secretary President
Dated: January 24, 1991
We are willing to render services to the Treasury Money Market
Trust and GNMA Trust as set forth in the Underwriting Contract.
USAA INVESTMENT MANAGEMENT COMPANY
Attest: /s/ Nora P. McDaniel By: /s/ John W. Saunders, Jr.
--------------------- ---------------------------
Secretary Senior Vice President
Dated: January 24, 1991
EXHIBIT 6(c)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to paragraph 12 of the Underwriting Contract dated as
of July 9, 1990 between USAA Investment Trust (the "Trust") and USAA
Investment Management Company (the "Underwriter"), please be advised
that the Trust has established a new series of its shares, namely,
the World Growth Fund (the "Fund"), and please be further advised
that the Trust desires to retain the Underwriter to sell and
distribute shares of the Fund and to render other services to the
Fund as provided in the Underwriting Contract.
Please state below whether you are willing to render such
services as provided in the Underwriting Contract.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
- ----------------------------- ---------------------------
Secretary President
Dated: July 21, 1992
We are willing to render services to the World Growth Fund as
set forth in the Underwriting Contract.
USAA INVESTMENT MANAGEMENT COMPANY
Attest: /s/ Nora P. McDaniel By:/s/ John W. Saunders, Jr.
- ---------------------------- ----------------------------
Assistant Secretary Senior Vice President
Dated: July 21, 1992
EXHIBIT 6(d)
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, TX 78288
Gentlemen:
Pursuant to paragraph 12 of the Underwriting Contract dated as
of July 9, 1990 between USAA Investment Trust (the "Investment
Trust") and USAA Investment Management Company (the "Underwriter"),
please be advised that the Investment Trust has established a new
series of its shares, namely, the Emerging Markets Fund (the
"Fund"), and please be further advised that the Investment Trust
desires to retain the Underwriter to sell and distribute shares of
the Fund and to render other services to the Fund as provided in the
Underwriting Contract.
Please state below whether you are willing to render such
services as provided in the Underwriting Contract.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
---------------------- -----------------------
Secretary President
Dated: September 7, 1994
We are willing to render services to the Emerging Markets Fund
as set forth in the Underwriting Contract.
USAA INVESTMENT MANAGEMENT COMPANY
Attest: /s/ Michael D. Wagner By: /s/ John W. Saunders, Jr.
---------------------- ---------------------------
Secretary Senior Vice President
Dated: September 7, 1994
EXHIBIT 6(e)
USAA Investment Management Company
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Gentlemen:
Pursuant to paragraph 12 of the Underwriting Contract dated as
of July 9, 1990 between USAA Investment Trust (the "Investment
Trust") and USAA Investment Management Company (the "Underwriter"),
please be advised that the Investment Trust has established three
new series of its shares, namely, the Growth Strategy Fund, the
Income Strategy Fund and the Balanced Strategy Fund (the "Funds"),
and please be further advised that the Investment Trust desires to
retain the Underwriter to sell and distribute shares of the Funds
and to render other services to the Funds as provided in the
Underwriting Contract.
Please state below whether you are willing to render such
services as provided in the Underwriting Contract.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. R. Roth
---------------------- ------------------------
Secretary President
Dated: September 1, 1995
We are willing to render services to the Growth Strategy Fund, the
Income Strategy Fund and the Balanced Strategy Fund as set forth in
the Underwriting Contract.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest: /s/ Alex M. Ciccone By: /s/ John W. Saunders, Jr.
-------------------- --------------------------
Assistant Secretary Senior Vice President
Dated: September 1, 1995
EXHIBIT 8(a)
CUSTODIAN CONTRACT
Between
USAA INVESTMENT TRUST
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It . . . . . 1
2. Duties of the Custodian with Respect to
Property of the Trust Held by the Custodian . . . . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . 6
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . 7
2.5 Payment for Shares . . . . . . . . . . . . . . . . . . . 8
2.6 Investment and Availability of Federal Funds . . . . . . 8
2.7 Collection of Income . . . . . . . . . . . . . . . . . . 8
2.8 Payment of Fund Moneys . . . . . . . . . . . . . . . . . 9
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . 11
2.10 Payments for Repurchases or Redemptions
of Shares of the Trust. . . . . . . . . . . . . . . . . 12
2.11 Appointment of Agents. . . . . . . . . . . . . . . . . 13
2.12 Deposit of Trust Assets in Securities System . . . . . 13
2.13 Ownership Certificates for Tax Purposes. . . . . . . . .16
2.14 Proxies. . . . . . . . . . . . . . . . . . . . . . . . .17
2.15 Communications Relating to Trust Portfolio Securities. .17
2.16 Proper Instructions. . . . . . . . . . . . . . . . . . .17
2.17 Actions Permitted Without Express Authority. . . . . . .18
2.18 Evidence of Authority. . . . . . . . . . . . . . . . . .19
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . .19
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
5. Opinion of Trust's Independent Accountants. . . . . . . . . . .21
6. Reports to Trust by Independent Public Accountants. . . . . . .21
7. Compensation of Custodian . . . . . . . . . . . . . . . . . . .21
8. Responsibility of Custodian . . . . . . . . . . . . . . . . . .22
9. Effective Period, Termination and Amendment . . . . . . . . . .23
10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . .24
11. Interpretive and Additional Provisions. . . . . . . . . . . . .26
12. Additional Funds. . . . . . . . . . . . . . . . . . . . . . . .26
13. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . .26
14. Limitation of Liability . . . . . . . . . . . . . . . . . . . .26
15. Prior Agreements. . . . . . . . . . . . . . . . . . . . . . . .27
CUSTODIAN AGREEMENT
This Agreement between USAA Investment Trust, a business
trust organized and existing under the laws of Massachusetts,
having its principal place of business at 9800 Fredericksburg Road,
San Antonio, Texas 78288 hereinafter called the "Trust", and State
Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WHEREAS, the Trust is authorized to issue shares of
beneficial interest without par value ("Shares") in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer Shares in two
series, the Gold Fund and the Cornerstone Fund (such series,
together with all other series subsequently established by the
Trust and made subject to this Agreement in accordance with
paragraph 12, being herein referred to as the "Fund(s)");
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of
its assets pursuant to the provisions of the Agreement and
Declaration of Trust. The Trust agrees to deliver to the Custodian
all securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it with
respect to all securities owned by any Fund subject to this
Contract from time to time, and the cash consideration received by
it for such new or treasury Shares of the Funds as may be issued or
sold from time to time. The Custodian shall not be responsible for
any property of any Fund held or received by the Trust and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.16), the Custodian shall from time to time employ one or
more sub-custodians, but only in accordance with an applicable vote
by the Trustees of the Trust, and provided that the Custodian shall
have no more or less responsibility or liability to the Trust on
account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Trust
Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by the Trust, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System".
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Trust held by the Custodian
or in a Securities System account of the Custodian only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only
in the following cases:
1) Upon sale of such securities for the account of a Fund
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Trust;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.12 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities of a
Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into
the name of the Trust or into the name of any nominee
or nominees of the Custodian or into the name or
nominee name of any agent appointed pursuant to
Section 2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face
amount or number of units; provided that, in any such
case, the new securities are to be delivered to the
Custodian;
7) To the broker selling the same for examination in
accordance with the "street delivery" custom;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such
warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Trust, but only against receipt
of adequate collateral as agreed upon from time to
time by the Custodian and the Trust, which may be in
the form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the Custodian's
account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of
securities owned by any Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any
borrowings by the Trust requiring a pledge of assets
of the appropriate Fund of the Trust, but only against
receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Trust, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
13) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Trustees or of
the Executive Committee signed by an officer of the
Trust and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is
to be made, declaring such purposes to be proper
corporate purposes, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the
name of the Funds or in the name of any nominees of the
Custodian which nominee shall be assigned exclusively to the
Funds, unless the Trust has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same investment
adviser as the Trust, or in the name or nominee name of any
agent appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Trust under the terms of this Agreement shall
be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of each Fund of
the Trust, subject only to draft or order by the Custodian
acting pursuant to the terms of this Agreement, and shall
hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of
that Fund, other than cash maintained by the Trust in a bank
account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by the
Custodian for the Trust may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved by vote of a majority of the Trustees of the Trust.
Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the
distributor for the Trust's Shares or from the Transfer Agent
of the Trust and deposit into the appropriate Fund account
such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will
provide timely notification to the Trust and the Transfer
Agent of any receipt by it of payments for Shares of the
Trust.
2.6 Investment and Availability of Federal Funds. Upon mutual
agreement between the Trust and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions,
1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal
funds received after a time agreed upon between the
Custodian and the Trust; and
2) make federal funds available to each Fund as of
specified times agreed upon from time to time by the
Trust and the Custodian in the amount of checks
received in payment for Shares of that Fund which are
deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect to
registered securities held hereunder to which the Trust shall
be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities
if, on the date of payment by the issuer, such securities are
held by the Custodian or agent thereof and shall credit such
income, as collected, to that Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. Income due any Fund on securities
loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Trust. The Custodian will have
no duty or responsibility in connection therewith, other than
to provide the Trust with such information or data as may be
necessary to assist the Trust in arranging for the timely
delivery to the Custodian of the income to which the
appropriate Fund is properly entitled.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out moneys of the
Trust in the following cases only:
1) Upon the purchase of securities for the account of a
Fund but only (a) against the delivery of such
securities to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian
and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Trust
or in the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof or (c) in
the case of repurchase agreements entered into between
the Trust and the Custodian, or another bank, (i)
against delivery of the securities either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the
receipt evidencing purchase by the Trust of securities
owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such
securities from the Trust;
2) In connection with conversion, exchange or surrender
of securities owned by the Trust as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
any Fund of the Trust as set forth in Section 2.10
hereof;
4) For the payment of any expense or liability incurred
by the Trust, including but not limited to the
following payments for the account of any Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Trust whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to
the governing documents of the Trust;
6) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions, a certified
copy of a resolution of the Trustees or of the
Executive Committee of the Trust signed by an officer
of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase
of securities for the account of a Fund is made by the
Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the
Trust to so pay in advance, the Custodian shall be absolutely
liable to the Trust for such securities to the same extent as
if the securities had been received by the Custodian, except
that in the case of repurchase agreements entered into by the
Trust with a bank which is a member of the Federal Reserve
System, the Custodian may transfer funds to the account of
such bank prior to the receipt of written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve
Bank of Boston or of the safe-keeping receipt, provided that
such securities have in fact been so transferred by book-
entry.
2.10 Payments for Repurchases or Redemptions of Shares of the
Trust. From such funds as may be available for the purpose
but subject to the limitations of the Agreement and
Declaration of Trust and any applicable votes of the Trustees
of the Trust pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered
to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or
repurchase of Shares of the Trust, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of a Fund, the
Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the
Trust to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Trust
and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove)
any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time
to time direct; provided, however, that the appointment of
any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Trust Assets in Securities Systems. The Custodian
may deposit and/or maintain securities owned by the Trust in
a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act
of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred
to herein as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Trust in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian
in the Securities System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Trust which are maintained in a
Securities System shall identify by book-entry those
securities belonging to each Fund of the Trust;
3) The Custodian shall pay for securities purchased for
the account of the Trust upon (i) receipt of advice
from the Securities System that such securities have
been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the
appropriate Fund of the Trust. The Custodian shall
transfer securities sold for the account of the Trust
upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and
payment for the account of the appropriate Fund of the
Trust. Copies of all advices from the Securities
System of transfers of securities for the account of
any Fund of the Trust shall identify the Trust, be
maintained for the Trust by the Custodian and be
provided to the Trust at its request. Upon request,
the Custodian shall furnish the Trust confirmation of
each transfer to or from the account of each Fund in
the form of a written advice or notice and shall
furnish to the Trust copies of daily transaction
sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in
the Securities System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 9 hereof;
6) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Fund resulting
from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their
employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may
have against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim
against the Securities System or any other person
which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the
Trust has not been made whole for any such loss or
damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt
of income or other payments with respect to securities of
each Fund or Trust (as the case may be) held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Trust or a
nominee of the Trust, all proxies, without indication of the
manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Trust Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith) received by the Custodian from issuers
of the securities being held for the Trust. With respect to
tender or exchange offers, the Custodian shall transmit
promptly to the Trust all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making
the tender or exchange offer. If the Trust desires to take
action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian at least three business days prior to the date on
which the Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used throughout
this Article 2 means a writing signed or initialled by one or
more person or persons as the Trustees shall have from time
to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved,
including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such
instructions with respect to the transaction involved. The
Trust shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the
Trustees of the Trust accompanied by a detailed description
of procedures approved by the Trustees, Proper Instructions
may include communications effected directly between electro-
mechanical or electronic devices provided that the Trustees
and the Custodian are satisfied that such procedures afford
adequate safeguards for the Trust's assets.
2.17 Actions Permitted without Express Authority. The Custodian
may in its discretion, without express authority from the
Trust:
1) make payments to itself or others for minor expenses
of handling securities or other similar items relating
to its duties under this Agreement, provided that all
such payments shall be accounted for to the Trust;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Trust,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of each Fund except as
otherwise directed by the Trustees of the Trust.
2.18 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of
the Trust. The Custodian may receive and accept a certified
copy of a vote of the Trustees of the Trust as conclusive
evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of
any action by the Trustees pursuant to the Agreement and
Declaration of Trust as described in such vote, and such vote
may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income. The Custodian
shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Trust to
keep the books of account of the Trust and/or compute the net
asset value per share of the outstanding shares of each Fund
of the Trust or, if directed in writing to do so by the
Trust, shall itself keep such books of account and/or compute
such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of each
Fund as described in that Fund's currently effective
prospectus and shall advise the Trust and the Transfer Agent
daily of the total amounts of such net income and, if
instructed in writing by an officer of the Trust to do so,
shall advise the Transfer Agent periodically of the division
of such net income among its various components. The
calculations of the net asset value per share and the daily
income of each Fund shall be made at the time or times
described from time to time in the Fund's currently effective
prospectus.
4. Records The Custodian shall create and maintain all records
relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the
Trust under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, applicable federal and state tax laws
and any other law or administrative rules or procedures which
may be applicable to the Trust. All such records shall be
the property of the Trust and shall at all times during the
regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents
of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of securities
owned by the Trust and held by the Custodian and shall, when
requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian,
include certificate numbers in such tabulations.
5. Opinion of Trust's Independent Accountant. The Custodian
shall take all reasonable action, as the Trust may from time
to time request, to obtain from year to year favorable
opinions from the Trust's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Trust's Form N-1A, and Form N-1R or other
annual reports to the Securities and Exchange Commission and
with respect to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants. The
Custodian shall provide the Trust, at such times as the Trust
may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, including
securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian
under this Agreement; such reports, which shall be of
sufficient scope and in sufficient detail, as may reasonably
be required by the Trust, to provide reasonable assurance
that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, shall so
state.
7. Compensation of Custodian. The Custodian shall be entitled
to reasonable compensation for its services and expenses as
Custodian, as agreed upon from time to time between the Trust
and the Custodian.
8. Responsibility of Custodian. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian
shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement
and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper
party or parties. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of
this Agreement, but shall be kept indemnified by and shall be
without liability to the Trust for any action taken or
omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who
may be counsel for the Trust) on all matters, and shall be
without liability for any action reasonably taken or omitted
pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions
effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action
with respect to securities, which action involves the payment
of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned to
the Trust being liable for the payment of money or incurring
liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide
indemnity to the Custodian in an amount and form satisfactory
to it.
If the Trust requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection
with the performance of this Agreement, except such as may
arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property
at any time held for the account of the appropriate Fund
shall be security therefor and should the Trust fail to repay
the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of the appropriate Fund
assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment. This Agreement
shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of
the parties hereto and may be terminated by either party by
an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery
or mailing; provided, however that the Custodian shall not
act under Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant
Secretary that the Trustees of the Trust have approved the
initial use of a particular Securities System, as required by
Rule 17f-4 under the Investment Company Act of 1940, as
amended; provided further, however, that the Trust shall not
amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of
the Agreement and Declaration of Trust, and further provided,
that the Trust may at any time by action of its Trustees (i)
substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a
like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Trust shall pay to
the Custodian such compensation as may be due as of the date
of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
10. Successor Custodian. If a successor custodian shall be
appointed by the Trustees of the Trust, the Custodian shall,
upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the
Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Trustees of the Trust, deliver at the
office of the Custodian and transfer such securities, funds
and other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the
Trustees shall have been delivered to the Custodian on or
before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement and to
transfer to an account of such successor custodian all of the
Trust's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor
of the Custodian under this Agreement.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Trust to procure
the certified copy of vote referred to or of the Trustees to
appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such
period as the Custodian retains possession of such
securities, funds and other properties and the provisions of
this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions. In connection with
the operation of this Agreement, the Custodian and the Trust
may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may
in their joint opinion be consistent with the general tenor
of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and
shall be annexed hereto, provided that no such interpretive
or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Master
Trust Agreement (also referred to as the Agreement and
Declaration of Trust) of the Trust. No interpretive or
additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this
Agreement.
12. Additional Funds. In the event that the Trust establishes
one or more series of Shares in addition to the Gold Fund and
the Cornerstone Fund, with respect to which it desires to
have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Fund
hereunder.
13. Massachusetts Law to Apply. This Agreement shall be
construed and the provisions thereof interpreted under and in
accordance with laws of the Commonwealth of Massachusetts.
14. Limitation of Liability. The Master Trust Agreement (also
referred to as the Agreement and Declaration of Trust) dated
May 9, 1984, as amended from time to time, establishing the
Trust, which is hereby referred to and a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts,
provides that the name USAA Investment Trust means Trustees
from time to time serving (as Trustees but not personally)
under said Master Trust Agreement. It is expressly
acknowledged and agreed that the obligations of the Trust
hereunder shall not be binding upon any of the shareholders,
Trustees, officers, employees or agents of the Trust,
personally, but shall bind only the trust property of the
Trust, as provided in its Master Trust Agreement. The
execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by the President of
the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided
in its Agreement and Declaration of Trust.
15. Prior Agreements. This Agreement supersedes and terminates,
as of the date hereof, all prior contracts between the Trust
and the Custodian relating to the custody of the Trust's
assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 27th day of July, 1984.
ATTEST USAA INVESTMENT TRUST
/s/ Nora P. McDaniel By /s/ George K. Sykes
- --------------------- ----------------------
ATTEST STATE STREET BANK AND TRUST
COMPANY
(illegible signature) By /s/ Peter R. O'Connell
- ----------------------- -------------------------
Assistant Secretary Vice President
EXHIBIT 8(b)
AMENDMENT TO CUSTODIAN CONTRACT
BETWEEN STATE STREET BANK AND TRUST
COMPANY AND USAA INVESTMENT TRUST
AGREEMENT made this 13th day of May, 1985 between State
Street Bank and Trust Company (the "Custodian") and USAA Investment
Trust (the "Trust").
WHEREAS, the Custodian and the Trust are parties to a
custodian contract dated July 27, 1984 (the "Custodian Contract")
governing the terms and conditions under which the Custodian
maintains custody of the securities and other assets of the Trust;
and
WHEREAS, the parties thereto desire to amend the Custodian
Contract to provide for the maintenance of the Trust's foreign
securities, and cash incidental to transactions in such securities,
in the custody of certain foreign banking institutions and foreign
securities depositories acting as sub-custodians in conformity with
the requirements of Rule 17f-5 under the Investment Company Act of
1940;
NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Custodian and the Trust hereby amend the
Custodian Contract and agree to the following terms and conditions:
1. Appointment of Foreign Sub-Custodians
The Trust hereby authorizes and instructs the Custodian
to employ as sub-custodians for the Trust's securities and other
assets the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign sub-
custodians"). Upon receipt of "Proper Instructions," as defined in
Section 2.16 of the Custodian Contract, together with a certified
resolution of the Trust's Board of Directors, the Custodian and the
Trust may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodians. Upon receipt of
Proper Instructions, the Trust may instruct the Custodian to cease
the employment of any one or more of such sub-custodians for
maintaining custody of the Trust's assets.
2. Assets to be Held
The Custodian shall limit the securities and other assets
maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities," as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Trust may
determine to reasonably necessary to effect the Trust's foreign
securities transactions.
3. Foreign Securities Depositories
Except as may otherwise be agreed upon in writing by the
Custodian and the Trust, assets of the Trust shall be maintained in
foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-
custodians pursuant to the terms hereof.
4. Segregation of Securities
The Custodian shall identify on its books as belonging to
the Trust, the foreign securities of the Trust held by each foreign
sub-custodian. Each agreement pursuant to which the Custodian
employs a foreign banking institution shall require that such
institutions establish a custody account for the Custodian on
behalf of the Trust and physically segregate in that account,
securities and other assets of the Trust, and, in the event that
such institution deposits the Trust's securities in a foreign
securities depository, that it shall identify on its books as
belonging to the Custodian, as agent for the Trust, the securities
so deposited.
5. Agreements with Foreign Banking Institutions
Each agreement with a foreign banking institution shall
be substantially in the form set forth in Exhibit 1 hereto and
shall provide that: (a) the Trust's assets will not be subject to
any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors, agents,
except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the Trust's assets will be freely
transferable without the payment of money or value other than for
custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Trust; (d) officers of
or auditors employed by, or other representatives of the Custodian,
including to the extent permitted under applicable law the
independent public accountants for the Trust, will be given access
to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and
(e) assets of the Trust held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents.
6. Access of Independent Accountants of the Trust
Upon request of the Trust, the Custodian will use its
best efforts to arrange for the independent accountants of the
Trust to be afforded access to the books and records of any foreign
banking institution employed as a foreign sub-custodian insofar as
such books and records relate to the performance of such foreign
banking institution under its agreement with the Custodian.
7. Reports by Custodian
The Custodian will supply to the Trust from time to time,
as mutually agreed upon, statements in respect of the securities
and other assets of the Trust held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Trust's securities and other assets and advices
or notifications of any transfers of securities to or from each
custodial account maintained by a foreign banking institution for
the Custodian on behalf of the Trust indicating, as to securities
acquired for the Trust, the identity of the entity having physical
possession of such securities.
8. Transactions in Foreign Custody Account
(a) Notwithstanding any provision of the Custodian
Contract to the contrary, settlement and payment for securities
received for the account of the Trust and delivery of securities
maintained for the account of the Trust may be effected in
accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction
or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against
a receipt with the exception of receiving later payment for such
securities from such purchaser or dealer.
(b) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of the
Custodian Contract and the Trust agrees to hold any such nominee
harmless from any liability as a holder of record of such
securities.
9. Liability of Foreign Sub-Custodians
Each agreement pursuant to which the Custodian employs a
foreign banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Account from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with
the institution's performance of such obligations. At the election
of the Trust, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Trust has not been made whole for any such loss, damage, cost,
expense, liability or claim.
10. Liability of Custodian
The Custodian shall be liable for the acts or omissions
of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in the Custodian Contract
and, regardless of whether assets are maintained in the custody of
a foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 12 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from or caused by, the directopm of or
authorization by the Trust to maintain custody or any securities or
cash of the Trust in a foreign country including, by not limited
to, losses resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism.
11. Monitoring Responsibilities
The Custodian shall furnish annually to the Trust, during
the month of April, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Trust in
connection with the initial approval of this amendment to the
Custodian Contract. In addition, the Custodian will promptly
inform the Trust in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or is notified by a foreign banking institution
employed as a foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or that
is shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted U.S. accounting
principles).
12. Branches of U.S. Banks
Except as otherwise set forth in this amendment to the
Custodian Contract, the provisions hereof shall not apply where the
custody of the Trust assets maintained in a foreign branch of a
banking institution which is a "bank" as defined by Section 2(a)(5)
of the Investment Company Act of 1940 which meets the qualification
set forth in Section 26(a) of said Act. The appointment of any
such branch as a sub-custodian shall be governed by paragraph 1 of
the Custodian Contract.
13. Applicability of Custodian Contract
Except as specifically superseded or modified herein, the
terms and provisions of the Custodian Contract shall continue to
apply with full force and effect to foreign custody arrangements
implemented pursuant to the terms of this amendment to the
Custodian Contract.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 13th day of May, 1985.
ATTEST: USAA INVESTMENT TRUST
/s/ Gloria Q. Lopez By: Robert L. Worrall
- ------------------- ----------------------
ATTEST: STATE STREET BANK AND TRUST
COMPANY
(illegible signature) By: /s/ Peter R. O'Connell
- --------------------- ------------------------
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Directors of USAA Investment Trust for use as sub-custodians for
the Fund's securities and other assets as of May 13, 1985:
Countries Countries
--------- ---------
Australia France
Belgium Hong Kong
Denmark Netherlands
Japan Mexico
Singapore Switzerland
South Africa Norway
Sweden Italy
Germany Spain
Canada Finland
EXHIBIT 8(c)
AMENDMENT TO CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust
Company (the "Custodian") and USAA Investment Trust (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a
Custodian Contract dated July 27, 1984 (the "Custodian Contract")
governing the terms and conditions under which the Custodian
maintains custody of the securities and other assets of the Fund; and
WHEREAS, the terms of the Custodian Contract were modified to
provide for the maintenance of the Fund's foreign securities, and
cash incidental to transactions in such securities, in the custody
of certain foreign banking institutions and foreign securities
depositories, pursuant to an amendment to the Custodian Contract
made the 13th day of May, 1985; and
WHEREAS, the parties hereto desire further to amend the
Custodian Contract to provide for for the maintenance of certain of
the Fund's foreign securities and other assets in the custody of
State Street London Limited (the "Trust Company"), a company
incorporated under the laws of the United Kingdom with the power to
act as a trustee and as a custodian of securities;
NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Custodian and the Fund hereby amend the terms
of the Custodian Contract and agree to the following terms and conditions:
1. The Fund hereby authorizes and instructs the Custodian to
employ the services of the Trust Company, as the sub-custodian in
the United Kingdom, to hold securities and other assets of the
Fund, subject to the terms of the Custodian Contract, as heretofore
amended, and to the terms and conditions hereof.
2. The securities to be held by the Trust Company shall be
limited to "foreign securities" as defined by paragraph (c) (1) of
Rule 17f-5 under the Investment Company Act of 1940 (the "1940 Act").
3. Cash held for the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund
with the Trust Company, which account shall be subject to the
direction of the Custodian, the Trust Company, or both.
4. The Custodian represents that it has obtained an order
from the Securities and Exchange Commission, pursuant to Section
6(c) of the 1940 Act, exempting the Custodian and the Fund from the
provisions of Section 17(f) of said Act, to the extent necessary to
permit the securities and other assets of the Fund to be maintained
in the custody of the Trust Company.
5. In delegating custody duties and obligations to the Trust
Company as permitted hereunder, the Custodian agrees that it shall
not be relieved of any responsibility to the Fund for any loss due
to such delegation to the Trust Company, except such loss as may
result from: (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities)
or (b) other risk of loss (excluding bankruptcy or insolvency of
the Trust Company not caused by a political risk) for which neither
the Custodian nor the Trust Company would be liable (including, but
not limited to, losses due to Acts of God, nuclear incident and
other losses under circumstances where the Custodian and the Trust
Company have exercised reasonable care).
6. Except as specifically superseded or modified herein, the
terms and conditions of the Custodian Contract, as heretofore
amended, shall continue to apply with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 1st day of May, 1986.
ATTEST USAA INVESTMENT TRUST
/s/ Nora P. McDaniel By: /s/ Michael J. C. Roth
- -------------------- --------------------------
Assistant Secretary Executive Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Peter H. Larsen By: (illegible signature)
- -------------------- ------------------------------
Assistant Secretary Vice President
EXHIBIT 8(d)
AMENDMENT TO AMENDMENT TO CUSTODIAN CONTRACT
BETWEEN STATE STREET BANK AND TRUST COMPANY AND
USAA INVESTMENT TRUST
AGREEMENT made this 1st day of May, 1986 between State Street
Bank and Trust Company (the "Custodian") and USAA Investment Trust
(the "Trust").
WHEREAS, the Custodian and the Trust are parties to a
custodian contact dated July 27, 1984 (the "Custodian Contract")
governing the terms and conditions under which the Custodian
maintains custody of the securities and other assets of the Trust; and
WHEREAS, an amendment to the Custodian Contract between the
Custodian and the Trust was made on May 13, 1985 (the "Amendment to
the Custodian Contract") providing for the maintenance of the
Trust's foreign securities, and cash incidental to transactions in
such securities, in the custody of certain foreign banking
institutions and foreign securities depositories acting as
subcustodians; and
WHEREAS, Section 11 of the Amendment to the Custodian
Contract provides that the Custodian will provide annually to the
Trust information concerning the foreign subcustodians employed by
the Custodian;
NOW THEREFORE, it is hereby agreed between the parties hereto
as follows:
1. Section 11 of the Amendment to the Custodian Contract be
amended to read:
"11. Monitoring Responsibilities
The Custodian shall furnish annually to the Trust, during
the month of June, information concerning the foreign subcustodians
employed by the Custodian. Such information shall be similar in
kind and scope to that furnished to the Trust in connection with
the initial approval of this amendment to the Custodian Contract.
In addition, the Custodian will promptly inform the Trust in the
event that the Custodian learns of a material adverse change in the
financial condition of a foreign subcustodian or is notified by a
foreign banking institution employed as a foreign subcustodian that
there appears to be a substantial likelihood that it's
shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance
with generally accepted U.S. accounting principles)."
2. Except as expressly modified herein, the provisions of
the Custodian Contract and the Amendment to the Custodian Contract
shall remain in full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 1st day of May, 1986.
ATTEST: USAA INVESTMENT TRUST
/s/ Nora P. McDaniel By: /s/ Michael J. C. Roth
- -------------------- ---------------------------
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Peter H. Larsen By: /s/ Charles Casidy
- -------------------- ----------------------------
EXHIBIT 8(e)
AMENDMENT TO THE
CUSTODIAN AGREEMENT
AGREEMENT made this 3th day of November, 1988 by and between STATE
STREET BANK AND TRUST COMPANY ("Custodian") and USAA INVESTMENT
TRUST (the "Trust").
WITNESSETH THAT:
WHEREAS, the Custodian and the Trust are parties to the
Custodian Agreement dated July 27, 1984 (as amended to date, the
"Agreement") which governs the terms and conditions under which the
Custodian maintains custody of the securities and other assets of
the Trust:
NOW THEREFORE, the Custodian and the Trust hereby amend the
terms of the Custodian Agreement and mutually agree to the
following:
Replace subsection 7) of Section 2.2 Delivery of Securities
with the following new subsection 7):
7) Upon the sale of such securities for the account of
the Trust, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
IN WITNESS WHEREOF, each of the parties has caused this
Amendment to be executed in its name and on its behalf by a duly
authorized officer as of the day and year first above written.
Attest USAA INVESTMENT TRUST
/s/ Nora P. McDaniel /s/ Michael J. C. Roth
- -------------------- ---------------------
Assistant Secretary Executive Vice President
STATE STREET BANK AND TRUST
COMPANY
/s/ Nancy Grady /s/ Guy R. Sturgeon
- -------------------- ------------------------
Assistant Secretary Vice President
EXHIBIT 8(f)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
July 27, 1984 between USAA Investment Trust (the "Trust") and State
Street Bank and Trust Company, (the "Custodian"), please be advised
that the Trust has established a new series of its shares, namely,
the International Fund (the "Fund"), and please be further advised
that the Trust desires to retain the Custodian to render custody
services under the Custodian Contract to the Fund in accordance
with the fee schedule attached hereto as Exhibit A.
The Trust further desires to retain the Custodian to render
services under the Amendment to the Custodian Contract, dated May
13, 1985, pursuant to Rule 17f-5 of the Investment Company Act of
1940 with regard to foreign banking institutions and foreign
securities depositories, to act as Subcustodians as shown on
Schedule B attached hereto.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By:/s/ Michael J. C. Roth
---------------------- -------------------------
Secretary Executive Vice President
Dated: May 26, 1988
We are willing to render custody services to the
International Fund in accordance with the fee schedule attached
hereto as Exhibit A.
STATE STREET BANK AND TRUST
COMPANY
Attest: /s/ J. Evan By: /s/ Philip J. Lussier
------------------------ -------------------------
Assistant Vice President Vice President
Dated: May 26, 1988
EXHIBIT A
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA INTERNATIONAL FUND
I. Administration
Custody, Portfolio and Fund Accounting Service -
Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain
investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare
daily trial balance. Calculate net asset value daily.
Provide selected general ledger reports. Securities
yield or market value quotations will be provided to
State Streeet by the fund.
The administration fee shown below is an annual charge,
billed and payable monthly, based on average monthly
net assets and calculated in the same manner as the
fund management fee.
ANNUAL FEES
Fund Net Assets Annual Full Services Fees
First $20 Million 1/15 of 1%
Next $80 Million 1/30 of 1%
Excess 1/100 of 1%
Minimum Monthly Charges
First 3 Months Minimum $ 850.00
Next 3 Months Minimum $ 1,700.00
Thereafter Minimum $ 2,500.00
II. Portfolio Trades - For Each Line Item
State Street Bank Repos $ 7.00
All Other Trades $16.00
III. Holdings Charge
For Each Issue Maintained $ 5.00
Monthly Charge
IV. Global Custody
Services Provided Include:
Cash Movements, Foreign Communication, Local Currency Settlements.
Annual Fees: 18 Basis Points
IV. Shareholder Check - Writing Service
Per Check Presented for Payment $1.00
V. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month.
Out-of-pocket expenses include, but are not limited to
the following:
Telephone
Wire Charges
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
DTC Eligibility Books
Pricing Services
STATE STREET BANK AND TRUST CO.
By: /s/Edward H. Stevens By: /s/ Philip J. Lussier
--------------------- ----------------------
Title: Vice President Controller Title: Vice President
Date: May 26, 1988 Date: May 2, 1988
EXHIBIT 8(g)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
July 27, 1984 between USAA Investment Trust (the "Trust") and State
Street Bank and Trust Company, (the "Custodian"), please be advised
that the Trust has established a new series of its shares, namely,
the Balanced Portfolio Fund (the "Fund"), and please be further
advised that the Trust desires to retain the Custodian to render
custody services under the Custodian Contract to the Fund in
accordance with the fee schedule attached hereto as Exhibit A.
The Trust further desires to retain the Custodian to render
services under the Amendment to the Custodian Contract, dated May
13, 1985, pursuant to Rule 17f-5 of the Investment Company Act of
1940 with regard to foreign banking institutions and foreign
securities depositories.
The Trust further requests that the Balanced Portfolio Fund
participate in subcustodian agreements between the Custodian and
either or both Bankers Trust Company and Irving Trust
Company to record ownership of one- to seven- day variable rate
demand notes in book-entry form.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Nora P. McDaniel By: /s/ Michael J. C. Roth
---------------------- -----------------------
Assistant Secretary Executive Vice President
Dated: January 3, 1989
We are willing to render custody services to the Fund in
accordance with the fee schedule attached hereto as Exhibit A.
STATE STREET BANK AND TRUST COMPANY
Attest: /s/ M. Fitzgerald By: /s/ K. Bergeron
- -------------------------- -------------------
Assistant Secretary Vice President
Dated: January 3, 1989
EXHIBIT A
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA BALANCED FUND
I. Administration
Custody, Portfolio and Fund Accounting Service -
Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain
investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare
daily trial balance. Calculate net asset value daily.
Provide selected general ledger reports. Securities
yield or market value quotations will be provided to
State Streeet by the fund.
The administration fee shown below is an annual charge,
billed and payable monthly, based on average monthly
net assets and calculated in the same manner as the
fund management fee.
ANNUAL FEES
Fund Net Assets Annual Full Services Fees
First $20 Million 1/15 of 1%
Next $80 Million 1/30 of 1%
Excess 1/100 of 1%
Minimum Monthly Charges
First 3 Months Minimum $ 850.00
Next 3 Months Minimum $ 1,700.00
Thereafter Minimum $ 2,500.00
II. Portfolio Trades - For Each Line Item
State Street Bank Repos $ 7.00
All Other Trades $16.00
III. Holdings Charge
For Each Issue Maintained $ 5.00
Monthly Charge
IV. Global Custody
Services Provided Include:
Cash Movements, Foreign Communication, Local Currency Settlements.
Annual Fees: 18 Basis Points
IV. Interest claim charges for items held at the request
of the traders over record date $75.00
V. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month.
Out-of-pocket expenses include, but are not limited to
the following:
Telephone
Wire Charges
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
DTC Eligibility Books
Pricing Services
Transfer agent proof fees
STATE STREET BANK AND TRUST CO.
By: /s/Edward H. Stevens By: /s/ Philip J. Lussier
-------------------- ----------------------
Title: Treasurer Title: Vice President
Date: January 5, 1989 Date: January 3, 1989
EXHIBIT 8(h)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
July 27, 1984 between USAA Investment Trust (the "Investment
Trust") and State Street Bank and Trust Company (the "Custodian"),
please be advised that the Trust has established two new series of
its shares, namely, the Treasury Money Market Trust and GNMA Trust
(the "Trusts"), and please be further advised that the Investment
Trust desires to retain the Custodian to render custody services
under the Custodian Contract to the Trusts in accordance with the
fee schedule attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
- ------------------------------ ----------------------------
Secretary President
Dated: January 24, 1991
We are willing to render custody services to the Treasury
Money Market Trust and GNMA Trust in accordance with the fee
schedule attached hereto as Exhibit A.
STATE STREET BANK AND TRUST COMPANY
Attest: /s/ M. Fitzgerald By: /s/ K. Bergeron
- --------------------------- --------------------
Secretary Vice President
Dated: January 24, 1991
EXHIBIT 8(i)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
July 27, 1984, as supplemented by the Amendment dated May 13, 1985
(together, the "Custodian Contract"), between USAA Investment Trust
(the "Trust") and State Street Bank and Trust Company, (the
"Custodian") please be advised that the Trust has established a new
series of its shares, namely, the World Growth Fund (the "Fund"),
and please be further advised that the Trust desires to retain the
Custodian to render custody services under the Custodian Contract
to the Fund in accordance with the fee schedule attached hereto as
Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By:/s/ Michael J. C. Roth
- ------------------------------- --------------------------
Secretary President
Dated: July 21, 1992
We are willing to render custody services to the World Growth
Fund in accordance with the fee schedule attached hereto as Exhibit A.
STATE STREET BANK AND TRUST COMPANY
Attest: /s/ Margurite Summers By: /s/ K. Donelin
- ------------------------------- -----------------------
Dated: July 21, 1992
EXHIBIT A
DRAFT
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA INVESTMENT TRUST
WORLD GROWTH FUND
I. Administration
Custody, Portfolio and Fund Accounting Service -
Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain
investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare
daily trial balance. Calculate net asset value daily.
Provide selected general ledger reports.
The administration fee shown below is an annual charge,
billed and payable monthly, based on average monthly
net assets and calculated in the same manner as the
fund management fee.
ANNUAL FEES
Fund Net Assets Annual Full Services Fees
First $20 Million 1/15 of 1%
Next $80 Million 1/30 of 1%
Excess 1/100 of 1%
Minimum Monthly Charges
First 3 Months Minimum $ 850.00
Next 3 Months Minimum $ 1,700.00
Thereafter Minimum $ 2,500.00
II. Portfolio Trades - For Each Line Item
State Street Bank Repos $ 7.00
All Other Trades $16.00
III. Holdings Charge
For Each Issue Maintained $ 5.00
Monthly Charge
IV. Global Custody
U.S. Equivalent Market Value 18 Basis Points
V. Automated Pricing
Base Charge/Month $ 375.00
Quote Charge/Month $ 6.00
VI. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month.
Out-of-pocket expenses include, but are not limited to
the following:
Telephone
Wire Charges
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
DTC Eligibility Books
Pricing Services
USAA INVESTMENT TRUST STATE STREET BANK AND TRUST CO.
WORLD GROWTH FUND
By: ______________________________By: ________________________________
Title: ____________________________Title: ______________________________
Date: _____________________________Date: ______________________________
EXHIBIT 8(j)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
July 27, 1984 between USAA Investment Trust (the "Investment
Trust") and State Street Bank and Trust Company (the "Custodian"),
please be advised that the Investment Trust has established a new
series of its shares, namely, the Emerging Markets Fund (the
"Fund"), and please be further advised that the Investment Trust
desires to retain the Custodian to render custody services under
the Custodian Contract to the Fund in accordance with the fee
schedule attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
- ----------------------------- ----------------------------
Secretary President
Dated: September 7, 1994
We are willing to render custody services to the Emerging
Markets Fund in accordance with the fee schedule attached hereto as
Exhibit A.
STATE STREET BANK AND TRUST COMPANY
Attest: /s/ Paul Kaminski By: /s/ Margurite Summers
- ----------------------------- -----------------------------
Secretary Vice President
Dated: September 7, 1994
STATE STREET
EXHIBIT A
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
I. Custody, Portfolio and Fund Accounting Services - Maintain
investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger, and
capital stock accounts. Prepare daily trial balance.
Calculate net asset value daily. Provide selected general
ledger reports. Securities yield or market value quotations
will be provided to State Street by the fund or via State
Streets Automated Pricing service.
The administration fee shown below is an annual charge, in
basis points, billed and payable monthly, based on average
monthly net assets.
ANNUAL FEES PER PORTFOLIO
Annual Full Service Fees
-----------------
First 50 Million 3.50 Basis Points
Next 50 Million 2.50 Basis Points
Next 100 Million 1.50 Basis Points
Excess 0.85 Basis Points
Minimum Monthly Charge $2,000.00
II. Portfolio Trades - For Each Line Item Processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $12.00
Boston/New York Physical $25.00
PTC Buy/Sell $20.00
All Other Trades $16.00
Maturity Collections (NY Physical) $ 8.00
Option Charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration/Option exercised $15.00
Interest Rate Futures -- no security movement $ 8.00
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
Principal Reduction Payments Per Paydown $10.00
Interest/Dividend Claim Charges
(For items held at the Request of Traders over record
date in street form) $50.00
III. Holdings Charge
Per Security per Month (Domestic Securities Only) $ 5.00
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
IV. Affirmation Charge
Per Affirmation per Month $ 1.00
V. Global Custody
U.S. Equivalent Market Value 13.75 Basis Points
Euroclear 5.00 Basis Points
VI. Automated Pricing Via NAVigator
Monthly Base Fee:
Funds with International Holdings $375.00
All other Funds $300.00
Monthly Quote Charge:
- Municipal Bonds via Muller Data $10.00
- Municipal Bonds via Kenny Information Systems $16.00
- Government, Corporate and Convertible Bonds
via Merrill Lynch $11.00
- Corporate and Government Bonds via Muller Data $11.00
- Options, Futures and Private Placements $ 6.00
- Foreign Equities and Bonds via Extel Ltd. $ 6.00
- Listed Equities, OTC Equities, and Bonds $ 6.00
- Corporate, Municipal, Convertible and
Government Bonds, Adjustable Rate Preferred
Stocks via IDSI $12.00
VII. Shareholder Check-Writing Service
Per check presented for payment
(excluding postage) $ .65
VIII. Advertised Yield Service
Annual Maintenance Fee:
For each portfolio maintained, monthly charge is based on the
number of holdings as followed:
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
Holding per Portfolio Monthly Charge
--------------------- --------------
0 to 50 $250.00
50 to 100 $300.00
over 100 $350.00
IX. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security
shipments and the preparation of special reports will be
subject to negotiation. Fees for yield calculation,
securities lending, and other special items will be
negotiated separately.
X. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month. Out-of-
pocket expenses include, but are not limited to the
following:
Telephone/Telex
Wire Charges ($5.25 per wire and $5.00 out)
Postage and Insurance (includes check writing postage)
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
(Bill directly to USAA Transfer Agency Company)
GNMA Transfer - $15 each
PTC Deposit/Withdrawal for same day turnarounds - $50.00
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
USAA TAX EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA TAX EXEMPT TRUST (name struckout)
USAA TAX FREE TRUST STATE STREET BANK & TRUST CO.
BY: /s/ Sherron Kirk BY:/s/ Marguerite Summers
----------------- -------------------------
Sherron Kirk Marguerite Summers
TITLE: TREASURER TITLE: VICE PRESIDENT
-------------- ---------------------
DATE: 10-4-94 DATE: 9/28/94
- ----------------- ------------------
EXHIBIT 8(k)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Pursuant to Section 12 of the Custodian Contract dated as of
July 27, 1984 between USAA Investment Trust (the "Investment
Trust") and State Street Bank and Trust Company (the "Custodian"),
please be advised that the Investment Trust has established three
new series of its shares, namely, the Growth Strategy Fund, the
Income Strategy Fund and the Balanced Strategy Fund (the "Funds"),
and please be further advised that the Investment Trust desires to
retain the Custodian to render custody services under the Custodian
Contract to the Funds in accordance with the fee schedule attached
hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
- ----------------------------- ---------------------------
Secretary President
Dated: September 1, 1995
We are willing to render custody services to the Growth
Strategy Fund, the Income Strategy Fund and the Balanced Strategy
Fund in accordance with the fee schedule attached hereto as
Exhibit A.
STATE STREET BANK AND TRUST
COMPANY
Attest: /s/ Paul M. Kaminski By: /s/ M. Summers
- ----------------------------- ----------------------
Assistant Vice President Vice President
Dated: September 1, 1995
STATE STREET
EXHIBIT A
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
I. Custody, Portfolio and Fund Accounting Services - Maintain
investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger, and
capital stock accounts. Prepare daily trial balance.
Calculate net asset value daily. Provide selected general
ledger reports. Securities yield or market value quotations
will be provided to State Street by the fund or via State
Streets Automated Pricing service.
The administration fee shown below is an annual charge, in
basis points, billed and payable monthly, based on average
monthly net assets.
ANNUAL FEES PER PORTFOLIO
Annual Full Service Fees
-----------------
First 50 Million 3.50 Basis Points
Next 50 Million 2.50 Basis Points
Next 100 Million 1.50 Basis Points
Excess 0.85 Basis Points
Minimum Monthly Charge $2,000.00
II. Portfolio Trades - For Each Line Item Processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $12.00
Boston/New York Physical $25.00
PTC Buy/Sell $20.00
All Other Trades $16.00
Maturity Collections (NY Physical) $ 8.00
Option Charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration/Option exercised $15.00
Interest Rate Futures -- no security movement $ 8.00
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
Principal Reduction Payments Per Paydown $10.00
Interest/Dividend Claim Charges
(For items held at the Request of Traders over record
date in street form) $50.00
III. Holdings Charge
Per Security per Month (Domestic Securities Only) $ 5.00
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
IV. Affirmation Charge
Per Affirmation per Month $ 1.00
V. Global Custody
U.S. Equivalent Market Value 13.75 Basis Points
Euroclear 5.00 Basis Points
VI. Automated Pricing Via NAVigator
Monthly Base Fee:
Funds with International Holdings $375.00
All other Funds $300.00
Monthly Quote Charge:
- Municipal Bonds via Muller Data $10.00
- Municipal Bonds via Kenny Information Systems $16.00
- Government, Corporate and Convertible Bonds
via Merrill Lynch $11.00
- Corporate and Government Bonds via Muller Data $11.00
- Options, Futures and Private Placements $ 6.00
- Foreign Equities and Bonds via Extel Ltd. $ 6.00
- Listed Equities, OTC Equities, and Bonds $ 6.00
- Corporate, Municipal, Convertible and
Government Bonds, Adjustable Rate Preferred
Stocks via IDSI $12.00
VII. Shareholder Check-Writing Service
Per check presented for payment
(excluding postage) $ .65
VIII. Advertised Yield Service
Annual Maintenance Fee:
For each portfolio maintained, monthly charge is based on the
number of holdings as followed:
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
- -------------------------------------------------------------------
Holding per Portfolio Monthly Charge
--------------------- --------------
0 to 50 $250.00
50 to 100 $300.00
over 100 $350.00
IX. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security
shipments and the preparation of special reports will be
subject to negotiation. Fees for yield calculation,
securities lending, and other special items will be
negotiated separately.
X. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month. Out-of-
pocket expenses include, but are not limited to the
following:
Telephone/Telex
Wire Charges ($5.25 per wire and $5.00 out)
Postage and Insurance (includes check writing postage)
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
(Bill directly to USAA Transfer Agency Company)
GNMA Transfer - $15 each
PTC Deposit/Withdrawal for same day turnarounds - $50.00
STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
USAA TAX-EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA STATE TAX-FREE TRUST
USAA TAX EXEMPT FUND, INC.
USAA INVESTMENT TRUST
USAA MUTUAL FUND, INC.
USAA TAX EXEMPT TRUST (name struckout)
USAA TAX FREE TRUST STATE STREET BANK & TRUST CO.
BY: /s/ Sherron Kirk BY:/s/ Marguerite Summers
----------------- -------------------------
Sherron Kirk Marguerite Summers
TITLE: TREASURER TITLE: VICE PRESIDENT
-------------- ---------------------
DATE: 10-4-94 DATE: 9/28/94
- ----------------- ------------------
EXHIBIT 9(a)
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 23rd day of January, 1992, by and
between USAA TRANSFER AGENCY COMPANY, a corporation organized
under the laws of the State of Delaware and having a place of
business in San Antonio, Texas (the "USAA Transfer Agency"), and
USAA INVESTMENT TRUST, a business trust organized under the laws
of the Commonwealth of Massachusetts, and having a place of
business in San Antonio, Texas (the "Trust"). The Trust
presently consists of six separate series designated as the
Cornerstone Fund, Gold Fund, International Fund, Balanced
Portfolio Fund, Treasury Money Market Trust and GNMA Trust
("Existing Funds") (such series together with all other series
subsequently established by the Trust with respect to which the
Trust desires to retain the USAA Transfer Agency to render
transfer agency services hereunder and with respect to which the
USAA Transfer Agency is willing to do, being herein collectively
referred to as the "Funds").
WITNESS THAT: USAA Transfer Agency is hereby appointed
Transfer Agent for the Shares of Beneficial Interest, without par
value (the "Shares") of the Trust and Dividend Disbursing Agent
for the Trust and shall act as Plan Agent for shareholders of the
Trust under the following terms and conditions:
1. DOCUMENTS.
In connection with the appointment of USAA Transfer Agency as
Transfer Agent, the Trust shall file with USAA Transfer Agency
the following documents:
(a) Certified copies of the Master Trust Agreement of the
Trust (sometimes referred to as the Agreement and Declaration
of Trust) and all amendments thereto;
(b) A certified copy of the Bylaws of the Trust as amended to date;
(c) A copy of the resolution of the Board of Trustees of the
Trust authorizing this Agreement;
(d) Specimens of all forms of outstanding and new share
certificates in the forms approved by the Board of Trustees
of the Trust with a certificate of the Secretary of the Trust
as to such approval.
(e) All account application forms and other documents relating
to record holders' accounts;
(f) A certified list of record holders of the Trust with the
name, address and tax identification number of each record
holder, the number of Shares held by each record holder,
certificate numbers and denominations (if any have been
issued), the plan account number of each record holder having
a plan, lists of any accounts against which stops have been
placed, together with the reasons for said stops, and the
number of Shares redeemed by the Trust.
(g) An opinion of counsel for the Trust with respect to the
validity of the Shares, the number of Shares authorized, the
status of redeemed Shares and the number of Shares with
respect to which a Registration Statement has been filed and
is in effect.
2. FURTHER DOCUMENTATION.
The Trust shall also furnish from time to time the following
documents:
(a) Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its Shares;
(b) Each Registration Statement filed with the Securities and
Exchange Commission and amendments thereof and orders
relating thereto in effect with respect to the sale of the
Shares of the Trust;
(c) A certified copy of each amendment to the Master Trust
Agreement and the Bylaws of the Trust;
(d) Certified copies of each vote of the Board of Trustees
authorizing officers to give instructions to the Transfer Agent;
(e) Specimens of all new share certificates accompanied by the
Board of Trustees' resolutions approving such forms;
(f) Such other certificates, documents or opinions which USAA
Transfer Agency may, in its discretion, deem necessary or
appropriate in the proper performance of its duties.
3. AUTHORIZED SHARES.
The Trust certifies to USAA Transfer Agency that as of the
close of business on the date of the Agreement, it has authorized
an unlimited number of Shares.
4. TRANSFER AGENT TO REGISTER SHARES.
USAA Transfer Agency shall record issues of Shares of the
Trust. Except as specifically agreed in writing between USAA
Transfer Agency and the Trust, USAA Transfer Agency shall have no
obligation, when crediting Shares or countersigning and issuing
certificates for Shares, to take cognizance of any other laws
relating to the issue and sale of such Shares.
5. TRANSFER AGENT TO RECORD TRANSFERS.
USAA Transfer Agency, upon receipt of proper request for
transfer and surrender to it of certificates, if any, in proper
form for transfer is authorized to transfer on the records of the
Trust maintained by it from time to time, Shares of the Trust,
and upon cancellation of surrendered certificates, if any, to
credit a like amount of Shares to the transferee and to
countersign, issue and deliver new certificates if requested.
6. SHARE CERTIFICATES.
The Trust shall supply USAA Transfer Agency with a sufficient
supply of blank share certificates and from time to time shall
renew such supply upon request of USAA Transfer Agency. Such
blank share certificates shall be properly signed, manually or by
facsimile, if authorized by the Trust, and shall bear the Trust
seal or facsimile thereof; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to
sign share certificates, USAA Transfer Agency may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
7. RECEIPT OF FUNDS.
Upon receipt at the office designated by USAA Transfer Agency
of any check or other order drawn or endorsed to it as Transfer
Agent for the Trust or as Plan Agent for any shareholder of the
Trust or otherwise identified as being for the account of the
Trust and in the case of a new account accompanied by a new
account application or sufficient information to establish an
account, USAA Transfer Agency shall stamp the check or other
order with the date of receipt, shall forthwith process the same
for collection, and compute the number of Shares to be purchased
according to the price of Shares in effect for such purchases as
set forth in the Trust's then current Prospectus. USAA Transfer
Agency shall credit the Share account of the investor with the
number of Shares so purchased and shall promptly mail the
investor a notice of such credit and mail a copy to the
Distributor. All such actions are subject to any instructions
which the Trust may give to USAA Transfer Agency with respect to
acceptance of orders for Shares so received by it. USAA Transfer
Agency shall deposit the net amount due the Trust in the bank
account of the Trust maintained by the Trust's custodian bank
(the "Custodian") and shall, on a daily basis, notify the
Custodian of the total amount deposited.
8. ISSUE OF SHARE CERTIFICATES.
If an investor requests a share certificate, USAA Transfer
Agency as Transfer Agent, shall countersign and mail by first
class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any
instructions for delivery of certificates which the Trust may
give to USAA Transfer Agency with respect to certificates
representing newly purchased Shares, and subject to the
limitation that no certificates representing newly purchased
Shares shall be mailed until the cash purchase price of such
Shares has been deposited in the bank account of the Trust
maintained by the Custodian.
9. RETURNED CHECKS.
In the event that any check or other order for the payment of
money is returned unpaid for any reason, USAA Transfer Agency
shall:
(a) Give prompt notification to the Trust of the nonpayment of
said check.
(b) In the absence of other instructions from the Trust take
such steps as may be necessary to cancel promptly any Shares
purchased on the basis of such returned check and shall
cancel accumulated dividends for such account, which are due
to that specific purchase.
10. NOTICE OF DISTRIBUTION.
The Trust shall promptly inform USAA Transfer Agency of the
declaration of any dividend or distribution on account of its
Shares.
11. DISTRIBUTIONS.
USAA Transfer Agency shall act as Dividend Disbursing Agent
for the Trust, and, as such in accordance with the provisions of
the Master Trust Agreement and then current Prospectus, shall
prepare and mail or credit income and capital gain payments to
investors. As the Dividend Disbursing Agent it shall, on or
before the payment date of any such dividend or distribution,
notify the Custodian of the estimated amount required to pay any
portion of said dividend or distribution which is payable in
cash, and the Trust agrees that on or before the payment date of
such distribution, it shall instruct the Custodian to make
available to the Dividend Disbursing Agent sufficient funds for
the cash amount to be paid out. If an investor is entitled to
receive additional Shares by virtue of any such distribution or
dividend, appropriate credits will be made to his account and/or
certificates delivered where required.
12. REDEMPTIONS.
USAA Transfer Agency shall receive and shall stamp with the
date of receipt, all certificates delivered to it for redemption
or repurchase as well as all requests for redemptions or
repurchase of Shares and shall process said certificates and
redemption and repurchase requests as follows:
(a) If such certificates, redemption or repurchase requests
comply with the standards for redemption or repurchase as
approved by the Trust, USAA Transfer Agency shall notify the
Trust of the total number of Shares presented and covered by
such requests received by USAA Transfer Agency on said date;
(b) On or prior to the seventh calendar day succeeding any
such receipt of certificates or request for redemption or
repurchase, USAA Transfer Agency shall from cash available in
the bank account maintained by the Custodian, pay the
applicable redemption or repurchase price, as the case may
be, to the investor as set forth in the Master Trust
Agreement and then current Prospectus of the Trust;
(c) If any such certificate or request for redemption or
repurchase does not comply with the standards for redemption
approved by the Trust, USAA Transfer Agency shall promptly
notify the investor of such fact, together with the reason
therefor, and shall effect such redemption or repurchase at
the price applicable to the date and time of receipt of
documents complying with said standards, or in the case of a
repurchase, at such other time as the Distributor, as agent
for the Trust, shall so direct.
13. WITHDRAWAL PLANS.
USAA Transfer Agency shall process withdrawal orders in
accordance with the terms of any withdrawal plans instituted by
the Trust and duly executed by investors. Payments upon such
withdrawal orders and redemptions of Shares held in withdrawal
plan accounts for the payment of the amounts required shall be
made at such times as the Trust may determine with the approval
of USAA Transfer Agency.
14. TAX RETURNS.
USAA Transfer Agency shall prepare, file with the Internal
Revenue Service and with the appropriate State Agencies, and, if
required, mail to investors such returns for reporting dividends
and distributions paid as are required to be so filed and mailed,
and shall withhold such sums as are required to be withheld under
applicable Federal and State income tax laws, rules and
regulations.
15. BOOKS AND RECORDS.
USAA Transfer Agency shall maintain records showing for each
investor's account the following:
(a) Names, addresses and tax identifying numbers;
(b) Number of Shares held;
(c) Historical information regarding the account of each
shareholder, including dividends paid and date and price for
all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholdings in the case of a
foreign account;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any shareholder
holding certificates;
(h) Any information required in order for USAA Transfer Agency
to perform the calculations contemplated or required by this Agreement.
Any such records required to be maintained by Rule 31a-1 of
the General Rules and Regulations under the Investment Company
Act of 1940, as amended (the "1940 Act") shall be preserved for
the periods prescribed in Rule 31a-2 of said rules as
specifically noted below. Such record retention shall be at the
expense of the Trust and records may be inspected by the Trust at
reasonable times. USAA Transfer Agency, may at its option at any
time, and shall forthwith upon the Trust's demand, turn over to
the Trust and cease to retain in USAA Transfer Agency files,
records and documents created and maintained by USAA Transfer
Agency pursuant to this Agreement, which are no longer needed by
USAA Transfer Agency in performance of its services or for its
protection. If not so turned over to the Trust, such records and
documents will be retained by USAA Transfer Agency for six years
from the year of creation, during the first two of which such
documents will be in readily accessible form. At the end of the
six year period, such records and documents will either be turned
over to the Trust, or destroyed in accordance with the Trust's
authorization.
16. INFORMATION TO BE FURNISHED TO TRUST.
USAA Transfer Agency shall furnish to the Trust periodically
as agreed upon the following information:
(a) A copy of the daily transaction register;
(b) Dividend and reinvestment amounts;
(c) The total number of Shares distributed in each state for
"blue sky" purposes as determined according to instructions
delivered from time to time by the Trust to USAA Transfer
Agency.
17. OTHER INFORMATION TO THE TRUST.
USAA Transfer Agency shall furnish to the Trust such other
information, including shareholder lists, and statistical
information as may be agreed upon from time to time.
18. CORRESPONDENCE.
USAA Transfer Agency shall answer that correspondence from
shareholders relating to their Share accounts and such other
correspondence as may from time to time be mutually agreed upon.
19. PROXIES.
USAA Transfer Agency shall mail such proxy cards and other
material supplied to it by the Trust in connection with
shareholder meetings of the Trust and shall receive, examine and
tabulate returned proxies and certify the vote of the Trust.
20. FEES AND CHARGES.
USAA Transfer Agency shall receive such compensation from the
Trust for its services as the Trust's Transfer and Dividend
Disbursing Agent, as Plan Agent for shareholders of the Trust,
and for its other duties pursuant hereto as may be agreed from
time to time, and shall be reimbursed for the cost of any and all
forms, including blank checks and proxies, used by it in
communicating with shareholders of the Trust, or especially
prepared for use in connection with its actions hereunder, as
well as the cost of postage, telephone (including facsimile
transmission) and telegraph used in communicating with
shareholders of the Trust, it being agreed that USAA Transfer
Agency, prior to ordering any forms in such supply as it
estimates will be adequate for more than two years' use, shall
obtain the written consent of the Trust. All forms for which
USAA Transfer Agency has received reimbursement from the Trust
shall be and remain the property of the Trust until used. The
cost of microfilm and microfiche for record retention shall be
reimbursed by the Trust. USAA Transfer Agency shall also receive
from the Trust reimbursement for all counsel fees incurred by
USAA Transfer Agency in connection with the performance of its
duties under this Agreement, unless such fees are incurred on a
matter involving USAA Transfer Agency's willful misconduct or
gross negligence.
21. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The Trust assumes full responsibility for the preparation,
contents and distribution of each Prospectus of the Trust for
complying with all applicable requirements of the Securities Act
of 1933, as amended, the Investment Company Act of 1940, as
amended, and any laws, rules and regulations of governmental
authorities having jurisdiction.
22. REFERENCES TO USAA TRANSFER AGENCY COMPANY.
The Trust shall not circulate any printed matter which
contains any reference to USAA Transfer Agency without the prior
written approval of USAA Transfer Agency, excepting solely such
printed matter as merely identifies USAA Transfer Agency as
Transfer Agent and Dividend Disbursing Agent for the Trust and
Plan Agent for the shareholders of the Trust. The Trust shall
submit printed matter requiring approval to USAA Transfer Agency
in draft form, allowing sufficient time for review by USAA
Transfer Agency and its counsel prior to any deadline for
printing.
23. FORCE MAJEURE.
USAA Transfer Agency shall not be liable for loss of data,
occurring by reason of circumstance beyond its control, including
but not limited to acts of civil or military authority, national
emergencies, fire, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of transportation,
communication or power supply. USAA Transfer Agency shall use
its best efforts to minimize the likelihood of all damage, loss
of data, delays and errors resulting from uncontrollable events,
and if such damage, loss of data, delays or errors occur, USAA
Transfer Agency shall use its best efforts to mitigate the
effects of such occurrence.
24. STANDARD OF CARE.
USAA Transfer Agency shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure
the accuracy of all services performed under this Agreement, but
assumes no responsibility and shall not be liable for loss or
damage due to errors unless said error is caused by its gross
negligence, bad faith or willful misconduct or that of its
employees.
25. INDEMNIFICATION.
The Trust shall indemnify and hold USAA Transfer Agency
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with its
acceptance of this Agreement, any action or omission by it in the
performance of its duties hereunder, or the functions of Transfer
and Dividend Disbursing Agent and Plan Agent, or as a result of
acting upon any instruction believed by it to have been executed
by a duly authorized officer of the Trust, or upon any
information, data, records or documents provided USAA Transfer
Agency or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Trust, provided that this
indemnification shall not apply to actions or omissions of USAA
Transfer Agency in cases of its own willful misconduct or gross
negligence, and further provided, that prior to confessing any
claim against it which may be the subject of this
indemnification, USAA Transfer Agency shall give the Trust
reasonable opportunity to defend against said claim in its own
name or in the name of USAA Transfer Agency.
26. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
27. AMENDMENT AND TERMINATION.
This Agreement shall be executed and become effective with
respect to all Existing Funds on January 23, 1992, and, with
respect to any additional Fund, on the date of receipt by the
Trust of notice from the USAA Transfer Agency in accordance with
this paragraph that the USAA Transfer Agency is willing to serve
as Transfer Agent with respect to such Fund. Unless terminated
as herein provided, this Agreement shall remain in full force and
effect through June 30, 1992, and, with respect to each
additional Fund, through the first June 30 occurring more than
twelve months after the date on which such Fund becomes a Fund
hereunder, and shall continue in full force and effect for
periods of one year thereafter with respect to each Fund so long
as such continuance with respect to any such Fund is approved at
least annually (a) by either the Trustees of the Trust or by vote
of a majority of the outstanding voting Shares (as defined in the
1940 Act) of such Fund, and (b) in either event by the vote of a
majority of the Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be
modified or amended from time to time by mutual agreement between
the parties hereto. The Agreement may be terminated at any time
after the expiration of such one year by sixty (60) days' written
notice given by one party to the other. Upon termination hereof,
the Trust shall pay to USAA Transfer Agency such compensation as
may be due as of the date of such termination, and shall likewise
reimburse USAA Transfer Agency for its costs, expenses and
disbursements. This Agreement supersedes any prior agreement
relating to the subject matter hereof between the parties.
28. LIMITATION OF LIABILITY.
The Master Trust Agreement dated May 9, 1984, as amended from
time to time, establishing the Trust, which is hereby referred to
and a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts, provides that the name USAA
Investment Trust means the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement.
It is expressly acknowledged and agreed that the obligations of
the Trust hereunder shall not be binding upon any of the
shareholders, Trustees, officers, employees or agents of the
Trust, personally, but shall bind only the trust property of the
Trust, as provided in its Master Trust Agreement. The execution
and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by the President of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any
liability of any of them personally, but shall bind only the
trust property of the Trust as provided in its Master Trust
Agreement.
EXECUTED under seal as of the day and year first above
written.
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
By: /s/ Michael J.C. Roth By: /s/ Joseph H.L. Jimenez
- ------------------------- ---------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
ATTEST: ATTEST:
/s/ Michael D. Wagner /s/ Michael D. Wagner
- --------------------- ---------------------
Secretary Secretary
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Cornerstone Fund
- ---------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Cornerstone Fund - charge per account $16.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Cornerstone Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: January 23, 1992 Date: January 23, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Gold Fund
- -------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Gold Fund - charge per account $16.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Gold Fund
By: /s/ Michael J. C. Roth By:/s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date:January 23, 1992 Date:January 23, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
International Fund
- -------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
International Fund - charge per account $16.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
International Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- --------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date:January 23, 1992 Date:January 23, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Balanced Portfolio Fund
- -----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Balanced Portfolio Fund - charge per account $14.38
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Balanced Portfolio Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- --------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date:January 23, 1992 Date:January 23, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Treasury Money Market Trust
- -----------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Treasury Money Market Trust - charge per account $6.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Treasury Money Market Trust
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date:January 23, 1992 Date:January 23, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
GNMA Trust
- ----------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
GNMA Trust - charge per account $14.38
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
GNMA Trust
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date:January 23, 1992 Date:January 23, 1992
EXHIBIT 9(b)
USAA Transfer Agency Company
USAA Building
San Antonio, TX 78288
Ladies and Gentlemen:
Pursuant to Section 27 of the Transfer Agency Agreement dated
as of July 9, 1990 between USAA Investment Trust (the "Trust")
and USAA Transfer Agency Company (the "Transfer Agent") please be
advised that the Trust has established a new series of its
shares, namely, the World Growth Fund (the "Fund"), and please be
further advised that the Trust desires to retain the Transfer
Agent to render transfer agency services under the Transfer
Agency Agreement to the Fund in accordance with the fee schedule
attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
--------------------- -----------------------
Secretary President
Dated: July 21, 1992
We are willing to render transfer agency services to the
World Growth Fund in accordance with the fee schedules attached
hereto as Exhibit A.
USAA TRANSFER AGENCY COMPANY
Attest: /s/ Nora P. McDaniel By: /s/ Dyek R. Boles
-------------------- -------------------
Assistant Secretary Treasurer
Dated: July 21, 1992
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
World Growth Fund
- --------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
World Growth Fund - charge per account $16.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
World Growth Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: October 1, 1992 Date: October 1, 1992
EXHIBIT 9(c)
USAA Transfer Agency Company
9800 Fredericksburg Road
San Antonio, TX 78288
Ladies and Gentlemen:
Pursuant to Section 27 of the Transfer Agency Agreement dated
as of January 23, 1992 between USAA Investment Trust (the
"Investment Trust") and USAA Transfer Agency Company (the
"Transfer Agent"), please be advised that the Investment Trust
has established a new series of its shares, namely, the Emerging
Markets Fund (the "Fund"), and please be further advised that the
Investment Trust desires to retain the Transfer Agent to render
transfer agency services under the Transfer Agency Agreement to
the Fund in accordance with the fee schedule attached hereto as
Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
--------------------- -----------------------
Secretary President
Dated: September 7, 1994
We are willing to render transfer agency services to the
Emerging Markets Fund in accordance with the fee schedules
attached hereto as Exhibit A.
USAA TRANSFER AGENCY COMPANY
Attest: /s/ Michael D. Wagner By: /s/ Joseph H. L. Jimenez
---------------------- --------------------------
Assistant Secretary Vice President
Dated: September 7, 1994
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Emerging Markets Fund
- ----------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Emerging Markets Fund - charge per account $20.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Emerging Markets Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
------------------------ --------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: September 7, 1994 Date: September 7, 1994
EXHIBIT 9(d)
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Emerging Markets Fund
- -------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Emerging Markets Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Emerging Markets Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- ------------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
International Fund
- -------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
International Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
International Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Treasury Money Market Trust
- ---------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Treasury Money Market Trust - charge per account $26.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Treasury Money Market Trust
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Balanced Portfolio Fund
- -------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Balanced Portfolio Fund - charge per account $26.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Balanced Portfolio Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Cornerstone Fund
- -------------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Cornerstone Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Cornerstone Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- --------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Gold Fund
- -----------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Gold Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Gold Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
World Growth Fund
- --------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
World Growth Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
World Growth Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- ---------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
GNMA Trust
- -------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
GNMA Trust - charge per account $26.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
GNMA Trust
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- --------------------------- -------------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: May 3, 1995 Date: May 3, 1995
EXHIBIT 9(e)
USAA Transfer Agency Company
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Ladies and Gentlemen:
Pursuant to Section 27 of the Transfer Agency Agreement dated
as of January 23, 1992 between USAA Investment Trust (the
"Investment Trust") and USAA Transfer Agency Company (the
"Transfer Agent"), please be advised that the Investment Trust
has established three new series of its shares, namely, the
Growth Strategy Fund, the Income Strategy Fund and the Balanced
Strategy Fund (the "Funds"), and please be further advised that
the Investment Trust desires to retain the Transfer Agent to
render transfer agency services under the Transfer Agency
Agreement to the Funds in accordance with the fee schedule
attached hereto as Exhibit A.
Please state below whether you are willing to render such
services in accordance with the fee schedule attached hereto as
Exhibit A.
USAA INVESTMENT TRUST
Attest: /s/ Michael D. Wagner By: /s/ Michael J. C. Roth
- ----------------------------- ---------------------------
Secretary President
Dated: September 1, 1995
We are willing to render transfer agency services to the
Growth Strategy Fund, the Income Strategy Fund and the Balanced
Strategy Fund in accordance with the fee schedules attached
hereto as Exhibit A.
USAA TRANSFER AGENCY COMPANY
Attest: /s/ Alex M. Ciccone By: /s/ Joseph H. L. Jimenez
- --------------------------- -----------------------------
Assistant Secretary Vice President
Dated: September 1, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Growth Strategy Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Growth Strategy Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Growth Strategy Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- --------------------------- -----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: September 1, 1995 Date: September 1, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Income Strategy Fund
- ----------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Income Strategy Fund - charge per account $26.00
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Income Strategy Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: September 1, 1995 Date: September 1, 1995
USAA Transfer Agency Company
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
USAA INVESTMENT TRUST
Balanced Strategy Fund
- --------------------------------------------------------------------
General - Fees are based on an annual per shareholder account
charge for account maintenance plus out-of-pocket expenses.
There is a minimum charge of $2,000 per month applicable to the
entire fund complex.
Annual Maintenance Charges - The annual maintenance charge
includes the processing of all transactions and correspondence.
The fee is billable on a monthly basis at the rate of 1/12 of the
annual fee. USAA Transfer Agency Company will charge for each
open account from the month the account is opened through January
of the year following the year all funds are redeemed from the
account.
Balanced Strategy Fund - charge per account $23.50
USAA INVESTMENT TRUST USAA TRANSFER AGENCY COMPANY
Balanced Strategy Fund
By: /s/ Michael J. C. Roth By: /s/ Joseph H. L. Jimenez
- -------------------------- ----------------------------
Michael J. C. Roth Joseph H. L. Jimenez
President Vice President
Date: September 1, 1995 Date: September 1, 1995
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) 227-8591
CABLE.GOODPROCT,BOSTON
September 18, 1995
USAA Investment Trust
USAA Building
9800 Fredricksburg Road
San Antonio, TX 78288
Gentlemen:
As counsel to USAA Investment Trust (the "Trust"), a
Massachusetts business trust, we have been asked to render our
opinion with respect to the issuance of an indefinite number of
shares of beneficial interest, no par value, of the Trust (the
"Shares") representing interests in the Growth and Tax Strategy
Fund, Cornerstone Strategy Fund, Emerging Markets Fund, Gold
Fund, International Fund, World Growth Fund, GNMA Trust, and
Treasury Money Market Trust series of the Trust, as more fully
described in the Prospectuses and Statement of Additional
Information contained in Post-Effective Amendment No. 21 (the
"Amendment") to the Trust's Registration Statement (No. 2-91069)
on Form N-1A.
We have examined the First Amended and Restated Master Trust
Agreement of the Trust dated June 2, 1995, as amended, the By-
Laws of the Trust, as amended, the records of certain meetings
and written consents of the Trustees of the Trust, the
Prospectuses and Statement of Additional Information relating to
the Shares contained in the Amendment, and such other documents,
records and certificates as we have deemed necessary for the
purposes of this opinion.
Based upon the foregoing, we are of the opinion that the
Shares, when issued and sold in accordance with the terms of the
Prospectus and Statement of Additional Information relating to
the Shares in effect at the time of such issuance and sale, will
be legally issued, fully paid and non-assessable by the Trust.
We hereby consent to the reference in the Amendment of our
opinion with respect to the legality of the shares of the Trust
representing interests in the Income Strategy Fund, Balanced
Strategy Fund and Growth Strategy Fund series of the Trust, which
opinion was filed with Post-Effective Amendment No. 20 to the
Registration Statement.
GOODWIN, PROCTER & HOAR
USAA Investment Trust
September 18, 1995
Page 2
We also hereby consent to the reference to this firm in the
Prospectuses under the heading "Legal Counsel" and in the
Statements of Additional Information under the heading "General
Information--Counsel" which form a part of the Amendment and to
the filing of this opinion as an exhibit to the Amendment.
Very truly yours,
/s/Goodwin, Procter & Hoar
----------------------------
GOODWIN, PROCTER & HOAR
EXHIBIT 11
The Shareholders and Board of Trustees
USAA Investment Trust
We consent to the use of our reports dated July 7, 1995 on the
financial statements of the Balanced Portfolio, Cornerstone,
Gold, International, World Growth and Emerging Markets Funds and
the GNMA and Treasury Money Market Trusts, separate Funds of the
USAA Investment Trust (the Trust), as of and for the year ended
May 31, 1995 included in the Trust's Annual Reports to
Shareholders for the year ended May 31, 1995 incorporated herein
by reference and to the references to our firm under the headings
"Financial Highlights" and "Independent Auditors" as part of
Post-Effective Amendment No. 21 under the Securities Act of 1933,
as amended, and Amendment No. 23 under the Investment Company Act
of 1940, as amended, to the Trust's Registration Statement on
Form N-1A.
/s/ KPMG Peat Marwick LLP
-------------------------
San Antonio, Texas
September 20, 1995
EXHIBIT 13(a)
SUBSCRIPTION
January 24, 1991
TO: Board of Trustees
USAA Investment Trust
USAA Building
San Antonio, Texas 78228
Dear Sirs:
The undersigned hereby subscribes to 100 shares of the
Treasury Money Market Trust series one cent par value, of USAA
Investment Trust at a price of $1.00 per share and agrees to pay
therefore, upon demand, cash in the amount of $100 to the named
Trust.
The undersigned hereby further subscribes to 10 shares of
the GNMA Trust series one cent par value, of USAA Investment
Trust at a price of $10.00 per share and agrees to pay therefore
upon demand, cash in the amount of $100 to the named Trust.
Very truly yours,
USAA INVESTMENT
MANAGEMENT COMPANY
/s/ Michael J. C. Roth
-----------------------
By: MICHAEL J.C. ROTH
President
January 24, 1991
USAA Investment Trust
USAA Building
San Antonio, TX 78288
Gentlemen:
In connection with the sale to us today of ten (10) shares
of capital stock representing interests in the GNMA Trust and one
hundred (100) shares of capital stock representing interests in
the Treasury Money Market Trust (collectively, the "Federal
Securities Trusts"), 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 Trust, unless 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
--------------------------
MICHAEL J.C. ROTH
President
EXHIBIT 13(b)
SUBSCRIPTION
July 21, 1992
TO: Board of Trustees
USAA Investment Trust
USAA Building
San Antonio, Texas 78228
Dear Sirs:
The undersigned hereby subscribes to 10 shares of the World
Growth Fund series one cent par value, of USAA Investment Trust
at a price of $10.00 per share and agrees to pay therefore upon
demand, cash in the amount of $100 to the named Trust.
Very truly yours,
USAA INVESTMENT
MANAGEMENT COMPANY
/s/ Michael J. C. Roth
-----------------------
By: MICHAEL J.C. ROTH
President
July 21, 1992
USAA Investment Trust
USAA Building
San Antonio, TX 78288
Gentlemen:
In connection with the sale to us today of ten (10) shares
of capital stock representing interests in the World Growth 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 Trust, unless 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
---------------------------
MICHAEL J.C. ROTH
President
EXHIBIT 13(c)
SUBSCRIPTION
October 24, 1994
TO: Board of Trustees
USAA Investment Trust
9800 Fredericksburg Road
San Antonio, TX 78288
Dear Sir:
The undersigned hereby subscribes to 10 shares of the
Emerging Markets Fund series one cent par value, of USAA
Investment Trust at a price of $10.00 per share and agrees to pay
therefore upon demand, cash in the amount of $100 to the named
Trust.
Very truly yours,
USAA INVESTMENT MANAGEMENT
COMPANY
/s/ Michael J. C. Roth
-----------------------
By: MICHAEL J.C. ROTH
President
October 24, 1994
USAA Investment Trust
9800 Fredericksburg Road
San Antonio, TX 78288
Gentlemen:
In connection with your sale to us today of ten (10) shares
of capital stock representing interests in the Emerging Markets
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 Trust, unless and until the Shares have been registered under
the 1933 Act or you have received an opinion of your counsel
indicting to your satisfaction that said sale, assignment or
transfer will not violate the provisions of the 1933 Act or any
rules or regulations promulgated thereunder.
Very truly yours,
USAA INVESTMENT MANAGEMENT
COMPANY
By: /s/ Michael J. C. Roth
--------------------------
MICHAEL J.C. ROTH
President
EXHIBIT 13(d)
SUBSCRIPTION
September 1, 1995
TO: Board of Trustees
USAA Investment Trust
10750 Robert F. McDermott Freeway
San Antonio, Texas
Dear Sirs:
The undersigned hereby subscribes to 10 shares of the Growth
Strategy Fund series, 10 shares of the Income Strategy Fund
series, and 10 shares of the Balanced Strategy Fund series, of
USAA Investment Trust at a price of $10.00 per share for each
Fund and agrees to pay therefore, upon demand, cash in the amount
of $100 to each of the named Funds.
Very truly yours,
USAA INVESTMENT
MANAGEMENT COMPANY
/s/ Michael J. C. Roth
-----------------------
By: MICHAEL J.C. ROTH
President
September 1, 1995
USAA Investment Trust
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Gentlemen:
In connection with the sale to us today of ten (10) shares
of capital stock representing interests in the Growth Strategy
Fund, ten (10) shares of capital stock representing interests in
the Income Strategy Fund and ten (10) shares of capital stock
representing interests in the Balanced Strategy Fund, we
understand that: (i) 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 (ii) 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 Trust, unless 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
---------------------------
MICHAEL J.C. ROTH
President
EXHIBIT 14(a)
[A picture of the USAA Eagle Logo is here]
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
IRA HANDBOOK
Page 1
Contents
Your Personal Retirement Plan 2
Which USAA Funds are Best For Me? 3
Questions and Answers 5
How to Apply 7
Checklist 8
Custodial Agreement 9
Disclosure Statement 16
Page 2
Your Personal Retirement Plan
An Individual Retirement Account (IRA) offers you many benefits. It would be
wise to consider establishing an account today for tomorrow's needs. Most
financial experts agree an IRA should be a part of every investor's financial
plan.
IRAs are still an important tax-saving investment. All dividends, interest,
and capital gains accumulate in your IRA on a tax-deferred basis. IRA earnings
are not federally taxed until you start making withdrawals (except for non-
deductible IRA contributions which are returned tax-free). This tax-deferred
accumulation in your IRA has a dramatic effect on your retirement income.
(see chart below)
Key reasons for opening an IRA:
* tax-deferred earnings
* supplemental retirement income
* Social Security may prove to be inadequate
* control of your financial future
* flexible investment
THE DRAMATIC DIFFERENCE IRA TAX SAVINGS CAN MAKE
[$2,000 annual investment at 8% over 5 years]*
[A graph is shown here which is a comparison of Taxable Returns at 8% to a
Tax-Deferred IRA Return at 8%, assuming $2,000 annual investments over 5
years. The ending taxable figure is $8,582.86 and the ending tax-deferred
IRA figure is $12,733.27.]
* Based on a hypothetical 8% annual rate of return compounded monthly.
Assumes a 28% tax bracket. This chart is for illustration purposes only.
It is not an indication of past or future results of an investment in any of
the funds managed and distributed by USAA Investment Management Company.
Management and administrative fees not included.
Page 3
Which USAA Funds Are Best For Me?
THE MUTUAL FUND ALTERNATIVE
Mutual fund IRAs offer managed investments and diversification through a
variety of stock, bond, income, and money market instruments which have
historically outperformed fixed-rate investments when held over an extended
period of time. What's more, you have flexibility to exchange shares from
fund to fund. That's very important if you want your investment to respond to
economic changes over the next ten, 20, or even 30 years.
USAA Investment Management Company (IMCO) manages and distributes a variety
of mutual fund IRAs to meet your own personal investment objectives. Here are
some of the many advantages of investing in a USAA mutual fund for your IRA:
PROFESSIONAL MANAGEMENT
USAA mutual funds are managed by investment professionals with the education,
knowledge, and experience to make sound investment decisions with your money
- -- decisions you might not have the time, interest, or training to make.
NO SALES CHARGE
USAA's funds are totally "no-load," which means you pay no sales commission,
redemption or 12b-l fees.
INVESTMENT FLEXIBILITY
USAA IMCO currently manages a family of mutual funds suitable for your IRA
with investment objectives ranging from conservative to aggressive (see chart
on next page).
DIVERSIFICATION
Each USAA mutual fund invests in a wide selection of securities (stocks,
bonds, etc.) suited to its particular investment objective, diversified by
economic sector, industry, and companies within a single industry, or it
invests in a variety of short-term money market instruments.
EXCHANGE PRIVILEGE
The family of funds managed by USAA IMCO offers a free exchange privilege
whereby you may control your investment by exchanging shares of one fund for
shares of another fund.
PERFORMANCE RESULTS
These are readily available every day in the financial section of most major
newspapers, as well as in the annual and semiannual reports sent directly to
you.
FINANCIAL REPORTS
You will receive a statement of your IRA account status when you open it and
whenever you make a transaction. In addition, you'll receive annual and
semiannual performance reports for the funds in which you invest.
USAA MUTUAL FUNDS SUITABLE FOR YOUR IRA
Aggressive Growth Fund Income Stock Fund
Cornerstone Fund International Fund
Emerging Markets Fund Money Market Fund
GNMA Trust Short-Term Bond Fund
Gold Fund Treasury Money
Growth Fund Market Trust
Growth & Income Fund World Growth Fund
Income Fund
If you did not request a prospectus for some of the funds listed here and
would like more complete information, including management fees charged and
expenses, please call us toll free at 1-800-531-8181. Please read the
prospectus carefully before you invest or send money. Everyone's investment
situation differs. Your age, income, net worth, comfort with risk, as well
as current market conditions, are all factors to consider in deciding which
investment is best for you.
Which funds are right for your IRA? You might want to take the following
factors into account when making your decision:
AGE
If you are older and close to retirement, you might want current income and
relative safety. If you are younger, you might be willing to accept a degree
of risk in hopes of larger long-term gains.
Page 4
Which USAA Funds Are Best For Me?
MARKET CONDITIONS
Fluctuating market conditions can affect all mutual funds -- aggressive and
conservative. Current market conditions, therefore, must be a primary
consideration when you select a fund for your IRA.
For example, when interest rates are high, money market funds are popular
with investors. But if the rates appear to be declining, some investors may
choose to switch to a growth or income fund. The flexibility to exchange
funds during periods of market swings is one of the best features of a mutual
fund. However, many fund managers and investment advisers insist there is no
foolproof system for calling the market's turns.
RISK TOLERANCE
If safety is a strong consideration, you're better off in the conservative or
moderate funds. If you're willing to accept risk, the aggressive funds may be
your best investment decision. You must be comfortable with the idea that the
value of your investment is likely to fluctuate depending on the market
situation.
PRIMARY RELATIVE
FUND INVESTMENT IMPORTANCE
TYPE/NAME OBJECTIVE INVESTS IN... VOLATILITY OF INCOME
- -----------------------------------------------------------------------------
AGGRESSIVE GROWTH
- -----------------
AGGRESSIVE Capital appreciation Stocks Very high Low
GROWTH FUND
EMERGING Capital appreciation Emerging Very high Low
MARKETS FUND markets
stocks
GROWTH
- -------
GROWTH FUND Capital appreciation Stocks Moderate Moderate
to high
INTERNATIONAL Capital appreciation Foreign Moderate Low
FUND*** stocks to high
WORLD Capital appreciation Foreign Moderate Low
GROWTH FUND*** stocks & to high
domestic
stocks
GROWTH & INCOME
- -----------------
GROWTH & Capital growth & Dividend Moderate Moderate
INCOME FUND current income paying common
stocks,
convertible
bonds
INCOME
- ------
INCOME Current income Bonds Moderate High
FUND (BONDS) and conservation
of capital
INCOME STOCK Current income, Stocks Moderate High
FUND (STOCKS) increasing dividend
income, capital
appreciation
GNMA TRUST Current income & Government Low to High
conservation of National moderate
capital Mortgage
Association
certificates
SHORT-TERM High current income Investment- Low High
BOND FUND with preservation of grade
principal securities,
bonds
PRECIOUS METALS
- ---------------
GOLD FUND Capital Gold mining & Very high Low
appreciation precious metals
stocks
MONEY MARKET
- -------------
MONEY Current income Money market Very low High
MARKET FUND+ plus stable instruments
principal
TREASURY Current income & U.S. Treasury Very low High
MONEY MARKET conservation of securities
TRUST+ capital with the
highest degree of
safety
DIVERSIFIED
- ------------
CORNERSTONE Achieve a positive Gold mining, Moderate Moderate
FUND inflation-adjusted real estate,
rate of return foreign & basic
value stocks,
government
securities
*** Foreign investing is subject to certain risks, which are discussed in the
Fund's prospectus. + An investment in any Money Market Fund or Treasury Money
Market Trust is neither insured nor guaranteed by the U.S. government and
there is no assurance the fund will be able to maintain a stable net asset
value of $1 per share.
Page 5
Some Basic IRA Questions and Answers
Q Who is eligible for an IRA?
A Any individual under age 70 1/2 with earned income is eligible to set up
an IRA. You may also qualify for an IRA if you receive taxable alimony or
separate maintenance payments according to a valid divorce or separation
agreement.
Q How much may I contribute to an IRA each year?
A You may contribute up to $2,000 to a regular IRA each year. For married
couples where only one spouse has earned income, or where both spouses have
earned income and one spouse elects to be treated as if he or she does not
have earned income, up to $2,250 may be split between a spousal IRA and a
regular IRA (no more than $2,000 may be deposited in either account). If each
person has earned income of at least $2,000, both may open an account and
contribute up to $2,000 for a maximum of $4,000.
The Tax Reform Act limits the deductibility of IRA contributions for certain
individuals. However, you may still make voluntary contributions to an IRA
regardless of deductibility status.
The amount of the contribution to a regular or spousal IRA which is deductible
depends on whether you (or your spouse) are an active participant in an
employer-sponsored retirement plan.
Q Why would a person want to open an IRA if the contribution isn't tax
deductible?
A Even if you are covered by a "qualified retirement plan" and cannot
deduct your contribution, you should still consider having an IRA. The
earnings will be tax-deferred until withdrawal. Earnings from most forms of
savings are taxed in the year in which they are earned. The effect is to
reduce the net yield on your money. Therefore, an IRA will continue to be an
excellent way to prepare for the financial needs of your retirement years.
Q When are employees considered to be covered by a "qualified retirement
plan"?
A Employees are considered covered by a qualified retirement plan if they
are active participants in any employer-maintained retirement plan, such as a
pension plan, savings and investment plan, a profit-sharing plan, a stock
bonus plan, a SEP plan, or a Section 401(k) or 403(b)(7) plan. Please ask your
employer if you have questions about being covered by a qualified retirement
plan.
Q Can married individuals filing separately who are not covered by a
qualified retirement plan deduct their IRA contribution?
A Yes, up to present law limitations ($2,000 for individual and $2,250 for
spousal IRAs) regardless of their level of income, but only if they live apart
from their spouses at all times during the year.
Q Are all individuals who are covered by a qualified retirement plan
automatically ineligible to deduct their IRA contribution?
A No. Single individuals who have an adjusted gross income of $25,000 or
less ($40,000 on joint returns) may deduct their IRA contribution even if
covered by another retirement plan. If adjusted gross income of a single
individual is between $25,000 and $35,000 ($40,000 and $50,000 on joint
returns), deductions for IRA contributions are allowed on a pro rata basis.
Once adjusted gross income of single individuals equals or exceeds $35,000
($50,000 on joint returns), their IRA deductions are not permitted if they
are covered by another qualified retirement plan.
Q How much is the initial investment to open a USAA mutual fund IRA?
A To open one of our regular mutual fund accounts for your IRA, the
minimum investment is $1,000 ($250 for Spousal IRAs).
Q What does your IRA pay?
A Unlike some other types of IRA instruments, we cannot promise or
guarantee a stated rate of return on your mutual fund IRA. With a mutual fund
IRA, however, you are not locked into a fixed rate of return on your
investment. Your return varies depending on which fund you select, interest
rates, dividend income, and individual stock and bond prices.
Q When may I make contributions?
A At your convenience. You are not asked to adhere to a set contribution
schedule. The amounts of your contribution may vary, as long as the total
annual contribution doesn't exceed the maximums and deadline for contributions.
Q When may I begin to receive distributions from my IRA?
A You may start withdrawals without tax penalties anytime after age 59 1/2
or if you become permanently disabled.
Q What is the latest date I may begin withdrawals from my IRA?
A The law requires that you begin to receive distributions from your IRA
no later than April 1 following the calendar year in which you reach age
70 1/2. If you make withdrawals at that time in installments, certain
minimum distributions (based on your life expectancy or the joint life
expectancies of you and your beneficiary) must begin. A 50% penalty tax will
be imposed if the amount actually distributed to you after age 70 1/2 is less
than the amount required by law to be distributed.
Q Are there penalties if I withdraw my money early?
A Unless you are permanently disabled, any money received from your IRA (in
a form other than a life annuity) before age 59 1/2 must be rolled over into
another tax-qualified plan or IRA within 60 days. Otherwise, any premature
distributions will be assessed a 10% penalty on the amount withdrawn, in
addition to ordinary income tax on the amount withdrawn.
Q If I have an IRA with another financial institution, must I leave it
there?
A No. If you decide it's in your best interest to change, you may
transfer your account from your present custodian directly to a USAA mutual
fund plan. Of course, such a transfer would be subject to the rules of your
existing account. One word of caution: Depending on the financial
institution involved, custodian-to-custodian transfer can take several weeks
to complete. So if you wish to transfer, we suggest you start early.
Q How is a rollover different from a transfer?
A A rollover is a transaction in which you receive a distribution of assets
from one tax-qualified retirement program and reinvest all (or part) of the
funds in an IRA within 60 days of receipt of the distribution. A transfer is a
transaction where you arrange for funds to be transferred directly from one
financial institution to another without handling the funds yourself. You may
transfer at any time; but you may make only one rollover in any one-year
period. This one per year rule applies separately to each IRA you own. As of
January 1, 1993 if you're planning to change jobs or retire you could be
affected by an IRS rule. If you roll over a lump-sum distribution from your
tax-qualified pension plan (for example, a 403(b)(7), 401(k) or Keogh plan),
20% of your money could be withheld to pay taxes. Fortunately, with proper
planning, you should be able to avoid this tax by notifying your employer that
you want to use the "direct rollover" procedure. In a direct rollover the
employer sends your retirement funds to the financial institution of your
choice.
Make sure you don't take possession ("constructive receipt") of the funds if
you want to avoid the 20% withholding. If you have any questions regarding
this IRS rule or if you are considering taking a distribution from your
retirement plan in the future, we suggest you contact your employer's plan
administrator for more information about a "direct rollover."
Q What happens to my IRA when I die?
A The value of your IRA will be paid to your designated beneficiary upon
your death. If you should fail to designate a beneficiary in writing or if
your beneficiary predeceases you, the value of your IRA, upon your death, will
be paid to your estate.
Page 7
How To Apply
Opening a mutual fund IRA might seem complicated. But it's rather simple if
you follow the instructions we've provided below.
OPEN YOUR IRA
- -------------
Fill out the enclosed IRA Application and Adoption Agreement and return it
with a check to USAA Shareholder Account Services. Be sure to specify which
fund you choose for your IRA.
FOR SPOUSAL IRA
- ---------------
The spouse without earned income (or who is considered not to have earned
income) for the year will complete a separate application in his or her name
and check the Spousal IRA block if the maximum contribution of $2,250 is
submitted. If both spouses work and want to set up IRAs, each must fill out
an application, and neither will check the Spousal IRA block. A second
application is enclosed for your spouse's use. A transaction statement will
be mailed to you when your application is accepted.
CONTRIBUTIONS
- -------------
INITIAL CONTRIBUTIONS: The minimum initial contribution is $1,000. ($250 for
spousal IRA)
MAXIMUM INDIVIDUAL CONTRIBUTIONS: Your IRA contributions (not including
rollover contributions) for any one tax year cannot exceed $2,000. If your
spouse works, he or she can also open an IRA for $2,000 if he or she has that
much income.
MAXIMUM SPOUSAL CONTRIBUTIONS: If your spouse doesn't have earned income (or
is not considered to have earned income) you may split a contribution of
$2,250 between your two accounts, provided that neither contribution exceeds
$2,000 for the tax year.
FEES
- ----
ANNUAL MAINTENANCE FEE: There are no annual IRA maintenance fees.
WITHDRAWAL FEES: $20.00 fee for total distribution. Exceptions to the fee are:
partial distributions, total transfer within USAA, and distributions due to
disability or death.
TRANSFER AN EXISTING IRA TO A USAA MUTUAL FUND IRA
- --------------------------------------------------
Complete the IRA Transfer Request and mail with the IRA Application and
Adoption Agreement to USAA Shareholder Account Services. You will not handle
the IRA funds; they will be sent directly from your current financial
institution to USAA Shareholder Account Services.
MAKE ROLLOVER CONTRIBUTIONS TO YOUR IRA
- ---------------------------------------
If this is a rollover contribution, check the appropriate block. Send a check
for the amount of the rollover to USAA Shareholder Account Services with the
IRA Application and Adoption Agreement. Rollovers must be made into the new
account within 60 days of receipt of a distribution from the old account.
Refer to the disclosure statement at the end of this booklet for more
information about rollover IRAs.
ADD MONEY TO YOUR IRA
- ---------------------
Complete the tear-off stub attached to your IRA statement when you receive it
and return it with a check to USAA Shareholder Account Services. Be sure to
indicate the tax year on your contribution.*
ARRANGE FOR AUTOMATIC BANK-DEBIT INVESTING
- ------------------------------------------
You may make automatic contributions to your IRA from a bank account through
IMCO's InvesTronic (registered trademark) automatic investment plan. Complete
the Monthly Automatic Investing section on the application.
MOVE YOUR IRA FUNDS FROM ONE USAA FUND TO ANOTHER
- -------------------------------------------------
You may call toll free and request a transfer of funds at any time or write
USAA Shareholder Account Services.
TAKE MONEY OUT OF YOUR IRA
- --------------------------
Write USAA Shareholder Account Services with your fund account number and tell
them you're ready to begin receiving IRA distributions. They will send you a
form about your distribution options. Age 59 1/2 is the earliest you can
ordinarily receive IRA distributions without penalty.
* If you do not indicate the tax year your contribution is for, we will
assume that the contribution is for the year we receive it.
Page 8
Checklist
Make Sure You Read: - IRA Custodial Agreement
- IRA Disclosure Statement
Make Sure You Sign: - IRA Application section "Signature and Custodian
Acceptance"
- IRA Transfer Request (if necessary)
For Spousal IRA: - If you intend to contribute for your spouse, he or
she must complete a separate IRA Application and
Adoption Agreement if the maximum contribution of
$2,250 is submitted.
Designation Of Beneficiary: - Be sure to complete this section to expedite
transfer of funds in the event of your death.
Contributions: - Your IRA contributions may not exceed $2,000 per
account for any one tax year. PLEASE MAKE SURE YOU
INCLUDE YOUR CHECK PAYABLE TO THE APPROPRIATE FUND
FOR YOUR INITIAL CONTRIBUTION.
Mailing Instructions: - Mail completed form(s) with your checks in the
enclosed envelope marked:
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, TX 78284-9855
Toll-Free Telephone Numbers
For Information Before If you have any investment questions about mutual
You Open An Account: funds or if you want to request an application or
prospectus for other funds managed by USAA Investment
Management Company, call toll free 1-800-531-8181
(in San Antonio, 456-7211).
For Information After NET ASSET VALUE PER SHARE:
You Open An Account: For a recorded message giving the Funds' current
status, call toll free 1-800-531-8066 (in San
Antonio, 498-8066).
ACCOUNT SERVICING: For general account service,
questions on existing accounts exchanges, or
redemptions, please call toll free 1-800-531-8448
(in San Antonio, 456-7202).
Page 9
Custodial Agreement
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including
the incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of beneficiary or
beneficiaries, either
Page 10
Custodial Agreement
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries, starting
by December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the
close of business on December 31 of the preceding year by the life expectancy
of the Depositor (or the joint life and last survivor expectancy of the
Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of
distributions under paragraph (3), determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of distribution in accordance with
paragraph (4) (b) (ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
Page 11
Custodial Agreement
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the Depositor may from time to time
specify. The Depositor's instructions may relate to current contributions or
to amounts previously contributed (including earnings thereon) or to both. In
the event that the Custodian receives a contribution from the Depositor with
respect to which no investment direction is specifically applicable, or if
any such investment direction is, in the opinion of the Custodian, unclear,
the Custodian may hold such amounts uninvested or return any such
contributions without liability for any loss, including any loss of income or
appreciation, and without liability for interest or any tax liability incurred
by Depositor pending receipt of instructions or clarification. For all
purposes of this Agreement, the term "Designated Investment Company" shall
mean USAA INVESTMENT TRUST or USAA MUTUAL FUND, INC. and any other regulated
investment company for which USAA INVESTMENT MANAGEMENT COMPANY (or any
affiliate thereof) acts as investment advisor and which is designated by USAA
INVESTMENT MANAGEMENT COMPANY as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions
made under this Agreement shall be deposited in the form of cash and shall be
made to the Custodian in accordance with such rules as the Custodian may
establish. Any contribution so made with respect to a tax year of the
Depositor shall be made prior to the due date of the Depositor's tax return
(not including extensions). Unless otherwise indicated in writing by the
Depositor, contributions shall be credited to the tax year in which they are
received by the Custodian. The Custodian, upon receipt of written instructions
from the Depositor, may exchange or cause to be exchanged shares of a
Designated Investment Company sold held by the Custodian on behalf of the
Depositor for any other shares of a Designated Investment Company available
for investment hereunder, subject to and in accordance with the terms and
conditions of the exchange privilege, as outlined in the current prospectuses
of any such Designated Investment Company and as may be agreed upon, in
writing, from time to time between the Custodian and USAA Investment
Management Company. The Depositor shall be the beneficial owner of the assets
held in the Account. All dividends and capital gains distributions received
on shares of a Designated Investment Company held in the Depositor's Account
shall, unless received in additional shares, be reinvested in shares of the
Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election
of the Depositor in additional shares or in cash or other property, the
Custodian shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time
upon thirty (30) days' notice in writing to the Custodian, and the Custodian
may resign at any time upon thirty (30) days' notice in writing to USAA
INVESTMENT MANAGEMENT COMPANY. Upon such resignation or removal, USAA
INVESTMENT MANAGEMENT COMPANY shall appoint a successor custodian, which
successor custodian shall be a "bank" as defined in Section 408(n) of the Code
or another person found qualified to act as a custodian of an Individual
Retirement Account by the Secretary of the Treasury or his delegate. Upon
receipt by the Custodian of written acceptance of such appointment by the
successor custodian or trustee, the Custodian shall transfer and pay over to
such successor the assets of the Account
Page 12
Custodial Agreement
and all records pertaining thereto. The Custodian is authorized, however, to
reserve such sum of money as it may deem advisable for payment of all its
fees, compensation, costs, and expenses or for payment of any other
liabilities constituting a charge on or against the assets of the Account or
on or against the Custodian, with any balance of such reserve remaining after
the payment of all such items to be paid over to the successor custodian or
trustee. If within the thirty (30) day period provided for above, USAA
Investment Management Company has not appointed a successor custodian or
trustee which has accepted such appointment, the Custodian shall, unless it
elects to terminate the Custodial Account, appoint a successor custodian
itself.
4. The Custodian shall deliver, or cause to be delivered, to the Depositor
all notices, prospectuses, financial statements, proxies and proxy soliciting
materials relating to Designated Investment Companies' shares held for
Depositor. The Custodian shall not vote any of the shares held hereunder
except in accordance with the written instructions of the Depositor.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor (or the Depositor's beneficiary
if the Depositor is deceased), make distributions out of the Account to the
Depositor in the manner and amounts as may be specified in such instructions.
All such instructions shall be deemed to constitute a certification by the
Depositor (or the Depositor's beneficiary if the Depositor is deceased) that
the distribution directed is one that the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) is permitted to receive.
Notwithstanding the provision of Article IV above, the Custodian assumes (and
shall have) no responsibility to make any distribution to the Depositor (or
the Depositor's beneficiary if the Depositor is deceased) unless and until
such written instructions specify the occasion for such distribution, the
elected manner of distribution and any declaration required by Article IV.
Prior to making any such distribution from the Account, the Custodian shall
be furnished with any and all applications, certificates, tax waivers,
signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by the Custodian,
but the Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if not
satisfied such instructions are genuine, and assumes no duty of further
inquiry. Upon receipt of proper written instructions as required above, the
Custodian shall cause the assets of the Account to be distributed in cash
and/or in kind, as specified in such written order.
(b) Distribution of the assets of the Account shall be made in accordance with
the provisions of Article IV as the Depositor (or the Depositor's beneficiary
if the Depositor is deceased) shall elect by written instructions to the
Custodian; subject, however to the provisions of Sections 401(a)(9), 408(a)(6)
and 408(b)(3) of the Code, the regulations promulgated thereunder, and the
following:
(i) No distribution from the Account shall be made in the form of an annuity
contract.
(ii) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election of the
Depositor. The recalculation of life expectancy of the surviving spouse shall
only be made at the written election of the surviving spouse.
(iii) If the Depositor dies before his/her entire interest in the Account has
been distributed, and if the designated beneficiary of the Depositor is the
Depositor's surviving spouse, the spouse may treat the Account as his/her own
individual retirement arrangement. This election will be deemed to have been
made if the surviving spouse makes regular IRA contribution to the Account,
makes a rollover to or from such Account, or fails to receive a payment from
the Account within the appropriate time period applicable to the deceased
Depositor under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the Depositor provided for in this
Agreement shall be effective if sent by regular mail to him at his last
address of record.
7. The Depositor hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of
the Agreement and hereby consents to such amendments, provided they shall
comply with all applicable provisions of the Code, the regulations thereunder
and with any other governmental law, regulation or ruling. Any such amendments
shall be effective as of the date specified in a written notice sent by first-
class mail to the address of the Depositor indicated by the Custodian's
records. Notwithstanding the foregoing, no amendment which increases the
burdens of the Custodian shall take effect without its prior written consent.
Nothing in this paragraph 7 shall be construed to restrict the Custodian's
freedom to change or substitute fee schedules in accordance with the
provisions of the adoption agreement, and no such change or substitution shall
be deemed to be an amendment to this Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been
received in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the Depositor. The Depositor and the Depositor's legal
representatives, as appropriate, shall always fully indemnify the Custodian
and USAA Investment Management Company and save each of them harmless from any
and all liability whatsoever which may arise in connection with this
Agreement and matters which the Agreement contemplates, except that which
arises due to the Custodian's gross negligence, willful misconduct or lack of
good faith. The Custodian shall not be obligated or expected to commence or
defend any legal action or proceeding in connection with this Agreement or
such matters unless agreed upon by the Custodian and the Depositor or said
legal representatives and unless fully indemnified for so doing to the
Custodian's satisfaction.
(b) The Custodian shall be an agent for the Depositor to perform the duties
conferred on it by the Depositor. The parties do not intend to confer any
fiduciary duties on the Custodian and none shall be implied. The Custodian
shall not be liable (and does not assume any responsibility for) the
collection of contributions, the deductibility of any contribution or the
propriety of any contributions under this Agreement, the selection of any
shares of any Designated Investment Company for the Account, or the purpose or
propriety of any distribution ordered in accordance with Article IV or
paragraph 5 of the Article VIII, which matters are the sole responsibility of
the Depositor or the Depositor's beneficiary, as the case may be.
(c) The Custodian and USAA Investment Management Company shall not be
responsible for any losses, penalties or other consequences to the Depositor
or to any other person a rising out of the making of any contribution or
withdrawal.
Page 14
Custodial Agreement
10. This Agreement together with the Application and Adoption Agreement
attached hereto and by this reference made a part hereof, constitutes the
entire agreement between the parties, and it shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
11. The Depositor shall have the right by written notice to the Custodian on
a form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such Depositor may be entitled in event of his
death prior to the complete distribution of such benefit. If no such
designation is in effect at the time of the Depositor's death, or if the
designated beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate. The last designation filed with the
Custodian shall be controlling, and, whether or not it fully disposes the
Account, shall revoke all such other designations previously filed by the
Depositor.
12. (a) The Custodian shall have the right to receive rollover contributions
as described in the Code and if any property is so transferred to it as a
rollover contribution, such property shall be sold by the Custodian and the
proceeds less any expenses, fees or commissions reinvested as provided in
paragraph 1 of this Article VIII. The Custodian reserves the right to refuse
to accept any property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably require,
shall transfer the assets held under this Agreement (reduced by any amounts
referred to in paragraph 3 of this Article VIII) to a successor individual
retirement account, or individual retirement annuity (other than an endowment
contract for the Depositor's benefit or to an exempt employee's trust
established under a plan which satisfies the qualification requirements of
Section 401(a) of the Code. Any amounts received or transferred by the
Custodian under this paragraph 12 shall be accompanied by such records and
other documents as the Custodian deems necessary to establish the nature,
value, and extent of the assets, and of the various interests therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in
the Account by the Depositor as security for a loan, or any loan or other
extension of credit from the Account to the Depositor shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except
that the Designated Investment Company shares must be registered in the name
of the Custodian or its nominee. No such delegation or subsequent change
herein shall be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall
cause to be mailed to the Depositor in respect of each tax year an account of
all transactions affecting the Account during such year and a statement
showing the Account as of the end of such year. If, within sixty (60) days
after such mailing, the Depositor has not given the Custodian written notice
of any exception or objection thereto, the annual accounting shall be deemed
to have been approved, and in such case, or upon the written approval of the
Depositor, the Custodian shall be released, relieved and discharged with
respect to all matters and statements set forth in such accounting as though
the account had been settled by judgment or
Page 15
Custodial Agreement
decree of a court of competent jurisdiction.
16. (a) The Custodian may charge the Depositor reasonable fees, including an
annual maintenance fee, for services hereunder according to standard with the
Agreement. Upon thirty (30) days' prior written notice, the Custodian may
substitute a fee schedule differing from that schedule initially provided.
(b) Custodian's fees, any income (including unrelated business income tax),
gift,,estate and inheritance taxes and other taxes of any kind whatsoever,
including transfer taxes incurred in connection with the investment or
reinvestment of the assets of the Account, that may be levied or incurred by
the Custodian in the performance of its duties may be charged to the Account,
with the right to liquidate shares of any Designated Investment Company for
this purpose, or (at Custodian's option) to the Depositor.
Page 16
Disclosure Statement
This disclosure statement outlines the basic provisions of an Individual
retirement account (IRA) as well as certain features unique to USAA mutual
fund IRAs. This is merely a general summary for your information. For an
interpretation of the applicable IRA and tax laws, contact your tax adviser
district IRS office. IRS Publication 590, "Tax Information on Individual
retirement Accounts," contains more detailed information on IRAs.
ONE
REVOCATION
An IRA which is established on the date of receipt of this Disclosure
Statement, or within seven days thereafter, may be revoked at any time within
seven days after the date of establishment of such IRA. An IRA established at
least seven days after the date of the receipt of this Disclosure Statement
may not be revoked (although it may be terminated). Revocation must be made by
telephone and confirmed in writing to USAA Shareholder Account Services, 9800
Fredericksburg Road, San Antonio, Texas 78288. Call 1-800-531-8448 (in San
Antonio, 456-7202). Mailed notice will be deemed given on the date that it is
postmarked (or, if sent by certified or registered mail, on the date of
certification or registration) if it is deposited in the mail in the United
States in an envelope or other appropriate wrapper, first class postage
pre-paid, properly addressed. In the event that you decide to revoke your IRA
and do so within such seven day period, you are entitled to a return of the
entire amount of your IRA contributions, without adjustment for such items as
administrative expenses or fluctuations in market value.
TWO
THE CUSTODIAL ACCOUNT
The USAA mutual fund IRA is a custodial account established for your exclusive
benefit or that of your named beneficiaries, as described in Section 408 of the
Internal Revenue Code. All amounts contributed to your IRA custodial account
will not be forfeitable. The custodial account is established through the use
of IRS Form 5305-A which has been approved as to form by the Internal Revenue
Service. IRS approval is determined only as to form of the account and does not
represent a determination of the merits of such an account.
THREE
CONTRIBUTIONS
A. FORM OF CONTRIBUTIONS Contributions must be made in cash and may be made
at any time from the beginning of the tax year, either periodically or in a
lump sum, until April 15 of the following year -- the deadline for filing your
tax return. If you receive a tax return extension, you must still make your
IRA contribution by April 15 in order to claim the deduction. You do not have
to contribute to an IRA every year. Additionally, regardless of your age, you
may also transfer funds from another IRA or certain qualified plan
distributions to a "rollover" IRA, which is described in paragraph 6 of this
Disclosure Statement. If you intend to report contributions made between
January 1 and April 15 as contributions for your prior tax year, you should
notify us in writing that such contributions have been made on account of such
prior tax year. Otherwise, the Custodian will assume the payment is for the
current tax year.
No part of your IRA account can be used to buy a life insurance policy. Your
account's assets cannot be combined with other property, except in a common
trust fund or common investment fund. Your IRA account may not be invested in
collectibles, such as gems or art, U.S. gold and silver coins and certain
state coins are permitted.
B. LIMITS ON ANNUAL CONTRIBUTIONS
You are eligible to make contribution to an IRA if you are under age 70 1/2
and if, at any time during the year, you receive compensation.
Contributions to your IRA for any taxable year may not exceed the lesser of
$2,000 or 100% of your compensation or earned income. If you and your spouse
both work and have compensation that is includible in your gross income, each
of you can annually contribute to your own IRA up to the lesser of $2,000 or
100% of compensation or earned income.
If your spouse earns no income, or earns $250 or less and elects to be treated
as earning no income, you can establish a "spousal IRA" with two separate
accounts if you file a joint Federal tax return. The aggregate annual amount
contributed to both IRAs each year cannot exceed the lesser of $2,250, or 100%
of your earned income or compensation. This amount is divided between the two
accounts as you direct, but not more than $2,000 may be contributed to one
account each year. Wages, salaries, tips, professional fees, net earnings from
self-employment, bonuses and other amounts you get for providing personal
service (and taxable alimony payments) are compensation. Dividend, interest,
rental, or capital gains income is not compensation. You may not make any
contribution (other than a rollover contribution) to your IRA with respect to
the tax year in which you reach age 70 1/2 or any subsequent year. However,
you may continue to make contributions to your spouse's spousal IRA and deduct
the deductible portion of such payments until the year in which your spouse
reaches age 70 1/2.
C. Simplified Employee Pension Plan
Contributions. A separate IRA may be established for use by your employer as
part of a SEP arrangement. Your employer may contribute to your SEP-IRA up to
a maximum of 15% of your compensation or $22,500, which-ever is less. If your
SEP-IRA is used as part of a salary reduction SEP, you may elect to reduce
your annual compensation, up to a maximum of 15% of your compensation or
$7,000 (indexed to reflect cost-of-living adjustments), whichever is less, and
have your employer contribute that amount to your SEP-IRA. If your employer
maintains both a salary reduction SEP and a regular SEP, the annual
contribution limit to both SEPs together is 15% of your compensation or
$22,500, whichever is less. You may contribute, in addition to the amount
contributed by your employer to your SEP-IRA, an amount not in excess of the
limits referred to under "Limits on Annual Contributions" above. It is your
and your employer's responsibility to see that contributions in excess of
normal IRA limits are made under a valid SEP and are, therefore, proper.
D. EXCESS CONTRIBUTIONS
An excess contribution is the amount paid to your IRA that is in excess of the
limit on annual contributions. You must pay a non-deductible 6% federal excise
tax on the excess amount for the tax year in which it is made, and for each
later year until the excess is eliminated either by:
(1) withdrawal or (2) application to a succeeding year's contribution.
You will not have to pay the 6% excise tax if you withdraw the excess
(together with its earnings) by the date your tax return is due (including
extensions). You must include in your gross income, for the year in which they
were received, the earnings made from the excess payment. You may also have to
pay the additional 10% tax on premature distributions on the amount of the
earnings.
However, the excess contribution itself will not be included in your taxable
income and will not be subject to the 10% premature distribution tax. You can
also remove any non-deductible IRA contributions by following this procedure.
Under similar rules, you can also withdraw amounts that are not excess
contributions (because they do not exceed $2,000) but are not deductible
(because they exceed the deductible limits).
Under certain circumstances, you may withdraw excess payments from your IRA
after the due date for filing your tax return (including extensions) and not
include it in your taxable gross income. You may do this: (1) if the total
payment (other than rollover contributions) for the year is $2,250 or less
and (2) you did not deduct the excess amount (or the deduction was disallowed
by the IRS). The excess payment you remove is thus not subject to the 10% tax
on premature distributions. But you will have to pay the 6% excise tax for
each year that the excess remains in the account at the end of the year.
If you pay more than $2,250 to your IRA for any year, and do not withdraw the
excess by the due date (including extensions) for filing your income tax
return, you must include in your taxable gross income any excess payment you
withdraw, even if you did not originally deduct it. You may also have to pay
the 10% tax on premature distributions on the amount you withdraw.
You may also eliminate an excess contribution from your IRA by not
contributing the maximum allowable amount in a later year. The subsequent
year's contribution would be reduced by the excess amount contributed in the
prior year. By using this method, you can avoid paying the 10% premature
distribution tax on withdrawals.
FOUR
SPOUSAL IRA AND DIVORCE
A. SPOUSAL IRA
If you and your spouse each earn compensation, you can each make contributions
to separate IRAs. But even if your spouse does not have any earned
compensation (or earns $250 or less and elects to be treated as having no
earned income), you may be eligible to establish an additional but separate
and independent IRA for your spouse. To qualify, you must be married at the
end of the tax year, and you and your spouse must file a joint return. The
maximum contribution to your IRA and to a Spousal IRA may not exceed the
lesser of $2,250 or 100% of your compensation, as defined under Section 3 B.
The contribution does not have to be equally divided between the two accounts;
however, the maximum contribution made to either account is $2,000. An excess
contribution to either account is not tax deductible and will be subject to a
penalty tax, as described in Section 3 C.
You may not claim a deduction for Spousal IRA contributions in the year your
unemployed spouse reaches the age of 70 1/2. If, however, you have not yet
attained the age of 70 1/2, you may continue to make contributions under the
original IRA rules. Distributions from a Spousal IRA do not have to begin until
April 1 of the year following the year in which the spouse for whom the
account or sub-account is maintained reaches age 70 1/2. With the exception of
the contribution limitations, all rules which apply to the regular IRA apply to
each spouse with respect to his or her own Spousal IRA.
B. DIVORCE OR LEGAL SEPARATION
If all or any portion of your IRA is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an IRA in the
receiving spouse's name. The transaction can be processed without tax
implications to you provided a written instrument executed by a court incident
to the divorce or legal separation in accordance with Section 408(d)(6) of the
Code is received by the Custodian and specifically directs such transfer.
FIVE
TAX DEDUCTION
You may deduct the full amount of your IRA contribution up to the annual
maximum if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return, you
will be deemed to be an active participant in an employer-sponsored retirement
plan if either you or your spouse is an active participant in such a plan. For
this purpose, a husband and wife who file separate tax returns for any year
and who live apart at all times during the year are not considered to be
married. In addition, even if you are an active participant in such a plan,
you may deduct the full amount of your IRA contribution if you have adjusted
gross income equal to or below a specified level ($40,000 for married
taxpayers filing joint returns and $25,000 for single taxpayers). If your
adjusted gross income exceeds this specified level, or if you are married and
file a separate tax return, the amount of your IRA contribution which is
deductible is phased out on the basis of:
Adjusted gross income between $25,000 and $35,000 if you are a single
taxpayer;
Adjusted gross income of up to $10,000 if you are a married taxpayer who files
a separate return;
Adjusted gross income between $40,000 and $50,000 if you are married and you
and your spouse file a joint return.
Adjusted gross income is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the IRA
deduction, adjusted gross income is modified to take into account deductions
for IRA contributions, taxable benefits under the Social Security Act and the
Railroad Retirement Act, and passive loss limitations under Code Section 86.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
adjusted gross income in excess of the phase out amount ($25,000 for single
taxpayers, $40,000 for married taxpayers who file joint returns and $0 for
married taxpayers who file separate returns). However, if you contribute to
a Spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000
of adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next lowest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your adjusted gross income is within the phase-out range and
your reduced deduction limit is more than $0 but less than $200, you are
permitted to deduct up to $200 of your IRA contribution.
If your adjusted gross income exceeds the applicable level specified above and
you are an active participant in an employer-sponsored retirement plan (or
your spouse is an active participant in such a plan if you file joint
returns), then you may not deduct any portion of your IRA contribution.
Special rules apply for purposes of determining whether or not you are an
active participant in an employer-sponsored retirement plan. Your Form W-2 for
the year should indicate your participation status. You should consult your
own tax or financial adviser if you have any questions. You can estimate your
deduction limit using the following formula:
[$10,000 - Excess AGI/$10,000] x Maximum Allowable Deduction = Deduction
Limit
* Excess AGI means adjusted gross income above the Specified Level.
* Maximum Allowable Deduction means $2,000 ($2,250 for "Spousal IRA").
Example 1: You are single, an active participant and have an adjusted gross
income of $32,000. You would calculate your deductible IRA contribution as
follows:
The Excess AGI is $32,000 - $25,000 = $7,000
Your IRA deduction limit is:
[$10,000 - $7,000/$10,000] x $2,000 = $600
Example 2: You are married and file a joint tax return. You and your spouse
individually earn more than $2,000 and one is an active participant. Your
combined adjusted gross income is $45,120. Each may contribute to an IRA and
calculate deductible contributions to each IRA as follows:
The Excess AGI is $45,120 - $40,000 = $ 5,120
Your IRA deduction limit is:
[$10,000 - $5,120/$10,000] x $2,000 = $ 976 (rounded up to $980)
Example 3: If, in Example 2, your spouse did not earn any compensation, or
elected to be treated as earning no compensation, you could establish a
Spousal IRA (consisting of an account for you and your spouse). The amount of
deductible contributions which could be made to the two IRAs is calculated
as follows:
[$10,000 - $5,120/$10,000] x $2,250 = $1,098 (rounded up to $1,100)
The $1,100 can be divided between your IRA and your spouse's IRA, but neither
IRA may have a deductible contribution of more than $980.
Example 4: You are married, file a separate tax return and are an active
participant. You have $1,400 of compensation and want to make a deductible
contribution to your IRA.
Your Excess AGI is $1,400 - $0 = $1,400
Your IRA deduction limit is:
[$10,000 - $1,400/$10,000] x $2,000 = $1,720
Though your IRA deduction limit as calculated above is $1,720, you may not
deduct an amount in excess of your adjusted gross income of $1,400.
Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
nondeductible contribution. Of course, the combined total of deductible and
nondeductible contributions must not exceed your annual maximum amount. Any
earnings on all your IRA contributions (deductible and non-deductible)
accumulate tax-free until you withdraw them.
SIX
ROLLOVER IRA
A rollover is a tax-free transfer of assets from one tax-qualified retirement
program to another. There are two kinds of rollover payments to an IRA. In
one, you rollover amounts from one IRA to another. With the other, you
rollover amounts from a qualified pension or profit-sharing plan to an IRA.
You cannot deduct a rollover payment on your tax return.
In addition, please note that the IRA you set up to receive rollover amounts
should be separate from an IRA you set up to receive annual contributions; and
if you establish a rollover IRA during the year in which you reach age 70 1/2,
you must begin receiving distributions from such IRA no later than April 1 of
such following year. Since strict limitations apply to rollovers, and a
variety of tax and financial planning issues should be considered in
determining whether to make a rollover contribution, it would be wise to check
with your tax adviser or local IRS district office for information concerning
your specific situation before proceeding with a rollover IRA.
However, please be aware that if you transfer the funds in your IRA from one
IRA trustee or custodian to another, either at your request, or at the
trustee's request, this is not a rollover. It is a transfer that is not
affected by the one-year waiting period described below.
A. ROLLOVER FROM ONE IRA TO ANOTHER
You may withdraw part or all of the assets from one IRA and reinvest them in
another IRA tax free once a year. To take advantage of this tax free
treatment, you must transfer the entire amount you receive to your new IRA by
the 60th day after the date the property is distributed from your first IRA or
other tax-qualified plans. Partial rollovers are taxed on the amount retained.
B. ROLLOVER FROM A TAX-QUALIFIED PLAN TO AN IRA
If you become entitled to receive all or any part of an "eligible rollover
distribution" from a tax-qualified plan such as a 401(k) plan, a profit
sharing plan, a Keogh plan, or a 403(b) tax-sheltered annuity, you may direct
the plan to make a direct rollover to your IRA and thus avoid the mandatory
20% Federal withholding tax. To do a direct rollover, the assets should
either be transferred directly to the IRA custodian, or the distribution check
can be made payable to the IRA custodian. If you choose to receive a
distribution directly from a tax-qualified plan, you may still rollover the
distribution (plus the amount of the withholding tax) to your IRA as long as
you do so within 60 days of the date you receive the distribution. An
"eligible rollover distribution" is any distribution from a tax-qualified
plan other than (a) a distribution that is one of a series of periodic
payments for the employee's life or over a period of 10 years or more, (b) a
required distribution after you attain 70 1/2 and (c) certain corrective
distributions.
Please remember that amounts subject to the post-70 1/2 minimum distribution
requirement and your prior non-deductible contributions are not eligible for
rollover treatment.
If you receive an eligible rollover distribution from your employer's plan and
roll it over into an IRA, you may later roll over those assets into a new
employer's plan, if you kept those assets in a separate account. Your
surviving spouse may also roll over into an IRA all or part of an eligible
rollover distribution (although amounts up to $5,000 which qualify for the
death benefit exclusion need not be rolled over) received from your employer's
plan because of your death.
SEVEN
DISTRIBUTIONS
A. TAX TREATMENT
Any money or property you receive from your IRA account is a distribution and
must be included in your gross income as ordinary taxable income in the year
received. The exceptions are rollovers and tax-free withdrawals of excess
payments as described above.
Generally, amounts distributed to you are includible in your gross income in
the taxable year you receive them and are taxed as ordinary income without
the special tax treatment available for lump-sum distributions.
Federal income tax will be withheld from distributions you receive from an
IRA unless you elect not to have tax withheld. However, if IRA distributions
are to be delivered outside of the United States, this withholding tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%.
If you withdraw an amount from any IRA during a taxable year and you have
previously made both deductible and nondeductible IRA contributions, then
part of the amount withdrawn is excludible from ordinary income and not
subject to taxation. The amount excludible for the taxable year is the
portion of the amount withdrawn which bears the same ratio to the amount
withdrawn for the taxable year as your aggregate non-deductible IRA
contributions remaining in all of your IRAs bear to the aggregate balance of
all your IRAs at the end of the year plus the amount of the distribution
during the year.
For example, an individual withdraws $1,000 from an IRA to which both
deductible and non-deductible contributions were made. At the end of the year,
the account balance is $4,000, of which $2,500 was nondeductible
contributions. The amount excludible from income is $500 ($2,500/$5,000
x $1,000).
In general, if, during any calendar year you receive distributions from your
IRAs, Section 403 annuities and qualified plans which, in the aggregate,
exceed $150,000, you maybe subject to a 15% penalty tax on the amount in
excess of $150,000. If the total amount of your benefits payable from such
plans at your death exceeds a certain permissible level, a similar 15% estate
tax is imposed on the amount in excess of the permissible level. Special rules
apply in certain circumstances and you should consult your tax adviser if you
have any questions regarding this tax.
B. METHODS OF DISTRIBUTION
1. IRA Distributions
You can withdraw money from your IRA account in either of the following ways:
a. a lump-sum withdrawal of the entire balance.
b. periodic payments (monthly, quarterly, annually) spread over a period of
years.
The following conditions apply to IRA distributions:
a. You may begin receiving distributions without any penalty any time after
you are 59 1/2.
b. You must begin receiving distributions from your IRA by April 1 following
the calendar year in which you become 70 1/2, the Required Distribution Date.
c. If you are disabled, you may receive distributions from your IRA
regardless of your age without paying any penalties. You must be certified as
disabled by a physician. For more information on disability, contact the IRS
and get a copy of IRS Publication 522, "Disability Payments."
d. If you request a withdrawal prior to your attainment of age 59 1/2, you
must furnish the Custodian with a written statement explaining how you intend
to dispose of the amount distributed. This requirement does not apply to a
distribution which is part of a series of substantially equal periodic
payments made over your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary.
2. Tax and Penalties on Premature Distribution
If you withdraw any of the funds in your IRA before age 59 1/2, the amount
includible in your gross income is subject to a 10% nondeductible penalty tax
unless: (1) the withdrawal is made because of your death or permanent
disability; (2) the withdrawal is an exempt withdrawal of an excess
contribution; or (3) the withdrawal is rolled over into another qualified plan
or IRA. You can also withdraw funds held in your IRA without any tax penalty
before you reach age 59 1/2 if you choose to receive installment payments in
substantially equal amounts over a period that does not exceed your life
expectancy or the joint life and last survivor expectancy of you and your
designated beneficiary. You should be aware, however, that the 10% penalty tax
will be applied retroactively to all installment payments if you alter the
method of distribution before you attain age 59 1/2 to a method that does not
qualify for the exception. This 10% penalty tax will also apply retroactively
if you do not receive the installment payments under a method that qualifies
for the exception for at least five years.
The 10% penalty tax discussed above does not apply to the portion of your IRA
distribution which is not includible in your gross income.
3. Penalties on Excess Accumulations Amounts you contribute to your IRA are
not to be kept indefinitely. The law requires that you begin to receive
distributions from your IRA no later than your "Required Distribution Date."
There is a minimum amount which you must withdraw by the Required Distribution
Date, December 31 of the calendar year containing the Required Distribution
Date, and December 31 of each calendar year thereafter. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) may be
recalculated each year if you elect to do so by filing a form with the
Custodian no later than your Required Distribution Date. Additionally, if your
bene-ficiary is not your spouse, the minimum distribution must be calculated
by reference to the "minimum distribution incidental benefit" rule of the
Internal Revenue Code. If the amount distributed during a taxable year is less
than the minimum amount required to be distributed, you will be subject to a
penalty tax equal to 50% of the deficiency unless you can prove that the
failure to make such minimum distribution was due to reasonable cause, or
demonstrate that reasonable steps are being taken to remedy the shortfall. If
you maintain more than one IRA, you must calculate the amount of your minimum
distribution in any year by considering the aggregate balances in all your
IRAs. Once the minimum amount is so determined, you may choose to withdraw it
from any one IRA. IRS Publication 590 contains a worksheet for figuring the
minimum amount that should be distributed from your IRA, so that you may avoid
the 50% excise tax.
You should consult your own tax or financial advisor with regard to the
calculation of the amount of minimum distribution each year because it is your
responsibility to make sure that this requirement is met. The Custodian is
not responsible to advise you in this matter and will only make distributions
to you from your IRA in accordance with your specific instructions.
C. DISTRIBUTION ON DEATH
Your beneficiaries include your estate, dependents, and anyone you choose to
have the benefits of your IRA after you die. You may designate your
beneficiaries on the IRA Application and Adoption Agreement when you open your
IRA and change them at any time by writing to the Custodian. Distribution to
your beneficiary may be made at any time in the event of your death either in
a lump sum or periodically as selected by your beneficiary but subject to the
following rules:
1. If distribution from your IRA has commenced after your Required
Distribution Date, the funds remaining in your account must continue to be
distributed to your designated beneficiary at least as rapidly as under the
method of distribution in effect prior to your death.
Subject to the foregoing, the remaining funds in the account will be
distributed to your designated beneficiary either outright or periodically,
as selected by such beneficiary. The Custodian will make distributions to your
beneficiary in accordance with his or her specific instructions. Your
beneficiary should be aware that he or she is subject to minimum distribution
rules and it is his or her responsibility to make sure that the rules are met.
2. If distribution from your IRA has not commenced prior to your Required
Distribution Date, then the entire account balance must generally be
completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death. However, there are
exceptions to this five-year distribution rule. First, the five-year
distribution rule does not apply if the funds in your IRA will be payable to
your designated beneficiary over a fixed period that is not longer than the
life expectancy of the beneficiary and if the distribution commences no later
than December 31 of the year containing the fifth anniversary of your death.
Second, if your beneficiary is your surviving spouse, he or she may elect
within the five-year period commencing with your death to receive the funds
in your IRA over a fixed period that is not longer than his or her life
expectancy and commencing at any date prior to the date you would have
attained age 70 1/2. Third, if your beneficiary is your surviving spouse, he
or she may elect to roll over the funds in your IRA into his or her own
account or to treat your IRA as his or her own by making regular or rollover
deposits into such IRA.
The designation of a beneficiary to receive funds from your IRA at your death
is not considered a transfer subject to federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your federal gross
estate.
HOW TO FILE IRA INFORMATION
WITH THE IRS
IRA Contributions. Deductible and nondeductible IRA contributions are reported
on IRS Form 1040 or Form 1040A. To the extent your contribution is deductible,
you can claim a deduction on your federal tax return. To the extent your
contribution is not deductible, you must designate it as a nondeductible
contribution on your federal tax return. You may choose to file your federal
income tax return before it is due (without extensions) and report your IRA
contributions before they are made. You must, however, make the contributions
by the due date (without extensions) of such return. To the extent your
contribution is deductible, you claim a deduction on your tax return. To the
extent your contribution is not deductible, you must designate it on Form
8606. There is a $100 penalty each time you overstate the amount of your
nondeductible contributions unless you can prove that the overstatement was
due to reasonable cause.
IRA Distributions. Report IRA distributions, whether taxable or not, including
taxable premature distributions on IRS Form 1040. You will also be required to
give additional information on Form 8606 in years you make a withdrawal from
your IRA. If you fail to file a required Form 8606, there is a $50 penalty for
each such failure unless you can prove that the failure was due to reasonable
cause.
Other Reporting Requirements. During those years when you have tax on excess
payments, premature distributions, prohibited transactions, and excess
accumulations, you must file Form 5329, "Return for Individual Retirement
Accounts."
Rollovers. Report any rollover from a qualified plan to an IRA on Form 1040.
Enter the amount of the distribution and the taxable amount. (Special Note:
This Disclosure Statement discusses the effect and requirements of the Federal
tax laws. You should check with your tax adviser with regard to the applicable
tax laws of your state.)
EIGHT
PROHIBITED TRANSACTIONS
Generally, a prohibited transaction is any improper use of your IRA account or
annuity. Some examples are: (1) the sale, exchange, or leasing of any property
between your IRA account and you; (2) the lending of money or other extension
of credit between your IRA account and you; (3) the furnishing of goods,
services, or facilities between your IRA account and you; or (4) the transfer
of assets of your IRA account for your use or for your benefit.
If you or your beneficiary engage in a prohibited transaction at any time
during the year, you generally must include the fair market value of all of
the IRA's assets in your taxable gross income for that year. You will also be
subject to the 10% tax on premature distributions if you are under the age of
59 1/2.
Additionally, if you pledge your IRA as security for a loan, or invest your
IRA in "collectibles" such as art, antiques, gems, or coins (other than United
States gold and silver coins or certain state coins), the amount so pledged or
invested is considered to have been distributed to you and will be taxed as
ordinary income during the year in which you make such pledge or investment.
You may also have to pay the 10% penalty tax on premature distributions.
NINE
OTHER INFORMATION
A. FUND PROSPECTUS
The annual earnings under USAA mutual fund IRAs consist of all dividends and
distributions on the mutual fund shares held in your account. The dividends
and distributions received from a given fund accumulate tax free and are
reinvested in shares of the fund credited to your account.
For complete information about advisory fees, other expenses, the method of
calculating the price per share, etc., of USAA's mutual funds, ask for and
read the funds' Statement of Additional Information. The growth in value of
the investments included in your IRA is neither guaranteed nor projected.
B. AMENDMENTS
USAA Investment Management Company will make any amendments that may be
required by the Internal Revenue Service and will provide a copy of these
amendments to you.
The Custodian reserves the right to amend the Application and Adoption
Agreement with respect to the Custodian compensation thirty days after
mailing of written notice to the investor.
C. CUSTODIAN'S FEES
There are no annual IRA maintenance fees. The Custodian charges a $20 fee for
total distribution.
Exceptions to the fee are: partial distributions, total transfer within USAA,
and distributions due to disability or death.
D. THE CUSTODIAN
The sponsor of your IRA is USAA Investment Management Company. The Custodian
is State Street Bank and Trust Company, or any successor Custodian selected
by the sponsor.
E. INTERNAL REVENUE SERVICE
You may obtain further information regarding an IRA from any district office
of the Internal Revenue Service.
Exhibit 14(b)
[A picture of the USAA Logo is here]
USAA
USAA INVESTMENT MANAGEMENT COMPANY
SEP-IRA
Handbook
Retirement Planning For Small Business Owners And The Self-Employed
CONTENTS
What Is A SEP-IRA? 3
Benefits Of A SEP-IRA 3
Why Choose A USAA Investment Management Company SEP-IRA? 6
Which USAA Mutual Funds Are Best For Me? 7
Questions And Answers 10
Checklist 13
Custodial Agreement 15
Disclosure Statement 22
Dear Business Owner:
Data from the U.S. Department of Labor and the Small Business Administration
shows that fewer than one in five individuals working for a small business
have an employer-sponsored pension plan. This compares to five out of six
people working in larger companies with 500 or more employees. Small
businesses such as yours are the lifeblood of the American economy. Attracting
and keeping excellent employees may depend on whether or not you offer a tax-
advantaged retirement plan.
The Simplified Employee Pension-Individual Retirement Account (SEP-IRA) plan
may be the right choice for your business. It allows the small employer as
well as the self-employed person to set up an easy, practical retirement
program without the administrative costs and complexities associated with
typical employer plans.
Today's lower interest rates on savings accounts and bank CDs make mutual
funds a sound alternative. At USAA Investment Management Company, we can
design a mutual fund investment portfolio to suit your company's retirement
needs.
If you would like more information after reading this handbook, please call
us at 1-800-531-6624 -- in San Antonio, call 445-7211. Let us help you map
out a plan to build a more secure future for you and your employees.
Sincerely,
/s/Michael J.C. Roth
- ----------------------
Michael J.C. Roth, CFA
President
USAA Investment Management Company
Certificates of Deposit offer a guaranteed interest rate and FDIC insurance
up to $100,000.
YOUR PERSONAL RETIREMENT PLAN
WHAT IS A SEP-IRA?
A SEP-IRA is a retirement program set up by the employer (or the self-employed
person) to which the employer makes tax deductible contributions for both
employer and employees. It was designed precisely for the small business owner
who does not need a full-scale corporate pension plan.
HOW DOES IT DIFFER FROM AN IRA?
An IRA is a personal retirement plan set up by any individual with earned
income. The maximum contribution amount is $2000 and it may or may not be
deductible from annual taxes, depending on the individual's level of income
and coverage by a pension plan. On the other hand, contributions to SEP-IRAs
can be much larger than for IRAs up to 15% of each employee's salary, for a
maximum of $22,500 annually.
WHO IS ELIGIBLE?
If you're an employer, you must cover all employees who have worked for you
three out of the past five years, have reached the age of 21, and have earned
at least $396* from your payroll during the year. Part-time employees are
also included.
*This is the amount in effect for 1995. This is adjusted periodically.
BENEFITS OF A SEP-IRA:
1 Tax-Deferred Earnings. All earnings - dividends, interest and capital
appreciation - accumulate in the account on a tax-deferred basis. This means
you pay no taxes until you start withdrawing funds. Because employer
contributions are tax deductible for your business, a SEP-IRA can mean
substantial tax benefits. (See graph on page 4 for an example of the impact
tax savings can have on the growth of your money for retirement.)
2 Income At Retirement. By investing in a SEP-IRA, you have the opportunity
to put aside money on a regular basis for yourself and your employees.
That's important, since you don't have to pay taxes on your earnings each
year. More money will be working for you and your employees' futures.
3 Tax-Deductible Contributions. All contributions to SEP-IRAs are tax-
deductible to the employer and are subject to the 15% decution limit. In
addition, the amount contributed to employees' accounts are not included
in the employees' taxable income.
4 You're In Control. The employer decides the amount and frequency of
contributions. If business conditions preclude making contributions in any
given year, contributions that year can be skipped.
5 Professional Investment Management. Once you have worked with your team of
account representatives on your investment decision, your responsibility
stops. Our mutual funds are managed by professional money managers who have
access to a wealth of resources. With these professionals carefully
analyzing the best investment opportunities for the funds, you receive
expertise at a low cost.
6 Enhanced Employee Benefits. SEP-IRAs may be established by self-employed
persons, partnerships and corporations.
7 Ease of the Plan. By establishing a SEP-IRA, you have an easy and practical
retirement program without the administrative costs and complexities such
as lots of paper work, annual management fees and IRS reporting associated
with typical employer plans.
WITH A SEP-IRA
The chart illustrates how $20,000 contributed each year for 20 years (the
maximum allowable contribution is $22,500 for combined employer and employee
contributions) to your SEP-IRA grows. If you are in the 31% tax bracket and
your account earns 8% each year, under a SEP-IRA tax-deferred plan your
account would have a value of $915,239.*
WITHOUT A SEP-IRA
This is what happens if you don't take advantage of investing in a SEP-IRA
retirement plan. If you are in the 31% tax bracket and you invest $20,000 of
taxable income earnings for 20 years, your $20,000 investment actually
represents $13,800* of "after-tax" dollars for your retirement plan. As a
result, in 20 years your final value without the tax-deferred, compounded
earnings would only be $631,515.*
[A graph appears here comparing a $20,000 annual contribution over 20 years
with a SEP-IRA and without a SEP-IRA. The horizontal axis shows the dollar
amount and the vertical axis shows the time period. The ending value with a
SEP-IRA is $915,239 and the ending value without a SEP-IRA is $631,515.]
* Annual contribution multiplied by one minus your tax bracket (31% in this
example).
** Based on hypothetical 8% annual rate of return compounded monthly. Assumes
a 31% tax bracket. This chart is for illustration purposes only. It is not
an indication of past or future results of an investment in any of the funds
managed and distrubited by USAA Investment Management Company. Management
and administrative fees not included.
ADDITIONAL BENEFITS TO EMPLOYEES
1 The Money Belongs To The Employees. The money deposited and accumulated in
a SEP-IRA belongs to your employees, even if they stop working for you.
2 Employers' Contributions Excluded From The Employee's Taxable Income.
Employers' contributions to SEP-IRAs are not included in employees' income
for income tax or Social Security tax purposes.
3 Ease of Distributions to Beneficiaries. In case of death, the assets in a
SEP-IRA will transfer to a designated beneficiary.
4 SEP-IRA Contributions Continues Until An Employee Retires. SEP-IRA
contributions can continue until an employee retires, but they must start
withdrawing assets in a SEP-IRA when they reach age 70 1/2.
SALARY REDUCTION SEPS
Salary Reduction SEPs (SAR-SEPs) offer another option. SAR-SEPs allow your
employees to make their own contributions to their retirement account through
tax-deductible salary deferrals. This means the contributions made by the
employee are deferred from taxes. A company may establish a SAR-SEP if it has
25 or fewer employees in lieu of salary and if at least half of them
participate in the program. Under this plan, employees can contribute up to
15% of their pay or $9,240* annually, whichever is less.
A company may have both SEP-IRA and SAR-SEP plans for its employees but the
total annual contribution per individual account cannot exceed $22,500. The
total annual contribution for all employees cannot exceed 15% of the taxable
compensation paid to the employees during the year.
*This amount is in effect for 1995. This amount is adjusted peridocally.
WHY CHOOSE A USAA INVESTMENT MANAGEMENT COMPANY SEP-IRA?
THE MUTUAL FUND ALTERNATIVE
Mutual fund SEP-IRAs offer managed investments and diversification through a
variety of stock, bond, income, and money market instruments. By investing in
mutual funds you also have the advantage of investing in growth-oriented
funds and that's important when planning for your retirement future. What's
more, you have the option to transfer shares from fund to fund at no charge.
This gives your investment the maximum flexibility over the next ten, 20, or
even 30 years.
USAA Investment Management Company (IMCO) manages and distributes a variety
of mutual fund SEP-IRAs to meet your own personal investment objectives. For
your retirement funds to grow, they must be invested wisely. Here are some of
the benefits of investing in a USAA Investment Management Company mutual fund:
Professional Management. USAA (IMCO) mutual funds are managed by investment
professionals with the education, knowledge and experience to make sound
investment decisions with your money -- decisions you may not have the time,
interest or experience to make.
Low Costs. Our IRAs have no annual IRA maintenance fees and USAA IMCO's funds
are totally no-load, which means you pay no sales commission, redemption or
12b-1 fees. A fee of $20 will be charged for all total distributions except
when due to disability, death or within USAA.
Diversification. Each USAA IMCO mutual fund invests in a wide range of
securities (stocks, bonds, etc.) suited to its particular investment
objective, diversified by economic sector, industry, and companies within a
single industry, or it invests in variety of short-term money market
instruments.
Exchange Privileges. Our free exchange privilege allows you to exchange shares
of one fund for shares of another mutual fund. You are allowed six exchanges
per calendar year per fund.
Performance Results. These are readily available every day in the financial
section of most major newspapers, but they will also be sent directly to you
in annual and semiannual reports from our company.
Unique Investor Service. When you become a shareholder, you will be assisted
by your own team of account representatives, a small group of expert
professionals, instead of speaking to a different person each time you call.
WHICH USAA MUTUAL FUNDS ARE BEST FOR ME?
PRIMARY RELATIVE
FUND INVESTMENT IMPORTANCE
TYPE/NAME OBJECTIVE INVESTS IN... VOLATILITY OF INCOME
- -----------------------------------------------------------------------------
AGGRESSIVE GROWTH
- -----------------
AGGRESSIVE Capital appreciation Stocks Very high Low
GROWTH FUND
EMERGING Capital appreciation Emerging Very high Low
MARKETS FUND* markets
stocks
GROWTH
- -------
GROWTH FUND Capital appreciation Stocks Moderate Moderate
to high
INTERNATIONAL Capital appreciation Foreign Moderate Low
FUND* stocks to high
WORLD Capital appreciation Foreign Moderate Low
GROWTH FUND* stocks & to high
domestic
stocks
GROWTH & INCOME
- -----------------
GROWTH & Capital growth & Dividend Moderate Moderate
INCOME FUND current income paying common
stocks,
convertible
bonds
INCOME
- ------
INCOME Current income Bonds Moderate High
FUND (BONDS) and conservation
of capital
INCOME STOCK Current income, Stocks Moderate High
FUND (STOCKS) increasing dividend
income, capital
appreciation
GNMA TRUST Current income & Government Low to High
conservation of National moderate
capital Mortgage
Association
certificates
SHORT-TERM High current income Investment- Low High
BOND FUND with preservation of grade
capital securities,
bonds
PRECIOUS METALS
- ---------------
GOLD FUND Capital Gold mining & Very high Low
appreciation precious metals
stocks
MONEY MARKET
- -------------
MONEY Current income Money market Very low High
MARKET FUND+ plus stable instruments
principal
TREASURY Current income & U.S. Treasury Very low High
MONEY MARKET conservation of securities
TRUST+ capital with the
highest degree of
safety
DIVERSIFIED
- ------------
CORNERSTONE Achieve a positive Gold mining, Moderate Moderate
FUND inflation-adjusted real estate,
rate of return foreign & basic
value stocks,
government
securities
If you would like more complete information on any of the funds listed,
including management fees and expenses, please call us at 1-800-531-8181
(456-7211 in San Antonio) and we will send you informative materials including
a prospectus. Please read them carefully before you invest or send any money.
*Foreign investing is subject to certain risks, such as currency fluctuations,
market illiquidity and political instability, which are discussed in the Fund's
prospectus. An investment in the Money Market Fund or Treasury Money Market
Fund is neither insured nor guaranteed by the U.S. Government and there is no
assurance the fund will be able to maintain a stable net asset value of $1 per
share.
EVERYONE'S INVESTMENT SITUATION IS DIFFERENT
Your age, income, net worth, risk tolerance, as well as current market
conditions, are all factors to consider in deciding which investment is best
for you.
Age. If you are close to retirement, you might want current income and
relative safety. If retirement is 5 years or more away, you may be willing to
accept a higher degree of risk with the objective of achieving larger long-
term gains.
Risk Tolerance. If safety of principal is a strong consideration, you are
better off opting for lower volatility and lower risk funds. For people who
can accept fluctuation in their retirement fund, the more aggressive stock
funds could be an attractive alternative. However, you must be comfortable
with the idea that the value of your investment is likely to fluctuate
depending on market conditions.
Market Conditions. Fluctuating economic conditions can affect mutual funds.
Therefore, the prevailing market environment must be a primary consideration
when you select a fund for your SEP-IRA. Your investment portfolio can easily
be constructed and kept in balance using a family of no-load mutual funds. Of
course, every person's ideal investment mixture is different. By speaking to
one of our knowledgeable account representatives, we can guide you in your
decisions and help you build a portfolio of mutual funds that pursues the
return you seek, balanced with a comfortable exposure to risk.
However, there is no foolproof system for calling the market's turns. So when
investing for the long-term, dollar-cost averaging1 may help you erase the
timing dilemma of "When do I get in ? When do I get out?" With dollar-cost
averaging, you invest a constant amount in a fund at regular intervals over a
period of time, regardless of the fund's price. When the price is low, you
purchase more shares; when the price is high, you purchase fewer shares.
Chances are that over time the average price you pay per share is lower than
the average selling price for those same shares.
1Dollar-cost averaging does not assure a profit or protect against a loss in
declining markets. Investors should consider their financial ability to
continue purchases through periods of low and high price levels.
QUESTIONS ABOUT SEP-IRAs
1 Must employers contribute to their employees' retirement accounts under
SEP-IRA? Whether or not an employer makes a contribution to the SEP-IRA
is entirely within the employer's discretion. However, if contributions
are made, the employer must make them for all eligible employees. Plans
that accept only employee contributions, such as SAR-SEPs, may allow for
up to 50% non-participation.
2 How much may an employer contribute? Under a SEP-IRA plan, the employer
determines the amount of the contribution each year. Please note that all
contributions to each eligible employee's account must be based on the
same percentage. For example, a 15% contribution given to an individual
earning $30,000 a year would be $4,500. The same percentage of an $18,000
salary would be $2,700. However, the maximum is limited to $22,500 per
year for the combined employer/employee contribution.
3 May the employee also contribute to an IRA outside of his/her Plan? Yes.
An employee is still allowed to contribute up to $2,000 to an IRA. The
amount that may be deductible is subject to various limitations.
4 Does an employer have to include every employee in the SEP-IRA or SAR-SEP
Plan? The employer must have a plan to cover all employees who are at
least 21 years of age and who have worked for the employer for at least
three of the past five calendar years. The employer may choose to
establish less restrictive eligibility requirements.
5 Do employees have the option not to participate? Yes, employees have the
option not to participate in a plan involving employer contributions.
However, for the plan to remain in compliance with the IRS, all employees
who are eligible must participate in the SEP-IRA plan.
6 Are employer SEP-IRA contributions subject to Social Security taxes? No.
The employer's contributions are not included as income on the W-2 form
and are not considered wages for the purpose of determining Social
Security taxes. Employee contributions to a SAR-SEP IRA are not included
as income on the W-2 form but are considered wages for the purpose of
determining Social Security taxes.
7 How much can an employee put into a SAR-SEP IRA? An employee may
contribute up to $9,240 (as adjusted for increases in the cost of living)
provided that when combined with the SEP-IRA contribution of his employer
the total amount contributed does not exceed 15 % of salary or $22,500,
whichever is less. Limits for highly compensated employees are different.
8 What is the definition of a highly compensated employee? An individual
who at any time during the current year or preceding calendar year:
- was a 5% owner of the business
- received compensation in excess of $100,000*;
- ranked in the top 20% of employees by compensation and received
compensation in excess of $66,000*;
- received compensation in excess of $60,000* (as adjusted annually for
increases in the cost of living) as an officer of the business or was the
highest paid ranking officer if no employee was paid more than $60,000*.
The contribution percentage of a highly compensated employee in any year may
not exceed 1.25 times the average contribution rate of the non-highly
compensated employee.
*This is the amount in effect for 1995. This amount is adjusted periodically.
9 When can money be withdrawn? Money in a SEP-IRA account like standard IRA
money, can be withdrawn at age 59 1/2 without penalty. With only a few
exceptions, the same penalties apply to SEP-IRA distributions. The most
notable penalty is 10% for taking an IRA distribution before age 59 1/2.
Exceptions to the early distribution penalty include distributions made to
a beneficiary on the death of the SEP-IRA owner or the owner's total
disability. Note: The IRS allows a special exception so some people can
take non-penalty IRA distributions before 59 1/2. To take this advantage
of this, you can take distributions of an IRA-approved series of
"substantially equal payments" over your life expectancy. See your tax
advisor if you are interested in this exception.
10 Can an employer contribute for participants who are older than 70 1/2?
Yes.
11 How are the withdrawals taxed? All withdrawals are subject to ordinary
income taxes.
12 Can employees move their funds from a SEP-IRA to a regular IRA? Yes. There
is no limit to the number of direct transfers from one custodian to
another, as long as the employee does not take possession of the funds.
If you take possession of the funds, you must then deposit your money into
a new IRA account within 60 days after you receive it or you lose your
rollover privileges and the entire amount is subject to the IRA 10%
withdrawal penalty. An IRA rollover can only be utilized once per year and
is not taxable but must be reported on your tax return.
13 Who can withdraw from an established SEP-IRA? Only the employee or the
beneficiaries, if applicable.
14 What is the difference between Internal Revenue Service Forms 5305A,
5305-SEP and 5305A-SEP (SAR-SEP)? Form 5305A must be completed by the
owner when opening a new IRA account. A 5305-SEP Form is used by employers
to establish a SEP-IRA plan for themselves and their employees. A
5305A-SEP (SAR-SEP) is the form filled out by employees in order to permit
employees to make SEP contributions through salary deductions. However,
non-profit organizations and state and local governments cannot establish
SAR-SEPs.
CHECKLIST
OPENING A SEP-IRA
- - The plan may be established by signing IRS Form 5305-SEP or Form 5305-A SEP.
This form is not filed with the IRS. Keep this form for your records.
- - Distribute a copy of your completed Form 5305-SEP, including all the
instructions and questions and answers to employees who are eligible to
participate in your SEP-IRA plan. (For eligibility requirements, refer to
"Who May Participate" on the Form 5305-SEP or Form 5305-A-SEP).
- - After a copy of the form is delivered to employees, make sure they read the
IRA Custodial Agreement and IRA Disclosure Statement (in this booklet).
- - Make sure you have each eligible employee complete and sign:
- IRA Application and Adoption Agreement
- IRA Transfer Request (if necessary)
- Salary Reduction Agreement in the case of a SAR-SEP.
- - Be sure to have all employees complete the Designation of Beneficiary
section on the application to expedite transfer of funds in the event of
death.
- - Your SEP-IRA contributions may be as much as 15% of a plan participant's
annual compensation, to a maximum of $22,500 (employer and employee) per
plan participant per year. PLEASE MAKE SURE YOU INCLUDE YOUR CHECK PAYABLE
TO THE APPROPRIATE FUND FOR YOUR INITIAL CONTRIBUTION.
- - Mail completed form(s) with your check(s) in the enclosed postage-paid
envelope.
- - Once all documents are in order, the only ongoing administrative requirement
of the employer is to report to each of the employees their SEP
contributions. If you are self-employed, simply make the contributions into
your own SEP-IRA. However, in the case of SAR-SEP, the employer must
determine each year whether the contributions made by the highly compensated
employees are within the permissible limits. If excess contributions are
made, they should be refunded. If you are self-employed, simply make the
contributions into your own SEP-IRA.
TOLL-FREE TELEPHONE NUMBERS
For more information before you open an account:
Call 1-800-531-8181 (in San Antonio 456-7211)
For information after you open an account: Account Servicing:
call 1-800-531-8448 (in San Antonio 456-7202).
24-Hour Access :
call 1-800-531-8777 (in San Antonio 498-8777)
For automated telephone information about your accounts through
TouchLine(registered trademark).***
Call 1-800-531-8066 (in San Antonio 498-8066) For a recorded
message giving the Funds' current net asset value.
***TouchLine(registered trademark) is a registered service mark of USAA.
Custodial Agreement
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(b)(8), or 408(d)(3) or an employer contribution to a simplified employee
pension plan as described in section 408(k). Rollover contributions before
January 1, 1993, include rollovers described in section 402(a)(5), 402(a)(6),
402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
simplified employee pension plan as described in section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary
or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or beneficiaries,
starting by December 31 of the year following the year of the Depositor's
death. If, however, the beneficiary is the Depositor's surviving spouse,
then this distribution is not required to begin before December 31 of the
year in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial account
as of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph (3), determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of distribution in accordance with
paragraph (4)(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
Custodial Agreement
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the Depositor may from time to time
specify. The Depositor's instructions may relate to current contributions or
to amounts previously contributed (including earnings thereon) or to both. In
the event that the Custodian receives a contribution from the Depositor with
respect to which no investment direction is specifically applicable, or if
any such investment direction is, in the opinion of the Custodian, unclear,
the Custodian may hold such amounts uninvested or return any such
contributions without liability for any loss, including any loss of income
or appreciation, and without liability for interest or any tax liability
incurred by Depositor pending receipt of instructions or clarification. For
all purposes of this Agreement, the term "Designated Investment Company" shall
mean USAA INVESTMENT TRUST or USAA MUTUAL FUND, INC. and any other regulated
investment company for which USAA INVESTMENT MANAGEMENT COMPANY (or any
affiliate thereof) acts as investment advisor and which is designated by USAA
INVESTMENT MANAGEMENT COMPANY as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions
made under this Agreement shall be deposited in the form of cash and shall be
made to the Custodian in accordance with such rules as the Custodian may
establish. Any contribution so made with respect to a tax year of the
Depositor shall be made prior to the due date of the Depositor's tax return
(not including extensions). Unless otherwise indicated in writing by the
Depositor, contributions shall be credited to the tax year in which they are
received by the Custodian. The Custodian, upon receipt of written
instructions from the Depositor, may exchange or cause to be exchanged shares
of a Designated Investment Company sold held by the Custodian on behalf of the
Depositor for any other shares of a Designated Investment Company available
for investment hereunder, subject to and in accordance with the terms and
conditions of the exchange privilege, as outlined in the current prospectuses
of any such Designated Investment Company and as may be agreed upon, in
writing, from time to time between the Custodian and USAA Investment
Management Company. The Depositor shall be the beneficial owner of the assets
held in the Account. All dividends and capital gains distributions received
on shares of a Designated Investment Company held in the Depositor's Account
shall, unless received in additional shares, be reinvested in shares of the
Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election
of the Depositor in additional shares or in cash or other property, the
Custodian shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time
upon thirty (30) days' notice in writing to the Custodian, and the Custodian
may resign at any time upon thirty (30) days' notice in writing to USAA
INVESTMENT MANAGEMENT COMPANY. Upon such resignation or removal, USAA
INVESTMENT MANAGEMENT COMPANY shall appoint a successor custodian, which
successor custodian shall be a "bank" as defined in Section 408(n) of the
Code or another person found qualified to act as a custodian of an Individual
Retirement Account by the Secretary of the Treasury or his delegate. Upon
receipt by the Custodian of written acceptance of such appointment by the
successor custodian or trustee, the Custodian shall transfer and pay over to
such successor the assets of the Account and all records pertaining thereto.
Custodial Agreement
The Custodian is authorized, however, to reserve such sum of money as it may
deem advisable for payment of all its fees, compensation, costs, and expenses
or for payment of any other liabilities constituting a charge on or against
the assets of the Account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over to
the successor custodian or trustee. If within the thirty (30) day period
provided for above, USAA Investment Management Company has not appointed a
successor custodian or trustee which has accepted such appointment, the
Custodian shall, unless it elects to terminate the Custodial Account, appoint
a successor custodian itself.
4. The Custodian shall deliver, or cause to be delivered, to the Depositor
all notices, prospectuses, financial statements, proxies and proxy soliciting
materials relating to Designated Investment Companies' shares held for
Depositor. The Custodian shall not vote any of the shares held hereunder
except in accordance with the written instructions of the Depositor.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor (or the Depositor's beneficiary
if the Depositor is deceased), make distributions out of the Account to the
Depositor in the manner and amounts as may be specified in such instructions.
All such instructions shall be deemed to constitute a certification by the
Depositor (or the Depositor's beneficiary if the Depositor is deceased) that
the distribution directed is one that the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) is permitted to receive.
Notwithstanding the provision of Article IV above, the Custodian assumes
(and shall have) no responsibility to make any distribution to the Depositor
(or the Depositor's beneficiary if the Depositor is deceased) unless and
until such written instructions specify the occasion for such distribution,
the elected manner of distribution and any declaration required by Article IV.
Prior to making any such distribution from the Account, the Custodian shall
be furnished with any and all applications, certificates, tax waivers,
signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by the Custodian,
but the Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if not
satisfied such instructions are genuine, and assumes no duty of further
inquiry. Upon receipt of proper written instructions as required above, the
Custodian shall cause the assets of the Account to be distributed in cash
and/or in kind, as specified in such written order.
(b) Distribution of the assets of the Account shall be made in accordance
with the provisions of Article IV as the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) shall elect by written instructions
to the Custodian; subject, however to the provisions of Sections 401(a)(9),
408(a)(6) and 408(b)(3) of the Code, the regulations promulgated there-under,
and the following:
(i) No distribution from the Account shall be made in the form of an
annuity contract.
(ii) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election of the
Depositor. The recalculation of life expectancy of the surviving spouse
shall only be made at the written election of the surviving spouse.
(iii) If the Depositor dies before his/her entire interest in the Account
has been distributed, and if the designated beneficiary of the Depositor is
the Depositor's surviving spouse, the spouse may treat the Account as his/her
own individual retirement arrangement. This election will be deemed to have
been made if the surviving spouse makes a regular IRA contribution to the
Account, makes a rollover to or from such Account, or fails to receive a
payment from the Account within the appropriate time period applicable to the
deceased Depositor under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the Depositor provided for in this
Agreement shall be effective if sent by regular mail to him at his last
address of record.
7. The Depositor hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of
the Agreement and hereby consents to such amendments, provided they shall
comply with all applicable provisions of the Code, the regulations thereunder
and with any other governmental law, regulation or ruling. Any such amendments
shall be effective as of the date specified in a written notice sent by first-
class mail to the address of the Depositor indicated by the Custodian's
records. Notwithstanding the foregoing, no mendment which increases the
burdens of the Custodian shall take effect without its prior written consent.
Nothing in this paragraph 7 shall be construed to restrict the Custodian's
freedom to change or substitute fee schedules in accordance with the
provisions of the adoption agreement, and no such change or substitution shall
be deemed to be an amendment to this Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been
received in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the Depositor. The Depositor and the Depositor's legal
representatives, as appropriate, shall always fully indemnify the Custodian
and USAA Investment Management Company and save each of them harmless from any
and all liability whatsoever which may arise in connection with this Agreement
and matters which the Agreement contemplates, except that which arises due to
the Custodian's gross negligence, willful misconduct or lack of good faith.
The Custodian shall not be obligated or expected to commence or defend any
legal action or proceeding in connection with this Agreement or such matters
unless agreed upon by the Custodian and the Depositor or said legal
representatives and unless fully indemnified for so doing to the Custodian's
satisfaction.
(b) The Custodian shall be an agent for the Depositor to perform the
duties conferred on it by the Depositor. The parties do not intend to confer
any fiduciary duties on the Custodian and none shall be implied. The Custodian
shall not be liable (and does not assume any responsibility for) the
collection of contributions, the deductibility of any contribution or the
propriety of any contributions under this Agreement, the selection of any
shares of any Designated Investment Company for the Account, or the purpose or
propriety of any distribution ordered in accordance with Article IV or
paragraph 5 of the Article VIII, which matters are the sole responsibility of
the Depositor or the Depositor's beneficiary,as the case may be.
(c) The Custodian and USAA Investment Management Company shall not be
responsible for any losses, penalties or other consequences to the Depositor
or to any other person arising out of the making of any contribution or
withdrawal.
10. This Agreement together with the Application and Adoption Agreement
attached hereto and by this reference made a part hereof, constitutes the
entire agreement between the parties, and it shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
11. The Depositor shall have the right by written notice to the Custodian on
a form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such Depositor may be entitled in event of his
death prior to the complete distribution of such benefit. If no such
designation is in effect at the time of the Depositor's death, or if the
designated beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate. The last designation filed with the
Custodian shall be controlling, and, whether or not it fully disposes the
Account, shall revoke all such other designations previously filed by the
Depositor.
Custodial Agreement
12. (a) The Custodian shall have the right to receive rollover contributions
as described in the Code and if any property is so transferred to it as a
rollover contribution, such property shall be sold by the Custodian and the
proceeds less any expenses, fees or commissions reinvested as provided in
paragraph 1 of this Article VIII. The Custodian reserves the right to refuse
to accept any property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably require,
shall transfer the assets held under this Agreement (reduced by any amounts
referred to in paragraph 3 of this Article VIII) to a successor individual
retirement account, or individual retirement annuity (other than an endowment
contract) for the Depositor's benefit or to an exempt employee's trust
established under a plan which satisfies the qualification requirements of
Section 401(a) of the Code. Any amounts received or transferred by the
Custodian under this paragraph 12 shall be accompanied by such records and
other documents as the Custodian deems necessary to establish the nature,
value, and extent of the assets, and of the various interests therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in
the Account by the Depositor as security for a loan, or any loan or other
extension of credit from the Account to the Depositor shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except
that the Designated Investment Company shares must be registered in the name
of the Custodian or its nominee. No such delegation or subsequent change
herein shall be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall
cause to be mailed to the Depositor in respect of each tax year an account
of all transactions affecting the Account during such year and a statement
showing the Account as of the end of such year. If, within sixty (60) days
after such mailing, the Depositor has not given the Custodian written notice
of any exception or objection thereto, the annual accounting shall be deemed
to have been approved, and in such case, or upon the written approval of the
Depositor, the Custodian shall be released, relieved and discharged with
respect to all matters and statements set forth in such accounting as though
the account had been settled by judgment or decree of a court of competent
jurisdiction.
16. (a) The Custodian may charge the Depositor reasonable fees, including
an annual maintenance fee, for services hereunder according to standard
schedules of rates which may be in effect from time to time. Initially, the
fees payable to the Custodian shall be in the schedule amount provided with
the Agreement. Upon thirty (30) days' prior written notice, the Custodian may
substitute a fee schedule differing from that schedule initially provided.
Custodial Agreement
(b) Custodian's fees, any income (including unrelated business income
tax), gift, estate and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Account, that may be levied
or incurred by the Custodian in the performance of its duties may be charged
to the Account, with the right to liquidate shares of any Designated
Investment Company for this purpose, or (at Custodian's option) to the
Depositor.
Disclosure Statement
This disclosure statement outlines the basic provisions of an Individual
retirement account (IRA) as well as certain features unique to USAA mutual
fund IRAs. This is merely a general summary for your information. For an
interpretation of the applicable IRA and tax laws, contact your tax adviser
district IRS office. IRS Publication 590, "Tax Information on Individual
retirement Accounts," contains more detailed information on IRAs.
ONE
REVOCATION
An IRA which is established on the date of receipt of this Disclosure
Statement, or within seven days thereafter, may be revoked at any time within
seven days after the date of establishment of such IRA. An IRA established at
least seven days after the date of the receipt of this Disclosure Statement
may not be revoked (although it may be terminated). Revocation must be made
by telephone and confirmed in writing to USAA Shareholder Account Services,
9800 Fredericksburg Road, San Antonio, Texas 78288. Call 1-800-531-8448 (in
San Antonio, 456-7202). Mailed notice will be deemed given on the date that
it is postmarked (or, if sent by certified or registered mail, on the date of
certification or registration) if it is deposited in the mail in the United
States in an envelope or other appropriate wrapper, first class postage
pre-paid, properly addressed. In the event that you decide to revoke your IRA
and do so within such seven day period, you are entitled to a return of the
entire amount of your IRA contributions, without adjustment for such items as
administrative expenses or fluctuations in market value.
TWO
THE CUSTODIAL ACCOUNT
The USAA mutual fund IRA is a custodial account established for your exclusive
benefit or that of your named beneficiaries, as described in Section 408 of
the Internal Revenue Code. All amounts contributed to your IRA custodial
account will not be forfeitable. The custodial account is established through
the use of IRS Form 5305-A which has been approved as to form by the Internal
Revenue Service. IRS approval is determined only as to form of the account and
does not represent a determination of the merits of such an account.
THREE
CONTRIBUTIONS
A. FORM OF CONTRIBUTIONS Contributions must be made in cash and may be made
at any time from the beginning of the tax year, either periodically or in a
lump sum, until April 15 of the following year - the deadline for filing your
tax return. If you receive a tax return extension, you must still make your
IRA contribution by April 15 in order to claim the deduction. You do not have
to contribute to an IRA every year. Additionally, regardless of your age, you
may also transfer funds from another IRA or certain qualified plan
distributions to a "rollover" IRA, which is described in paragraph 6 of this
Disclosure Statement. If you intend to report contributions made between
January 1 and April 15 as contributions for your prior tax year, you should
notify us in writing that such contributions have been made on account of such
prior tax year. Otherwise, the Custodian will assume the payment is for the
current tax year.
No part of your IRA account can be used to buy a life insurance policy. Your
account's assets cannot be combined with other property, except in a common
trust fund or common investment fund. Your IRA account may not be invested in
collectibles, such as gems or art; U.S. gold and silver coins and certain
state coins are permitted.
B. LIMITS ON ANNUAL CONTRIBUTIONS
You are eligible to make contribution to an IRA if you are under age 70 1/2
and if, at any time during the year, you receive compensation. Contributions
to your IRA for any taxable year may not exceed the lesser of $2,000 or 100%
of your compensation or earned income. If you and your spouse both work and
have compensation that is includible in your gross income, each of you can
annually contribute to your own IRA up to the lesser of $2,000 or 100% of
compensation or earned income.
Disclosure Statement
If your spouse earns no income, or earns $250 or less and elects to be treated
as earning no income, you can establish a "spousal IRA" with two separate
accounts if you file a joint Federal tax return. The aggregate annual amount
contributed to both IRAs each year cannot exceed the lesser of $2,250, or 100%
of your earned income or compensation. This amount is divided between the two
accounts as you direct, but not more than $2,000 may be contributed to one
account each year. Wages, salaries, tips, professional fees, net earnings from
self-employment, bonuses and other amounts you get for providing personal
service (and taxable alimony payments) are compensation. Dividend, interest,
rental, or capital gains income is not compensation You may not make any
contribution (other than a rollover contribution) to your IRA with respect to
the tax year in which you reach age 70 1/2 or any subsequent year. However,
you may continue to make contributions to your spouse's spousal IRA and deduct
the deductible portion of such payments until the year in which your spouse
reaches age 70 1/2.
C SIMPLIFIED EMPLOYEE PENSION PLAN CONTRIBUTIONS
A separate IRA may be established for use by your employer as part of a SEP
arrangement. Your employer may contribute to your SEP-IRA up to a maximum of
15% of your compensation or $22,500, whichever is less. If your SEP-IRA is
used as part of a salary reduction SEP, you may elect to reduce your annual
compensation, up to a maximum of 15% of your compensation or $7,000 (indexed
to reflect cost-of-living adjustments), whichever is less, and have your
employer contribute that amount to your SEP-IRA. If your employer maintains
both a salary reduction SEP and a regular SEP, the annual contribution limit
to both SEPs together is 15% of your compensation or $22,500, whichever is
less. You may contribute, in addition to the amount contributed by your
employer to your SEP-IRA, an amount not in excess of the limits referred to
under "Limits on Annual Contributions" above. It is your and your employer's
responsibility to see that contributions in excess of normal IRA limits are
made under a valid SEP and are, therefore, proper.
D. EXCESS CONTRIBUTIONS
An excess contribution is the amount paid to your IRA that is in excess of the
limit on annual contributions. You must pay a non-deductible 6% federal excise
tax on the excess amount for the tax year in which it is made, and for each
later year until the excess is eliminated either by: (1) withdrawal or
(2) application to a succeeding year's contribution.
You will not have to pay the 6% excise tax if you withdraw the excess
(together with its earnings) by the date your tax return is due (including
extensions). You must include in your gross income, for the year in which they
were received, the earnings made from the excess payment. You may also have to
pay the additional 10% tax on premature distributions on the amount of the
earnings.
However, the excess contribution itself will not be included in your taxable
income and will not be subject to the 10% premature distribution tax.
You can also remove any non-deductible IRA contributions by following this
procedure.
Under similar rules, you can also withdraw amounts that are not excess
contributions (because they do not exceed $2,000) but are not deductible
(because they exceed the deductible limits).
Disclosure Statement
Under certain circumstances, you may withdraw excess payments from your IRA
after the due date for filing your tax return (including extensions) and not
include it in your taxable gross income. You may do this: (1) if the total
payment (other than a rollover contribution) for the year is $2,250 or less
and (2) you did not deduct the excess amount (or the deduction was disallowed
by the IRS). The excess payment you remove is thus not subject to the 10% tax
on premature distributions. But you will have to pay the 6% excise tax for
each year that the excess remains in the account at the end of the year.
If you pay more than $2,250 to your IRA for any year, and do not withdraw the
excess by the due date (including extensions) for filing your income tax
return, you must include in your taxable gross income any excess payment you
withdraw, even if you did not originally deduct it. You may also have to pay
the 10% tax on premature distributions on the amount you withdraw.
You may also eliminate an excess contribution from your IRA by not
contributing the maximum allowable amount in a later year. The subsequent
year's contribution would be reduced by the excess amount contributed in the
prior year. By using this method, you can avoid paying the 10% premature
distribution tax on withdrawals.
FOUR
SPOUSAL IRA AND DIVORCE
A SPOUSAL IRA
If you and your spouse each earn compensation, you can each make contributions
to separate IRAs. But even if your spouse does not have any earned
compensation (or earns $250 or less and elects to be treated as having no
earned income), you may be eligible to establish an additional but separate
and independent IRA for your spouse. To qualify, you must be married at the
end of the tax year, and you and your spouse must file a joint return. The
maximum contribution to your IRA and to a Spousal IRA may not exceed the
lesser of $2,250 or 100% of your compensation, as defined under Section 3 B.
The contribution does not have to be equally divided between the two accounts;
however, the maximum contribution made to either account is $2,000. An excess
contribution to either account is not tax deductible and will be subject to a
penalty tax, as described in Section 3 C.
You may not claim a deduction for Spousal IRA contributions in the year your
unemployed spouse reaches the age of 70 1/2 . If, however, you have not yet
attained the age of 70 1/2 , you may continue to make contributions under the
original IRA rules. Distributions from a Spousal IRA do not have to begin
until April 1 of the year following the year in which the spouse for whom the
account or sub-account is maintained reaches age 70 1/2 . With the exception
of the contribution limitations, all rules which apply to the regular IRA
apply to each spouse with respect to his or her own Spousal IRA.
B. DIVORCE OR LEGAL SEPARATION
If all or any portion of your IRA is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an IRA in the
receiving spouse's name. The transaction can be processed without tax
implications to you provided a written instrument executed by a court incident
to the divorce or legal separation in accordance with Section 408(d)(6) of the
Code is received by the Custodian and specifically directs such transfer.
FIVE
TAX DEDUCTION
You may deduct the full amount of your IRA contribution up to the annual
maximum if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified plans, Simplified Employee Pension plans,
tax-sheltered annuity plans, and certain governmental plans) for any part of
such year. If you are married and you and your spouse file a joint return,
you will be deemed to be an active participant in an employer-sponsored
retirement plan if either you or your spouse is an active participant in such
a plan. For this purpose, a husband and wife who file separate tax returns
for any year and who live apart at all times during the year are not
considered to be married.
Disclosure Statement
In addition, even if you are an active participant in such a plan, you may
deduct the full amount of your IRA contribution if you have adjusted gross
income equal to or below a specified level ($40,000 for married taxpayers
filing joint returns and $25,000 for single taxpayers). If your adjusted
gross income exceeds this specified level, or if you are married and file a
separate tax return, the amount of your IRA contribution which is deductible
is phased out on the basis of:
Adjusted gross income between $25,000 and $35,000 if you are a single
taxpayer;
Adjusted gross income of up to $10,000 if you are a married taxpayer who
files a separate return;
Adjusted gross income between $40,000 and $50,000 if you are married and you
and your spouse file a joint return.
Adjusted gross income is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the
IRA deduction, adjusted gross income is modified to take into account
deductions for IRA contributions, taxable benefits under the Social
Security Act and the Railroad Retirement Act, and passive loss
limitations under Code Section 86.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
adjusted gross income in excess of the phase out amount ($25,000 for single
taxpayers, $40,000 for married taxpayers who file joint returns and $0 for
married taxpayers who file separate returns). However, if you contribute to a
Spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next lowest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your adjusted gross income is within the phase-out range and
your reduced deduction limit is more than $0 but less than $200, you are
permitted to deduct up to $200 of your IRA contribution.
If your adjusted gross income exceeds the applicable level specified above and
you are an active participant in an employer-sponsored retirement plan (or
your spouse is an active participant in such a plan if you file joint
returns), then you may not deduct any portion of your IRA contribution.
Special rules apply for purposes of determining whether or not you are an
active participant in an employer-sponsored retirement plan. Your Form W-2 for
the year should indicate your participation status. You should consult your
own tax or financial adviser if you have any questions. You can estimate your
deduction limit using the following formula:
$10,000 - Excess AGI x Maximum Allowable Deduction
- --------------------
$10,000 = Deduction Limit
*Excess AGI means adjusted gross income above the Specified Level.
*Maximum Allowable Deduction means $2,000 ($2,250 for "Spousal IRA").
Example 1: You are single, an active participant and have an adjusted gross
income of $32,000. You would calculate your deductible IRA contribution as
follows:
The Excess AGI is $32,000 - $25,000 = $7,000 Your IRA deduction limit is:
$10,000 - $7,000 x $2,000 = $600
- ----------------
$10,000
Example 2: You are married and file a joint tax return. You and your spouse
individually earn more than $2,000 and one is an active participant. Your
combined adjusted gross income is $45,120. Each may contribute to an IRA and
calculate deductible contributions to each IRA as follows:
The Excess AGI is $45,120 - $40,000 = $ 5,120
Your IRA deduction limit is:
$10,000 - $5,120 x $2,000 = $ 976 (rounded up to $980)
- ----------------
$10,000
Example 3: If, in Example 2, your spouse did not earn any compensation, or
elected to be treated as earning no compensation, you could establish a
Spousal IRA (consisting of an account for you and your spouse). The amount of
deductible contributions which could be made to the two IRAs is calculated
as follows:
$10,000 - $5,120 x $2,250 = $1,098
- ----------------
$10,000 (rounded up to $1,100)
Disclosure Statement
The $1,100 can be divided between your IRA and your spouse's IRA, but neither
IRA may have a deductible contribution of more than $980.
Example 4: You are married, file a separate tax return and are an active
participant. You have $1,400 of compensation and want to make a deductible
contribution to your IRA.
Your Excess AGI is $1,400 - $0 = $1,400
Your IRA deduction limit is:
$10,000 - $1,400 x $2,000 = $1,720
- ----------------
$10,000
Though your IRA deduction limit as calculated above is $1,720, you may not
deduct an amount in excess of your adjusted gross income of $1,400.
Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up
to your annual maximum amount with all or part of the contribution being a
nondeductible contribution. Of course, the combined total of deductible and
nondeductible contributions must not exceed your annual maximum amount. Any
earnings on all your IRA contributions (deductible and non-deductible)
accumulate tax-free until you withdraw them.
SIX
ROLLOVER IRA
A rollover is a tax-free transfer of assets from one tax-qualified retirement
program to another. There are two kinds of rollover payments to an IRA. In
one, you rollover amounts from one IRA to another. With the other, you
rollover amounts from a qualified pension or profit-sharing plan to an IRA.
You cannot deduct a rollover payment on your tax return.
In addition, please note that the IRA you set up to receive rollover amounts
should be separate from an IRA you set up to receive annual contributions;
and if you establish a rollover IRA during the year in which you reach age
70 1/2, you must begin receiving distributions from such IRA no later than
April 1 of such following year. Since strict limitations apply to rollovers,
and a variety of tax and financial planning issues should be considered in
determining whether to make a rollover contribution, it would be wise to check
with your tax adviser or local IRS district office for information concerning
your specific situation before proceeding with a rollover IRA.
However, please be aware that if you transfer the funds in your IRA from one
IRA trustee or custodian to another, either at your request, or at the
trustee's request, this is not a rollover. It is a transfer that is not
affected by the one-year waiting period described below.
A. ROLLOVER FROM ONE IRA TO ANOTHER
You may withdraw part or all of the assets from one IRA and reinvest them in
another IRA tax free once a year. To take advantage of this tax free
treatment, you must transfer the entire amount you receive to your new IRA
by the 60th day after the date the property is distributed from your first
IRA or other tax-qualified plans. Partial rollovers are taxed on the amount
retained.
B. ROLLOVER FROM A TAX-QUALIFIED PLAN TO AN IRA
If you become entitled to receive all or any part of an "eligible rollover
distribution" from a tax-qualified plan such as a 401(k) plan, a profit
sharing plan, a Keogh plan, or a 403(b) tax-sheltered annuity, you may direct
the plan to make a direct rollover to your IRA and thus avoid the mandatory
20% Federal withholding tax. To do a direct rollover, the assets should
either be transferred directly to the IRA custodian, or the distribution
check can be made payable to the IRA custodian. If you choose to receive a
distribution directly from a tax-qualified plan, you may still rollover the
distribution (plus the amount of the withholding tax) to your IRA as long as
you do so within 60 days of the date you receive the distribution. An
"eligible rollover distribution" is any distribution from a tax-qualified
plan other than (a) a distribution that is one of a series of periodic
payments for the employee's life or over a period of 10 years or more,
(b) a required distribution after you attain 70 1/2 and (c) certain corrective
distributions.
Please remember that amounts subject to the post-70 1/2 minimum distribution
requirement and your prior non-deductible contributions are not eligible for
rollover treatment.
If you receive an eligible rollover distribution from your employer's plan and
roll it over into an IRA, you may later roll over those assets into a new
employer's plan, if you kept those assets in a separate account. Your
surviving spouse may also roll over into an IRA all or part of an eligible
rollover distribution (although amounts up to $5,000 which qualify for the
death benefit exclusion need not be rolled over) received from your employer's
plan because of your death.
Disclosure Statement
SEVEN
DISTRIBUTIONS
A. TAX TREATMENT
Any money or property you receive from your IRA account is a distribution
and must be included in your gross income as ordinary taxable income in the
year received. The exceptions are rollovers and tax-free withdrawals of
excess payments as described above.
Generally, amounts distributed to you are includible in your gross income
in the taxable year you receive them and are taxed as ordinary income
without the special tax treatment available for lump-sum distributions.
Federal income tax will be withheld from distributions you receive from an
IRA unless you elect not to have tax withheld. However, if IRA distributions
are to be delivered outside of the United States, this withholding tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%.
If you withdraw an amount from any IRA during a taxable year and you have
previously made both deductible and nondeductible IRA contributions, then
part of the amount withdrawn is excludible from ordinary income and not
subject to taxation. The amount excludible for the taxable year is the
portion of the amount withdrawn which bears the same ratio to the amount
withdrawn for the taxable year as your aggregate non-deductible IRA
contributions remaining in all of your IRAs bear to the aggregate balance
of all your IRAs at the end of the year plus the amount of the distribution
during the year. For example, an individual withdraws $1,000 from an IRA to
which both deductible and non-deductible contributions were made. At the end
of the year, the account balance is $4,000, of which $2,500 was nondeductible
contributions. The amount excludible from income is $500 ($2,500/$5,000 x
$1,000).
In general, if, during any calendar year you receive distributions from your
IRAs, Section 403 annuities and qualified plans which, in the aggregate,
exceed $150,000, you maybe subject to a 15% penalty tax on the amount in
excess of $150,000. If the total amount of your benefits payable from such
plans at your death exceeds a certain permissible level, a similar 15% estate
tax is imposed on the amount in excess of the permissible level. Special rules
apply in certain circumstances and you should consult your tax adviser if you
have any questions regarding this tax.
B. METHODS OF DISTRIBUTION
1. IRA Distributions
You can withdraw money from your IRA account in either of the following ways:
a. a lump-sum withdrawal of the entire balance.
b. periodic payments (monthly, quarterly, annually) spread over a period
of years.
The following conditions apply to IRA distributions:
a. You may begin receiving distributions withoutany penalty any time after
you are 59 1/2.
b. You must begin receiving distributions from your IRA by April 1 following
the calendar year in which you become 70 1/2, the "Required Distribution
Date."
c. If you are disabled, you may receive distributions from your IRA
regardless of your age without paying any penalties. You must be certified as
disabled by a physician. For more information on disability, contact the IRS
and get a copy of IRS Publication 522, "Disability Payments."
d. If you request a withdrawal prior to your attainment of age 59 1/2, you
must furnish the Custodian with a written statement explaining how you intend
to dispose of the amount distributed. This requirement does not apply to a
distribution which is part of a series of substantially equal periodic
payments made over your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary.
2. Tax and Penalties on Premature Distribution
If you withdraw any of the funds in your IRA before age 59 1/2, the amount
includible in your gross income is subject to a 10% nondeductible penalty tax
unless: (1) the withdrawal is made because of your death or permanent
disability; (2) the withdrawal is an exempt withdrawal of an excess
contribution; or (3) the withdrawal is rolled over into another qualified plan
or IRA. You can also withdraw funds held in your IRA without any tax penalty
before you reach age 59 1/2 if you choose to receive installment payments in
substantially equal amounts over a period that does not exceed your life
expectancy or the joint life and last survivor expectancy of you and your
designated beneficiary. You should be aware, however, that the 10% penalty
tax will be applied retroactively to all installment payments if you alter
the method of distribution before you attain age 59 1/2 to a method that does
not qualify for the exception. This 10% penalty tax will also apply
retroactively if you do not receive the installment payments under a method
that qualifies for the exception for at least five years.
The 10% penalty tax discussed above does not apply to the portion of your IRA
distribution which is not includible in your gross income.
3. Penalties on Excess Accumulations
Amounts you contribute to your IRA are not to be kept indefinitely. The law
requires that you begin to receive distributions from your IRA no later than
your "Required Distribution Date." There is a minimum amount which you must
withdraw by the Required Distribution Date, December 31 of the calendar year
containing the Required Distribution Date, and December 31 of each calendar
year thereafter. This minimum amount is determined by your life expectancy or
the joint life and last survivor expectancy of you and your designated
beneficiary, subject to the minimum distribution incidental death benefit
rule. Your life expectancy (and your spouse's life expectancy if your spouse
is your designated beneficiary) may be recalculated each year if you elect to
do so by filing a form with the Custodian no later than your Required
Distribution Date. Additionally, if your beneficiary is not your spouse, the
minimum distribution must be calculated by reference to the "minimum
distribution incidental benefit" rule of the Internal Revenue Code. If the
amount distributed during a taxable year is less than the minimum amount
required to be distributed, you will be subject to a penalty tax equal to
50% of the deficiency unless you can prove that the failure to make such
minimum distribution was due to reasonable cause, or demonstrate that
reasonable steps are being taken to remedy the shortfall. If you maintain
more than one IRA, you must calculate the amount of your minimum distribution
in any year by considering the aggregate balances in all your IRAs. Once the
minimum amount is so determined, you may choose to withdraw it from any one
IRA. IRS Publication 590 contains a worksheet for figuring the minimum amount
that should be distributed from your IRA, so that you may avoid the 50%
excise tax. You should consult your own tax or financial advisor with regard
to the calculation of the amount of minimum distribution each year because
it is your responsibility to make sure that this requirement is met. The
Custodian is not responsible to advise you in this matter and will only make
distributions to you from your IRA in accordance with your specific
instructions.
Disclosure Statement
C. DISTRIBUTION ON DEATH
Your beneficiaries include your estate, dependents, and anyone you choose to
have the benefits of your IRA after you die. You may designate your
beneficiaries on the IRA Application and Adoption Agreement when you open
your IRA and change them at any time by writing to the Custodian. Distribution
to your beneficiary may be made at any time in the event of your death either
in a lump sum or periodically as selected by your beneficiary but subject to
the following rules:
1. If distribution from your IRA has commenced after your Required
Distribution Date, the funds remaining in your account must continue to be
distributed to your designated beneficiary at least as rapidly as under the
method of distribution in effect prior to your death. Subject to the
foregoing, the remaining funds in the account will be distributed to your
designated beneficiary either outright or periodically, as selected by such
beneficiary. The Custodian will make distributions to your beneficiary in
accordance with his or her specific instructions. Your beneficiary should
be aware that he or she is subject to minimum distribution rules and it is
his or her responsibility to make sure that the rules are met.
2. If distribution from your IRA has not commenced prior to your Required
Distribution Date, then the entire account balance must generally be
completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death. However, there are
exceptions to this five-year distribution rule. First, the five-year
distribution rule does not apply if the funds in your IRA will be payable to
your designated beneficiary over a fixed period that is not longer than the
life expectancy of the beneficiary and if the distribution commences no
later than December 31 of the year containing the fifth anniversary of your
death. Second, if your beneficiary is your surviving spouse, he or she may
elect within the five-year period commencing with your death to receive the
funds in your IRA over a fixed period that is not longer than his or her life
expectancy and commencing at any date prior to the date you would have
attained age 70 1/2. Third, if your beneficiary is your surviving spouse, he
or she may elect to roll over the funds in your IRA into his or her own
account or to treat your IRA as his or her own by making regular or rollover
deposits into such IRA.
The designation of a beneficiary to receive funds from your IRA at your death
is not considered a transfer subject to federal gift taxes. However, any
funds remaining in your IRA at your death would be includible in your federal
gross estate.
HOW TO FILE IRA
INFORMATION WITH THE IRS
IRA Contributions. Deductible and nondeductible IRA contributions are reported
on IRS Form 1040 or Form 1040A. To the extent your contribution is deductible,
you can claim a deduction on your federal tax return. To the extent your
contribution is not deductible, you must designate it as a nondeductible
contribution on your federal tax return. You may choose to file your Federal
income tax return before it is due (without extensions) and report your IRA
contributions before they are made. You must, however, make the contributions
by the due date (without extensions) of such return. To the extent your
contribution is deductible, you claim a deduction on your tax return. To the
extent your contribution is not deductible, you must designate it on Form 8606.
There is a $100 penalty each time you overstate the amount of your
nondeductible contributions unless you can prove that the overstatement was due
to reasonable cause.
IRA Distributions. Report IRA distributions, whether taxable or not, including
taxable premature distributions on IRS Form 1040. You will also be required to
give additional information on Form 8606 in years you make a withdrawal from
your IRA. If you fail to file a required Form 8606, there is a $50 penalty for
each such failure unless you can prove that the failure was due to reasonable
cause.
Disclosure Statement
Other Reporting Requirements. During those years when you have tax on excess
payments, premature distributions, prohibited transactions, and excess
accumulations, you must file Form 5329, "Return for Individual Retirement
Accounts."
Rollovers. Report any rollover from a qualified plan to an IRA on Form 1040.
Enter the amount of the distribution and the taxable amount. (Special Note:
This Disclosure Statement discusses the effect and requirements of the
Federal tax laws. You should check with your tax adviser with regard to
the applicable tax laws of your state.)
EIGHT
PROHIBITED TRANSACTIONS
Generally, a prohibited transaction is any improper use of your IRA account or
annuity. Some examples are: (1) the sale, exchange, or leasing of any property
between your IRA account and you; (2) the lending of money or other extension
of credit between your IRA account and you; (3) the furnishing of goods,
services, or facilities between your IRA account and you; or (4) the transfer
of assets of your IRA account for your use or for your benefit.
If you or your beneficiary engage in a prohibited transaction at any time
during the year, you generally must include the fair market value of all of
the IRA's assets in your taxable gross income for that year. You will also
be subject to the 10% tax on premature distributions if you are under the
age of 59 1/2.
Additionally, if you pledge your IRA as security for a loan, or invest your
IRA in "collectibles" such as art, antiques, gems, or coins (other than
United States gold and silver coins or certain state coins), the amount so
pledged or invested is considered to have been distributed to you and will
be taxed as ordinary income during the year in which you make such pledge or
investment. You may also have to pay the 10% penalty tax on premature
distributions.
NINE
OTHER INFORMATION
A. FUND PROSPECTUS
The annual earnings under USAA mutual fund IRAs consist of all dividends and
distributions on the mutual fund shares held in your account. The dividends
and distributions received from a given fund accumulate tax free and are
reinvestedin shares of the fund credited to your account.
For complete information about advisory fees, other expenses, the method of
calculating the price per share, etc., of USAA's mutual funds, ask for and
read the funds' Statement of Additional Information. The growth in value of
the investments included in your IRA is neither guaranteed nor projected.
B. AMENDMENTS
USAA Investment Management Company will make any amendments that may be
required by the Internal Revenue Service and will provide a copy of these
amendments to you.
The Custodian reserves the right to amend the Application and Adoption
Agreement with respect to the Custodian compensation thirty days after
mailing of written notice to the investor.
C. CUSTODIAN'S FEES
There are no annual IRA maintenance fees. The Custodian charges a $20 fee
for total distribution. Exceptions to the fee are: partial distributions,
total transfer within USAA, and distributions due to disability or death.
D. THE CUSTODIAN
The sponsor of your IRA is USAA Investment Management Company. The Custodian
is State Street Bank and Trust Company, or any successor Custodian selected
by the sponsor.
E. INTERNAL REVENUE SERVICE
You may obtain further information regarding an IRA from any district office
of the Internal Revenue Service.
Exhibit 14(c)
[A picture of the USAA logo is here]
403(b)(7) Handbook
Tax-Sheltered Custodial Account And Retirement Plan
USAA INVESTMENT MANAGEMENT COMPANY
Retirement Planning For Employees of Tax-Exempt Organizations and Educational
Institutions
Table Of Contents
What Is A 403(b)(7) Plan? 2
Benefits Of A 403(b)(7) 3
Why Choose A USAA Investment Management Company
Custodial Account? 5
Which USAA Mutual Funds Are Best For Me? 6
Questions And Answers About USAA 403(b)(7) Mutual Funds 9
Checklist 12
Toll-Free Telephone Numbers 13
Custodial Agreement 14
What Is A 403(b)(7) Plan?
The 403(b)(7) plan, also known as a Tax-Sheltered Custodial
Account, is a retirement plan designed to provide retirement
savings and investments for employees of:
1) tax-exempt organizations described in section 501(c)(3)
of the IRS Code, or
2) educational institutions described in section
170(b)(1)(a)(ii) of the IRS Code.
Under a 403(b)(7) plan, an employer makes regular
contributions to an employee's tax-sheltered account based
on a salary reduction agreement between the employer and
employee. The money is managed by a financial institution
also known as the custodian.
Many institutions such as hospitals, religious
organizations, scientific research institutes, public
schools and state universities are eligible for 403(b)(7)
plans. Check with your organization's personnel department
to see if yours qualifies.
What Makes A 403(b)(7) Unique from an IRA?
An Individual Retirement Account (IRA) is a personal
retirement plan set up by any individual with earned income.
The maximum contribution amounts are $2,000 for individual
and $2,250 for spousal IRAs and it may or may not be tax
deductible, depending on the individual's level of income
and coverage by a pension plan.
Now let's look at what distinguishes the 403(b)(7) plan from
an IRA.
1 When you invest in a 403(b)(7) plan, you may make a
larger tax-deferred annual contribution of up to $9,500 or
15 to 20 percent of your gross income. You will save more on
your taxes each year you contribute to your plan, and
regardless of your level of income, it's always deductible.
2 Since your contributions are invested each pay period,
accumulated earnings may compound over a longer period of
time.
3 By choosing a 403(b)(7) plan, you will be able to
invest in USAA Investment Management Company's no-load
mutual funds, which means you pay no set-up fees or 12b-1
fees. A true no-load investment.
4 By investing in a 403(b)(7) plan, you'll enjoy the
convenience of regular, systematic investing through a
salary reduction agreement.
What Is A Salary Reduction Agreement?
A Salary Reduction Agreement enables you to save for your
retirement in an easy and taxed-favored manner. Here is how
it works: you authorize your employer to reduce your salary
by a certain amount, which your employer then contributes to
your 403(b)(7) account. The exact amount you're allowed to
put into a 403(b)(7) depends on a number of factors, but
most people can typically allocate as much as 15 to 20
percent of their gross compensation or up to a maximum of
$9,500* per year, whichever is lower.
* This is the amount in effect for 1995. This amount is
adjusted periodically.
Benefits Of A 403(b)(7)
1 A Better Way To Invest.
For eligible individuals, a 403(b)(7) offers the
possibility to invest a greater amount than through most
other tax-sheltered retirement investment vehicles. This
could mean higher retirement benefits when distribution time
comes around.
2 Tax-Deferred Savings And Earnings.
The money in your 403(b)(7) account is not subject to
taxes until you start withdrawals. This means that your
savings and all subsequent investment earnings - interest,
dividends and capital gains - accumulate on a tax-deferred
basis for as long as you leave them in the account.
3 You Pay Less In Taxes Right Away.
Since your contributions to the plan are deducted by
your employer before you pay taxes, your taxable income is
reduced by the amount of the contribution. As a result, you
will be paying less in taxes right away.
4 You're In Control.
You decide how much you want deducted from your salary
(up to the permitted limit) and you define the investment
objectives.
(See graph on page 4 for an example of the impact tax
savings can have on the growth of your money for
retirement.)
Benefits Of A 403 (b)(7)
With A Tax-Sheltered Custodial Account
The chart illustrates a hypothetical monthly contribution
sum of $400 ($4,800 each year) for 30 years to a tax-
sheltered custodial account. If you are in the 28% tax
bracket and your account earns 6% each year, under a tax-
sheltered custodial account plan your account would have a
value of $403,815* after 30 years.
Without A Tax-Sheltered Custodial Account
This is what happens if you don't take advantage of
investing in a tax-sheltered custodial account.
Assume you are in the 28% tax bracket and invest $4,800 of
taxable income each year for 30 years. Your $4,800 annual
investment actually represents $3,456 of "after-tax" dollars
for your retirement plan. As a result, in 30 years your
account value, without the tax-deferred compounded earnings,
would only grow to $290,747.*
[A graph is shown here comparing the account value if $4,800
of taxable income is invested each year for 30 years with a
403(b)(7) and without a retirement plan. The vertical
axis shows the dollar amount and the horizontal axis shows
the time frame. The ending account value after 30 years
with a 403(b)(7) is $403,815 and without a retirement plan
is $290,747.]
* Based on a hypothetical 6% annual interest rate compounded
monthly. Assumes a 28% tax bracket. This chart is for
illustration purposes only. It is not an indication of past
or future results of an investment in any of the funds
managed and distributed by USAA Investment Management
Company. Management and administrative fees are not
included.
Why Choose A USAA Investment Management Company Custodial
Account?
The Mutual Fund Alternative.
USAA's 403(b)(7) mutual funds offer managed investments and
diversification through a variety of stock, bond, income and
money market instruments. By investing in mutual funds you
also have the advantage of investing in growth-oriented
funds and that's important when planning for your future
retirement. What's more, you have the option to transfer
shares from fund to fund at no charge. This gives your
investment the maximum flexibility over the next ten, 20, or
even 30 years.
USAA Investment Management Company (IMCO) manages and
distributes a variety of mutual funds to meet your own
personal investment objectives. For your retirement funds to
grow, they must be invested wisely. Here are some of the
benefits of investing in a USAA Investment Management
Company mutual fund:
Professional Management.
USAA IMCO mutual funds are managed by investment
professionals with the education, knowledge, and experience
to make sound investment decisions for your money -
decisions you may not have the time, interest or experience
to make.
Low Costs.
Our tax-sheltered custodial accounts have no annual
maintenance fees and USAA IMCO's funds are totally no-load,
which means you pay no sales commission or 12b-1 fees. 100%
of your hard-earned dollars go to work for you immediately.
The Custodian charges a $20 fee for total distributions.
Exceptions to the fee are: partial distributions, total
transfer within USAA, and distributions due to disability or
death.
Unique Investor Service.
When you become a shareholder, you will be assisted by your
own team of account representatives, a small group of expert
professionals who are qualified to help you make sound
investment choices customized to your individual needs.
Diversification.
Each USAA IMCO mutual fund invests in a wide range of
securities (stocks, bonds, etc.) suited to its particular
investment objective. The funds are diversified by economic
sector, industry, and companies within a single industry,
and it may invest in a variety of short-term money market
instruments.
Exchange Privileges.
Our free exchange privilege allows you to exchange shares of
one fund for shares of another mutual fund with the same
registration. You may exchange six times per calendar year.
Performance Results.
These are readily available every day in the financial
section of most major newspapers, but they will also be sent
directly to you in annual and semiannual reports from our
company.
Which USAA Mutual Funds Are Best For Me?
PRIMARY RELATIVE
FUND INVESTMENT IMPORTANCE
TYPE/NAME OBJECTIVE INVESTS IN... VOLATILITY OF INCOME
- -----------------------------------------------------------------------------
AGGRESSIVE GROWTH
- -----------------
AGGRESSIVE Capital appreciation Stocks Very high Low
GROWTH FUND
EMERGING Capital appreciation Emerging Very high Low
MARKETS FUND* markets
stocks
GROWTH
- -------
GROWTH FUND Capital appreciation Stocks Moderate Moderate
to high
INTERNATIONAL Capital appreciation Foreign Moderate Low
FUND* stocks to high
WORLD Capital appreciation Foreign Moderate Low
GROWTH FUND* & domestic to high
stocks
GROWTH & INCOME
- -----------------
GROWTH & Capital growth & Dividend Moderate Moderate
INCOME FUND current income paying common
stocks,
convertible
bonds
INCOME
- ------
INCOME Current income Bonds Moderate High
FUND (BONDS) and conservation
of capital
INCOME STOCK Current income, Dividend Moderate High
FUND (STOCKS) increasing dividend paying stocks
income, capital
appreciation
GNMA TRUST Current income & Government Low to High
conservation of National moderate
capital Mortgage
Association
certificates
SHORT-TERM High current income Investment- Low High
BOND FUND with preservation of grade
principal securities,
bonds
DIVERSIFIED
- ------------
CORNERSTONE Achieve a positive Gold mining, Moderate Moderate
FUND inflation-adjusted Government
rate of return Securities,
Real Estate,
Foreign and Basic
Value Stocks
PRECIOUS METALS
- ---------------
GOLD FUND Capital Gold mining & Very high Low
appreciation precious metals
stocks
MONEY MARKET
- -------------
MONEY Current income Money market Very low High
MARKET FUND+ plus stable instruments
principal
TREASURY Current income & U.S. Treasury Very low High
MONEY MARKET conservation of securities
TRUST+ capital with the
highest degree of
safety
If you would like more complete information on any of the
funds listed, including management fees and expenses, please
call us at 1-800-531-8000, extension 8-4539, (in San Antonio
498-4539) and we will send you informative materials
including a prospectus. Please read them carefully before
you invest or send any money.
*Foreign investing is subject to certain risks, such as
currency fluctuations, market illiquidity and political
instability, which are discussed in the Fund's prospectus.
An investment in the Money Market Fund or Treasury Money
Market Trust is neither insured nor guaranteed by the U.S.
Government and there is no assurance the fund will be able
to maintain a stable net asset value of $1 per share.
Everyone's Investment Situation Is Different
Your age, income, net worth, risk tolerance, as well as
current market conditions, are all factors to consider in
deciding which investment is best for you.
Age.
If you are close to retirement, you may need current income
and relative safety. If retirement is five years or more
away, you may be willing to accept a higher degree of risk
with the objective of achieving higher long-term gains.
Risk Tolerance.
If you are highly concerned about maintaining the safety of
your principal, you may be better off opting for lower
volatility and lower-risk funds. Remember, however, that
saving vehicles which guarantee your principal may be
subject to a less obvious risk - the loss of purchasing
power due to inflation. For those who can accept some
fluctuation in their retirement fund, the more aggressive
stock funds could be an attractive alternative. However, you
must be comfortable with the idea that the value of your
investment is likely to fluctuate depending on market
conditions.
Market Conditions.
Fluctuating economic conditions can affect mutual funds. For
example, the up or down direction of interest rates will
affect both the price and the yield of an income-oriented
mutual fund. Your investment portfolio can easily be
constructed and kept in balance using a family of no-load
mutual funds. Of course, every person's ideal investment
mixture is different. As a free service to you, one of our
knowledgeable account representatives will guide you in your
decisions and help you build a portfolio of mutual funds
that pursues the return you seek, balanced with a
comfortable exposure to risk.
Remember, there is no foolproof system for calling the
market's turns. So when investing for the long-term, dollar-
cost averaging1 may help you erase the timing dilemma of,
"When do I get in? How much should I invest?" With dollar-
cost averaging, you invest a constant amount in a fund at
regular intervals over a period of time, regardless of the
fund's price. When the price is low, you purchase more
shares; when the price is high, you purchase fewer shares.
Chances are that over time the average price you pay per
share is lower than the average selling price for those same
shares.
1Dollar-cost averaging does not assure a profit or protect
against a loss in declining markets. Investors should
consider their financial ability to continue purchases
through periods of low and high price levels.
Questions And Answers About 403(b)(7) USAA Mutual Funds
When is the best time to start investing for retirement?
The best time is now. The sooner you start investing for
your retirement years, the better your chances will be to
achieve a comfortable retirement income.
Why should I have a tax-sheltered custodial plan?
There are several ways to save for retirement, but a TSCA -
also known as the 403(b)(7) - provides an excellent
opportunity to build a retirement nest egg by allowing you
to set aside a sizable portion of your current income in a
tax-sheltered account. The money you contribute during your
working years, as well as the earnings generated, accumulate
on a tax-deferred basis until withdrawal.
Who is eligible for a 403(b)(7)?
Federal law mandates that employees of non-profit
organizations described in the 501(c)(3) section of the IRS
Code and those working for educational institutions
described in the 170(b)(1)(a)(ii) section of the Code are
eligible. These definitions include a wide range of people,
including many who work in hospitals, research institutes,
religious and charitable organizations, as well as in public
schools, state universities and other state-affiliated
educational institutions. If you are not sure whether you
qualify, check with the personnel or administrative
department at your place of employment.
How much can I put into a 403(b)(7)?
That depends on several factors, but most people are able to
allocate 15 to 20 percent of their gross compensation
without exceeding IRS limits. The maximum you can
contribute, however, is $9,500 per year or 15 to 20 percent,
whichever is lower. If you are considering a substantial
amount, we will help you compute your personal Maximum
Exclusion Allowance(MEA).
What if I leave my current job?
If you leave your current job, your 403(b)(7) mutual fund
account will continue earning dividends and compounding as
before, or you may withdraw the entire value of the account.
Any premature distributions (before age 59 1/2) will be
assessed a 10% penalty on the amount withdrawn, in addition
to ordinary income tax on the entire amount withdrawn.
However, if you leave your job, you will not be able to make
further annual contributions unless your new employer is
approved by law for this type of plan.
If your new employer is approved, all you have to do to
continue with your current contract is fill out a salary
reduction agreement form and get your new employer to agree
to send us your contributions.
How can I change the amount of my salary reduction
agreement?
It's simple. You will need to fill out a new Salary
Reduction Agreement Form.
Who chooses the funds to which my money will be allocated?
You do, according to your own investment objectives and
tolerance of risk. We will, of course, provide our guidance
as you request it.
Why should I invest in a mutual fund 403(b)(7)?
Mutual funds offer the advantages of diversification and
professional investment management. What's more, USAA IMCO
funds are all "no load," meaning you don't pay any
commissions or sales charges. All of your money starts
working for you from day one.
Can I transfer my 403(b)(7) account to a regular IRA?
Yes you can, but you must either be terminated from service
or be 59 1/2. There is no limit to the number of direct
transfers from one custodian to another, as long as the
employee does not take possession of the funds. If you take
possession of the funds, you must then deposit your money
into a IRA account within 60 days after you receive it or
you lose your rollover privileges and the entire amount is
subject to the IRA 10% penalty. An IRA rollover can only be
used once per year and is not taxable but must be reported
on your tax return.
How will I keep track of my account?
You will receive a confirmation statement every time your
employer makes a contribution and whenever there is any
activity within the account. You will also receive a
quarterly consolidated statement plus a year-end statement
summarizing all activity throughout the year.
When can I start withdrawals?
Money can be withdrawn at age 59 1/2 without penalty. Unless
you become disabled, earlier withdrawals are subject to
penalty. You may delay withdrawals but not later than age
70 1/2. After age 70 1/2, if you make withdrawals in
installments, certain minimum distributions (based on life
expectancy or joint life expectancies of you and your
beneficiary) must begin. A 50% penalty tax will be imposed
if the amount actually distributed to you after 70 1/2 is
less than the amount required by law to be distributed.
How are the withdrawals taxed?
All withdrawals are subject to ordinary income taxes in the
year received.
Checklist
Here's how simple it is to open a 403(b)(7):
To begin investing in a USAA Investment Management Company
403(b)(7) mutual fund, please follow the steps outlined
below:
* Read the prospectus(es) for the fund(s) you've selected.
* Complete the following forms:
- Account Application
- Salary Reduction Agreement
* Both you and your employer must sign and date the
Salary Reduction Agreement and both of you should keep a
copy for your records. USAA does not require a copy of this
agreement.
* If your account is to be opened with a lump-sum
contribution from another plan, complete the Account
Transfer Form as well.
* On the Application, specify the fund(s) you want
to invest in, in either a dollar amount or a percentage
amount that you wish to allocate to each fund.
* Mail completed forms in the enclosed postage-paid
envelope.
Upon acceptance of your application and receipt of money
from your employer, you will receive a confirmation
statement and a copy of each form signed by USAA Investment
Management Company, the custodian. Generally, it takes about
two weeks to process your application after we receive your
deposit. The first deduction from your paycheck will
normally take place within four to six weeks after you give
your employer the salary reduction form.
Your annual 403(b)(7) contributions are typically limited to
15 to 20 percent of your gross compensation or $9,500,
whichever is lower. But since your personal contribution
maximum may be higher or lower, you may want to talk with
your benefits office about the calculation of your personal
Maximum Exclusion Allowance(MEA) or we will be happy to help
you compute it.
Toll-Free Telephone Numbers
For more information before you open an account:
Call 1-800-531-8000
extension 8-4539
(in San Antonio 498-4539).
For information after you open an account:
Account Servicing:
call 1-800-531-8448
(in San Antonio 456-7202).
24-Hour Access:
call 1-800-531-8777
(in San Antonio 498-8777),
For automated telephone information about your accounts
through TouchLine(registered trademark).*
Call 1-800-531-8066
(in San Antonio 498-8066),
For a recorded message giving the Funds' current net asset
value.
*TouchLine(registered trademark) is a registered service
mark of USAA.
Custodial Agreement
Introduction To The USAA Mutual Funds Section 403(b)(7)
Custodial Account
The attached documents are intended to establish an
arrangement that satisfies Section 403(b) of the Internal
Revenue Code of 1986, as amended from time to time (the
"Code"). However, no Internal Revenue Service ruling has
been requested with respect to the tax consequences of the
attached documents and neither USAA INVESTMENT MANAGEMENT
COMPANY nor State Street Bank and Trust Company makes any
representation with respect to such matters. Arrangements
such as those reflected in the attached documents should not
be entered into by any Employer or Employee who has not
first obtained competent independent professional advice on
the tax and other consequences.
This material is not authorized for distribution unless
preceded or accompanied by an effective prospectus
containing further information about the mutual funds in
which the assets of the account are to be invested.
Eligibility
Employees of organizations qualified under Section 501(c)(3)
of the Code or employees of an educational institution
(including public school systems) are eligible to arrange
for tax-sheltered contributions to a Section 403(b)(7)
Custodial Account, investing in mutual funds.
Contributions
Each year, approximately 20 percent of an eligible
Employee's includible compensation (up to a maximum of
$9,500, which dollar amount may be adjusted upwards in the
future to reflect inflation) may be contributed to a 403(b)
account for that employee. It is also possible to make
additional catch-up contributions in certain limited
circumstances. Contributions must be made by the Employer
and are arranged through a "salary reduction agreement" such
as the one enclosed. If your Employer has another standard
form which is used for all employees, it may be used instead
of our form. The $9,500 limit discussed above applies to the
aggregate of all "elective" contributions made for the
Employee under all 403(b) accounts plus certain elective
contributions under other tax qualified plans. If you exceed
this limit for any year, you may be subject to serious
adverse tax consequences. Accordingly, you should take care
and consult with your tax advisor to assure that the limit
is not exceeded.
In addition to the $9,500 per year limit on 403(b)
"elective" contributions, all 403(b) contributions are
subject to annual contribution limits which are quite
complicated and depend on a variety of factors, including
your age, your years of service with an eligible employer,
your participation in other retirement programs, etc.
If you choose, we will make all calculations for you.
Requests for this service may be made by calling 1-800-531-
8000, extension 84539 and asking for a Tax-Sheltered Annuity
representative.
Eligible contributions are not taxable as current income,
giving you the benefit of investing money which would
otherwise have been paid in federal income taxes. Your
employer should exclude these amounts from your federal
gross income on your W-2, and you do not have to separately
deduct them on your annual federal income tax return.
Amounts distributed from a 403(b) account will be included
in taxable gross income at that time. (Contributions to the
account may be subject to social security taxes or state and
local income taxes.)
Distribution
The IRS requirements for mutual fund custodial accounts
provide for distribution to be made under several
conditions. In general, you may begin to receive assets held
in your account at the time of termination of service,
retirement, death, attainment of age 59 1/2, or if you incur
a "financial hardship." A financial hardship will be present
only if the Employee is faced with immediate and heavy
financial needs and does not have other resources reasonably
available to meet these needs. The determination that a
financial hardship exists and the amount needed to meet the
hardship must be made by an independent person or persons
designated by the Employer. The Custodian will not make any
distribution based on financial hardship until it has
received the requisite written notice from the independent
person or persons.
Beginning in 1989, if you incur a "financial hardship," you
will only be able to receive from the 403(b) account the
"elective" contributions which the Employer has made on your
behalf under a "salary reduction agreement" and not any of
the earnings in the 403(b) account.
In general, any distribution to you from the 403(b) account
before you reach age 59 1/2 may be subject to a 10 percent
penalty tax in addition to regular income tax. In addition,
there are other special taxes which may apply to your
distribution. Further, in certain cases, your distribution
may be subject to mandatory 20% federal income tax
withholding, if it is not rolled over directly to an IRA or
another Section 403(b) arrangement. You should consult your
tax advisor in conjunction with any election you make with
regard to distributions of amounts in your account.
Introduction
The Employer, the Employee and the Custodian, by signing the
Application, have established this tax-sheltered Custodial
Account under Section 403(b)(7) of the Internal Revenue
Code. The Application is hereby made a part of this
Agreement. The Employer will make an initial contribution to
the Account as indicated on the Application. The Employer,
the Employee and the Custodian agree that the terms and
conditions of the Custodial Account are as set forth in this
Agreement.
This Agreement shall take effect upon acceptance by the
State Street Bank and Trust Company of Boston,
Massachusetts, of its appointment to serve as Custodian in
accordance herewith. As provided more fully in Article IV
below, the Custodian is to invest all contributions to the
Custodial Account in shares of one or more Designated
Investment Companies.
Article I/Definitions
As used in this Agreement, the following terms shall have
the meaning hereinafter set forth, unless a different
meaning is plainly required by the context.
1. "Application" means the agreement between the Employer,
the Employee and the Custodian which incorporates this
Agreement in order to establish a USAA Mutual Funds Section
403(b)(7) Custodial Account for the Employee.
2. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
References to the Code shall be deemed to include any
Treasury Regulations issued thereunder.
3. "Custodial Account" means the Section 403(b)(7) Custodial
Account established under this Agreement, and when the
context so implies, refers to the assets, if any, then held
by the Custodian hereunder.
4. "Custodian" means State Street Bank and Trust Company, or
any successor thereto as provided in Article IX hereof.
5. "Designated Investment Company" means USAA MUTUAL FUND,
INC., USAA INVESTMENT TRUST, and any other regulated
investment company (within the meaning of Section 851(a) of
the Code) for which USAA INVESTMENT MANAGEMENT COMPANY (or
any affiliate thereof) acts as investment advisor and which
is designated by USAA INVESTMENT MANAGEMENT COMPANY as
eligible for investment under this Agreement.
6. "Employee" means any person employed by the Employer on a
full or part time basis for whom the Employer and the
Employee have agreed to execute an Application. This term
also includes any person formerly employed by the Employer
and who has assets in his Custodial Account.
7. "Employer" means the Employer named in the Application.
The Employer shall be an organization that is (i) described
in Section 501(c)(3) of the Code and exempt from tax under
Section 501(a) of the Code, or (ii) an educational
organization described in Section 170(b)(1)(A)(ii) of the
Code and which is a State, political subdivision of a State,
or an agency or instrumentality of one or more of the
foregoing.
8. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
9. "Excess Contribution" means the amount of any
contribution made by the Employer on behalf of the Employee
for any year which is an "excess contribution" as that term
is defined in Section 4973(c) of the Code.
10. "Excess Deferral" means the amount of any contribution
made by the Employer on behalf of the Employee for any year
which is an "excess deferral" as that term is defined in
Section 402(g) of the Code.
11. "Rollover Contribution" means any amount distributed
from an individual retirement account or an individual
retirement annuity described in Section 408 of the Code, the
entire amount of which is attributable to a tax- sheltered
annuity contract described in Section 403(b) of the Code, or
directly from such a tax-sheltered annuity contract and then
transferred to the Custodial Account in accordance with
Section 403(b)(8) or 408(d)(3)(A)(iii) of the Code.
12. "Sponsor" means USAA INVESTMENT MANAGEMENT COMPANY.
Article II/Establishment Of Custodial Account
The Custodian shall open and maintain a Custodial Account
for the benefit of the Employee. The Custodian may evidence
its acceptance of its appointment by sending to the Employee
a confirmation of the Custodian's receipt of the first
contribution to the Custodial Account. The Employee shall be
the beneficial owner of all Designated Investment Company
shares held in his Custodial Account. The name, address and
social security number of the Employee are set forth in the
Application, and it shall be the obligation of the Employee
to notify the Custodian of any address changes. The
Custodian shall notify the Employee of the identification
number of the Custodial Account maintained for his benefit
hereunder.
Article III/Contributions
1. Employer Contributions. The Employer shall make
contributions in cash to the Custodian either in accordance
with a salary reduction agreement between the Employer and
the Employee or otherwise. The initial contribution shall be
submitted to the Custodian with the executed Application.
The aggregate contribution by the Employer on behalf of the
Employee during the first 12 months following the
establishment of the Custodial Account shall be at least
$250; the Custodian shall not accept any contribution to the
Custodial Account of less than $25.
2. Transfers From And To Other Accounts. The Employer or the
Employee may cause the transfer of assets acceptable to the
Custodian from an existing custodial account established
under Section 403(b)(7) of the Code on behalf of the
Employee and/or from an existing annuity contract
established under Section 403(b) of the Code on behalf of
the Employee to his Custodial Account hereunder. Such
transferred assets shall be treated as an Employer
contribution for purposes of this Agreement and shall be
invested, distributed and otherwise dealt with as such;
provided, however, that such transferred amounts shall be
disregarded in applying the limitations on the amount of
Employer contributions which can be made hereunder. The
Employee may cause the transfer of assets from the
Employee's Custodial Account hereunder to another custodial
account established under Section 403(b)(7) of the Code
and/or to an annuity contract qualified under Section 403(b)
of the Code. It shall be the responsibility of the person
who causes a transfer under this Paragraph (i.e., the
Employer or Employee), and not the responsibility of the
Custodian, the Sponsor, or any Designated Investment
Company, to determine and ensure that such transfer complies
with all applicable tax law requirements.
3. Limitations on Contributions. The Employee shall compute
the maximum amount that may be contributed on his behalf by
the Employer for each tax year in accordance with his
"exclusion allowance" as that term is defined in Section
403(b)(2) of the Code. The Employee shall also determine the
applicable limitation(s) on contributions under Section 415
of the Code, and the Employee shall have the right to avail
himself of and make any of the elections provided under such
section.
In addition, the Employee shall determine the applicable
limitation on "elective" contributions to the Custodial
Account under Section 402(g) of the Code. Such computations
and determinations shall be made at least annually, and the
Employee shall communicate the results to the Employer.
Neither the Custodian, the Sponsor nor any Designated
Investment Company shall have any duty or responsibility to
determine that the amount of the initial or any subsequent
contribution made by the Employer on behalf of the Employee
is consistent with the terms of any applicable salary
reduction agreement entered into by and between the Employer
and the Employee or to verify that such amount is not in
excess of the Employee's exclusion allowance under Section
403(b)(2) of the Code or the applicable limitations under
Sections 402(g) and 415 of the Code.
4. Rollover Contributions. The Custodian may also accept
Rollover Contributions in cash as a deposit to the Custodial
Account, provided, however, that any such Rollover
Contribution shall be held by the Custodian in a separate
Custodial Account for the benefit of the Depositor that
consists only of Rollover Contributions and the earnings
thereof. Once transferred into the Employee's Custodial
Account, such assets shall be treated as an Employer
contribution for purposes of this Agreement and shall be
invested, distributed and otherwise dealt with as such;
provided, however, that such Rollover Contributions shall be
disregarded in applying the limitations on the amount of
Employer contributions which can be made hereunder. The
Employee shall execute such forms and provide such
information as the Custodian may require with respect to the
source of Rollover Contributions. It shall be the
responsibility of the Employee, and not the responsibility
of the Custodian, the Sponsor, or any Designated Investment
Company, to determine and ensure that such Rollover
Contribution complies with all applicable tax law
requirements.
A Rollover Contribution also may be made in Designated
Investment Company shares and/or in other securities,
provided that the Custodian reserves the right to refuse to
accept any property which is not in the form of cash or
Designated Investment Company shares. If securities, other
than Designated Investment Company shares, are accepted by
the Custodian, they shall be sold by the Custodian and the
proceeds, after deduction of all expenses and charges
involved in the sale, shall be reinvested in accordance with
Article IV.
Article IV/Investment Of Account Assets
1. Contributions. All contributions to the Custodial Account
shall be invested in such shares of one or more Designated
Investment Companies as the Employee may direct. Such
Designated Investment Company shares shall be acquired by
the Custodian at the price and in the manner in which such
shares are then being publicly offered by such Designated
Investment Company. If such investment instructions are not
received by the Custodian, or are received but are, in the
opinion of the Custodian, unclear, the Custodian may hold or
return all or a portion of the contribution uninvested
without liability for loss of income or appreciation, and
without liability for interest, pending receipt of proper
instructions or clarification. The Custodian shall advise
the Employee of the form and manner in which investment
instructions must be given and shall not be required to act
or be held liable for failure to act upon improperly given
instructions.
2. Changes in Investment. The Employee may from time to time
direct the Custodian to redeem any or all Designated
Investment Company shares acquired by the Custodian under
this Agreement and to reinvest the proceeds in such other
Designated Investment Company shares as the Employee may
specify. Any such transaction must conform with the
provisions of the current prospectus(es) of the applicable
Designated Investment Company(ies).
3. Dividends. All dividends or other distributions received
by the Custodian on shares of any Designated Investment
Company held in the Custodial Account shall (unless received
in additional shares of such Designated Investment Company)
be reinvested in additional shares of the Designated
Investment Company from which the distribution is made. If
any distribution on shares of a Designated Investment
Company may be received at the election of the shareholder
in additional shares or cash or other property, the
Custodian shall elect to receive such distribution in
additional shares.
4. Registration and Voting. All Designated Investment
Company shares acquired by the Custodian hereunder shall be
registered in the name of the Custodian or of its nominee.
The Custodian shall deliver, or cause to be executed and
delivered, to the Employee all notices, prospectuses,
financial statements, proxies, and proxy soliciting
materials relating to the Designated Investment Company
shares held in the Custodial Account. The Custodian shall
not vote any of the shares held hereunder except in
accordance with written instructions received from the
Employee. Voting instructions which have not been timely
received by the Custodian shall not be voted by the
Custodian.
Article V/Distributions
1. Time of Distributions.
(a) Subject to the remaining provisions of this Article V,
distribution of assets held in the Employee's Custodial
Account shall begin at such times as the Employee (or his
beneficiary, if applicable) shall elect by written notice to
the Custodian at any time after the occurrence of the
earliest of these events:
(1) The Employee's
(a) Separation from service with the Employer;
(b) disability (within the meaning of Section 72(m)(7) of the Code);
(c) death;
(d) attainment of age 59 1/2
(2) a financial hardship of the Employee, as determined by
an independent person or persons designated by the Employer.
"Financial hardship" shall include a financial need of
the Employee because of sickness, temporary disability, or
any other immediate and heavy financial need of the
Employee, provided, however, that the term financial
hardship shall be limited so as to conform to the
requirements of Section 403(b)(7) of the Code. No
distribution based on financial hardship may exceed the
amount determined to be required to meet the immediate
financial need created by the hardship and not reasonably
available from other resources of the Employee.
Effective in 1989, a distribution because of financial
hardship is limited to an Employee's "elective"
contributions not previously distributed, and the earnings
on such contributions will not be distributable on account
of financial hardship. Any distribution prior to age 59 1/2
even on account of a financial hardship, may subject the
Employee to a 10 percent penalty tax on the distribution.
No distribution based on financial hardship shall be
made by the Custodian until its receipt of written notice
from such independent person (or persons) that a qualifying
hardship has been determined and stating the amount required
to be distributed to meet that hardship.
(b) If, and only if, contributions have been made to the
Custodial Account under this Agreement after December 31,
1986 then, subject to the provisions of Paragraph 2(f), the
distribution to an Employee of amounts under this Agreement
shall begin no later than the April 1 following the close of
the calendar year in which the Employee attains age 70 1/2
(the "Required Distribution Date"). Notwithstanding the
foregoing, the Required Distribution Date for any Employee
who attained age 70 1/2 before January 1, 1988 shall be no
earlier than the April 1 next following the calendar year in
which the Employee terminates employment.
(c) The Custodian shall not be responsible for making any
distributions until such time as it has received written
instructions from the Employee (or his beneficiary, if
applicable) to begin making distributions, and, in the case
of financial hardship, it has received the written notice of
the designated independent person or persons.
(d) At any time before the commencement of distributions,
the Employee (or his beneficiary, if applicable, subject to
the restrictions in paragraph 4) shall instruct the
Custodian of the method of distribution. Upon receipt by the
Custodian of any and all certificates and other documents
requested by the Custodian, the Custodian will comply with
the written instructions of the Employee (or his
beneficiary, if applicable) to make distribution in
accordance with one of the methods of distribution set
forth. In the event that the Employee (or his beneficiary,
if applicable) fails to properly elect a method of
distribution of his Custodial Account, installment payments
pursuant to sub-paragraph (b) of paragraph 2 shall be made
to the Employee (or his beneficiary) on a monthly basis over
a 10-year period if a systematic withdrawal plan is
available for the Designated Investment Company shares held
in the Custodial Account and if the assets in such Account
are determined sufficient by the Sponsor. If such a plan is
unavailable and/or if such assets are insufficient, the
value of the shares held in the Custodial Account will be
distributed in a single lump sum in cash.
2. Methods of Distribution.
(a) The value of the Custodial Account may be distributed
in one of the following ways:
(1) A single sum payment, in cash and/or in kind,
consisting of the entire balance in the Custodial Account;
or a single sum payment, in cash and/or in kind, consisting
of part of the balance in the Custodial Account with the
remainder distributed pursuant to sub-paragraph (b) or (c);
(2) In installments, in cash and/or in kind, over a
period of years not to exceed the life expectancy of the
Employee or the joint life and last survivor expectancy of
the Employee and his beneficiary. The installment payments
shall be made in approximately equal amounts or
approximately equal fractions of the Employee's Custodial
Account and may be paid in monthly or other regular
increments as elected by the Employee and as agreed to by
the Custodian.
(3) By the purchase and distribution of an annuity
contract, utilizing all available assets of the Custodial
Account, from an insurance company designated by the
Employee, with either fixed or variable annuity payments for
the life of the Employee or, if the Employee so elects, for
the lives of the Employee and his beneficiary. Such policy
may provide for installment payments over a period measured
by the life expectancy of the Employee or the joint life
expectancy of the Employee and his beneficiary and the
survivor, or over a shorter period.
If the Employee elects the method of distribution
described in (3) above, the annuity contract must satisfy
the requirements of Section 401(a)(9) of the code. If the
Employee elects the method of distribution described in (2),
the annual payment required to be made by the Employee's
Required Distribution Date is for the calendar year the
Employee reached age 70 1/2. Annual payments for subsequent
years, including the year the Employee's Required
Distribution Date occurs, must be made by December 31 of
that year.
(b) If, and only if, contributions have been made to the
Custodial Account under this Agreement after December 31,
1986, the method of distribution
(1) may not extend the payment of such Employee's
benefits beyond the life expectancy of the Employee or the
joint life and last survivor expectancy of the Employee and
his beneficiary (determined using attained ages as of the
calendar year in which payments commence under Section 1.72-
9 of the Treasury Regulations) and
(2) if someone other than the Employee's spouse is the
beneficiary, then the period of years over which installment
payments are to be paid shall be such that any period of
years remaining as of the calendar year in which the
Employee attains age 70 1/2 or any subsequent calendar year
shall meet the minimum distribution incidental benefit
requirement which shall be determined in accordance with the
regulations promulgated under Section 401(a)(9) of the Code.
(c) Notwithstanding the foregoing, if the value of the
Custodial Account at the time distribution is to be made or
commenced is less than $250, the full amount in the
Custodial Account shall be distributed as a single-sum
payment in cash.
(d) The Employee (or his beneficiary, if applicable) shall
be responsible for insuring that distributions are made in
accordance with this Agreement and with all requirements of
applicable law. The Custodian shall have no responsibility
regarding the method and timing of distributions other than
to follow the written instructions of the Employee (or his
beneficiary, if applicable).
(e) In the case of distributions to be made over the life
expectancy of the Employee (or over the joint lives of the
Employee and his beneficiary or the life expectancy of the
beneficiary) in equal or substantially equal annual
payments, to determine the minimum annual payments, to
determine the minimum annual payment for each year, divide
the Employee's entire interest in the Custodial Account as
of the close of business on December 31 of the preceding
year by the life expectancy of the Employee (or the joint
life and last survivor expectancy of the Employee and his
beneficiary, or the life expectancy of the beneficiary,
whichever applies). In the case of distributions under
paragraph 2, determine the initial life expectancy (or joint
life and last survivor expectancy) using the attained ages
of the Employee and beneficiary as of their birthdays in the
year the Employee reaches age 70 1/2. In the case of
distributions in accordance with paragraph 4, determine life
expectancy using the attained age of the beneficiary as of
the beneficiary's birthday in the year distributions are
required to commence. The recalculation of the life
expectancy of the Employee and/or the Employee's spouse
shall only be made at the written election of the Employee.
The recalculation of the life expectancy of the Employee's
surviving spouse shall only be made at the written election
of the surviving spouse. Any recalculation of the Employee's
and/or spouse's life expectancy will be done annually using
their attained ages as of their birthdays in the year for
which the minimum annual payment is being determined. The
life expectancy of a beneficiary (other than the spouse)
will not be recalculated. The minimum annual payment may be
made in a series of installments (e.g., monthly, quarterly,
etc.) as long as the total payments for the year made by the
date required are not less than the minimum amounts
required.
(f) If the Employee maintains one or more 403(b) accounts
or annuities with any institution other than the Custodian,
the Employee may elect to withdraw the minimum distribution
required under sub-paragraph (e) above from such other
accounts or annuities.
3. Designation of Beneficiary.
The Employee may designate and change his beneficiary or
beneficiaries under this Agreement on a form acceptable to
the Custodian for such purpose. A designation of beneficiary
hereunder shall not become effective until it has been filed
with the Custodian. If no such designation is in effect at
the time of the Employee's death, the beneficiary shall be
the Employee's surviving spouse, or, if there is no
surviving spouse, then the estate of the Employee.
The balance in the Custodial Account at the death of the
Employee shall be distributed to such beneficiary of
beneficiaries. Such beneficiary shall have the right to
determine the timing and method of distribution, subject to
any applicable restrictions contained in this Article V.
4. Death Benefits.
If the Employee dies before his entire interest is
distributed to him, the entire remaining interest will be
distributed as follows:
(a) If the Employee dies on or after his Required
Distribution Date, distribution must continue to be made in
accordance with paragraph 2.
(b) If the Employee dies before his Required Distribution
Date, the entire remaining interest will, at the election of
the beneficiary, either (i) be distributed by the December
31 of the year containing the fifth anniversary of the
Employee's death, or (ii) be distributed in equal or
substantially equal payments over the life or life
expectancy of the beneficiary or (iii) by the purchase of an
annuity contract. The election of either (i), (ii) or (iii)
must be made by December 31 of the year following the year
of the Employee's death. If the beneficiary does not elect
either of the distribution options described in (i), (ii)
and (iii), distribution will be made in accordance with (ii)
if the beneficiary is the Employee's surviving spouse and in
accordance with (i) if the beneficiary is anyone other than
the surviving spouse. In the case of distributions under
(ii) or (iii), distributions must commence by December 31 of
the year following the year of the Employee's death. If the
Employee's spouse is the beneficiary, distributions need not
commence until December 31 of the year the Employee would
have attained age 70 1/2, if later.
(c) Following the death of the Employee and until
distribution of the Custodial Account has been completed,
the beneficiary shall have the right to control the
investment of the assets of the Custodial Account to the
same extent as the Employee had such right under Article IV.
(d) If the beneficiary dies before receiving the entire
balance of the Custodial Account, such balance shall be paid
to the executor of the beneficiary's estate.
5. Distribution of Excess Contributions and Excess Deferrals.
Any provision herein to the contrary notwithstanding, if the
Employee notifies the Custodian in writing within the time
prescribed by law (if any) that all or any portion of a
contribution made on behalf of the Employee was an Excess
Contribution or an Excess Deferral, then the Custodian may
distribute, within the time prescribed by law (if any), to
the Employee Designated Investment Company shares and/or
cash representing the amount of such Excess Contribution or
Excess Deferral, and in either case, the net income
attributable thereto, reduced by any administrative charges
allocable to the Excess Contribution or Excess Deferral.
Articles VI/Protection of Employee Benefits
1. Non-forfeitable. The Custodial Account has been created
for the exclusive benefit of the Employee and his
beneficiaries. The interest of the Employee in the balance
in the Custodial Account shall at all times be non-
forfeitable, but shall be subject to the fees, expenses and
charges described in Article VII.
2. Non-alienable. Except as provided in Article V, no
interest, right or claim in or to any part of the Custodial
Account or any payment therefrom shall be assignable,
transferable, or subject to sale, mortgage, pledge,
hypothecation, commutation, anticipation, garnishment,
attachment, execution, or levy of any kind, and the
Custodian shall not recognize any attempt to assign,
transfer, sell, mortgage, pledge, hypothecate, commute,
anticipate, garnish, attach, execute upon or levy upon the
same, except to the extent required by law.
Article VII/Reporting, Custodian Fees And Expenses Of The
Account
1. Furnishing of Data. The Employee agrees to provide at
such times and in such manner as may be requested by the
Custodian, such information as may be necessary for the
Custodian to prepare any reports required by the Internal
Revenue Service, the Department of Labor or any other
governmental agency.
2. Reports by Custodian. The Custodian agrees to submit
reports to the Internal Revenue Service, other government
agencies, and the Employee at such times and in such manner
and containing such information as may be prescribed as the
responsibility of the Custodian by applicable statues and
regulations thereunder.
3. Custodian Fees and Expenses of Account. The Custodian
shall advise the Employer and the Employee of its fee
schedule at the time of the execution of the initial
Application. All fees of the Custodian in the performance of
its duties hereunder may be charged against the Custodial
Account in such manner as may be determined by the
Custodian, or at the Custodian's option, may be paid by the
Employer or the Employee directly. Upon thirty (30) days'
prior written notice, the Custodian may substitute a
different fee schedule. The Custodian's fees, any income or
other taxes of any kind that may be levied or assessed in
respect to the assets of the Custodial Account, and all
other administrative expenses incurred by the Custodian in
the performance of its duties, including fees for legal
services rendered to the Custodian, may be reserved by the
Custodian and charged to the Custodial Account, with the
right to liquidate Designated Investment Company shares for
this purpose.
Article VIII/Concerning The Custodian
1. Annual Report. The Custodian shall keep adequate records
of transactions it is required to perform hereunder. Not
later than sixty (60) days after the close of each calendar
year or after the Custodian's resignation or removal
pursuant to Article IX, the Custodian shall render to the
Employee a written report or reports reflecting the
transactions effected by it during such period and the
assets of the Custodial Account at the close of the period.
Sixty (60) days after rendering such reports(s), the
Custodian shall, to the extent permitted by applicable law,
be forever released and discharged from all liability and
accountability to anyone with respect to its acts and
transactions shown in or reflected by such report(s), except
with respect to those as to which the recipient of such
report(s) shall have filed written objections with the
Custodian within the later such sixty (60) day period.
2. ERISA Requirements. Certain ERISA requirements will
apply if the Custodial Account and this Agreement are
determined to constitute, or to be a part of, an "employee
pension benefit plan" subject to Title I of ERISA. This may
occur if, for example, the Employer makes any contributions
on behalf of an Employee other than the elective
contributions contemplated herein. If the Custodial Account
becomes subject to Title I of ERISA, the Employer shall be
responsible for assuring that the Custodial Account complies
with all requirements of the provisions of Title I. The
Custodian, the Employer and the Employee shall furnish to
one another such information relevant to the Custodial
Account as may be required in that respect.
3. Delegation of Authority. The Custodian may perform any of
its administrative duties through such other persons or
entities as may be designated from time to time by the
Custodian, with the prior approval of the Sponsor, except
that Designated Investment Company shares must be registered
as provided in paragraph 4 of Article IV. No such delegation
or subsequent change therein shall be considered an
amendment of this Agreement. The Custodian shall not be
liable (and assumes no responsibility) for the collection of
contributions, the tax exclusion of any contribution or its
propriety under this Agreement, or the purpose, propriety,
or timeliness of any distribution ordered in accordance with
Article V.
4. Liability of Custodian. The Custodian's liability under
this Agreement and matters which it contemplates shall be
limited to matters arising from the Custodian's negligence
or willful misconduct. The Custodian shall not be obligated
or expected to commence or defend any legal action or
proceeding in connection with this Agreement unless agreed
upon by the Custodian, the Employer and the Employee and
unless fully indemnified for so doing to the Custodian's
satisfaction.
5. Reliance on Documents. The Custodian may conclusively
rely upon and shall be protected in acting upon any written
order from the Employer or the Employee or his beneficiary
or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed and, so long as it acts in good
faith, in taking or omitting to take any other action in
reliance thereon.
6. Cash Balances. The Custodian shall not be liable for
interest on any cash balances maintained in the Custodial
Account.
Article IX/Resignation Or Removal Of Custodian
1. With Respect to a Custodial Account. Except as otherwise
provided in paragraph 2 of this Article IX, the Custodian
may resign at any time upon thirty (30) days' notice in
writing to the Employer and the Employee, and may be removed
by the Employee at any time upon thirty (30) days' notice in
writing to the Custodian and the Employer. Upon such
resignation or removal, the Employee shall appoint a
successor custodian or trustee, which successor shall be a
"bank" as defined in Section 401(d)(1) of the Code. Upon
receipt by the Custodian of written acceptance of such
appointment by the successor custodian or trustee, the
Custodian shall transfer and pay over to such successor the
assets of the Custodial Account and all records pertaining
thereto. The Custodian is authorized, however, to reserve
such sum of money as it may deem advisable for payment of
all its fees, compensation, costs, and expenses or for
payment of any other liabilities constituting a charge on or
against the assets of the Custodial Account or on or against
the Custodian, with any balance of such reserve remaining
after the payment of all such items to be paid over to the
successor custodian or trustee. If within the thirty (30)
day period provided for, the Employee has not appointed a
successor custodian or trustee which has accepted such
appointment, the Custodian shall, unless it elects to
terminate this Agreement, appoint a successor custodian
itself.
2. With Respect to All Custodial Accounts. The Sponsor may
remove the Custodian at any time upon thirty (30) days'
notice in writing to the Custodian and the Custodian may
resign at anytime upon thirty (30) days' notice in writing
to the Sponsor. Upon such resignation or removal, the
Sponsor shall appoint a successor custodian, which successor
custodian shall be a "bank" as defined in Section 401(d)(1)
of the Code and the provisions of paragraph 1 of this
Article IX shall apply with respect to the transfer of
custodianship to such successor custodian. The provisions of
this paragraph 2 shall apply if, and only if, the
resignation or removal of the Custodian relates to all
Section 403(b)(7) Custodial Accounts established pursuant to
agreements comparable to this Agreement.
Article X/Amendment
1. By Sponsor. The Employee also delegates to the Sponsor
the Employee's rights so to amend, provided that the Sponsor
amends in the same manner all agreements comparable to this
one under which such power has been delegated to it. Such an
amendment by the Sponsor shall be communicated in writing to
the Employee, the Employer and the Custodian.
2. Changes in Custodian's Fee Schedule. This Article X shall
not be construed to restrict the Custodian's freedom to
change or substitute fee schedules in the manner provided by
paragraph 3 of Article VII, and no such change or
substitution shall be deemed to be an amendment of this
Agreement.
3. Limitations on Amendments. Notwithstanding the foregoing,
no amendment shall be made which would:
(a) cause or permit any part of the assets in the Custodial
Account to be diverted to purposes other than for the
exclusive benefit of the Employee and/or his beneficiaries,
or cause or permit any portion of such assets to revert to
or become the property of the Employer:
(b) increase the burdens of the Custodian without its prior
written consent; or
(c) retroactively deprive the Employee of any benefit to
which he was entitled under the Agreement by reason of
contributions made by the Employer, unless such modification
or amendment is necessary to conform the Agreement to, or
satisfy the conditions of, any law, governmental regulation
or ruling, and to permit the Agreement and Custodial Account
to meet the requirements of Section 403(b) of the Code, or
any similar statute enacted in lieu thereof, and any such
retroactive modification or amendment must be pursuant to an
opinion of counsel that it is necessary or advisable to
conform the Agreement to the requirements for qualification
under Section 403(b) of the Code.
Article XI/Termination Of Custodial Account
1. Voluntary Termination. With respect to amounts not yet
earned by the Employee the salary reduction agreement
between the Employee and the Employer may be terminated by
either the Employee or the Employer by giving written notice
to the other. Copies of such notice shall be sent forthwith
to the Custodian. Unless otherwise mutually agreed upon by
the Employer and the Employee, any such termination shall
take effect as of the last day of the month next following
the month in which such written notice shall have been
given, the Employee's compensation level shall be increased
by the amount by which it otherwise would be reduced
pursuant to any applicable salary reduction agreement and
the obligations under this Agreement of the Employer with
respect to future pay periods shall cease.
2. No Successor Custodian. If, within the time specified in
paragraph 1 of Article IX after the Custodian's resignation
or removal, the Employee has not appointed a successor
Custodian which has accepted such appointment, termination
of the Custodial Account may be effected by the Custodian by
distributing all assets thereof in a lump sum in kind to the
Employee (or his beneficiary, if applicable), subject to the
Custodian's right to reserve funds as provided in Article
VII. Upon such termination of the Custodial Account, this
Agreement shall terminate and have no further force and
effect, and the Custodian shall be relieved from all further
liability with respect to this Agreement, the Custodial
Account, and all assets thereof so distributed.
3. Termination on Disqualification. The Agreement shall
terminate as to the Employee if, the Internal Revenue
Service declares that this Custodial Account does not
constitute a tax-qualified custodial account under Section
403(b)(7) of the Code. On such termination of this
Agreement, all assets in the Custodial Account shall be
distributed in kind by the Custodian to the Employee (or his
beneficiary, if applicable), subject to the Custodian's
right to reserve funds as provided in Article VII.
4. Termination on Distribution. This Agreement shall
terminate as to the Employee when all assets held in the
Custodial Account for the Employee have been distributed.
Article XII/Miscellaneous
1. Applicable Law. This Agreement shall be construed,
administered and enforced according to the laws of the
Commonwealth of Massachusetts; provided, however, that it is
intended that this Agreement create a tax-qualified
custodial account under Section 403(b)(7) of the Code and
this Agreement shall be so construed and limited and the
powers here under exercised so as to accomplish the purpose.
2. Pronouns. Whenever used in this Agreement, the masculine
pronoun is to be deemed to include feminine. The singular
form, whenever used herein, shall mean or include the plural
form where applicable, and vice versa.
3. Notices. Any notices, accounting or other communication
which the Custodian may give the Employer or the Employee
shall be deemed given when mailed to the Employer or
Employee at the latest address which has been furnished to
the Custodian. Any notice or other communication which the
Employer or Employee may give to the Custodian shall not
become effective until actual receipt of said notice by the
Custodian.
4. Separability. If any provision of this Agreement shall be
for any reason invalid or unenforceable, the remaining
provisions shall, nevertheless, continue in effect and shall
not be invalidated thereby unless they are rendered
unconscionable, inadequate, or incapable of being
interpreted as a result of the deletion of the invalid or
unenforceable portions of the Agreement.
5. Successors. This Agreement shall be binding upon and
shall inure to the benefit of the successor in interest of
the parties hereto.
6. No Employment Contract. This Agreement shall not be
deemed to constitute a contract of employment between the
Employer and the Employee, nor shall any provision hereof
restrict the right of the Employer to discharge the Employee
or of the Employee to terminate his employment.
7. If the Custodial Account and this Agreement are
determined to constitute, or to be a part of, an "employee
pension benefit plan" subject to Title I of ERISA and, as a
result, the Employer adopts a written plan document which
has provisions which are inconsistent with the provisions of
this Agreement, then provided such plan document complies
with the requirements of the Code and ERISA, the provisions
of such plan document shall control, to the extent necessary
to comply with ERISA; provided, however, that nothing in
such plan document may be construed to increase the
responsibilities of the Custodian or the Sponsor, and,
consistent with Paragraph 2 of Article VIII, the Employer
shall ensure compliance with applicable ERISA requirements.
(BACK COVER)
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288-9856
10095-0995
Recycled Paper
(Registered Trademark)1995 USAA. All rights reserved.
EXHIBIT 16
TOTAL RETURN CALCULATION
Formula used for the calculation of average annual total return: P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeeming value of a hypothetical $1,000
initial investment. The ERV assumes reinvestment
of all dividends and distributions at the net
asset value on reinvestment date.
Cornerstone Fund
For the period ended 9/30/88
1 Year Total Return: 1000(1+T)1 = $ 866.10
T = (13.39%)
50 Months Total Return: 1000(1+T)4.17 = $1,846.71
T = 15.80%
Gold Fund
For the period ended 9/30/88
1 Year Total Return: 1000(1+T)1 = $ 511.10
T = (48.89%)
50 Months Total Return: 1000(1+T)4.17 = $ 902.25
T = (2.44%)
International Fund*
For the period ended 9/30/88
3 Months Total Return: 1000(1+T).25 = $ 964.00
T = (3.60%)
* (Commencement of operations, July 1, 1988)
EXHIBIT 19(a)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Antonio and State
of Texas on the 21st day of January, 1994.
USAA INVESTMENT TRUST
/s/ Michael J.C. Roth
----------------------
Michael J.C. Roth
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Know all men by these presents that each person whose signature appears
below constitutes and appoints Michael J.C. Roth, John W. Saunders, Jr. and
Michael D. Wagner, and each of them, as his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place
and stead, in any and all capacities to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute, may lawfully do
or cause to be done by virtue hereof.
(Signature) (Title) (Date)
/s/ Hansford T. Johnson Chairman of the Board January 21, 1994
- -------------------------- of Trustees
Hansford T. Johnson
/s/ Michael J.C. Roth Vice Chairman of the January 21, 1994
- -------------------------- Board of Trustees
Michael J.C. Roth and President (Principal
Executive Officer)
/s/ Sherron A. Kirk Treasurer (Principal January 21, 1994
- -------------------------- Financial and
Sherron A. Kirk Accounting Officer)
/s/ John W. Saunders, Jr. Trustee January 21, 1994
- --------------------------
John W. Saunders, Jr.
/s/ C. Dale Briscoe Trustee January 21, 1994
- --------------------------
C. Dale Briscoe
/s/ George E. Brown Trustee January 21, 1994
- --------------------------
George E. Brown
/s/ Howard L. Freeman, Jr. Trustee January 21, 1994
- --------------------------
Howard L. Freeman, Jr.
/s/ Richard A. Zucker Trustee January 21, 1994
- --------------------------
Richard A. Zucker
/s/ Barbara B. Dreeben Trustee January 21, 1994
- --------------------------
Barbara B. Dreeben
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<TABLE> <S> <C>
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<CIK> 0000745903
<NAME> USAA INVESTMENT TRUST
<SERIES>
<NUMBER> 4
<NAME> BALANCED PORTFOLIO FUND
<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000745903
<NAME> USAA INVESTMENT TRUST
<SERIES>
<NUMBER> 5
<NAME> GNMA TRUST
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745903
<NAME> USAA INVESTMENT TRUST
<SERIES>
<NUMBER> 6
<NAME> TREASURY MONEY MARKET TRUST
<S> <C>
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<PERIOD-END> MAY-31-1995
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> WORLD GROWTH FUND
<S> <C>
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<PERIOD-END> MAY-31-1995
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<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> EMERGING MARKETS FUND
<S> <C>
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