Prospectus - USAA

any such income in the future. However, of course, changes in federal tax laws
or other unforeseen circumstances could result in a Fund’s earning income that
is a tax preference item for purposes of the federal AMT.
TEMPORARY DEFENSIVE STRATEGY
Each Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund’s principal investment strategies in attempting to
respond to adverse market, economic, political, or other conditions. The effect
of taking such a temporary defensive position is that a Fund may not achieve its
investment objective(s). To the extent that these temporary investments produce
taxable income, that income may result in that Fund not fully achieving its
investment objective during the time it is in this temporary defensive posture.
CALIFORNIA BOND FUND
What is the credit quality of the Fund's investments?
Under normal market conditions, we will invest the Fund’s assets so that at least
50% of the total market value of the tax-exempt securities are rated within the
three highest long-term rating categories (A or higher) by such rating agencies
as Moody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Ratings
Group (S&P), Fitch Ratings, Inc. (Fitch), Dominion Bond Rating Service
Limited (Dominion); or in the highest short-term rating category by Moody’s,
S&P, Fitch, or Dominion.
Investment-grade securities include securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities, as well as securities rated or
subject to a guarantee of an obligor that is rated within the categories listed
by at least one of the Nationally Recognized Statistical Rating Organizations
(NRSROs). Below are investment-grade ratings for four of the current NRSRO
rating agencies:
Long-Term Short-Term
Rating Agency Debt Securities Debt Securities
Moody’s At least Baa3 At least Prime–3 or MIG 3
S&P At least BBB– At least A–3 or SP–2
Fitch At least BBB– At least F3
Dominion At least BBB low At least R–2 low
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