<PAGE>
In addition to these rules, the Treasury has indicated that it might in the
future issue a regulation or a revenue ruling on the issue of whether a variable
contract owner is exercising impermissible "control" over the investments
underlying a segregated asset account, thereby causing the income earned on a
Contract to be taxed currently.
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 12-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 the
excise tax.
The VA World Growth Fund's 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 VA World Growth Fund invests 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 the Fund with respect to investments in PFICs would be
insignificant.
TRUSTEES AND OFFICERS OF THE TRUST
The Board of Trustees consists of five Trustees. Set forth below are the
Trustees and officers of the Trust, their ages and their respective offices and
principal occupations during the last five years. Unless otherwise indicated,
the business address of each is 9800 Fredericksburg Road, San Antonio, TX
78288. Asterisks denote Trustees who are interested persons of the Trust within
the meaning of the 1940 Act.
<TABLE>
<CAPTION>
Principal Occupation During
Name, Address and Age Position with Trust the Past Five Years
- -------------------------- ------------------- --------------------------------------------
<S> <C> <C>
Edwin L. Rosane* Chairperson and Chief Executive Officer and President,
Age 59 President USAA Life, since 1993 and 1990,
respectively
Michael J.C. Roth* Vice Chairperson Chief Executive Officer and President,
Age 54 USAA IMCO, since October 1993 and
January 1990, respectively
</TABLE>
14
