UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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: DECEMBER 31
Date of reporting period: DECEMBER 31, 2009
ITEM 1. REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - ANNUAL REPORT FOR PERIOD ENDING DECEMBER 31, 2009
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA S&P 500 INDEX FUND]
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ANNUAL REPORT
USAA S&P 500 INDEX FUND
MEMBER SHARES o REWARD SHARES
DECEMBER 31, 2009
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FUND OBJECTIVE
SEEKS TO MATCH, BEFORE FEES AND EXPENSES, THE PERFORMANCE OF THE S&P 500 INDEX.
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TYPES OF INVESTMENTS
Normally, at least 80% of the Fund's assets will be invested in the stocks of
companies composing the S&P 500 Index.
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
MANAGER'S COMMENTARY 4
FUND RECOGNITION 7
INVESTMENT OVERVIEW 9
FINANCIAL INFORMATION
Distributions to Shareholders 15
Report of Independent Registered Public Accounting Firm 16
Portfolio of Investments 17
Notes to Portfolio of Investments 38
Financial Statements 40
Notes to Financial Statements 43
EXPENSE EXAMPLE 59
TRUSTEES' AND OFFICERS' INFORMATION 61
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
"LOOKING BACK AT THE MARKET DECLINE,
MANY INVESTORS WERE NOT APPROPRIATELY [PHOTO OF DANIEL S. McNAMARA]
POSITIONED RELATIVE TO THEIR RISK
TOLERANCE."
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JANUARY 2010
Equities had a remarkable run during 2009. Between March 9, 2009, when the
market reached a bottom and the end of the year, stock prices steadily climbed.
Although the rally did not completely erase the declines of 2008, the market has
established a beachhead and is moving in the right direction. Likewise, the
worst of the Great Recession appears to be over. After three quarters of
negative growth, the gross domestic product (GDP) -- the broadest measure of
U.S. economic activity -- rose by 2.2% in the third quarter of 2009. Other
important measures of economic activity have also trended higher, including
industrial production, retail sales, and residential real estate sales.
Will the recovery be swift? Or will there be a "double dip?" I say "no" to both
questions. Significant assets -- including vast amounts of U.S. government
stimulus -- have been thrown into the breach. As a result, I don't expect the
economy to fall back into a recession. But I don't expect a quick recovery
either. Instead, I anticipate a slow and steady slog with lower economic growth
than the United States has enjoyed in recent decades. Access to credit is likely
to remain tight until the securitization markets heal and banks relax lending
standards. Most consumers and businesses will continue rebuilding their balance
sheets by increasing their savings rate and reducing their spending and
borrowing. While the outlook for job growth has improved, unemployment is likely
to persist at an uncomfortably high level for most of 2010.
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2 | USAA S&P 500 INDEX FUND
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I also think the equity market is expecting a strong cyclical recovery.
Although many stocks seemed to trade at appropriate levels at the end of 2009,
we see support for some growth in prices over the near term. Meanwhile,
consensus forecasts (which are based on individual company estimates) call for
corporate earnings growth of 30% or more during 2010. Meeting these expectations
will require significant top-line revenue growth, not just more cost cutting.
USAA's expectations are more in line with top-down earnings forecasts in the 8%
to 15% range.
Of course, no one really knows what will happen. That's why it is important to
revisit your investment plan. A new year is an opportune time to stop and take
stock. Looking back at the market decline, many investors were not appropriately
positioned relative to their risk tolerance. With this in mind, I have
undertaken a review of my own investment portfolio. 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 appreciate the trust you have placed
in us. We will 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. Thank you for the opportunity to help you with your investment needs.
Sincerely,
/S/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Investment Management Company
Mutual fund operating expenses apply and continue throughout the life of the
fund.
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PRESIDENT'S MESSAGE | 3
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MANAGER'S COMMENTARY ON THE FUND
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o HOW DID THE USAA S&P 500 INDEX FUND (THE FUND) PERFORM DURING 2009?
The Fund closely tracked its benchmark, the S&P 500(R) Index (the Index),
for the year ended December 31, 2009. The Fund produced a return of 26.28%
(Member Shares) and 26.47% (Reward Shares) for the period, as compared to
26.46% for the benchmark. The broad-based index is a group of large-company
stocks that is not available for direct investment.
Though recovering from a negative year in 2008, large-cap stocks
underperformed both mid-cap stocks and small-caps stocks in 2009. Mid-cap
stocks, as represented by the S&P 400(R) MidCap Index, returned 37.38% for
the period and small-cap stocks, as represented by the Russell 2000(R)
Index, returned 27.17%.
o WHAT WERE MARKET CONDITIONS DURING THE PERIOD?
The beginning of the first quarter in 2009 continued to be marked by
extreme volatility in equity markets around the world as grim economic news
persisted, including the announcement that the United States officially
slid into a recession. Increasing unemployment, decreases in manufacturing,
and continued weakness in consumer spending plagued the first quarter. In
the face of a rapidly crumbling economy, President Barack Obama's new
administration passed a $787 billion stimulus plan on February 17, 2009.
The U.S stock market
Refer to pages 10 and 12 for benchmark definitions.
Past performance is no guarantee of future results.
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4 | USAA S&P 500 INDEX FUND
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hit a low for the year on March 9, 2009. International markets staged a
rally in late March 2009 when U.S. Treasury Secretary Timothy Geithner
provided additional details on the government's plan to relieve banks of
their toxic assets and improve the flow of credit.
The stock market rally that began in March 2009 displayed no signs of a
slowdown during the third quarter of the year. By the end of September
2009, the Index had climbed 58.25% from its low on March 9, 2009. This
recovery was supported in part by an improvement in economic data such as
second-quarter GDP growth numbers that came in at a revised -0.7%, a
substantial improvement from the first quarter GDP results. Third-quarter
market performance also was boosted by a number of corporate earnings
reports that beat expectations.
The fourth quarter began on a weak note following substandard macroeconomic
data and questions about the quality of company earnings. The indexes
improved in November and December, benefiting from stronger macroeconomic
data and earnings announcements and as more banks repaid their Troubled
Asset Relief Program (also known as "TARP") loans in full following large
equity offerings. Positive news in December included an unexpected increase
in U.S. pending home sales, the Federal Reserve Board pledged to keep rates
low, and a report of better-than-expected sales forecast from auto makers.
o PLEASE DESCRIBE SECTOR PERFORMANCE.
All sectors posted positive returns for the year ending 2009. The largest
gain was seen in Information Technology, which returned 61.72% for the
year. Information Technology is the largest sector in the Index
representing 19.86%. Other strong performers were Consumer Discretionary
and Industrials which posted returns of 41.30% and 20.93% respectively.
Financials, with a weight of 14.38% of the Index returned 17.22% for the
year.
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MANAGER'S COMMENTARY ON THE FUND | 5
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o WHAT INVESTMENT STRATEGIES WILL YOU PURSUE FOR THE FUND IN 2010?
We don't manage the Fund according to a given outlook for the equity
markets or the economy in general, because we're managing an index fund
that seeks to replicate as closely as possible (before deduction of
expenses) the broad diversification and returns of the Index. Nevertheless,
we will monitor economic conditions and their effect on the financial
markets as we seek to track closely the index's performance.
Thank you for your investment in the Fund.
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6 | USAA S&P 500 INDEX FUND
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FUND RECOGNITION
USAA S&P 500 INDEX FUND
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LIPPER LEADER (OVERALL)
MEMBER AND REWARD SHARES
[5]
TAX
EFFICIENCY
The Fund's Member and Reward shares are listed as a Lipper Leader for Tax
Efficiency among 159 funds within the Lipper S&P 500 Index Funds category for
the overall period ended December 31, 2009. The Fund's Member and Reward shares
received a Lipper Leader rating for Tax Efficiency amongst 159 and 143 funds for
the three- and five-year periods, respectively, and the Fund's Member shares
received a Lipper Leader rating among 96 funds for the 10-year period. Lipper
ratings for Tax Efficiency reflect funds' historical success in postponing
taxable distributions relative to peers as of December 31, 2009. Tax efficiency
offers no benefits to investors in tax-sheltered accounts such as 401(k) plans.
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FUND RECOGNITION | 7
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LIPPER LEADERS (OVERALL)
REWARD SHARES
[5] [5] [5]
TOTAL RETURN PRESERVATION EXPENSE
The Fund's Reward Shares are listed as a Lipper Leader for Total Return and
Expense among 164 and 49 funds, respectively, within the Lipper S&P 500 Index
Funds category, and for Preservation among 9,246 equity funds, for the overall
period ended December 31, 2009. The Fund's Reward Shares received a Lipper
Leader rating for Total Return among 164 and 148 funds for the three- and
five-year periods, respectively, a Lipper Leader rating for Preservation among
7,392 funds for the five-year period and a score of 4 among 9,246 funds for the
three-year period within the Lipper S&P 500 Index Funds category. The Fund's
Reward shares received a Lipper Leader rating for Expense among 49 and 41 equity
funds for the three- and five-year periods, respectively. Lipper ratings for
Total Return reflect funds' historical total return performance relative to
peers as of December 31, 2009. Lipper ratings for Preservation reflect funds'
historical loss avoidance relative to other funds within the same asset class as
of December 31, 2009. Preservation ratings are relative, rather than absolute,
measures, and funds named Lipper Leaders for Preservation may still experience
losses periodically; those losses may be larger for equity and mixed equity
funds than for fixed-income funds. Lipper ratings for Expense reflect funds'
expense minimization relative to peers with similar load structures as of
December 31, 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, Preservation, and Expense
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 S&P 500 INDEX FUND
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INVESTMENT OVERVIEW
USAA S&P 500 INDEX FUND MEMBER SHARES (Ticker Symbol: USSPX)
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12/31/09 12/31/08
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Net Assets $1,831.6 Million $1,446.2 Million
Net Asset Value Per Share $16.71 $13.51
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/09
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1 Year 5 Years 10 Years
26.28% 0.24% -1.17%
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EXPENSE RATIO*
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Before Reimbursement 0.38% After Reimbursement 0.25%
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 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 AS REPORTED IN THE FUND'S PROSPECTUS DATED MAY
1, 2009, 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)
AS REPORTED IN THE FUND'S PROSPECTUS DATED MAY 1, 2009. IMCO HAS VOLUNTARILY
AGREED TO LIMIT THE MEMBER SHARES' TOTAL ANNUAL OPERATING EXPENSES TO 0.25%,
BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND EXCLUDING ANY ACQUIRED
FUND FEES AND EXPENSES, AND TO REIMBURSE THE FUND 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. The performance data excludes the impact of a $10
account maintenance fee that is assessed on accounts of less than $10,000.
Performance of Member Shares will vary from Reward Shares due to differences in
expenses.
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INVESTMENT OVERVIEW | 9
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o CUMULATIVE PERFORMANCE COMPARISON o
MEMBER SHARES
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA S&P 500 INDEX
S&P 500 INDEX FUND -- MEMBER SHARES
12/31/1999 $10,000.00 $10,000.00
1/31/2000 9,497.58 9,498.25
2/29/2000 9,317.79 9,319.37
3/31/2000 10,229.34 10,222.78
4/30/2000 9,921.58 9,916.45
5/31/2000 9,718.02 9,706.39
6/30/2000 9,957.60 9,942.70
7/31/2000 9,801.92 9,789.19
8/31/2000 10,410.76 10,394.44
9/30/2000 9,861.14 9,846.39
10/31/2000 9,819.45 9,802.41
11/30/2000 9,045.29 9,028.42
12/31/2000 9,089.56 9,073.05
1/31/2001 9,412.05 9,392.04
2/28/2001 8,553.84 8,535.32
3/31/2001 8,011.95 7,992.72
4/30/2001 8,634.57 8,609.65
5/31/2001 8,692.42 8,664.49
6/30/2001 8,480.86 8,449.96
7/31/2001 8,397.37 8,367.47
8/31/2001 7,871.68 7,845.08
9/30/2001 7,236.02 7,211.26
10/31/2001 7,374.00 7,349.23
11/30/2001 7,939.64 7,910.32
12/31/2001 8,009.19 7,976.10
1/31/2002 7,892.31 7,860.57
2/28/2002 7,740.11 7,708.07
3/31/2002 8,031.21 7,994.76
4/30/2002 7,544.29 7,508.12
5/31/2002 7,488.71 7,452.51
6/30/2002 6,955.29 6,918.96
7/31/2002 6,413.10 6,384.23
8/31/2002 6,455.20 6,421.43
9/30/2002 5,753.65 5,722.65
10/31/2002 6,260.07 6,227.18
11/30/2002 6,628.53 6,591.56
12/31/2002 6,239.12 6,206.29
1/31/2003 6,075.68 6,037.41
2/28/2003 5,984.52 5,948.28
3/31/2003 6,042.62 5,999.79
4/30/2003 6,540.35 6,494.27
5/31/2003 6,884.95 6,833.35
6/30/2003 6,972.78 6,915.52
7/31/2003 7,095.72 7,038.34
8/31/2003 7,234.10 7,170.60
9/30/2003 7,157.28 7,090.26
10/31/2003 7,562.16 7,493.39
11/30/2003 7,628.70 7,555.04
12/31/2003 8,028.78 7,947.34
1/31/2004 8,176.15 8,090.11
2/29/2004 8,289.80 8,199.56
3/31/2004 8,164.73 8,075.50
4/30/2004 8,036.56 7,946.63
5/31/2004 8,146.84 8,051.63
6/30/2004 8,305.26 8,205.96
7/31/2004 8,030.38 7,933.06
8/31/2004 8,062.86 7,961.79
9/30/2004 8,150.19 8,044.79
10/31/2004 8,274.70 8,169.74
11/30/2004 8,609.51 8,496.53
12/31/2004 8,902.48 8,782.37
1/31/2005 8,685.48 8,569.46
2/28/2005 8,868.26 8,748.50
3/31/2005 8,711.22 8,592.63
4/30/2005 8,546.00 8,427.48
5/31/2005 8,817.93 8,694.64
6/30/2005 8,830.44 8,705.75
7/31/2005 9,158.84 9,027.65
8/31/2005 9,075.27 8,944.74
9/30/2005 9,148.77 9,015.82
10/31/2005 8,996.26 8,864.00
11/30/2005 9,336.51 9,197.01
12/31/2005 9,339.76 9,201.10
1/31/2006 9,587.06 9,442.20
2/28/2006 9,613.08 9,466.80
3/31/2006 9,732.73 9,583.81
4/30/2006 9,863.42 9,707.32
5/31/2006 9,579.54 9,430.67
6/30/2006 9,592.53 9,441.48
7/31/2006 9,651.70 9,496.06
8/31/2006 9,881.34 9,719.32
9/30/2006 10,135.98 9,969.01
10/31/2006 10,466.28 10,292.84
11/30/2006 10,665.30 10,487.14
12/31/2006 10,814.91 10,630.50
1/31/2007 10,978.47 10,790.66
2/28/2007 10,763.74 10,580.45
3/31/2007 10,884.13 10,696.50
4/30/2007 11,366.25 11,169.00
5/31/2007 11,762.88 11,556.04
6/30/2007 11,567.46 11,365.01
7/31/2007 11,208.81 11,011.75
8/31/2007 11,376.83 11,173.24
9/30/2007 11,802.31 11,591.23
10/31/2007 11,990.05 11,773.69
11/30/2007 11,488.78 11,276.99
12/31/2007 11,409.08 11,196.18
1/31/2008 10,724.74 10,523.80
2/29/2008 10,376.34 10,182.51
3/31/2008 10,331.54 10,133.02
4/30/2008 10,834.72 10,629.43
5/31/2008 10,975.06 10,762.49
6/30/2008 10,049.82 9,854.15
7/31/2008 9,965.34 9,771.86
8/31/2008 10,109.48 9,910.72
9/30/2008 9,208.65 9,022.85
10/31/2008 7,662.08 7,507.83
11/30/2008 7,112.29 6,964.91
12/31/2008 7,187.97 7,038.79
1/31/2009 6,582.12 6,444.85
2/28/2009 5,881.27 5,757.12
3/31/2009 6,396.44 6,261.67
4/30/2009 7,008.64 6,859.52
5/31/2009 7,400.65 7,242.35
6/30/2009 7,415.34 7,257.82
7/31/2009 7,976.21 7,805.98
8/31/2009 8,264.18 8,085.33
9/30/2009 8,572.56 8,385.19
10/31/2009 8,413.31 8,226.38
11/30/2009 8,917.97 8,718.70
12/31/2009 9,090.23 8,888.41
[END CHART]
Data from 12/31/99 to 12/31/09.
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P 500
Index Fund's Member Shares closely tracks the S&P 500 Index. The S&P 500 Index
is an unmanaged index representing the weighted average performance of a group
of 500 widely held, publicly traded stocks.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for our use. The USAA S&P 500 Index Fund is not sponsored, endorsed, sold, or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the USAA S&P 500 Index Fund. o Index
products incur fees and expenses and may not always be invested in all
securities of the index the Fund attempts to mirror. It is not possible to
invest directly in an index.
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 S&P 500 INDEX FUND
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USAA S&P 500 INDEX FUND REWARD SHARES (Ticker Symbol: USPRX)
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12/31/09 12/31/08
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Net Assets $894.0 Million $697.8 Million
Net Asset Value Per Share $16.71 $13.51
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/09
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception 5/01/02
26.47% 0.36% 2.24%
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EXPENSE RATIO*
--------------------------------------------------------------------------------
Before Reimbursement 0.22% After Reimbursement 0.09%
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 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 AS REPORTED IN THE FUND'S PROSPECTUS DATED MAY
1, 2009, 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)
AS REPORTED IN THE FUND'S PROSPECTUS DATED MAY 1, 2009. IMCO HAS VOLUNTARILY
AGREED TO LIMIT THE REWARD SHARES' TOTAL ANNUAL OPERATING EXPENSES TO 0.09%,
BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND EXCLUDING ANY ACQUIRED
FUND FEES AND EXPENSES, AND TO REIMBURSE THE FUND 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.
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INVESTMENT OVERVIEW | 11
<PAGE>
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o CUMULATIVE PERFORMANCE COMPARISON o
REWARD SHARES
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA S&P 500 INDEX
S&P 500 INDEX FUND -- REWARD SHARES
4/30/2002 $10,000.00 $10,000.00
5/31/2002 9,926.33 9,834.86
6/30/2002 9,219.27 9,132.62
7/31/2002 8,500.59 8,426.81
8/31/2002 8,556.40 8,482.04
9/30/2002 7,626.50 7,559.41
10/31/2002 8,297.76 8,225.87
11/30/2002 8,786.15 8,707.21
12/31/2002 8,269.98 8,200.15
1/31/2003 8,053.34 7,977.01
2/28/2003 7,932.51 7,859.25
3/31/2003 8,009.53 7,935.34
4/30/2003 8,669.28 8,582.61
5/31/2003 9,126.04 9,030.72
6/30/2003 9,242.45 9,144.24
7/31/2003 9,405.41 9,306.64
8/31/2003 9,588.84 9,481.53
9/30/2003 9,487.01 9,379.66
10/31/2003 10,023.69 9,912.95
11/30/2003 10,111.88 9,994.52
12/31/2003 10,642.20 10,518.03
1/31/2004 10,837.53 10,706.98
2/29/2004 10,988.17 10,858.13
3/31/2004 10,822.40 10,692.00
4/30/2004 10,652.50 10,521.38
5/31/2004 10,798.69 10,660.40
6/30/2004 11,008.67 10,871.11
7/31/2004 10,644.31 10,509.59
8/31/2004 10,687.37 10,547.64
9/30/2004 10,803.12 10,661.87
10/31/2004 10,968.16 10,821.09
11/30/2004 11,411.95 11,260.56
12/31/2004 11,800.28 11,640.03
1/31/2005 11,512.65 11,357.84
2/28/2005 11,754.93 11,595.13
3/31/2005 11,546.77 11,389.20
4/30/2005 11,327.77 11,176.74
5/31/2005 11,688.21 11,530.84
6/30/2005 11,704.80 11,541.98
7/31/2005 12,140.09 11,975.21
8/31/2005 12,029.32 11,865.29
9/30/2005 12,126.75 11,956.26
10/31/2005 11,924.59 11,754.93
11/30/2005 12,375.60 12,203.05
12/31/2005 12,379.91 12,205.16
1/31/2006 12,707.70 12,524.98
2/28/2006 12,742.18 12,557.61
3/31/2006 12,900.79 12,715.75
4/30/2006 13,074.02 12,886.17
5/31/2006 12,697.73 12,512.56
6/30/2006 12,714.94 12,530.42
7/31/2006 12,793.38 12,609.44
8/31/2006 13,097.77 12,905.74
9/30/2006 13,435.30 13,240.27
10/31/2006 13,873.10 13,670.15
11/30/2006 14,136.91 13,928.08
12/31/2006 14,335.22 14,122.06
1/31/2007 14,552.02 14,334.72
2/28/2007 14,267.40 14,055.60
3/31/2007 14,426.98 14,206.41
4/30/2007 15,066.03 14,840.62
5/31/2007 15,591.76 15,354.67
6/30/2007 15,332.73 15,097.99
7/31/2007 14,857.34 14,628.69
8/31/2007 15,080.05 14,849.93
9/30/2007 15,644.02 15,401.95
10/31/2007 15,892.87 15,644.40
11/30/2007 15,228.45 14,991.15
12/31/2007 15,122.79 14,887.77
1/31/2008 14,215.71 13,994.09
2/29/2008 13,753.90 13,533.72
3/31/2008 13,694.51 13,477.98
4/30/2008 14,361.48 14,131.13
5/31/2008 14,547.50 14,314.83
6/30/2008 13,321.09 13,112.08
7/31/2008 13,209.11 12,995.80
8/31/2008 13,400.17 13,187.32
9/30/2008 12,206.12 12,011.53
10/31/2008 10,156.13 9,988.97
11/30/2008 9,427.38 9,273.51
12/31/2008 9,527.69 9,369.04
1/31/2009 8,724.63 8,585.40
2/28/2009 7,795.65 7,669.99
3/31/2009 8,478.52 8,337.74
4/30/2009 9,289.99 9,140.79
5/31/2009 9,809.61 9,650.55
6/30/2009 9,829.07 9,667.85
7/31/2009 10,572.51 10,398.03
8/31/2009 10,954.22 10,777.16
9/30/2009 11,362.98 11,173.88
10/31/2009 11,151.89 10,969.31
11/30/2009 11,820.82 11,625.35
12/31/2009 12,049.14 11,849.24
[END CHART]
*Data from 4/30/02 to 12/31/09.
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P 500
Index Fund's Reward Shares closely tracks the S&P 500 Index. The S&P 500 Index
is an unmanaged index representing the weighted average performance of a group
of 500 widely held, publicly traded stocks.
*The performance of the S&P 500 Index is calculated from the end of the month,
April 30, 2002, while the Reward Shares were introduced on May 1, 2002. There
may be a slight variation of the performance numbers because of this difference.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for our use. The USAA S&P 500 Index Fund is not sponsored, endorsed, sold, or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the USAA S&P 500 Index Fund. o Index
products incur fees and expenses and may not always be invested in all
securities of the index the Fund attempts to mirror. It is not possible to
invest directly in an index.
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.
================================================================================
12 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
TOP 10 EQUITY HOLDINGS
AS OF 12/31/09
(% of Net Assets)
Exxon Mobil Corp. ......................................................... 3.2%
Microsoft Corp. ........................................................... 2.4%
Apple, Inc. ............................................................... 1.9%
Johnson & Johnson ......................................................... 1.8%
Procter & Gamble Co. ...................................................... 1.8%
International Business Machines Corp. ..................................... 1.7%
AT&T, Inc. ................................................................ 1.7%
JPMorgan Chase & Co. ...................................................... 1.6%
General Electric Co. ...................................................... 1.6%
Chevron Corp. ............................................................. 1.5%
You will find a complete list of securities that the Fund owns on pages 17-37.
================================================================================
INVESTMENT OVERVIEW | 13
<PAGE>
================================================================================
o SECTOR ALLOCATION* -- 12/31/2009 o
[PIE CHART OF SECTOR ALLOCATION]
INFORMATION TECHNOLOGY 19.7%
FINANCIALS 14.3%
HEALTH CARE 12.6%
ENERGY 11.4%
CONSUMER STAPLES 11.3%
INDUSTRIALS 10.2%
CONSUMER DISCRETIONARY 9.5%
UTILITIES 3.7%
MATERIALS 3.6%
TELECOMMUNICATION SERVICES 3.2%
[END CHART]
* Excludes money market instruments and short-term investments purchased with
cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
14 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------
The following federal tax information related to the Fund's fiscal year ended
December 31, 2009, is provided for information purposes only and should not be
used for reporting to federal or state revenue agencies. Federal tax
information for the calendar year will be reported to you on Form 1099-DIV in
January 2010.
100% of ordinary income distributions qualify for the dividends-received
deductions eligible to corporations.
For the tax year ended December 31, 2009, the Fund hereby designates 100%, or
the maximum amount allowable, of its net taxable income as qualified dividends
taxed at individual net capital gains rates.
For the fiscal year ended December 31, 2009, certain dividends paid by the Fund
qualify as interest-related dividends. The Fund designates $68,000 as qualifying
interest income.
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS | 15
<PAGE>
================================================================================
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF USAA S&P 500 INDEX FUND:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the USAA S&P 500 Index Fund (one of the
portfolios constituting USAA Mutual Funds Trust) (the "Fund") as of December 31,
2009, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatements. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2009, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA S&P 500 Index Fund at December 31, 2009, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with U.S. generally accepted accounting
principles.
/S/ ERNST & YOUNG LLP
San Antonio, Texas
February 17, 2010
================================================================================
16 | USAA S&P 500 INDEX FUND
<PAGE>
===============================================================================
PORTFOLIO OF INVESTMENTS
December 31, 2009
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
COMMON STOCKS (99.5%)
CONSUMER DISCRETIONARY (9.5%)
----------------------------
ADVERTISING (0.2%)
125,600 Interpublic Group of Companies, Inc.* $ 927
85,600 Omnicom Group, Inc. 3,351
----------
4,278
----------
APPAREL & ACCESSORIES & LUXURY GOODS (0.2%)
85,308 Coach, Inc. 3,116
16,067 Polo Ralph Lauren Corp. 1,301
24,668 VF Corp. 1,807
----------
6,224
----------
APPAREL RETAIL (0.4%)
24,477 Abercrombie & Fitch Co. "A" 853
128,773 Gap, Inc. 2,698
76,800 Limited Brands, Inc. 1,478
32,945 Ross Stores, Inc. 1,407
115,493 TJX Companies, Inc. 4,221
----------
10,657
----------
AUTO PARTS & EQUIPMENT (0.2%)
184,394 Johnson Controls, Inc. 5,023
----------
AUTOMOBILE MANUFACTURERS (0.3%)
897,069 Ford Motor Co.* 8,971
----------
AUTOMOTIVE RETAIL (0.1%)
24,711 AutoNation, Inc.* 473
7,899 AutoZone, Inc.* 1,249
37,100 O'Reilly Automotive, Inc.* 1,414
----------
3,136
----------
BROADCASTING (0.1%)
181,071 CBS Corp. "B" 2,544
----------
CABLE & SATELLITE (1.0%)
776,173 Comcast Corp. "A" 13,086
259,966 DIRECTV "A"* 8,670
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
22,600 Scripps Networks Interactive "A" $ 938
96,871 Time Warner Cable, Inc. 4,010
----------
26,704
----------
CASINOS & GAMING (0.1%)
82,696 International Game Technology 1,552
19,979 Wynn Resorts Ltd. 1,164
----------
2,716
----------
COMPUTER & ELECTRONICS RETAIL (0.2%)
93,250 Best Buy Co., Inc. 3,680
44,000 GameStop Corp. "A"* 965
37,500 RadioShack Corp. 731
----------
5,376
----------
CONSUMER ELECTRONICS (0.0%)
20,965 Harman International Industries, Inc. 740
----------
DEPARTMENT STORES (0.4%)
62,900 J.C. Penney Co., Inc. 1,674
83,430 Kohl's Corp.* 4,499
111,790 Macy's, Inc. 1,874
45,300 Nordstrom, Inc. 1,702
13,018 Sears Holdings Corp.(g)* 1,086
----------
10,835
----------
DISTRIBUTORS (0.1%)
43,400 Genuine Parts Co. 1,647
----------
EDUCATION SERVICES (0.1%)
35,781 Apollo Group, Inc. "A"* 2,167
16,900 DeVry, Inc. 959
----------
3,126
----------
FOOTWEAR (0.3%)
106,121 NIKE, Inc. "B" 7,011
----------
GENERAL MERCHANDISE STORES (0.4%)
23,800 Big Lots, Inc.* 690
38,000 Family Dollar Stores, Inc. 1,058
204,516 Target Corp. 9,892
----------
11,640
----------
HOME FURNISHINGS (0.0%)
44,300 Leggett & Platt, Inc. 904
----------
HOME IMPROVEMENT RETAIL (0.9%)
462,305 Home Depot, Inc. 13,375
399,549 Lowe's Companies, Inc. 9,345
================================================================================
18 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
26,500 Sherwin-Williams Co. $ 1,634
----------
24,354
----------
HOMEBUILDING (0.1%)
70,449 D.R. Horton, Inc. 766
39,900 Lennar Corp. "A" 509
79,272 Pulte Homes, Inc.* 793
----------
2,068
----------
HOMEFURNISHING RETAIL (0.1%)
73,500 Bed Bath & Beyond, Inc.* 2,839
----------
HOTELS, RESORTS & CRUISE LINES (0.3%)
120,856 Carnival Corp.* 3,830
70,936 Marriott International, Inc. "A" 1,933
6,995 Marriott International, Inc. "A" - Fractional Shares* -
50,800 Starwood Hotels & Resorts Worldwide, Inc. 1,858
47,262 Wyndham Worldwide Corp. 953
----------
8,574
----------
HOUSEHOLD APPLIANCES (0.1%)
16,300 Black & Decker Corp. 1,056
20,193 Whirlpool Corp. 1,629
----------
2,685
----------
HOUSEWARES & SPECIALTIES (0.1%)
39,952 Fortune Brands, Inc. 1,726
73,100 Newell Rubbermaid, Inc. 1,097
----------
2,823
----------
INTERNET RETAIL (0.6%)
90,881 Amazon.com, Inc.* 12,225
56,053 Expedia, Inc.* 1,441
11,861 Priceline.com, Inc.* 2,592
----------
16,258
----------
LEISURE PRODUCTS (0.1%)
33,800 Hasbro, Inc. 1,084
99,300 Mattel, Inc. 1,984
----------
3,068
----------
MOTORCYCLE MANUFACTURERS (0.1%)
64,900 Harley-Davidson, Inc. 1,635
----------
MOVIES & ENTERTAINMENT (1.4%)
611,028 News Corp. "A" 8,365
320,463 Time Warner, Inc. 9,338
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
164,944 Viacom, Inc. "B"* $ 4,904
525,066 Walt Disney Co. 16,933
----------
39,540
----------
PHOTOGRAPHIC PRODUCTS (0.0%)
75,400 Eastman Kodak Co.(g)* 318
----------
PUBLISHING (0.2%)
61,200 Gannett Co., Inc. 909
88,000 McGraw-Hill Companies, Inc. 2,949
10,000 Meredith Corp. 308
35,200 New York Times Co. "A"* 435
1,811 Washington Post Co. "B" 796
----------
5,397
----------
RESTAURANTS (1.1%)
40,375 Darden Restaurants, Inc. 1,416
295,113 McDonald's Corp. 18,427
200,140 Starbucks Corp.* 4,615
128,100 Yum! Brands, Inc. 4,480
----------
28,938
----------
SPECIALIZED CONSUMER SERVICES (0.1%)
90,300 H&R Block, Inc. 2,043
----------
SPECIALTY STORES (0.2%)
71,700 Office Depot, Inc.* 463
199,767 Staples, Inc. 4,912
33,600 Tiffany & Co. 1,445
----------
6,820
----------
TIRES & RUBBER (0.0%)
64,800 Goodyear Tire & Rubber Co.* 914
----------
Total Consumer Discretionary 259,806
----------
CONSUMER STAPLES (11.3%)
------------------------
AGRICULTURAL PRODUCTS (0.2%)
175,153 Archer-Daniels-Midland Co. 5,484
----------
BREWERS (0.1%)
42,300 Molson Coors Brewing Co. "B" 1,910
----------
DISTILLERS & VINTNERS (0.1%)
31,206 Brown-Forman Corp. "B" 1,672
56,500 Constellation Brands, Inc. "A"* 900
----------
2,572
----------
================================================================================
20 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
DRUG RETAIL (0.8%)
383,297 CVS Caremark Corp. $ 12,346
271,302 Walgreen Co. 9,962
----------
22,308
----------
FOOD DISTRIBUTORS (0.2%)
160,351 Sysco Corp. 4,480
----------
FOOD RETAIL (0.3%)
175,045 Kroger Co. 3,594
113,428 Safeway, Inc. 2,415
55,425 SUPERVALU, Inc. 705
38,700 Whole Foods Market, Inc.* 1,062
----------
7,776
----------
HOUSEHOLD PRODUCTS (2.5%)
37,374 Clorox Co. 2,280
136,342 Colgate-Palmolive Co. 11,201
114,031 Kimberly-Clark Corp. 7,265
796,688 Procter & Gamble Co. 48,303
----------
69,049
----------
HYPERMARKETS & SUPER CENTERS (1.4%)
120,100 Costco Wholesale Corp. 7,106
581,431 Wal-Mart Stores, Inc.(f) 31,078
----------
38,184
----------
PACKAGED FOODS & MEAT (1.4%)
51,707 Campbell Soup Co. 1,748
120,646 ConAgra Foods, Inc. 2,781
48,600 Dean Foods Co.* 877
89,570 General Mills, Inc. 6,342
87,400 H.J. Heinz Co. 3,737
44,800 Hershey Co. 1,603
19,200 Hormel Foods Corp. 738
33,102 J.M. Smucker Co. 2,044
70,327 Kellogg Co. 3,741
401,238 Kraft Foods, Inc. "A" 10,906
37,717 McCormick & Co., Inc. 1,363
192,755 Sara Lee Corp. 2,348
79,200 Tyson Foods, Inc. "A" 972
----------
39,200
----------
PERSONAL PRODUCTS (0.3%)
118,071 Avon Products, Inc. 3,719
31,300 Estee Lauder Companies, Inc. "A" 1,514
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
61,262 Mead Johnson Nutrition Co. "A" $ 2,677
----------
7,910
----------
SOFT DRINKS (2.5%)
632,446 Coca-Cola Co. 36,049
88,701 Coca-Cola Enterprises, Inc. 1,880
68,900 Dr Pepper Snapple Group, Inc. 1,950
40,319 Pepsi Bottling Group, Inc. 1,512
426,818 PepsiCo, Inc. 25,951
----------
67,342
----------
TOBACCO (1.5%)
562,911 Altria Group, Inc. 11,050
44,511 Lorillard, Inc. 3,571
520,848 Philip Morris International, Inc. 25,100
45,600 Reynolds American, Inc. 2,415
----------
42,136
----------
Total Consumer Staples 308,351
----------
ENERGY (11.4%)
--------------
COAL & CONSUMABLE FUELS (0.2%)
50,300 CONSOL Energy, Inc. 2,505
24,036 Massey Energy Co. 1,010
74,700 Peabody Energy Corp. 3,377
----------
6,892
----------
INTEGRATED OIL & GAS (6.7%)
548,006 Chevron Corp. 42,191
403,949 ConocoPhillips 20,630
1,295,093 Exxon Mobil Corp.(f) 88,312
80,423 Hess Corp. 4,866
192,197 Marathon Oil Corp. 6,000
52,803 Murphy Oil Corp. 2,862
222,234 Occidental Petroleum Corp. 18,079
----------
182,940
----------
OIL & GAS DRILLING (0.2%)
19,100 Diamond Offshore Drilling, Inc. 1,880
79,334 Nabors Industries Ltd.* 1,736
33,700 Rowan Companies, Inc.* 763
----------
4,379
----------
OIL & GAS EQUIPMENT & SERVICES (1.7%)
85,000 Baker Hughes, Inc. 3,441
77,280 BJ Services Co. 1,437
67,001 Cameron International Corp.* 2,801
================================================================================
22 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
34,500 FMC Technologies, Inc.* $ 1,995
244,395 Halliburton Co. 7,354
115,300 National Oilwell Varco, Inc. 5,084
328,609 Schlumberger Ltd. 21,389
66,484 Smith International, Inc. 1,806
----------
45,307
----------
OIL & GAS EXPLORATION & PRODUCTION (2.2%)
134,794 Anadarko Petroleum Corp. 8,414
92,293 Apache Corp. 9,522
26,950 Cabot Oil & Gas Corp. 1,175
174,642 Chesapeake Energy Corp. 4,520
68,300 Denbury Resources, Inc.* 1,011
121,368 Devon Energy Corp. 8,920
69,456 EOG Resources, Inc. 6,758
46,961 Noble Energy, Inc. 3,344
29,731 Pioneer Natural Resources Co. 1,432
43,244 Range Resources Corp. 2,156
95,429 Southwestern Energy Co.* 4,599
157,164 XTO Energy, Inc. 7,313
----------
59,164
----------
OIL & GAS REFINING & MARKETING (0.1%)
34,400 Sunoco, Inc. 898
41,000 Tesoro Corp. 556
150,826 Valero Energy Corp. 2,526
----------
3,980
----------
OIL & GAS STORAGE & TRANSPORTATION (0.3%)
186,900 El Paso Corp. 1,837
174,700 Spectra Energy Corp. 3,583
161,266 Williams Companies, Inc. 3,400
----------
8,820
----------
Total Energy 311,482
----------
FINANCIALS (14.3%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (1.3%)
70,060 Ameriprise Financial, Inc. 2,720
326,719 Bank of New York Mellon Corp., Inc. 9,138
22,400 Federated Investors, Inc. "B" 616
40,802 Franklin Resources, Inc. 4,298
117,478 Invesco Ltd. 2,760
50,388 Janus Capital Group, Inc. 678
46,221 Legg Mason, Inc. 1,394
65,600 Northern Trust Corp.(c) 3,437
================================================================================
PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
134,566 State Street Corp. $ 5,859
69,119 T. Rowe Price Group, Inc. 3,681
----------
34,581
----------
CONSUMER FINANCE (0.8%)
323,305 American Express Co. 13,100
124,121 Capital One Financial Corp. 4,759
149,955 Discover Financial Services 2,206
133,300 SLM Corp.* 1,502
----------
21,567
----------
DIVERSIFIED BANKS (1.9%)
43,300 Comerica, Inc. 1,280
519,600 U.S. Bancorp 11,696
1,393,097 Wells Fargo & Co. 37,600
----------
50,576
----------
INSURANCE BROKERS (0.2%)
76,100 Aon Corp. 2,918
143,200 Marsh & McLennan Companies, Inc. 3,162
----------
6,080
----------
INVESTMENT BANKING & BROKERAGE (1.5%)
257,145 Charles Schwab Corp. 4,839
399,873 E*TRADE Financial Corp.* 700
140,247 Goldman Sachs Group, Inc. 23,679
369,312 Morgan Stanley 10,932
----------
40,150
----------
LIFE & HEALTH INSURANCE (1.0%)
126,418 AFLAC, Inc. 5,847
83,811 Lincoln National Corp. 2,085
224,944 MetLife, Inc. 7,952
90,165 Principal Financial Group, Inc. 2,168
127,800 Prudential Financial, Inc. 6,359
23,600 Torchmark Corp. 1,037
90,400 Unum Group 1,765
----------
27,213
----------
MULTI-LINE INSURANCE (0.3%)
37,832 American International Group, Inc.(g)* 1,134
33,436 Assurant, Inc. 986
127,800 Genworth Financial, Inc. "A"* 1,451
104,044 Hartford Financial Services Group, Inc. 2,420
99,708 Loews Corp. 3,624
----------
9,615
----------
================================================================================
24 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
MULTI-SECTOR HOLDINGS (0.0%)
50,400 Leucadia National Corp.* $ 1,199
----------
OTHER DIVERSIFIED FINANCIAL SERVICES (3.8%)
2,708,940 Bank of America Corp. 40,797
5,309,740 Citigroup, Inc.(f) 17,575
1,074,389 JPMorgan Chase & Co. 44,770
----------
103,142
----------
PROPERTY & CASUALTY INSURANCE (0.8%)
147,436 Allstate Corp. 4,429
94,328 Chubb Corp. 4,639
45,792 Cincinnati Financial Corp. 1,202
183,737 Progressive Corp.* 3,305
150,178 Travelers Companies, Inc. 7,488
91,600 XL Capital Ltd. "A" 1,679
----------
22,742
----------
REAL ESTATE SERVICES (0.0%)
69,456 CB Richard Ellis Group, Inc. "A"* 942
----------
REGIONAL BANKS (0.9%)
188,300 BB&T Corp. 4,777
211,495 Fifth Third Bancorp 2,062
60,887 First Horizon National Corp.* 816
342,463 First Horizon National Corp. - Fractional Shares* -
180,553 Huntington Bancshares, Inc. 659
230,426 KeyCorp 1,279
22,700 M&T Bank Corp.(g) 1,518
130,780 Marshall & Ilsley Corp. 713
126,259 PNC Financial Services Group, Inc. 6,665
318,602 Regions Financial Corp. 1,686
137,230 SunTrust Banks, Inc. 2,784
34,400 Zions Bancorp(g) 441
----------
23,400
----------
REITs - DIVERSIFIED (0.1%)
43,246 Vornado Realty Trust 3,025
----------
REITs - INDUSTRIAL (0.1%)
125,285 ProLogis 1,715
----------
REITs - OFFICE (0.1%)
37,400 Boston Properties, Inc. 2,508
----------
REITs - RESIDENTIAL (0.2%)
34,660 Apartment Investment & Management Co. "A" 552
21,657 AvalonBay Communities, Inc. 1,778
================================================================================
PORTFOLIO OF INVESTMENTS | 25
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
77,589 Equity Residential Properties Trust $ 2,621
----------
4,951
----------
REITs - RETAIL (0.3%)
104,268 Kimco Realty Corp. 1,411
78,519 Simon Property Group, Inc. 6,266
----------
7,677
----------
REITs - SPECIALIZED (0.5%)
80,297 HCP, Inc. 2,452
32,236 Health Care REIT, Inc. 1,429
170,736 Host Hotels & Resorts, Inc.* 1,992
45,600 Plum Creek Timber Co., Inc. 1,722
38,011 Public Storage 3,096
43,390 Ventas, Inc. 1,898
----------
12,589
----------
SPECIALIZED FINANCE (0.4%)
18,028 CME Group, Inc. 6,056
20,400 IntercontinentalExchange, Inc.* 2,291
53,100 Moody's Corp. 1,423
40,200 Nasdaq OMX Group, Inc.* 797
72,137 NYSE Euronext 1,825
----------
12,392
----------
THRIFTS & MORTGAGE FINANCE (0.1%)
133,557 Hudson City Bancorp, Inc. 1,834
95,100 People's United Financial, Inc. 1,588
----------
3,422
----------
Total Financials 389,486
----------
HEALTH CARE (12.6%)
-------------------
BIOTECHNOLOGY (1.6%)
277,235 Amgen, Inc.* 15,683
79,703 Biogen Idec, Inc.* 4,264
126,421 Celgene Corp.* 7,039
19,500 Cephalon, Inc.* 1,217
73,520 Genzyme Corp.* 3,603
246,520 Gilead Sciences, Inc.* 10,670
----------
42,476
----------
HEALTH CARE DISTRIBUTORS (0.4%)
81,143 AmerisourceBergen Corp. 2,115
97,415 Cardinal Health, Inc. 3,141
73,999 McKesson Corp. 4,625
27,600 Patterson Companies, Inc.* 772
----------
10,653
----------
================================================================================
26 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT (1.9%)
165,468 Baxter International, Inc. $ 9,710
65,410 Becton, Dickinson & Co. 5,158
406,176 Boston Scientific Corp.* 3,656
26,800 C.R. Bard, Inc. 2,088
48,707 Carefusion Corp.* 1,218
43,063 Hospira, Inc.* 2,196
10,221 Intuitive Surgical, Inc.* 3,100
303,333 Medtronic, Inc. 13,341
92,638 St. Jude Medical, Inc.* 3,407
78,050 Stryker Corp. 3,932
33,300 Varian Medical Systems, Inc.* 1,560
58,574 Zimmer Holdings, Inc.* 3,462
----------
52,828
----------
HEALTH CARE FACILITIES (0.0%)
114,549 Tenet Healthcare Corp.* 617
----------
HEALTH CARE SERVICES (0.8%)
28,000 DaVita, Inc.* 1,645
75,626 Express Scripts, Inc.* 6,538
29,434 Laboratory Corp. of America Holdings* 2,203
131,286 Medco Health Solutions, Inc.* 8,390
42,206 Quest Diagnostics, Inc. 2,548
----------
21,324
----------
HEALTH CARE SUPPLIES (0.1%)
40,000 DENTSPLY International, Inc. 1,407
----------
HEALTH CARE TECHNOLOGY (0.0%)
48,234 IMS Health, Inc. 1,016
----------
LIFE SCIENCES TOOLS & SERVICES (0.4%)
48,523 Life Technologies Corp.* 2,534
14,400 Millipore Corp.* 1,042
32,900 PerkinElmer, Inc. 678
112,461 Thermo Fisher Scientific, Inc.* 5,363
25,082 Waters Corp.* 1,554
----------
11,171
----------
MANAGED HEALTH CARE (1.0%)
119,886 Aetna, Inc. 3,800
76,086 CIGNA Corp. 2,684
40,880 Coventry Health Care, Inc.* 993
45,100 Humana, Inc.* 1,979
================================================================================
PORTFOLIO OF INVESTMENTS | 27
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
315,533 UnitedHealth Group, Inc. $ 9,618
125,963 WellPoint, Inc.* 7,342
----------
26,416
----------
PHARMACEUTICALS (6.4%)
423,182 Abbott Laboratories 22,848
83,853 Allergan, Inc. 5,284
448,580 Bristol-Myers Squibb Co. 11,327
275,058 Eli Lilly and Co. 9,822
81,700 Forest Laboratories, Inc.* 2,623
752,328 Johnson & Johnson 48,457
65,400 King Pharmaceuticals, Inc.* 802
832,362 Merck & Co., Inc. 30,415
86,700 Mylan, Inc.* 1,598
2,199,838 Pfizer, Inc.(f) 40,015
28,800 Watson Pharmaceuticals, Inc.* 1,141
----------
174,332
----------
Total Health Care 342,240
----------
INDUSTRIALS (10.2%)
-------------------
AEROSPACE & DEFENSE (2.7%)
199,101 Boeing Co. 10,777
105,995 General Dynamics Corp. 7,226
34,492 Goodrich Corp. 2,216
208,300 Honeywell International, Inc. 8,165
50,567 ITT Corp. 2,515
32,000 L-3 Communications Holdings, Inc. 2,783
88,204 Lockheed Martin Corp. 6,646
86,288 Northrop Grumman Corp. 4,819
38,300 Precision Castparts Corp. 4,227
105,603 Raytheon Co. 5,441
42,393 Rockwell Collins, Inc. 2,347
256,666 United Technologies Corp. 17,815
----------
74,977
----------
AIR FREIGHT & LOGISTICS (1.0%)
47,100 C.H. Robinson Worldwide, Inc. 2,766
56,326 Expeditors International of Washington, Inc. 1,956
85,682 FedEx Corp. 7,150
271,899 United Parcel Service, Inc. "B" 15,599
----------
27,471
----------
AIRLINES (0.1%)
199,600 Southwest Airlines Co. 2,281
----------
================================================================================
28 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
BUILDING PRODUCTS (0.1%)
100,000 Masco Corp. $ 1,381
----------
COMMERCIAL PRINTING (0.0%)
56,900 R.R. Donnelley & Sons Co. 1,267
----------
CONSTRUCTION & ENGINEERING (0.2%)
49,400 Fluor Corp. 2,225
33,000 Jacobs Engineering Group, Inc.* 1,241
55,893 Quanta Services, Inc.* 1,165
----------
4,631
----------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.8%)
170,890 Caterpillar, Inc. 9,739
53,948 Cummins, Inc. 2,474
116,200 Deere & Co. 6,285
100,268 PACCAR, Inc. 3,637
----------
22,135
----------
DIVERSIFIED SUPPORT SERVICES (0.1%)
36,500 Cintas Corp. 951
49,200 Iron Mountain, Inc.* 1,120
----------
2,071
----------
ELECTRICAL COMPONENTS & EQUIPMENT (0.5%)
204,817 Emerson Electric Co. 8,725
13,460 First Solar, Inc.(g)* 1,823
39,500 Rockwell Automation, Inc. 1,856
24,978 Roper Industries, Inc. 1,308
----------
13,712
----------
ENVIRONMENTAL & FACILITIES SERVICES (0.3%)
90,055 Republic Services, Inc. 2,549
23,000 Stericycle, Inc.* 1,269
134,035 Waste Management, Inc. 4,532
----------
8,350
----------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.1%)
32,200 Monster Worldwide, Inc.* 560
43,100 Robert Half International, Inc. 1,152
----------
1,712
----------
INDUSTRIAL CONGLOMERATES (2.2%)
192,594 3M Co. 15,922
2,903,044 General Electric Co.(f) 43,923
71,800 Textron, Inc. 1,350
----------
61,195
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 29
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
INDUSTRIAL MACHINERY (0.8%)
70,647 Danaher Corp. $ 5,313
50,600 Dover Corp. 2,105
45,300 Eaton Corp. 2,882
14,522 Flowserve Corp. 1,373
105,384 Illinois Tool Works, Inc. 5,057
33,036 Pall Corp. 1,196
45,100 Parker-Hannifin Corp. 2,430
16,826 Snap-On, Inc. 711
20,500 Stanley Works(g) 1,056
----------
22,123
----------
OFFICE SERVICES & SUPPLIES (0.1%)
32,718 Avery Dennison Corp. 1,194
57,200 Pitney Bowes, Inc. 1,302
----------
2,496
----------
RAILROADS (1.0%)
71,865 Burlington Northern Santa Fe Corp. 7,087
106,570 CSX Corp. 5,168
100,441 Norfolk Southern Corp. 5,265
138,570 Union Pacific Corp. 8,855
----------
26,375
----------
RESEARCH & CONSULTING SERVICES (0.1%)
14,500 Dun & Bradstreet Corp. 1,223
35,700 Equifax, Inc. 1,103
----------
2,326
----------
TRADING COMPANIES & DISTRIBUTORS (0.1%)
36,400 Fastenal Co.(g) 1,516
17,585 W.W. Grainger, Inc. 1,703
----------
3,219
----------
TRUCKING (0.0%)
15,500 Ryder System, Inc. 638
----------
Total Industrials 278,360
----------
INFORMATION TECHNOLOGY (19.7%)
------------------------------
APPLICATION SOFTWARE (0.5%)
144,368 Adobe Systems, Inc.* 5,310
61,900 Autodesk, Inc.* 1,573
51,021 Citrix Systems, Inc.* 2,123
57,718 Compuware Corp.* 417
88,230 Intuit, Inc.* 2,709
30,416 salesforce.com, Inc.* 2,244
----------
14,376
----------
================================================================================
30 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (2.6%)
1,568,002 Cisco Systems, Inc.* $ 37,538
35,100 Harris Corp. 1,669
59,625 JDS Uniphase Corp.* 492
142,199 Juniper Networks, Inc.* 3,792
622,447 Motorola, Inc.* 4,830
454,744 QUALCOMM, Inc. 21,036
109,604 Tellabs, Inc.* 623
----------
69,980
----------
COMPUTER HARDWARE (5.2%)
245,584 Apple, Inc.* 51,784
466,085 Dell, Inc.* 6,693
646,188 Hewlett-Packard Co. 33,285
358,975 International Business Machines Corp. 46,990
199,857 Sun Microsystems, Inc.* 1,873
47,700 Teradata Corp.* 1,499
----------
142,124
----------
COMPUTER STORAGE & PERIPHERALS (0.7%)
553,457 EMC Corp.* 9,669
21,600 Lexmark International, Inc. "A"* 561
92,300 NetApp, Inc.* 3,174
32,900 QLogic Corp.* 621
63,000 SanDisk Corp.* 1,826
61,100 Western Digital Corp.* 2,698
----------
18,549
----------
DATA PROCESSING & OUTSOURCED SERVICES (1.4%)
27,200 Affiliated Computer Services, Inc. "A"* 1,624
137,741 Automatic Data Processing, Inc. 5,898
42,338 Computer Sciences Corp.* 2,436
86,499 Fidelity National Information Services, Inc. 2,027
41,951 Fiserv, Inc.* 2,034
26,426 MasterCard, Inc. "A" 6,764
89,488 Paychex, Inc. 2,742
50,155 Total System Services, Inc. 866
122,683 Visa, Inc. "A" 10,730
190,799 Western Union Co. 3,597
----------
38,718
----------
ELECTRONIC COMPONENTS (0.4%)
48,000 Amphenol Corp. "A" 2,216
421,269 Corning, Inc. 8,135
----------
10,351
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 31
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
96,200 Agilent Technologies, Inc.* $ 2,989
39,200 FLIR Systems, Inc.* 1,283
----------
4,272
----------
ELECTRONIC MANUFACTURING SERVICES (0.1%)
51,500 Jabil Circuit, Inc. 895
36,800 Molex, Inc. 793
----------
1,688
----------
HOME ENTERTAINMENT SOFTWARE (0.1%)
88,216 Electronic Arts, Inc.* 1,566
----------
INTERNET SOFTWARE & SERVICES (2.0%)
46,700 Akamai Technologies, Inc.* 1,183
304,706 eBay, Inc.* 7,173
65,909 Google, Inc. "A"* 40,862
54,400 VeriSign, Inc.* 1,319
321,669 Yahoo!, Inc.* 5,397
----------
55,934
----------
IT CONSULTING & OTHER SERVICES (0.2%)
79,430 Cognizant Technology Solutions Corp. "A"* 3,598
80,809 SAIC, Inc.* 1,531
----------
5,129
----------
OFFICE ELECTRONICS (0.1%)
230,870 Xerox Corp. 1,953
----------
SEMICONDUCTOR EQUIPMENT (0.3%)
360,101 Applied Materials, Inc. 5,020
46,400 KLA-Tencor Corp. 1,678
60,700 MEMC Electronic Materials, Inc.* 827
28,336 Novellus Systems, Inc.* 661
53,300 Teradyne, Inc.* 572
----------
8,758
----------
SEMICONDUCTORS (2.2%)
146,927 Advanced Micro Devices, Inc.* 1,422
77,885 Altera Corp. 1,763
78,300 Analog Devices, Inc. 2,473
116,150 Broadcom Corp. "A"* 3,653
1,504,576 Intel Corp. 30,693
62,074 Linear Technology Corp. 1,896
171,098 LSI Corp.* 1,028
51,100 Microchip Technology, Inc. 1,485
225,861 Micron Technology, Inc.* 2,385
================================================================================
32 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
63,330 National Semiconductor Corp. $ 973
148,284 NVIDIA Corp.* 2,770
339,908 Texas Instruments, Inc. 8,858
77,153 Xilinx, Inc. 1,933
----------
61,332
----------
SYSTEMS SOFTWARE (3.8%)
51,500 BMC Software, Inc.* 2,065
107,022 CA, Inc. 2,404
41,900 McAfee, Inc.* 1,700
2,106,881 Microsoft Corp. 64,239
87,600 Novell, Inc.* 363
1,065,067 Oracle Corp. 26,137
52,304 Red Hat, Inc.* 1,616
220,370 Symantec Corp.* 3,942
----------
102,466
----------
Total Information Technology 537,196
----------
MATERIALS (3.6%)
----------------
ALUMINUM (0.2%)
262,361 Alcoa, Inc. 4,229
----------
CONSTRUCTION MATERIALS (0.1%)
34,973 Vulcan Materials Co. 1,842
----------
DIVERSIFIED CHEMICALS (0.8%)
310,230 Dow Chemical Co. 8,571
247,313 E.I. du Pont de Nemours & Co. 8,327
20,600 Eastman Chemical Co. 1,241
20,100 FMC Corp. 1,121
46,305 PPG Industries, Inc. 2,711
----------
21,971
----------
DIVERSIFIED METALS & MINING (0.3%)
116,667 Freeport-McMoRan Copper & Gold, Inc.* 9,367
22,800 Titanium Metals Corp.* 286
----------
9,653
----------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.5%)
13,900 CF Industries Holdings, Inc. 1,262
148,887 Monsanto Co. 12,171
----------
13,433
----------
FOREST PRODUCTS (0.1%)
59,008 Weyerhaeuser Co. 2,546
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 33
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
GOLD (0.2%)
132,896 Newmont Mining Corp. $ 6,287
----------
INDUSTRIAL GASES (0.5%)
56,901 Air Products & Chemicals, Inc. 4,613
22,609 Airgas, Inc. 1,076
84,700 Praxair, Inc. 6,802
----------
12,491
----------
METAL & GLASS CONTAINERS (0.1%)
26,300 Ball Corp. 1,360
45,800 Owens-Illinois, Inc.* 1,505
34,000 Pactiv Corp.* 821
----------
3,686
----------
PAPER PACKAGING (0.1%)
30,166 Bemis Co., Inc. 894
42,700 Sealed Air Corp. 934
----------
1,828
----------
PAPER PRODUCTS (0.2%)
116,767 International Paper Co. 3,127
46,411 MeadWestvaco Corp. 1,329
----------
4,456
----------
SPECIALTY CHEMICALS (0.2%)
65,301 Ecolab, Inc. 2,911
21,200 International Flavors & Fragrances, Inc. 872
32,071 Sigma-Aldrich Corp. 1,621
----------
5,404
----------
STEEL (0.3%)
29,699 AK Steel Holding Corp. 634
27,100 Allegheny Technologies, Inc. 1,213
34,567 Cliffs Natural Resources, Inc. 1,593
87,100 Nucor Corp. 4,063
38,056 United States Steel Corp. 2,098
----------
9,601
----------
Total Materials 97,427
----------
TELECOMMUNICATION SERVICES (3.2%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (2.9%)
1,608,855 AT&T, Inc. 45,096
82,114 CenturyTel, Inc. 2,974
82,200 Frontier Communications Corp. 642
392,681 Qwest Communications International, Inc. 1,653
================================================================================
34 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
773,772 Verizon Communications, Inc. $ 25,635
119,531 Windstream Corp. 1,314
----------
77,314
----------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
108,208 American Tower Corp. "A"* 4,675
70,100 MetroPCS Communications, Inc.* 535
793,639 Sprint Nextel Corp.* 2,905
----------
8,115
----------
Total Telecommunication Services 85,429
----------
UTILITIES (3.7%)
----------------
ELECTRIC UTILITIES (1.8%)
49,300 Allegheny Energy, Inc. 1,158
130,687 American Electric Power Co., Inc. 4,547
88,216 Edison International 3,068
52,213 Entergy Corp. 4,273
181,350 Exelon Corp. 8,863
83,509 FirstEnergy Corp. 3,879
111,799 FPL Group, Inc. 5,905
50,933 Northeast Utilities 1,314
64,409 Pepco Holdings, Inc. 1,085
28,747 Pinnacle West Capital Corp. 1,052
101,339 PPL Corp. 3,274
76,100 Progress Energy, Inc. 3,121
219,700 Southern Co. 7,320
----------
48,859
----------
GAS UTILITIES (0.1%)
35,200 EQT Corp. 1,546
13,517 Nicor, Inc. 569
46,500 Questar Corp. 1,933
----------
4,048
----------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%)
181,500 AES Corp.* 2,416
55,775 Constellation Energy Group, Inc. 1,961
----------
4,377
----------
MULTI-UTILITIES (1.6%)
67,234 Ameren Corp. 1,879
110,746 CenterPoint Energy, Inc. 1,607
57,902 CMS Energy Corp. 907
75,959 Consolidated Edison, Inc. 3,451
161,963 Dominion Resources, Inc. 6,304
================================================================================
PORTFOLIO OF INVESTMENTS | 35
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
45,832 DTE Energy Co. $ 1,998
353,658 Duke Energy Corp. 6,086
19,300 Integrys Energy Group, Inc. 810
73,559 NiSource, Inc. 1,131
102,600 PG&E Corp. 4,581
137,146 Public Service Enterprise Group, Inc. 4,560
29,384 SCANA Corp. 1,107
66,633 Sempra Energy 3,730
60,290 TECO Energy, Inc. 978
31,500 Wisconsin Energy Corp. 1,570
127,922 Xcel Energy, Inc. 2,714
----------
43,413
----------
Total Utilities 100,697
----------
Total Common Stocks (cost: $2,579,992) 2,710,474
----------
MONEY MARKET INSTRUMENTS (0.4%)
MONEY MARKET FUND (0.2%)
4,622,900 Northern Institutional Funds - Diversified Assets
Portfolio, 0.01%(a),(d) 4,623
----------
---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
---------------------------------------------------------------------------------------------------
U.S.TREASURY BILLS (0.2%)
$6,470 0.11%, 5/06/2010(b),(e) 6,467
----------
Total Money Market Instruments (cost: $11,090) 11,090
----------
---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (0.3%)
MONEY MARKET FUNDS (0.3%)
268,628 AIM Short-Term Investment Co. Liquid Assets Portfolio, 0.18%(a) 268
8,924,645 BlackRock Liquidity Funds TempFund, 0.12%(a) 8,925
----------
Total Money Market Funds 9,193
----------
================================================================================
36 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.0%)
$500 Credit Suisse First Boston LLC, 0.00%, acquired on 12/31/2009
and due 1/04/2010 at $500 (collateralized by $515 of
Fannie Mae(i), 0.18%(h), due 5/25/2010; market value $515) $ 500
200 Deutsche Bank Securities, Inc., 0.01%, acquired on 12/31/2009
and due 1/04/2010 at $200 (collateralized by $202 of
Fannie Mae(i), 1.38%, due 4/28/2011; market value $204) 200
----------
Total Repurchase Agreements 700
----------
Total Short-Term Investments Purchased With Cash Collateral
From Securities Loaned (cost: $9,893) 9,893
----------
TOTAL INVESTMENTS (COST: $2,600,975) $2,731,457
==========
---------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
---------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
---------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $2,710,474 $ - $- $2,710,474
Money Market Instruments:
Money Market Fund 4,623 - - 4,623
U.S. Treasury Bills - 6,467 - 6,467
Short-Term Investments Purchased
with Cash Collateral from
Securities Loaned:
Money Market Fund 9,193 - - 9,193
Repurchase Agreements - 700 - 700
Other financial instruments* 149 - - 149
---------------------------------------------------------------------------------------------------
Total $2,724,439 $7,167 $- $2,731,606
---------------------------------------------------------------------------------------------------
* Other financial instruments are derivative instruments not reflected in the
portfolio of investments, such as futures, which are valued at the unrealized
appreciation/depreciation on the investment.
================================================================================
PORTFOLIO OF INVESTMENTS | 37
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
December 31, 2009
--------------------------------------------------------------------------------
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 PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
REIT -- Real estate investment trust
o SPECIFIC NOTES
(a) Rate represents the money market fund annualized seven-day yield at
December 31, 2009.
(b) Rate represents an annualized yield at time of purchase, not a coupon
rate.
(c) Northern Trust Corp. is the parent to Northern Trust Investments, N.A.
(NTI), which is the subadviser of the Fund.
(d) NTI is both the subadviser of the Fund and the adviser of the Northern
Institutional Funds.
(e) Security with a value of $6,467,000 is segregated as collateral for
initial margin requirements on open futures contracts.
================================================================================
38 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
(f) Security, or a portion thereof, is segregated to cover the value of
open futures contracts at December 31, 2009, as shown in the following
table:
CONTRACT VALUE AT UNREALIZED
TYPE OF FUTURE EXPIRATION CONTRACTS POSITION DECEMBER 31, 2009 APPRECIATION
--------------------------------------------------------------------------------------------------
S&P 500 Index Futures March 18, 2010 50 Long $13,884,000 $149,000
(g) The security or a portion thereof was out on loan as of December 31,
2009.
(h) Zero-coupon security. Rate represents the effective yield at the date
of purchase.
(i) 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.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 39
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
December 31, 2009
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (including securities
on loan of $8,732) (cost of $2,600,975) $2,731,457
Cash 230
Receivables:
Capital shares sold:
Affiliated transactions (Note 8) 224
Nonaffiliated transactions 3,417
USAA Investment Management Company (Note 7D) 206
USAA Transfer Agency Company (Note 7E) 23
Dividends and interest 3,659
Other 34
----------
Total assets 2,739,250
----------
LIABILITIES
Payables:
Upon return of securities loaned 9,893
Securities purchased 578
Capital shares redeemed 2,513
Variation margin on futures contracts 151
Accrued management fees 230
Accrued transfer agent's fees 66
Other accrued expenses and payables 139
----------
Total liabilities 13,570
----------
Net assets applicable to capital shares outstanding $2,725,680
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,897,281
Accumulated undistributed net investment income 73
Accumulated net realized loss on investments and futures transactions (302,305)
Net unrealized appreciation of investments and futures contracts 130,631
----------
Net assets applicable to capital shares outstanding $2,725,680
==========
Net asset value, redemption price, and offering price per share:
Member Shares (net assets of $1,831,645/109,614 shares outstanding) $ 16.71
==========
Reward Shares (net assets of $894,035/53,496 shares outstanding) $ 16.71
==========
See accompanying notes to financial statements.
================================================================================
40 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Year ended December 31, 2009
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 53,241
Interest 72
Other (Note 7B) 2
Securities lending (net) 1,196
--------
Total income 54,511
--------
EXPENSES
Management fees 2,307
Administration and servicing fees:
Member Shares 930
Reward Shares 454
Transfer agent's fees:
Member Shares 3,267
Reward Shares 438
Custody and accounting fees:
Member Shares 17
Reward Shares 7
Postage:
Member Shares 180
Reward Shares 5
Shareholder reporting fees:
Member Shares 79
Reward Shares 1
Trustees' fees 10
Registration fees:
Member Shares 44
Reward Shares 29
Professional fees 194
Other 72
--------
Total expenses 8,034
Expenses reimbursed:
Member Shares (2,368)
Reward Shares (1,100)
--------
Net expenses 4,566
--------
NET INVESTMENT INCOME 49,945
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS
Net realized gain (loss) on:
Investments (7,048)
Futures transactions 10,440
Change in net unrealized appreciation/depreciation of:
Investments 524,600
Futures contracts (342)
--------
Net realized and unrealized gain 527,650
--------
Increase in net assets resulting from operations $577,595
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 41
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Years ended December 31,
--------------------------------------------------------------------------------
2009 2008
---------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 49,945 $ 61,195
Net realized loss on investments (7,048) (33,952)
Net realized gain (loss) on futures transactions 10,440 (16,609)
Change in net unrealized appreciation/depreciation of:
Investments 524,600 (1,270,782)
Futures contracts (342) 345
------------------------
Increase (decrease) in net assets resulting from
operations 577,595 (1,259,803)
------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Member Shares (32,663) (40,782)
Reward Shares (17,209) (20,716)
------------------------
Total distributions of net investment income (49,872) (61,498)
------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 6)
Member Shares 32,302 26,735
Reward Shares 21,722 82,958
------------------------
Total net increase in net assets from capital
share transactions 54,024 109,693
------------------------
Capital contribution from USAA Transfer Agency
Company (Note 7E):
Reward Shares 23 101
------------------------
Net increase (decrease) in net assets 581,770 (1,211,507)
NET ASSETS
Beginning of year 2,143,910 3,355,417
------------------------
End of year $2,725,680 $ 2,143,910
========================
Accumulated undistributed net investment income:
End of year $ 73 $ -
========================
See accompanying notes to financial statements.
================================================================================
42 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
--------------------------------------------------------------------------------
(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 annual report pertains only to the USAA S&P 500
Index Fund (the Fund), which is classified as diversified under the 1940 Act.
The Fund seeks to match, before fees and expenses, the performance of the S&P
500 Index. USAA Investment Management Company (the Manager), an affiliate of the
Fund, has retained Northern Trust Investments, N.A. (NTI) to serve as subadviser
for the Fund. NTI is responsible for investing the Fund's assets. Under normal
market conditions, NTI attempts to achieve the Fund's objective by investing at
least 80% of the Fund's assets in the stocks of companies composing the S&P 500
Index.
The Fund has two classes of shares: Member Shares and Reward 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 agency 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 Reward Shares are offered for sale to qualified public
shareholders and to the USAA Target Retirement Funds (Target Funds), which are
managed by the Manager.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
<PAGE>
================================================================================
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. If no last sale or official closing price is reported or
available, the average of the bid and asked prices generally is used.
2. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their net asset value (NAV) at the end
of each business day.
3. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
4. Repurchase agreements are valued at cost, which approximates market
value.
5. Futures are valued based upon the last sale price at the close of
market on the principal exchange on which they are traded.
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
================================================================================
44 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
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.
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. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- On January 1, 2009, the
Fund adopted an accounting standard that requires
================================================================================
NOTES TO FINANCIAL STATEMENTS | 45
<PAGE>
================================================================================
qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of and gains
and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements, if any.
The Fund may buy, sell, and enter into certain types of derivatives,
including, but not limited to futures contracts and options on futures
contracts under circumstances in which such instruments are expected by the
portfolio manager to aid in achieving the Fund's investment objective. The
Fund also may use derivatives in circumstances where the portfolio manager
believes they offer an economical means of gaining exposure to a particular
securities market, or to keep cash on hand to meet shareholder redemptions
or other needs while maintaining exposure to the market. With exchange
listed futures contracts and options, counterparty credit risk to the Fund
is limited to the exchange's clearinghouse which, as counterparty to all
exchange traded futures contracts and options, guarantees the transactions
against default from the actual counterparty to the trade.
FUTURES CONTRACTS -- The Fund is subject to cash flow and tracking error
risk in the normal course of pursuing its investment objectives. The Fund
may use stock index futures contracts in an attempt to reduce any
performance discrepancies between the Fund and the S&P 500 Index. A futures
contract represents a commitment for the future purchase or sale of an
asset at a specified price on a specified date. Upon entering into such
contracts, the Fund is required to deposit with the broker in either cash
or securities an initial margin in an amount equal to a certain percentage
of the contract amount. Subsequent payments (variation margin) are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the contract, and are recorded for financial statement purposes as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Upon entering into such contracts, the Fund bears the risk of interest
================================================================================
46 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
or exchange rates or securities prices moving unexpectedly in an unfavorable
direction, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AS OF DECEMBER 31, 2009*
(IN THOUSANDS)
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING INSTRUMENTS LIABILITIES LIABILITIES
UNDER STATEMENT 133 LOCATION FAIR VALUE LOCATION FAIR VALUE
------------------------------------------------------------------------------------------
Equity contracts Net unrealized $149** - $-
appreciation of
investments
and futures
contracts
------------------------------------------------------------------------------------------
*For open derivative instruments as of December 31, 2009, see the notes to
portfolio of investments, which is also indicative of activity for the
year ended December 31, 2009.
**Includes cumulative appreciation (depreciation) of futures contracts as
reported in the notes to portfolio of investments. Only current day's
variation margin is reported within the statement of assets and
liabilities.
THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS DURING
THE YEAR ENDED DECEMBER 31, 2009 (IN THOUSANDS)
CHANGE IN
DERIVATIVES NOT UNREALIZED
ACCOUNTED FOR AS REALIZED APPRECIATION
HEDGING INSTRUMENTS STATEMENT OF GAIN (LOSS) (DEPRECIATION)
UNDER STATEMENT 133 OPERATIONS LOCATION ON DERIVATIVES ON DERIVATIVES
---------------------------------------------------------------------------------------------
Equity contracts Net realized gain (loss) $10,440 $(342)
on futures transactions/
Change in net unrealized
appreciation/depreciation
of futures contracts
---------------------------------------------------------------------------------------------
D. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 47
<PAGE>
================================================================================
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.
E. 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.
F. 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.
G. EXPENSES PAID INDIRECTLY -- Through arrangements with 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 year ended December 31, 2009, these bank
credits reduced the expenses of the Member Shares and Reward Shares by less
than $500.
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
================================================================================
48 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
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.
(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 year ended December 31, 2009, the Fund paid CAPCO facility fees of
$13,000, which represents 6.0% of the total fees paid to CAPCO by the USAA
funds. The Fund had no borrowings under this agreement during the year ended
December 31, 2009.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 49
<PAGE>
================================================================================
(3) DISTRIBUTIONS
The character of any distributions made during the year from net investment
income or net realized gains is determined in accordance with federal tax
regulations and may differ from those determined in accordance with U.S.
generally accepted accounting principles. Also, due to the timing of
distributions, the fiscal year in which amounts are distributed may differ from
the year that the income or realized gains were recorded by the Fund.
The tax character of distributions paid during the years ended December 31,
2009, and 2008, was as follows:
2009 2008
------------------------------
Ordinary income* $49,872,000 $61,498,000
* Includes distribution of short-term realized capital gains, if any, which are
taxable as ordinary income.
As of December 31, 2009, the components of net assets representing distributable
earnings on a tax basis were as follows:
Undistributed ordinary income $ 73,000
Accumulated capital and other losses (291,022,000)
Unrealized appreciation of investments 119,348,000
The difference between book-basis and tax-basis unrealized appreciation of
investments is attributable to the tax deferral of losses on wash sales.
Distributions of net investment income are made quarterly. Distributions of
realized gains from security transactions not offset by capital losses are made
annually in the succeeding fiscal year or as otherwise required to avoid the
payment of federal taxes. At December 31, 2009, the Fund had a current
post-October capital loss of $116,000 and capital loss carryovers of
$290,906,000, for federal income tax purposes. The post-October loss will be
recognized on the first day of the following fiscal year. If not offset by
subsequent capital gains, the capital loss carryovers will expire between 2010
and 2017, as shown on the next page. It is unlikely that the Trust's Board of
Trustees will authorize a distribution of capital gains realized in the future
until the capital loss carryovers have been used or expire.
================================================================================
50 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
CAPITAL LOSS CARRYOVERS
--------------------------------------------------------------------------------
EXPIRES BALANCE
----------- ------------
2010 $213,601,000
2011 344,000
2012 1,474,000
2013 17,856,000
2014 10,601,000
2016 41,901,000
2017 5,129,000
------------
Total $290,906,000
============
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the year ended
December 31, 2009, the Fund did not incur any income tax, interest, or
penalties. As of December 31, 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 December 31, 2006, through December 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 year ended December 31, 2009, were $182,035,000
and $113,789,000, respectively.
As of December 31, 2009, the cost of securities, including short-term
securities, for federal income tax purposes, was $2,612,109,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 51
<PAGE>
================================================================================
Gross unrealized appreciation and depreciation of investments as of December 31,
2009, for federal income tax purposes, were $667,099,000 and $547,751,000,
respectively, resulting in net unrealized appreciation of $119,348,000.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Wachovia Global
Securities Lending (Wachovia), may lend its securities to 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 year ended December 31, 2009, the Fund
received securities-lending income of $1,196,000, which is net of the 20% income
retained by Wachovia. As of December 31, 2009, the Fund loaned securities having
a fair market value of approximately $8,732,000 and received cash collateral of
$9,893,000 for the loans, which was invested in short-term investments, as noted
in the Fund's portfolio of investments.
================================================================================
52 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
(6) CAPITAL SHARE TRANSACTIONS
At December 31, 2009, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
Capital share transactions were as follows, in thousands:
YEAR ENDED YEAR ENDED
12/31/2009 12/31/2008
------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------
MEMBER SHARES:
Shares sold 21,247 $ 294,006 22,870 $ 412,318
Shares issued from reinvested
dividends 2,174 31,344 2,310 39,417
Shares redeemed (20,832) (293,048) (23,477) (425,000)
-----------------------------------------------
Net increase (decrease) from
capital share transactions 2,589 $ 32,302 1,703 $ 26,735
===============================================
REWARD SHARES:
Shares sold 15,558 $ 219,222 14,928 $ 271,076
Shares issued from reinvested
dividends 1,141 16,479 1,160 19,771
Shares redeemed (14,838) (213,979) (11,757) (207,889)
-----------------------------------------------
Net increase (decrease) from
capital share transactions 1,861 $ 21,722 4,331 $ 82,958
===============================================
(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 for allocating
assets to
================================================================================
NOTES TO FINANCIAL STATEMENTS | 53
<PAGE>
================================================================================
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 Fund's management fees are accrued daily
and paid monthly at an annualized rate of 0.10% of the Fund's average net
assets for the fiscal year. For the year ended December 31, 2009, the Fund
incurred management fees, paid or payable to the Manager, of $2,307,000.
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into an investment
subadvisory agreement with NTI, under which NTI 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 NTI a subadvisory fee in an
annual amount of 0.02% of the Fund's average daily net assets on amounts up
to $1.5 billion; 0.01% of the Fund's average daily net assets for the next
$1.5 billion; and 0.005% of the Fund's average daily net assets that exceed
$3 billion. For the year ended December 31, 2009, the Manager incurred
subadvisory fees, paid or payable to NTI, of $380,000.
NTI has agreed to remit to the Fund all subadvisory fees earned on Fund
assets invested in any of NTI's affiliated money market funds. For the
year ended December 31, 2009, NTI remitted $2,000 to the Fund for the
investments in the Northern Institutional Funds Money Market Portfolios.
NTI is a direct subsidiary of The Northern Trust Company, the Fund's
custodian and accounting agent.
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 0.06% of the Fund's average net assets for the fiscal
year. For the year ended December 31, 2009, the Member Shares and Reward
Shares incurred administration and servicing fees, paid or payable to the
Manager, of $930,000 and $454,000, respectively.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides
================================================================================
54 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
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 year ended December 31,
2009, the Fund reimbursed the Manager $93,000 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 Member Shares and the Reward Shares to 0.25% and
0.09%, respectively, of their annual average net assets, excluding
extraordinary expenses and before reductions of any expenses paid
indirectly, and will reimburse the Fund for all expenses in excess of those
amounts. The Manager may modify or terminate this voluntary agreement at
any time. For the year ended December 31, 2009, the Fund incurred
reimbursable expenses from the Manager for the Member Shares and the Reward
Shares of $2,353,000 and $1,092,000, respectively, of which $206,000 in
total was receivable from the Manager.
In addition, NTI has contractually agreed to reimburse the Fund for all
license fees paid by the Fund to Standard & Poor's, in amounts not
exceeding the annual rate of 0.001% of the average daily net assets of the
Fund. For the year ended December 31, 2009, the Fund incurred reimbursable
expenses from NTI for the Member Shares and the Reward Shares of $15,000
and $8,000, respectively.
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 based on an annual charge of $20 per
shareholder account plus out-of-pocket expenses. The Fund also pays SAS
fees that are related to the administration and servicing of accounts that
are traded on an omnibus basis. For the year ended December 31, 2009, the
Fund incurred transfer agent's fees, paid or payable to SAS for the Member
Shares and Reward Shares, of $3,267,000 and $438,000, respectively.
Additionally, for the year ended December 31, 2009, the Fund's Reward
Shares recorded a receivable from SAS for a capital contribution of $23,000
for adjustments related to corrections to shareholder transactions.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 55
<PAGE>
================================================================================
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.
G. ACCOUNT MAINTENANCE FEE -- SAS assesses a $10 annual account maintenance
fee to allocate part of the fixed cost of maintaining shareholder accounts.
This fee is charged directly to the shareholders' accounts and does not
impact the Fund. The fee is waived on accounts with balances of $10,000 or
more.
(8) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
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 December 31, 2009, the Fund recorded a receivable
for capital shares sold of $224,000 for the Target Funds' purchase of the Fund's
Reward Shares. As of December 31, 2009, the Target Funds owned the following
percent of the total outstanding shares of the Fund:
OWNERSHIP %
------------------------------------------------------------------------------
USAA Target Retirement Income Fund 0.1%
USAA Target Retirement 2020 Fund 0.3
USAA Target Retirement 2030 Fund 0.7
USAA Target Retirement 2040 Fund 0.7
USAA Target Retirement 2050 Fund 0.3
(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 February 17, 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.
================================================================================
56 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS -- MEMBER SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2009 2008 2007 2006 2005
---------------------------------------------------------------
Net asset value at
beginning of period $ 13.51 $ 21.98 $ 21.24 $ 18.70 $ 18.15
---------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .30 .39 .39 .35 .30
Net realized and unrealized
gain (loss) 3.20 (8.47) .74 2.53 .55
---------------------------------------------------------------
Total from investment operations 3.50 (8.08) 1.13 2.88 .85
---------------------------------------------------------------
Less distributions from:
Net investment income (.30) (.39) (.39) (.34) (.30)
---------------------------------------------------------------
Net asset value at end of period $ 16.71 $ 13.51 $ 21.98 $ 21.24 $ 18.70
===============================================================
Total return (%)* 26.28 (37.13) 5.32(a) 15.54 4.77
Net assets at end of period (000) $1,831,645 $1,446,160 $2,315,340 $2,248,677 $2,292,568
Ratios to average net assets:**
Expenses (%)(b),(c) .25 .23 .19(a) .19 .19
Expenses, excluding
reimbursements (%)(c) .40 .37 .33 .34 .33
Net investment income (%) 2.11 2.12 1.76 1.73 1.68
Portfolio turnover (%) 5 3 5 4 6
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period; does not reflect $10 annual
account maintenance fee. Includes adjustments in accordance with U.S.
generally accepted accounting principles and could differ from the Lipper
reported return.
** For the year ended December 31, 2009, average net assets were
$1,554,451,000.
(a) For the year ended December 31, 2007, SAS voluntarily reimbursed the Member
Shares for a portion of the transfer agent's fees incurred. The
reimbursement had no effect on the Member Shares' total return or ratio of
expenses to average net assets.
(b) Effective May 1, 2008, the Manager voluntarily agreed to reimburse the
Member Shares for expenses in excess of 0.25% of their annual average net
assets. Prior to May 1, 2008, the Manager voluntarily agreed to reimburse
the Member Shares for expenses in excess of 0.19% of their annual average
net assets from October 1, 2004, through April 30, 2008.
(c) Reflects total operating expenses of the Member Shares before reductions of
any expenses paid indirectly. The Member Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 57
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS (CONTINUED) -- REWARD SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2009 2008 2007 2006 2005
-------------------------------------------------------------
Net asset value at
beginning of period $ 13.51 $ 21.99 $ 21.25 $ 18.70 $ 18.15
-------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .32 .41 .41 .36 .32
Net realized and unrealized
gain (loss) 3.20 (8.48) .74 2.55 .55
-------------------------------------------------------------
Total from investment operations 3.52 (8.07) 1.15 2.91 .87
-------------------------------------------------------------
Less distributions from:
Net investment income (.32) (.41) (.41) (.36) (.32)
-------------------------------------------------------------
Net asset value at end of period $ 16.71 $ 13.51 $ 21.99 $ 21.25 $ 18.70
=============================================================
Total return (%)* 26.47 (37.07) 5.42(a) 15.71 4.86
Net assets at end of period (000) $894,035 $697,750 $1,040,077 $952,147 $506,999
Ratios to average net assets:**
Expenses (%)(b),(c) .09 .09 .09(a) .09 .09
Expenses, excluding
reimbursements (%)(c) .23 .21 .20 .20 .19
Net investment income (%) 2.26 2.27 1.86 1.85 1.78
Portfolio turnover (%) 5 3 5 4 6
* 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 year ended December 31, 2009, average net assets were $759,792,000.
(a) For the year ended December 31, 2007, SAS voluntarily reimbursed the Reward
Shares for a portion of the transfer agent's fees incurred. The
reimbursement had no effect on the Reward Shares' total return or ratio of
expenses to average net assets.
(b) Effective October 1, 2004, the Manager voluntarily agreed to reimburse the
Reward Shares for expenses in excess of 0.09% of their average annual net
assets.
(c) Reflects total operating expenses of the Reward Shares before reductions of
any expenses paid indirectly. The Reward Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
================================================================================
58 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
EXPENSE EXAMPLE
December 31, 2009 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as account maintenance fees, 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 July 1, 2009, through
December 31, 2009.
ACTUAL EXPENSES
The line labeled "actual" under each share class in 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 for your share
class in the "actual" line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Actual expenses in the table on the next page do not reflect the effect of the
annual $10.00 account maintenance fee that is assessed on accounts with balances
of less than $10,000, at a rate of $2.50 per quarter. To include the effect of
this fee on the expenses that you paid, add $5.00 ($2.50 for two quarters) to
your calculated estimated expenses. If you are currently assessed this fee, your
ending account value reflects the quarterly deduction from your account.
================================================================================
EXPENSE EXAMPLE | 59
<PAGE>
================================================================================
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 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 account
maintenance fees, 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 JULY 1, 2009 -
JULY 1, 2009 DECEMBER 31, 2009 DECEMBER 31, 2009
--------------------------------------------------------
MEMBER SHARES
Actual $1,000.00 $1,224.70 $1.40
Hypothetical
(5% return before expenses) 1,000.00 1,023.95 1.28
REWARD SHARES
Actual 1,000.00 1,225.60 0.50
Hypothetical
(5% return before expenses) 1,000.00 1,024.75 0.46
* Expenses are equal to the Fund's annualized expense ratio of 0.25% for Member
Shares and 0.09% for Reward Shares, which are net of any reimbursements and
expenses paid indirectly, multiplied by the average account value over the
period, multiplied by 184 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 22.47% for Member Shares and 22.56% for Reward Shares for the six-month
period of July 1, 2009, through December 31, 2009.
================================================================================
60 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
TRUSTEES' AND OFFICERS' INFORMATION
TRUSTEES AND OFFICERS OF THE TRUST
--------------------------------------------------------------------------------
The Board of Trustees of the Trust consists of six Trustees. These Trustees and
the Trust's Officers supervise the business affairs of the USAA family of funds.
The Board of Trustees is responsible for the general oversight of the funds'
business and for assuring that the funds are managed in the best interests of
each fund's respective shareholders. The Board of Trustees periodically reviews
the funds' investment performance as well as the quality of other services
provided to the funds and their shareholders by each of the fund's service
providers, including USAA Investment Management Company (IMCO) and its
affiliates. The term of office for each Trustee shall be 20 years or until the
Trustee reaches age 70. All members of the Board of Trustees shall be presented
to shareholders for election or re-election, as the case may be, at least once
every five years. Vacancies on the Board of Trustees can be filled by the action
of a majority of the Trustees, provided that at least two-thirds of the Trustees
have been elected by the shareholders.
Set forth below are the Trustees and Officers of the Trust, their respective
offices and principal occupations during the last five years, length of time
served, and information relating to any other directorships held. Each serves on
the Board of Trustees of the USAA family of funds consisting of one registered
investment company offering 46 individual funds as of December 31, 2009. Unless
otherwise indicated, the business address of each is 9800 Fredericksburg Road,
San Antonio, TX 78288.
If you would like more information about the funds' Trustees, you may call (800)
531-USAA (8722) to request a free copy of the funds' statement of additional
information (SAI).
================================================================================
TRUSTEES' AND OFFICERS' INFORMATION | 61
<PAGE>
================================================================================
INTERESTED TRUSTEE(1)
--------------------------------------------------------------------------------
CHRISTOPHER W. CLAUS(2, 4)
Trustee
Born: December 1960
Year of Election or Appointment: 2001
Chair of the Board of Directors, IMCO (11/04-present); President, IMCO
(2/01-10/09); Chief Investment Officer, IMCO (2/07-2/08); Chief Executive
Officer, IMCO (2/01-2/07); Chair of the Board of Directors, USAA Financial
Advisors, Inc. (FAI) (1/07-present); President, FAI (12/07-10/09); President,
Financial Advice and Solutions Group (FASG) USAA (9/09-present); President,
Financial Services Group, USAA (1/07-9/09). Mr. Claus serves as Chair of the
Board of Directors of USAA Investment Corporation, USAA Shareholder Account
Services (SAS), USAA Financial Planning Services Insurance Agency, Inc. (FPS),
and FAI. He also is Vice Chair for USAA Life Insurance Company (USAA Life).
NON-INTERESTED (INDEPENDENT) TRUSTEES
--------------------------------------------------------------------------------
BARBARA B. DREEBEN(3, 4, 5, 6)
Trustee
Born: June 1945
Year of Election or Appointment: 1994
President, Postal Addvantage (7/92-present), a postal mail list management
service. Mrs. Dreeben holds no other directorships of any publicly held
corporations or other investment companies outside the USAA family of funds.
================================================================================
62 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
ROBERT L. MASON, PH.D.(3, 4, 5, 6)
Trustee
Born: June 1946
Year of Election or Appointment: 1997
Institute Analyst, Southwest Research Institute (3/02-present), which focuses in
the fields of technological research. Dr. Mason holds no other directorships of
any publicly held corporations or other investment companies outside the USAA
family of funds.
BARBARA B. OSTDIEK, PH.D.(3, 4, 5, 6, 7)
Trustee
Born: March 1964
Year of Election or Appointment: 2007
Academic Director of the El Paso Corporation Finance Center at Jesse H. Jones
Graduate School of Management at Rice University (7/02-present); Associate
Professor of Finance at Jesse H. Jones Graduate School of Management at Rice
University (7/01-present). Dr. Ostdiek holds no other directorships of any
publicly held corporations or other investment companies outside the USAA family
of funds.
MICHAEL F. REIMHERR(3, 4, 5, 6)
Trustee
Born: August 1945
Year of Election or Appointment: 2000
President of Reimherr Business Consulting (5/95-present), an organization that
performs business valuations of large companies to include the development of
annual business plans, budgets, and internal financial reporting. Mr. Reimherr
holds no other directorships of any publicly held corporations or other
investment companies outside the USAA family of funds.
================================================================================
TRUSTEES' AND OFFICERS' INFORMATION | 63
<PAGE>
================================================================================
RICHARD A. ZUCKER(2, 3, 4, 5, 6)
Trustee and Chair of the Board of Trustees
Born: July 1943
Year of Election or Appointment: 1992(+)
Vice President, Beldon Roofing Company (7/85-present). Mr. Zucker holds no other
directorships of any publicly held corporations or other investment companies
outside the USAA family of funds.
(1) Indicates the Trustee is an employee of IMCO or affiliated companies and
is considered an "interested person" under the Investment Company Act of
1940.
(2) Member of Executive Committee
(3) Member of Audit Committee
(4) Member of Pricing and Investment Committee
(5) Member of Corporate Governance Committee
(6) The address for all non-interested trustees is that of the USAA Funds,
P.O. Box 659430, San Antonio, TX 78265-9430.
(7) Dr. Ostdiek was appointed the Audit Committee Financial Expert for the
Funds' Board in November 2008.
(+) Mr. Zucker was elected as Chair of the Board in 2005.
================================================================================
64 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
INTERESTED OFFICERS(1)
--------------------------------------------------------------------------------
DANIEL S. McNAMARA
Vice President
Born: June 1966
Year of Appointment: 2009
President and Director, IMCO, FAI, FPS, and SAS (10/09-present); President, Banc
of America Investment Advisors (9/07-9/09); Managing Director, Planning and
Financial Products Group, Bank of America (9/01-9/09).
CLIFFORD A. GLADSON
Vice President
Born: November 1950
Year of Appointment: 2002
Senior Vice President, Fixed Income Investments, IMCO (9/02-present). Mr.Gladson
also serves as a Director for SAS.
JOHN P. TOOHEY
Vice President
Born: March 1968
Year of Appointment: 2009
Vice President, Equity Investments, IMCO (2/09-present); Managing Director, AIG
Investments (12/00-1/09).
MARK S. HOWARD
Secretary
Born: October 1963
Year of Appointment: 2002
Senior Vice President and Deputy General Counsel, Business & Regulatory
Services, USAA (10/08-present); Senior Vice President, USAA Life/IMCO/ FPS
General Counsel, USAA (10/03-10/08). Mr. Howard also holds the Officer positions
of Senior Vice President, Secretary, and Counsel for USAA Life, FAI, and FPS,
and is an Assistant Secretary of USAA, IMCO, and SAS.
================================================================================
TRUSTEES' AND OFFICERS' INFORMATION | 65
<PAGE>
================================================================================
ROBERTO GALINDO, JR.
Treasurer
Born: November 1960
Year of Appointment: 2000
Assistant Vice President, Portfolio Accounting/Financial Administration, USAA
(12/02-present); Assistant Treasurer, USAA family of funds (7/00-2/08).
CHRISTOPHER P. LAIA
Assistant Secretary
Born: January 1960
Year of Appointment: 2008
Vice President, FASG General Counsel, USAA (10/08-present); Vice President,
Securities Counsel, USAA (6/07-10/08); General Counsel, Secretary, and Partner,
Brown Advisory (6/02-6/07). Mr. Laia also holds the Officer positions of Vice
President and Secretary, IMCO and SAS, and Vice President and Assistant
Secretary, FAI and FPS.
WILLIAM A. SMITH
Assistant Treasurer
Born: June 1948
Year of Appointment: 2009
Vice President, Senior Financial Officer, and Treasurer, FASG, FAI, and SAS
(2/09-present); Senior Financial Officer, USAA Life (2/07-present); consultant,
Robert Half/Accounttemps (8/06-1/07); Chief Financial Officer, California State
Automobile Association (8/04-12/05).
JEFFREY D. HILL
Chief Compliance Officer
Born: December 1967
Year of Appointment: 2004
Assistant Vice President, Mutual Funds Compliance, USAA (9/04-present).
(1) Indicates those Officers who are employees of IMCO or affiliated
companies and are considered "interested persons" under the Investment
Company Act of 1940.
================================================================================
66 | USAA S&P 500 INDEX FUND
<PAGE>
================================================================================
TRUSTEES Christopher W. Claus
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Richard A. Zucker
--------------------------------------------------------------------------------
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, AND San Antonio, Texas 78265-9825
DISTRIBUTOR
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "Products & Services"
SELF-SERVICE 24/7 click "Investments," then
AT USAA.COM "Mutual Funds"
OR CALL Under "My Accounts" go to
(800) 531-USAA "Investments." View account balances,
(8722) or click "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's Web site at HTTP://WWW.SEC.GOV. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available (i) at USAA.COM; and (ii) on the
SEC's Web site at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's Web site at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
<PAGE>
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
At USAA.COM click: MY DOCUMENTS
Set preferences to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
============================================================================
29237-0210 (C)2010, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
On September 24, 2009, the Board of Trustees of USAA Mutual Funds Trust approved
a Code of Ethics (Sarbanes Code) applicable solely to its senior financial
officers, including its principal executive officer (President), as defined
under the Sarbanes-Oxley Act of 2002 and implementing regulations of the
Securities and Exchange Commission. A copy of the Sarbanes Code is attached as
an Exhibit to this Form N-CSR.
No waivers (explicit or implicit) have been granted from a provision of the
Sarbanes Code.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
On November 18, 2008, the Board of Trustees of USAA Mutual Funds Trust
designated Dr. Barbara B. Ostdiek, Ph.D. as the Board's audit committee
financial expert. Dr. Ostdiek has served as an Associate Professor of Management
at Rice University since 2001. Dr. Ostdiek also has served as an Academic
Director at El Paso Corporation Finance Center since 2002. Dr. Ostdiek is an
independent trustee who serves as a member of the Audit Committee, Pricing and
Investment Committee and the Corporate Governance Committee of the Board of
Trustees of USAA Mutual Funds Trust.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The Registrant, USAA Mutual Funds Trust, consists of 46 funds in
all. Only 10 funds of the Registrant have a fiscal year-end of December 31 and are
included within this report (the Funds). The aggregate fees accrued or billed by
the Registrant's independent auditor, Ernst & Young LLP, for professional
services rendered for the audit of the Registrant's annual financial statements
and services provided in connection with statutory and regulatory filings by the
Registrant for the Funds for fiscal years ended December 31, 2009 and 2008 were
$262,287 and $244,927, respectively.
(b) AUDIT RELATED FEE. The aggregate fees accrued or paid to Ernst & Young, LLP
by USAA Shareholder Account Services (SAS) for professional services rendered
for audit related services related to the annual study of internal controls of
the transfer agent for fiscal years ended December 31, 2009 and 2008 were $61,513
and $63,500, respectively. All services were preapproved by the Audit Committee.
(c) TAX FEES. No such fees were billed by Ernst & Young LLP for the review of
federal, state and city income and tax returns and excise tax calculations for
fiscal years ended December 31, 2009 and 2008.
(d) ALL OTHER FEES. No such fees were billed by Ernst & Young LLP for fiscal
years ended December 31, 2009 and 2008.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICY. All audit and non-audit services to
be performed for the Registrant by Ernst & Young LLP must be pre-approved by the
Audit Committee. The Audit Committee Charter also permits the Chair of the Audit
Committee to pre-approve any permissible non-audit service that must be
commenced prior to a scheduled meeting of the Audit Committee. All non-audit
services were pre-approved by the Audit Committee or its Chair, consistent with
the Audit Committee's preapproval procedures.
(2) Not applicable.
(f) Not applicable.
(g) The aggregate non-audit fees billed by Ernst & Young LLP for services
rendered to the Registrant and the Registrant's investment adviser, IMCO, and
the Funds' transfer agent, SAS, for December 31, 2009 and 2008 were $104,896 and
$108,000, respectively.
(h) Ernst & Young LLP provided non-audit services to IMCO in 2009 and 2008 that
were not required to be pre-approved by the Registrant's Audit Committee because
the services were not directly related to the operations of the Registrant's
Funds. The Board of Trustees will consider Ernst & Young LLP's independence and
will consider whether the provision of these non-audit services to IMCO is
compatible with maintaining Ernst & Young LLP's independence.
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 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
considering by the Trust's Board in approving the Trust's advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). Code of Ethics pursuant to Item 2 of Form N-CSR is filed hereto exactly
as set forth below:
CODE OF ETHICS
FOR PRINCIPAL EXECUTIVE OFFICER
AND SENIOR FINANCIAL OFFICERS
USAA MUTUAL FUNDS TRUST
I. PURPOSE OF THE CODE OF ETHICS
USAA Mutual Funds Trust (the Trust or the Funds) has adopted this code
of ethics (the Code) to comply with Section 406 of the Sarbanes-Oxley Act of
2002 (the Act) and implementing regulations of the Securities and Exchange
Commission (SEC). The Code applies to the Trust's Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer (each a Covered
Officer), as detailed in Appendix A.
The purpose of the Code is to promote:
- honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between the Covered
Officers' personal and professional relationships;
- full, fair, accurate, timely and understandable disclosure in
reports and documents that the Trust files with, or submits
to, the SEC and in other public communications made by the
Trust;
- compliance with applicable laws and governmental rules and
regulations;
- prompt internal reporting of violations of the Code to the
Chief Legal Officer of the Trust, the President of the Trust
(if the violation concerns the Treasurer), the CEO of USAA,
and if deemed material to the Funds' financial condition or
reputation, the Chair of the Trust's Board of Trustees; and
- accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business
ethics and should be sensitive to actual and apparent conflicts of interest.
II. CONFLICTS OF INTEREST
A. DEFINITION OF A CONFLICT OF INTEREST.
A conflict of interest exists when a Covered Officer's private interest
influences, or reasonably appears to influence, the Covered Officer's judgment
or ability to act in the best interests of the Funds and their shareholders. For
example, a conflict of interest could arise if a Covered Officer, or an
immediate family member, receives personal benefits as a result of his or her
position with the Funds.
Certain conflicts of interest arise out of relationships between
Covered Officers and the Funds and are already subject to conflict of interest
provisions in the Investment Company Act of 1940 (the 1940 Act) and the
Investment Advisers Act of 1940 (the Advisers Act). For example, Covered
Officers may not individually engage in certain transactions with the Funds
because of their status as "affiliated persons" of the Funds. The USAA Funds'
and USAA Investment Management Company's (IMCO) compliance programs and
procedures are designed to prevent, or identify and correct, violations of these
provisions. This Code does not, and is not intended to, repeat or replace these
programs and procedures, and such conflicts fall outside of the parameters of
this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts could arise from, or as a result of, the contractual
relationships between the Funds and IMCO of which the Covered Officers are also
officers or employees. As a result, this Code recognizes that the Covered
Officers will, in the normal course of their duties (whether formally for the
Funds or for IMCO, or for both), be involved in establishing policies and
implementing decisions that will have different effects on IMCO and the Funds.
The participation of Covered Officers in such activities is inherent in the
contractual relationship between the Funds and IMCO and is consistent with the
performance by the Covered Officers of their duties as officers of the Funds.
Thus, if performed in compliance with the provisions of the 1940 Act and the
Advisers Act, such activities will be deemed to have been handled ethically.
B. GENERAL RULE. Covered Officers Should Avoid Actual and Apparent
Conflicts of Interest.
Conflicts of interest, other than the conflicts described in the two
preceding paragraphs, are covered by the Code. The following list provides
examples of conflicts of interest under the Code, but Covered Officers should
keep in mind that these examples are not exhaustive. The overarching principle
is that the personal interest of a Covered Officer should not be placed
improperly before the interest of the Funds and their shareholders.
Each Covered Officer must not engage in conduct that constitutes an
actual conflict of interest between the Covered Officer's personal interest and
the interests of the Funds and their shareholders. Examples of actual conflicts
of interest are listed below but are not exclusive. Each Covered Officer must
not:
- use his personal influence or personal relationships improperly to
influence investment decisions or financial reporting by the Funds
whereby the Covered Officer would benefit personally to the
detriment of the Funds and their shareholders;
- cause the Funds to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit of the Funds and their shareholders.
- accept gifts, gratuities, entertainment or any other benefit from
any person or entity that does business or is seeking to do
business with the Funds DURING CONTRACT NEGOTIATIONS.
- accept gifts, gratuities, entertainment or any other benefit with
a market value over $100 per person, per year, from or on behalf
of any person or entity that does, or seeks to do, business with
or on behalf of the Funds.
- EXCEPTION. Business-related entertainment such as meals,
and tickets to sporting or theatrical events, which are
infrequent and not lavish are excepted from this
prohibition. Such entertainment must be appropriate as to
time and place, reasonable and customary in nature, modest
in cost and value, incidental to the business, and not so
frequent as to raise any question of impropriety
(Customary Business Entertainment).
Certain situations that could present the appearance of a conflict of
interest should be discussed with, and approved by, or reported to, an
appropriate person. Examples of these include:
- service as a director on the board or an officer of any public or
private company, other than a USAA company or the Trust, must be
approved by the USAA Funds' and Investment Code of Ethics
Committee and reported to the Trust.
- the receipt of any non-nominal (I.E., valued over $25) gifts from
any person or entity with which a Trust has current or prospective
business dealings must be reported to the Chief Legal Officer. For
purposes of this Code, the individual holding the title of
Secretary of the Trust shall be considered the Chief Legal Officer
of the Trust.
- the receipt of any business-related entertainment from any person
or entity with which the Funds have current or prospective
business dealings must be approved in advance by the Chief Legal
Officer unless such entertainment qualifies as Customary Business
Entertainment.
- any ownership interest in, or any consulting or employment
relationship with, any of the Trust's service providers, other
than IMCO or any other USAA company, must be approved by the CEO
of USAA and reported to the Trust's Board.
- any material direct or indirect financial interest in commissions,
transaction charges or spreads paid by the Funds for effecting
portfolio transactions or for selling or redeeming shares other
than an interest arising from the Covered Officer's employment,
such as compensation or equity ownership should be approved by the
CEO of USAA and reported to the Trust's Board.
III. DISCLOSURE AND COMPLIANCE REQUIREMENTS
- Each Covered Officer should familiarize himself with the
disclosure requirements applicable to the Funds, and the
procedures and policies implemented to promote full, fair,
accurate, timely and understandable disclosure by the Trust.
- Each Covered Officer should not knowingly misrepresent, or
cause others to misrepresent, facts about the Funds to others,
whether within or outside the Funds, including to the Funds'
Trustees and auditors, and to government regulators and
self-regulatory organizations.
- Each Covered Officer should, to the extent appropriate within
his area of responsibility, consult with other officers and
employees of the Funds and IMCO with the goal of promoting
full, fair, accurate, timely and understandable disclosure in
the reports and documents filed by the Trust with, or
submitted to, the SEC, and in other public communications made
by the Funds.
- Each Covered Officer is responsible for promoting compliance
with the standards and restrictions imposed by applicable
laws, rules and regulations, and promoting compliance with the
USAA Funds' and IMCO's operating policies and procedures.
- A Covered Officer should not retaliate against any person
who reports a potential violation of this Code in good faith.
- A Covered Officer should notify the Chief Legal Officer
promptly if he knows of any violation of the Code. Failure
to do so itself is a violation of this Code.
IV. REPORTING AND ACCOUNTABILITY
A. INTERPRETATION OF THE CODE. The Chief Legal Officer of the Trust
is responsible for applying this Code to specific situations in
which questions are presented under it and has the authority to
interpret the Code in any particular situation. The Chief Legal
Officer should consult, if appropriate, the USAA Funds' outside
counsel or counsel for the Independent Trustees. However, any
approvals or waivers sought by a Covered Officer will be
reported initially to the CEO of USAA and will be considered by
the Trust's Board of Trustees.
B. REQUIRED REPORTS
- EACH COVERED OFFICER MUST:
- Upon adoption of the Code, affirm in writing to the
Board that he has received, read and understands the
Code.
- Annually thereafter affirm to the Chief Legal Officer
that he has complied with the requirements of the Code.
- THE CHIEF LEGAL OFFICER MUST:
- report to the Board about any matter or situation
submitted by a Covered Officer for interpretation under
the Code, and the advice given by the Chief Legal
Officer;
- report annually to the Board and the Corporate
Governance Committee describing any issues that arose
under the Code, or informing the Board and Corporate
Governance Committee that no reportable issues occurred
during the year.
C. INVESTIGATION PROCEDURES
The Funds will follow these procedures in investigating and enforcing
this Code:
- INITIAL COMPLAINT. All complaints or other inquiries
concerning potential violations of the Code must be reported
to the Chief Legal Officer. The Chief Legal Officer shall be
responsible for documenting any complaint. The Chief Legal
Officer also will report immediately to the President of the
Trust (if the complaint involves the Treasurer), the CEO of
USAA and the Chair of the Trust's Audit Committee (if the
complaint involves the President) any material potential
violations that could have a material effect on the Funds'
financial condition or reputation. For all other complaints,
the Chief Legal Officer will report quarterly to the Board.
- INVESTIGATIONS. The Chief Legal Officer will take all
appropriate action to investigate any potential violation
unless the CEO of USAA directs another person to undertake
such investigation. The Chief Legal Officer may utilize USAA's
Office of Ethics to do a unified investigation under this Code
and USAA's Code of Conduct. The Chief Legal Officer may direct
the Trust's outside counsel or the counsel to the Independent
Trustees (if any) to participate in any investigation under
this Code.
- STATUS REPORTS. The Chief Legal Officer will provide monthly
status reports to the Board about any alleged violation of the
Code that could have a material effect on the Funds' financial
condition or reputation, and quarterly updates regarding all
other alleged violations of the Code.
- VIOLATIONS OF THE CODE. If after investigation, the Chief
Legal Officer, or other investigating person, believes that a
violation of the Code has occurred, he will report immediately
to the CEO of USAA the nature of the violation, and his
recommendation regarding the materiality of the violation. If,
in the opinion of the investigating person, the violation
could materially affect the Funds' financial condition or
reputation, the Chief Legal Officer also will notify the Chair
of the Trust's Audit Committee. The Chief Legal Officer will
inform, and make a recommendation to, the Board, which will
consider what further action is appropriate. Appropriate
action could include: (1) review of, and modifications to, the
Code or other applicable policies or procedures;
(2) notifications to appropriate personnel of IMCO or USAA;
(3) dismissal of the Covered Officer; and/or (4) other
disciplinary actions including reprimands or fines.
- The Board of Trustees understands that Covered
Officers also are subject to USAA's Code of Business
Conduct. If a violation of this Code also violates
USAA's Code of Business Conduct, these procedures do
not limit or restrict USAA's ability to discipline
such Covered Officer under USAA's Code of Business
Conduct. In that event, the Chairman of the Board of
Trustees will report to the Board the action taken by
USAA with respect to a Covered Officer.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Funds for
purposes of Section 406 of the Act and the implementing regulations adopted by
the SEC applicable to registered investment companies. If other policies and
procedures of the Trust, IMCO, or other service providers govern or purport to
govern the behavior or activities of Covered Officers, they are superseded by
this Code to the extent that they overlap, conflict with, or are more lenient
than the provisions of this Code. The Investment Code of Ethics (designated to
address 1940 Act and Advisers Act requirements) and IMCO's more detailed
compliance policies and procedures (including its Insider Trading Policy) are
separate requirements applying to Covered Officers and other IMCO employees, and
are not part of this Code. Also, USAA's Code of Conduct imposes separate
requirements on Covered Officers and all employees of USAA, and also is not part
of this Code.
VI. AMENDMENTS
Any amendment to this Code, other than amendments to Appendix A, must
be approved or ratified by majority vote of the Board of Trustees.
VII. CONFIDENTIALITY AND DOCUMENT RETENTION
The Chief Legal Officer shall retain material investigation documents
and reports required to be prepared under the Code for six years from the date
of the resolution of any such complaint. All reports and records prepared or
maintained pursuant to this Code will be considered confidential and shall be
maintained and protected accordingly. Except as otherwise required by law or
this Code, such matters shall not be disclosed to anyone other than the Trust's
Board of Trustees and counsel for the Independent Trustees (if any), the Trust
and its counsel, IMCO, and other personnel of USAA as determined by the Trust's
Chief Legal Officer or the Chair of the Trust's Board of Trustees.
Approved and adopted by IMCO's Code of Ethics Committee: June 12, 2003.
Approved and adopted by the Boards of Directors/Trustees of USAA Mutual Fund,
Inc., USAA Tax-Exempt Fund, Inc., USAA Investment Trust & USAA State Tax-Free
Trust: June 25, 2003.
Approved and adopted by the Board of Trustees of USAA Life Investment Trust:
August 20, 2003.
Approved and adopted as amended by IMCO's Code of Ethics Committee: August 15,
2005.
Approved and adopted as amended by the Boards of Directors/Trustees of USAA
Mutual Fund, Inc., USAA Tax-Exempt Fund, Inc., USAA Investment Trust & USAA
State Tax-Free Trust: September 14, 2005.
Approved and adopted as amended by the Board of Trustees of USAA Life Investment
Trust: December 8, 2005.
Approved and adopted as amended by IMCO's Code of Ethics Committee: August 16,
2006.
Approved and adopted by the Board of Trustees of USAA Mutual Funds Trust:
September 13, 2006.
Approved and adopted by IMCO's Code of Ethics Committee: August 28, 2007.
Approved and adopted by the Investment Code of Ethics Committee: August 29,
2008.
Approved and adopted as amended by the Board of Trustees of USAA Mutual Funds
Trust: September 19, 2008.
Approved and adopted by the Investment Code of Ethics Committee: August 17,
2009.
Approved and adopted by the Board of Trustees of USAA Mutual Funds Trust:
September 24, 2009.
<PAGE>
APPENDIX A
COVERED OFFICERS
PRESIDENT
TREASURER
<PAGE>
(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 December 31, 2009
By:* /s/ CHRISTOPHER P. LAIA
--------------------------------------------------------------
Signature and Title: Christopher P. Laia, Assistant Secretary
Date: 02/26/2010
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /s/ CHRISTOPHER W. CLAUS
-----------------------------------------------------
Signature and Title: Christopher W. Claus, President
Date: 02/26/2010
------------------------------
By:* /s/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 02/26/2010
------------------------------
*Print the name and title of each signing officer under his or her signature.
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