SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
USAA Investment Trust
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
___________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
5) Total fees paid:
___________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
[USAA
EAGLE
LOGO]
2002 IMCO PROXY
TRAINING GUIDE
[GRAPHIC
MAN VOTING]
Prepared by Learning Systems Development
Carey Rokovich, Ext. 8-9482
Course Code #IMCO - F1456
(c) 2002, USAA. All rights reserved. USAA confidential and propriety
information.
FOR INTERNAL USE ONLY.
LAST REVISED 08/14/2002 4:26 PM
Page 2 of 30
2002 IMCO Proxy Training
================================================================================
TABLE OF CONTENTS
INTRODUCTION................................................................. 3
COURSE MAP................................................................... 4
2002 PROXY SUMMARY........................................................... 5
DATES TO REMEMBER............................................................ 7
TRANSFER DIRECTORY........................................................... 8
PROXY CARD INFORMATION & SAMPLE..............................................11
VOTING TERMINOLOGY...........................................................12
PROPOSAL TABLES (JOB AIDS)...................................................13
PROPOSAL 1...................................................................15
PROPOSAL 2.................................................................. 19
PROPOSAL 3............. .....................................................23
PROPOSAL 4...................................................................26
PROPOSAL 5................................................................ . 27
MISCELLANEOUS................................................................28
===============================================================================
Page 3 of 30
INTRODUCTION
===============================================================================
WELCOME Welcome to this 2-hour 2002 IMCO Proxy Training class!
This course is customized for the IMCO Member Service
representatives (MSR) and Operations' employees.
This course was prepared with the understanding that the
following prerequisites have been fulfilled:
o Completed the 2002 Subadvisory Training,
o Have knowledge of all USAA IMCO Equity Funds,
o Experience with proxyvote.com & usaa.com, and
o Familiarity with the 2001 IMCO Proxy Initiative.
The training documents that you should have in front of
you include:
o 2002 IMCO Proxy Training Guide
o 2002 Proxy Statement and related documents
o USAA Magazine Article
o Ignites Article (For internal use only)
---------------------------------------------------------
COURSE Given a 2002 IMCO Proxy Training Guide, 2002
OBJECTIVE Proxy Statement, & role-plays, the students will be able
to:
o explain (verbally) each of the 5 Proxy proposals
clearly to assist in getting a positive voting
outcome, and
o respond knowledgeably to any Proxy questions and/or
concerns.
The explanations and responses must all be related to
the NEW INVESTMENT MANAGEMENT STRUCTURE and each student
must address each item listed on the appropriate
Proposal checklist.
--------------------------------------------------------
BUSINESS Deliver superior mutual fund performance by employing an
GOAL external group of leading investment firms in the U.S.
who have long-term proven track records.
--------------------------------------------------------
Page 4 of 30
COURSE MAP
START
[arrow down]
Introduction
[arrow down]
Proxy Summary
[arrow down]
Proxy Information & Samples
[arrow down]
Dates to Remember
[arrow down]
Terminology
[arrow down]
Proposal 1 + Roleplay
[arrow down]
Proposal 2 + Roleplay
[arrow down]
Proposal 3 + Roleplay
[arrows down]
Proposal 4 Proposal 5
CLASS ENDS
Online ON-LINE
Comprehensive Course
QUIZ Evaluation
Page 5 of 30
2002 PROXY SUMMARY
================================================================================
--------------------------------------------------------
PURPOSE Improve the performance of USAA's family of funds by
OF PROXY seeking shareholder approval of the New Investment
Management Structure at a shareholder meeting to be held
on October 18, 2002 at 3 p.m. in the McDermott
Auditorium in the USAA Building.
--------------------------------------------------------
PROPOSALS The proposals include the following:
o PROPOSAL 1 - Approve ADVISORY Agreements with IMCO
o PROPOSAL 2 - Approve SUBADVISORY Agreements with
Subadvisers
o 2A - Wellington Management Company, LLP
o 2B - Marsico Capital Management, LLC
o 2C - MFS Investment Management
o 2D - The Boston Company Asset Management, LLC
o 2E - Dresdner RCM Global Investors LLC
o 2F - Westwood Management Corporation
o 2G - Batterymarch Financial Management, Inc.
o 2H - Eagle Asset Management, Inc.
o PROPOSAL 3 - Approve Proposal to Permit IMCO and the
Funds' Board to CHANGE Subadvisers WITHOUT FURTHER
SHAREHOLDER APPROVAL
o PROPOSAL 4 - Approve an Amendment to Investment
Objective of the GROWTH FUND
o PROPOSAL 5 - Approve an Amendment to Investment
Objective of the GROWTH & INCOME FUND
--------------------------------------------------------
ELIGIBLE Shareholders of record of each fund as of the close of
TO VOTE business on August 23, 2002 are eligible to vote on
applicable proposals. Each share is entitled to ONE vote
for EACH FULL share held and a fractional vote for each
fractional share held. Only shareholders of the 15
affected funds will be eligible to vote.
--------------------------------------------------------
PROXY MAILING On August 23, 2002 the following documents will be
included in the Proxy mailing:
o Letter to Shareholders
o Summary of the Proposals
o Notice of Special Meeting (Part of the statement)
o Proxy Statement
o Proxy Card(s)
o Postage-paid envelope
--------------------------------------------------------
Page 6 of 30
--------------------------------------------------------
VOTING The Board of Directors unanimously recommends that
OPTIONS shareholders (S/H) vote "FOR" all proposals. Each S/H
may vote, and re-vote as many times as he or she wishes.
THE LAST VOTE PROCESSED IS THE ONE THAT COUNTS. The
shareholder may vote by:
1) INTERNET -
o Go to WWW.PROXYVOTE.COM or the "Proxy Voting" link on
usaa.com;
o If voting for more than one fund, remind
shareholder to vote each SEPARATE proxy
card for as many as he/she receives;
o Shareholders will need to vote for each
applicable proposals and will not have the
option to cast ONE vote "FOR" all
proposals;
o Enter each 12-digit control # located on the middle
right side of each proxy card;
o Follow the site instructions;
o Advise the shareholder not to mail in the
proxy card(s) if this method is used
(unless, of course, he/she wants to change
his/her vote).
2)PHONE
o Call toll-free 1-800-690-6903;
o If voting for more than one fund, remind
shareholder to vote each SEPARATE proxy card
for as many as he/she receives;
o Shareholders will need to vote for each
applicable proposals and will not have the
option to cast ONE vote "FOR" all
proposals;
o Enter each 12-digit control # located on the middle
right side of each proxy card;
o Follow recorded instructions;
o Advise the shareholder not to mail in the proxy
card(s) if this method is used (unless, of course,
he/she wants to change his/her vote)..
3)MAIL
o Mark, sign & date each proxy card;
o If voting for more than one fund, remind
shareholder to vote each SEPARATE proxy card
for as many as he/she receives;
o Shareholders will need to vote for each applicable
proposals and will not have the option to cast ONE
vote "FOR" all proposals;
o If card is signed but not marked to cast a vote, it
will be voted "FOR" all applicable proposals;
o If no signature, the card will be rejected and not
remailed;
o If another proxy card needs to be remailed to an
alternate address, email David.Zuniga@usaa.com;
o Return in postage-paid envelope.
4)IN PERSON DURING SHAREHOLDER MEETING
o Attend meeting on 10/18/02 @ 3 P.M. in the McDermott
Auditorium;
o Bring proxy card(s) to vote at the meeting;
o PCs and Reps will be available to help with on-line
voting.
--------------------------------------------------------
Page 7 of 30
DATES TO REMEMBER
--------------------------------- ---------------------------------------------
MONTH EVENT
- --------------------------------- ----------------------------------------------
- --------------------------------- ----------------------------------------------
o 26th - Board voted in favor of
INTERIM and Proposed advisory and
subadvisory agreements, and
terminated FORMER advisory
JUNE agreements.
o 27th - USAA press release regarding
subadvising
o 28th - Interim advisory and
subadvisory agreements took effect
--------------------------------- ---------------------------------------------
--------------------------------- ---------------------------------------------
o 17th - Filed Proxy with SEC
JULY o 26th - Received SEC comments
--------------------------------- ---------------------------------------------
--------------------------------- ---------------------------------------------
o 23rd - Shareholders of record of
the 15 affected funds as of close
of business are eligible to vote
AUGUST
o 23rd - Proxy mailings start
o 30th - Proxy page for IMCO will be
available on usaa.com
--------------------------------- ---------------------------------------------
--------------------------------- ---------------------------------------------
o 18TH - USAA MUTUAL FUND
SHAREHOLDERS MEETING @ 3 P.M. IN
THE MCDERMOTT AUDITORIUM
OCTOBER
o 31st - USAA Life Investment Trust
(LIT) Shareholders Meeting @ 2 p.m.
in the McDermott Auditorium
--------------------------------- ---------------------------------------------
--------------------------------- ---------------------------------------------
o 25th - 150-day Interim Advisory and
NOVEMBER Subadvisory agreements will
terminate (unless shareholders
approve the proposed agreements
before this date - Rule 15a-4)
--------------------------------- ---------------------------------------------
Page 8 of 30
TRANSFER DIRECTORY
================================================================================
[graphic
keypad]
800 NUMBERS
It's best to ask the shareholder in all cases, "Are you ready to place your vote
at this time?" If the shareholder is not ready to vote, he/she may call at a
later time using any of the following 800#s:
o Georgeson Shareholders Communications to vote..........1-866-748-4465
(Transfer once shareholder is ready to cast his/her vote)
o IMCO & LIT Proxy to "vote by phone"......................1-800-690-6903
(Reaches a touchtone system with recorded instructions)
o LIT Proxy 800# for Questions.............................1-800-292-8180
[graphic
keypad]
FOR INTERNAL USE
Because Life Investment Trust Company and Corporate proxies will be mailed
around the same time, representatives who receive member phone calls about
proxies other than the IMCO mutual fund proxy should forward those calls as
follows:
o LIT proxy questions/concerns: VARIABLE TEAM at ext. 2-3300
o CORPORATE proxy questions/concerns: Email DAVID ZUNIGA for call back
o MEDIA CALLS: TOM HONEYCUTT at ext. 8-0910
Page 9 of 30
2002 PROXY CARD INFORMATION & SAMPLES
===============================================================================
--------------------------------------------------------
PROXY o HOUSEHOLDING means that proxy statements/proxy
HOUSEHOLDING cards will be mailed in the same envelope for all
"members" who have the same social security number
and same zip code. For example, an individual,
joint tenant, and IRA shareholder would receive his
three proxies in ONE envelope (assuming same SSN
and Zip).
o THERE WILL BE ONE CARD FOR EVERY ACCOUNT. If a S/H
has 3 mutual fund accounts, he will receive 3 proxy
cards. If he has 25 accounts, he will receive 25
cards.
o EACH CARD WILL HAVE ITS OWN SPECIFIC CONTROL
NUMBER.
o ALL COMMON MATERIAL WILL BE MAILED IN ONE ENVELOPE.
-------------------------------------------------------
ADDRESS HIERARCHY The address hierarchy will be as usual....
o seasonal address first, if applicable;
o mailing address next, if applicable;
o registration address if only address on file.
-------------------------------------------------------
PROXY o While there is only ONE proxy statement, there are
CARDS 15 VERSIONS of the proxy CARD.
o The individual fund will drive which
proposal/request for vote is used or which will
simply read NOT APPLICABLE TO THIS FUND.
o Proposal #2 will consist, on all cards, of eight
sub-proposals (2A, 2B, 2C, 2D, 2E, 2F, 2G, & 2H).
For any sub-proposal not applicable to the fund,
the line will read NOT APPLICABLE TO THIS FUND and
no boxes will appear.
o If the proxy card is signed, but no voting
instructions are indicated on the card, the shares
will be voted "FOR" all applicable proposals.
o The "last" vote received is the vote recorded.
-------------------------------------------------------
Page 10 of 30
--------------------------------------------------------
RETURN MAIL HOW WILL RETURN MAIL BE HANDLED?
Return mail will not be remailed for the 2002 Proxy
Initiative.
--------------------------------------------------------
REMAIL PROXY IF THE S/H REQUESTS THAT THE PROXY CARD BE REMAILED:
CARD o Confirm address.
o Send an email to David Zuniga for all remail
requests with S/H's name, USAA member #, and mutual
fund account numbers.
o David Zuniga verifies information and forwards
information to Javier Morales for handling.
--------------------------------------------------------
INCOMING LETTERS Any incoming correspondence will be routed as follows:
o Chris Claus mail goes to Patricia Acuna for
handling.
o Bob Davis mail goes to Patricia Acuna for further
routing.
o Board Member mail goes to Cherie Black for further
routing.
o General Correspondence goes to Javier Morales for
further routing.
o Emailed Proxy questions/concerns goes to Javier
Morales for further routing.
o Life Investment Trust Proxy mail goes to Danny
Piper for further routing.
o Any notes written on proxy cards will be routed to
Javier Morales.
--------------------------------------------------------
Page 11 of 30
[sample of proxy card]
Page 12 of 30
VOTING TERMINOLOGY
================================================================================
The following definitions are provided to better understand the Proxy STATEMENT:
ADJOURNED To suspend until a later stated time.
(ADJOURNMENT)
ABSTENTION Abstentions will assist a Fund in obtaining a quorum,
but will have the affect of an "AGAINST" vote. This
means that if we need the majority of a fund's shares to
be voted, the "for, against, and abstain" votes all
count toward the needed majority. BUT, for example, in
achieving 67% of the votes being voted FOR a proposal,
an abstention hurts because it goes against the "for"
vote percentage.
MAJORITY A number more than half of the total.
PLURALITY The larger or greater part.
QUORUM The minimal number of shares that must be present for
valid transaction of business. (EX: We need a majority
of a fund's shares to be represented either in person or
by proxy. The "for, against, and abstain" votes all
count toward the need of majority. Of the need of
majority, 67% must vote for a proposal in order for it
to pass or, alternatively, more than 50% of all
outstanding shares of a fund must vote for a proposal in
order for it to pass.)
RULE 15A-4 UNDER Under this regulation, the interim agreements typically
INVESTMENT COMPANY terminate 150 days after the date on which ACT OF 1940
ACT OF 1940 the former agreements terminated, in this case on
11/25/02.
Page 13 of 30
IMCO
PROPOSAL TABLE OF FUNDS AFFECTED
================================================================================
- --------------------------- ------------------ ------------------ ------------------ ----------------- ------------------
IMCO PROPOSAL 1 PROPOSAL 2 PROPOSAL 3 PROPOSAL 4 PROPOSAL 5
FUNDS
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
AGGRESSIVE GROWTH X 2-B X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
BALANCED STRATEGY X 2-A X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
CAPITAL GROWTH X 2-G X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
CORNERSTONE STRATEGY X 2-A, 2-C X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
EMERGING MARKETS X 2-D X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
FIRST START GROWTH X 2-B X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
GROWTH X 2-B, 2-E X X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
GROWTH & INCOME X 2-A X X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
GROWTH & TAX STRATEGY X 2-E X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
INCOME STOCK X 2-D, 2-F X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
INTERNATIONAL X 2-C X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
SCIENCE & TECHNOLOGY X 2-A X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
SMALL CAP STOCK X 2-H X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
VALUE X 2-F X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
WORLD GROWTH X 2-C X
- --------------------------- ------------------ ------------------ ----------------- ------------------ -------------------
IMCO PROPOSALS
PROPOSAL 1 - Approve ADVISORY Agreements with IMCO
PROPOSAL 2 - Approve SUBADVISORY Agreements between IMCO and Subadvisers
o 2A - Wellington Management Company, LLP
o 2B - Marsico Capital Management, LLC
o 2C - MFS Investment Management
o 2D - The Boston Company Asset Management, LLC
o 2E - Dresdner RCM Global Investors LLC
o 2F - Westwood Management Corporation
o 2G - Batterymarch Financial Management, Inc.
o 2H - Eagle Asset Management, Inc.
PROPOSAL 3 - Approve Proposal to Permit IMCO and the Funds' Board to CHANGE
Subadvisers WITHOUT FURTHER SHAREHOLDER APPROVAL
PROPOSAL 4 - Approve an Amendment to Investment OBJECTIVE OF THE GROWTH FUND
PROPOSAL 5 - Approve an Amendment to Investment OBJECTIVE OF THE GROWTH & INCOME
FUND
Page 14 of 30
FYI...
USAA LIFE INVESTMENT TRUST
(LIT)
PROPOSAL TABLE OF FUNDS AFFECTED
================================================================================
- ------------------------------ -------------- -------------- -------------- -------------- ----------------
LIT PROPOSAL 1 PROPOSAL 2 PROPOSAL 3 PROPOSAL 4 PROPOSAL 5
FUNDS
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
LIFE AGGRESSIVE GROWTH X X 3B X
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
LIFE DIVERSIFIED ASSETS X X 3A X
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
LIFE GROWTH & INCOME X X 3A X X
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
LIFE INCOME X X X
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
LIFE WORLD GROWTH X X 3C X
- ------------------------------- -------------- -------------- -------------- -------------- ----------------
LIT PROPOSALS
PROPOSAL 1 - ELECTION of James Middleton to the Trust's Board of TRUSTEES
PROPOSAL 2 - Approve ADVISORY Agreement with IMCO (which includes
a proposed increase to the fee for the Life World Growth Fund)
PROPOSAL 3 - Approve SUBADVISORY Agreements between IMCO and Subadvisers
o 3A - Wellington Management Company, LLP
o 3B - Marsico Capital Management, LLC
o 3C - MFS Investment Management
PROPOSAL 4 - Approve Proposal to Permit IMCO and the Trusts' Board to
CHANGE Subadvisers WITHOUT FURTHER SHAREHOLDER APPROVAL
PROPOSAL 5 - Approval of an amendment to the INVESTMENT OBJECTIVE OF
THE USAA LIFE GROWTH AND INCOME FUND
Page 15 of 30
- --------------------------------------------------------------------------------
PROPOSAL 1 APPROVE NEW INVESTMENT ADVISORY
AGREEMENTS WITH IMCO
- -------------------------------------------------------------------------------
FUNDS AFFECTED 15 Equity and Asset Strategy Funds
--------------------------------------------------------
FORMER o Since inception, IMCO served as the Fund's manager
AGREEMENT and Investment adviser.
o Presently the benchmark indices for purposes of
calculating the performance adjustment to the
advisory fee are:
o Aggressive Growth - Lipper MID-CAP Growth Funds
Index
o Capital Growth - Lipper MID-CAP Growth Funds Index
o Growth & Income - Lipper LARGE-CAP CORE Funds Index
--------------------------------------------------------
PROPOSED IMCO'S RESPONSIBILITIES IN MANAGING THE FUNDS WOULD
AGREEMENT CHANGE AS FOLLOWS UNDER THE PROPOSED AGREEMENT:
o provide portfolio management oversight of assets
managed by the subadviser(s),
o recommend to the board the hiring, termination, and
replacement of subadvisers to manage the equity
portion of the funds' assets and
o provide same SERVICES and facilities as provided in
the former agreement and continue to directly manage
any fixed income portion of the funds' assets.
3 NEW BENCHMARK INDICES
A Benchmark index is used to calculate the
performance-based portion of the ADVISORY fees payable
to IMCO. The New benchmarks more closely correlate to
the way each fund is now being managed:
o Aggressive Growth - Lipper LARGE-CAP Growth Funds
Index
o Capital Growth - Lipper SMALL-CAP Growth Funds Index
o Growth & Income - Lipper MULTI-CAP CORE Funds Index
--------------------------------------------------------
FEES SAME FEES RATES
o No fee rates have changed
--------------------------------------------------------
WHY Identified the need to restructure the manner in which
each fund's assets are managed in order to achieve
better performance consistent with the investment
objectives and strategies of the funds by employing the
proposed subadvisers to manage each applicable fund's
equity assets.
--------------------------------------------------------
Page 16 of 30
--------------------------------------------------------
PASSING REQUIREMENT Requires a "FOR" vote by a "majority of the outstanding
voting securities" of a fund which means THE LESSER OF
...
o More than 50% of the outstanding shares of the fund
OR
o 67% or more of the shares present at the meeting, if
more than 50% of the outstanding shares are present
at the meeting in person or by proxy
NOTE: Abstentions and broker non-votes will have the
effect of votes "AGAINST" this proposal.
--------------------------------------------------------
EFFECTIVE Upon shareholder approval and will remain in effect
until July 31, 2004. Thereafter, the agreement will
automatically continue, provided that it is specifically
approved at least annually by a vote of a majority of
the Independent Board Members and by a majority of all
Board members. .
--------------------------------------------------------
QUESTIONS IN PROXY Questions answered in the PROXY STATEMENT are:
STATEMENT & SUMMARY
o Why are the shareholders BEING ASKED TO VOTE on this
proposal?
o What are the KEY PROVISIONS of the agreements?
o What are THE DIFFERENCES BETWEEN THE AGREEMENTS?
o When will the new investment advisory AGREEMENTS TAKE
EFFECT?
o What is the DIFFERENCE IN THE INDEX used to calculate
the performance adjustment TO THE
ADVISORY FEE for the New Benchmark Funds?
o How is the PERFORMANCE ADJUSTMENT under the
agreements CALCULATED?
o Will the FUNDS' TOTAL EXPENSE CHANGE as a result of
the proposed agreements?
o Who are the DIRECTORS AND PRINCIPAL EXECUTIVE OFFICER
of IMCO?
o Does IMCO or any of its affiliates provide any
ADDITIONAL SERVICES to the funds?
o What did the BOARD CONSIDER in reviewing this
proposal?
o HOW does the Board RECOMMEND SHAREHOLDERS VOTE on
Proposal 1?
o What percentage of shareholders' votes is REQUIRED TO
APPROVE a new investment advisory agreement?
Questions answered in the SUMMARY OF THE PROPOSALS
document are:
o What are the DIFFERENCES between the PROPOSED
agreements and the FORMER and INTERIM agreements?
o Will the ADVISORY FEE RATES charged to the funds
INCREASE as a result of the proposed agreements?
--------------------------------------------------------
Page 17 of 30
--------------------------------------------------------
QUESTIONS Be prepared for any additional questions that come up
THAT MAY such as the following:
COME UP ...
MEMBER QUESTION #1
Q. "IT LOOKS TO ME LIKE THE CHANGES HAVE ALREADY BEEN
MADE! WHY WERE THE USAA MEMBERS TOLD AFTER THE FACT
ABOUT THE CHANGE IN MANAGEMENT? ISN'T ONE OF YOUR
FIDUCIARY RESPONSIBILITIES TO PROVIDE MEMBERS WITH
TIMELY INFORMATION SO THAT THEY CAN MAKE INFORMED
DECISIONS?"
A. Although the Board has approved this proposal, the
shareholders also need to approve this proposal. If
the shareholders do not approve this action, it will
be the responsibility of IMCO and the Board to
address the need to internally manage the Funds or
select other subadvisers for ultimate approval by the
shareholders. The reason members were not asked to
vote on this action prior to the Board meeting is
that the funds needed to be managed with focus on
their objectives rather than on the outcome of a
pending change in managers. Moreover, IMCO and the
funds' board believed that making the changes
promptly was in the funds' shareholders best
interests.
NOTES:__________________________________________________
MEMBER QUESTION #2
Q. "IF USAA CAN'T SUPERVISE THE INVESTING FUNCTION NOW,
HOW WILL IT SUPERVISE SOMEONE ELSE?"
A. Please know that we take our responsibility to
shareholders very seriously and our PRIORITY is to
monitor the performance of USAA mutual funds closely.
Relationship managers from IMCO's portfolio
management, marketing, finance and legal, and
compliance, will actively monitor the activities of
the subadvisers. IMCO's Investment Strategy Committee
also will monitor the activities of the subadvisers
closely.
NOTES: ________________________________________________
MEMBER QUESTION #3
Q. "IF THE MEMBERS VOTE DOWN THE CHANGE, WILL THE USAA
MANAGEMENT TEAM BE READY TO MANAGE OUR ASSETS?"
A. If this proposal or any other proposal related to the
management of the funds is not approved, then IMCO
and the funds Board would need to consider other
alternatives, such as the need to internally manage
the funds or select other subadvisers for ultimate
approval by the shareholder.
NOTES:__________________________________________________
QUESTIONS CONTINUE ON THE NEXT PAGE
Page 18 of 30
QUESTIONS THAT MAY
COME UP... MEMBER QUESTION #4
Q. "TELL ME YOUR FEES WILL NOT INCREASE! IN FACT, I
WOULD EXPECT A SLIGHT DECREASE SINCE YOU ARE NOW OUT
OF THE ASSET MANAGEMENT BUSINESS, REPUTEDLY THE MOST
EXPENSIVE PART OF EQUITY FUNDS MANAGEMENT."
A. The advisory fee rates charged to the funds will not
increase as a result of the proposed agreements. With
respect to the three funds with a proposed new
benchmark index, the impact of the proposed
agreements to the performance adjustment will depend
on each fund's performance relative to the new index.
Last, fees will not decrease because you will be
getting access to leading investment firms at the
same low rate you have always paid.
NOTES:__________________________________________________
MEMBER QUESTION #5
Q. "TELL ME WHY I SHOULD KEEP MY FUNDS WITH USAA."
A. You will now have access to some of the LEADING
investment firms in the industry with no change to
your funds' advisory fee rates. Our review of this
decision included a thorough cost-benefit analysis of
internal and external options for managing the equity
portion of the Funds. We, meaning IMCO and the funds'
Board, determined that engaging subadvisers to manage
the equity portion of the Funds was a better option
than continuing to manage this portion of the Funds
internally.
NOTES:_____________________________________________________
Page 19 of 30
- --------------------------------------------------------------------------------
PROPOSAL 2
APPROVAL OF INVESTMENT
SUBADVISORY AGREEMENTS BETWEEN
IMCO AND SUBADVISERS
- --------------------------------------------------------------------------------
--------------------------------------------------------
FUNDS AFFECTED 15 Equity and Asset Strategy Funds
--------------------------------------------------------
FORMER
AGREEMENT Since inception, IMCO served as the Fund's manager and
Investment adviser.
--------------------------------------------------------
PROPOSED EMPLOY THE NEW SUBADVISERS TO:
AGREEMENT o Manage the day-to-day investment of all
or a portion of each fund's assets consistent with
each fund's investment objectives, policies, and
restrictions.
o Place all orders for the purchase and sale of
portfolio securities for the portion of a fund
managed by the subadviser (subject to the
supervision and monitoring of IMCO & the oversight
of the Fund's Board).
--------------------------------------------------------
FEES The Subadvisory Agreements will not impact the funds'
total expense ratios. IMCO (not the fund) pays an annual
fee to the subadvisers for services under the
Subadvisory Agreements.
--------------------------------------------------------
WHY Identified the need to restructure the manner in which
each fund's assets are managed in order to achieve
better performance consistent with the investment
objectives and strategies of the funds by employing the
proposed subadvisers to manage each applicable fund's
equity assets.
--------------------------------------------------------
PASSING Requires a "FOR" vote by a "majority of the outstanding
REQUIREMENT voting securities" of a fund which means THE LESSER OF
...
o More than 50% of the outstanding shares of the fund
OR
o 67% or more of the shares present at the meeting, if
more than 50% of the outstanding shares are present
at the meeting in person or by proxy
NOTE: Abstentions and broker non-votes will have the
effect of votes "AGAINST" this proposal.
--------------------------------------------------------
Page 20 of 30
--------------------------------------------------------
EFFECTIVE Upon shareholder approval, and to remain in effect for
an initial two-year period. Thereafter, the agreement
will automatically continue, provided that it is
specifically approved at least annually by a vote of a
majority of the Independent Board Members and by a
majority of all Board members.
--------------------------------------------------------
QUESTIONS IN PROXY Questions answered in the PROXY STATEMENT are:
STATEMENT o WHY are shareholders being ASKED TO VOTE on this
& SUMMARY proposal?
o What was the PROCESS LEADING TO THIS PROPOSAL and WHO
ARE the proposed SUBADVISERS?
o What are the KEY PROVISIONS of the subadvisory
agreements?
o What are the DIFFERENCES between the SUBADVISORY AND
INTERIM SUBADVISORY agreements?
o When will the investment subadvisory agreements TAKE
EFFECT? o Will the FUNDS' TOTAL EXPENSES CHANGE as a
result of the subadvisory agreements? o What
INFORMATION DID THE BOARD CONSIDER prior to proposing
these changes? o How does the BOARD RECOMMEND
shareholders VOTE on Proposal 2? o What PERCENTAGE OF
SHAREHOLDERS' VOTES IS REQUIRED TO APPROVE each
subadvisory agreement?
Questions answered in the SUMMARY OF THE PROPOSALS
document are:
o What was the PROCESS LEADING TO THIS PROPOSAL and WHO
are the PROPOSED SUBADVISERS?
o What are the KEY PROVISIONS of the SUBADVISORY
AGREEMENTS?
o Will FEES CHARGED TO THE FUNDS CHANGE as a result of
the subadvisory agreements?
--------------------------------------------------------
INDIVIDUAL SUBADVISER REVIEW THE PROXY STATEMENT for more details about the
PROPOSALS subadvisers within each subproposal:
o PROPOSAL 2 - Approve Subadvisory Agreements with
Subadvisers between IMCO and...
o 2A - Wellington Management Company, LLP
o 2B - Marsico Capital Management, LLC
o 2C - MFS Investment Management
o 2D - The Boston Company Asset Management, LLC
o 2E - Dresdner RCM Global Investors LLC
o 2F - Westwood Management Corporation
o 2G - Batterymarch Financial Management, Inc.
o 2H - Eagle Asset Management, Inc.
--------------------------------------------------------
Page 21 of 30
--------------------------------------------------------
QUESTIONS THAT MAY Be prepared for any additional questions that come up
COME UP... such as the following:
MEMBER QUESTION #1
Q. "WHY DID THE SHAREHOLDERS NOT GET TO DECIDE ON WHO
THE OUTSOURCE COMPANIES SHOULD BE?"
A. Although the Board has approved this proposal, the
shareholders also need to approve this proposal. If
the shareholders do not approve this action, it will
be the responsibility of IMCO and the Board to
address the need to internally manage the Funds or
select other subadvisers for ultimate approval by the
shareholders. The reason members were not asked to
vote on this action prior to the Board meeting is
that the funds needed to be managed with focus on
their objectives rather than on the outcome of a
pending change in managers. Moreover, IMCO and the
funds' board believed that making the changes
promptly was in the funds' shareholders best
interests.
NOTES:__________________________________________________
MEMBER QUESTION #2
Q. "WHEN WILL INFORMATION BE AVAILABLE ON THE INVESTING
TRACK RECORD OF THE NEW MANAGEMENT COMPANIES?"
A. Information regarding the investment track records of
the subadvisers is available regarding other
portfolios, such as the similar Funds mentioned in
the proxy statement, they are currently running.
However, there are investment marketing regulations
that limit us from using such information when
presenting the subadvisers as new managers of some of
USAA's mutual funds to our shareholders. We realize
the importance of this information and hope to have
it available in the near future.
NOTES:__________________________________________________
MEMBER QUESTION #3
Q. "AS I UNDERSTAND IN YOUR LETTER, USAA WILL OVERSEE
THE MUTUAL FUNDS (OVERHEAD) AS WILL ANOTHER ASSET
MANAGEMENT ORGANIZATION (MORE OVERHEAD). ARE YOU SURE
THAT WHAT USAA (AND I) SAVE BY CONTRACTING OUT THE
OPERATION OF THE EQUITY FUNDS WILL NOT BE
OVERSHADOWED BY INCREASED MANAGEMENT COSTS?"
A. You will now have access to some of the LEADING
investment firms in the industry with no change to
your fund's advisory fee rates.
NOTES:__________________________________________________
QUESTIONS CONTINUE ON THE NEXT PAGE
Page 22 of 30
QUESTIONS THAT MAY MEMBER QUESTION #4
COME UP...
Q. "IN THE FUTURE, WHAT PARAMETERS WILL BE USED WHEN
SELECTING SUBADVISERS?"
A. Among other factors, a Fund's Board will consider the
expertise, financial strength, a subadviser's quality
of services offered by each proposed subadviser, as
well as the qualifications and experience of the
proposed subadviser's advisory personnel, the
subadviser's organizational resources, and the
subadviser's investment performance track record when
managing comparable funds.
NOTES:__________________________________________________
MEMBER QUESTION #5
Q. " WHAT CONSEQUENCES, IN THE FUTURE, WILL WE
EXPERIENCE IF USAA TERMINATES A SUBADVISER?"
A. While fees payable to any new subadviser may be
different, the advisory fee you pay to IMCO would not
be affected. The Board and IMCO may not increase the
rate of fees payable by the Fund to IMCO for advisory
services WITHOUT first obtaining shareholder
approval.
NOTES:__________________________________________________
MEMBER QUESTION #6
Q. WHY DOES IMCO FORESEE THE POSSIBILITY OF CHANGING THE
SUBADVISORY AGREEMENT IN THE FUTURE IF IMCO HAS
DETERMINED THAT THE NEW SUBADVISER GROUP IS THE BEST?
A. In order to act in the best interests of the Fund and
its shareholders, the Board and IMCO will determine
if changes are necessary or desirable after
periodically comparing the investment performance of
the assets managed by the subadviser with other
accounts with similar investment objectives managed
by other advisers and after reviewing the
subadviser's COMPLIANCE with federal securities laws
and regulations.
NOTES:_________________________________________________
MEMBER QUESTION #7
Q. "JUST HOW WILL IMCO PROVIDE OVERSIGHT?"
A. Basically, just as we would with a portfolio manager
who is an employee of IMCO. IMCO will actively
monitor the activities of the subadvisers through
ongoing audits for compliance with investment
policies and parameters and regulatory requirements,
reviews of reports from the subadvisers, and ongoing
dialogues with designated subadviser personnel. In
addition, the USAA Funds' Board will continue to act
in its oversight role just as it has in the past.
NOTES:_______________________________________________
Page 23 of 30
- -------------------------------------------------------------------------------
PROPOSAL 3 APPROVAL OF A PROPOSAL TO PERMIT IMCO AND
THE BOARD TO:
1) APPOINT AND REPLACE SUBADVISERS,
2) ENTER INTO SUBADVISORY AGREEMENTS, AND
3) APPROVE AMENDMENTS TO SUBADVISORY AGREEMENTS
WITHOUT FURTHER SHAREHOLDER APPROVAL
- -------------------------------------------------------------------------------
FUNDS AFFECTED 15 Equity and Asset Strategy Funds
-------------------------------------------------------
A special shareholder meeting would be called to obtain
shareholder approval to:
CURRENTLY o appoint and replace subadvisers for a fund and
o enter into, and approve amendments to, subadvisory
agreements
-------------------------------------------------------
On 6/18/02, the SEC granted an order permitting IMCO to
PROPOSAL change subadvisers for each fund without first calling a
special shareholder meeting and obtaining shareholder
approval with the condition that the shareholders
approve this "manager-of-managers" arrangement first.
By approving this proposal, you will authorize IMCO and
the Board, without obtaining further shareholder
approval, will have the ability to: o appoint and
replace subadvisers for a fund and o enter into, and
approve amendments to, subadvisory agreements
IMPORTANT NOTES:
o IMCO WILL STILL NEED TO OBTAIN APPROVAL FROM THE
BOARD, including Independent Board Members, who
will oversee the subadviser selection process to
ensure that shareholders' interests are protected
whenever IMCO selects a subadviser or modifies a
subadvisory agreement.
o An Information Statement with all of the relevant
information of hiring new subadvisers would be sent
within 90 days from the date of hire.
o The fund will disclose in its prospectus the
existence, substance, and effect of the SEC order.
--------------------------------------------------------
o This proposal...
WILL permit the Board and IMCO to change the
fees payable to a subadviser without
FEES shareholder approval, however,
o This proposal...
WILL NOT permit the Board and IMCO to
increase the rate of the fees payable by the
FUND to IMCO under the advisory agreement
without first obtaining shareholder approval.
--------------------------------------------------------
Page 24 of 30
--------------------------------------------------------
WHY This prevents unnecessary administrative expenses and
potential harmful delays in seeking changes deemed
necessary and beneficial to shareholders by the fund's
Board.
--------------------------------------------------------
CONDITIONS A fund will NOT rely on the SEC order unless all of the
conditions below have been met:
o Proposed "manager of managers" structure is approved
by a majority of the fund's outstanding voting
securities (i.e. this proposal is approved).
o Disclosed all details of this order in the prospectus
relating to the fund.
o IMCO provides management and administrative services
to the fund, including overall supervisory
responsibility for the general management and
investment of the fund.
o Majority of the Fund's Board will be Independent
Board Members.
o Subadviser cannot be an affiliated person of the
subaccount or IMCO, without such arrangement being
approved by shareholders
o Board & Independent Board Members must make a
separate finding when a subadviser change is proposed
for the fund WITH an affiliated subadviser and
document that this change does not involve a conflict
of interest.
o No director or officer of the Fund or of IMCO will
own directly or indirectly any interest in any
subadviser for the Fund (except under certain limited
circumstances).
o IMCO must furnish shareholders with an Information
Statement of any changes caused by the addition of a
new subadviser within 90 days of the hiring of a new
subadviser.
--------------------------------------------------------
PASSING Requires a "FOR" vote by a "majority of the outstanding
REQUIREMENT voting securities" of a fund which means THE LESSER OF
...
o More than 50% of the outstanding shares of the fund
OR
o 67% or more of the shares present at the meeting, if
more than 50% of the outstanding shares are present
at the meeting in person or by proxy
NOTE: Abstentions and broker non-votes will have the
effect of votes "AGAINST" this proposal.
--------------------------------------------------------
EFFECTIVE Upon shareholder approval.
-------------------------------------------------------
Page 25 of 30
--------------------------------------------------------
QUESTIONS IN PROXY
STATEMENT Questions answered in the PROXY STATEMENT are:
& SUMMARY
o WHY are shareholders being ASKED TO VOTE on this proposal?
o HOW will shareholders be INFORMED OF NEW SUBADVISERS
for a fund?
o What are the BENEFITS to a fund?
o What are the CONDITIONS of the order?
o How does THE BOARD RECOMMEND SHAREHOLDERS VOTE on
Proposal 3?
o What PERCENTAGE OF SHAREHOLDERS' VOTES IS REQUIRED to
permit IMCO to enter into new or amended subadvisory
agreements without obtaining shareholder approval?
Questions answered in the SUMMARY OF THE PROPOSALS
document are:
o WHY are shareholders BEING ASKED TO VOTE on this
proposal?
o What are the BENEFITS to each fund?
o HOW will shareholders be INFORMED OF NEW SUBADVISERS
FOR A FUND?
-------------------------------------------------------
Page 26 of 30
- -------------------------------------------------------------------------------
PROPOSAL 4 APPROVAL OF AN AMENDMENT TO THE
INVESTMENT OBJECTIVE OF THE
USAA GROWTH FUND
-------------------------------------------------------
FUND AFFECTED USAA Growth Fund
--------------------------------------------------------
Two objectives exist:
CURRENT o Primary investment objective - Long term growth of
OBJECTIVE capital
o Secondary Objective - Regular income and conservation
of principal
--------------------------------------------------------
PROPOSAL To have a SOLE investment objective of "LONG-TERM growth
of capital"
--------------------------------------------------------
WHY Board and IMCO no longer believe the secondary
objectives of regular income and conservation of
principal are appropriate given the strategic direction
of the fund and investment style of the current
subadvisers.
--------------------------------------------------------
PASSING Requires a "FOR" vote by a "majority of the outstanding
REQUIREMENT voting securities" of the GROWTH FUND that means THE
LESSER OF ...
o More than 50% of the outstanding shares of the GROWTH
FUND
OR
o 67% or more of the shares of the Growth Fund present
at the meeting, if more than 50% of the outstanding
shares of the Growth Fund are present at the meeting
in person or by proxy NOTE: Abstentions and broker
non-votes will have the effect of votes "AGAINST"
this proposal.
--------------------------------------------------------
EFFECTIVE Upon shareholder approval.
--------------------------------------------------------
QUESTIONS IN PROXY Questions answered in the PROXY STATEMENT are:
STATEMENT
& SUMMARY o WHAT CHANGE is the board of directors proposing to
the fund's INVESTMENT objective?
o WHY is the Board of Directors proposing this CHANGE?
o How does the Board of Directors RECOMMEND
SHAREHOLDERS VOTE on this proposal?
o What PERCENTAGE OF SHAREHOLDERS' VOTES IS REQUIRED to
change the fund's investment objective?
Questions answered in the SUMMARY OF THE PROPOSALS
document are:
o WHAT CHANGE is the Board of Directors proposing TO
the Fund's INVESTMENT OBJECTIVE?
o WHY is the Board of Directors proposing this CHANGE?
--------------------------------------------------------
Page 27 of 30
- --------------------------------------------------------------------------------
PROPOSAL 5 APPROVAL OF AN AMENDMENT TO THE
INVESTMENT OBJECTIVE OF THE USAA
GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
FUND AFFECTED USAA Growth & Income Fund
--------------------------------------------------------
CURRENT Fund's investment objective places EQUAL EMPHASIS on
OBJECTIVE Growth and Income.
--------------------------------------------------------
PROPOSAL Change the Growth & Income fund's investment objectives
as follows:
o PRIMARY investment objective - Capital Growth
o SECONDARY investment objective - Current income
--------------------------------------------------------
WHY There has been a dramatic reduction in the number of
companies that pay dividends with respect to their
common stock. As a result, it is increasingly difficult
for a fund that invests primarily in equity securities
to comply with an objective that places equal emphasis
on growth and income.
--------------------------------------------------------
PASSING Requires a "FOR" vote by a "majority of the outstanding
REQUIREMENT voting securities" of GROWTH & INCOME fund which means
THE LESSER OF ...
o More than 50% of the outstanding shares of the GROWTH
& INCOME fund
OR
o 67% or more of the shares of the Growth & Income Fund
present at the meeting, if more than 50% of the
outstanding shares of the Growth & Income Fund are
present at the meeting in person or by proxy NOTE:
Abstentions and broker non-votes will have the effect
of votes "AGAINST" this proposal.
--------------------------------------------------------
EFFECTIVE Upon shareholder approval.
--------------------------------------------------------
QUESTIONS IN PROXY Questions answered in the Proxy statement are:
STATEMENT & SUMMARY
o WHAT CHANGE is the Board of Directors proposing TO
THE FUND'S INVESTMENT OBJECTIVE?
o WHY is the Board of Directors proposing this CHANGE?
o How does the Board of Directors RECOMMEND
SHAREHOLDERS VOTE on this proposal?
o What PERCENTAGE OF SHAREHOLDERS' VOTES IS REQUIRED to
change the fund's investment objectives?
Questions answered in the SUMMARY OF THE PROPOSALS
document are:
o WHAT CHANGE is the Board of Directors proposing TO
the Fund's INVESTMENT OBJECTIVE?
o WHY is the Board of Directors proposing this CHANGE?
--------------------------------------------------------
Page 28 of 30
GEORGESON SHAREHOLDER COMMUNICATIONS
================================================================================
TELEPHONE Georgeson Shareholder Communications (GSC) will call to
SOLICITATION solicit votes.
o Monday - Friday between the hours of 9:00 a.m. and
7:00 p.m. CST
o Saturday from 9:00 a.m. to 5:00 p.m. Central Standard
Time only.
If the shareholder (S/H) wants to vote when solicited by
Georgeson Communications, the Georgeson Communications
rep will record the vote. A confirmation statement will
be generated and mailed to the shareholder.
If the shareholder requests a duplicate Proxy Statement
through Georgeson, Georgeson will contact ADP.
--------------------------------------------------------
USAA TRANSFERS TO After confirming that the shareholder wants to vote
GEORGESON now by telephone:
USAA Rep transfers S/H to Georgeson at (866) 748-4465.
*USAA Rep introduces himself/herself to Georgeson.
*USAA Rep states the S/H name and address.
*USAA Rep introduces Georgeson rep to S/H.
Script Suggestion:
o HELLO, THIS IS _____FROM USAA. I HAVE___ ON THE LINE
TO VOTE HIS/HER PROXY CARD(S). THE ADDRESS OF THE
CUSTOMER IS _____, CITY AND STATE.
o HELLO,__ THANK YOU FOR HOLDING, I HAVE__ ON THE LINE
WHO WILL TAKE YOUR VOTE.
--------------------------------------------------------
GEORGESON TRANSFERS If S/H has questions regarding his/her account and/or
TO USAA in-depth Proxy questions when Georgeson solicits vote,
the Georgeson rep will transfer call.
Rep transfers S/H to USAA at 1-800-531-8448.
*Georgeson Rep introduces himself/herself to USAA.
*Georgeson Rep states the S/H name and address.
*Georgeson Rep introduces USAA rep to S/H.
*USAA rep verifies S/H identity with name, DOB or SSN.
Page 29 of 30
COPY OF INTERNET PAGE
USAA Mutual Fund Shareholders: Your Vote Counts
If you owned a USAA equity mutual fund as of AUGUST 23, 2002, you
recently received a proxy statement in the mail. It tells you about
important issues that affect USAA mutual funds.
USAA's mutual fund board of directors carefully considered the proposals
and recommends voting IN FAVOR OF all of the proposals. Your "FOR" vote
on these issues will enable us to meet your future investment needs with
the quality you expect.
Please review your proxy statement and submit your vote on or before the
shareholder meeting on OCTOBER 18, 2002.
BEFORE YOU VOTE
o Read your proxy statement and determine your vote.
o Have your proxy card(s) available. You should have a separate proxy card for
each of your accounts.
o If you did not receive proxy card(s) or if you have questions about voting,
call toll-free, 1-800-531-8448.
FOUR WAYS TO VOTE
1. INTERNET
o Go to: PROXYVOTE.COM
o Enter the 12-digit control number from each proxy card.
o Follow the instructions on the site.
o You will need to submit your vote separately for each proxy card you've
received.
2. PHONE
o Call toll-free, 1-800-690-6903.
o Enter the 12-digit control number from each proxy card.
o Follow the recorded instructions.
3. MAIL
o Mark your choices and sign each proxy card.
o Return your completed proxy card(s) in the provided postage-paid envelope.
4. IN PERSON
o You are invited to attend the mutual fund shareholder meeting:
OCTOBER 18, 2002, 3:00 p.m. Central Time
USAA Building, McDermott Auditorium
9800 Fredericksburg Road, San Antonio, Texas
HIS COMMUNICATION IS BEING MADE ON BEHALF OF USAA MUTUAL FUND, INC. AND
USAA INVESTMENT TRUST. SHAREHOLDERS OF THE AFFECTED USAA MUTUAL FUNDS
WILL RECEIVE A PROXY STATEMENT ON THESE MATTERS. SHAREHOLDERS SHOULD READ
THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT CONTAINS
IMPORTANT INFORMATION. SHAREHOLDERS MAY OBTAIN AN ADDITIONAL FREE COPY OF
THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME
AVAILABLE FROM USAA INVESTMENT MANAGEMENT COMPANY OR THE SEC'S WEB SITE
AT WWW.SEC.GOV.
Page 30 of 30
[COPY OF PROXYVOTE.COM VOTING PAGE]
[Ignites Article Used as handout to telephone reps]
Study: Subadvising More Popular Than Ever
New research shows that fund firms are relying on subadvisors to a much greater
degree than ever before, DOW JONES NEWSWIRES reports.
According to a study by FINANCIAL RESEARCH, 43% of the mutual funds launched
last year were subadvised funds. That compares to just 13% in 2000 and 19% in
1999, the previous record high.
The surge has mostly to do with the fact that far fewer new funds are being
introduced. But another factor seems to be that companies want to keep up with
evolving market trends and see subadvisors as a quicker and cheaper way to do
it.
If you fail to offer the product of the moment, you stand to miss out on
considerable inflows, says John Benvenuto, the Financial Research consultant who
authored the report. Subadvisors are helping firms keep on top of trends, he
says.
Last year, for instance, when small-cap value was the hot sector, six mid-cap
value and five more small-cap value funds hit the market with the help of
subadvisors. The year before, only one such subadvised fund was introduced, the
report says.
Another big reason for the subadvising increase was that several firms with
their own fund families brought out entire lines of subadvised funds.
AMERICAN EXPRESS FINANCIAL ADVISORS, for example, introduced what it called the
Partners series, which is made up of seven mostly value-oriented subadvised
funds to balance out Amex's significant growth offerings.
And PACIFIC LIFE INSURANCE broke into the retail fund business last year by
introducing a line of 12 funds subadvised by managers like PUTNAM and PIMCO.
All in all, 106 subadvised funds hit the market last year. Eighty were U.S.
stock funds, 19 were international funds and seven were fixed-income.
At year-end, assets in subadvised funds came to $434 billion, or a record 10.6%
of total industry assets. That share should climb to 12.5% by 2005, Financial
Research estimates.
Though new companies continue to embrace the subadvising model, assets in
subadvised funds remain mostly in the hands of just a few major firms.
VANGUARD heads the pack, handling 43% of overall subadvised fund assets. Nearly
$200 billion, or a third of its total managed assets, belonged to subadvised
funds last year.
No. 2 was SEI INVESTMENTS, with $49 billion in subadvised funds.
WELLINGTON, meanwhile, is the biggest manager that subadvises funds, running
$122 billion for several Vanguard portfolios.
Contact Joe Morris at jamorris@mac.com
(NEWS SUMMARIES BASED ON ORIGINAL REPORTS IN OTHER PUBLICATIONS ARE PREPARED BY
THE IGNITES.COM STAFF AND ARE NOT CREATED, SPONSORED, APPROVED OR ENDORSED BY
THE PUBLICATIONS TO WHICH THE ORIGINAL REPORTS ARE ATTRIBUTED.)