As filed with the Securities and Exchange Commission on June 15, 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. 20
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 22
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)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
X on September 1, 1995 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 Balanced Portfolio Fund, Cornerstone 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 Balanced Portfolio Fund,
Cornerstone Fund, Gold Fund, International Fund, World Growth
Fund, GNMA Trust, and Treasury Money Market Trust for the fiscal
year ended May 31, 1994 on or about July 20, 1994. The
Registrant intends to file its Rule 24f-2 notice for all series
for the fiscal year ending May 31, 1995 on or prior to July 31,
1995. The Registrant now declares its intention to register an
indefinite number of shares of the Balanced Strategy Fund, Growth
Strategy Fund, and Income Strategy Fund pursuant to Rule 24f-
2(a)(1) under the Act.
Exhibit Index on Page 108
Page 1 of 180
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
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 Not Applicable
Part A
Prospectuses for the
Balanced Strategy, Growth Strategy and Income Strategy Funds
are included herein
Not included in this Post-Effective Amendment
are the Prospectuses for the
Balanced Portfolio, Cornerstone, Emerging Markets, Gold,
International, and World Growth Funds,
GNMA Trust and Treasury Money Market Trust
Part A
Prospectus for the
Balanced Strategy Fund
is included herein
USAA BALANCED STRATEGY FUND
SEPTEMBER 1, 1995 PROSPECTUS
USAA Balanced 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 high total
return, with reduced risk over time, through an asset
allocation strategy that seeks a combination of long-term
growth of capital and current income. Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail or
in person. Page 14.
HOW DO YOU SELL?
You may redeem shares of the Fund by mail, telephone,
fax, or telegraph on any day that the net asset value is
calculated. Page 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 Balanced 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 may invest in foreign
securities it involves a higher degree of risk and may
not be appropriate for some investors. See Special Risk
Considerations, page 13.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Fund, dated September
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
Performance Information 4
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 5
Using Mutual Funds in an Asset Allocation Program 6
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
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 21
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 (ANA))
- ------------------------------------------------------------------------
Management Fee, net of reimbursements .00%
12b-1 Fee None
Other Expenses (estimated)
Transfer Agent Fee** .50%
Custodian Fee .55%
All Other Expenses .20%
----
Total Other Expenses 1.25%
----
Total Fund Operating Expenses, net of reimbursements 1.25%
====
- ------------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire Redemption.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 15.
The Manager has voluntarily agreed to limit the Fund's
annual expenses until October 1, 1996, to 1.25% of its
ANA and will reimburse the Fund for all expenses in
excess of the limitation. The Management Fee, Other
Expenses, and Total Operating Expenses information give
effect to all such expense reimbursements by the Manager.
Absent such reimbursements, the amount of the Management
Fee, Other Expenses, and Total Operating Expenses as a
percentage of the Fund's ANA would be .75%, 1.51%, and
2.26%, 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 - $ 13 3 years - $ 40
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.
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 portfolios, each with different objectives and
policies. In combination, these portfolios are designed
to provide investors with the opportunity to formulate
their own investment program. You may exchange any
shares you hold in any one USAA portfolio for shares in
any other USAA portfolio. For more complete information
about the portfolios in the USAA Family of Funds,
including charges and expenses, call the Manager for a
Prospectus. Be sure to read it carefully before you
invest or send money.
USAA 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 several different types 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 Seek high current return, Bonds and stocks
Strategy with reduced risk over time,
Fund through an asset allocation
strategy which emphasizes
income and gives secondary
emphasis to long-term growth
of capital.
Growth and Tax Seek a conservative balance Short- and long-term tax
Strategy Fund between income, the majority exempt bonds and basic
of which is tax-exempt, and value stocks
the potential for long-term
growth of capital to preserve
purchasing power.
Balanced Seek high total return, with Stocks and bonds
Strategy reduced risk over time, through
Fund an asset allocation strategy
that seeks a combination of
long-term growth of capital and
current income.
Cornerstone Achieve a positive inflation- Foreign & basic value
Strategy adjusted rate of return and a stocks, government
Fund reasonably stable value of securities, real estate
Fund shares. stocks and gold stocks
Growth Seek high total return, with Small & large cap stocks,
Strategy reduced risk over time, bonds, and international
Fund through an asset allocation stocks
strategy which emphasizes
capital appreciation and gives
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 seek high total
return, with reduced risk over time, through an asset
allocation strategy that seeks a combination of long-term
growth of capital and current income.
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
Stocks 50 - 70%
Bonds 30 - 50%
Money Market Instruments 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.
As a temporary defensive measure, the Manager may
invest up to 100% of the Fund's assets in high quality,
short-term debt instruments.
The Fund's portfolio turnover rate 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.
Characteristics and associated risks of each investment
category are as follows:
Stocks - In this category, investments will consist
primarily of common stocks or securities convertible into
common stocks or securities which carry the right to buy
common stocks. Investments may also include foreign
securities. For a discussion of the risks associated
with investments in foreign issuers, see Special Risk Considerations.
The Fund may also invest in U.S. Real Estate Investment
Trusts (REITs). 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.
Bonds - In this category, investments will consist of
U.S. dollar-denominated securities selected for their
high yields relative to the risk involved. Consistent
with this policy, in periods of rising interest rates, a
greater portion of the portfolio may be invested in
securities the value of which is believed to be less
sensitive to interest rate changes.
Investments in this category may consist of obligations
of the U.S. Government, its agencies and
instrumentalities; mortgage-backed securities; corporate
debt securities such as notes, bonds, and commercial
paper; U.S. bank obligations, including certificates of
deposit and banker's acceptances; obligations of state
and local governments and their agencies and instrumentalities;
asset-backed securities; master demand notes; eurodollar
obligations; yankee obligations; and other debt securities.
The debt securities in the Fund must be investment
grade at the time of purchase. Investment grade
securities are those issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, those
rated at least Baa by Moody's Investors Service
(Moody's), BBB by Standard & Poor's Ratings Group (S&P),
BBB by Fitch Investors Service (Fitch), or BBB by Duff
and Phelps (D&P), or those judged to be of equivalent
quality by the Manager if not rated. 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 below investment grade, 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 debt ratings, see Appendix A to the SAI.
Money Market Instruments - In this category, investments
will consist of high quality U.S. dollar-denominated debt
securities that present minimal credit risk and have
remaining maturities of 397 days or less. Such
securities may include U.S. government obligations,
commercial paper and other short-term corporate
obligations, and certificates of deposit, bankers'
acceptances, bank deposits, and other financial
institution obligations. These securities may carry
fixed or variable interest rates.
OTHER POLICIES
Convertible Securities - As stated earlier, the Fund may
invest in convertible securities. Convertible securities
are bonds, preferred stocks, and other securities that
pay interest or dividends and offer the buyer the option
of converting the security into common stock. The value
of convertible securities depends partially on interest
rate changes and the credit quality of the issuer.
Because a convertible security affords an investor the
opportunity, through its conversion feature, to
participate in the capital appreciation of the underlying
common stock, the value of convertible securities may
also change based on the price of the common stock.
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 the 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 7 days from
the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which
is unrelated to the coupon rate or maturity of the
purchased security. 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.
Mortgage-Backed and Asset-Backed Securities - The Fund
may invest in mortgage-backed and asset-backed
securities. Mortgage-backed securities include, but are
not limited to, securities issued by the Government
National Mortgage Association (Ginnie Mae), the Federal
National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac).
These securities represent ownership in a pool of
mortgage loans. They differ from conventional bonds in
that principal is paid back to the investor as payments
are made on the underlying mortgages in the pool.
Accordingly, the Fund receives monthly scheduled payments
of principal and interest along with any unscheduled
principal prepayments on the underlying mortgages.
Because these scheduled and unscheduled principal
payments must be reinvested at prevailing interest rates,
mortgage-backed securities do not provide an effective
means of locking in long-term interest rates
for the investor. Like other fixed income securities,
when interest rates rise, the value of a mortgage-backed
security generally will decline; however, when interest
rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as
much as other fixed income securities.
Mortgage-backed securities also include collateralized
mortgage obligations (CMOs). CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage-
related securities. CMOs are divided into pieces
(tranches) with varying maturities and the cash flow from
the underlying mortgages are used to pay off each tranche
separately. CMOs are designed to provide investors with
more predictable maturities than regular mortgage
securities but such maturities can be difficult to
predict because of the effect of prepayments. Failure to
accurately predict prepayments can adversely affect the
Fund's return on these investments. CMOs may also be
less marketable than other securities.
Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments
generated by particular assets, such as credit card,
motor vehicle, or trade receivables. They may be pass-
through certificates, which have characteristics very
similar to mortgage-backed securities, discussed above.
They may also be in the form of asset-backed commercial
paper, which is issued by a special purpose entity,
organized solely to issue the commercial paper and to
purchase interests in the assets. The credit quality of
these securities depends primarily upon the quality of
the underlying assets and the level of credit support and
enhancement provided.
The weighted average life of such securities is likely
to be substantially shorter than their stated final
maturity as a result of scheduled principal payments and
unscheduled principal prepayments.
Master Demand Notes - The Fund may invest in variable
rate master demand notes (Master Demand Notes). Master
Demand Notes are obligations that permit the investment
of fluctuating amounts by the Fund, at varying rates of
interest using direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily
changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to
the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the
full amount of the note without penalty. Frequently,
such obligations are secured by letters of credit or
other credit support arrangements provided by banks.
Because Master Demand Notes are direct lending
arrangements between the lender and borrower, these
instruments generally will not be traded, and there
generally is no secondary market for these notes,
although they are redeemable (and immediately repayable
by the borrower) at face value, plus accrued interest, at
any time. Therefore, where Master Demand Notes are not
secured by bank letters of credit or other credit support
arrangements, the Fund's right to redeem depends on the
ability of the borrower to pay principal and interest on
demand. In connection with Master Demand Note
arrangements, the Fund will continuously monitor the
earning power, cash flow, and other liquidity ratios of
the issuer, and the borrower's ability to pay principal
and interest on demand. Master Demand Notes, as such,
are not typically rated by credit rating agencies. The
Fund will invest in Master Demand Notes only if the Board
of Directors or its delegate has determined that they are
of credit quality comparable to the debt securities in
which the Fund generally may invest.
Eurodollar and Yankee Obligations - The Fund may invest
in Eurodollar and Yankee Obligations. Eurodollar
obligations are dollar-denominated instruments issued
outside the U.S. capital markets by foreign corporations
and financial institutions and by foreign branches of
U.S. corporations and financial institutions. Yankee
obligations are dollar-denominated instruments issued by
foreign issuers in the U.S. capital markets. While
investments in Eurodollar and Yankee obligations are
intended to reduce risk by providing further
diversification, such investments involve sovereign risk
in addition to credit and market risk. Sovereign risk
includes local political or economic developments,
potential nationalization, and withholding taxes on
dividend or interest payments.
In addition, the Fund may invest in Eurodollar and
Yankee obligations of investment-grade emerging market
countries. An emerging market country can be considered
to be a country which is in the initial stages of its
industrial cycle. Investments in emerging market
countries involve exposure to economic structures that
are generally less diverse and mature than in the United
States, and to political systems which may be less
stable. In the past, markets of emerging market
countries have been more volatile than the markets of
developed countries. See Special Risk Considerations for
a discussion of other risks associated with foreign investments.
Put Bonds - The Fund may invest in securities (including
securities with variable interest rates) which may be
redeemed or sold back (put) to the issuer of the security
or a third party at face value prior to stated maturity
(Put Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer.
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. Commercial paper and
certain Put Bonds that are subject to restrictions on
transfer and other securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933 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. With respect to 75% of its total assets, the Fund
may not purchase 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.
b. The Fund may 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).
c. The Fund may not concentrate its investments in
any one industry although it may invest up to 25%
of the value of its total assets in any one
industry; provided, this limitation does not apply
to securities issued or guaranteed by the U.S.
Government and its agencies or instrumentalities.
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
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, 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.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the methods described in the following table. A complete,
signed application is required together with a check
(payable to USAA Balanced Strategy Fund) 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 any purchases, the price of your
shares 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 share 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
INITIAL PURCHASES: Minimum $3,000 - (Except Individual Retirement
Accounts (IRAs) at $2,000, Spousal IRAs at $250, and USAA employee
payroll deduction).
Mail
Send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
In Person
Bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway
San Antonio, TX
USAA Employee
Payroll Deduction
The periodic purchase of shares through payroll deduction ($25 minimum)
by any employee of USAA, its subsidiaries or affiliated companies.
Exchange
Call our telephone assistance numbers. The new account must have the
same registration as the account from which you are exchanging.
ADDITIONAL PURCHASES: Minimum $50 - (Except USAA employee payroll deduction).
Mail
Send your check and the "Invest By Mail" stub, which accompanies
your Fund's transaction confirmation, to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Bank Wire Purchase
Instruct your bank (which may charge a fee for the service) to wire
the specified amount to the Trust as follows:
State Street Bank and Trust Company
Boston, MA 02101
ABA# 011000028
Attn: USAA Balanced Strategy Fund
USAA AC-69384998
Shareholder(s) Name(s)
Shareholder Account Number
Electronic Funds Transfer (EFT)
You can pay for purchases electronically via electronic
funds transfer. Systematic (regular) purchases can be
deducted from your bank account, payroll, income-
producing investment, or from a USAA money market
account. Intermittent (as-needed) purchases can be
deducted from your bank account through our Buy/Sell Service.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the methods
described in the following table on any day the NAV 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 upon
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds trans-fer has cleared, which
could take up to 15 days from the purchase date. If you
are considering redeeming shares soon after purchase, the
Manager suggests you purchase by bank wire or certified
check to avoid delay.
In addition, the 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.
Redemption of Shares
Any of the following methods may be used to authorize the
Transfer Agent to redeem shares from your account based
on instructions received.
Written, Fax, or Telegraph
Send your written instructions to:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Telephone
Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
(continued)
Methods of Payment
Any of the following methods of payment may be used with
your redemption request.
Bank Wire Redemption
The wire redemption privilege allows redemptions of
$1,000 or more to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. USAA Shareholder Account Services deducts
a wire fee from the account for the redemption by wire.
The fee as of the date of this Prospectus is $10 and is
subject to change at any time. The fee is paid to State
Street Bank and Trust Company and the Transfer Agent for
their services in connection with the wire redemption.
Your bank may also charge a fee for receiving funds by wire.
Electronic Funds Transfer (EFT)
You can request electronic redemptions via electronic
funds transfer. Systematic (regular) or intermittent
(as-needed) redemptions can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check Redemption
You may request a redemption to be paid by check to the
registered shareholder(s) and mailed to the address of
record. This check redemption privilege is automatically
established when your application is completed and accepted.
There is a 15 day waiting period before a check redemption
can be processed following a telephone address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust does not receive good funds
either by check or electronic funds transfer, the
cancellation may be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions and supporting
documents to change an account registration due to events
such as divorce, marriage, or death. If a new account
needs to be established, an application must be completed
and returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of 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 portfolios in the USAA Family of Funds, provided
you do not hold these shares in stock certificate form
and that the shares to be acquired are offered in your
state of residence. Exchange redemptions and purchases
will be processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between
portfolios is a taxable event. Accordingly, a capital
gain or loss may be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Telephone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the portfolios and
their shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any
portfolio in the USAA Family of Funds are limited for
each account to six per calendar year except that there
is no limitation on exchanges out of the 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
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) - the periodic purchase
of shares through electronic funds transfer from a
checking or savings account.
Direct Purchase Service - the periodic purchase of shares
through electronic funds transfer from a non-governmental
employer, an income-producing investment, or an account
with a participating financial institution.
Automatic Purchase Plan - the periodic transfer of funds
from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
Retirement Plans - plans are available for IRA (including
SEP/IRA) and 403(b)(7) accounts. Federal taxes on
current income may be deferred if an investor qualifies.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each account
transaction. 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 mailed to each shareholder
will reflect annual account history for the prior tax
year. There will be a $10 fee charged for copies of
historical statements for other than the prior tax year
for any one account. You will receive the Fund's
financial statements with a summary of its investments
and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the 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.
DIRECTED DIVIDENDS
If you own shares in more than one of the funds in the
USAA Family of Funds, you may direct that dividends
and/or capital gain distributions earned in one fund be
used to automatically purchase shares in another fund.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the 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
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
at least annually. Net capital gain, if any, 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.
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 in excess of
$ 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 portfolios,
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 management fee is computed
and paid at three-fourths of one percent (.75%) 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.
PORTFOLIO MANAGERS
The following individuals are primarily responsible for
managing the Fund.
R. David Ullom, Assistant Vice President of Equity
Investments since September of 1994, is the asset
allocation manager for the Fund and portfolio manager for
the Stocks investment category. Mr. Ullom has 20 years
investment management experience and has worked for IMCO
10 years where he has held various positions in Equity
Investments. Mr. Ullom earned the Chartered Financial
Analyst (CFA) designation in 1980 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 Washington University,
Missouri and a BS from Oklahoma State University.
Paul H. Lundmark, Executive Director of Fixed Income
Investments since November of 1994, is portfolio manager
for the Bonds investment category. Mr. Lundmark has nine
years investment management experience and has worked for
IMCO four years. He has held various positions in Fixed
Income Investments since 1/92. From 5/90 to 7/91 he was
employed as an Associate with Raymond James & Associates,
Inc., St. Petersburg, Florida. Mr. Lundmark earned the
CFA designation in 1989 and also is a member of the AIMR
and SAFAS. He holds an MBA and BSB from the University
of Minnesota.
J. Eric Thorderson, Executive Director of Fixed Income
Investments since March of 1994, is portfolio manager for
the Money Market Instruments investment category. Mr.
Thorderson has eight years investment management
experience and has worked for IMCO four years where he
has held various positions in Fixed Income Investments.
From 5/86 to 9/89 he was employed as an Investment
Analyst with Alexander Hamilton Life Insurance, Michigan.
Mr. Thorderson earned the CFA designation in 1989 and is
a member of the AIMR and SAFAS. He holds an MBA from the
University of Illinois and a BA from Wayne State
University of Michigan.
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 Master Trust Agreement (Master Trust Agreement)
dated June 2, 1995. 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 10750 Robert F. McDermott Freeway, 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
Growth Strategy Fund
is included herein
USAA GROWTH STRATEGY FUND
SEPTEMBER 1, 1995 PROSPECTUS
USAA Growth 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 high total return, with
reduced risk over time, through an asset allocation strategy which
emphasizes capital appreciation and gives secondary emphasis to income.
Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail or
in person. Page 14.
HOW DO YOU SELL?
You may redeem shares of the Fund by mail, telephone,
fax, or telegraph on any day that the net asset value is
calculated. Page 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 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 13.
If you would like more information, a STATEMENT OF
ADDITIONAL INFORMATION (SAI) of the Fund, dated September
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
Performance Information 4
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 5
Using Mutual Funds in an Asset Allocation Program 6
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
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 21
Management of the Trust 22
Service Providers 23
Description of Shares 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 (ANA))
- -------------------------------------------------------------------------
Management Fee .75%
12b-1 Fee None
Other Expenses (estimated)
Transfer Agent Fee** .35%
Custodian Fee .21%
All Other Expenses .45%
----
Total Other Expenses 1.01%
----
Total Fund Operating Expenses 1.76%
====
- -------------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire Redemption.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 15.
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 - $ 18 3 years - $ 55
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.
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 portfolios, each with different objectives and
policies. In combination, these portfolios are designed
to provide investors with the opportunity to formulate
their own investment program. You may exchange any
shares you hold in any one USAA portfolio for shares in
any other USAA portfolio. For more complete information
about the portfolios in the USAA Family of Funds,
including charges and expenses, call the Manager for a
Prospectus. Be sure to read it carefully before you
invest or send money.
USAA 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 several different types 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 Seek high current return, Bonds and stocks
Strategy with reduced risk overtime,
Fund through an asset allocation
strategy which emphasizes
income and gives secondary
emphasis to long-term growth
of capital.
Growth and Tax Seek a conservative balance Short- and long-term tax
Strategy Fund between income, the majority exempt bonds and basic
of which is tax-exempt, and value stocks
the potential for long-term
growth of capital to preserve
purchasing power.
Balanced Seek high total return, with Stocks and bonds
Strategy reduced risk over time, through
Fund an asset allocation strategy
that seeks a combination of
long-term growth of capital and
current income.
Cornerstone Achieve a positive inflation- Foreign & basic value
Strategy adjusted rate of return and a stocks, government
Fund reasonably stable value of securities, real estate
Fund shares. stocks and gold stocks
Growth Seek high total return, with Small & large cap stocks,
reduced risk over time, bonds, and international
through an asset allocation stocks
strategy which emphasizes
capital appreciation and gives
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 seek high total
return, with reduced risk over time, through an asset
allocation strategy which emphasizes capital appreciation
and gives secondary emphasis to income.
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
Large Cap Stocks 25 - 35%
Small Cap Stocks 25 - 35%
International Stocks 15 - 25%
Bonds 15 - 25%
Money Market Instruments 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.
As a temporary defensive measure, the Manager may
invest up to 100% of the Fund's assets in high quality,
short-term debt instruments.
The Fund's portfolio turnover rate 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.
Characteristics and associated risks of each investment
category are as follows:
Large Cap Stocks - In this category, investments will
consist of common stocks of companies that have market
capitalizations of $1 billion or more, at the time of
purchase. Investments may also include securities
convertible into common stocks or securities which carry
the right to buy common stocks.
The Fund may continue to hold securities in the Large
Cap Stocks investment category that qualified when
purchased as Large Cap Stocks, but whose market
capitalizations have subsequently declined below $1 billion.
Small Cap Stocks - In this category, investments will
consist of common stocks of companies that have market
capitalizations of less than $1 billion, at the time of
purchase. Investments may also include securities
convertible into common stocks or securities which carry
the right to buy common stocks.
The Fund may continue to hold securities in the Small
Cap Stocks investment category that qualified when
purchased as Small Cap Stocks, but whose market
capitalizations have subsequently increased above $1 billion.
Investing in smaller companies, especially those that
have a narrow product line or are thinly traded, often
involves greater risk than investing in established
companies with proven track records. These securities
may be subject to more price volatility than securities
of larger companies.
International Stocks - In this category, investments will
consist of common 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 the U.S. if at least 50% of
its revenues are derived from operations outside the U.S.
or if its primary production or operating facilities are
located outside the U.S.
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.
Bonds - In this category, investments will consist of
U.S. dollar-denominated securities selected for their
high yields relative to the risk involved. Consistent
with this policy, in periods of rising interest rates, a
greater portion of the portfolio may be invested in securities
the value of which is believed to be less sensitive to
interest rate changes.
Investments in this category may consist of obligations of the
U.S. Government, its agencies and instrumentalities; mortgage-backed
securities; corporate debt securities such as notes, bonds, and
commercial paper; U.S. bank obligations, including certificates of
deposit and banker's acceptances; obligations of state and local
governments and their agencies and instrumentalities; asset-backed
securities; master demand notes; eurodollar obligations; yankee
obligations; and other debt securities.
The debt securities in the Fund must be investment
grade at the time of purchase. Investment grade
securities are those issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, those
rated at least Baa by Moody's Investors Service
(Moody's), BBB by Standard & Poor's Ratings Group (S&P),
BBB by Fitch Investors Service (Fitch), or BBB by Duff
and Phelps (D&P), or those judged to be of equivalent
quality by the Manager if not rated. 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 below investment grade, 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 debt ratings, see Appendix A to the SAI.
Money Market Instruments - In this category, investments
will consist of high quality U.S. dollar-denominated debt
securities that present minimal credit risk and have
remaining maturities of 397 days or less. Such securities may
include U.S. government obligations, commercial paper
and other short-term corporate obligations, and
certificates of deposit, bankers' acceptances, bank
deposits, and other financial institution obligations.
These securities may carry fixed or variable interest rates.
OTHER POLICIES
Convertible Securities - As stated earlier, the Fund may
invest in convertible securities. Convertible securities
are bonds, preferred stocks, and other securities that
pay interest or dividends and offer the buyer the option
of converting the security into common stock. The value
of convertible securities depends partially on interest
rate changes and the credit quality of the issuer.
Because a convertible security affords an investor the
opportunity, through its conversion feature, to
participate in the capital appreciation of the underlying
common stock, the value of convertible securities may
also change based on the price of the common stock.
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 the 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 7 days from
the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. 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.
Mortgage-Backed and Asset-Backed Securities - The Fund
may invest in mortgage-backed and asset-backed
securities. Mortgage-backed securities include, but are
not limited to, securities issued by the Government
National Mortgage Association (Ginnie Mae), the Federal
National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac).
These securities represent ownership in a pool of
mortgage loans. They differ from conventional bonds in
that principal is paid back to the investor as payments
are made on the underlying mortgages in the pool.
Accordingly, the Fund receives monthly scheduled payments
of principal and interest along with any unscheduled
principal prepayments on the underlying mortgages.
Because these scheduled and unscheduled principal
payments must be reinvested at prevailing interest rates,
mortgage-backed securities do not provide an effective
means of locking in long-term interest rates for the
investor. Like other fixed income securities, when
interest rates rise, the value of a mortgage-backed
security generally will decline; however, when interest
rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as
much as other fixed income securities.
Mortgage-backed securities also include collateralized
mortgage obligations (CMOs). CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage-
related securities. CMOs are divided into pieces
(tranches) with varying maturities and the cash flow from
the underlying mortgages are used to pay off each tranche
separately. CMOs are designed to provide investors with
more predictable maturities than regular mortgage
securities but such maturities can be difficult to
predict because of the effect of prepayments. Failure to
accurately predict prepayments can adversely affect the
Fund's return on these investments. CMOs may also be
less marketable than other securities.
Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments
generated by particular assets, such as credit card,
motor vehicle, or trade receivables. They may be pass-
through certificates, which have characteristics very
similar to mortgage-backed securities, discussed above.
They may also be in the form of asset-backed commercial
paper, which is issued by a special purpose entity,
organized solely to issue the commercial paper and to
purchase interests in the assets. The credit quality of
these securities depends primarily upon the quality of
the underlying assets and the level of credit support and
enhancement provided.
The weighted average life of such securities is likely
to be substantially shorter than their stated final
maturity as a result of scheduled principal payments and
unscheduled principal prepayments.
Master Demand Notes - The Fund may invest in variable
rate master demand notes (Master Demand Notes). Master
Demand Notes are obligations that permit the investment
of fluctuating amounts by the Fund, at varying rates of
interest using direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes
in the amounts borrowed. The Fund has the right to increase
the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount,
and the borrower may repay up to the full amount of the note
without penalty. Frequently, such obligations are secured by
letters of credit or other credit support arrangements
provided by banks. Because Master Demand Notes are
direct lending arrangements between the lender and
borrower, these instruments generally will not be traded,
and there generally is no secondary market for these
notes, although they are redeemable (and immediately
repayable by the borrower) at face value, plus accrued
interest, at any time. Therefore, where Master Demand
Notes are not secured by bank letters of credit or other
credit support arrangements, the Fund's right to redeem
depends on the ability of the borrower to pay principal
and interest on demand. In connection with Master Demand
Note arrangements, the Fund will continuously monitor the
earning power, cash flow, and other liquidity ratios of
the issuer, and the borrower's ability to pay principal
and interest on demand. Master Demand Notes, as such,
are not typically rated by credit rating agencies. The
Fund will invest in Master Demand Notes only if the Board
of Directors or its delegate has determined that they are
of credit quality comparable to the debt securities in
which the Fund generally may invest.
Eurodollar and Yankee Obligations - The Fund may invest
in Eurodollar and Yankee obligations. Eurodollar
obligations are dollar-denominated instruments issued
outside the U.S. capital markets by foreign corporations
and financial institutions and by foreign branches of
U.S. corporations and financial institutions. Yankee
obligations are dollar-denominated instruments issued by
foreign issuers in the U.S. capital markets. While
investments in Eurodollar and Yankee obligations are intended
to reduce risk by providing further diversification, such
investments involve sovereign risk in addition to credit and
market risk. Sovereign risk includes local political or
economic developments, potential nationalization, and
withholding taxes on dividend or interest payments.
In addition, the Fund may invest in Eurodollar and
Yankee obligations of investment-grade emerging market
countries. See Special Risk Considerations for a
discussion of other risks associated with foreign investments.
Put Bonds - The Fund may invest in securities (including
securities with variable interest rates) which may be
redeemed or sold back (put) to the issuer of the security
or a third party at face value prior to stated maturity
(Put Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer.
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. Commercial paper and
certain Put Bonds that are subject to restrictions on
transfer and other securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933 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. With respect to 75% of its total assets, the Fund
may not purchase 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.
b. The Fund may 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).
c. The Fund may not concentrate its investments in
any one industry although it may invest up to 25%
of the value of its total assets in any one
industry; provided, this limitation does not apply
to securities issued or guaranteed by the U.S.
Government and its agencies or instrumentalities.
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
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, 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 methods described in the following table. A
complete, signed application is required together with a
check (payable to USAA Growth Strategy Fund) 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 any purchases, the price of your
shares 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 share 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
INITIAL PURCHASES: Minimum $3,000 - (Except Individual Retirement Accounts
(IRAs) at $2,000, Spousal IRAs at $250, and USAA employee payroll deduction).
Mail
Send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
In Person
Bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway
San Antonio, TX
USAA Employee Payroll Deduction
The periodic purchase of shares through payroll deduction ($25 minimum)
by any employee of USAA, its subsidiaries or affiliated companies.
Exchange
Call our telephone assistance numbers. The new account must have the
same registration as the account from which you are exchanging.
ADDITIONAL PURCHASES: Minimum $50 - (Except USAA employee payroll deduction).
Mail
Send your check and the "Invest By Mail" stub, which accompanies your
Fund's transaction confirmation, to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Bank Wire Purchase
Instruct your bank (which may charge a fee for the
service) to wire the specified amount to the Trust as follows:
State Street Bank and Trust Company
Boston, MA 02101
ABA# 011000028
Attn: USAA Growth Strategy Fund
USAA AC-69384998
Shareholder(s) Name(s)
Shareholder Account Number
Electronic Funds Transfer (EFT)
You can pay for purchases electronically via electronic
funds transfer. Systematic (regular) purchases can be
deducted from your bank account, payroll, income-
producing investment, or from a USAA money market
account. Intermittent (as-needed) purchases can be
deducted from your bank account through our Buy/Sell Service.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the methods
described in the following table on any day the NAV 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 upon
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds trans-fer has cleared, which
could take up to 15 days from the purchase date. If you
are considering redeeming shares soon after purchase, the
Manager suggests you purchase by bank wire or certified
check to avoid delay.
In addition, the 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.
Redemption of Shares
Any of the following methods may be used to authorize the
Transfer Agent to redeem shares from your account based
on instructions received.
Written, Fax, or Telegraph
Send your written instructions to:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Telephone
Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
(continued)
Methods of Payment
Any of the following methods of payment may be used with
your redemption request.
Bank Wire Redemption
The wire redemption privilege allows redemptions of
$1,000 or more to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. USAA Shareholder Account Services deducts
a wire fee from the account for the redemption by wire.
The fee as of the date of this Prospectus is $10 and is
subject to change at any time. The fee is paid to State
Street Bank and Trust Company and the Transfer Agent for
their services in connection with the wire redemption.
Your bank may also charge a fee for receiving funds by wire.
Electronic Funds Transfer (EFT)
You can request electronic redemptions via electronic
funds transfer. Systematic (regular) or intermittent
(as-needed) redemptions can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check Redemption
You may request a redemption to be paid by check to the
registered shareholder(s) and mailed to the address of
record. This check redemption privilege is automatically
established when your application is completed and
accepted. There is a 15 day waiting period before a check
redemption can be processed following a telephone address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust does not receive good funds
either by check or electronic funds transfer, the
cancellation may be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions and supporting
documents to change an account registration due to events
such as divorce, marriage, or death. If a new account
needs to be established, an application must be completed
and returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of 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 portfolios in the USAA Family of Funds, provided
you do not hold these shares in stock certificate form
and that the shares to be acquired are offered in your
state of residence. Exchange redemptions and purchases
will be processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between
portfolios is a taxable event. Accordingly, a capital
gain or loss may be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Telephone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the portfolios and
their shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any
portfolio in the USAA Family of Funds are limited for
each account to six per calendar year except that there
is no limitation on exchanges out of the 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
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) - the periodic purchase
of shares through electronic funds transfer from a
checking or savings account.
Direct Purchase Service - the periodic purchase of shares
through electronic funds transfer from a non-governmental
employer, an income-producing investment, or an account
with a participating financial institution.
Automatic Purchase Plan - the periodic transfer of funds
from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
Retirement Plans - plans are available for IRA (including
SEP/IRA) and 403(b)(7) accounts. Federal taxes on
current income may be deferred if an investor qualifies.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each account
transaction. 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 mailed to each shareholder
will reflect annual account history for the prior tax
year. There will be a $10 fee charged for copies of
historical statements for other than the prior tax year
for any one account. You will receive the Fund's
financial statements with a summary of its investments
and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the 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.
DIRECTED DIVIDENDS
If you own shares in more than one of the funds in the
USAA Family of Funds, you may direct that dividends
and/or capital gain distributions earned in one fund be
used to automatically purchase shares in another fund.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the 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
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
at least annually. Net capital gain, if any, 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.
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 in excess of
$ 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 portfolios,
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 management fee is computed
and paid at three-fourths of one percent (.75%) 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.
PORTFOLIO MANAGERS
The following individuals are primarily responsible for
managing the Fund.
David G. Parsons, Assistant Vice President of Equity
Investments since March of 1995, is the asset allocation
manager of the Fund and portfolio manager for the Large
Cap Stocks investment category. Mr. Parsons has 12 years
investment management experience working for IMCO where he
has held various positions in Equity Investments. Mr.
Parsons earned the Chartered Financial Analyst (CFA)
designation in 1986 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 Texas, an MA from
Southern Illinois University and a BA from Austin College, Texas.
John K. Cabell, Jr. and Eric M. Efron, Associate
Portfolio Managers of Equity Investments since March of
1995, are co-portfolio managers for the Small Cap Stocks
investment category. Mr. Cabell has 16 years investment
management experience and has worked six years as a
Senior Securities Analyst in Equity Investments for IMCO.
His business experience during the past five years also
included the following positions: Chief Economist for
Retirement Systems of Alabama from 3/91 to 3/94 and
Senior Investment Analyst for Seidler Amdec from 10/90 to
2/91. Mr. Cabell earned the CFA designation in 1982 and
is a member of the AIMR and SAFAS. He holds an MA and BS
from the University of Alabama. Mr. Efron has 15 years
investment management experience and has worked three
years as a Senior Securities Analyst in Equity
Investments for IMCO. Prior to joining IMCO, he held
various investment positions with C&S/Sovran Bank of
Atlanta, Georgia from 9/84 to 12/91. Mr. Efron earned
the CFA designation in 1983 and is also a member of the
AIMR and SAFAS. He holds an MBA from New York
University, an MA from the University of Michigan, and a
BA from Oberlin College, Ohio.
Albert C. Sebastian, Associate Portfolio Manager of
Equity Investments since March of 1995, is the portfolio
manager for the International Stocks investment category.
Mr. Sebastian has 11 years investment management
experience and has worked four years as a Senior Securities
Analyst in Equity Investments for IMCO. Prior to joining
IMCO, he was President of Prospect Investment Advisors.
Mr. Sebastian earned the CFA designation in 1989 and is a
member of the AIMR, SAFAS and the International Society
of Financial Analysts. He holds an MBA from the
University of Michigan and a BA from Holy Cross College,
Massachusetts.
Paul H. Lundmark, Executive Director of Fixed Income
Investments since November of 1994, is portfolio manager
for the Bonds investment category. Mr. Lundmark has nine
years investment management experience and has worked for
IMCO four years. He has held various positions in Fixed
Income Investments since 1/92. From 5/90 to 7/91 he was
employed as an Associate with Raymond James & Associates,
Inc., St. Petersburg, Florida. Mr. Lundmark earned the
CFA designation in 1989 and is a member of the AIMR and
SAFAS. He holds an MBA and BSB from the University of Minnesota.
J. Eric Thorderson, Executive Director of Fixed Income
Investments since March of 1994, is portfolio manager for
the Money Market Instruments investment category. Mr.
Thorderson has eight years investment management
experience and has worked for IMCO four years where he
has held various positions in Fixed Income Investments.
From 5/86 to 9/89 he was employed as an Investment
Analyst with Alexander Hamilton Life Insurance, Michigan.
Mr. Thorderson earned the CFA designation in 1989 and is
a member of the AIMR and SAFAS. He holds an MBA from the
University of Illinois and a BA from Wayne State
University of Michigan.
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.
SERVICE PROVIDERS
UNDERWRITER/ USAA Investment Management Company
DISTRIBUTOR 9800 Fredericksburg Rd., San Antonio, Texas 78288.
TRANSFER USAA Shareholder Account Services
AGENT 10750 Robert F. McDermott Freeway, San Antonio, Texas 78288.
CUSTODIAN State Street Bank and Trust Company
P.O. Box 1713, Boston, Massachusetts 02105.
LEGAL Goodwin, Procter & Hoar
COUNSEL Exchange Place, Boston, Massachusetts 02109.
INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 112 East Pecan, Suite 2400, San Antonio, Texas 78205.
DESCRIPTION OF SHARES
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. 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.
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
Income Strategy Fund
is included herein
USAA INCOME STRATEGY FUND
SEPTEMBER 1, 1995 PROSPECTUS
USAA Income 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 high current
return, with reduced risk over time, through an asset
allocation strategy which emphasizes income and gives
secondary emphasis to long-term growth of capital. Page 8.
HOW DO YOU BUY?
Fund shares are sold on a continuous basis at the net
asset value per share without a sales charge. Make your
initial investment directly with the Manager by mail or
in person. Page 13.
HOW DO YOU SELL?
You may redeem shares of the Fund by mail, telephone,
fax, or telegraph on any day that the net asset value is
calculated. Page 15.
This Prospectus, which should be read and retained for
future reference, provides information regarding the
Trust and the Fund that you should know before investing.
Shares of the USAA Income 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 Fund, dated September
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
Performance Information 4
USING MUTUAL FUNDS
USAA Family of No-Load Mutual Funds 5
Using Mutual Funds in an Asset Allocation Program 6
INVESTMENT PORTFOLIO INFORMATION
Investment Objective and Policies 8
SHAREHOLDER INFORMATION
Purchase of Shares 13
Redemption of Shares 15
Conditions of Purchase and Redemption 16
Exchanges 17
Other Services 18
Share Price Calculation 19
Dividends, Distributions and Taxes 20
Management of the Trust 21
Description of Shares 22
Service Providers 23
Telephone Assistance Numbers 23
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 Fee, net of reimbursements .00%
12b-1 Fee None
Other Expenses (estimated)
Transfer Agent Fee** .40%
Custodian Fee .57%
All Other Expenses .03%
----
Total Other Expenses 1.00%
----
Total Fund Operating Expenses, net of reimbursements 1.00%
====
- -------------------------------------------------------------------------
* A shareholder who requests delivery of redemption
proceeds by wire transfer will be subject to a $10
fee. See Redemption of Shares - Bank Wire Redemption.
** The Fund pays USAA Shareholder Account Services an
annual fixed fee per account for its services.
See Transfer Agent in the SAI, page 15.
The Manager has voluntarily agreed to limit the Fund's
annual expenses until October 1, 1996, to 1.00% of its
ANA and will reimburse the Fund for all expenses in
excess of the limitation. The Management Fee, Other
Expenses, and Total Operating Expenses information give
effect to all such expense reimbursements by the Manager.
Absent such reimbursements, the amount of the Management
Fee, Other Expenses, and Total Operating Expenses as a
percentage of the Fund's ANA would be .50%, 1.78%, and
2.28%, 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 - $ 10 3 years - $ 32
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.
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 or 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. 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 specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the
beginning of the period, would produce the redeemable
value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions
during the period.
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 portfolios, each with different objectives and
policies. In combination, these portfolios are designed
to provide investors with the opportunity to formulate
their own investment program. You may exchange any
shares you hold in any one USAA portfolio for shares in
any other USAA portfolio. For more complete information
about the portfolios in the USAA Family of Funds,
including charges and expenses, call the Manager for a
Prospectus. Be sure to read it carefully before you
invest or send money.
USAA 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 several different types 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 Seek high current return, Bonds and stocks
Strategy with reduced risk over time,
Fund through an asset allocation
strategy which emphasizes
income and gives secondary
emphasis to long-term growth
of capital.
Growth and Tax Seek a conservative balance Short- and long-term tax
Strategy Fund between income, the majority exempt bonds and basic
of which is tax-exempt, and value stocks
the potential for long-term
growth of capital to preserve
purchasing power.
Balanced Seek high total return, with Stocks and bonds
Strategy reduced risk over time, through
Fund an asset allocation strategy
that seeks a combination of
long-term growth of capital and
current income.
Cornerstone Achieve a positive inflation- Foreign & basic value
Strategy adjusted rate of return and a stocks, government
Fund reasonably stable value of securities, real estate
Fund shares. stocks and gold stocks
Growth Seek high total return, with Small & large cap stocks,
Strategy reduced risk over time, bonds, and international
Fund through an asset allocation stocks
strategy which emphasizes
capital appreciation and gives
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 seek high current
return, with reduced risk over time, through an asset
allocation strategy which emphasizes income and gives
secondary emphasis to long-term growth of capital.
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 investing the Fund's
assets in each of the following investment categories
within the indicated ranges:
Percentage
Target Range
Investment Category of Net Assets
Bonds 75 - 85%
Stocks 15 - 25%
Money Market Instruments 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.
As a temporary defensive measure, the Manager may
invest up to 100% of the Fund's assets in high quality,
short-term debt instruments.
The Fund's portfolio turnover rate 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.
Characteristics and associated risks of each investment
category are as follows:
Bonds - In this category, investments will consist of
U.S. dollar-denominated securities selected for their
high yields relative to the risk involved. Consistent
with this policy, in periods of rising interest rates, a
greater portion of the portfolio may be invested in
securities the value of which is believed to be less
sensitive to interest rate changes.
Investments in this category may consist of obligations
of the U.S. Government, its agencies and
instrumentalities; mortgage-backed securities; corporate
debt securities such as notes, bonds, and commercial
paper; U.S. bank obligations, including certificates of
deposit and banker's acceptances; obligations of state
and local governments and their agencies and instrumentalities;
asset-backed securities; master demand notes; eurodollar
obligations; yankee obligations; and other debt securities.
The debt securities in the Fund must be investment
grade at the time of purchase. Investment grade
securities are those issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, those
rated at least Baa by Moody's Investors Service
(Moody's), BBB by Standard & Poor's Ratings Group (S&P),
BBB by Fitch Investors Service (Fitch), or BBB by Duff
and Phelps (D&P), or those judged to be of equivalent
quality by the Manager if not rated. 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 below investment grade, 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 debt ratings, see Appendix A to the SAI.
Stocks - In this category, investments will consist
primarily of dividend paying common stocks or securities
convertible into common stocks or securities which carry
the right to buy common stocks. Investments may also
include foreign securities. For a discussion of the
risks associated with investments in foreign issuers, see
Special Risk Considerations.
The Fund may also invest in U.S. Real Estate Investment
Trusts (REITs). 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.
Money Market Instruments - In this category, investments
will consist of high quality U.S. dollar-denominated debt
securities that present minimal credit risk and have
remaining maturities of 397 days or less. Such
securities may include U.S. government obligations,
commercial paper and other short-term corporate
obligations, and certificates of deposit, bankers'
acceptances, bank deposits, and other financial
institution obligations. These securities may carry
fixed or variable interest rates.
OTHER POLICIES
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 7 days from
the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or
maturity of the purchased security. 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 the 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.
Mortgage-Backed and Asset-Backed Securities - The Fund
may invest in mortgage-backed and asset-backed
securities. Mortgage-backed securities include, but are
not limited to, securities issued by the Government
National Mortgage Association (Ginnie Mae), the Federal
National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac).
These securities represent ownership in a pool of
mortgage loans. They differ from conventional bonds in
that principal is paid back to the investor as payments
are made on the underlying mortgages in the pool.
Accordingly, the Fund receives monthly scheduled payments
of principal and interest along with any unscheduled
principal prepayments on the underlying mortgages.
Because these scheduled and unscheduled principal
payments must be reinvested at prevailing interest rates,
mortgage-backed securities do not provide an effective
means of locking in long-term interest rates for the
investor. Like other fixed income securities, when
interest rates rise, the value of a mortgage-backed
security generally will decline; however, when interest
rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as
much as other fixed income securities.
Mortgage-backed securities also include collateralized
mortgage obligations (CMOs). CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage-
related securities. CMOs are divided into pieces
(tranches) with varying maturities and the cash flow from
the underlying mortgages are used to pay off each tranche
separately. CMOs are designed to provide investors with
more predictable maturities than regular mortgage
securities but such maturities can be difficult to
predict because of the effect of prepayments. Failure to
accurately predict prepayments can adversely affect the Fund's
return on these investments. CMOs may also be less
marketable than other securities.
Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments
generated by particular assets, such as credit card,
motor vehicle, or trade receivables. They may be pass-
through certificates, which have characteristics very
similar to mortgage-backed securities, discussed above.
They may also be in the form of asset-backed commercial
paper, which is issued by a special purpose entity,
organized solely to issue the commercial paper and to
purchase interests in the assets. The credit quality of
these securities depends primarily upon the quality of
the underlying assets and the level of credit support and
enhancement provided.
The weighted average life of such securities is likely
to be substantially shorter than their stated final
maturity as a result of scheduled principal payments and
unscheduled principal prepayments.
Master Demand Notes - The Fund may invest in variable
rate master demand notes (Master Demand Notes). Master
Demand Notes are obligations that permit the investment
of fluctuating amounts by the Fund, at varying rates of
interest using direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily
changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to
the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the
full amount of the note without penalty. Frequently,
such obligations are secured by letters of credit or
other credit support arrangements provided by banks.
Because Master Demand Notes are direct lending
arrangements between the lender and borrower, these
instruments generally will not be traded, and there
generally is no secondary market for these notes,
although they are redeemable (and immediately
repayable by the borrower) at face value, plus accrued
interest, at any time. Therefore, where Master Demand
Notes are not secured by bank letters of credit or other
credit support arrangements, the Fund's right to redeem
depends on the ability of the borrower to pay principal
and interest on demand. In connection with Master Demand
Note arrangements, the Fund will continuously monitor the
earning power, cash flow, and other liquidity ratios of
the issuer, and the borrower's ability to pay principal
and interest on demand. Master Demand Notes, as such,
are not typically rated by credit rating agencies. The
Fund will invest in Master Demand Notes only if the Board
of Directors or its delegate has determined that they are
of credit quality comparable to the debt securities in
which the Fund generally may invest.
Eurodollar and Yankee Obligations - The Fund may invest
in Eurodollar and Yankee obligations. Eurodollar
obligations are dollar-denominated instruments issued
outside the U.S. capital markets by foreign corporations
and financial institutions and by foreign branches of
U.S. corporations and financial institutions. Yankee
obligations are dollar-denominated instruments issued by
foreign issuers in the U.S. capital markets. While
investments in Eurodollar and Yankee obligations are
intended to reduce risk by providing further
diversification, such investments involve sovereign risk
in addition to credit and market risk. Sovereign risk
includes local political or economic developments,
potential nationalization, and withholding taxes on
dividend or interest payments.
In addition, the Fund may invest in Eurodollar and
Yankee obligations of investment-grade emerging market
countries. An emerging market country can be considered
to be a country which is in the initial stages of its
industrial cycle. Investments in emerging market countries
involve exposure to economic structures that are generally
less diverse and mature than in the United States, and to
political systems which may be less stable. In the past,
markets of emerging market countries have been more
olatile than the markets of developed countries. See Special
Risk Considerations for a discussion of other risks associated
with foreign investments.
Put Bonds - The Fund may invest in securities (including
securities with variable interest rates) which may be
redeemed or sold back (put) to the issuer of the security
or a third party at face value prior to stated maturity
(Put Bonds). Such securities will normally trade as if
maturity is the earlier put date, even though stated
maturity is longer.
Convertible Securities - As stated earlier, the Fund may
invest in convertible securities. Convertible securities
are bonds, preferred stocks, and other securities that
pay interest or dividends and offer the buyer the option
of converting the security into common stock. The value
of convertible securities depends partially on interest
rate changes and the credit quality of the issuer.
Because a convertible security affords an investor the
opportunity, through its conversion feature, to
participate in the capital appreciation of the underlying
common stock, the value of convertible securities may
also change based on the price of the common stock.
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 the 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.
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. Commercial paper and
certain Put Bonds that are subject to restrictions on
transfer and other securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933 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. With respect to 75% of its total assets, the Fund
may not purchase 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.
b. The Fund may 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).
c. The Fund may not concentrate its investments in
any one industry although it may invest up to 25%
of the value of its total assets in any one
industry; provided, this limitation does not apply
to securities issued or guaranteed by the U.S.
Government and its agencies or instrumentalities.
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
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, 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.
PURCHASE OF SHARES
OPENING AN ACCOUNT
You may open an account and make an investment by any of
the methods described in the following table. A complete,
signed application is required together with a check
(payable to USAA Income Strategy Fund) 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 any purchases, the price of your
shares 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 share 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
INITIAL PURCHASES: Minimum $3,000 - (Except Individual Retirement Accounts
(IRAs) at $2,000, Spousal IRAs at $250, and USAA employee payroll deduction).
Mail
Send your application and check to:
USAA Investment Management Company
9800 Fredericksburg Rd., San Antonio, TX 78288
In Person
Bring your application and check to:
USAA Investment Management Company
USAA Federal Savings Bank
10750 Robert F. McDermott Freeway
San Antonio, TX
USAA Employee Payroll Deduction
The periodic purchase of shares through payroll deduction ($25
minimum) by any employee of USAA, its subsidiaries or affiliated companies.
Exchange
Call our telephone assistance numbers. The new account must have the
same registration as the account from which you are exchanging.
ADDITIONAL PURCHASES: Minimum $50 - (Except USAA employee payroll deduction).
Mail
Send your check and the "Invest By Mail" stub, which accompanies your
Fund's transaction confirmation, to the Transfer Agent:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Bank Wire Purchase
Instruct your bank (which may charge a fee for the
service) to wire the specified amount to the Trust as follows:
State Street Bank and Trust Company
Boston, MA 02101
ABA# 011000028
Attn: USAA Income Strategy Fund
USAA AC-69384998
Shareholder(s) Name(s)
Shareholder Account Number
Electronic Funds Transfer (EFT)
You can pay for purchases electronically via electronic
funds transfer. Systematic (regular) purchases can be
deducted from your bank account, payroll, income-
producing investment, or from a USAA money market
account. Intermittent (as-needed) purchases can be
deducted from your bank account through our Buy/Sell Service.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
REDEMPTION OF SHARES
You may redeem shares of the Fund by any of the methods
described in the following table on any day the NAV 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 upon
redemption of shares purchased by check or electronic
funds transfer will not be disbursed until the purchase
check or electronic funds trans-fer has cleared, which
could take up to 15 days from the purchase date. If you
are considering redeeming shares soon after purchase, the
Manager suggests you purchase by bank wire or certified
check to avoid delay.
In addition, the 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.
Redemption of Shares
Any of the following methods may be used to authorize the Transfer
Agent to redeem shares from your account based on instructions received.
Written, Fax, or Telegraph
Send your written instructions to:
USAA Shareholder Account Services
9800 Fredericksburg Rd., San Antonio, TX 78288
Send a signed fax to 210-498-2889, or send a telegraph to
USAA Shareholder Account Services.
Written redemption requests must include the following:
(1) a letter of instruction or stock assignment, and
stock certificate (if issued), specifying the Fund and
the number of shares or dollar amount to be redeemed;
(2) signatures of all owners of the shares exactly as
their names appear on the account; (3) other supporting
legal documents, if required, as in the case of estates,
trusts, guardianships, custodianships, partnerships,
corporations, and pension and profit-sharing plans; and
(4) method of payment.
Telephone
Call toll free 1-800-531-8448, in San Antonio, 210-456-7202.
The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine,
and if it does not, it may be liable for any losses due
to unauthorized or fraudulent instructions. Information
is obtained prior to any discussion regarding an account
including: (1) USAA number or account number, (2) the
name(s) on the account registration, and (3) social
security number or tax identification number for the
account registration. In addition, all telephone
communications with a shareholder are recorded and
confirmations of all account transactions are sent to the
address of record.
Redemption by telephone, fax, or telegraph is not
available for shares represented by stock certificates.
(continued)
Methods of Payment
Any of the following methods of payment may be used with
your redemption request.
Bank Wire Redemption
The wire redemption privilege allows redemptions of
$1,000 or more to be sent directly to your bank account.
Establish this service when you apply for your account,
or later upon request. If your account is at a savings
bank, savings and loan association, or credit union,
please obtain precise wiring instructions from your
institution. Specifically, include the name of the
correspondent bank and your institution's account number
at that bank. USAA Shareholder Account Services deducts
a wire fee from the account for the redemption by wire.
The fee as of the date of this Prospectus is $10 and is
subject to change at any time. The fee is paid to State
Street Bank and Trust Company and the Transfer Agent for
their services in connection with the wire redemption.
Your bank may also charge a fee for receiving funds by wire.
Electronic Funds Transfer (EFT)
You can request electronic redemptions via electronic
funds transfer. Systematic (regular) or intermittent
(as-needed) redemptions can be credited to your bank account.
Establish any of our electronic investing services when
you apply for your account, or later upon request.
Check Redemption
You may request a redemption to be paid by check to the
registered shareholder(s) and mailed to the address of
record. This check redemption privilege is automatically
established when your application is completed and accepted.
There is a 15 day waiting period before a check redemption
can be processed following a telephone address change.
CONDITIONS OF PURCHASE AND REDEMPTION
NONPAYMENT
If any order to purchase shares is cancelled due to
nonpayment or if the Trust does not receive good funds
either by check or electronic funds transfer, the
cancellation may be treated as a redemption of shares
purchased and you will be responsible for any resulting
loss incurred by the Fund or the Manager. If you are a
shareholder, shares can be redeemed from any of your
account(s) as reimbursement for all losses. In addition,
you may be prohibited or restricted from making future
purchases in any of the USAA Family of Funds. A $15 fee
is charged for all returned items, including checks and
electronic funds transfers.
TRANSFER OF SHARES
Fund shares may be transferred to another person by
sending written instructions to the Transfer Agent. The
account must be clearly identified and the shareholder
must include the number of shares to be transferred, the
signatures of all registered owners, and all stock
certificates, if any, which are the subject of transfer.
You also need to send written instructions and supporting
documents to change an account registration due to events
such as divorce, marriage, or death. If a new account
needs to be established, an application must be completed
and returned to the Transfer Agent.
ACCOUNT BALANCE
The Board of 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 portfolios in the USAA Family of Funds, provided
you do not hold these shares in stock certificate form
and that the shares to be acquired are offered in your
state of residence. Exchange redemptions and purchases
will be processed simultaneously at the share prices next
determined after the exchange order is received. For
federal income tax purposes, an exchange between
portfolios is a taxable event. Accordingly, a capital
gain or loss may be realized.
The Fund has undertaken certain procedures regarding
telephone transactions. See Redemption of Shares - Telephone.
EXCHANGE LIMITATIONS,
EXCESSIVE TRADING
To minimize Fund costs and to protect the portfolios and
their shareholders from unfair expense burdens, the Funds
restrict excessive exchanges. Exchanges out of any
portfolio in the USAA Family of Funds are limited for
each account to six per calendar year except that there
is no limitation on exchanges out of the 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
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) - the periodic purchase
of shares through electronic funds transfer from a
checking or savings account.
Direct Purchase Service - the periodic purchase of shares
through electronic funds transfer from a non-governmental
employer, an income-producing investment, or an account
with a participating financial institution.
Automatic Purchase Plan - the periodic transfer of funds
from a USAA money market fund to purchase shares in
another non-money market USAA mutual fund.
Buy/Sell Service - the intermittent purchase or
redemption of shares through electronic funds transfer to
or from a checking or savings account.
Systematic Withdrawal Plan - the periodic redemption of
shares from one of your accounts permitting you to
receive a fixed amount of money monthly or quarterly.
Retirement Plans - plans are available for IRA (including
SEP/IRA) and 403(b)(7) accounts. Federal taxes on
current income may be deferred if an investor qualifies.
SHAREHOLDER STATEMENTS
AND REPORTS
You will receive a confirmation after each account
transaction except reinvested dividends. At the end of
each quarter you will receive a consolidated statement
for all of your mutual fund accounts, regardless of
account activity. The fourth quarter consolidated
statement mailed to each shareholder will reflect annual
account history for the prior tax year. There will be a
$10 fee charged for copies of historical statements for
other than the prior tax year for any one account. You
will receive the Fund's financial statements with a
summary of its investments and performance at least semiannually.
In an effort to reduce expenses and respond to
shareholders' requests to reduce mail, the 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.
DIRECTED DIVIDENDS
If you own shares in more than one of the funds in the
USAA Family of Funds, you may direct that dividends
and/or capital gain distributions earned in one fund be
used to automatically purchase shares in another fund.
TELEPHONE ASSISTANCE
Call our telephone assistance numbers for specific forms,
a copy of the 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
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.
Securities purchased with maturities of 60 days or less
are stated at amortized cost which approximates market
value. Other debt and government 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. Net capital gain, if any, 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.
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 in excess of
$ 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 portfolios, 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 management fee is
computed and paid at one-half of one percent (.50%) of ANA.
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, is the asset
allocation manager of the Fund and portfolio manager for
the Bonds investment category. Mr. Saunders has 26 years
investment management experience and has worked for IMCO
25 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.
R. David Ullom, Assistant Vice President of Equity
Investments since September of 1994, is portfolio manager
for the Stocks investment category. Mr. Ullom has 20
years investment management experience and has worked for
IMCO 10 years where he has held various positions in
Equity Investments. Mr. Ullom earned the CFA designation
in 1980 and also is a member of the AIMR and SAFAS. He
holds an MBA from Washington University, Missouri and a
BS from Oklahoma State University.
J. Eric Thorderson, Executive Director of Fixed Income
Investments since March of 1994, is portfolio manager for
the Money Market Instruments investment category. Mr.
Thorderson has eight years investment management
experience and has worked for IMCO four years where he
has held various positions in Fixed Income Investments.
From 5/86 to 9/89 he was employed as an Investment Analyst
with Alexander Hamilton Life Insurance, Michigan. Mr.
Thorderson earned the CFA designation in 1989 and is a
member of the AIMR and SAFAS. He holds an MBA from the
University of Illinois and a BA from Wayne State University
of Michigan.
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 Master Trust Agreement (Master Trust Agreement)
dated June 2, 1995. 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 10750 Robert F. McDermott Freeway, 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
Balanced Strategy, Growth Strategy and Income Strategy Funds
is included herein
Not included in this Post-Effective Amendment
is the Statement of Additional Information for the
Balanced Portfolio, Cornerstone, Gold, International,
and World Growth Funds, GNMA Trust and Treasury Money Market Trust
or the Statement of Additional Information for the
Emerging Markets Fund
USAA STATEMENT OF
INVESTMENT ADDITIONAL INFORMATION
TRUST September 1, 1995
- ----------------------------------------------------------------------------
USAA INCOME STRATEGY FUND
USAA BALANCED STRATEGY FUND
USAA GROWTH STRATEGY FUND
USAA INVESTMENT TRUST (the Trust) is a registered investment
company offering shares of eleven no-load mutual funds, three of
which are described in this Statement of Additional Information
(SAI): the Income Strategy Fund, Balanced Strategy Fund, and
Growth Strategy Fund (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 September 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
2 Additional Information Regarding Redemption of Shares
3 Investment Plans
4 Investment Policies
6 Special Risk Considerations
7 Investment Restrictions
8 Portfolio Transactions
9 Further Description of Shares
10 Tax Considerations
11 Trustees and Officers of the Trust
14 The Trust's Manager
15 General Information
15 Calculation of Performance Data
16 Appendix A - Long-Term and Short-Term Debt Ratings
17 Appendix B - Comparison of Portfolio Performance
20 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 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 net asset value 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 each Fund 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 New York
Stock Exchange.
(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 net asset value is calculated will not be reflected in a
Fund's net asset value, unless the Manager determines that the
particular event would materially affect net asset value. 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.
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 net asset value 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 Securities and Exchange Commission (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.
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) - the periodic purchase of
shares through electronic funds transfer from a checking or
savings account. By completing an application, which may be
obtained from the Manager, you invest a specific amount each
month ($50 minimum) in any of your accounts.
Direct Purchase Service - the periodic purchase of shares through
electronic funds transfer from 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.
Investment Plans, cont.
Each redemption of shares may result in a gain or loss,
which must be reported on the shareholder's income tax return.
Therefore, a shareholder should keep an accurate record of any
gain or loss on each withdrawal.
Tax-Deferred Retirement Plans
Federal taxes on current income may be deferred if an investor
qualifies for certain types of retirement programs. For the
convenience of the investor, the following plans are made
available by the Manager: IRA (including SEP/IRA) and 403(b)(7)
accounts. The minimum initial investment in each of these plans
is $2,000 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. 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.
Section 4(2) Commercial Paper and Rule 144A Securities
Each Fund may invest in commercial paper issued in reliance on
the "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933 (Section 4(2)
Commercial Paper). Section 4(2) Commercial Paper is restricted
as to disposition under the federal securities laws; therefore,
any resale of Section 4(2) Commercial Paper must be effected in a
transaction exempt from registration under the Securities Act of
1933. Section 4(2) Commercial Paper is normally resold to other
investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) Commercial
Paper, thus providing liquidity.
Each Fund may also 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.
Liquidity Determinations
The Board of Trustees has established guidelines pursuant to
which Section 4(2) Commercial Paper, 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 Fund's investment restrictions applicable to investments
in illiquid securities. In determining the liquidity of Section 4(2)
Commercial Paper 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. In
determining the liquidity 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 (including Eurodollar
obligations) 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
Directors and will not be considered "restricted securities" for
purposes of a Fund's investment restriction.
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 33 1/3% of the value of a
Fund's total assets. The Trust may terminate such loans at any
time.
Forward Currency Contracts
Each Fund 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.
Investment Policies, cont.
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 generally
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)
Certain risks are 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 Funds 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 the Prospectus.
SPECIAL RISK CONSIDERATIONS
Currency Exchange Rate Fluctuations
A portion of each 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
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 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 for temporary or emergency purposes in
an amount not exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings).
(3) Concentrate its investments in any one industry although it
may invest up to 25% of the value of its total assets in any
one industry; provided, this limitation does not apply to
securities issued or guaranteed by the U.S. Government and
its agencies or instrumentalities.
(4) Issue senior securities, except as permitted under the 1940 Act.
(5) Underwrite securities of other issuers, except to the extent
that it may be deemed to act as a statutory underwriter in
the distribution of any restricted securities or not readily
marketable securities.
(6) Lend any securities or make any loan if, as a result, more
than 33 1/3% of its total assets would be lent to other
parties, except that this limitation does not apply to
purchases of debt securities or to repurchase agreements.
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 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, valued at the lower of cost or market
value, in excess of 5% of the Fund's net assets. Included
in that amount, but not to exceed 2% of the Fund's net
assets, may be 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).
Investment Restrictions, cont.
(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).
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 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 Turnover Rates
The rate of portfolio turnover in any of the Funds 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 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. A higher degree
of equity portfolio activity will increase brokerage costs to a
Fund. It is not anticipated however, that the portfolio turnover
rates of the Funds 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.
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,
three of which are described in this SAI. Under the First Amended
and Restated Master Trust Agreement (Master Trust Agreement), 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 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 Fund'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) 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.
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 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 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.
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
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
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 (a) Family of Funds (d)
- ----- ------------------ -------------------
C. Dale Briscoe $4,660 $18,500
George E. Brown (b) 4,660 18,500
Barbara B. Dreeben 4,660 18,500
Howard L. Freeman, Jr. 4,660 18,500
Hansford T. Johnson None (c) None (c)
Michael J.C. Roth None (c) None (c)
John W. Saunders, Jr. None (c) None (c)
Richard A. Zucker 4,660 18,500
- ----------------
(a) Compensation may be deferred by Trustees under a non-
qualified Deferred Compensation Plan adopted by the Trust in
1987. Deferred amounts accumulate interest quarterly based
on the annualized U.S. Treasury Bill rate in effect on the
last day of the quarter. No compensation was deferred
during the fiscal year ended May 31, 1995.
(b) Since the Plan's adoption, the total amounts of deferred
compensation accrued by the Trust and the USAA Family of
Funds (plus earnings thereon) for participating
Trustees/Directors are as follows: George E. Brown, $4,310
and $20,395, respectively. Amounts deferred and accumulated
earnings thereon are not funded and are general unsecured
liabilities of the USAA Funds until paid.
(c) 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.
(d) 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 May 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 May 31, 1995, USAA and its affiliates (including
related employee benefit plans) owned 13,612 shares (.13%) of the
Balanced Portfolio Fund, 500,010 shares (21.33%) of the Emerging
Markets Fund, 5,938,052 shares (27.07%) of the International
Fund, 615,320 shares (3.97%) of the World Growth Fund, and
342,228 shares (1.3%) of the GNMA Trust, for an aggregate total
of 7,409,222 shares (3.69%) of the Trust.
The Trust knows of no other persons who, as of May 31, 1995,
held of record or owned beneficially 5% or more of any Fund's
shares.
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., and USAA State Tax-Free Trust. As of the date
of this SAI, total assets under management by the Manager were in
excess of $ billion, of which approximately $ 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,
1997 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 fee but exclusive of
the interest, taxes, brokerage fees 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. Any such waiver or
reimbursement may be terminated by the Manager at any time
without prior notice to the shareholders. The Manager has
voluntarily agreed to limit the annual expenses of the Income
Strategy and Balanced Strategy Funds to 1.00% and 1.25%,
respectively, of each Fund's ANA until October 1, 1996 and will
reimburse each Fund for all expenses in excess of such limitation.
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 of $23.50 by the Balanced
Strategy and Growth Strategy Funds and $26.00 by the Income
Strategy 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 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, are the Trust's independent auditors. In this capacity
the firm is responsible for auditing the annual financial
statements of the Funds and reporting thereon.
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 - Income Strategy Fund
This Fund 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 = [((((a-b) divided by (cd)) +1) to the 6th power) -1] multiplied by 2
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
Total Return
The Funds 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
Calculation of Performance Data, cont.
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year periods at the end of the year or period
The calculation assumes any charges are deducted from the initial
$1,000 payment and assumes all dividends and distributions by
such Fund are reinvested at the price stated in the Prospectus on
the reinvestment dates during the period, and includes all
recurring fees that are charged to all shareholder accounts.
APPENDIX A - LONG-TERM AND SHORT-TERM DEBT RATINGS
Ratings
Moody's:
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.
S&P:
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.
Fitch:
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.
Duff & Phelps:
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 but may vary slightly from time to time because of
economic conditions.
A Protection factors are average but adequate. However, risk
factors are variable and greater in periods of economic stress.
BBB Below average protection factors but still considered
sufficient for prudent investment. Considerable variability
in risk during economic cycles.
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.
Appendix B, cont.
Denver Post, a newspaper which may quote financial news.
Financial Planning, a monthly magazine that periodically features
companies in the mutual fund industry.
Financial Services Week, a weekly newspaper which covers financial news.
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).
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 towards the novice investor.
In addition, the Growth Strategy Fund may be cited for performance
information and articles in International Reports, a publication providing
insights on world financial markets and economics.
Among the organizations cited above, Lipper Analytical
Services, Inc.'s and Morningstar, Inc.'s tracking results may be
used. A Fund will be compared to Lipper's or Morningstar's
appropriate fund category according to its objective and
portfolio holdings. The Balanced Strategy Fund will be compared
to funds in Lipper's and Morningstar's balanced fund categories,
the Growth Strategy Fund to Lipper's global portfolio flexible fund
or flexible portfolio fund categories and to Morningstar's asset
allocation fund category, and the Income Strategy Fund to Lipper's
income or fixed income fund categories and to Morningstar's income
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.
- 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.
- 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 New York Stock Exchange, American Stock Exchange and NASDAQ.
- 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 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.
26533-0995
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 Statements of Additional Information)
of this Registration Statement:
With respect to the Balanced Strategy, Growth Strategy
and Income Strategy Funds, the Unaudited Financial
Statements to be included in Part B will be filed by
amendment.
(b) Exhibits:
Exhibit No. Description of Exhibits
- ---------- -----------------------
1 First Amended and Restated Master Trust Agreement, June 2, 1995
(filed herewith)
2 By-laws, as amended (filed herewith)
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Cornerstone Fund (1)
(b) Gold Fund (1)
(c) International Fund(3)
(d) Balanced Portfolio Fund (5)
(e) GNMA Trust (7)
(f) Treasury Money Market Trust (7)
(g) World Growth Fund (8)
(h) Emerging Markets Fund (11)
(i) Form of Balanced Strategy Fund (filed herewith)
(j) Form of Growth Strategy Fund (filed herewith)
(k) Form of Income Strategy Fund (filed herewith)
5 (a) Advisory Agreement (filed herewith)
(b) Letter Agreement adding GNMA Trust and Treasury Money Market
Trust (filed herewith)
(c) Letter Agreement adding World Growth Fund (filed herewith)
(d) Letter Agreement adding Emerging Markets Fund (filed herewith)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds (filed herewith)
6 (a) Underwriting Agreement (6)
(b) Letter Agreement adding GNMA Trust and Treasury Money
Market Trust (7)
(c) Letter Agreement adding World Growth Fund (8)
(d) Letter Agreement adding Emerging Markets Fund (10)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds (filed herewith)
7 (a) Form of Trustees' Deferred Compensation Plan (2)
(b) Form of Revocation of Trustees' Deferred Compensation Plan (2)
8 (a) Custodian Agreement (1)
(b) Letter Agreement adding GNMA Trust and Treasury Money
Market Trust (7)
(c) Letter Agreement adding World Growth Fund (8)
(d) Letter Agreement adding Emerging Markets Fund (11)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds (filed herewith)
9 (a) Transfer Agency Agreement (6)
(b) Letter Agreement adding GNMA Trust and Treasury Money
Market Trust (7)
(c) Letter Agreement adding World Growth Fund (8)
(d) Letter Agreement adding Emerging Markets Fund (10)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds (filed herewith)
Exhibit No. Description of Exhibits
- ---------- -----------------------
10 (a) Opinion and Consent of Counsel with respect to the Balanced
Portfolio, Cornerstone, Gold, and International Funds,
and GNMA and Treasury Money Market Trusts (6)
(b) Opinion and Consent of Counsel with respect to the World
Growth Fund (8)
(c) Opinion of Counsel with respect to the Emerging Markets Fund (10)
(d) Consent of Counsel with respect to the Emerging Markets Fund (11)
(e) Opinion and Consent of Counsel with respect to the Balanced
Strategy, Growth Strategy and Income Strategy Funds
(filed herewith)
11 Other Opinions - Not Applicable
12 Financial statements omitted from prospectus - Not Applicable
13 Subscriptions (1)
14 Prototype Plans (4)
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation (5)
17 Financial Data Schedule - Not Applicable
18 Plan Adopting Multiple Classes of Shares - Not Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron
A. Kirk, John W. Saunders, Jr., C. Dale Briscoe,
George E. Brown, Howard L. Freeman, Jr., and
Richard A. Zucker dated January 21, 1994 (9)
(b) Powers of Attorney for Hansford T. Johnson and
Barbara B. Dreeben (filed herewith)
- ---------------------
(1) Incorporated by reference to Securities Act of 1933
Pre-Effective Amendment No. 2 and Investments Company
Act of 1940 Amendment No. 2 to this Registration Statement.
(2) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 4 and Investment Company
Act of 1940 Amendment No. 6 to this Registration Statement.
(3) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 5 and Investment Company
Act of 1940 Amendment No. 7 to this Registration Statement.
(4) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 6 and Investment Company
Act of 1940 Amendment No. 8 to this Registration Statement.
(5) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 7 and Investment Company
Act of 1940 Amendment No. 9 to this Registration Statement.
(6) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 11 and Investment Company
Act of 1940 Amendment No. 13 to this Registration Statement.
(7) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 12 and Investment Company
Act of 1940 Amendment No. 14 to this Registration Statement.
(8) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 15 and Investment Company
Act of 1940 Amendment No. 17 to this Registration Statement.
(9) Incorporated by reference to Post-Effective Amendment
No. 17 of the Registrant (No. 2-91069) filed with the
Securities and Exchange Commission on January 28, 1994.
(10) Incorporated by reference to Post-Effective Amendment No. 18
of the Registrant (No. 2-91069) filed with the Securities
and Exchange Commission on September 8, 1994.
(11) Incorporated by reference to Post-Effective Amendment No. 19
of the Registrant (No. 2-91069) filed with the Securities
and Exchange Commission on April 11, 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 May 31, 1995,
of each class of securities of the Registrant.
Title of Class Number of Record Holders
-------------- ------------------------
Balanced Portfolio Fund 8,821
Cornerstone Fund 99,089
Emerging Markets Fund 3,862
Gold Fund 25,321
International Fund 28,533
World Growth Fund 25,211
GNMA Trust 10,979
Treasury Money Market Trust 2,253
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 request of the Registrants
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 to shareholders upon request and without charge.
The Registrant hereby undertakes with respect to the
Balanced Strategy, Growth Strategy and Income Strategy Funds
to file financial statements which need not be certified
within four to six months from the date of the Registrant's
1933 Act Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Antonio and State
of Texas on the 2nd day of June, 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 June 2, 1995
- -------------------------- Board of Trustees
Hansford T. Johnson
/s/ Michael J.C. Roth Vice Chairman of the June 2, 1995
- -------------------------- Board of Trustees and
Michael J.C. Roth President (Principal
Executive Officer)
/s/ Sherron A. Kirk Treasurer (Principal June 2, 1995
- -------------------------- Financial and
Sherron A. Kirk Accounting Officer)
/s/ John W. Saunders, Jr. Trustee June 2, 1995
- --------------------------
John W. Saunders, Jr.
/s/ C. Dale Briscoe Trustee June 2, 1995
- --------------------------
C. Dale Briscoe
/s/ George E. Brown Trustee June 2, 1995
- --------------------------
George E. Brown
/s/ Howard L. Freeman, Jr. Trustee June 2, 1995
- --------------------------
Howard L. Freeman, Jr.
/s/ Richard A. Zucker Trustee June 2, 1995
- --------------------------
Richard A. Zucker
/s/ Barbara B. Dreeben Trustee June 2, 1995
- --------------------------
Barbara B. Dreeben
Exhibit Index
Exhibit Item Page No. *
1 First Amended and Restated Master Trust Agreement,
June 2, 1995 (filed herewith) 110
2 By-laws, as amended (filed herewith) 132
3 Voting trust agreement - Not Applicable
4 Specimen certificates for shares of
(a) Cornerstone Fund (1)
(b) Gold Fund (1)
(c) International Fund(3)
(d) Balanced Portfolio Fund (5)
(e) GNMA Trust (7)
(f) Treasury Money Market Trust (7)
(g) World Growth Fund (8)
(h) Emerging Markets Fund (11)
(i) Form of Balanced Strategy Fund (filed herewith) 138
(j) Form of Growth Strategy Fund (filed herewith) 141
(k) Form of Income Strategy Fund (filed herewith) 144
5 (a) Advisory Agreement (filed herewith) 147
(b) Letter Agreement adding GNMA Trust and Treasury
Money Market Trust (filed herewith) 154
(c) Letter Agreement adding World Growth Fund (filed
herewith) 156
(d) Letter Agreement adding Emerging Markets Fund
(filed herewith) 158
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds
(filed herewith) 160
6 (a) Underwriting Agreement (6)
(b) Letter Agreement adding GNMA Trust and Treasury
Money Market Trust (7)
(c) Letter Agreement adding World Growth Fund (8)
(d) Letter Agreement adding Emerging Markets Fund (10)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds
(filed herewith) 162
7 (a) Form of Trustees' Deferred Compensation Plan (2)
(b) Form of Revocation of Trustees' Deferred
Compensation Plan (2)
8 (a) Custodian Agreement (1)
(b) Letter Agreement adding GNMA Trust and Treasury
Money Market Trust (7)
(c) Letter Agreement adding World Growth Fund (8)
(d) Letter Agreement adding Emerging Markets Fund (11)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds
(filed herewith) 164
9 (a) Transfer Agency Agreement (6)
(b) Letter Agreement adding GNMA Trust and Treasury
Money Market Trust (7)
(c) Letter Agreement adding World Growth Fund (8)
(d) Letter Agreement adding Emerging Markets Fund (10)
(e) Form of Letter Agreement adding Balanced Strategy,
Growth Strategy and Income Strategy Funds
(filed herewith) 170
10 (a) Opinion and Consent of Counsel with respect to the
Balanced Portfolio, Cornerstone, Gold, and
International Funds, and GNMA and Treasury
Money Market Trusts (6)
(b) Opinion and Consent of Counsel with respect to the
World Growth Fund (8)
(c) Opinion of Counsel with respect to the Emerging
Markets Fund (10)
(d) Consent of Counsel with respect to the Emerging
Markets Fund (11)
(e) Opinion and Consent of Counsel with respect to
the Balanced Strategy, Growth Strategy and
Income Strategy Funds (filed herewith) 175
Exhibit Index, cont.
Exhibit Item Page No. *
11 Other Opinions - Not Applicable
12 Financial statements omitted from prospectus - Not
Applicable
13 Subscriptions (1)
14 Prototype Plans (4)
15 12b-1 Plans - Not Applicable
16 Schedule for Computation of Performance Quotation (5)
17 Financial Data Schedule - Not Applicable
18 Plan Adopting Multiple Classes of Shares - Not
Applicable
19 Powers of Attorney
(a) Powers of Attorney for Michael J.C. Roth, Sherron
A. Kirk, John W. Saunders, Jr., C. Dale Briscoe,
George E. Brown, Howard L. Freeman, Jr., and
Richard A. Zucker dated January 21, 1994 (9)
(b) Powers of Attorney for Hansford T. Johnson and
Barbara B. Dreeben (filed herewith) 178
- ---------------------
(1) Incorporated by reference to Securities Act of 1933
Pre-Effective Amendment No. 2 and Investments Company
Act of 1940 Amendment No. 2 to this Registration Statement.
(2) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 4 and Investment Company
Act of 1940 Amendment No. 6 to this Registration Statement.
(3) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 5 and Investment Company
Act of 1940 Amendment No. 7 to this Registration Statement.
(4) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 6 and Investment Company
Act of 1940 Amendment No. 8 to this Registration Statement.
(5) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 7 and Investment Company
Act of 1940 Amendment No. 9 to this Registration Statement.
(6) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 11 and Investment Company
Act of 1940 Amendment No. 13 to this Registration Statement.
(7) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 12 and Investment Company
Act of 1940 Amendment No. 14 to this Registration Statement.
(8) Incorporated by reference to Securities Act of 1933
Post-Effective Amendment No. 15 and Investment Company
Act of 1940 Amendment No. 17 to this Registration Statement.
(9) Incorporated by reference to Post-Effective Amendment
No. 17 of the Registrant (No. 2-91069) filed with the
Securities and Exchange Commission on January 28, 1994.
(10) Incorporated by reference to Post-Effective Amendment No. 18
of the Registrant (No. 2-91069) filed with the Securities
and Exchange Commission on September 8, 1994.
(11) Incorporated by reference to Post-Effective Amendment No. 19
of the Registrant (No. 2-91069) filed with the Securities
and Exchange Commission on April 11, 1995.
- ----------------------------------
* Refers to sequentially numbered pages
EXHIBIT 1
USAA INVESTMENT TRUST
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
JUNE 2, 1995
USAA INVESTMENT TRUST
MASTER TRUST AGREEMENT
Page
ARTICLE I. NAME AND DEFINITIONS. . . . . . . . . . . . . . . . . .1
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 Definitions. . . . . . . . . . . . . . . . . . . . . .1
(a) "Trust" . . . . . . . . . . . . . . . . .1
(b) "Trustees". . . . . . . . . . . . . . . .1
(c) "Shares". . . . . . . . . . . . . . . . .1
(d) "Sub-Trust" or "Series" . . . . . . . . .1
(e) "Shareholder" . . . . . . . . . . . . . .1
(f) "1940 Act". . . . . . . . . . . . . . . .2
(g) "Commission". . . . . . . . . . . . . . .2
(h) "Declaration of Trust". . . . . . . . . .2
(i) "By-Laws" . . . . . . . . . . . . . . . .2
ARTICLE II. PURPOSE OF TRUST. . . . . . . . . . . . . . . . . . .2
ARTICLE III. THE TRUSTEES. . . . . . . . . . . . . . . . . . . . .2
Section 3.1 Number, Designation, Election, Term, etc. . . . . . .2
(a) Trustee(s). . . . . . . . . . . . . . . .2
(b) Number. . . . . . . . . . . . . . . . . .2
(c) Election and Term . . . . . . . . . . . .2
(d) Resignation and Retirement. . . . . . . .2
(e) Removal . . . . . . . . . . . . . . . . .2
(f) Vacancies . . . . . . . . . . . . . . . .3
(g) Effect of Death, Resignation, etc.. . . .3
(h) No Accounting . . . . . . . . . . . . . .3
Section 3.2 Powers of Trustees. . . . . . . . . . . . . . . . . .3
(a) Investments . . . . . . . . . . . . . . .4
(b) Disposition of Assets . . . . . . . . . .4
(c) Ownership Powers. . . . . . . . . . . . .4
(d) Subscription. . . . . . . . . . . . . . .4
(e) Form of Holding . . . . . . . . . . . . .4
(f) Reorganization, etc . . . . . . . . . . .4
(g) Voting Trusts, etc. . . . . . . . . . . .4
(h) Compromise. . . . . . . . . . . . . . . .4
(i) Partnerships, etc . . . . . . . . . . . .4
(j) Borrowing and Security. . . . . . . . . .4
(k) Guarantees, etc . . . . . . . . . . . . .4
(l) Insurance . . . . . . . . . . . . . . . .4
(m) Pensions, etc . . . . . . . . . . . . . .5
Section 3.3 Certain Contracts . . . . . . . . . . . . . . . . . .5
(a) Advisory. . . . . . . . . . . . . . . . .5
(b) Administration. . . . . . . . . . . . . .5
(c) Distribution. . . . . . . . . . . . . . .5
(d) Custodian and Depository . . . . . . . .5
(e) Transfer and Dividend Disbursing Agency .6
(f) Shareholder Servicing . . . . . . . . . .6
(g) Accounting. . . . . . . . . . . . . . . .6
Page
Section 3.4 Payment of Trust Expenses and Compensation of
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.5 Ownership of Assets of the Trust. . . . . . . . . . 7
ARTICLE IV. SHARES. . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1 Description of Shares . . . . . . . . . . . . . . . 7
Section 4.2 Establishment and Designation of Sub-Trusts . . . . 7
(a) Assets Belonging to Sub-Trusts. . . . . 8
(b) Liabilities Belonging to Sub-Trusts . . 8
(c) Dividends . . . . . . . . . . . . . . . 8
(d) Liquidation . . . . . . . . . . . . . . 9
(e) Voting. . . . . . . . . . . . . . . . . 9
(f) Redemption by Shareholder . . . . . . . 9
(g) Redemption by Trust . . . . . . . . . . 9
(h) Net Asset Value . . . . . . . . . . . . 9
(i) Transfer. . . . . . . . . . . . . . . . 10
(j) Equality. . . . . . . . . . . . . . . . 10
(k) Fractions . . . . . . . . . . . . . . . 10
(l) Conversion Rights . . . . . . . . . . . 10
Section 4.3 Ownership of Shares . . . . . . . . . . . . . . . . 10
Section 4.4 Investments in the Trust. . . . . . . . . . . . . . 10
Section 4.5 No Pre-emptive Rights . . . . . . . . . . . . . . . 10
Section 4.6 Status of Shares and Limitation of
Personal Liability. . . . . . . . . . . . . . . 10
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS. . . . . . 11
Section 5.1 Voting Powers . . . . . . . . . . . . . . . . . . . 11
Section 5.2 Meetings. . . . . . . . . . . . . . . . . . . . . . 11
Section 5.3 Record Dates. . . . . . . . . . . . . . . . . . . . 11
Section 5.4 Quorum and Required Vote. . . . . . . . . . . . . . 12
Section 5.5 Action by Written Consent . . . . . . . . . . . . . 12
Section 5.6 Inspection of Records . . . . . . . . . . . . . . . 12
Section 5.7 Additional Provisions . . . . . . . . . . . . . . . 12
Section 5.8 Shareholder Communications. . . . . . . . . . . . . 12
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION. . . . . . 13
Section 6.1 Trustees, Shareholders, etc.
Not Personally Liable; Notice . . . . . . . . . 13
Section 6.2 Trustee's Good Faith Action;
Expert Advice; No Bond or Surety. . . . . . . . 13
Page
Section 6.3 Indemnification of Shareholders . . . . . . . . . . 13
Section 6.4 Indemnification of Trustees, Officers, etc. . . . . 13
Section 6.5 Compromise Payment. . . . . . . . . . . . . . . . . 14
Section 6.6 Indemnification Not Exclusive, etc. . . . . . . . . 14
Section 6.7 Liability of Third Persons Dealing with Trustees. . 15
ARTICLE VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 15
Section 7.1 Duration and Termination of Trust . . . . . . . . . 15
Section 7.2 Reorganization. . . . . . . . . . . . . . . . . . . 15
Section 7.3 Amendments. . . . . . . . . . . . . . . . . . . . . 16
Section 7.4 Filing of Copies; References; Headings. . . . . . . 16
Section 7.5 Applicable Law. . . . . . . . . . . . . . . . . . . 16
USAA INVESTMENT TRUST
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT dated as
of this 2nd day of June, 1995, by the Trustees hereunder, and by
the holders of shares of beneficial interest to be issued
hereunder as hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business
of an investment company; and
WHEREAS, this Trust is authorized to issue its shares of
beneficial interest in separate series, each separate series to
be a Sub-Trust hereunder, all in accordance with the provisions
hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts business
trust in accordance with the provisions hereinafter set forth;
and
WHEREAS, the Trustees desire to amend and restate the Master
Trust Agreement dated May 9, 1984 in its entirety by adopting
this First Amended and Restated Master Trust Agreement, which
shall supersede such Master Trust Agreement and be the governing
instrument of the Trust from and after the date hereof.
NOW, THEREFORE, the Trustees hereby amend and restate the
Master Trust Agreement dated May 9, 1984 in its entirety and
declare that they will hold all cash, securities and other assets
which they may from time to time acquire in any manner as
Trustees hereunder IN TRUST to manage and dispose of the same
upon the following terms and conditions for the benefit of the
holders from time to time of shares of beneficial interest in
this Trust or Sub-Trusts created hereunder as hereinafter set
forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. This Trust shall be known as "USAA
Investment Trust" and the Trustees shall conduct the business of
the Trust under that name or any other name or names as they may
from time to time determine.
Section 1.2 Definitions. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as
amended from time to time, inclusive of each and every Sub-Trust
established hereunder;
(b) "Trustees" refers to the Trustees of the Trust and of
each Sub-Trust hereunder named herein or elected in accordance
with Article III;
(c) "Shares" refers to the transferable units of interest
into which the beneficial interest in the Trust and each Sub-
Trust of the Trust (as the context may require) shall be divided
from time to time;
(d) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of Article
IV, each of which Series shall be a Sub-Trust of the Trust;
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as amended
from time to time;
(g) The term "Commission" shall have the meaning given it
in the 1940 Act;
(h) "Declaration of Trust" shall mean this Master Trust
Agreement as amended or restated from time to time; and
(i) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment
company and to offer Shareholders of the Trust and each Sub-Trust
of the Trust one or more investment programs primarily in
securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) Trustee(s). The Trustees hereof are Hansford T.
Johnson, 10750 Robert F. McDermott Freeway, San Antonio, Texas,
78288; Michael J.C. Roth, 10750 Robert F. McDermott Freeway, San
Antonio, Texas, 78288; John W. Saunders, Jr., 10750 Robert F.
McDermott Freeway, San Antonio, Texas, 78288; C. Dale Briscoe,
7829 Timber Top Drive, Boerne, Texas, 78006; George E. Brown,
5829 Northgap Drive, San Antonio, Texas, 78239; Barbara B.
Dreeben, 200 Patterson #1008, San Antonio, Texas, 78209; Howard
L. Freeman, Jr., 2710 Hopeton, San Antonio, Texas, 78230; and
Richard A. Zucker, 5039 West Avenue, San Antonio, Texas, 78213.
(b) Number. The Trustee(s) serving as such, whether named
above or hereafter becoming a Trustee, may increase or decrease
(to not less than two at any time after the effective date of the
Trust's Registration Statement with the Commission) the number of
Trustees to a number other than the number theretofore
determined. No decrease in the number of Trustees shall have the
effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be
decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 3.1.
(c) Election and Term. The Trustees shall be elected by
the Shareholders of the Trust at the first meeting of
Shareholders following the initial public offering of shares of
the Trust. Each Trustee, whether named above or hereafter
becoming a Trustee, shall serve as a Trustee of the Trust and of
each Sub-Trust hereunder during the lifetime of this Trust and
until its termination as hereinafter provided except as such
Trustee sooner dies, resigns or is removed. Subject to Section
16(a) of the 1940 Act, the Trustees may elect their own
successors and may, pursuant to Section 3.1(f) hereof, appoint
Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect upon
such delivery or upon such later date as is specified in such
instrument and shall be effective as to the Trust and each Sub-
Trust hereunder.
(e) Removal. Any Trustee may be removed with or without
cause at any time: (i) by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become effective;
or (ii) by vote of Shareholders holding not less than two-thirds of
the Shares then outstanding, cast in person or by proxy at any meeting
called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds of the Shares then
outstanding and filed with the Trust's Custodian. Any such
removal shall be effective as to the Trust and each Sub-Trust
hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any of
the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may (but so long as there are at
least two remaining Trustees, need not unless required by the
1940 Act) be filled by a majority of the remaining Trustees,
subject to the provisions of Section 16(a) of the 1940 Act,
through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine and such
appointment shall be effective upon the written acceptance of the
person named therein to serve as a Trustee and agreement by such
person to be bound by the provisions of this Declaration of
Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of retirement, resignation or increase
in number of Trustees to be effective at a later date shall
become effective only at or after the effective date of said
retirement, resignation, or increase in number of Trustees. As
soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment is effective, the Trust
estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
(g) Effect of Death, Resignation, etc. The death,
resignation, retirement, removal, or incapacity of the Trustees,
or any one of them, shall not operate to annul or terminate the
Trust or any Sub-Trust hereunder or to revoke or terminate any
existing agency or contract created or entered into pursuant to
the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by the
1940 Act or under circumstances which would justify his removal
for cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
Section 3.2 Powers of Trustees. Subject to the provisions
of this Declaration of Trust, the business of the Trust shall be
managed by the Trustees, and they shall have all powers necessary
or convenient to carry out that responsibility and the purpose of
the Trust. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business and affairs of the
Trust and may amend and repeal them to the extent that such By-
Laws do not reserve that right to the Shareholders; they may from
time to time in accordance with the provisions of Section 4.1
hereof establish Sub-Trusts, each such Sub-Trust to operate as a
separate and distinct investment medium and with separately
defined investment objectives and policies and distinct
investment purpose; they may as they consider appropriate elect
and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of
the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing; they may appoint from their
own number, and terminate, any one or more committees consisting
of two or more Trustees, including without implied limitation an
executive committee, which may, when the Trustees are not in
session and subject to the 1940 Act, exercise some or all of the
power and authority of the Trustees as the Trustees may
determine; in accordance with Section 3.3 they may employ one or
more Advisers, Administrators, Depositories and Custodians and
may authorize any Depository or Custodian to employ subcustodians
or agents and to deposit all or any part of such assets in a
system or systems for the central handling of securities and debt
instruments, retain transfer, dividend, accounting or Shareholder
servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more
distributors, principal underwriters or otherwise, set record
dates or times for the determination of Shareholders or various
of them with respect to various matters; they may compensate or
provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem
appropriate; and in general they may delegate to any officer of
the Trust, to any committee of the Trustees and to any employee,
adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or
consultant of the Trust such authority, powers, functions and
duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without
implied limitation the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact
for the Trustees.
Without limiting the foregoing and to the extent not
inconsistent with the 1940 Act or other applicable law, the
Trustees shall have power and authority for and on behalf of the
Trust and each separate Sub-Trust established hereunder:
(a) Investments. To invest and reinvest cash and other
property, and to hold cash or other property uninvested without
in any event being bound or limited by any present or future law
or custom in regard to investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend,
pledge, mortgage, hypothecate, write options on and lease any or
all of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise
any rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute and
deliver proxies or powers of attorney to such person or persons
as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities,
debt instruments or property as the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of
subscription or otherwise which in any manner arise out of
ownership of securities or debt instruments;
(e) Form of Holding. To hold any security, debt instrument
or property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name of
the Trustees or of the Trust or of any Sub-Trust or in the name
of a custodian, subcustodian or other depositary or a nominee or
nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in
any plan for the reorganization, consolidation or merger of any
corporation or issuer, any security or dept instrument of which
is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any
security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a committee,
depositary, voting trustee or otherwise, and in that connection
to deposit any security or debt instrument with, or transfer any
security or debt instrument to, any such committee, depositary or
trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so
deposited or transferred) as the Trustees shall deem proper, and
to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise
adjust claims in favor of or against the Trust or any Sub-Trust
or any matter in controversy, including but not limited to claims
for taxes;
(i) Partnerships, etc. To enter into joint ventures,
general or limited partnerships and any other combinations or
associations;
(j) Borrowing and Security. To borrow funds and to
mortgage and pledge the assets of the Trust or any part thereof
to secure obligations arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment
of any notes or other obligations of any person; to make
contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such
obligations;
(l) Insurance. To purchase and pay for entirely out of
Trust property such insurance as they may deem necessary or
appropriate for the conduct of the business, including, without
limitation, insurance policies insuring the assets of the Trust
and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal underwriters,
or independent contractors, or any thereof (or any person connected
therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being
or having held any such office or position, or by reason of any
action alleged to have been taken or omitted by any such person
in any such capacity, including any action taken or omitted that
may be determined to constitute negligence, whether or not the
Trust would have the power to indemnify such person against such
liability; and
(m) Pensions, etc. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit
plans, trust and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
Except as otherwise provided by the 1940 Act or other
applicable law, this Declaration of Trust or the By-Laws, any
action to be taken by the Trustees on behalf of the Trust or any
Sub-Trust may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum, consisting of at least a majority
of the Trustees then in office, being present), within or without
Massachusetts, including any meeting held by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall
constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office (or such
larger or different number as may be required by the 1940 Act or
other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with
the provisions of the 1940 Act, but notwithstanding any
limitations of present and future law or custom in regard to
delegation of powers by trustees generally, the Trustees may, at
any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth
herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited
partnerships, other type of organizations, or individuals
("Contracting Party"), to provide for the performance and
assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any
Sub-Trust, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the
Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the Trustees
with respect to the investments of the Trust or of the assets
belonging to any Sub-Trust of the Trust (as that phrase is
defined in subsection (a) of Section 4.2), to manage such
investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio
transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of
the Trustees and in conformity with any policies of the Trustees
with respect to the operations of the Trust and each Sub-Trust,
to supervise all or any part of the operations of the Trust and
each Sub-Trust, and to provide all or any part of the
administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(c) Distribution. To distribute the Shares of the Trust
and each Sub-Trust, to be principal underwriter of such Shares,
and/or to act as agent of the Trust and each Sub-Trust in the
sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) Custodian and Depository. To act as depository for and
to maintain custody of the property of the Trust and each Sub-
Trust and accounting records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain
records of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof, and to disburse any
dividends declared by the Trustees and in accordance with the
policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect
to the relationship of the Trust and its Shareholders, records
with respect to Shareholders and their Shares, and similar
matters; and
(g) Accounting. To handle all or any part of the
accounting responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of
the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto
may contain such terms interpretive of or in addition to the
delineation of the services, duties and responsibilities provided
for, including provisions that are not inconsistent with the 1940
Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent
or limit the Trust or a Contracting Party from entering into sub-
contractual arrangements relative to any of the matters referred
to in Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter
or distributor or agent of or for any Contracting Party, or
of or for any parent or affiliate of any Contracting Party
or that the Contracting Party or any parent or affiliate
thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract
providing for the rendering of any similar services to one
or more other corporations, trusts, associations,
partnerships, limited partnerships or other organizations,
or have other business or interests,
shall not affect the validity of any contract for the performance
and assumption of services, duties and responsibilities to, for
or of the Trust or any Sub-Trust and/or the Trustees or disqualify
any Shareholder, Trustee or officer of the Trust from voting
upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its
Shareholders, provided that in the case of any relationship
or interest referred to in the preceding clause (i) on the
part of any Trustee or officer of the Trust either (x) the
material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any
such relationship or interest and the contract involved is
approved in good faith by a majority of such Trustees not
having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum
of all of the Trustees), (y) the material facts as to such
relationship or interest and as to the contract have been
disclosed to or are known by the Shareholders entitled to
vote thereon and the contract involved is specifically
approved in good faith by vote of the Shareholders, or (z)
the specific contract involved is fair to the Trust as of
the time it is authorized, approved or ratified by the
Trustees or by the Shareholders.
Section 3.4. Payment of Trust Expenses and Compensation of
Trustees. The Trustees are authorized to pay or to cause to be
paid out of the principal or income of the Trust or any Sub-
Trust, or partly out of principal and partly out of income, and
to charge or allocate the same to, between or among such one or
more of the Sub-Trusts that may be established and designated
pursuant to Article IV, as the Trustees deem fair, all expenses,
fees, charges, taxes and liabilities incurred or arising in
connection with the Trust or any Sub-Trust, or in connection with
the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser,
administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend
disbursing agent, accounting agent, Shareholder servicing agent,
and such other agents, consultants, and independent contractors
and such other expenses and charges as the Trustees may deem
necessary or proper to incur. Without limiting the generality of
any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as
Trustees may fix the amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all
of the assets of the Trust shall at all times be considered as
vested in the Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest
in the Trust shall be divided into Shares, all without par value
and of one class, but the Trustees shall have the authority from
time to time to divide the class of Shares into two or more
Series of Shares (each of which Series of Shares shall be a
separate and distinct Sub-Trust of the Trust, including without
limitation those Sub-Trusts specifically established and
designated in Section 4.2), as they deem necessary or desirable.
Each Sub-Trust established hereunder shall be deemed to be a
separate trust under Massachusetts General Laws Chapter 182. The
Trustees shall have exclusive power without the requirement of
shareholder approval to establish and designate such separate and
distinct Sub-Trusts, and to fix and determine the relative rights
and preferences as between the shares of the separate Sub-Trusts
as to right of redemption and the price, terms and manner of
redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the
several Sub-Trusts shall have separate voting rights or no voting
rights.
The number of authorized Shares and the number of Shares of
each Sub-Trust that may be issued is unlimited, and the Trustees
may issue Shares of any Sub-Trust for such consideration and on
such terms as they may determine (or for no consideration if
pursuant to a Share dividend or split-up), all without action or
approval of the Shareholders. All Shares when so issued on the
terms determined by the Trustees shall be fully paid and non-
assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The
Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Sub-Trust into one
or more Sub-Trusts that may be established and designated from
time to time. The Trustees may hold as treasury Shares, reissue
for such consideration and on such terms as they may determine,
or cancel, at their discretion from time to time, any Shares of
any Sub-Trust reacquired by the Trust.
The Trustees may from time to time close the transfer books
or establish record dates and times for the purposes of
determining the holders of Shares entitled to be treated as such,
to the extent provided or referred to in Section 5.3.
The establishment and designation of any Sub-Trust in
addition to those established and designated in Section 4.2 shall
be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of the Shares
of such Sub-Trust, or as otherwise provided in such instrument.
At any time that there are no Shares outstanding of any
particular Sub-Trust previously established and designated the
Trustees may be an instrument executed by a majority of their
number abolish that Sub-Trust and the establishment and
designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this
Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire,
own, hold and dispose of Shares of any Sub-Trust of the Trust to
the same extent as if such person were not a Trustee, officer or
other agent of the Trust; and the Trust may issue and sell or
cause to be issued and sold and may purchase Shares of any Sub-
Trust from any such person or any such organization subject only
to the general limitations, restrictions or other provisions
applicable to the sale or purchase of Shares of such Sub-Trust
generally.
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 Fund," the "International
Fund," the "Balanced Portfolio 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 Fund, International Fund, Balanced Portfolio 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:
(a) Assets Belonging to Sub-Trusts. All consideration
received by the Trust for the issue or sale of Shares of a
particular Sub-Trust, together with all assets in which such
consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees
in trust for the benefit of the holders of Shares of that Sub-
Trust and shall irrevocably belong to that Sub-Trust for all
purposes, and shall be so recorded upon the books of account of
the Trust. Such consideration, assets, income, earnings,
profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General Items
allocated to that Sub-Trust as provided in the following
sentence, are herein referred to as "assets belonging to" that
Sub-Trust. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Sub-
Trust (collectively "General Items"), the Trustees shall allocate
such General Items to and among any one or more of the Sub-Trusts
established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to a particular
Sub-Trust shall belong to that Sub-Trust. Each such allocation
by the Trustees shall be conclusive and binding upon the
Shareholders of all Sub-Trusts for all purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets
belonging to each particular Sub-Trust shall be charged with the
liabilities in respect of that Sub-Trust and all expenses, costs,
charges and reserves attributable to that Sub-Trust, and any
general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any
particular Sub-Trust shall be allocated and charged by the
Trustees to and among any one or more of the Sub-Trusts
established and designated from time to time in such manner and
on such basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to a Sub-Trust are herein
referred to as "liabilities belonging to" that Sub-Trust. Each
allocation of liabilities, expenses, costs, charges and reserves
by the Trustees shall be conclusive and binding upon the
Shareholders of all Sub-Trusts for all purposes. Any creditor of
any Sub-Trust may look only to the assets of that Sub-Trust to
satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon
the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a
particular Sub-Trust may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise pursuant
to a standing resolution or resolutions adopted only once or with
such frequency as the Trustees may determine, to the holders of
Shares of that Sub-Trust, from such of the income and capital
gains, accrued or realized, from the assets belonging to that
Sub-Trust, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that Sub-Trust. All
dividends and distributions on Shares of a particular Sub-Trust
shall be distributed pro rata to the holders of Shares of that
Sub-Trust in proportion to the number of Shares of that Sub-Trust
held by such holders at the date and time of record established
for the payment of such dividends or distributions, except that
in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under
such program or procedure. Such dividends and distributions may
be made in cash or Shares of that Sub-Trust or a combination
thereof as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by
each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution
paid in Shares will be paid at the net asset value thereof as
determined in accordance with subsection (h) of Section 4.2.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Sub-Trust that
has been established and designated shall be entitled to receive,
when and as declared by the Trustees, the excess of the assets
belonging to that Sub-Trust over the liabilities belonging to
that Sub-Trust. The assets so distributable to the Shareholders
of any particular Sub-Trust shall be distributed among such
Shareholders in proportion to the number of Shares of that Sub-
Trust held by them and recorded on the books of the Trust. The
liquidation of any particular Sub-Trust may be authorized by vote
of a majority of the Trustees then in office subject to the
approval of a majority of the outstanding voting Shares of that
Sub-Trust, as defined in the 1940 Act.
(e) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a Share of each Sub-Trust shall be
entitled to one vote for each whole Share and to a proportionate
fractional vote for each fractional Share standing in his name on
the books of the Trust and all Shares of each Sub-Trust shall
vote as a separate class except as to voting for Trustees and as
otherwise required by the 1940 Act. As to any matter which does
not affect the interest of a particular Sub-Trust, only the
holders of Shares of the one or more affected Sub-Trusts shall be
entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Sub-Trust shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each
week, to require the Trust to redeem all or any part of his
Shares of that Sub-Trust at a redemption price equal to the net
asset value per Share of that Sub-Trust next determined in
accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption. Payment of the
redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may, subject to the requirements of the
1940 Act, make payment wholly or partly in securities or other
assets belonging to the Sub-Trust of which the Shares being
redeemed are part at the value of such securities or assets used
in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone
payment of the redemption price and may suspend the right of the
holders of Shares of any Sub-Trust to require the Trust to redeem
Shares of that Sub-Trust during any period or at any time when
and to the extent permissible under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust that
has been established and designated is subject to redemption by
the Trust at the redemption price which would be applicable if
such Share was then being redeemed by the Shareholder pursuant to
subsection (f) of this Section 4.2: (a) at any time, if the
Trustees determine in their sole discretion that failure to so
redeem may have materially adverse consequences to the holders of
the Shares of the Trust or any Sub-Trust thereof, or (b) upon
such other conditions as may from time to time be determined by
the Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Shareholder accounts of a
minimum amount. Upon such redemption the holders of the Shares
so redeemed shall have no further rights with respect thereto
other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any
Sub-Trust shall be the quotient obtained by dividing the value of
the net assets of that Sub-Trust (being the value of the assets
belonging to that Sub-Trust less the liabilities belonging to
that Sub-Trust) by the total number of Shares of that Sub-Trust
outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the next asset value
per Share of any Sub-Trust at a designated constant dollar amount
and in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declarations of income
attributable to that Sub-Trust as dividends payable in additional
Shares of that Sub-Trust at the designated constant dollar amount
and for the handling of any losses attributable to that Sub-
Trust. Such procedures may provide that in the event of any loss
each Shareholder shall be deemed to have contributed to the capital
of the Trust attributable to that Sub-Trust his pro rata portion of
the total number of Shares required to be cancelled in order to permit
the net asset value per Share of that Sub-Trust to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by his
investment in any Sub-Trust with respect to which the Trustees
shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such
loss.
(i) Transfer. All Shares of each particular Sub-Trust
shall be transferable, but transfers of Shares of a particular
Sub-Trust will be recorded on the Share transfer records of the
Trust applicable to that Sub-Trust only at such times as
Shareholders shall have the right to require the Trust to redeem
Shares of that Sub-Trust and at such other times as may be
permitted by the Trustees.
(j) Equality. All Shares of each particular Sub-Trust
shall represent an equal proportionate interest in the assets
belonging to that Sub-Trust (subject to the liabilities belonging
to that Sub-Trust), and each Share of any particular Sub-Trust
shall be equal to each other Share of that Sub-Trust; but the
provisions of this sentence shall not restrict any distinctions
permissible under subsection (c) of this Section 4.2 that may
exist with respect to dividends and distributions on Shares of
the same Sub-Trust. The Trustees may from time to time divide or
combine the Shares of any particular Sub-Trust into a greater or
lesser number of Shares of that Sub-Trust without thereby
changing the proportionate beneficial interest in the assets
belonging to that Sub-Trust or in any way affecting the rights of
Shares of any other Sub-Trust.
(k) Fractions. Any fractional Share of any Sub-Trust, if
any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole Share
of that Sub-Trust, including rights and obligations with respect
to voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the
authority to provide that holders of Shares of any Sub-Trust
shall have the right to convert said Shares into Shares of one or
more other Sub-Trust in accordance with such requirements and
procedures as may be established by the Trustees.
Section 4.3 Ownership of Shares. The ownership of Shares
shall be recorded on the books of the Trust or of a transfer or
similar agent for the Trust, which books shall be maintained
separately for the Shares of each Sub-Trust that has been
established and designated. No certificates certifying the
ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make
such rules as they consider appropriate for the issuance of Share
certificates, the use of facsimile signatures, the transfer of
Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent, as the case
may be, shall be conclusive as to who are the Shareholders and as
to the number of Shares of each Sub-Trust held from time to time
by each such Shareholder.
Section 4.4 Investments in the Trust. The Trustees may
accept investments in the Trust and each Sub-Trust thereof from
such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from
time to time authorize. The Trustees may authorize any
distributor, principal underwriter, custodian, transfer agent or
other person to accept orders for the purchase of Shares that
conform to such authorized terms and to reject any purchase
orders for Shares whether or not conforming to such authorized
terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have
no pre-emptive or other right to subscribe to any additional
Shares or other securities issued by the Trust.
Section 4.6 Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving
only the rights provided in this instrument. Every Shareholder
by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the Trust
or any Sub-Trust thereof nor entitle the representative of any
deceased Shareholder to an accounting or to take
any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder to
any title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have
power to vote only (i) for the election or removal of Trustees as
provided in Section 3.1, (ii) with respect to any contract with a
Contracting Party as provided in Section 3.3 as to which
Shareholder approval is as required by the 1940 Act, (iii) with
respect to any termination or reorganization of the Trust or any
Sub-Trust to the extent and as provided in Sections 7.1 and 7.2,
(iv) with respect to any amendment of this Declaration of Trust
to the extent and as provided in Section 7.3, (v) to the same
extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any Sub-Trust
thereof or the Shareholders (provided, however, that a
shareholder of a particular Sub-Trust shall not be entitled to a
derivative or class action on behalf of any other Sub-Trust [or
shareholder of any other Sub-Trust] of the Trust) and (vi) with
respect to such additional matters relating to the Trust as may
be required by the 1940 Act, this Declaration of Trust, the By-
Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider
necessary or desirable. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or by
proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless
at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by
law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Section 5.2 Meetings. No annual or regular meeting of
Shareholders is required. Special meetings of Shareholders may
be called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to
be given by the Trustees by mailing such notice at least seven
days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust.
The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any
Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of 30 days after
written application by Shareholders holding at least 10% of the
Shares then outstanding requesting a meeting be called for any
other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least 10%
of the Shares then outstanding may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner
provided for herein in case of call thereof by the Trustees.
Section 5.3 Record Dates. For the purpose of determining
the Shareholders who are entitled to vote or act at any meeting
or any adjournment thereof, or who are entitled to participate in
any dividend or distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer
books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees
may determine; or without closing the transfer books the Trustees
may fix a date and time not more than 60 days prior to the date
of any meeting of Shareholders or other action as the date and
time of record for the determination of Shareholders entitled to vote
at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who
was a Shareholder at the date and time so fixed shall be entitled
to vote at such meeting or any adjournment thereof or to be
treated as a Shareholder of record for purposes of such other
action, even though he has since that date and time disposed of
his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the
Shares entitled to vote shall be a quorum for the transaction of
business at a Shareholders' meeting, but any lesser number shall
be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set
for the original meeting without the necessity of further notice.
A majority of the Shares voted, at a meeting of which a quorum is
present shall decide any questions and a plurality shall elect a
Trustee, except when a different vote is required or permitted by
any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the
provisions of the 1940 Act and other applicable law, any action
taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by the 1940 Act or
by any express provision of this Declaration of Trust or the By-
Laws) consent to the action in writing and such written consents
are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a
meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the
Trust shall be open to inspection by Shareholders to the same
extent as is permitted stockholders of a Massachusetts business
corporation under the Massachusetts Business Corporation Law.
Section 5.7 Additional Provisions. The By-Laws may include
further provisions for Shareholders' votes and meetings and
related matters not inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or
more Shareholders of record who have been such for at least six
months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least
$25,000 or at least 1% of the outstanding Shares, whichever is
less, shall apply to the Trustees in writing, stating that they
wish to communicate with other Shareholders with a view to
obtaining signatures to a request for a Shareholder meeting and
accompanied by a form of communication and request which they
wish to transmit, the Trustees shall within five business days
after receipt of such application either (1) afford to such
applicants access to a list of the names and addresses of all
Shareholders as recorded on the books of the Trust or Sub-Trust,
as applicable; or (2) inform such applicants as to the
approximate number of Shareholders of record, and the approximate
cost of mailing to them the proposed communication and form of
request.
If the Trustees elect to follow the course specified in
clause (2) above, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all Shareholders of record at
their addresses as recorded on the books, unless within five
business days after such tender the Trustees shall mail to such
applicants and file with the Commission, together with a copy of
the material to be mailed, a written statement signed by at least
a majority of the Trustees to the effect that in their opinion
either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein
not misleading, or would be in violation of applicable law, and
specifying the basis of such opinion. The Trustees shall
thereafter comply with any order entered by the Commission and
the requirements of the 1940 Act and the Securities Exchange Act
of 1934.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice. All persons extending credit to, contracting
with or having any claim against the Trust shall look only to the
assets of the Sub-Trust with which such person dealt for payment
under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or
future, nor any other Sub-Trust shall be personally liable
therefor. Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees
or any of them in connection with the Trust shall be conclusively
deemed to have been executed or done only by or for the Trust (or
the Sub-Trust) or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer
against any liability to the Trust or the Shareholders to which
such Trustee or officer would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of
Trustee or of such officer.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of The Commonwealth of Massachusetts and
shall recite to the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets
and property of the Trust, or the particular Sub-Trust in
question, as the case may be, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No
Bond or Surety. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable for his own wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes
of fact or law. Subject to the foregoing, (a) the Trustees shall
not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser,
administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or
accounting agent of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee; (b) the
Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust and
their duties as Trustees, and shall be under no liability for any
act or omission in accordance with such advice or for failing to
follow such advice; and (c) in discharging their duties, the
Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject
matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the
Trustees pursuant to Section 3.3. The Trustees as such shall not
be required to give any bond or surety or any other security for
the performance of their duties.
Section 6.3 Indemnification of Shareholders. In case any
Shareholder (or former Shareholder) of any Sub-Trust of the Trust
shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or
having been a Shareholder and not because of such Shareholder's
acts or omissions or for some other reason, said Sub-Trust (upon
proper and timely request by the Shareholder) shall assume the
defense against such charge and satisfy any judgment thereon, and
the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of said Sub-Trust
estate to be held harmless from and indemnified against all loss
and expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc.
The Trust shall indemnify (from the assets of the Sub-Trust or
Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise [hereinafter
referred to as a "Covered Person"]) 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 Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or 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 wilful 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 Trust 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 Sub-Trust 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 Sub-Trust in question if it is
ultimately determined that indemnification of such expenses is
not authorized under this Article VI and (i) the Covered Person
shall have provided security for such undertaking, (ii) the Trust
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 a full
trial-type inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 Compromise Payment. As to any matter disposed
of by a compromise payment by any such Covered Person referred to
in Section 6.4, 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 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 from 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 Trust or to have been liable to the Trust or its Shareholders
by reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right
of indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against
whom the action, suit or other proceeding in question or another
action, suit or other proceeding on the same or similar grounds
is then or has been pending or threatened, and a "disinterested"
person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending or
threatened. Nothing contained in this article shall affect any
rights to indemnification to which personnel of the Trust, other
than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
Section 6.7 Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless
terminated as provided herein, the Trust shall continue without
limitation of time and, without limiting the generality of the
foregoing, no change, alteration or modification with respect to
any Sub-Trust shall operate to terminate the Trust. The Trust
may be terminated at any time by a majority of the Trustees then
in office subject to a favorable vote of a majority of the
outstanding voting securities, as defined in the 1940 Act, Shares
of each Sub-Trust voting separately by Sub-Trust.
Upon termination, after paying or otherwise providing for
all charges, taxes, expenses and liabilities, whether due or
accrued or anticipated as may be determined by the Trustees, the
Trust shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets to distributable
form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in
conformity with the provisions of subsection (d) of Section 4.2.
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; provided, however, that no
assets belonging to any particular 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, partnerships, associations or
corporations merged into it, any such consolidation or 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. 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.
Section 7.3 Amendments. All rights granted to the
Shareholders under this Declaration of Trust are granted subject
to the reservation of the right to amend this Declaration of
Trust as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or
Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or
Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights
of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder
with respect to which such amendment is or purports to be
applicable and so long as such amendment is not in contravention
of applicable law, including the 1940 Act, by an instrument in
writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such
Trustees). Any amendment to this Declaration of Trust that
adversely affects the rights of Shareholders may be adopted at
any time 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 such Trustees) when authorized to do so by the
vote in accordance with subsection (e) of Section 4.2 of
Shareholders holding a majority of the Shares entitled to vote.
Subject to the foregoing, any such amendment shall be effective
as provided in the instrument containing the terms of such
amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by
a Trustee or officer of the Trust to the effect that such
amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The
original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of
each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with the
Boston City Clerk, as well as any other governmental office where
such filing may from time to time be required, but the failure to
make any such filing shall not impair the effectiveness of this
instrument or any such amendment. Anyone dealing with the Trust
may rely on a certificate by an officer of the Trust as to
whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in
connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this
instrument as a whole as the same may be amended or affected by
any such amendments. The masculine gender shall include the
feminine and neuter genders. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect
of this instrument. This instrument may be executed in any
number of counterparts each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is
made in The Commonwealth of Massachusetts, and it is created
under and is to be governed by and construed and administered
according to the laws of said Commonwealth, including the
Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention
that matters not specifically covered herein or as to which an
ambiguity may exist shall be resolved as if the Trust were a
business corporation organized in Massachusetts, but the
reference to said Business Corporation Law is not intended to
give the Trust, the Trustees, the Shareholders or any other
person any right, power, authority or responsibility available
only to or in connection with an entity organized in corporate
form. The Trust shall be of the type referred to in Section 1 of
Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
[END OF TEXT]
IN WITNESS WHEREOF, the undersigned hereunto have set their
hands and seals for themselves and their assigns, 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
EXHIBIT 2
BY-LAWS
OF
USAA INVESTMENT TRUST
As Amended January 18, 1994
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws
shall be subject to the Agreement and Declaration of Trust (also
referred to as the Master Trust Agreement), as from time to time
in effect (the "Declaration of Trust"), of the USAA Investment
Trust, the Massachusetts business trust established by the
Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of
the Trust shall be located in San Antonio, Texas.
ARTICLE 2
Meeting of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may
be held without call or notice at such places and at such times
as the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may
be held at any time and at any place designated in the call of
the meeting when called by the Chairman of the Board, the Vice
Chairman of the Board, the President or the Treasurer or by two
or more Trustees, sufficient notice thereof being given to each
Trustee by the Secretary or an Assistant Secretary or by the
officer of the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of
a special meeting to send notice by mail at least forty-eight
hours or by telegram at least twenty-four hours before the
meeting addressed to the Trustee at his usual or last known
business or residence address or to give notice to him in person
or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the
meeting.
2.4 Quorum. At any meeting of the Trustees a majority of
the Trustees then in office shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
2.5 Participation by Telephone. One or more of the
Trustees or of any committee of the Trustees may participate in a
meeting thereof by means of a conference telephone or similar
communications equipment allowing all persons participating in
the meeting to hear each other at the same time. Action to
approve an advisory agreement may not be taken by Trustees at a
telephonic meeting unless otherwise permitted under the
Investment Company Act of 1940. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust
shall be a Chairman of the Board, a Vice Chairman of the Board, a
President, a Treasurer, a Secretary and such other officers,
including Vice Presidents, if any, as the Trustees from time to
time may in their discretion elect. The Trust may also have such
agents as the Trustees from time to time may in their discretion
appoint. The Chairman of the Board and Vice Chairman of the
Board shall be Trustees and may, but need not be, shareholders;
and any other officer may, but need not be, a Trustee or
shareholder. Any two or more offices may be held by the same
person.
3.2 Election. The Chairman of the Board, the Vice Chairman
of the Board, the President, the Treasurer and the Secretary
shall be elected annually by the Trustees at a meeting held
within the first four months of the Trust's fiscal year. The
meeting at which the officers are elected shall be known as the
annual meeting of Trustees. Other officers, if any, may be
elected or appointed by the Trustees at said meeting or at any
other time. Vacancies in any office may be filled at any time.
3.3 Tenure. The Chairman of the Board, the Vice Chairman
of the Board, the President, the Treasurer and the Secretary
shall hold office until the next annual meeting of the Trustees
and until their respective successors are chosen and qualified,
or in each case until he sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and
each agent shall retain authority at the pleasure of the
Trustees.
3.4 Powers. Subject to the other provisions of these By-
Laws, each officer shall have, in addition to the duties and
powers herein and in the Declaration of Trust set forth, such
duties and powers as are commonly incident to the office occupied
by him as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may
from time to time designate.
3.5 Chairman; Vice Chairman; President. Unless the
Trustees otherwise provide, the Chairman of the Board, or, if
there is no Chairman, or in the absence of the Chairman, the Vice
Chairman of the Board, or, if there is no Vice Chairman, or in
the absence of the Vice Chairman, the President, shall preside at
all meetings of the shareholders and of the Trustees. Unless the
Trustees otherwise provide, the Vice Chairman shall be the Chief
Executive Officer and the President shall be the Chief Operating
Officer.
3.6 Vice President. The Vice President, or if there be
more than one Vice President, the Vice Presidents in the order
determined by the Trustees (or if there be no such determination,
then in the order of their election) shall in the absence of the
President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions
upon the President. The Vice Presidents shall perform such other
duties and have such other powers as the Board of Trustees may
from time to time prescribe.
3.7 Treasurer. The Treasurer shall be the chief financial
and accounting officer of the Trust, and shall, subject to the
provisions of the Declaration of Trust and to any arrangement
made by the Trustees with a custodian, investment adviser or
manager, or transfer, shareholder servicing or similar agent, be
in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers
as may be designated from time to time by the Trustees or by the
President.
3.8 Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the
order determined by the Trustees (or if there be no such
determination, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other
powers as the Board of Trustees may from time to time prescribe.
3.9 Secretary. The Secretary shall record all proceedings
of the shareholders and the Trustees in books to be kept
therefor, which books or a copy thereof shall be kept at the
principal office of the Trust. In the absence of the Secretary
from any meeting of the shareholders or Trustees, an Assistant
Secretary, or if there be none or if he is absent, a temporary
secretary chosen at such meeting shall record the proceedings
thereof in the aforesaid books.
3.10 Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order
determined by the Trustees (or if there be no determination, then
in the order of their election), shall, in the absence of the
Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.11 Resignations and Removals. Any Trustee or officer may
resign at any time by written instrument signed by him and
delivered to the Chairman of the Board, the Vice Chairman of the
Board, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective at some other
time. The Trustees may remove any officer elected by them with
or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee or officer resigning
and no officer removed shall have any right to any compensation
for any period following his resignation or removal, or any right
to damages on account of such removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the
Trustees then in office, may elect from their number an Executive
Committee or other committees and may delegate thereto some or
all of their powers except those which by law, by the Declaration
of Trust, or by these By-Laws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make
rules for the conduct of its business, but unless otherwise
provided by the Trustees or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by
these By-Laws for the Trustees themselves. All members of such
committees shall hold such offices at the pleasure of the
Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their
powers or duties shall keep records of its meetings and shall
report its action to the Trustees. The Trustees shall have power
to rescind any action of any committee, but no such rescission
shall have retroactive effect.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render
reports at the time and in the manner required by the Declaration
of Trust or any applicable law. Officers and committees shall
render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. The fiscal year of the Trust shall be fixed
by resolution of the Trustees.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a
flat-faced die with the word "Massachusetts," together with the
name of the Trust and the year of its organization cut or
engraved thereon, but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other
manner, all deeds, leases, contracts, notes and other obligations
made by the Trustees shall be signed by the President, any Vice
President, or by the Treasurer and need not bear the seal of the
Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all shareholders. In
that event, a shareholder may receive a certificate stating the
number of shares owned by him, in such form as shall be
prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a Vice President and by the
Treasurer or Assistant Treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent, or
by a registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued
by the Trust with the same effect as if he were such officer at
the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees shall prescribe.
9.3 Issuance of New Certificate to Pledgee. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder,
and entitled to vote thereon.
9.4 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of shares certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
Dealings with Trustees and Officers
10.1 General. Any Trustee, officer or other agent of the
Trust may acquire, own and dispose of shares of the Trust to the
same extent as if he were not a Trustee, officer or agent; and
the Trustees may accept subscriptions to shares or repurchase
shares from any firm or company in which any Trustee, officer or
other agent of the Trust may have an interest.
ARTICLE 11
Amendments to the By-Laws
11.1 General. These By-Laws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at
any meeting of the Trustees, or by one or more writings signed by
such a majority.
EXHIBIT 4(i)
Number USAA INVESTMENT TRUST Shares
(A Massachusetts Business Trust)
BALANCED STRATEGY FUND
Shares of Beneficial Interest
Account No. Alpha Code CUSIP
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:
______________________ PICTURE of ______________________
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
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:
______________________ PICTURE of ________________________
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
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:
_____________________ PICTURE of _____________________
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(a)
ADVISORY AGREEMENT
AGREEMENT made as of the 21st day of September, 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 (the "Manager"), 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").
WHEREAS, the Trust is engaged in business as an open-end
management investment company and is so registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business
of rendering investment management services and is registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of
beneficial interest, without par value (the "Shares"), in
separate series or Sub-Trusts with each such series representing
interests in a separate portfolio of securities and other assets;
and
WHEREAS, the Trust presently offers Shares in four series
designated as the Cornerstone Fund, Gold Fund, International Fund
and Balanced Portfolio Fund (the "Existing Funds") (such series,
together with all other series subsequently established by the
Trust with respect to which the Trust desires to retain the
Manager to render investment advisory services hereunder and with
respect to which the Manager is willing so to do, being herein
collectively referred to as the "Funds");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed
between the parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Existing Funds. The Trust hereby appoints the
Manager to act as manager and investment adviser to each of
the Existing Funds for the period and on the terms herein
set forth. The Manager accepts such appointment and agrees
to render the services herein set forth, for the
compensation herein provided.
(b) Additional Funds. In the event that the Trust
establishes one or more series other than the Existing Funds
with respect to which it desires to retain the Manager to
render management and investment advisory services
hereunder, it shall so notify the Manager in writing. If
the Manager is willing to render such services it shall
notify the Trust in writing, whereupon the Trust shall
appoint the Manager to act as manager and investment adviser
to each of such series of Shares for the period and on the
terms herein set forth, the Manager shall accept such
appointment and agree to render the services herein set
forth for the compensation herein provided, and each of such
series of Shares shall become a Fund hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following
services and facilities to the Trust:
(a) Investment Program. The Manager will (i) furnish
continuously an investment program for each Fund, (ii)
determine (subject to the overall supervision and review of
the Board of Trustees of the Trust) what investments shall
be purchased, held, sold or exchanged by each Fund and what
portion, if any, of the assets of each Fund shall be held
uninvested, and (iii) make changes on behalf of the Trust in
the investments of each Fund. The Manager will also manage,
supervise and conduct the other affairs and business of the
Trust and of each Fund thereof and matters incidental
thereto, subject always to the control of the Board of
Trustees of the Trust and to the provisions of the Trust's
Master Trust Agreement and Bylaws and the 1940 Act.
(b) Regulatory Reports. The Manager shall furnish to
the Trust necessary assistance in:
(i) The preparation of all reports now or hereafter
required by Federal or other laws.
(ii) The preparation of Prospectuses, Registration
Statements, and amendments thereto that may be required
by Federal or other laws or by the rules or regulations
of any duly authorized commission or administrative
body.
(c) Office Space, Facilities, and Personnel. The
Manager shall furnish to the Trust office space in the
offices of the Manager or in such other place or places as
may be agreed upon from time to time, and all necessary
office facilities, simple business equipment, supplies,
utilities, telephone service and accounting services (in
addition to those provided by the custodian and transfer
agent) for managing the affairs and investments of the
Trust. These services are exclusive of the necessary
records of any dividend disbursing agent, transfer agent,
registrar or custodian. The Manager shall compensate all
personnel, officers, and Trustees of the Trust if such
persons are also officers or employees of the Manager or its
affiliates.
(d) Fidelity Bond. The Manager shall provide and
maintain a bond issued by a reputable insurance company
authorized to do business in the place where the bond is
issued, against larceny and embezzlement covering each
officer and employee of the Trust who may singly or jointly
with others have access to funds or securities of the Trust,
with direct or indirect authority to draw upon such funds or
to direct generally the disposition of such funds. The bond
shall be in such reasonable amount as a majority of the
Board of Trustees of the Trust who are not officers or
employees of the Trust shall determine, with due
consideration to the aggregate assets of the Trust to which
any such officer or employee may have access.
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the
Manager set forth in Paragraph 2 above, the Trust assumes and
shall pay all expenses for all other Trust operations and
activities and shall reimburse the Manager for any such expenses
incurred by the Manager. The expenses to be borne by the Trust
shall include, without limitation:
(a) the charges and expenses of any registrar, share
transfer or dividend disbursing agent, custodian, or
depository appointed by the Trust for the safekeeping of its
cash, portfolio securities and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions for transactions in the
portfolio securities of the Trust;
(d) all taxes, including issuance and transfer taxes,
and fees payable by the Trust to Federal, state or other
governmental agencies;
(e) the cost of share certificates representing Shares
of the Trust;
(f) fees involved in registering and maintaining
registrations of the Trust and of its Shares with the
Securities and Exchange Commission and various states and
other jurisdictions;
(g) all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing proxy
statements, quarterly reports, semiannual reports, annual
reports and other communications (including Prospectuses) to
existing shareholders;
(h) compensation and travel expenses of Trustees who
are not "interested persons" within the meaning of the 1940
Act;
(i) the expense of furnishing or causing to be
furnished to each shareholder a statement of his account,
including the expense of mailing;
(j) charges and expenses of legal counsel in
connection with matters relating to the Trust, including,
without limitation, legal services rendered in connection
with the Trust's legal and financial structure and relations
with its shareholders, issuance of Trust Shares, and
registration and qualification of securities under Federal,
state and other laws;
(k) membership or association dues for the Investment
Company Institute or similar organizations;
(l) interest payable on Trust borrowings; and
(m) postage.
4. ADVISORY FEE.
(a) For the services and facilities to be provided by
the Manager as provided in Paragraph 2 hereof, the Trust
shall pay to the Manager a monthly fee with respect to the
Cornerstone, Gold and International Funds computed as a
percentage of aggregate average net assets of each Fund,
which on an annual basis is equal to three-fourths of one
percent (.75%) of all Monthly Average Net Assets (defined
below) of each Fund for such calendar month.
(b) For the services and facilities to be provided by
the Manager as provided in Paragraph 2 hereof, the Trust
shall pay to the Manager a monthly fee with respect to the
Balanced Portfolio Fund computed as a percentage of
aggregate average net assets of such Fund, which on an
annual basis is equal to one-half of one percent (.50%) of
all Monthly Average Net Assets (defined below) for such Fund
for such calendar month.
(c) The "Monthly Average Net Assets" of any Fund of
the Trust for any calendar month shall be equal to the
quotient produced by dividing (i) the sum of the net assets
of such Fund, determined in accordance with procedures
established from time to time by or under the direction of
the Board of Trustees of the Trust in accordance with the
Master Trust Agreement, as of the close of business on each
day during such month that such Fund was open for business,
by (ii) the number of such days.
(d) The Manager may from time to time and for such
periods as it deems appropriate voluntarily waive fees or
otherwise reduce its compensation hereunder.
5. EXPENSE LIMITATION.
In the event that expenses of any Fund of the Trust for any
fiscal year should exceed the expense limitation on investment
company expenses imposed by any statute or regulatory authority
of any jurisdiction in which Shares of the Trust are qualified
for offer and sale, the compensation due the Manager for such
fiscal year with respect to such Fund shall be reduced by the
amount of such excess by a reduction or refund thereof. In the
event that the expenses of any Fund exceed any expense limitation
which the Manager may, by written notice to such Fund,
voluntarily declare to be effective subject to such terms and
conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary,
the Manager shall assume expenses of such Fund, to the extent
required by such expense limitation.
In the event this Agreement is terminated with respect to
any one or more Funds as of a date other than the last day of the
fiscal year of the Trust, the Manager shall pay the Trust a pro
rata portion of the amount that the Manager would have been
required to pay, if any, had this Agreement remained in effect
for the full fiscal year.
6. TRUST TRANSACTIONS.
In connection with the management of the investment and
reinvestment of the assets of the Trust, the Manager, acting by
its own officers, directors or employees or by a duly authorized
subcontractor, is authorized to select the brokers or dealers
that will execute purchase and sale transactions for the Trust
and is directed to use its best efforts to obtain the best
available price and most favorable execution with respect to all
such purchases and sales of portfolio securities for the Trust.
Subject to this primary requirement, and maintaining as its first
consideration the benefits to the Trust and its shareholders, the
Manager shall have the right, subject to the control of the Board
of Trustees, to follow a policy of selecting brokers and dealers
who furnish statistical, research and other services to the Trust
or to the Manager.
The Manager agrees that neither it nor any of its officers
or directors will take any long or short position in the Shares
of the Trust; provided, however, that such prohibition:
(a) shall not prevent the Manager from purchasing
Shares of the Trust if orders to purchase such Shares are
placed upon the receipt by the Manager of purchase orders
for such Shares and are not in excess of such purchase
orders received by the Manager; and
(b) shall not prevent the purchase of Shares of the
Trust by any of the persons above described for their
account and for investment at the price at which such Shares
are available to the public at the time of purchase or as
part of the initial capital of the Trust.
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement
and Bylaws of the Trust and of the Manager, respectively, it is
understood that Trustees, officers, agents and shareholders of
the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers, or otherwise, that
directors, officers, agents and shareholders of the Manager are
or may be interested in the Trust as Trustees, officers,
shareholders or otherwise, that the Manager (or any such
successor) is or may be interested in the Trust as a shareholder
or otherwise and that the effect of any such interests shall be
governed by said Master Trust Agreement and Bylaws.
8. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect
the Manager against any liability to the Trust or its
shareholders to which it might otherwise be subject by reason of
any willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its
obligations and duties under this Agreement. Nor shall any
provision hereof be deemed to protect any Trustee or officer of
the Trust against any such liability to which he might otherwise
be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of his duties or the reckless
disregard of his obligations and duties. If any provision of
this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall be executed on the
first date upon which the Agreement shall have been approved
by a majority of the outstanding voting securities (as that
term is defined in the 1940 Act) of any Existing Fund. This
Agreement shall become effective with respect to any
Existing Fund on the date upon which the Agreement shall
have been approved by a majority of the outstanding voting
securities (as that term is defined in the 1940 Act) of such
Existing Fund, and with respect to any additional Fund on
the date of receipt by the Trust of notice from the Manager
in accordance with Paragraph 1(b) hereof that the Manager is
willing to serve as Manager with respect to such Fund.
Unless terminated as herein provided, this Agreement shall
remain in full force and effect with respect to each
Existing Fund 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 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.
Any approval of this Agreement by the holders of a
majority of the outstanding Shares (as defined in the 1940
Act) of any Fund shall be effective to continue this
Agreement with respect to any such Fund notwithstanding (A)
that this Agreement has not been approved by the holders of
a majority of the outstanding Shares of any other Fund
affected thereby, and (B) that this Agreement has not been
approved by the vote of a majority of the outstanding Shares
of the Trust, unless such approval shall be required by any
other applicable law or otherwise.
(b) Termination. This Agreement may be terminated at
any time, without payment of any penalty, by vote of
the Trustees of the Trust or by vote of a majority of
the outstanding Shares (as defined in the 1940 Act), or
by the Manager on sixty (60) days' written notice to
the other party.
(c) Automatic Termination. This Agreement shall
automatically terminate in the event of its assignment.
10. NAME OF TRUST.
It is understood that the name "USAA," and any logo
associated with that name, is the valuable property of the United
Services Automobile Association, and that the Trust has the right
to include "USAA" as a part of its name only so long as this
Agreement shall continue and the Manager is a wholly owned
subsidiary of the United Services Automobile Association. Upon
termination of this Agreement the Trust shall forthwith cease to
use the "USAA" name and logo and shall submit to its shareholders
an amendment to its Articles of Incorporation to change the
Trust's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to
the subject matter hereof between the parties.
12. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not
to be deemed exclusive, and the Manager shall be free to render
similar services to others so long as its services hereunder are
not impaired thereby.
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 of any of them personally, but shall bind only the
trust property of the Trust as provided in its Master Trust
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed 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
----------------------- -----------------------
MICHAEL J.C. ROTH, President MICHAEL J.C. ROTH, President
ATTEST: ATTEST:
/s/ Michael D. Wagner /s/ Michael D. Wagner
- ------------------------- -----------------------
MICHAEL D. WAGNER, Secretary MICHAEL D. WAGNER, Secretary
EXHIBIT 5(b)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
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 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
Manager to render management and investment advisory services
under the Advisory Agreement to the Trusts at the fees stated below:
Advisory Fee Schedule
One-eighth of one percent (.125%) of the
aggregate average net assets of the Treasury
Money Market Trust and of the aggregate average
net assets of the GNMA Trust.
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: January 24, 1991
We are willing to render management and investment advisory
services to the Treasury Money Market Trust and GNMA Trust at the
fees stated above.
USAA INVESTMENT MANAGEMENT COMPANY
Attest: /s/Nora P. McDaniel By: /s/John W. Saunders, Jr.
---------------------- ------------------------
Assistant Secretary Senior Vice President
Dated: January 24, 1991
EXHIBIT 5(c)
USAA Investment Management Company
USAA Building
San Antonio, TX 78288
Gentlemen:
Pursuant to Section 1(b) of the Advisory Agreement dated as
of September 21, 1990 between USAA Investment Trust (the "Trust")
and USAA Investment Management Company (the "Manager"), 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 Manager to
render management and investment advisory services under the
Advisory Agreement to the Fund at the fees stated below:
Advisory Fee Schedule
Three-fourths of one percent (3/4%) of the
aggregate average net assets of the 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: July 21, 1992
We are willing to render management and investment advisory
services to the World Growth Fund at the fees stated above.
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 5(d)
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, TX 78288
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 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 Manager to render
management and investment advisory services under the Advisory
Agreement to the Funds at the fees stated below:
Advisory Fee Schedule
One percent (1%) of the aggregate average net assets of the
Emerging Markets 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 7, 1994
We as the sole shareholder of the above Funds, do hereby
approve the Advisory Service Agreement and are willing to render
management and investment advisory services to the Emerging
Markets Fund at the fees stated above.
USAA INVESTMENT MANAGEMENT
COMPANY
Attest: /s/Michael D. Wagner By: /s/John W. Saunders, Jr.
-------------------- ------------------------
Secretary Senior Vice President
Dated: September 7, 1994
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: By:
---------------------- -------------------
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: By:
--------------------- ------------------
Assistant Secretary Senior Vice President
Dated: September 1, 1995
EXHIBIT 6(e)
USAA Investment Management Company
10750 Robert F. McDermott Freeway
San Antonio, TX 78288
Ladies and 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: By:
---------------------- -------------------
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: By:
--------------------- ------------------
Assistant Secretary Senior Vice President
Dated: September 1, 1995
EXHIBIT 8(e)
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: By:
---------------------- -------------------
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: By:
--------------------- ------------------
Secretary Vice President
Dated: September 1, 1995
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
- ----------------------------------------------------------------
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 .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 is 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(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: By:
---------------------- -------------------
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: By:
--------------------- ------------------
Assistant Secretary Vice President
Dated: September 1, 1995
Exhibit A
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
included 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: By:
--------------------------- -------------------
Michael J.C. Roth Joseph H.L. Jimenez
President Vice President
Date: September 1, 1995 Date: September 1, 1995
Exhibit A
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
included 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: By:
--------------------------- -------------------------
Michael J.C. Roth Joseph H.L. Jimenez
President Vice President
Date: September 1, 1995 Date: September 1, 1995
Exhibit A
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
included 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: By:
--------------------------- -------------------------
Michael J.C. Roth Joseph H.L. Jimenez
President Vice President
Date: September 1, 1995 Date: September 1, 1995
EXHIBIT 10(e)
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
CABLE: GOODPROCT.BOSTON
June 9, 1995
USAA Investment Trust
USAA Building
9800 Fredericksburg Road
San Antonio, Texas 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 Income Strategy Fund, the
Balanced Strategy Fund and the Growth Strategy Fund series of the
Trust, as more fully described in the prospectus and statement of
additional information contained in Post-Effective Amendment No.
20 (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, the By-Laws of the
Trust, as amended, the records of certain meetings and written
consents of the Trustees of the Trust, the prospectus 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 Balanced Portfolio Fund, the
Cornerstone Fund, the Gold Fund, the International Fund, the GNMA
Trust and the Treasury Money Market Trust series of the Trust,
which opinion was filed with Post-Effective Amendment No. 11 to
the Registration Statement, to the reference in the Amendment of
our opinion with respect to the legality of the shares of the
Trust representing interest in the World Growth Fund series of
the Trust, which opinion was filed with Post-Effective Amendment
No. 15 to the Registration Statement, and to the reference in the
Amendment of our opinion with respect to the legality of the
shares of the Trust representing interests in the Emerging
Markets Fund series of the Trust, which opinion was filed with
Post-Effective Amendment No. 18 to the Registration Statement.
We also hereby consent to the reference to this firm in the
prospectus under the heading "Legal Counsel" and in the statement
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 19(b)
POWER OF ATTORNEY
Know all men by these presents that the undersigned Trustee
of USAA INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), constitutes and appoints Michael J.C. Roth, John W.
Saunders, Jr. and Michael D. Wagner, and each of them, as his
true and lawful attorney-in-fact and agent, with full power or
substitution, for him and in his name, place and stead, in any
and all capacities to sign registration statements on any form or
forms filed under the Securities Act of 1933 and the Investment
Company Act of 1940 and any and all amendments thereto, with all
exhibits, instruments, and other documents necessary or
appropriate in connection therewith and to file them with the
Securities and Exchange Commission or any other regulatory
authority as may be necessary or desirable, hereby ratifying and
confirming all that said attorney-in-fact and agent or his
substitute, may lawfully do or cause to be done by virtue hereof.
/s/ Hansford T. Johnson June 2, 1995
- --------------------------------- ---------------------
Hansford T. Johnson, Trustee Date
POWER OF ATTORNEY
Know all men by these presents that the undersigned Trustee
of USAA INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), constitutes and appoints Michael J.C. Roth, John W.
Saunders, Jr. and Michael D. Wagner, and each of them, as her
true and lawful attorney-in-fact and agent, with full power or
substitution, for her and in her name, place and stead, in any
and all capacities to sign registration statements on any form or
forms filed under the Securities Act of 1933 and the Investment
Company Act of 1940 and any and all amendments thereto, with all
exhibits, instruments, and other documents necessary or
appropriate in connection therewith and to file them with the
Securities and Exchange Commission or any other regulatory
authority as may be necessary or desirable, hereby ratifying and
confirming all that said attorney-in-fact and agent or her
substitute, may lawfully do or cause to be done by virtue hereof.
/s/ Barbara B. Dreeben June 2, 1995
- --------------------------------- -------------------------
Barbara B. Dreeben, Trustee Date
