CONFIDENTIAL DRAFT


                                                   FINAL - APPROVED MAY 26, 2006

                                                                    CONFIDENTIAL
                                                           FOR INTERNAL USE ONLY
                                                               DO NOT DISTRIBUTE


                              2006 PROXY STATEMENT


          FOR USE ON MEDIA CALLS BETWEEN MAY 26, 2006 AND JULY 19, 2006


                                     SUMMARY

PURPOSE OF THE PROXY
Shareholders are being asked to:
     *  Re-elect trustees
     *  Approve plans of reorganization

The   reorganizations   would   benefit  the  Funds  by  achieving   operational
efficiencies and cost savings through  reductions in future  reporting,  filing,
and proxy  costs,  as well as  reductions  in costs  associated  with the Funds'
administration.

PROPOSALS
PROPOSAL 1 - Re-elect Trustees
     *  The Board of Trustees  has adopted a policy that each Trustee be elected
        or re-elected at least once every five years.

     *  The last time the Board of Trustees was  presented to  shareholders  for
        election  was July  2001,  so it is now  time to  present  the  Board of
        Trustees to shareholders for re-election.

PROPOSAL 2 - Approve Plans of Reorganization
     *  Shareholders are being asked to approve plans of reorganization  for the
        existing Funds (except the Florida  Tax-Free Income Fund and the Florida
        Tax-Free Money Market Fund).

     *  The USAA family of funds  currently  consists of 39 mutual  funds.  Each
        Fund is a series of one of four legal entities:  USAA Mutual Fund, Inc.,
        USAA Tax Exempt Fund, Inc., USAA Investment Trust, and USAA Mutual Funds
        Trust (formerly USAA State Tax-Free Trust).  USAA Mutual Fund, Inc., and
        USAA Tax Exempt Fund, Inc. are each organized as Maryland  corporations.
        USAA  Investment  Trust and USAA Mutual  Funds Trust are  organized as a
        Massachusetts   business   trust  and  a   Delaware   statutory   trust,
        respectively.  To date, each of these four entities has been governed by
        boards  of  directors  or  boards  or  trustees  comprised  of the  same
        individuals for financial and operational efficiencies.

     *  Because shareholders of the Florida Tax-Free Income Fund and the Florida
        Tax-Free Money Market Fund are already Funds of USAA Mutual Funds Trust,
        they are not required to vote on a reorganization, and they are entitled
        to vote only on Proposal 1.

ELIGIBLE TO VOTE

     *  Shareholders  of record of each Fund as of the close of  business on May
        26,  2006,  are  entitled  to vote  at the  shareholder  meeting  or any
        adjournment thereof.

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     *  It is expected that the Notice of Special  Meeting,  the proxy card, the
        proxy summary, and the proxy statement will be mailed to shareholders of
        record on or about May 26, 2006.

SHAREHOLDER MEETING
Wednesday,  July 19, 2006, at 2 p.m. CT in the McDermott  Auditorium of the USAA
Building.

MORE  INFORMATION:  Shareholders  of record date had a proxy statement and proxy
card mailed to them.  Copies of the final proxy statement are available for free
at the SEC's website at WWW.SEC.GOV

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                           DETAILS ABOUT THE PROPOSALS

- --------------------------------------------------------------------------------
PROPOSAL 1
ELECTION OF BOARD OF DIRECTORS
- --------------------------------------------------------------------------------

FUNDS AFFECTED
     *  All Funds

PROPOSAL
     *  Re-elect the five Trustees of each Fund.

WHY?
     *  The Board of Trustees  has adopted a policy that each Trustee be elected
        or re-elected at least once every five years. The last time the Board of
        Trustees was presented to shareholders for election was July 2001, so it
        is now  time to  present  the  Board  of  Trustees  to  shareholder  for
        re-election.

     *  Each of the  five  nominees  currently  serves  on the  Funds'  Board of
        Trustees and was elected or re-elected in 2001.

WHO ARE THE CURRENT TRUSTEES?
     *  INDEPENDENT TRUSTEES*
          o  Richard A. Zucker
          o  Barbara B. Dreeben
          o  Robert L. Mason, Ph.D.
          o  Michael F. Reimherr

     *  MANAGEMENT TRUSTEE
          o  Christopher W. Claus

          * Dr. Laura Starks recently resigned from the Board of Trustees.

APPROVAL
     *  The nominees for Trustees of the Funds receiving the vote of a plurality
        of the  outstanding  voting  shares  of each of the four  Companies  and
        Trusts cast at a meeting shall be elected, provided a quorum is present.

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- --------------------------------------------------------------------------------
PROPOSAL 2
APPROVE PLANS OF REORGANIZATION
- --------------------------------------------------------------------------------

FUNDS AFFECTED
     *  All Funds (except for the Florida  Tax-Free  Income Fund and the Florida
        Tax-Free Money Market Fund).

PROPOSAL
     *  Organize all Funds under the same legal entity (USAA Mutual Funds Trust,
        formerly known as USAA State Tax-Free Trust) that is subject to the same
        state law (Delaware),  the same governing documents,  and the same legal
        requirements regarding the operation of each Fund.

     *  The primary purposes of the proposed  Reorganizations are to seek future
        economies of scale and to  eliminate  certain  costs,  some of which are
        paid by the  Funds,  associated  with  operating  four  different  legal
        entities  organized  in  three  different  states,  each  of  which  has
        different fundamental investment restrictions.

     *  On April 19, 2006, the Board of each existing  Fund,  except the Florida
        Tax-Free Income Fund and the Florida Tax-Free Money Market Fund (each an
        Existing  Fund),  approved a series of initiatives  that are designed to
        streamline  and  modernize  the  operations  of the  Existing  Funds  by
        organizing  all of the USAA  family  of funds  into  one  legal  entity,
        leaving  all Funds (New  Funds)  subject to one state law and one set of
        governing documents.

     *  After the  reorganizations  there will be one legal  entity (USAA Mutual
        Funds  Trust)  operating  under  one  uniform  set of  legally  required
        investment restrictions.

WHY?
     *  Currently,  the USAA family of funds are organized  under four different
        legal entities subject to three different state laws that have different
        governing   documents  and   requirements   for,   among  other  things,
        shareholder meetings and shareholder approval.

     *  The primary  purpose of the proposed  reorganizations  is to seek future
        economies  of scale  and to  eliminate  certain  costs  associated  with
        operating four different  legal  entities  organized in three  different
        states.

     *  Also, the  reorganization  will permit the funds to develop  uniform and
        modern fundamental investment restrictions to seek additional efficiency
        of operations.

APPROVAL
     *  Shareholders of each Fund are being asked to vote separately.  By voting
        "FOR"  Proposal  2,  shareholders  of a Fund will effect all the actions
        that are applicable to that Fund.

     *  Approval of Proposal 2 will require the "yes" vote of a "majority of the
        outstanding  voting  securities,"  as  provided  in the 1940 Act, of the
        following  Funds:  Balanced  Strategy Fund,  Cornerstone  Strategy Fund,
        Growth and Tax Strategy Fund, Emerging Markets Fund, Precious Metals and
        Minerals Fund,  International  Fund,  World Growth Fund, GNMA Trust, and
        Treasury Money Market Trust.

     *  Approval of Proposal 2 will require the "yes" vote of a "majority of the
        aggregate  number of shares  entitled  to vote:  for all other  Existing
        Funds entitled to vote on Proposal 2.

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IF APPROVED, THE REORGANIZATIONS WILL HAVE THE FOLLOWING EFFECTS WITH RESPECT TO
THE NEW FUNDS:

     1.  If elected,  the same Trustees  nominated for re-election in Proposal 1
         will serve as Trustees for the New Funds.

     2.  The New Funds will enter into investment  advisory agreements with IMCO
         that are  substantially  similar to the  agreements  currently in place
         with respect to the Existing  Funds,  except that, as discussed  below,
         there  will be  changes  to the  Lipper  Indexes  used to  compute  the
         performance  adjustment for three of the New Funds, a provision will be
         added  permitting  the Board to change a New Fund's  benchmark  without
         shareholder  approval,  there  will be a  change  to the  advisory  and
         transfer  agency  fees of one of the New  Funds,  and,  similar  to the
         equity  funds,  there will be a change to permit  IMCO to  implement  a
         manager-of  managers  structure  for all  Funds in the USAA  family  of
         funds.

     3.  IMCO will enter into subadvisory  agreements on behalf of the New Funds
         with  the  current   subadvisers   of  the  Existing   Funds  that  are
         substantially  identical  to the  agreements  currently  in place  with
         respect to the Existing Funds.

     4.  The  investment  objective(s)  of each New Fund will be  classified  as
         non-fundamental, meaning that the Board of the New Funds may change the
         investment  objective(s)  in light  of  market  circumstances  or other
         events, without shareholder approval.

     5.  The investment  objective of the New Funds  corresponding  to the First
         Start Growth Fund, the International  Fund, and the Precious Metals and
         Minerals Fund will be revised.

     6.  The  classification  of the New Funds  corresponding  to the Aggressive
         Growth Fund and the Precious  Metals and Minerals  Fund will be changed
         to non-diversified.

     7.  The New Funds will adopt more  modernized and  streamlined  fundamental
         investment restrictions than those currently in effect for the Existing
         Funds.

     8.  The Lipper Indexes used to compute the  performance  adjustment for the
         New Funds  corresponding  to the Capital  Growth Fund,  the First Start
         Growth Fund,  and the Growth and Tax Strategy Fund will be changed to a
         Lipper Index that is more  appropriate to the investment  strategies of
         each of the Existing Funds.

     9.  Under the new  advisory  agreement  for all Funds in the USAA family of
         funds,  IMCO will  have the  ability  to hire,  replace,  or  terminate
         subadvisers  with Board approval alone.  IMCO does not have any present
         intention to hire  subadvisers to manage the  day-to-day  activities of
         the  Precious  Metals and Minerals  Fund,  or any fixed income or money
         market fund.

     10. The transfer agency fee of the New Fund corresponding to the Aggressive
         Growth  Fund will be  reduced  and the  average  net asset  breakpoints
         applicable  to the  base  advisory  fee will be  increased  to make the
         Fund's pricing  structure more  competitive  with comparable  funds and
         enable IMCO to continue  retaining leading money managers in this asset
         class to manage the Fund's assets.

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