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
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA INTERNATIONAL FUND]
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SEMIANNUAL REPORT
USAA INTERNATIONAL FUND
FUND SHARES o INSTITUTIONAL SHARES
NOVEMBER 30, 2009
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FUND OBJECTIVE
CAPITAL APPRECIATION.
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TYPES OF INVESTMENTS
Invests at least 80% of the Fund's assets in equity securities of foreign
(including emerging market) companies.
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
FUND RECOGNITION 7
INVESTMENT OVERVIEW 9
FINANCIAL INFORMATION
Portfolio of Investments 16
Notes to Portfolio of Investments 22
Financial Statements 24
Notes to Financial Statements 27
EXPENSE EXAMPLE 43
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 INTERNATIONAL 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
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[PHOTO OF MARCUS L. SMITH] [PHOTO OF DANIEL LING]
MARCUS L. SMITH DANIEL LING*
MFS MFS
Investment Management Investment Management
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o HOW DID THE USAA INTERNATIONAL FUND (THE FUND SHARES) PERFORM?
For the six-month period ended November 30, 2009, the Fund Shares had a
total return of 22.02%. This compares to a return of 18.89% for the Lipper
International Funds Index and 19.65% for the Morgan Stanley Capital
International Europe, Australasia, and Far East Index (the Index).
o WHAT FACTORS LED TO THE SOLID PERFORMANCE?
During the reporting period, stock selection was the primary driver of
performance relative to the Index, particularly within the industrial goods
and services, retailing, and consumer staples sectors. At MFS, we look to
invest in companies with sustainable earnings growth, strong balance sheets,
and strong competitive positions within their industries. This high-quality
bias held back relative performance early in the period, when lower-quality
companies led the initial stages of the rally. As the period progressed,
however, we believe that investors recognized the strong characteristics of
the companies we owned.
Refer to pages 10 and 13 for benchmark definitions.
Foreign investing is subject to additional risks, such as currency
fluctuations, market illiquidity, and political instability.
Past performance is no guarantee of future results.
*Effective October 6, 2009, David R. Mannheim no longer is a co-manager of
the Fund.
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4 | USAA INTERNATIONAL FUND
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In the industrial goods and services sector, our overweight position in the
strong-performing electrical distribution equipment provider, Schneider
Electric S.A., boosted index-relative returns. In retailing, the Fund's
holdings of Hong Kong-based logistics company Li & Fung Ltd. were among the
top contributors to relative performance. Within consumer staples, our best
performing stocks relative to the Index were brewer Heineken N.V., global
food company Nestle S.A., and wine and alcoholic beverage producer Pernod
Ricard S.A.
Stocks in other sectors that were among the Fund's top relative contributors
included industrial gases company Linde A.G., postal system operator TNT
N.V., technology consulting firm Infosys Technology Ltd. ADR, financial
services firm Komercni Banka A.S., and car maker Toyota Motor Company ADR.
o DO YOU ANTICIPATE REMAINING UNDERWEIGHT FINANCIAL SERVICES?
As of the date of this writing we intend to remain underweight in financial
services, especially in banks, which are a larger part of the Index than
they are within the S&P 500(R) Index. However, as we think about issues such
as leverage, stability, and sustainability of earnings, it is hard to find
many banks that meet our criteria. There are plenty of other opportunities
in today's global stock markets. Technology and health care are two areas
where we are finding attractive opportunities that do meet our criteria.
o HOW WAS THE FUND ALLOCATED ON A REGIONAL/COUNTRY BASIS?
It is important to note that our regional and country exposures are a direct
result of our individual stock selection, not from macro-economic views.
Further, where a company is headquartered is increasingly less relevant than
where it derives its revenues. For instance, long-time
Toyota Motor Company ADR was sold out of the Fund prior to November 30,
2009.
You will find a complete list of securities that the Fund owns on pages
16-21.
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MANAGERS' COMMENTARY ON THE FUND | 5
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holding Nestle S.A. is classified as Swiss and European (excluding the
United Kingdom), but only a portion of its sales are in Switzerland, and a
portion are in the eurozone. It does a significant portion of its business
in emerging markets, as do many of the companies we hold in the Fund.
As of November 30, 2009, the Fund was overweight in Europe (excluding the
United Kingdom) relative to the Index. We were underweight in Japan, had a
relatively neutral weighting in the United Kingdom, and had a small position
in emerging markets, which are not part of the Index.
o WHAT'S YOUR OUTLOOK?
At MFS, we anticipate a somewhat muted global economic recovery. For
companies and their earnings, there is a big difference between 2.5%
economic growth and 3.5% to 4% economic growth. Our contention is that there
will be no free ride in a moderate growth environment because competition
will be more severe. We believe this will be a positive environment for a
process such as ours that focuses on companies with defendable, competitive
positions because of their brand or industry structure. We think consumer
staples, health care, and higher-end retail company stocks are better
positioned to deliver above-average earnings growth than stocks in areas
such as utilities, communications, and banking.
On behalf of our colleagues at USAA, we thank you for your continued
investment in the Fund.
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6 | USAA INTERNATIONAL FUND
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FUND RECOGNITION
USAA INTERNATIONAL FUND SHARES
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OVERALL MORNINGSTAR RATING(TM)
out of 203 foreign large growth funds
for the period ended November 30, 2009:
OVERALL RATING
* * * * *
3-YEAR
* * * * *
out of 203 funds
5-YEAR
* * * *
out of 149 funds
10-YEAR
* * * * *
out of 79 funds
The Overall Morningstar Rating for a fund is derived from a weighted average of
the performance figures associated with its three-, five-, and 10-year (if
applicable) Morningstar Rating metrics. Ratings are based on risk-adjusted
returns.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. For each fund with at least
a three-year history, Morningstar calculates a Morningstar Rating(TM) based on a
Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's
monthly performance (including the effects of sales charges, loads, and
redemption fees), placing more emphasis on downward variations and rewarding
consistent performance. The top 10% of the funds in each broad asset class
receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars,
the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.
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FUND RECOGNITION | 7
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LIPPER LEADERS (OVERALL)
[5] [5]
TOTAL RETURN CONSISTENT
RETURN
The International Fund Shares are listed as a Lipper Leader for Total Return and
Consistent Return among 308 and 305 funds within the Lipper International
Large-Cap Core category, respectively. The Fund Shares received a Lipper Leader
rating for Total Return among 308, 270, and 149 international large-cap core
funds for the three-, five- and 10-year periods, respectively; it received a
Lipper Leader for Consistent Return among 304, 267, and 146 funds for the
three-, five-, and 10-year periods, respectively. Lipper ratings for Total
Return reflect funds' historical total return performance relative to peers as
of November 30, 2009. Lipper ratings for Consistent Return reflect funds'
historical risk-adjusted returns, adjusted for volatility, relative to peers as
of November 30, 2009.
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Ratings are subject to change every month and are based on an equal-weighted
average of percentile ranks for the Total Return and Consistent Return metrics
over three-, five-, and 10-year periods (if applicable). The highest 20% of
funds in each peer group are named Lipper Leaders, the next 20% receive a score
of 4, the middle 20% are scored 3, the next 20% are scored 2, and the lowest 20%
are scored 1. Lipper ratings are not intended to predict future results, and
Lipper does not guarantee the accuracy of this information. More information is
available at WWW.LIPPERLEADERS.COM. Lipper Leader Copyright 2010, Reuters, All
Rights Reserved.
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8 | USAA INTERNATIONAL FUND
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INVESTMENT OVERVIEW
USAA INTERNATIONAL FUND SHARES (Ticker Symbol: USIFX)
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11/30/09 5/31/09
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Net Assets $1,308.8 Million $1,049.0 Million
Net Asset Value Per Share $22.00 $18.08
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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
22.02% 40.38% 6.35% 4.34%
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EXPENSE RATIO**
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1.31%
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
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
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 | 9
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA INTERNATIONAL LIPPER INTERNATIONAL MSCI-EAFE
FUND SHARES FUNDS INDEX INDEX
11/30/99 $10,000.00 $10,000.00 $10,000.00
12/31/99 10,827.78 11,228.64 10,897.52
01/31/00 10,402.98 10,571.39 10,205.10
02/29/00 10,818.55 11,268.98 10,479.82
03/31/00 11,100.21 11,298.02 10,886.06
04/30/00 10,559.97 10,581.38 10,313.20
05/31/00 10,287.55 10,290.63 10,061.31
06/30/00 10,795.46 10,767.07 10,454.79
07/31/00 10,429.71 10,418.08 10,016.48
08/31/00 10,590.16 10,594.15 10,103.42
09/30/00 10,040.72 9,976.95 9,611.47
10/31/00 9,627.42 9,638.16 9,384.43
11/30/00 9,233.57 9,231.28 9,032.51
12/31/00 9,656.60 9,575.98 9,353.56
01/31/01 9,817.05 9,632.38 9,348.73
02/28/01 9,121.74 8,956.49 8,647.88
03/31/01 8,465.32 8,326.79 8,071.41
04/30/01 9,116.88 8,833.23 8,632.30
05/31/01 8,864.04 8,619.26 8,327.64
06/30/01 8,547.98 8,375.82 7,987.07
07/31/01 8,494.50 8,158.10 7,841.75
08/31/01 8,421.56 7,994.51 7,643.03
09/30/01 7,541.48 7,123.46 6,868.89
10/31/01 7,740.84 7,316.40 7,044.82
11/30/01 8,047.16 7,589.58 7,304.51
12/31/01 8,249.08 7,724.95 7,347.90
01/31/02 7,963.95 7,413.15 6,957.48
02/28/02 8,111.43 7,517.06 7,006.28
03/31/02 8,553.87 7,914.69 7,419.29
04/30/02 8,583.36 7,970.22 7,434.21
05/31/02 8,666.94 8,084.17 7,528.40
06/30/02 8,391.64 7,765.07 7,228.73
07/31/02 7,541.17 6,989.85 6,515.11
08/31/02 7,585.41 6,995.42 6,500.32
09/30/02 7,020.07 6,242.02 5,802.23
10/31/02 7,437.93 6,565.99 6,114.07
11/30/02 7,575.58 6,876.84 6,391.56
12/31/02 7,500.36 6,656.78 6,176.65
01/31/03 7,183.10 6,412.98 5,918.79
02/28/03 7,009.59 6,223.09 5,782.95
03/31/03 6,945.15 6,070.69 5,669.33
04/30/03 7,609.42 6,671.70 6,224.99
05/31/03 8,001.05 7,100.25 6,602.18
06/30/03 8,115.06 7,268.00 6,761.73
07/31/03 8,199.34 7,471.79 6,925.40
08/31/03 8,293.53 7,687.39 7,092.65
09/30/03 8,506.69 7,841.65 7,311.29
10/31/03 8,908.23 8,309.17 7,766.99
11/30/03 9,200.71 8,476.07 7,939.67
12/31/03 9,893.17 9,052.89 8,559.95
01/31/04 10,048.06 9,247.43 8,681.00
02/29/04 10,322.87 9,458.86 8,881.39
03/31/04 10,252.92 9,504.96 8,931.37
04/30/04 10,128.01 9,221.66 8,729.33
05/31/04 10,212.95 9,216.43 8,758.68
06/30/04 10,367.84 9,402.10 8,950.59
07/31/04 10,033.07 9,094.19 8,660.11
08/31/04 10,058.06 9,142.57 8,698.35
09/30/04 10,337.86 9,386.05 8,925.69
10/31/04 10,652.65 9,683.66 9,230.05
11/30/04 11,237.24 10,304.86 9,860.59
12/31/04 11,719.32 10,736.27 10,293.10
01/31/05 11,499.42 10,562.71 10,104.25
02/28/05 12,003.59 11,022.92 10,540.85
03/31/05 11,687.14 10,730.88 10,276.04
04/30/05 11,429.69 10,459.40 10,034.44
05/31/05 11,429.69 10,525.43 10,039.29
06/30/05 11,440.42 10,666.65 10,172.51
07/31/05 11,976.77 11,065.95 10,484.36
08/31/05 12,336.13 11,384.57 10,749.26
09/30/05 12,695.48 11,856.17 11,228.05
10/31/05 12,400.49 11,514.84 10,900.13
11/30/05 12,625.76 11,827.73 11,166.70
12/31/05 13,205.47 12,418.92 11,686.33
01/31/06 14,116.39 13,237.96 12,403.85
02/28/06 14,088.10 13,177.11 12,376.42
03/31/06 14,501.12 13,644.73 12,784.32
04/30/06 15,157.44 14,293.28 13,394.89
05/31/06 14,619.94 13,640.08 12,874.71
06/30/06 14,716.12 13,574.06 12,873.86
07/31/06 15,032.96 13,694.83 13,001.30
08/31/06 15,553.49 14,070.33 13,358.76
09/30/06 15,581.78 14,142.13 13,379.42
10/31/06 15,898.62 14,655.37 13,899.80
11/30/06 16,356.91 15,151.76 14,315.18
12/31/06 16,817.16 15,634.58 14,764.57
01/31/07 17,178.42 15,777.40 14,864.48
02/28/07 17,097.45 15,755.18 14,984.42
03/31/07 17,402.65 16,214.38 15,366.38
04/30/07 18,000.59 16,874.47 16,048.82
05/31/07 18,280.88 17,373.68 16,330.41
06/30/07 18,299.56 17,428.78 16,350.36
07/31/07 17,863.56 17,194.36 16,109.56
08/31/07 17,950.76 17,023.67 15,857.81
09/30/07 18,635.91 18,041.56 16,706.21
10/31/07 19,171.56 18,933.55 17,362.61
11/30/07 18,667.05 18,149.07 16,791.66
12/31/07 18,302.31 17,861.80 16,413.72
01/31/08 16,981.66 16,349.72 14,897.45
02/29/08 17,175.09 16,376.41 15,110.88
03/31/08 17,348.51 16,178.75 14,951.89
04/30/08 18,128.89 17,103.67 15,763.45
05/31/08 18,515.75 17,359.81 15,916.95
06/30/08 16,948.31 15,870.57 14,615.13
07/31/08 16,474.75 15,318.88 14,146.06
08/31/08 15,921.14 14,702.40 13,572.81
09/30/08 14,280.34 12,765.56 11,610.32
10/31/08 11,792.45 10,077.65 9,267.55
11/30/08 10,892.01 9,422.21 8,766.64
12/31/08 11,850.35 10,069.67 9,293.70
01/31/09 10,515.88 9,044.85 8,381.68
02/28/09 9,563.68 8,214.90 7,521.78
03/31/09 10,300.42 8,824.92 7,998.48
04/30/09 11,197.01 9,917.45 9,022.61
05/31/09 12,531.48 11,261.67 10,090.04
06/30/09 12,336.87 11,087.55 10,032.65
07/31/09 13,699.14 12,203.74 10,948.65
08/31/09 14,157.86 12,645.22 11,543.80
09/30/09 14,915.45 13,282.72 11,985.79
10/31/09 14,665.24 12,917.88 11,836.02
11/30/09 15,290.76 13,389.54 12,073.00
[END CHART]
Data from 11/30/99 to 11/30/09.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA International Fund Shares to the following benchmarks:
o The unmanaged Lipper International Funds Index tracks the total return
performance of the 30 largest funds within the Lipper International Funds
category.
o The unmanaged Morgan Stanley Capital International Europe, Australasia and
Far East (MSCI-EAFE(R)) Index reflects the movements of stock markets in
Europe, Australasia, and the Far East by representing a broad selection of
domestically listed companies within each market.
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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10 | USAA INTERNATIONAL FUND
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USAA INTERNATIONAL FUND INSTITUTIONAL SHARES*
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11/30/09 5/31/09
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Net Assets $102.7 Million $58.1 Million
Net Asset Value Per Share $22.06 $18.09
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AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/09
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5/31/09 to 11/30/09** 1 Year Since Inception 8/01/08
22.23% 41.03% -3.94%
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EXPENSE RATIO***
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Before Reimbursement 0.91% After Reimbursement 0.87%
*The USAA International Fund Institutional Shares (Institutional Shares)
commenced operations on August 1, 2008, and are not offered for sale directly to
the general public. The Institutional Shares are available only to the USAA
Target Retirement Funds.
**Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
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.
***THE BEFORE REIMBURSEMENT EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING
EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND INCLUDING ANY
ACQUIRED FUND FEES AND EXPENSES, AND IS CALCULATED AS A PERCENTAGE OF AVERAGE
NET ASSETS. THE AFTER REIMBURSEMENT EXPENSE RATIO REPRESENTS TOTAL ANNUAL
OPERATING EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND
EXCLUDING ANY ACQUIRED FUND FEES AND EXPENSES, AFTER REIMBURSEMENT FROM USAA
INVESTMENT MANAGEMENT COMPANY (IMCO). BEFORE AND AFTER REIMBURSEMENT EXPENSE
RATIOS ARE REPORTED IN THE INSTITUTIONAL SHARES' PROSPECTUS DATED OCTOBER 1,
2009. FOR THE FIRST TWO FISCAL YEARS, IMCO HAS VOLUNTARILY AGREED TO LIMIT THE
INSTITUTIONAL SHARES' TOTAL ANNUAL OPERATING EXPENSES TO 0.87%, BEFORE
REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND EXCLUDING ANY ACQUIRED FUND FEES
AND EXPENSES, AND TO REIMBURSE THE INSTITUTIONAL SHARES FOR EXPENSES IN EXCESS
OF THIS AMOUNT. IMCO CAN MODIFY OR TERMINATE THIS ARRANGEMENT AT ANY TIME. THESE
EXPENSE RATIOS MAY DIFFER FROM THE EXPENSE RATIOS 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.
================================================================================
INVESTMENT OVERVIEW | 11
<PAGE>
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA INTERNATIONAL FUND LIPPER INTERNATIONAL MSCI-EAFE
INSTITUTIONAL SHARES FUNDS INDEX INDEX
07/31/08 $10,000.00 $10,000.00 $10,000.00
08/31/08 9,823.05 9,597.57 9,594.76
09/30/08 8,810.70 8,333.22 8,207.46
10/31/08 7,275.72 6,578.58 6,551.33
11/30/08 6,720.16 6,150.72 6,197.23
12/31/08 7,311.09 6,573.37 6,569.82
01/31/09 6,494.44 5,904.38 5,925.10
02/28/09 5,909.90 5,362.59 5,317.23
03/31/09 6,369.80 5,760.81 5,654.21
04/30/09 6,924.26 6,474.00 6,378.18
05/31/09 7,753.79 7,351.49 7,132.76
06/30/09 7,633.44 7,237.83 7,092.19
07/31/09 8,480.17 7,966.47 7,739.72
08/31/09 8,763.85 8,254.66 8,160.43
09/30/09 9,240.94 8,670.81 8,472.88
10/31/09 9,086.20 8,432.65 8,367.01
11/30/09 9,477.32 8,740.54 8,534.53
[END CHART]
*Data from 7/31/08 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.
*The performance of the MSCI-EAFE Index and the Lipper International Funds Index
is calculated from the end of the month, July 31, 2008, while the Institutional
Shares' inception date is August 1, 2008. There may be a slight variation of
performance numbers because of this difference.
================================================================================
12 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
The graph on page 12 illustrates the comparison of a $10,000 hypothetical
investment in the USAA International Fund Institutional Shares to the following
benchmarks:
o The unmanaged Morgan Stanley Capital International Europe, Australasia and
Far East (MSCI-EAFE) Index reflects the movements of stock markets in
Europe, Australasia, and the Far East by representing a broad selection of
domestically listed companies within each market.
o The unmanaged Lipper International Funds Index tracks the total return
performance of the 30 largest funds within the Lipper International Funds
category.
================================================================================
INVESTMENT OVERVIEW | 13
<PAGE>
================================================================================
TOP 10 INDUSTRIES
AS OF 11/30/09
(% of Net Assets)
Pharmaceuticals ...................................... 8.9%
Packaged Foods & Meat ................................ 5.9%
Apparel & Accessories & Luxury Goods ................. 5.8%
Diversified Banks .................................... 5.7%
Industrial Gases ..................................... 5.7%
Distillers & Vintners ................................ 4.1%
Household Products ................................... 4.1%
Electrical Components & Equipment .................... 3.8%
Integrated Oil & Gas ................................. 3.3%
Brewers .............................................. 3.1%
TOP 10 EQUITY HOLDINGS
AS OF 11/30/09
(% of Net Assets)
Nestle S.A. .......................................... 4.4%
Roche Holdings AG .................................... 4.4%
Linde AG ............................................. 3.8%
LVMH Moet Hennessy Louis Vuitton S.A. ................ 3.7%
Reckitt Benckiser Group plc .......................... 3.5%
Heineken N.V. ........................................ 3.1%
Schneider Electric S.A. .............................. 2.9%
Bayer AG ............................................. 2.6%
Canadian National Railway Co. ........................ 2.5%
Diageo plc ........................................... 2.4%
You will find a complete list of securities that the Fund owns on pages 16-21.
================================================================================
14 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
o ASSET ALLOCATION -- 11/30/2009* o
[PIE CHART OF ASSET ALLOCATION]
FRANCE 19.4%
UNITED KINGDOM 18.5%
SWITZERLAND 16.5%
GERMANY 12.3%
JAPAN 11.0%
NETHERLANDS 6.9%
OTHER** 15.2%
[END CHART]
* Excludes short-term investments purchased with cash collateral from
securities loaned.
** Includes countries with less than 3% of the portfolio and money market
instruments (1.5%).
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
INVESTMENT OVERVIEW | 15
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
November 30, 2009 (unaudited)
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
EQUITY SECURITIES (98.3%)
COMMON STOCKS (98.2%)
CONSUMER DISCRETIONARY (12.2%)
------------------------------
ADVERTISING (2.0%)
3,030,774 WPP plc $ 28,320
----------
APPAREL & ACCESSORIES & LUXURY GOODS (5.8%)
1,261,110 Burberry Group plc 11,826
526,294 Compagnie Financiere Richemont S.A. 17,018
504,460 LVMH Moet Hennessy Louis Vuitton S.A.(a) 52,538
----------
81,382
----------
CASINOS & GAMING (1.1%)
2,131,311 Ladbrokes plc 4,733
3,455,440 William Hill plc 10,170
----------
14,903
----------
DISTRIBUTORS (0.7%)
2,628,400 Li & Fung Ltd. 10,564
----------
MOVIES & ENTERTAINMENT (1.0%)
469,946 Vivendi S.A. 13,541
----------
PUBLISHING (1.6%)
1,069,120 Wolters Kluwer N.V. 23,278
----------
Total Consumer Discretionary 171,988
----------
CONSUMER STAPLES (20.1%)
------------------------
BREWERS (3.1%)
921,350 Heineken N.V. 43,330
----------
DISTILLERS & VINTNERS (4.1%)
2,003,650 Diageo plc 33,786
284,026 Pernod Ricard S.A. 24,220
----------
58,006
----------
FOOD RETAIL (1.7%)
257,200 Lawson, Inc. 12,735
1,581,139 Tesco plc 11,003
----------
23,738
----------
================================================================================
16 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (4.1%)
367,200 Kao Corp. $ 9,006
973,060 Reckitt Benckiser Group plc 49,624
----------
58,630
----------
PACKAGED FOODS & MEAT (5.9%)
351,585 DANONE S.A. 21,016
1,321,098 Nestle S.A. 62,448
----------
83,464
----------
PERSONAL PRODUCTS (1.2%)
258,500 Beiersdorf AG 16,811
----------
Total Consumer Staples 283,979
----------
ENERGY (5.9%)
-------------
INTEGRATED OIL & GAS (3.3%)
811,280 Royal Dutch Shell plc "A" 24,030
362,906 Total S.A. ADR 22,569
----------
46,599
----------
OIL & GAS EXPLORATION & PRODUCTION (2.6%)
5,753,000 CNOOC Ltd. 8,848
3,554 INPEX Holdings, Inc. 27,712
----------
36,560
----------
Total Energy 83,159
----------
FINANCIALS (12.7%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (1.4%)
589,075 Julius Baer Group Ltd. 19,441
----------
CONSUMER FINANCE (0.5%)
648,100 Aeon Credit Service Co. Ltd. 6,583
----------
DIVERSIFIED BANKS (5.7%)
2,463,502 Banca Intesa S.p.A.* 10,672
206,859 Erste Bank der Oesterreichischen Sparkassen AG(a) 8,411
2,337,918 HSBC Holdings plc 27,192
46,202 Komercni Banka A.S. 10,096
974,081 Standard Chartered plc 23,781
----------
80,152
----------
DIVERSIFIED CAPITAL MARKETS (0.5%)
464,945 UBS AG* 7,212
----------
MULTI-LINE INSURANCE (2.1%)
1,280,100 AXA S.A. 30,504
----------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.4%)
569,000 ING Groep N.V.* 5,301
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
REINSURANCE (0.5%)
144,587 Swiss Re $ 6,876
----------
SPECIALIZED FINANCE (1.6%)
275,050 Deutsche Boerse AG 22,918
----------
Total Financials 178,987
----------
HEALTH CARE (12.2%)
-------------------
BIOTECHNOLOGY (0.6%)
150,169 Actelion Ltd.* 8,836
----------
HEALTH CARE EQUIPMENT (2.7%)
57,689 Sonova Holding AG 6,852
240,030 Synthes, Inc. 31,567
----------
38,419
----------
PHARMACEUTICALS (8.9%)
470,255 Bayer AG 36,005
290,560 GlaxoSmithKline plc 6,008
228,245 Merck KGaA 21,526
375,020 Roche Holdings AG 61,343
----------
124,882
----------
Total Health Care 172,137
----------
INDUSTRIALS (10.6%)
-------------------
AIR FREIGHT & LOGISTICS (1.7%)
831,270 TNT N.V. 24,115
----------
ELECTRICAL COMPONENTS & EQUIPMENT (3.8%)
460,720 Legrand S.A. 12,656
374,779 Schneider Electric S.A. 41,019
----------
53,675
----------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.5%)
4,117,090 Hays plc 6,611
----------
INDUSTRIAL CONGLOMERATES (1.0%)
918,879 Smiths Group plc 14,421
----------
INDUSTRIAL MACHINERY (1.1%)
187,700 FANUC Ltd. 15,504
----------
RAILROADS (2.5%)
669,782 Canadian National Railway Co. 35,231
----------
Total Industrials 149,557
----------
INFORMATION TECHNOLOGY (10.0%)
------------------------------
APPLICATION SOFTWARE (0.8%)
238,080 SAP AG 11,375
----------
================================================================================
18 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS (2.6%)
73,800 Hirose Electric Co. Ltd. $ 7,803
1,119,800 HOYA Corp. 28,565
----------
36,368
----------
IT CONSULTING & OTHER SERVICES (1.6%)
-------------------------------------
439,550 Infosys Technologies Ltd. ADR(a) 22,404
----------
OFFICE ELECTRONICS (2.1%)
707,400 Canon, Inc. 27,252
354,500 Konica Minolta Holdings, Inc. 3,264
----------
30,516
----------
SEMICONDUCTOR EQUIPMENT (0.4%)
107,200 Tokyo Electron Ltd. 5,854
----------
SEMICONDUCTORS (2.5%)
29,632 Samsung Electronics Co. Ltd. 18,348
1,608,843 Taiwan Semiconductor Manufacturing Co. Ltd. ADR 16,716
----------
35,064
----------
Total Information Technology 141,581
----------
MATERIALS (9.1%)
----------------
DIVERSIFIED METALS & MINING (0.6%)
294,200 BHP Billiton plc 8,990
----------
INDUSTRIAL GASES (5.7%)
222,273 Air Liquide S.A. 25,833
438,280 Linde AG 53,885
----------
79,718
----------
SPECIALTY CHEMICALS (2.8%)
34,853 Givaudan S.A. 27,585
218,200 Shin-Etsu Chemical Co. Ltd. 11,839
----------
39,424
----------
Total Materials 128,132
----------
TELECOMMUNICATION SERVICES (2.5%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (1.0%)
7,069,650 Singapore Telecommunications Ltd. 14,967
----------
WIRELESS TELECOMMUNICATION SERVICES (1.5%)
238,620 America Movil S.A.B. de C.V. ADR "L" 11,545
575,770 MTN Group Ltd. 9,237
----------
20,782
----------
Total Telecommunication Services 35,749
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
UTILITIES (2.9%)
----------------
ELECTRIC UTILITIES (0.8%)
295,056 E.ON AG $ 11,670
----------
MULTI-UTILITIES (2.1%)
696,046 Gaz de France S.A.(a) 29,065
----------
Total Utilities 40,735
----------
Total Common Stocks (cost: $1,242,502) 1,386,004
----------
RIGHTS (0.1%)
CONSUMER DISCRETIONARY (0.1%)
-----------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.1%)
418,800 ING Groep N.V.* 1,038
----------
Total Consumer Discretionary 1,038
----------
CONSUMER STAPLES (0.0%)
-----------------------
DISTILLERS & VINTNERS (0.0%)
284,026 Pernod Ricard SA*(b) 484
----------
Total Consumer Staples 484
----------
Total Rights (cost: $1,651) 1,522
----------
Total Equity Securities (cost: $1,244,153) 1,387,526
----------
MONEY MARKET INSTRUMENTS (1.5%)
MONEY MARKET FUNDS (1.5%)
21,292,503 State Street Institutional Liquid Reserve Fund, 0.19%(c) (cost: $21,293) 21,293
----------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (5.1%)
MONEY MARKET FUNDS (1.3%)
18,098,363 BlackRock Liquidity Funds TempFund, 0.15%(c) 18,098
----------
---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (3.8%)
$23,600 Credit Suisse First Boston LLC, 0.16%, acquired on 11/30/2009 and
due 12/01/2009 at $23,600 (collateralized by $10,380 of Federal
Home Loan Bank(d), 0.03%(e), due 2/05/2010; $13,700 of Fannie Mae(d),
0.10%(e) due 5/12/2010; combined market value $24,073) 23,600
================================================================================
20 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
---------------------------------------------------------------------------------------------------
$30,300 Deutsche Bank Securities, Inc., 0.16%, acquired on 11/30/2009 and
due 12/01/2009 at $30,300 (collateralized by $33,075 of U.S. Treasury,
1.66%(e), due 11/15/2013; market value $30,906) $ 30,300
----------
Total Repurchase Agreements 53,900
----------
Total Short-term Investments Purchased With Cash Collateral
From Securities Loaned (cost: $71,998) 71,998
----------
TOTAL INVESTMENTS (COST: $1,337,444) $1,480,817
==========
---------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
---------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
---------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $1,386,004 $ - $- $1,386,004
Rights 1,038 484 - 1,522
Money Market Instruments:
Money Market Funds 21,293 - - 21,293
Short-Term Investments
Purchased With Cash
Collateral From Securities
Loaned:
Money Market Funds 18,098 - - 18,098
Repurchase Agreements - 53,900 - 53,900
---------------------------------------------------------------------------------------------------
Total $1,426,433 $54,384 $- $1,480,817
---------------------------------------------------------------------------------------------------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<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
RIGHTS -- enable the holder to buy a specified number of shares of new
issues of a common stock before it is offered to the public.
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.
o SPECIFIC NOTES
(a) The security or a portion thereof was out on loan as of November 30,
2009.
(b) Security was fair valued at November 30, 2009, by USAA Investment
Management Company (the Manager), in accordance with valuation
procedures approved by the Board of Trustees.
================================================================================
22 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
(c) Rate represents the money market fund annualized seven-day yield at
November 30, 2009.
(d) Securities issued by government-sponsored enterprises are supported only
by the right of the government-sponsored enterprise to borrow from the
U.S. Treasury, the discretionary authority of the U.S. government to
purchase the government-sponsored enterprises' obligations, or by the
credit of the issuing agency, instrumentality, or corporation, and are
neither issued nor guaranteed by the U.S. Treasury.
(e) Zero-coupon security. Rate represents the effective yield at the date of
purchase.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (including securities
on loan of $67,217) (cost of $1,337,444) $1,480,817
Cash denominated in foreign currencies (identified cost of $359) 373
Receivables:
Capital shares sold:
Affiliated transactions (Note 8) 210
Nonaffiliated transactions 1,349
USAA Investment Management Company (Note 7D) 12
Dividends and interest 2,886
Securities sold 2,796
Other 95
----------
Total assets 1,488,538
----------
LIABILITIES
Payables:
Upon return of securities loaned 71,998
Securities purchased 2,859
Capital shares redeemed 833
Unrealized depreciation on foreign currency contracts held, at value 3
Accrued management fees 913
Accrued transfer agent's fees 245
Other accrued expenses and payables 148
----------
Total liabilities 76,999
----------
Net assets applicable to capital shares outstanding $1,411,539
==========
NET ASSETS CONSIST OF:
Paid-in capital $1,340,013
Accumulated undistributed net investment income 15,417
Accumulated net realized loss on investments (87,405)
Net unrealized appreciation of investments 143,373
Net unrealized appreciation of foreign currency translations 141
----------
Net assets applicable to capital shares outstanding $1,411,539
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $1,308,798/59,478 shares outstanding) $ 22.00
==========
Institutional Shares (net assets of $102,741/4,658 shares outstanding) $ 22.06
==========
See accompanying notes to financial statements.
================================================================================
24 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $737) $ 7,561
Interest 29
--------
Total income 7,590
--------
EXPENSES
Management fees 4,800
Administration and servicing fees:
Fund Shares 884
Institutional Shares 20
Transfer agent's fees:
Fund Shares 1,672
Institutional Shares 20
Custody and accounting fees:
Fund Shares 229
Institutional Shares 15
Postage:
Fund Shares 67
Shareholder reporting fees:
Fund Shares 23
Trustees' fees 5
Registration fees:
Fund Shares 23
Professional fees 57
Other 16
--------
Total expenses 7,831
Expenses reimbursed:
Institutional Shares (12)
--------
Net expenses 7,819
--------
NET INVESTMENT LOSS (229)
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments (7,091)
Foreign currency transactions 185
Change in net unrealized appreciation/depreciation of:
Investments 250,097
Foreign currency translations (284)
--------
Net realized and unrealized gain 242,907
--------
Increase in net assets resulting from operations $242,678
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 25
<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 (loss) $ (229) $ 20,380
Net realized loss on investments (7,091) (79,785)
Net realized gain (loss) on foreign currency transactions 185 (466)
Change in net unrealized appreciation/depreciation of:
Investments 250,097 (414,392)
Foreign currency translations (284) 595
---------------------------
Increase (decrease) in net assets resulting from operations 242,678 (473,668)
---------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares - (23,385)
Institutional Shares* - (576)
---------------------------
Total distributions of net investment income - (23,961)
---------------------------
Net realized gains:
Fund Shares - (13,113)
Institutional Shares* - (287)
---------------------------
Total distributions of net realized gains - (13,400)
---------------------------
Distributions to shareholders - (37,361)
---------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Fund Shares 32,356 36,865
Institutional Shares* 29,480 55,106
---------------------------
Total net increase in net assets from capital share transactions 61,836 91,971
---------------------------
Capital contribution from USAA Transfer Agency Company:
Fund Shares - 41
Institutional Shares* - 22
---------------------------
Net increase (decrease) in net assets 304,514 (418,995)
NET ASSETS
Beginning of period 1,107,025 1,526,020
---------------------------
End of period $1,411,539 $1,107,025
===========================
Accumulated undistributed net investment income:
End of period $ 15,417 $ 15,646
===========================
* Institutional Shares were initiated on August 1, 2008.
See accompanying notes to financial statements.
================================================================================
26 | USAA INTERNATIONAL FUND
<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
International Fund (the Fund), which is classified as diversified under the 1940
Act. The Fund's investment objective is capital appreciation.
The Fund has two classes of shares: International Fund Shares (Fund Shares) and
International Fund Institutional Shares (Institutional Shares). Each class of
shares has equal rights to assets and earnings, except that each class bears
certain class-related expenses specific to the particular class. These expenses
include administration and servicing fees, transfer agent fees, postage,
shareholder reporting fees, and certain registration and custodian fees.
Expenses not attributable to a specific class, income, and realized gains or
losses on investments are allocated to each class of shares based on each
class's relative net assets. Each class has exclusive voting rights on matters
related solely to that class and separate voting rights on matters that relate
to both classes. The Institutional Shares are currently offered for sale only to
the USAA Target Retirement Funds (Target Funds) and not to the general public.
The Target Funds are managed by USAA Investment Management Company (the
Manager), an affiliate of the Fund.
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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
<PAGE>
================================================================================
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. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the
foreign markets may be closed. Therefore, the calculation of the
Fund's net asset value (NAV) may not take place at the same time the
prices of certain foreign securities held by the Fund are determined.
In most cases, events affecting the values of foreign securities that
occur between the time of their last quoted sales or official closing
prices and the close of normal trading on the NYSE on a day the Fund's
NAV is calculated will not be reflected in the value of the Fund's
foreign securities. However, the Manager and the Fund's subadviser,
if applicable, will monitor for events that would materially affect
the value of the Fund's foreign securities. The Fund's subadviser has
agreed to notify the Manager of significant events it identifies that
would materially affect the value of the Fund's foreign securities.
If the Manager determines that a particular event would materially
affect the value of the Fund's foreign securities, then the Manager,
under valuation procedures approved by the Trust's Board of Trustees,
will consider such available information that it deems relevant to
determine a fair value for the affected foreign securities. In
addition, the Fund may use information from an external vendor or
other sources to adjust the foreign market closing prices of foreign
equity securities to reflect what the Fund believes to be the fair
value of the securities as of the close of the NYSE. Fair valuation of
affected foreign equity securities may occur frequently based on an
assessment that events that
================================================================================
28 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
occur on a fairly regular basis (such as U.S. market movements) are
significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates
market value.
5. Repurchase agreements are valued at cost, which approximates market
value.
6. 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 the Manager 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 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
<PAGE>
================================================================================
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 notification. Interest income is recorded
daily on the accrual basis. Discounts and premiums on short-term securities
are amortized on a straight-line basis over the life of the respective
securities.
================================================================================
30 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
E. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers. These agreements are
collateralized by underlying securities. The collateral obligations are
marked-to-market daily to ensure their value is equal to or in excess of the
repurchase agreement price plus accrued interest and are held by the Fund,
either through its regular custodian or through a special "tri-party"
custodian that maintains separate accounts for both the Fund and its
counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit risk, and the Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
F. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the
exchange rate obtained from an independent pricing service on the
respective dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
<PAGE>
================================================================================
equivalent of the amounts received. At the end of the Fund's fiscal year,
these net realized foreign currency gains/losses are reclassified from
accumulated net realized gain/loss to accumulated undistributed net
investment income on the statement of assets and liabilities as such amounts
are treated as ordinary income/loss for tax purposes. Net unrealized
foreign currency exchange gains/losses arise from changes in the value of
assets and liabilities, other than investments in securities, resulting from
changes in the exchange rate.
G. 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 expenses of the Fund
Shares and the Institutional Shares by less than $500. For the six-month
period ended November 30, 2009, the Fund did not incur any brokerage
commission recapture credits.
H. 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 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.
I. 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.
================================================================================
32 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
(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 $3,000, which represents 2.9% 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.
Distributions of net investment income and 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 $21,959,000, for federal
income tax purposes, which, if not offset by subsequent capital gains, will
expire in 2017. It is unlikely
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
<PAGE>
================================================================================
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.
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
$156,912,000 and $92,936,000, respectively.
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 $234,481,000 and $91,108,000, respectively, resulting in net
unrealized appreciation of $143,373,000.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Wachovia Global
Securities Lending (Wachovia), may lend its securities to
================================================================================
34 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
qualified financial institutions, such as certain broker-dealers, to earn
additional income. The borrowers are required to secure their loans continuously
with cash collateral in an amount at least equal to the fair value of the
securities loaned, initially in an amount at least equal to 102% of the fair
value of domestic securities loaned and 105% of the fair value of international
securities loaned. Cash collateral is invested in high-quality short-term
investments. Cash collateral requirements are determined daily based on the
prior business day's ending value of securities loaned. Imbalances in cash
collateral may occur on days where market volatility causes security prices to
change significantly, and are adjusted the next business day. The Fund and
Wachovia retain 80% and 20%, respectively, of the income earned from the
investment of cash received as collateral, net of any expenses associated with
the lending transaction. Wachovia receives no other fees from the Fund for its
services as securities-lending agent. Risks to the Fund in securities-lending
transactions are that the borrower may not provide additional collateral when
required or return the securities when due, and that the value of the short-term
investments will be less than the amount of cash collateral required to be
returned to the borrower. Wachovia Bank, N.A., parent company of Wachovia, has
agreed to indemnify the Fund against any losses due to counterparty default in
securities-lending transactions. For the six-month period ended November 30,
2009, the Fund received net securities-lending income of $0 due to corrections
to previous estimated income. As of November 30, 2009, the Fund loaned
securities having a fair market value of approximately $67,217,000 and received
cash collateral of $71,998,000 for the loans, which was invested in short-term
investments, as noted in the Fund's portfolio of investments.
(6) CAPITAL SHARE TRANSACTIONS
At November 30, 2009, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
<PAGE>
================================================================================
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated Target Funds. Capital share transactions were as
follows, in thousands:
SIX-MONTH
PERIOD ENDED YEAR ENDED
11/30/2009 5/31/2009
--------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------
FUND SHARES:
Shares sold 6,466 $ 133,202 12,823 $ 222,710
Shares issued from reinvested
dividends - - 2,168 35,855
Shares redeemed (4,992) (100,846) (11,936) (221,700)
--------------------------------------------------
Net increase from capital
share transactions 1,474 $ 32,356 3,055 $ 36,865
==================================================
INSTITUTIONAL SHARES
(INITIATED ON AUGUST 1, 2008):
Shares sold 1,748 $ 35,485 3,356 $ 57,461
Shares issued from reinvested
dividends - - 52 863
Shares redeemed (300) (6,005) (198) (3,218)
--------------------------------------------------
Net increase from capital
share transactions 1,448 $ 29,480 3,210 $ 55,106
==================================================
(7) 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,
subject to the authority of and supervision by the Trust's Board of
Trustees. The Manager is authorized to select (with approval of the Trust's
Board of Trustees and without shareholder approval) one or more subadvisers
to manage the actual day-to-day investment 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
================================================================================
36 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
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 0.75% of the Fund's average net assets for
the fiscal year.
The performance adjustment is calculated separately for each share class on
a monthly basis by comparing each class's performance to that of the Lipper
International Funds Index over the performance period. The Lipper
International Funds Index tracks the total return performance of the 30
largest funds in the Lipper International Funds category. The performance
period for each class consists of the current month plus the previous 35
months. The performance adjustment for the Institutional Shares includes the
performance of the Fund Shares for periods prior to August 1, 2008. 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)
----------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% 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.
Each class's annual performance adjustment rate is multiplied by the average
net assets of each respective class 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
<PAGE>
================================================================================
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper International Funds Index over that period, even if
the class 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 $4,800,000, which
included a performance adjustment for the Fund Shares and Institutional
Shares of $85,000 and less than $500, respectively. For the Fund Shares and
Institutional Shares, the performance adjustments were 0.01% and less than
0.01%, respectively.
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into an investment
subadvisory agreement with MFS Investment Management (MFS), under which MFS
directs the investment and reinvestment of the Fund's assets (as allocated
from time to time by the Manager). The Manager (not the Fund) pays MFS a
subadvisory fee in the annual amount of 0.29% of the Fund's average net
assets that MFS manages. For the six-month period ended November 30, 2009,
the Manager incurred subadvisory fees, paid or payable to MFS, of
$1,824,000.
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% and 0.05% of average net assets of the Fund Shares
and Institutional Shares, respectively. For the six-month period ended
November 30, 2009, the Fund Shares and Institutional Shares incurred
administration and servicing fees, paid or payable to the Manager, of
$884,000 and $20,000, respectively.
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
================================================================================
38 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
period ended November 30, 2009, the Fund reimbursed the Manager $28,000 for
these compliance and legal services. These expenses are included in the
professional fees on the Fund's statement of operations.
D. EXPENSE LIMITATION -- The Manager has voluntarily agreed to limit the annual
expenses of the Institutional Shares for its first two fiscal years to 0.87%
of its average annual net assets, excluding extraordinary expenses and
before reductions of any expenses paid indirectly, and will reimburse the
Institutional Shares for all expenses in excess of that amount. The Manager
may modify or terminate this voluntary agreement at any time. For the
six-month period ended November 30, 2009, the Institutional Shares incurred
reimbursable expenses of $12,000, which was receivable from the Manager.
E. 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. Transfer agent's fees for Fund Shares
are paid monthly based on an annual charge of $23 per shareholder account
plus out-of-pocket expenses. The Fund Shares also pay SAS fees that are
related to the administration and servicing of accounts that are traded on
an omnibus basis. Transfer agent's fees for Institutional Shares are paid
monthly based on a fee accrued daily at an annualized rate of 0.05% of the
Institutional Shares' average net assets, plus out-of-pocket expenses. For
the six-month period ended November 30, 2009, the Fund Shares and
Institutional Shares incurred transfer agent's fees, paid or payable to SAS,
of $1,672,000 and $20,000, respectively.
F. 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.
(8) TRANSACTIONS WITH AFFILIATES
The Fund is one of 13 USAA mutual funds in which the affiliated Target Funds may
invest. The Target Funds do not invest in the Fund for the purpose of exercising
management or control. As of November 30, 2009,
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
<PAGE>
================================================================================
the Fund recorded a receivable for capital shares sold of $210,000 for the
Target Funds' purchases and redemptions of Institutional Shares. As of November
30, 2009, the Target Funds owned the following percent of the total outstanding
shares of the Fund:
OWNERSHIP %
--------------------------------------------------------------------------------
USAA Target Retirement Income Fund 0.4%
USAA Target Retirement 2020 Fund 1.0
USAA Target Retirement 2030 Fund 2.1
USAA Target Retirement 2040 Fund 2.6
USAA Target Retirement 2050 Fund 1.2
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.
(9) 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 Shares received a reimbursement from SAS in the
amount of $249,000 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.
================================================================================
40 | USAA INTERNATIONAL FUND
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS -- FUND SHARES
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 $ 18.08 $ 27.77 $ 29.35 $ 25.85 $ 21.32 $ 20.45
---------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment
income (loss) (.01)(a) .35 .51 .20 .72 .10
Net realized and
unrealized gain (loss) 3.93(a) (9.35) (.13) 6.00 5.09 2.35
---------------------------------------------------------------------------------------------------
Total from investment
operations 3.92(a) (9.00) .38 6.20 5.81 2.45
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income - (.44) (.41) (.56) (.21) (.14)
Realized capital gains - (.25) (1.55) (2.14) (1.07) (1.44)
---------------------------------------------------------------------------------------------------
Total distributions - (.69) (1.96) (2.70) (1.28) (1.58)
---------------------------------------------------------------------------------------------------
Net asset value at end
of period $ 22.00 $ 18.08 $ 27.77 $ 29.35 $ 25.85 $ 21.32
===================================================================================================
Total return (%)* 21.68 (32.16) 1.32 24.99(b) 27.90 11.91
Net assets at end
of period (000) $1,308,798 $1,048,966 $1,526,020 $1,505,679 $1,001,141 $645,908
Ratios to average
net assets:**
Expenses (%)(c) 1.27(d) 1.31 1.14 1.20(b) 1.20 1.24
Net investment
income (loss) (%) (.06)(d) 1.89 1.94 1.21 3.29 1.02
Portfolio turnover (%) 8 22 32 38 44 41
* 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 $1,176,095,000.
(a) Calculated using average shares. For the six-month period ended November 30, 2009, average shares were 58,470,000.
(b) For the year ended May 31, 2007, SAS voluntarily reimbursed the Fund Shares for a portion of the transfer agent's fees
incurred.The reimbursement had no effect on the Fund Shares' total return or ratio of expenses to average net assets.
(c) Reflects total operating expenses of the Fund Shares before reductions of any expenses paid indirectly. The Fund Shares'
expenses paid indirectly decreased the expense ratios as follows:
(.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+) (.01%) (.01%)
(+) Represents less than 0.01% of average net assets.
(d) Annualized. The ratio is not necessarily indicative of 12 months of operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS (CONTINUED) -- INSTITUTIONAL SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED PERIOD ENDED
NOVEMBER 30, MAY 31,
2009 2009***
----------------------------------
Net asset value at beginning of period $ 18.09 $ 24.30
----------------------------------
Income (loss) from investment operations:
Net investment income(a) .04(d) .59
Net realized and unrealized gain (loss)(a) 3.93 (6.07)
----------------------------------
Total from investment operations(a) 3.97 (5.48)
----------------------------------
Less distributions from:
Net investment income - (.48)
Realized capital gains - (.25)
----------------------------------
Total distributions - (.73)
----------------------------------
Net asset value at end of period $ 22.06 $ 18.09
==================================
Total return (%)* 21.95 (22.25)
Net assets at end of period (000) $102,741 $58,059
Ratios to average net assets:**
Expenses (%)(b),(c) .87 .87
Expenses, excluding reimbursements (%)(b),(c) .90 .91
Net investment income (%)(c) .37 4.46
Portfolio turnover (%) 8 22
* 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
$78,430,000.
*** Institutional Shares were initiated on August 1, 2008.
(a) Calculated using average shares. For the period ended November 30, 2009,
average shares were 3,878,000.
(b) Reflects total operating expenses of the Institutional Shares before
reductions of any expenses paid indirectly. The Institutional Shares'
expenses paid indirectly decreased the expense ratios by less than 0.01%.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(d) Reflected net investment income per share, whereas the statement of
operations reflected a net investment loss for the period for the Fund in
total. The difference in net investment income (loss) for the Fund versus
the Institutional Shares is due to the significantly lower expenses incurred
by the Institutional Shares versus the Fund Shares.
================================================================================
42 | USAA INTERNATIONAL 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 line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class 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
================================================================================
EXPENSE EXAMPLE | 43
<PAGE>
================================================================================
paid for the period. You may use this 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
---------------------------------------------------------
FUND SHARES
Actual $1,000.00 $1,216.80 $7.06
Hypothetical
(5% return before expenses) 1,000.00 1,018.70 6.43
INSTITUTIONAL SHARES
Actual 1,000.00 1,219.50 4.84
Hypothetical
(5% return before expenses) 1,000.00 1,020.71 4.41
* Expenses are equal to the annualized expense ratio of 1.27% for Fund Shares
and 0.87% for Institutional Shares, which are net of any reimbursements and
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 actual ending account values are based on its actual
total returns of 21.68% for Fund Shares and 21.95% for Institutional Shares
for the six-month period of June 1, 2009, through November 30, 2009.
================================================================================
44 | USAA INTERNATIONAL 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
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TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
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CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
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INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
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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.
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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.
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<PAGE>
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
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>> SAVE PAPER AND FUND COSTS
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23410-0110 (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
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Signature and Title: Christopher P. Laia, Assistant Secretary
Date: 01/26/2010
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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
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Signature and Title: Christopher W. Claus, President
Date: 01/27/2010
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By:* ROBERTO GALINDO, JR.
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Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 01/27/2010
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*Print the name and title of each signing officer under his or her signature.
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