UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: CHRISTOPHER P. LAIA
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: MAY 31,
Date of reporting period: NOVEMBER 30, 2009
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED NOVEMBER 30, 2009
USAA GROWTH & TAX STRATEGY FUND
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA GROWTH AND TAX STRATEGY FUND]
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SEMIANNUAL REPORT
USAA GROWTH AND TAX STRATEGY FUND
NOVEMBER 30, 2009
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FUND OBJECTIVE
CONSERVATIVE BALANCE FOR THE INVESTOR BETWEEN INCOME, THE MAJORITY OF WHICH IS
EXEMPT FROM FEDERAL INCOME TAX, AND THE POTENTIAL FOR LONG-TERM GROWTH OF
CAPITAL TO PRESERVE PURCHASING POWER.
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TYPES OF INVESTMENTS
Invests at least a majority in tax-exempt bonds and money market instruments and
the remainder in blue chip stocks.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Investment Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
INVESTMENT OVERVIEW 7
FINANCIAL INFORMATION
Portfolio of Investments 12
Notes to Portfolio of Investments 34
Financial Statements 37
Notes to Financial Statements 40
EXPENSE EXAMPLE 51
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA INVESTMENT MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2010, USAA. All rights reserved.
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PRESIDENT'S MESSAGE
"IN MY OPINION, THOSE WHO WERE DIVERSIFIED
WEATHERED THE STORM BETTER THAN THOSE [PHOTO OF DANIEL S. MCNAMARA]
WHO WERE AGGRESSIVELY POSITIONED."
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DECEMBER 2009
As we head into 2010, I wish you a healthy and prosperous new year. I am
honored to be the new president of the USAA Investment Management Company, an
organization with a rich history of service and accomplishment.
At the time of this writing, the financial markets appear to be back on track --
an excellent time, in my opinion, to take stock of the past year. At the
beginning of 2009, stocks seemed priced for extinction. In the fixed income
market, credit spreads (or, the difference in bond yields) had widened to record
levels as investors fled to the safety of U.S. Treasury securities. The U.S.
economy was in a deep recession. Home prices continued to fall and unemployment
steadily increased, leading to a sharp decline in consumer spending.
In March 2009, however, world stock prices reversed course. For example, the S&P
500 Index rose 64% between the market bottom on March 6, 2009, and November 30,
2009. The fixed income market experienced record price appreciation, and the
prices of oil and other commodities such as gold and precious metals increased.
The dollar weakened, making U.S. goods and services less expensive to buyers
around the world. Meanwhile, the federal government's fiscal stimulus spending,
including its "cash for clunkers" program, seemed to help stabilize the economy.
In the third quarter, the U.S. gross domestic product grew at 2.2%.
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2 | USAA GROWTH AND TAX STRATEGY FUND
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I believe the worst of the crisis appears to be over. Nevertheless, risk
remains. And no one knows exactly what will happen next. This makes it an
opportune time for all of us to take stock of our investment portfolios.
Looking back at the market decline, many investors were not appropriately
positioned relative to their risk tolerance. In my opinion, those who were
diversified weathered the storm better than those who were aggressively
positioned.
With this in mind, I have undertaken a review of my own investment portfolio.
Like a medical exam helps me to take care of my physical health, a portfolio
checkup helps me to monitor my financial health. The process gives me the
opportunity to reflect on my goals, re-evaluate my risk tolerance, consider
changes in my investment strategy, and reposition my portfolio accordingly. I
urge you to do the same. Our trained service representatives are standing ready
to assist you -- free of charge.
At USAA Investment Management Company, we stand ready to help you with your
investment needs. We continue to offer what we consider an excellent value --
some of the industry's top investment talent, first-class service, and no-load
mutual funds. On behalf of all us, thank you for your business and the trust you
have placed in us.
Sincerely,
/S/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Investment Management Company
Diversification does not guarantee a profit or prevent a loss. o Mutual fund
operating expenses apply and continue throughout the life of the Fund. o Past
performance is no guarantee of future results.
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PRESIDENT'S MESSAGE | 3
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MANAGERS' COMMENTARY ON THE FUND
USAA Investment Management Company Northern Trust Investments, N.A.
CLIFFORD A. GLADSON, CFA MICHAEL LIAO, CFA
Tax-Exempt Bonds and Money CHRISTOPHER A. FRONK, CFA, CPA
Market Instruments Blue Chip Stocks
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o HOW DID THE USAA GROWTH AND TAX STRATEGY FUND (THE FUND) PERFORM?
For the six-month period ended November 30, 2009, the Fund had a total return
of 12.79%. This compares to returns of 20.50% for the S&P 500(R) Index, 15.42%
for the Lipper Balanced Funds Index, 12.06% for the Composite Index, and 4.75%
for the Barclays Capital Municipal Bond Index.
As of November 30, 2009, the Fund had a 12-month dividend yield of 3.17%,
compared to 2.26% for the average fund in the Lipper Balanced Funds peer
group.
o PLEASE CHARACTERIZE THE FUND'S PERFORMANCE IN LIGHT OF THE RECOVERY OF RISK
ASSETS DURING THE REPORTING PERIOD.
It was another solid period of performance, especially given the nature of
your Fund. The Fund is unique in that in must keep more than 50% of assets in
municipal bonds to pass tax-free income from those bonds to shareholders. The
remainder of the Fund is invested
Refer to page 9 for benchmark definitions.
Past performance is no guarantee of future results.
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4 | USAA GROWTH AND TAX STRATEGY FUND
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in an equity portfolio managed by Northern Trust Investments (NTI), which uses
a tax-managed index strategy that seeks to track the return of the S&P 500
Index while minimizing capital gains distributions.
In periods when the S&P 500 Index significantly outpaces the returns from
municipal bonds, the Fund tends to have a slight performance disadvantage
compared to other funds in the Lipper Balanced Fund peer group because its
peers can keep higher weightings in stocks. Having said that, our municipal
bond portfolio performed well, outperforming the Barclays Capital Municipal
Bond Index, while NTI performed roughly in line with the S&P 500 Index while
harvesting capital losses that leave the Fund in a good position to continue
to provide a high level of tax efficiency going forward. Finally, the Fund's
distribution yield is higher than the peer group average, with most of the
current income being tax-free.
o WHAT LED TO THE STRONG PERFORMANCE IN THE MUNICIPAL BOND PORTION OF THE FUND?
We continued to focus on carefully-researched, higher-yielding
investment-grade municipal bonds with maturities in the 20- to 30-year range,
with the goal of continuing to provide a high level of tax-free income to
shareholders. Interestingly, yields on The Bond Buyer-40 Bond Index of
long-term municipal bonds actually rose slightly over the period, from 5.32%
on May 31, 2009, to 5.43% on November 30, 2009. While bond prices and yields
move in opposite directions, the bonds we owned as a group enjoyed capital
appreciation as well as high current income.
As interest rates rise, existing bond prices fall.
The Bond Buyer-40 Bond Index represents an average of the prices of 40
recently issued municipal securities, based on quotations obtained from six
municipal securities broker's brokers. The 40 component issues are selected
according to defined criteria and are replaced by newer issues on a periodic
basis. This index is published daily and serves as the basis for futures
contracts.
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MANAGERS' COMMENTARY ON THE FUND | 5
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o ARE YOU CONCERNED ABOUT THE STATE OF MUNICIPAL FINANCES OR THE RISK OF
INFLATION?
Despite the fact that most municipal and state governments are under a lot of
pressure, the consensus view--which we share--is that they are busily
adjusting their fiscal plans to weather the storm. There also has been direct
aid from federal stimulus programs. The tax-free market received further
support from Build America Bonds, which allowed municipalities to sell bonds
in the taxable market, reducing supply in our market.
We are concerned about inflation longer term because of the huge amount of
government deficit spending. However, the immediate problem the Federal
Reserve Board is fighting is the potential for deflation. We continue to
monitor the situation closely and will make adjustments to the portfolio as
necessary. It's important for shareholders to keep in mind that this is a
long-term fund that seeks to maximize compounding of high tax-free dividend
yields.
o HOW DID THE EQUITY PORTION OF THE FUND MANAGED BY NTI PERFORM?
As we said in May's annual report, we entered the period "in a much better
position to be tax efficient in a rising market than at any point since we
took over the equity portion [of the Fund] at the end of 2006." We were able
to continue to perform roughly in line with the S&P 500 Index while harvesting
additional capital losses that can be used to offset any of the Fund's capital
gains; this will carry forward into next year. At the same time, we reduced
the active risk in the Fund, which is the risk that we won't perform in line
with the S&P 500 Index due to our buying and selling stocks to achieve tax
efficiency. Altogether, we had a strong six months and are well positioned
moving forward to fulfill our mandate.
On behalf of our colleagues at USAA, we thank you for your continued
investment in the Fund. We are working hard to keep your trust.
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6 | USAA GROWTH AND TAX STRATEGY FUND
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INVESTMENT OVERVIEW
USAA GROWTH AND TAX STRATEGY FUND (Ticker Symbol: USBLX)
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11/30/09 5/31/09
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Net Assets $145.8 Million $132.8 Million
Net Asset Value Per Share $12.21 $11.00
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AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/09
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5/31/09 to 11/30/09* 1 Year 5 Years 10 Years
12.79% 21.60% 2.35% 1.56%
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30-DAY SEC YIELD** AS OF 11/30/09 EXPENSE RATIO***
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2.85% 0.90%
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**Calculated as prescribed by the Securities and Exchange Commission.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
usaa.com.
***THE EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING EXPENSES INCLUDING
ANY ACQUIRED FUND FEES AND EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID
INDIRECTLY, AS REPORTED IN THE FUND'S PROSPECTUS DATED OCTOBER 1, 2009, AND IS
CALCULATED AS A PERCENTAGE OF AVERAGE NET ASSETS. THIS EXPENSE RATIO MAY DIFFER
FROM THE EXPENSE RATIO DISCLOSED IN THE FINANCIAL HIGHLIGHTS.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
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INVESTMENT OVERVIEW | 7
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
BARCLAYS
CAPITAL USAA GROWTH
MUNICIPAL LIPPER BALANCED COMPOSITE AND TAX S&P 500
BOND INDEX FUNDS INDEX INDEX STRATEGY FUND INDEX
11/30/1999 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
12/31/1999 9,925.45 10,295.89 10,277.41 10,176.00 10,588.96
1/31/2000 9,882.23 10,037.24 10,031.73 9,974.96 10,056.95
2/29/2000 9,997.08 10,013.06 10,102.62 10,116.87 9,866.57
3/31/2000 10,215.50 10,602.62 10,645.96 10,790.74 10,831.81
4/30/2000 10,155.15 10,408.32 10,438.36 10,534.81 10,505.92
5/31/2000 10,102.32 10,310.38 10,272.40 10,284.83 10,290.37
6/30/2000 10,370.02 10,474.95 10,591.61 10,517.07 10,544.06
7/31/2000 10,514.31 10,446.40 10,586.05 10,439.17 10,379.21
8/31/2000 10,676.36 10,912.69 11,028.90 10,798.73 11,023.91
9/30/2000 10,620.81 10,683.03 10,706.17 10,253.69 10,441.92
10/31/2000 10,736.70 10,673.58 10,702.27 10,356.29 10,397.78
11/30/2000 10,817.93 10,286.13 10,277.25 10,036.43 9,578.02
12/31/2000 11,085.22 10,541.79 10,474.26 10,108.55 9,624.90
1/31/2001 11,195.05 10,765.52 10,659.44 10,199.73 9,966.39
2/28/2001 11,230.55 10,347.64 10,198.76 9,707.37 9,057.63
3/31/2001 11,331.20 10,013.48 9,935.69 9,342.70 8,483.83
4/30/2001 11,208.42 10,433.71 10,234.60 9,673.53 9,143.11
5/31/2001 11,329.11 10,526.64 10,322.56 9,722.54 9,204.37
6/30/2001 11,404.91 10,365.35 10,232.05 9,606.37 8,980.35
7/31/2001 11,573.85 10,357.85 10,241.61 9,668.11 8,891.94
8/31/2001 11,764.50 10,063.08 10,040.06 9,291.51 8,335.29
9/30/2001 11,725.03 9,579.49 9,624.49 8,817.36 7,662.19
10/31/2001 11,864.73 9,739.81 9,786.81 9,004.16 7,808.31
11/30/2001 11,764.71 10,127.59 10,050.02 9,359.10 8,407.25
12/31/2001 11,653.41 10,200.63 10,051.60 9,268.52 8,480.90
1/31/2002 11,855.54 10,111.16 10,053.72 9,299.90 8,357.14
2/28/2002 11,998.37 10,042.46 10,033.35 9,180.67 8,195.97
3/31/2002 11,763.24 10,262.03 10,103.45 9,325.31 8,504.21
4/30/2002 11,993.15 10,015.77 9,938.20 9,003.31 7,988.62
5/31/2002 12,066.03 10,011.10 9,934.25 8,984.37 7,929.77
6/30/2002 12,193.61 9,584.01 9,646.78 8,599.56 7,364.93
7/31/2002 12,350.43 9,092.80 9,358.50 8,465.99 6,790.80
8/31/2002 12,498.90 9,186.09 9,443.15 8,542.31 6,835.39
9/30/2002 12,772.66 8,637.64 9,096.58 8,277.07 6,092.52
10/31/2002 12,560.92 8,997.69 9,344.21 8,526.92 6,628.76
11/30/2002 12,508.72 9,362.72 9,531.05 8,629.42 7,018.93
12/31/2002 12,772.66 9,110.34 9,394.31 8,497.25 6,606.58
1/31/2003 12,740.29 8,973.87 9,243.85 8,374.29 6,433.51
2/28/2003 12,918.42 8,906.57 9,255.60 8,413.12 6,336.98
3/31/2003 12,926.14 8,942.92 9,286.10 8,548.62 6,398.51
4/30/2003 13,011.55 9,426.87 9,664.27 8,854.86 6,925.56
5/31/2003 13,316.21 9,843.81 10,011.11 9,115.49 7,290.44
6/30/2003 13,259.62 9,918.46 10,032.93 9,160.84 7,383.45
7/31/2003 12,795.63 9,941.44 9,936.07 9,049.44 7,513.63
8/31/2003 12,891.06 10,109.27 10,067.54 9,141.18 7,660.16
9/30/2003 13,270.06 10,122.10 10,154.61 9,252.58 7,578.81
10/31/2003 13,203.24 10,456.05 10,379.33 9,443.83 8,007.54
11/30/2003 13,340.85 10,548.62 10,482.17 9,522.97 8,078.00
12/31/2003 13,451.32 10,926.59 10,772.95 9,784.98 8,501.65
1/31/2004 13,528.37 11,089.75 10,865.97 9,871.22 8,657.69
2/29/2004 13,731.96 11,240.89 11,016.06 9,970.73 8,778.03
3/31/2004 13,684.14 11,187.27 10,899.08 9,870.05 8,645.60
4/30/2004 13,360.06 10,952.16 10,691.60 9,676.52 8,509.88
5/31/2004 13,311.62 11,000.52 10,727.26 9,749.93 8,626.66
6/30/2004 13,360.06 11,172.51 10,839.65 9,843.10 8,794.41
7/31/2004 13,535.88 10,962.18 10,719.15 9,587.95 8,503.34
8/31/2004 13,807.14 11,028.86 10,824.91 9,641.67 8,537.74
9/30/2004 13,880.43 11,192.70 10,917.50 9,891.03 8,630.20
10/31/2004 13,999.88 11,313.74 11,034.69 10,120.58 8,762.05
11/30/2004 13,884.40 11,618.50 11,198.08 10,390.64 9,116.58
12/31/2004 14,053.96 11,908.52 11,443.60 10,698.46 9,426.80
1/31/2005 14,185.30 11,755.12 11,374.55 10,530.38 9,197.02
2/28/2005 14,138.11 11,921.42 11,463.72 10,610.77 9,390.57
3/31/2005 14,048.95 11,757.29 11,316.73 10,433.63 9,224.28
4/30/2005 14,270.50 11,616.00 11,283.16 10,396.89 9,049.33
5/31/2005 14,371.36 11,882.37 11,507.00 10,764.27 9,337.27
6/30/2005 14,460.52 11,967.75 11,562.74 10,934.54 9,350.52
7/31/2005 14,395.16 12,233.70 11,743.04 11,163.57 9,698.26
8/31/2005 14,540.50 12,269.09 11,751.58 11,126.63 9,609.77
9/30/2005 14,442.57 12,317.73 11,775.56 11,219.50 9,687.60
10/31/2005 14,354.86 12,124.32 11,670.31 11,093.27 9,526.10
11/30/2005 14,423.77 12,418.67 11,916.40 11,360.58 9,886.40
12/31/2005 14,547.81 12,527.45 11,990.25 11,450.19 9,889.84
1/31/2006 14,587.07 12,826.49 12,171.25 11,569.79 10,151.70
2/28/2006 14,685.00 12,810.44 12,193.30 11,641.55 10,179.25
3/31/2006 14,583.73 12,935.18 12,265.39 11,638.84 10,305.95
4/30/2006 14,578.71 13,076.22 12,322.16 11,703.06 10,444.34
5/31/2006 14,643.66 12,816.95 12,170.97 11,558.57 10,143.74
6/30/2006 14,588.53 12,809.28 12,151.04 11,535.29 10,157.49
7/31/2006 14,762.05 12,869.07 12,206.04 11,640.38 10,220.14
8/31/2006 14,981.10 13,116.57 12,446.97 11,842.47 10,463.31
9/30/2006 15,085.30 13,305.65 12,619.74 12,033.99 10,732.96
10/31/2006 15,179.89 13,615.63 12,867.42 12,253.68 11,082.70
11/30/2006 15,306.44 13,877.91 13,045.59 12,408.28 11,293.45
12/31/2006 15,252.35 13,980.54 13,086.40 12,464.37 11,451.87
1/31/2007 15,213.31 14,131.32 13,177.15 12,543.32 11,625.06
2/28/2007 15,413.77 14,077.39 13,145.92 12,490.69 11,397.69
3/31/2007 15,375.76 14,198.17 13,193.38 12,537.23 11,525.17
4/30/2007 15,421.29 14,606.53 13,483.58 12,828.59 12,035.68
5/31/2007 15,353.00 14,920.37 13,679.44 13,022.83 12,455.66
6/30/2007 15,273.44 14,780.97 13,559.42 12,875.38 12,248.74
7/31/2007 15,391.84 14,529.00 13,405.80 12,706.56 11,868.97
8/31/2007 15,325.44 14,646.45 13,415.93 12,733.21 12,046.88
9/30/2007 15,552.21 15,060.24 13,751.07 13,069.27 12,497.42
10/31/2007 15,621.54 15,325.07 13,917.18 13,185.56 12,696.21
11/30/2007 15,721.15 14,965.79 13,657.91 12,881.42 12,165.43
12/31/2007 15,764.79 14,893.10 13,613.81 12,780.15 12,081.03
1/31/2008 15,963.58 14,400.75 13,305.62 12,437.67 11,356.39
2/29/2008 15,232.73 14,213.38 12,790.19 11,869.86 10,987.47
3/31/2008 15,668.11 14,104.76 12,882.14 12,045.74 10,940.03
4/30/2008 15,851.45 14,572.37 13,281.02 12,417.91 11,472.84
5/31/2008 15,947.29 14,733.35 13,450.84 12,526.84 11,621.45
6/30/2008 15,767.29 13,954.42 12,848.55 11,937.86 10,641.71
7/31/2008 15,827.23 13,777.69 12,752.59 11,846.38 10,552.26
8/31/2008 16,012.45 13,830.08 12,893.17 12,020.19 10,704.89
9/30/2008 15,261.54 12,785.20 11,961.11 11,130.56 9,751.01
10/31/2008 15,105.76 11,146.60 10,782.17 10,005.52 8,113.35
11/30/2008 15,153.79 10,638.81 10,300.91 9,599.76 7,531.18
12/31/2008 15,374.72 10,994.80 10,371.26 9,546.35 7,611.31
1/31/2009 15,937.48 10,485.85 10,227.14 9,425.16 6,969.78
2/28/2009 16,021.21 9,807.59 9,793.02 9,089.54 6,227.65
3/31/2009 16,024.14 10,353.08 10,181.92 9,408.79 6,773.17
4/30/2009 16,344.25 11,066.21 10,838.27 9,945.09 7,421.42
5/31/2009 16,517.15 11,621.39 11,281.36 10,349.67 7,836.52
6/30/2009 16,362.42 11,649.14 11,215.60 10,323.40 7,852.07
7/31/2009 16,636.18 12,349.07 11,727.56 10,769.36 8,445.98
8/31/2009 16,920.59 12,679.54 12,079.51 11,054.01 8,750.91
9/30/2009 17,527.83 13,084.97 12,597.91 11,615.66 9,077.46
10/31/2009 17,159.89 12,931.99 12,303.50 11,338.41 8,908.83
11/30/2009 17,301.68 13,413.40 12,642.45 11,673.02 9,443.21
[END CHART]
Data from 11/30/99 to 11/30/09.
See next page for benchmark definitions.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
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8 | USAA GROWTH AND TAX STRATEGY FUND
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The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Growth and Tax Strategy Fund to the following benchmarks:
o The unmanaged Barclays Capital Municipal Bond Index is a benchmark of total
return performance for the long-term, investment-grade, tax-exempt bond
market.
o The unmanaged Lipper Balanced Funds Index tracks the total return performance
of the 30 largest funds within the Lipper Balanced Funds category.
o The Composite Index is comprised of 51% of the Lipper General Municipal Debt
Funds Index and 49% of the Lipper Large-Cap Core Funds Index. The unmanaged
Lipper General Municipal Debt Funds Index tracks the total return performance
of the 30 largest funds within this category. This category includes funds
that invest at least 65% of their assets in municipal debt issues in the top
four credit categories. The unmanaged Lipper Large-Cap Core Funds Index tracks
the total return performance of the 30 largest funds within this category.
This category includes funds that, by portfolio practice, invest at least 75%
of their equity assets in companies with market capitalizations (on a
three-year weighted basis) of greater than 300% of the dollar-weighted median
market capitalization of the middle 1,000 securities of the S&P 1500 Index.
Large-cap core funds have more latitude in the companies in which they invest.
These funds have an above-average price-to-earnings ratio, price-to-book
ratio, and three-year sales growth figure, compared to the S&P 500 Index.
o The unmanaged S&P 500 Index represents the weighted average performance of a
group of 500 widely held, publicly traded stocks.
================================================================================
INVESTMENT OVERVIEW | 9
<PAGE>
================================================================================
TOP 10 INDUSTRIES
AS OF 11/30/09
(% of Net Assets)
Integrated Oil & Gas ............................ 3.5%
Pharmaceuticals ................................. 3.1%
Computer Hardware ............................... 2.5%
Systems Software ................................ 1.8%
Other Diversified Financial Services ............ 1.7%
Aerospace & Defense ............................. 1.3%
Household Products .............................. 1.3%
Integrated Telecommunication Services ........... 1.3%
Communications Equipment ........................ 1.2%
Soft Drinks ..................................... 1.2%
TOP 5 TAX-EXEMPT BOND HOLDINGS
AS OF 11/30/09
(% of Net Assets)
Lewisville ...................................... 3.8%
New York City Trust for Cultural Resources ...... 2.8%
Hospital Finance Auth. .......................... 2.8%
Detroit Sewage Disposal ......................... 2.4%
Mashantucket (Western) Pequot Tribe ............. 2.3%
TOP 5 BLUE CHIP STOCK HOLDINGS
AS OF 11/30/09
(% of Net Assets)
Exxon Mobil Corp. ............................... 1.7%
Microsoft Corp. ................................. 1.1%
Procter & Gamble Co. ............................ 0.9%
Apple, Inc. ..................................... 0.9%
Johnson & Johnson ............................... 0.9%
You will find a complete list of securities that the Fund owns on pages 12-33.
================================================================================
10 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
o ASSET ALLOCATION -- 11/30/2009 o
[PIE CHART OF ASSET ALLOCATION]
TAX-EXEMPT BONDS 53.6%
BLUE CHIP STOCKS 46.9%
TAX-EXEMPT MONEY MARKET INSTRUMENTS 1.4%
[END CHART]
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
INVESTMENT OVERVIEW | 11
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
November 30, 2009 (unaudited)
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------
TAX-EXEMPT SECURITIES (55.0%)
TAX-EXEMPT BONDS (53.6%)
ARIZONA (1.4%)
$2,250 Univ. Medical Center Corp. 5.00% 7/01/2035 $ 2,039
--------
ARKANSAS (1.8%)
2,500 Conway Health Facilities Board 6.40 8/01/2029 2,559
--------
CALIFORNIA (0.5%)
4,435 West Contra Costa USD (INS) 5.05(a) 8/01/2034 803
--------
COLORADO (0.3%)
500 Univ. of Colorado Hospital Auth. 5.00 11/15/2037 471
--------
CONNECTICUT (2.3%)
6,000 Mashantucket (Western) Pequot Tribe,
acquired 9/21/1999; $5,583(b),(c) 5.75 9/01/2027 3,300
--------
FLORIDA (2.1%)
3,000 Orlando (INS) 5.13 11/01/2027 3,122
--------
HAWAII (0.8%)
1,000 State (INS) 5.25 9/01/2019 1,122
--------
INDIANA (3.8%)
1,250 Finance Auth. 5.38 11/01/2032 1,257
550 Health and Educational Facility Financing Auth. 5.25 2/15/2036 491
1,000 Health and Educational Facility Financing Auth. 5.00 2/15/2039 885
3,000 Rockport (INS) 4.63 6/01/2025 2,864
--------
5,497
--------
KENTUCKY (0.7%)
1,000 Economic Dev. Finance Auth. (INS) 6.00 12/01/2033 1,087
--------
LOUISIANA (1.2%)
985 Local Government Environmental Facilities and
Community Dev. Auth. (INS) 6.55 9/01/2025 854
1,000 Parish of St. John the Baptist 5.13 6/01/2037 878
--------
1,732
--------
MAINE (0.4%)
595 Health and Higher Educational Facilities Auth. (INS)5.75 7/01/2030 610
--------
================================================================================
12 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------
MICHIGAN (7.2%)
$3,500 Detroit Sewage Disposal (INS)(PRE)(d) 5.75% 7/01/2026 $ 3,551
3,000 Hospital Finance Auth. (INS) 5.00 11/15/2026 2,950
4,000 Hospital Finance Auth. 6.25 10/01/2027 4,000
--------
10,501
--------
MISSOURI (0.9%)
1,500 Health and Educational Facility Financing Auth. 5.38 2/01/2035 1,314
--------
NEW JERSEY (2.1%)
2,000 EDA 5.00 9/01/2033 2,050
1,000 Middlesex County Improvement Auth. 5.00 8/15/2023 1,017
--------
3,067
--------
NEW MEXICO (0.6%)
1,000 Farmington 4.88 4/01/2033 833
--------
NEW YORK (10.1%)
1,000 Dormitory Auth. 5.50 5/01/2037 1,003
3,000 MTA 5.00 11/15/2030 3,051
295 New York City 6.00 5/15/2020 301
1,000 New York City 5.25 8/15/2023 1,092
1,500 New York City Housing Dev. Corp. (INS) 5.00 7/01/2025 1,555
1,500 New York City Municipal Water Finance Auth. 5.00 6/15/2037 1,526
4,000 New York City Trust for Cultural Resources(e) 5.00 12/01/2039 4,016
8,455 Oneida County IDA (INS) 4.65(a) 7/01/2035 2,121
--------
14,665
--------
NORTH CAROLINA (0.8%)
1,000 Charlotte-Mecklenberg Hospital Auth. (PRE) 4.88 1/15/2032 1,162
--------
RHODE ISLAND (0.1%)
205 Housing and Mortgage Finance Corp. 6.85 10/01/2024 205
--------
TENNESSEE (0.3%)
2,000 Knox County Health, Educational and Housing
Facilities Board 5.01(a) 1/01/2035 385
--------
TEXAS (13.7%)
3,000 El Paso (INS) 4.75 8/15/2033 2,975
2,000 Hidalgo County Health Services Corp. 5.00 8/15/2026 1,818
3,000 Houston Utility Systems (INS)(d) 5.13 5/15/2028 3,096
5,675 Lewisville (INS) 5.80 9/01/2025 5,509
1,500 Manor ISD (NBGA) 5.00 8/01/2037 1,542
2,000 Pflugerville (INS) 5.00 8/01/2028 2,042
1,500 Public Finance Auth. (INS) 5.00 2/15/2036 1,199
================================================================================
PORTFOLIO OF INVESTMENTS | 13
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------
$1,000 San Leanna Education Facilities Corp. 4.75% 6/01/2032 $ 872
1,000 Transportation Commission 4.50 4/01/2033 982
--------
20,035
--------
WASHINGTON (1.6%)
1,500 Economic Dev. Finance Auth. (INS) 5.00 6/01/2038 1,506
1,000 Vancouver Downtown Redevelopment Auth. (INS) 5.00 1/01/2023 770
--------
2,276
--------
WEST VIRGINIA (0.9%)
1,500 Pleasants County 5.25 10/15/2037 1,373
--------
Total Tax-Exempt Bonds (cost: $82,504) 78,158
--------
TAX-EXEMPT MONEY MARKET INSTRUMENTS (1.4%)
VARIABLE-RATE DEMAND NOTES (1.3%)
CALIFORNIA (1.3%)
2,000 State Economic Recovery (LIQ) 0.24 7/01/2023 2,000
--------
---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
---------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (0.1%)
72,619 SSgA Tax Free Money Market Fund, 0.01%(f) 73
--------
Total Tax-Exempt Money Market Instruments (cost: $2,073) 2,073
--------
Total Tax-exempt Securities (cost: $84,577) 80,231
--------
BLUE CHIP STOCKS (46.9%)
CONSUMER DISCRETIONARY (4.4%)
-----------------------------
ADVERTISING (0.1%)
2,760 Interpublic Group of Companies, Inc.* 17
1,760 Omnicom Group, Inc. 65
--------
82
--------
APPAREL & ACCESSORIES & LUXURY GOODS (0.1%)
2,260 Coach, Inc. 79
420 Polo Ralph Lauren Corp. 32
650 VF Corp. 47
--------
158
--------
APPAREL RETAIL (0.2%)
750 Abercrombie & Fitch Co. "A" 30
3,060 Gap, Inc. 66
================================================================================
14 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
1,450 Limited Brands, Inc. $ 24
3,010 TJX Companies, Inc. 115
--------
235
--------
AUTO PARTS & EQUIPMENT (0.1%)
4,330 Johnson Controls, Inc. 117
--------
AUTOMOBILE MANUFACTURERS (0.1%)
22,821 Ford Motor Co.* 203
--------
AUTOMOTIVE RETAIL (0.1%)
920 AutoNation, Inc.* 16
300 AutoZone, Inc.* 45
240 O'Reilly Automotive, Inc.* 9
--------
70
--------
BROADCASTING (0.1%)
5,840 CBS Corp. "B" 75
--------
CABLE & SATELLITE (0.4%)
18,762 Comcast Corp. "A" 275
6,660 DIRECTV "A"* 211
630 Scripps Networks Interactive "A" 25
1,939 Time Warner Cable, Inc. 81
--------
592
--------
CASINOS & GAMING (0.1%)
2,100 International Game Technology 40
490 Wynn Resorts Ltd. 31
--------
71
--------
COMPUTER & ELECTRONICS RETAIL (0.1%)
2,800 Best Buy Co., Inc. 120
960 GameStop Corp. "A"* 24
970 RadioShack Corp. 18
--------
162
--------
CONSUMER ELECTRONICS (0.0%)
510 Harman International Industries, Inc. 19
--------
DEPARTMENT STORES (0.2%)
1,710 J.C. Penney Co., Inc. 49
2,160 Kohl's Corp.* 115
2,970 Macy's, Inc. 49
1,370 Nordstrom, Inc. 46
470 Sears Holdings Corp.* 33
--------
292
--------
DISTRIBUTORS (0.0%)
1,160 Genuine Parts Co. 42
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
EDUCATION SERVICES (0.0%)
980 Apollo Group, Inc. "A"* $ 56
--------
FOOTWEAR (0.1%)
2,810 NIKE, Inc. "B" 182
--------
GENERAL MERCHANDISE STORES (0.2%)
600 Big Lots, Inc.* 14
1,230 Family Dollar Stores, Inc. 38
5,330 Target Corp. 248
--------
300
--------
HOME FURNISHINGS (0.0%)
1,100 Leggett & Platt, Inc. 21
--------
HOME IMPROVEMENT RETAIL (0.4%)
12,080 Home Depot, Inc. 331
10,460 Lowe's Companies, Inc. 228
710 Sherwin-Williams Co. 43
--------
602
--------
HOMEBUILDING (0.0%)
2,350 D.R. Horton, Inc. 24
470 KB Home 6
1,840 Pulte Homes, Inc. 17
--------
47
--------
HOMEFURNISHING RETAIL (0.1%)
2,070 Bed Bath & Beyond, Inc.* 77
--------
HOTELS, RESORTS, & CRUISE LINES (0.1%)
2,990 Carnival Corp.* 96
1,777 Marriott International, Inc. "A" 46
1,570 Starwood Hotels & Resorts Worldwide, Inc. 50
1,270 Wyndham Worldwide Corp. 23
--------
215
--------
HOUSEHOLD APPLIANCES (0.1%)
520 Black & Decker Corp. 31
610 Stanley Works 30
570 Whirlpool Corp. 42
--------
103
--------
HOUSEWARES & SPECIALTIES (0.1%)
1,070 Fortune Brands, Inc. 41
2,370 Newell Rubbermaid, Inc. 35
--------
76
--------
================================================================================
16 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
INTERNET RETAIL (0.3%)
2,370 Amazon.com, Inc.* $ 322
1,800 Expedia, Inc.* 46
290 Priceline.com, Inc.* 62
--------
430
--------
LEISURE PRODUCTS (0.0%)
1,440 Hasbro, Inc. 43
1,240 Mattel, Inc. 24
--------
67
--------
MOTORCYCLE MANUFACTURERS (0.0%)
1,720 Harley-Davidson, Inc. 50
--------
MOVIES & ENTERTAINMENT (0.7%)
15,930 News Corp. "A" 182
8,393 Time Warner, Inc. 258
4,590 Viacom, Inc. "B"* 136
13,495 Walt Disney Co. 408
--------
984
--------
PHOTOGRAPHIC PRODUCTS (0.0%)
1,900 Eastman Kodak Co.* 8
--------
PUBLISHING (0.1%)
1,980 Gannett Co., Inc. 19
2,160 McGraw-Hill Companies, Inc. 65
300 Meredith Corp. 8
1,000 New York Times Co. "A"* 8
50 Washington Post Co. "B" 21
--------
121
--------
RESTAURANTS (0.5%)
7,930 McDonald's Corp. 502
6,180 Starbucks Corp.* 135
3,350 Yum! Brands, Inc. 118
--------
755
--------
SPECIALIZED CONSUMER SERVICES (0.0%)
2,610 H&R Block, Inc. 53
--------
SPECIALTY STORES (0.1%)
2,330 Office Depot, Inc.* 14
4,350 Staples, Inc. 102
720 Tiffany & Co. 31
--------
147
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
TIRES & RUBBER (0.0%)
1,760 Goodyear Tire & Rubber Co.* $ 24
--------
Total Consumer Discretionary 6,436
--------
CONSUMER STAPLES (5.5%)
-----------------------
AGRICULTURAL PRODUCTS (0.1%)
4,660 Archer-Daniels-Midland Co. 144
--------
BREWERS (0.0%)
920 Molson Coors Brewing Co. "B" 42
--------
DISTILLERS & VINTNERS (0.0%)
320 Brown-Forman Corp. "B" 16
1,440 Constellation Brands, Inc. "A"* 25
--------
41
--------
DRUG RETAIL (0.4%)
10,232 CVS Caremark Corp. 317
7,230 Walgreen Co. 281
--------
598
--------
FOOD DISTRIBUTORS (0.1%)
4,290 Sysco Corp. 116
--------
FOOD RETAIL (0.2%)
4,700 Kroger Co. 107
2,940 Safeway, Inc. 66
400 SUPERVALU, Inc. 6
1,070 Whole Foods Market, Inc.* 27
--------
206
--------
HOUSEHOLD PRODUCTS (1.3%)
990 Clorox Co. 59
3,610 Colgate-Palmolive Co. 304
2,620 Kimberly-Clark Corp. 173
20,673 Procter & Gamble Co. 1,289
--------
1,825
--------
HYPERMARKETS & SUPER CENTERS (0.7%)
2,970 Costco Wholesale Corp. 178
15,290 Wal-Mart Stores, Inc. 834
--------
1,012
--------
PACKAGED FOODS & MEAT (0.7%)
1,310 Campbell Soup Co. 46
3,840 ConAgra Foods, Inc. 85
1,310 Dean Foods Co.* 21
2,840 General Mills, Inc. 193
2,125 H.J. Heinz Co. 90
================================================================================
18 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
910 Hershey Co. $ 32
828 J.M. Smucker Co. 49
1,830 Kellogg Co. 96
10,440 Kraft Foods, Inc. "A" 277
1,120 McCormick & Co., Inc. 40
5,070 Sara Lee Corp. 62
720 Tyson Foods, Inc. "A" 9
--------
1,000
--------
PERSONAL PRODUCTS (0.1%)
3,050 Avon Products, Inc. 105
840 Estee Lauder Companies, Inc. "A" 39
--------
144
--------
SOFT DRINKS (1.2%)
16,420 Coca-Cola Co. 939
2,700 Coca-Cola Enterprises, Inc. 53
1,960 Dr. Pepper Snapple Group, Inc.* 51
1,150 Pepsi Bottling Group, Inc. 44
10,660 PepsiCo, Inc. 663
--------
1,750
--------
TOBACCO (0.7%)
14,680 Altria Group, Inc. 276
1,225 Lorillard, Inc. 96
13,560 Philip Morris International, Inc. 652
980 Reynolds American, Inc. 49
--------
1,073
--------
Total Consumer Staples 7,951
--------
ENERGY (5.6%)
-------------
COAL & CONSUMABLE FUELS (0.1%)
1,050 CONSOL Energy, Inc. 48
720 Massey Energy Co. 27
1,920 Peabody Energy Corp. 86
--------
161
--------
INTEGRATED OIL & GAS (3.5%)
14,280 Chevron Corp. 1,114
10,510 ConocoPhillips 544
34,090 Exxon Mobil Corp. 2,559
2,130 Hess Corp. 124
5,130 Marathon Oil Corp. 167
1,400 Murphy Oil Corp. 79
6,250 Occidental Petroleum Corp. 505
--------
5,092
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
OIL & GAS DRILLING (0.1%)
510 Diamond Offshore Drilling, Inc. $ 51
710 ENSCO International, Inc. 31
2,180 Nabors Industries Ltd.* 45
960 Rowan Companies, Inc.* 24
--------
151
--------
OIL & GAS EQUIPMENT & SERVICES (0.8%)
2,257 Baker Hughes, Inc. 92
2,500 BJ Services Co. 47
1,400 Cameron International Corp.* 53
920 FMC Technologies, Inc.* 50
5,590 Halliburton Co. 164
3,080 National-Oilwell Varco, Inc. 132
8,310 Schlumberger Ltd. 531
2,020 Smith International, Inc. 55
--------
1,124
--------
OIL & GAS EXPLORATION & PRODUCTION (0.9%)
3,330 Anadarko Petroleum Corp. 198
2,120 Apache Corp. 202
700 Cabot Oil & Gas Corp. 27
4,790 Chesapeake Energy Corp. 115
1,440 Denbury Resources, Inc.* 19
3,190 Devon Energy Corp. 215
2,090 EOG Resources, Inc. 181
1,270 Noble Energy, Inc. 83
1,020 Pioneer Natural Resources Co. 42
1,130 Range Resources Corp. 53
2,200 Southwestern Energy Co.* 97
3,972 XTO Energy, Inc. 168
--------
1,400
--------
OIL & GAS REFINING & MARKETING (0.1%)
1,000 Sunoco, Inc. 25
3,590 Valero Energy Corp. 57
--------
82
--------
OIL & GAS STORAGE & TRANSPORTATION (0.1%)
3,415 El Paso Corp. 33
4,910 Spectra Energy Corp. 95
4,220 Williams Companies, Inc. 84
--------
212
--------
Total Energy 8,222
--------
================================================================================
20 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
FINANCIALS (6.8%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.6%)
2,195 Ameriprise Financial, Inc. $ 84
9,445 Bank of New York Mellon Corp. 252
770 Federated Investors, Inc. "B" 20
1,110 Franklin Resources, Inc. 120
3,300 Invesco Ltd. ADR 73
1,180 Janus Capital Group, Inc. 15
1,220 Legg Mason, Inc. 34
1,420 Northern Trust Corp.(g) 70
3,500 State Street Corp. 145
2,210 T. Rowe Price Group, Inc. 108
--------
921
--------
CONSUMER FINANCE (0.4%)
9,220 American Express Co. 386
3,560 Capital One Financial Corp. 137
3,520 Discover Financial Services 54
4,030 SLM Corp.* 44
--------
621
--------
DIVERSIFIED BANKS (0.9%)
1,300 Comerica, Inc. 37
13,540 U.S. Bancorp 327
33,080 Wells Fargo & Co. 927
--------
1,291
--------
INSURANCE BROKERS (0.1%)
1,990 Aon Corp. 77
3,710 Marsh & McLennan Companies, Inc. 84
--------
161
--------
INVESTMENT BANKING & BROKERAGE (0.7%)
6,900 Charles Schwab Corp. 127
9,720 E*TRADE Financial Corp.* 16
3,790 Goldman Sachs Group, Inc. 643
7,320 Morgan Stanley 231
--------
1,017
--------
LIFE & HEALTH INSURANCE (0.5%)
3,460 AFLAC, Inc. 159
2,199 Lincoln National Corp. 50
5,370 MetLife, Inc. 184
2,260 Principal Financial Group, Inc. 57
3,005 Prudential Financial, Inc. 150
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
665 Torchmark Corp. $ 29
2,390 Unum Group 46
--------
675
--------
MULTI-LINE INSURANCE (0.2%)
970 American International Group, Inc.* 28
700 Assurant, Inc. 21
3,680 Genworth Financial, Inc. "A"* 40
2,730 Hartford Financial Services Group, Inc. 67
2,636 Loews Corp. 93
--------
249
--------
MULTI-SECTOR HOLDINGS (0.0%)
1,340 Leucadia National Corp.* 29
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (1.7%)
54,763 Bank of America Corp. 868
92,380 Citigroup, Inc. 380
28,039 JPMorgan Chase & Co. 1,191
--------
2,439
--------
PROPERTY & CASUALTY INSURANCE (0.4%)
3,880 Allstate Corp. 110
2,920 Chubb Corp. 147
1,410 Cincinnati Financial Corp. 36
1,110 MBIA, Inc.* 4
4,790 Progressive Corp.* 80
4,110 Travelers Companies, Inc. 215
2,830 XL Capital Ltd. "A" 52
--------
644
--------
REAL ESTATE SERVICES (0.0%)
1,830 CB Richard Ellis Group, Inc. "A"* 21
--------
REGIONAL BANKS (0.5%)
5,370 BB&T Corp. 134
5,810 Fifth Third Bancorp 58
1,743 First Horizon National Corp.* 24
5,200 Huntington Bancshares, Inc. 20
7,160 KeyCorp 42
700 M&T Bank Corp. 46
4,100 Marshall & Ilsley Corp. 24
3,345 PNC Financial Services Group, Inc. 191
9,440 Regions Financial Corp. 55
4,000 SunTrust Banks, Inc. 94
1,130 Zions Bancorp 15
--------
703
--------
================================================================================
22 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
REITs - DIVERSIFIED (0.1%)
1,354 Vornado Realty Trust $ 89
--------
REITs - INDUSTRIAL (0.0%)
3,345 ProLogis 44
--------
REITs - OFFICE (0.0%)
1,050 Boston Properties, Inc. 70
--------
REITs - RESIDENTIAL (0.1%)
510 AvalonBay Communities, Inc. 37
2,235 Equity Residential Properties Trust 72
--------
109
--------
REITs - RETAIL (0.1%)
2,670 Kimco Realty Corp. 33
2,012 Simon Property Group, Inc. 146
--------
179
--------
REITs - SPECIALIZED (0.2%)
1,880 HCP, Inc. 59
940 Health Care REIT, Inc. 42
4,280 Host Hotels & Resorts, Inc. 45
1,180 Plum Creek Timber Co., Inc. 40
795 Public Storage 63
1,230 Ventas, Inc. 53
--------
302
--------
SPECIALIZED FINANCE (0.2%)
480 CME Group, Inc. 158
540 IntercontinentalExchange, Inc.* 58
920 Moody's Corp. 21
1,180 NASDAQ OMX Group, Inc.* 22
2,110 NYSE Euronext 53
--------
312
--------
THRIFTS & MORTGAGE FINANCE (0.1%)
3,850 Hudson City Bancorp, Inc. 51
1,430 People's United Financial, Inc. 23
--------
74
--------
Total Financials 9,950
--------
HEALTH CARE (6.0%)
------------------
BIOTECHNOLOGY (0.8%)
7,200 Amgen, Inc.* 406
2,050 Biogen Idec, Inc.* 96
2,970 Celgene Corp.* 165
================================================================================
PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
560 Cephalon, Inc.* $ 31
1,920 Genzyme Corp.* 97
6,410 Gilead Sciences, Inc.* 295
--------
1,090
--------
HEALTH CARE DISTRIBUTORS (0.2%)
2,160 AmerisourceBergen Corp. 53
2,620 Cardinal Health, Inc. 84
1,315 CareFusion Corp.* 34
1,500 McKesson Corp. 93
760 Patterson Companies, Inc.* 20
--------
284
--------
HEALTH CARE EQUIPMENT (0.9%)
4,460 Baxter International, Inc. 243
1,750 Becton, Dickinson and Co. 131
8,840 Boston Scientific Corp.* 74
720 C.R. Bard, Inc. 59
1,160 Hospira, Inc.* 55
290 Intuitive Surgical, Inc.* 81
8,060 Medtronic, Inc. 342
2,430 St. Jude Medical, Inc.* 89
2,040 Stryker Corp. 103
830 Varian Medical Systems, Inc.* 39
1,720 Zimmer Holdings, Inc.* 102
--------
1,318
--------
HEALTH CARE FACILITIES (0.0%)
3,580 Tenet Healthcare Corp.* 16
--------
HEALTH CARE SERVICES (0.4%)
900 DaVita, Inc.* 53
1,770 Express Scripts, Inc.* 152
795 Laboratory Corp. of America Holdings* 58
3,620 Medco Health Solutions, Inc.* 229
590 Quest Diagnostics, Inc. 34
--------
526
--------
HEALTH CARE SUPPLIES (0.0%)
1,270 DENTSPLY International, Inc. 42
--------
HEALTH CARE TECHNOLOGY (0.0%)
1,560 IMS Health, Inc. 34
--------
LIFE SCIENCES TOOLS & SERVICES (0.2%)
1,469 Life Technologies Corp.* 73
400 Millipore Corp.* 27
================================================================================
24 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
300 PerkinElmer, Inc. $ 6
3,000 Thermo Fisher Scientific, Inc.* 142
690 Waters Corp.* 40
--------
288
--------
MANAGED HEALTH CARE (0.4%)
2,340 Aetna, Inc. 68
2,340 CIGNA Corp. 75
1,260 Coventry Health Care, Inc.* 28
1,210 Humana, Inc.* 50
8,230 UnitedHealth Group, Inc. 236
3,360 WellPoint, Inc.* 182
--------
639
--------
PHARMACEUTICALS (3.1%)
11,100 Abbott Laboratories 605
2,250 Allergan, Inc. 131
13,700 Bristol-Myers Squibb Co. 347
7,160 Eli Lilly and Co. 263
1,780 Forest Laboratories, Inc.* 55
19,520 Johnson & Johnson 1,227
680 King Pharmaceuticals, Inc.* 8
22,133 Merck & Co., Inc. 801
2,210 Mylan, Inc.* 39
57,104 Pfizer, Inc. 1,038
930 Watson Pharmaceuticals, Inc.* 34
--------
4,548
--------
Total Health Care 8,785
--------
INDUSTRIALS (4.8%)
------------------
AEROSPACE & DEFENSE (1.3%)
5,150 Boeing Co. 270
2,730 General Dynamics Corp. 180
900 Goodrich Corp. 53
5,330 Honeywell International, Inc. 205
1,220 ITT Corp. 63
830 L-3 Communications Holdings, Inc. 65
2,320 Lockheed Martin Corp. 179
1,340 Northrop Grumman Corp. 73
1,010 Precision Castparts Corp. 105
2,985 Raytheon Co. 154
1,340 Rockwell Collins, Inc. 72
6,660 United Technologies Corp. 448
--------
1,867
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 25
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.5%)
1,230 C.H. Robinson Worldwide, Inc. $ 68
810 Expeditors International of Washington, Inc. 26
2,650 FedEx Corp. 224
6,570 United Parcel Service, Inc. "B" 378
--------
696
--------
AIRLINES (0.0%)
3,590 Southwest Airlines Co. 33
--------
BUILDING PRODUCTS (0.0%)
3,110 Masco Corp. 42
--------
COMMERCIAL PRINTING (0.0%)
1,460 R.R. Donnelley & Sons Co. 30
--------
CONSTRUCTION & ENGINEERING (0.1%)
1,280 Fluor Corp. 54
880 Jacobs Engineering Group, Inc.* 31
810 Quanta Services, Inc.* 15
--------
100
--------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.4%)
4,405 Caterpillar, Inc. 257
1,700 Cummins, Inc. 76
3,070 Deere & Co. 164
2,572 PACCAR, Inc. 96
--------
593
--------
DIVERSIFIED SUPPORT SERVICES (0.1%)
1,130 Cintas Corp. 32
1,550 Iron Mountain, Inc.* 37
--------
69
--------
ELECTRICAL COMPONENTS & EQUIPMENT (0.2%)
5,060 Emerson Electric Co. 210
230 First Solar, Inc.* 27
1,210 Rockwell Automation, Inc. 53
--------
290
--------
ENVIRONMENTAL & FACILITIES SERVICES (0.1%)
2,526 Republic Services, Inc. 71
430 Stericycle, Inc.* 24
3,525 Waste Management, Inc. 116
--------
211
--------
================================================================================
26 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.0%)
1,060 Monster Worldwide, Inc.* $ 15
750 Robert Half International, Inc. 17
--------
32
--------
INDUSTRIAL CONGLOMERATES (1.1%)
4,660 3M Co. 361
75,270 General Electric Co. 1,206
2,070 Textron, Inc. 41
--------
1,608
--------
INDUSTRIAL MACHINERY (0.4%)
1,835 Danaher Corp. 130
1,320 Dover Corp. 54
1,210 Eaton Corp. 77
490 Flowserve Corp. 49
3,320 Illinois Tool Works, Inc. 162
850 Pall Corp. 27
1,120 Parker-Hannifin Corp. 60
--------
559
--------
OFFICE SERVICES & SUPPLIES (0.0%)
660 Avery Dennison Corp. 25
1,270 Pitney Bowes, Inc. 29
--------
54
--------
RAILROADS (0.5%)
1,560 Burlington Northern Santa Fe Corp. 153
3,000 CSX Corp. 142
2,600 Norfolk Southern Corp. 134
3,850 Union Pacific Corp. 244
--------
673
--------
RESEARCH & CONSULTING SERVICES (0.0%)
390 Dun & Bradstreet Corp. 31
720 Equifax, Inc. 20
--------
51
--------
TRADING COMPANIES & DISTRIBUTORS (0.1%)
930 Fastenal Co. 35
480 W.W. Grainger, Inc. 47
--------
82
--------
TRUCKING (0.0%)
400 Ryder System, Inc. 16
--------
Total Industrials 7,006
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 27
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (8.9%)
-----------------------------
APPLICATION SOFTWARE (0.2%)
3,800 Adobe Systems, Inc.* $ 133
1,090 Autodesk, Inc.* 26
1,240 Citrix Systems, Inc.* 47
1,730 Compuware Corp.* 12
2,210 Intuit, Inc.* 65
640 Salesforce.com, Inc.* 40
--------
323
--------
COMMUNICATIONS EQUIPMENT (1.2%)
780 Ciena Corp.* 9
40,855 Cisco Systems, Inc.* 956
980 Harris Corp. 43
1,890 JDS Uniphase Corp.* 14
3,970 Juniper Networks, Inc.* 104
15,930 Motorola, Inc. 127
11,570 QUALCOMM, Inc. 521
2,800 Tellabs, Inc.* 16
--------
1,790
--------
COMPUTER HARDWARE (2.5%)
6,410 Apple, Inc.* 1,282
12,670 Dell, Inc.* 179
17,550 Hewlett-Packard Co. 861
9,540 International Business Machines Corp. 1,205
5,330 Sun Microsystems, Inc.* 45
1,255 Teradata Corp.* 37
--------
3,609
--------
COMPUTER STORAGE & PERIPHERALS (0.3%)
14,680 EMC Corp.* 247
670 Lexmark International, Inc. "A"* 17
2,010 NetApp, Inc.* 62
1,600 SanDisk Corp.* 32
1,200 Western Digital Corp.* 44
--------
402
--------
DATA PROCESSING & OUTSOURCED SERVICES (0.5%)
710 Affiliated Computer Services, Inc. "A"* 39
3,810 Automatic Data Processing, Inc. 166
1,130 Computer Sciences Corp.* 62
2,280 Fidelity National Information Services, Inc. 51
880 Fiserv, Inc.* 41
650 MasterCard, Inc. "A" 157
2,340 Paychex, Inc. 73
================================================================================
28 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
1,690 Total System Services, Inc. $ 29
3,885 Western Union Co. 72
--------
690
--------
ELECTRONIC COMPONENTS (0.2%)
1,270 Amphenol Corp. "A" 52
11,020 Corning, Inc. 184
--------
236
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
2,450 Agilent Technologies, Inc.* 71
1,020 FLIR Systems, Inc.* 29
--------
100
--------
ELECTRONIC MANUFACTURING SERVICES (0.0%)
1,810 Jabil Circuit, Inc. 24
1,210 Molex, Inc. 23
--------
47
--------
HOME ENTERTAINMENT SOFTWARE (0.0%)
2,640 Electronic Arts, Inc.* 45
--------
INTERNET SOFTWARE & SERVICES (0.9%)
1,440 Akamai Technologies, Inc.* 35
6,790 eBay, Inc.* 166
1,680 Google, Inc. "A"* 979
1,380 VeriSign, Inc.* 31
8,020 Yahoo!, Inc.* 120
--------
1,331
--------
IT CONSULTING & OTHER SERVICES (0.1%)
2,120 Cognizant Technology Solutions Corp. "A"* 93
--------
OFFICE ELECTRONICS (0.0%)
6,150 Xerox Corp. 47
--------
SEMICONDUCTOR EQUIPMENT (0.1%)
8,140 Applied Materials, Inc. 100
990 KLA-Tencor Corp. 31
1,620 MEMC Electronic Materials, Inc.* 20
830 Novellus Systems, Inc.* 17
1,450 Teradyne, Inc.* 13
--------
181
--------
SEMICONDUCTORS (1.0%)
5,210 Advanced Micro Devices, Inc.* 37
2,150 Altera Corp. 45
2,500 Analog Devices, Inc. 75
3,180 Broadcom Corp. "A"* 93
================================================================================
PORTFOLIO OF INVESTMENTS | 29
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
38,600 Intel Corp. $ 741
1,440 Linear Technology Corp. 39
5,530 LSI Corp.* 29
1,370 Microchip Technology, Inc. 36
6,140 Micron Technology, Inc.* 46
1,660 National Semiconductor Corp. 24
3,610 NVIDIA Corp.* 47
8,770 Texas Instruments, Inc. 222
1,990 Xilinx, Inc. 45
--------
1,479
--------
SYSTEMS SOFTWARE (1.8%)
1,755 BMC Software, Inc.* 68
2,830 CA, Inc. 62
1,110 McAfee, Inc.* 42
54,905 Microsoft Corp. 1,615
2,530 Novell, Inc.* 10
28,117 Oracle Corp. 621
620 Red Hat, Inc.* 17
5,910 Symantec Corp.* 105
--------
2,540
--------
Total Information Technology 12,913
--------
MATERIALS (1.7%)
----------------
ALUMINUM (0.1%)
7,080 Alcoa, Inc. 88
--------
CONSTRUCTION MATERIALS (0.0%)
880 Vulcan Materials Co. 43
--------
DIVERSIFIED CHEMICALS (0.4%)
8,320 Dow Chemical Co. 231
5,660 E.I. du Pont de Nemours & Co. 196
470 Eastman Chemical Co. 28
100 FMC Corp. 5
1,260 PPG Industries, Inc. 75
--------
535
--------
DIVERSIFIED METALS & MINING (0.2%)
2,961 Freeport-McMoRan Copper & Gold, Inc.* 245
510 Titanium Metals Corp. 5
--------
250
--------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.2%)
410 CF Industries Holdings, Inc. 35
3,860 Monsanto Co. 312
--------
347
--------
================================================================================
30 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
FOREST PRODUCTS (0.1%)
1,495 Weyerhaeuser Co. $ 58
--------
GOLD (0.1%)
3,220 Newmont Mining Corp. 173
--------
INDUSTRIAL GASES (0.2%)
1,525 Air Products & Chemicals, Inc. 126
580 Airgas, Inc. 27
2,250 Praxair, Inc. 185
--------
338
--------
METAL & GLASS CONTAINERS (0.1%)
690 Ball Corp. 34
1,440 Owens-Illinois, Inc.* 45
1,020 Pactiv Corp.* 25
--------
104
--------
PAPER PACKAGING (0.0%)
790 Bemis Co., Inc. 23
1,350 Sealed Air Corp. 30
--------
53
--------
PAPER PRODUCTS (0.1%)
3,700 International Paper Co. 94
1,460 MeadWestvaco Corp. 40
--------
134
--------
SPECIALTY CHEMICALS (0.1%)
1,530 Ecolab, Inc. 69
570 International Flavors & Fragrances, Inc. 23
1,140 Sigma-Aldrich Corp. 61
--------
153
--------
STEEL (0.1%)
960 AK Steel Holding Corp. 19
260 Allegheny Technologies, Inc. 9
2,530 Nucor Corp. 107
970 United States Steel Corp. 44
--------
179
--------
Total Materials 2,455
--------
TELECOMMUNICATION SERVICES (1.5%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (1.3%)
41,790 AT&T, Inc. 1,126
1,581 CenturyTel, Inc. 56
2,450 Frontier Communications Corp. 19
================================================================================
PORTFOLIO OF INVESTMENTS | 31
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
7,610 Qwest Communications International, Inc. $ 28
20,705 Verizon Communications, Inc. 651
3,606 Windstream Corp. 36
--------
1,916
--------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
2,180 American Tower Corp. "A"* 89
2,120 MetroPCS Communications, Inc.* 14
24,510 Sprint Nextel Corp.* 91
--------
194
--------
Total Telecommunication Services 2,110
--------
UTILITIES (1.7%)
----------------
ELECTRIC UTILITIES (0.9%)
1,390 Allegheny Energy, Inc. 31
3,380 American Electric Power Co., Inc. 109
8,194 Duke Energy Corp. 137
2,810 Edison International 96
1,430 Entergy Corp. 112
4,675 Exelon Corp. 225
1,215 FirstEnergy Corp. 52
3,490 FPL Group, Inc. 181
1,480 Northeast Utilities 36
1,890 Pepco Holdings, Inc. 31
850 Pinnacle West Capital Corp. 30
2,730 PPL Corp. 83
1,360 Progress Energy, Inc. 53
5,510 Southern Co. 177
--------
1,353
--------
GAS UTILITIES (0.1%)
1,130 EQT Corp. 47
360 Nicor, Inc. 14
1,260 Questar Corp. 50
--------
111
--------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
5,750 AES Corp.* 73
1,520 Constellation Energy Group, Inc. 48
4,340 Dynegy, Inc. "A"* 8
--------
129
--------
MULTI-UTILITIES (0.6%)
1,840 Ameren Corp. 48
2,760 CenterPoint Energy, Inc. 37
2,000 Consolidated Edison, Inc. 86
================================================================================
32 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
4,220 Dominion Resources, Inc. $ 153
920 DTE Energy Co. 37
551 Integrys Energy Group, Inc. 21
2,360 NiSource, Inc. 34
2,630 PG&E Corp. 111
3,670 Public Service Enterprise Group, Inc. 115
880 SCANA Corp. 31
1,780 Sempra Energy 95
1,830 TECO Energy, Inc. 27
870 Wisconsin Energy Corp. 39
3,320 Xcel Energy, Inc. 67
--------
901
--------
Total Utilities 2,494
--------
Total Blue Chip Stocks (cost: $52,446) 68,322
--------
TOTAL INVESTMENTS (COST: $137,023) $148,553
========
---------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
---------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
---------------------------------------------------------------------------------------------------
Tax-Exempt Bonds $ - $78,158 $- $ 78,158
Tax-Exempt Money
Market Instruments:
Variable-Rate Demand Notes - 2,000 - 2,000
Money Market Funds 73 - - 73
Blue Chip Stocks 68,322 - - 68,322
---------------------------------------------------------------------------------------------------
Total $68,395 $80,158 $- $148,553
---------------------------------------------------------------------------------------------------
================================================================================
PORTFOLIO OF INVESTMENTS | 33
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
o CATEGORIES AND DEFINITIONS
VARIABLE-RATE DEMAND NOTES (VRDNs) -- provide the right to sell the security
at face value on either that day or within the rate-reset period. The interest
rate is adjusted at a stipulated daily, weekly, monthly, quarterly, or other
specified time interval to reflect current market conditions. VRDNs will
normally trade as if the maturity is the earlier put date, even though stated
maturity is longer.
CREDIT ENHANCEMENTS -- add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
interest payments when due. The enhancement may be provided by a high-quality
bank, insurance company or other corporation, or a collateral trust. The
enhancements do not guarantee the market values of the securities.
(INS) Principal and interest payments are insured by one of the following:
ACA Financial Guaranty Corp., Assured Guaranty Corp., Financial
Guaranty Insurance Co., Financial Security Assurance, Inc., or National
Public Finance Guarantee Corp.
================================================================================
34 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
Although bond insurance reduces the risk of loss due to default by an
issuer, such bonds remain subject to the risk that value may fluctuate
for other reasons, and there is no assurance that the insurance
company will meet its obligations.
(LIQ) Liquidity enhancement that may, under certain circumstances, provide
for repayment of principal and interest upon demand from JPMorgan
Chase Bank, N.A.
(NBGA) Principal and interest payments or, under certain circumstances,
underlying mortgages are guaranteed by a nonbank guarantee agreement
from Texas Permanent School Fund.
o PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
EDA Economic Development Authority
IDA Industrial Development Authority/Agency
ISD Independent School District
MTA Metropolitan Transportation Authority
PRE Prerefunded to a date prior to maturity
REIT Real estate investment trust
USD Unified School District
o SPECIFIC NOTES
(a) Zero-coupon security. Rate represents the effective yield at the date of
purchase.
(b) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by Rule
144A, and as such has been deemed liquid by
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 35
<PAGE>
================================================================================
USAA Investment Management Company (the Manager) under liquidity
guidelines approved by the Board of Trustees, unless otherwise noted as
illiquid.
(c) Security deemed illiquid by the Manager, under liquidity guidelines
approved by the Board of Trustees. The aggregate market value of these
securities at November 30, 2009, was $3,300,000, which represented 2.3%
of the Fund's net assets.
(d) At November 30, 2009, portions of these securities were segregated to
cover delayed-delivery and/or when-issued purchases.
(e) At November 30, 2009, the aggregate market value of securities purchased
on a when-issued basis was $4,016,000.
(f) Rate represents the money market fund annualized seven-day yield at
November 30, 2009.
(g) Northern Trust Corp. is the parent of Northern Trust Investments, N.A.,
which is the subadviser of the Fund.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
36 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $137,023) $148,553
Cash 30
Receivables:
Capital shares sold 63
Dividends and interest 1,247
--------
Total assets 149,893
--------
LIABILITIES
Payables:
Securities purchased 4,006
Capital shares redeemed 29
Accrued management fees 53
Accrued transfer agent's fees 1
Other accrued expenses and payables 53
--------
Total liabilities 4,142
--------
Net assets applicable to capital shares outstanding $145,751
========
NET ASSETS CONSIST OF:
Paid-in capital $151,977
Accumulated undistributed net investment income 914
Accumulated net realized loss on investments (18,670)
Net unrealized appreciation of investments 11,530
--------
Net assets applicable to capital shares outstanding $145,751
========
Capital shares outstanding, unlimited number of shares
authorized, no par value 11,935
========
Net asset value, redemption price, and offering price per share $ 12.21
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 37
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 830
Interest 2,106
-------
Total income 2,936
-------
EXPENSES
Management fees 308
Administration and servicing fees 105
Transfer agent's fees 93
Custody and accounting fees 48
Postage 3
Shareholder reporting fees 11
Trustees' fees 5
Registration fees 16
Professional fees 33
Other 2
-------
Total expenses 624
-------
NET INVESTMENT INCOME 2,312
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Unaffiliated transactions (1,734)
Affiliated transactions (Note 7) 6
Change in net unrealized appreciation/depreciation 16,267
-------
Net realized and unrealized gain 14,539
-------
Increase in net assets resulting from operations $16,851
=======
See accompanying notes to financial statements.
================================================================================
38 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended November 30, 2009 (unaudited), and year ended
May 31, 2009
-----------------------------------------------------------------------------------------
11/30/2009 5/31/2009
-----------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 2,312 $ 4,910
Net realized loss on investments (1,728) (12,348)
Change in net unrealized appreciation/depreciation of
investments 16,267 (24,321)
-------------------------
Increase (decrease) in net assets resulting from
operations 16,851 (31,759)
-------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,207) (5,067)
-------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,406 6,375
Reinvested dividends 2,058 4,709
Cost of shares redeemed (8,164) (21,651)
-------------------------
Decrease in net assets from capital share transactions (1,700) (10,567)
-------------------------
Net increase (decrease) in net assets 12,944 (47,393)
NET ASSETS
Beginning of period 132,807 180,200
-------------------------
End of period $145,751 $132,807
=========================
Accumulated undistributed net investment income:
End of period $ 914 $ 809
=========================
CHANGE IN SHARES OUTSTANDING
Shares sold 378 561
Shares issued for dividends reinvested 179 419
Shares redeemed (700) (1,958)
-------------------------
Decrease in shares outstanding (143) (978)
=========================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 39
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940 (the 1940 Act), as amended, is an open-end management investment company
organized as a Delaware statutory trust consisting of 46 separate funds. The
information presented in this semiannual report pertains only to the USAA Growth
and Tax Strategy Fund (the Fund), which is classified as diversified under the
1940 Act. The Fund's investment objective is to seek a conservative balance
between income, the majority of which is exempt from federal income tax, and the
potential for long-term growth of capital to preserve purchasing power.
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If
no last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
2. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their net asset value (NAV) at the end
of each business day.
================================================================================
40 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
3. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
4. Debt securities with maturities greater than 60 days are valued each
business day by a pricing service (the Service) approved by the Trust's
Board of Trustees. The Service uses an evaluated 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
these securities based on methods that 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 for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before
the pricing of the Fund, are valued in good faith at fair value, using
methods determined by USAA Investment Management Company (the Manager),
an affiliate of the Fund, in consultation with the Fund's subadviser,
if applicable, under valuation procedures approved by the Trust's Board
of Trustees. The effect of fair value pricing is that securities may not
be priced on the basis of quotations from the primary market in which
they are traded and the actual price realized from the sale of a
security may differ materially from the fair value price. Valuing these
securities at fair value is intended to cause the Fund's NAV to be more
reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
<PAGE>
================================================================================
duration of any restrictions on disposition of the securities, and an
evaluation of the forces that influenced the market in which the
securities are purchased and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments
is based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its income to its shareholders.
Therefore, no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon
================================================================================
42 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
notification. Interest income is recorded daily on the accrual basis.
Discounts and premiums are amortized over the life of the respective
securities, using the effective yield method for long-term securities and
the straight-line method for short-term securities.
E. SECURITIES PURCHASED ON A DELAYED-DELIVERY OR WHEN-ISSUED BASIS -- Delivery
and payment for securities that have been purchased by the Fund on a
delayed-delivery or when-issued basis can take place a month or more after
the trade date. During the period prior to settlement, these securities do
not earn interest, are subject to market fluctuation, and may increase or
decrease in value prior to their delivery. The Fund maintains segregated
assets with a market value equal to or greater than the amount of its
purchase commitments. The purchase of securities on a delayed-delivery or
when-issued basis may increase the volatility of the Fund's NAV to the
extent that the Fund makes such purchases while remaining substantially
fully invested. As of November 30, 2009, the Fund's outstanding
delayed-delivery commitments, including interest purchased, were 4,006,000;
all of which were when-issued securities.
F. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition,
through arrangements with the Fund's custodian and other banks utilized by
the Fund for cash management purposes, realized credits, if any, generated
from cash balances in the Fund's bank accounts may be used to directly
reduce the Fund's expenses. For the six-month period ended November 30,
2009, custodian and other bank credits reduced the Fund's expenses by less
than $500. For the six-month period ended November 30, 2009, the Fund did
not incur any brokerage commission recapture credits.
G. INDEMNIFICATIONS -- Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liabilities arising
out of the performance of their duties to the Trust. In addition, in the
normal course of business the Trust enters into contracts that contain a
variety of representations and warranties that provide
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
<PAGE>
================================================================================
general indemnifications. The Trust's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be
made against the Trust that have not yet occurred. However, the Trust
expects the risk of loss to be remote.
H. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $750 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA funds that are party to the loan agreement are assessed facility fees
by CAPCO based on the funds' assessed proportionate share of CAPCO's operating
expenses related to obtaining and maintaining CAPCO's funding programs in total
(in no event to exceed 0.13% annually of the amount of the committed loan
agreement). Prior to September 25, 2009, the maximum annual facility fee was
0.07% of the amount of the committed loan agreement. The facility fees are
allocated among the funds based on their respective average net assets for the
period.
For the six-month period ended November 30, 2009, the Fund paid CAPCO facility
fees of less than $500, which represents 0.4% of the total fees paid to CAPCO by
the USAA funds. The Fund had no borrowings under this agreement during the
six-month period ended November 30, 2009.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year-end of May 31, 2010, in
accordance with applicable tax law.
================================================================================
44 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
Distributions of net investment income are made quarterly. Distributions of
realized gains from security transactions not offset by capital losses are made
annually in the succeeding fiscal year or as otherwise required to avoid the
payment of federal taxes. At May 31, 2009, the Fund had capital loss carryovers
of $7,055,000, for federal income tax purposes, which, if not offset by
subsequent capital gains, will expire between 2015 and 2017, as shown below. It
is unlikely that the Trust's Board of Trustees will authorize a distribution of
capital gains realized in the future until the capital loss carryovers have been
used or expire.
CAPITAL LOSS CARRYOVERS
---------------------------
EXPIRES BALANCE
------- ----------
2015 $ 833,000
2017 6,222,000
----------
Total $7,055,000
==========
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the six-month period
ended November 30, 2009, the Fund did not incur any income tax, interest, or
penalties. As of November 30, 2009, the Manager has reviewed all open tax years
and concluded that there was no impact to the Fund's net assets or results of
operations. Tax years ended May 31, 2006, through May 31, 2009, remain subject
to examination by the Internal Revenue Service and state taxing authorities. On
an ongoing basis, the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended November 30, 2009, were
$14,068,000 and $13,526,000, respectively.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 45
<PAGE>
================================================================================
As of November 30, 2009, the cost of securities, including short-term
securities, for federal income tax purposes, was approximately the same as that
reported in the financial statements.
Gross unrealized appreciation and depreciation of investments as of November 30,
2009, were $17,985,000 and $6,455,000, respectively, resulting in net unrealized
appreciation of $11,530,000.
(5) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund
and for directly managing the day-to-day investment of a portion of the
Fund's assets, subject to the authority of and supervision by the Trust's
Board of Trustees. The Manager is also authorized to select (with approval
of the Trust's Board of Trustees and without shareholder approval) one or
more subadvisers to manage the day-to-day investment of a portion of the
Fund's assets. The Manager monitors each subadviser's performance through
quantitative and qualitative analysis, and periodically recommends to the
Trust's Board of Trustees as to whether each subadviser's agreement should
be renewed, terminated, or modified. The Manager also is responsible for
allocating assets to the subadvisers. The allocation for each subadviser
can range from 0% to 100% of the Fund's assets, and the Manager can change
the allocations without shareholder approval.
The investment management fee for the Fund is composed of a base fee and a
performance adjustment. The Fund's base fee is accrued daily and paid
monthly at an annualized rate of 0.50% of the Fund's average net assets for
the fiscal year.
The performance adjustment is calculated monthly by comparing the Fund's
performance to the performance of certain Lipper indexes. The portion of the
performance adjustment that includes periods beginning August 1, 2006, is
based on a Composite Index comprised of 51% of the Lipper General Municipal
Debt Funds Index, which tracks the total return performance of the 30
largest funds within this category, and 49% of the Lipper Large-Cap Core
Funds Index,
================================================================================
46 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
which tracks the total return performance of the 30 largest funds within
this category. The portion of the performance adjustment that includes
periods before August 1, 2006, is based on the Lipper Balanced Funds Index,
which tracks the total return performance of the 30 largest funds within
this category. The performance period for the Fund consists of the current
month plus the previous 35 months. The following table is utilized to
determine the extent of the performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
---------------------------------------------------------------------------
+/- 0.20% to 0.50% +/- 0.04%
+/- 0.51% to 1.00% +/- 0.05%
+/- 1.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
The annual performance adjustment rate is multiplied by the average net
assets of the Fund over the entire performance period, which is then
multiplied by a fraction, the numerator of which is the number of days in
the month and the denominator of which is 365 (366 in leap years). The
resulting amount is the performance adjustment; a positive adjustment in
the case of overperformance, or a negative adjustment in the case of
underperformance.
Under the performance fee arrangement, the Fund will pay a positive
performance fee adjustment for a performance period whenever the Fund
outperforms the applicable Lipper index over that period, even if the Fund
had overall negative returns during the performance period.
For the six-month period ended November 30, 2009, the Fund incurred total
management fees, paid or payable to the Manager, of $308,000, which
included a (0.06)% performance adjustment of $(42,000).
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into an investment
subadvisory agreement with Northern Trust Investments, N.A. (NTI), under
which NTI directs the investment and reinvestment
================================================================================
NOTES TO FINANCIAL STATEMENTS | 47
<PAGE>
================================================================================
of the portion of the Fund's assets invested in blue chip stocks (as
allocated from time to time by the Manager). The Manager (not the Fund)
pays NTI a subadvisory fee equal to the greater of a minimum annual fee of
$100,000 or a fee at an annual amount of 0.25% on the first $40 million of
assets and 0.10% on assets over $40 million of the portion of the Fund's
average net assets that NTI manages. For the six-month period ended
November 30, 2009, the Manager incurred subadvisory fees, paid or payable
to NTI, of $63,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and shareholder servicing functions for the Fund. For such
services, the Manager receives a fee accrued daily and paid monthly at an
annualized rate of 0.15% of the Fund's average net assets. For the six-month
period ended November 30, 2009, the Fund incurred administration and
servicing fees, paid or payable to the Manager, of $105,000.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Trust's Board of Trustees
has approved the reimbursement of a portion of these expenses incurred by
the Manager. For the six-month period ended November 30, 2009, the Fund
reimbursed the Manager $3,000 for these compliance and legal services.
These expenses are included in the professional fees on the Fund's
statement of operations.
D. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund based on an annual charge of $25.50 per
shareholder account plus out-of-pocket expenses. The Fund also pays SAS
fees that are related to the administration and servicing of accounts that
are traded on an omnibus basis. For the six-month period ended November 30,
2009, the Fund incurred transfer agent's fees, paid or payable to SAS, of
$93,000.
E. UNDERWRITING SERVICES -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
================================================================================
48 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
(6) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(7) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
During the six-month period ended November 30, 2009, in accordance with
affiliated transaction procedures approved by the Trust's Board of Trustees,
purchases and sales of security transactions were executed between the Fund and
the following affiliated USAA fund at the then-current market price with no
brokerage commissions incurred.
COST TO NET REALIZED
SELLER PURCHASER PURCHASER GAIN TO SELLER
------------------------------------------------------------------------------
USAA Growth and USAA New York
Tax Strategy Fund Bond Fund $2,015,000 $6,000
(8) SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date but before the
financial statements are issued are categorized as recognized or non-recognized
for financial statement purposes. The Manager has evaluated subsequent events
through January 19, 2010, the date the financial statements were issued, and has
determined there were no events that required recognition or disclosure in the
Fund's financial statements. Subsequent events that will affect future financial
statements are as follows:
On December 4, 2009, the Fund received a reimbursement from SAS in the amount of
$21,000 related to corrections in fees paid for the administration and servicing
of certain accounts. This amount will be reflected on the statement of
operations as a reduction of expenses.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 49
<PAGE>
================================================================================
(9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
--------------------------------------------------------------------------------
2009 2009 2008 2007 2006 2005
--------------------------------------------------------------------------------
Net asset value at
beginning of period $ 11.00 $ 13.80 $ 14.75 $ 14.40 $ 14.65 $ 14.61
--------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .19 .40 .40 .38 .36 .34
Net realized and
unrealized gain (loss) 1.20 (2.80) (.96) 1.37 .71 1.15
--------------------------------------------------------------------------------
Total from investment
operations 1.39 (2.40) (.56) 1.75 1.07 1.49
--------------------------------------------------------------------------------
Less distributions from:
Net investment income (.18) (.40) (.39) (.39) (.34) (.35)
Realized capital gains - - - (1.01) (.98) (1.10)
--------------------------------------------------------------------------------
Total distributions (.18) (.40) (.39) (1.40) (1.32) (1.45)
--------------------------------------------------------------------------------
Net asset value at end
of period $ 12.21 $ 11.00 $ 13.80 $ 14.75 $ 14.40 $ 14.65
================================================================================
Total return (%)* 12.79 (17.38) (3.81) 12.67(a) 7.38 10.40
Net assets at end
of period (000) $145,751 $132,807 $180,200 $201,778 $191,755 $188,469
Ratios to average
net assets:**
Expenses (%)(b) .89(c) .90 .89 .91(a) .83 .81
Net investment income (%) 3.30(c) 3.46 2.80 2.66 2.44 2.37
Portfolio turnover (%) 10 25 38 37 111 120
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the
period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could
differ from the Lipper reported return.
** For the six-month period ended November 30, 2009, average net assets were $139,818,000.
(a) For the year ended May 31, 2007, SAS voluntarily reimbursed the Fund for a portion of the transfer agent's
fees incurred. The reimbursement had no effect on the Fund's total return or ratio of expenses to average
net assets.
(b) Reflects total operating expenses of the Fund before reductions of any expenses paid indirectly. The Fund's
expenses paid indirectly decreased the expense ratios as follows:
(.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+) (.01%) (.03%)
(+) Represents less than 0.01% of average net assets.
(c) Annualized. The ratio is not necessarily indicative of 12 months of operations.
================================================================================
50 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
EXPENSE EXAMPLE
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, and other Fund operating
expenses. This example is intended to help you understand your indirect costs,
also referred to as "ongoing costs" (in dollars), of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire six-month period of June 1, 2009, through
November 30, 2009.
ACTUAL EXPENSES
The first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested at the beginning of the period, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this
================================================================================
EXPENSE EXAMPLE | 51
<PAGE>
================================================================================
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JUNE 1, 2009 -
JUNE 1, 2009 NOVEMBER 30, 2009 NOVEMBER 30, 2009
--------------------------------------------------------
Actual $1,000.00 $1,127.90 $4.75
Hypothetical
(5% return before expenses) 1,000.00 1,020.61 4.51
* Expenses are equal to the Fund's annualized expense ratio of 0.89%, which is
net of any expenses paid indirectly, multiplied by the average account value
over the period, multiplied by 183 days/365 days (to reflect the one-half-year
period). The Fund's ending account value on the first line in the table is
based on its actual total return of 12.79% for the six-month period of June 1,
2009, through November 30, 2009.
================================================================================
52 | USAA GROWTH AND TAX STRATEGY FUND
<PAGE>
================================================================================
TRUSTEES Christopher W. Claus
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Richard A. Zucker
--------------------------------------------------------------------------------
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, AND San Antonio, Texas 78265-9825
DISTRIBUTOR
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "Products & Services"
SELF-SERVICE 24/7 click "Investments," then
AT USAA.COM "Mutual Funds"
OR CALL Under "My Accounts" go to
(800) 531-USAA "Investments." View account balances,
(8722) or click "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's Web site at HTTP://WWW.SEC.GOV. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available (i) at usaa.com; and (ii) on the
SEC's Web site at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's Web site at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
<PAGE>
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
At USAA.COM click: MY DOCUMENTS
Set preferences to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
================================================================================
27801-0110 (C)2010, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended November 30, 2009
By:* CHRISTOPHER P. LAIA
-----------------------------------------------------------
Signature and Title: Christopher P. Laia, Assistant Secretary
Date: 01/26/2010
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* CHRISTOPHER W. CLAUS
-----------------------------------------------------
Signature and Title: Christopher W. Claus, President
Date: 01/27/2010
------------------------------
By:* ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 01/27/2010
------------------------------
*Print the name and title of each signing officer under his or her signature.
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