UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: CHRISTOPHER P. LAIA
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: JULY 31,
Date of reporting period: JANUARY 31, 2010
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2010
[LOGO OF USAA]
USAA (R)
[GRAPHIC OF USAA GROWTH & INCOME FUND]
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SEMIANNUAL REPORT
USAA GROWTH & INCOME FUND
JANUARY 31, 2010
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FUND OBJECTIVE
CAPITAL GROWTH AND, SECONDARILY, CURRENT INCOME.
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TYPES OF INVESTMENTS
Invests primarily in equity securities that show the best potential for total
return through a combination of capital appreciation and income.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Investment Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
INVESTMENT OVERVIEW 10
FINANCIAL INFORMATION
Portfolio of Investments 13
Notes to Portfolio of Investments 26
Financial Statements 28
Notes to Financial Statements 31
EXPENSE EXAMPLE 45
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
"I EXPECT THIS RECOVERY TO PROCEED AT
A SLOWER PACE THAN THOSE IN RECENT [PHOTO OF DANIEL S. McNAMARA]
MEMORY."
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FEBRUARY 2010
The U.S. economy appears to be on the mend. As the reporting period ended, the
federal government announced that the U.S. gross domestic product grew 5.9%
during the fourth quarter of 2009. The strong showing followed a 2.2% expansion
in the third quarter. While these numbers are encouraging, it is still too early
to declare that a long-term sustainable recovery has begun. Much of the growth
has been the result of inventory reduction, driven largely by the government's
"cash for clunkers" auto rebate program and its first-time homebuyer tax credit.
Consumers took advantage of the incentives to make purchases they might have put
off for a few years, but when the programs ended so did most of the spending.
There are also other obstacles to a sustained recovery. Although housing prices
have stabilized, the residential real estate market is fragile. Unemployment
remains high. Companies are making do with less, delaying hiring, and continuing
to lay off workers. While this may increase productivity and the financial
bottom line of individual businesses, it also acts as a drag on consumer
spending and on the speed at which the economy will return to more historically
normal levels of growth. As a result, I expect this recovery to proceed at a
slower pace than those in recent memory.
Nevertheless, I am cautiously optimistic. Improved economic conditions may give
the Federal Reserve Board (the Fed) the flexibility to pull back at least some
of the stimulus money it pumped into the financial system. Caution is
essential. If the Fed governors unwind the stimulus too soon,
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2 | USAA GROWTH & INCOME FUND
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they could stall the recovery. An inordinate delay could unleash inflation. At
the very least, the Fed is likely to keep short-term interest rates low until
the recovery is well underway. As I write to you, inflation does not appear to
be an immediate threat because employment remains weak and excess capacity
remains high. As a result, most businesses lack pricing power. However, I am
concerned about the projections for continued deficit spending, which could feed
inflation as the decade progresses.
So, how do we invest in this challenging environment? Money market yields are at
record lows. Bonds have experienced a remarkable rally, but their prices have
moved close to historic norms. Equities, which rebounded from their March 2009
lows, gave back some of their gains toward the end of the reporting period.
Under the circumstances, I plan to keep my guard up and stay focused on my
investment plan. During the market decline, many investors were not
appropriately positioned relative to their time horizon or risk tolerance. With
this in mind, I recently took some time to reflect on my own goals, reconsider
my risk tolerance, make a few changes to my investment strategy, and reposition
my portfolio. I encourage you to do the same. If you would like assistance,
please call one of our trained service representatives. They are available to
help you -- free of charge.
At USAA Investment Management Company, we are proud to provide you with what we
consider an exceptional value -- outstanding service, world-class investment
talent, and a broad array of 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. o As interest rates rise, bond prices fall.
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PRESIDENT'S MESSAGE | 3
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MANAGERS' COMMENTARY ON THE FUND
Loomis, Sayles & Company, L.P. Wellington Management Company, LLP
MARK B. BARIBEAU, CFA MATTHEW E. MEGARGEL, CFA
PAMELA N. CZEKANSKI, CFA FRANCIS BOGGAN, CFA
RICHARD SKAGGS, CFA JEFF KRIPKE
Barrow, Hanley, Mewhinney & Strauss, LLC UBS Global Asset Management
(Americas) Inc.*
MARK GIAMBRONE, CPA
JAMES P. BARROW JOHN C. LEONARD, CFA
RAY NIXON, Jr. THOMAS M. COLE, CFA
ROBERT J. CHAMBERS, CFA THOMAS J. DIGENAN, CFA, CPA
TIMOTHY J. CULLER, CFA
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o HOW DID THE USAA GROWTH & INCOME FUND (THE FUND) PERFORM?
For the six-month period ended January 31, 2010, the Fund had a total
return of 10.83%. This compares to returns of 10.16% for the Russell 3000
Index (the Index) and 10.20% for the Lipper Multi-Cap Core Funds Index.
The Fund has four subadvisers. Wellington Management Company, LLP
(Wellington Management) manages in a core style against the Index. UBS
Global Asset Management (Americas) Inc. (UBS) uses a core U.S. large-cap
equity strategy, also managing against the Index. Barrow, Hanley,
Mewhinney & Strauss, LLC (BHMS) is a value-oriented manager, managing
against the Russell 3000 Value Index. Loomis,
Refer to page 11 for benchmark definitions.
Past performance is no guarantee of future results.
*Effective October 14, 2009, Scott Hazen no longer is a co-manager of the
Fund.
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4 | USAA GROWTH & INCOME FUND
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Sayles & Company L.P. (Loomis Sayles) is a growth-oriented manager,
managing against the Russell 3000 Growth Index.
o HOW DID THE WELLINGTON MANAGEMENT PORTION PERFORM?
We outperformed the Index, helped by strong security selection in the
energy, financials, and information technology sectors. Selection in
materials and consumer discretionary was somewhat weaker. Overall, sector
allocation decisions had little impact on performance.
On an individual stock level, the Fund's top positive contributors to
Index-relative performance included Hartford Financial Services, Inc.,
credit enhancement product provider Assured Guaranty Ltd., and information
technology services provider Perot Systems. Among other names that
contributed to performance was Precision Castparts Corp., a provider of
industrial components to the aerospace and industrial gas turbine
industries. Detractors from Index-relative performance included
Switzerland-based investment bank and money manager UBS AG, global
engineering and construction company Fluor, and Martin Marietta Materials,
Inc., a seller of aggregates primarily for the construction industry.
QUALCOMM, Inc. was also among other holdings that detracted from
performance. We sold our position in Fluor during the period and maintained
positions in QUALCOMM, UBS, and Martin Marietta.
o HOW IS WELLINGTON MANAGEMENT POSITIONED?
As of January 31, 2010, we believe the market is already discounting an
improving economy, inventory restocking, and the successful avoidance of a
banking sector collapse. Near-term U.S. economic data is likely to remain
positive and may surprise on the upside, though global economic uncertainty
has increased in recent weeks. We ended the period with overweights in
information technology, health care
You will find a complete list of securities that the Fund owns on pages
13-25.
Perot Systems was sold out of the Fund prior to January 31, 2010.
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MANAGERS' COMMENTARY ON THE FUND | 5
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and materials. We added most to the health care sector over the period,
which looks attractive to us based on low valuations across big pharma and
HMOs. We expect that increasing visibility in the wake of regulatory
reforms should be a positive catalyst for the sector. We have a less
positive view on utilities, which we expect to face increasing regulatory
pressure as states look to shore up budgets, and industrial demand pressure
weakens pricing. Fundamentals within consumer staples are solid, but we are
not overly excited about opportunities within that sector on a valuation
basis. Telecom is also an underweight as we see mounting technological risk
and earnings growth remains low.
o HOW DID THE UBS PORTION PERFORM?
We outperformed the Index, with stock selection being the most important
driver. We were overweight in the strong-performing healthcare sector, led
by Covidien plc, a medical instruments company that is increasing margins.
An overweight to media also helped, led by Comcast Corp. "A", Viacom Inc.
"B", and Interpublic Group of Companies, Inc. Other individual holdings that
contributed to performance were VMware Inc. "A", the virtualization software
company that helps companies become more efficient by reducing demand on
server capacity. Finally, our underweight to ExxonMobil Corp. was a big
contributor to index-relative performance; we felt the company had become
overpriced in the flight to safety early last year.
The biggest detractor from Index-relative performance was Exelon, a utility
company that suffered from falling power prices in a weak economy. We
continue to hold the stock as they have the largest nuclear capacity in the
United States, which should give them an even better cost structure in the
event some type of carbon tax is implemented. We sold out of SprintNextel,
another detractor; our original thesis was that the company would benefit
from being a low-cost provider, but their customer churn rates were high
and their subscriber base diminished.
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6 | USAA GROWTH & INCOME FUND
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o HOW IS THE UBS PORTION POSITIONED?
Our biggest overweight is health care, where we've been adding to names
that meet our growth and value criteria. We've reduced our position in some
banks because of the political environment, especially those who have heavy
reliance on proprietary trading that's under threat from Washington. We
continue to find Wells Fargo & Co. and JPMorgan Chase & Co. attractive.
We are neutral between consumer staples and consumer discretionary, after
having leaned towards one or the other since the financial crisis. Overall,
we don't see divergent opportunities across sectors, but within them.
Individual stock selection is likely to be the best way to outperform a
market that, in our view, still has room to move higher. We'll look to take
advantage of volatility given our view that the economy may move into a
several-year era of slow growth later in 2010.
o HOW DID THE VALUE-ORIENTED BHMS PORTION PERFORM?
We outperformed the Russell 3000 Value Index. Even though we were
underweight financials, we had outstanding stock selection within the
sector, so on an attribution basis it was our best sector relative to the
Index. Our next best sector was industrials, where we've been adding to
holdings based on strong earnings. We were hurt in the consumer
discretionary sector, largely due to poor stock selection, as we didn't own
many lower-quality names that led within the sector. We also struggled in
the information technology sector, but we are comfortable with our holdings
in the sector, which in general are trading at attractive multiples and, in
some cases, pay very nice dividends.
The unmanaged Russell 3000(R) Value Index measures the performance of those
Russell 3000 companies with lower price-to-book ratios and lower forecasted
growth values.
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MANAGERS' COMMENTARY ON THE FUND | 7
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o WHAT'S BHMS' OUTLOOK?
In the wake of an historic 10-month stock market rally, we're looking for
more modest returns this year. We think expectations, especially on the
revenue side, have gotten ahead of the fundamentals. Corporate managements
did a great job of cost cutting to keep bottom line earnings intact, but
now we need revenues to keep the earnings momentum going. That will be
tough given the lack of consumer and business confidence. We do see the
economy continuing to improve, especially in the first half of the year,
but it will remain a slow process. We think dividends will be an important
part of the total return from stocks this year. Further, we think that
active management will be crucial as we seek to find companies that can
deliver revenue growth in a slow recovery.
o HOW DID THE GROWTH-ORIENTED LOOMIS SAYLES PORTION PERFORM?
We just slightly lagged the Russell 3000 Growth Index. Our biggest
contributors to Index-relative performance included Priceline.com, Inc.,
Apple. Inc., Amazon.com, Inc., Google, Inc. "A", Marvell Technology Group
Ltd. (a semiconductor company), Cognizant Technology Solutions Corp. "A",
Visa, Inc. "A", and Express Scripts, Inc. Detractors included QUALCOMM,
Inc., and Bucyrus International, Inc., a mining equipment company. On a
sector level we had good contributions from our holdings in consumer,
financials, and materials.
o WHAT'S LOOMIS SAYLES' OUTLOOK?
We have been adding to health care names in this portfolio, bringing us
close to the Index weight. We see the late January/early February 2009
selloff as a probably healthy correction within an
The unmanaged Russell 3000(R) Growth Index measures the performance of those
Russell 3000 companies with higher price-to-book ratios and higher
forecasted growth values.
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8 | USAA GROWTH & INCOME FUND
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ongoing bull market. Revenue growth will continue to move to the fore of
investor thinking, and it's important to note that 30% of the S&P 500
companies reporting so far have delivered their highest fourth quarter
revenues ever. We think the economy is going to continue to recover, with
jobs lagging but improving as the year goes on, and we believe 2010 gross
domestic product growth to be in the 3% to 4% range. While finding good
stocks across the capitalization spectrum, we are most bullish on U.S.
large-cap growth stocks, with a focus on large-cap technology and consumer
discretionary names with a technology tie-in, such as Priceline.com and
Amazon.com.
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MANAGERS' COMMENTARY ON THE FUND | 9
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INVESTMENT OVERVIEW
USAA GROWTH & INCOME FUND (Symbol: USGRX)
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1/31/10 7/31/09
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Net Assets $1,007.0 Million $927.1 Million
Net Asset Value Per Share $12.54 $11.35
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AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/10
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7/31/09 to 1/31/10* 1 Year 5 Years 10 Years
10.83% 37.32% -0.50% 0.77%
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EXPENSE RATIO**
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1.12%
*Total returns for periods of less than one year are not annualized. This six-
month return is cumulative.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
**THE EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING EXPENSES BEFORE
REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND INCLUDING ANY ACQUIRED FUND FEES
AND EXPENSES, AS REPORTED IN THE FUND'S PROSPECTUS DATED DECEMBER 1, 2009, AND
IS CALCULATED AS A PERCENTAGE OF AVERAGE NET ASSETS. THIS EXPENSE RATIO MAY
DIFFER FROM THE EXPENSE RATIO DISCLOSED IN THE FINANCIAL HIGHLIGHTS.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
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10 | USAA GROWTH & INCOME FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA GROWTH & LIPPER MULTI-CAP
INCOME FUND CORE FUNDS INDEX RUSSELL 3000 INDEX
1/31/2000 $10,000.00 $10,000.00 $10,000.00
2/29/2000 9,526.04 10,385.27 10,092.69
3/31/2000 10,557.45 11,050.91 10,883.34
4/30/2000 10,547.01 10,640.66 10,499.80
5/31/2000 10,578.32 10,270.86 10,204.90
6/30/2000 10,551.59 10,703.97 10,507.04
7/31/2000 10,347.67 10,536.72 10,321.33
8/31/2000 10,849.62 11,280.06 11,086.78
9/30/2000 10,489.07 10,761.90 10,584.80
10/31/2000 10,723.70 10,640.31 10,434.09
11/30/2000 10,361.09 9,734.35 9,472.36
12/31/2000 10,707.05 9,947.39 9,631.54
1/31/2001 10,974.33 10,290.78 9,961.03
2/28/2001 10,477.20 9,364.39 9,050.91
3/31/2001 10,032.63 8,808.95 8,460.92
4/30/2001 10,761.10 9,522.57 9,139.44
5/31/2001 10,793.24 9,602.80 9,212.85
6/30/2001 10,512.25 9,437.56 9,042.97
7/31/2001 10,565.91 9,247.81 8,893.94
8/31/2001 9,927.34 8,723.85 8,368.87
9/30/2001 9,125.81 7,829.58 7,630.53
10/31/2001 9,233.36 8,042.17 7,808.06
11/30/2001 9,932.45 8,673.73 8,409.46
12/31/2001 10,050.96 8,876.97 8,527.99
1/31/2002 9,889.66 8,680.66 8,421.05
2/28/2002 9,778.41 8,523.87 8,248.85
3/31/2002 10,068.32 8,868.85 8,610.52
4/30/2002 9,567.13 8,491.88 8,158.78
5/31/2002 9,489.16 8,422.32 8,064.25
6/30/2002 8,804.39 7,762.49 7,483.75
7/31/2002 8,163.16 7,150.30 6,888.77
8/31/2002 8,191.04 7,195.54 6,921.31
9/30/2002 7,371.15 6,533.81 6,194.09
10/31/2002 7,873.35 6,947.52 6,687.30
11/30/2002 8,436.93 7,370.59 7,091.96
12/31/2002 7,912.85 6,947.08 6,691.01
1/31/2003 7,678.44 6,829.77 6,527.29
2/28/2003 7,546.94 6,711.86 6,419.90
3/31/2003 7,589.07 6,733.57 6,487.41
4/30/2003 8,149.95 7,257.25 7,017.16
5/31/2003 8,647.87 7,748.02 7,440.75
6/30/2003 8,813.22 7,863.70 7,541.16
7/31/2003 9,025.10 8,015.64 7,714.15
8/31/2003 9,219.81 8,262.11 7,885.10
9/30/2003 9,086.40 8,152.21 7,799.50
10/31/2003 9,682.61 8,637.72 8,271.52
11/30/2003 9,825.93 8,772.59 8,385.45
12/31/2003 10,225.09 9,122.35 8,769.00
1/31/2004 10,368.54 9,336.67 8,951.92
2/29/2004 10,529.21 9,481.69 9,072.52
3/31/2004 10,378.90 9,374.06 8,964.83
4/30/2004 10,195.20 9,176.70 8,779.47
5/31/2004 10,321.49 9,286.61 8,907.06
6/30/2004 10,617.73 9,492.18 9,084.09
7/31/2004 10,175.57 9,102.98 8,740.57
8/31/2004 10,123.88 9,096.29 8,776.57
9/30/2004 10,298.52 9,290.80 8,911.48
10/31/2004 10,384.72 9,430.97 9,057.85
11/30/2004 10,907.69 9,904.38 9,478.91
12/31/2004 11,312.44 10,252.63 9,816.66
1/31/2005 11,066.92 10,019.39 9,555.19
2/28/2005 11,269.47 10,221.96 9,765.53
3/31/2005 11,089.16 10,061.24 9,600.36
4/30/2005 10,855.70 9,787.37 9,391.78
5/31/2005 11,255.03 10,188.13 9,747.64
6/30/2005 11,309.01 10,300.31 9,815.74
7/31/2005 11,782.52 10,736.93 10,218.43
8/31/2005 11,770.22 10,688.04 10,121.02
9/30/2005 11,847.82 10,784.05 10,209.56
10/31/2005 11,564.71 10,561.08 10,018.35
11/30/2005 12,063.24 10,967.54 10,408.06
12/31/2005 12,092.29 11,095.55 10,417.41
1/31/2006 12,511.52 11,507.65 10,765.46
2/28/2006 12,426.37 11,461.91 10,784.60
3/31/2006 12,540.92 11,717.36 10,971.02
4/30/2006 12,704.90 11,862.53 11,090.05
5/31/2006 12,094.91 11,451.60 10,734.98
6/30/2006 12,116.73 11,417.86 10,753.98
7/31/2006 11,926.07 11,281.03 10,743.91
8/31/2006 12,037.83 11,548.01 11,006.73
9/30/2006 12,432.95 11,795.98 11,253.12
10/31/2006 12,821.48 12,234.81 11,658.21
11/30/2006 13,183.67 12,524.58 11,911.87
12/31/2006 13,247.42 12,664.64 12,054.52
1/31/2007 13,636.18 12,940.68 12,283.97
2/28/2007 13,401.46 12,770.11 12,082.46
3/31/2007 13,628.85 12,904.72 12,208.22
4/30/2007 14,076.30 13,406.59 12,695.90
5/31/2007 14,758.47 13,908.54 13,158.57
6/30/2007 14,611.77 13,788.10 12,912.13
7/31/2007 14,127.64 13,346.97 12,471.79
8/31/2007 14,252.34 13,433.15 12,650.81
9/30/2007 14,773.14 13,901.31 13,112.03
10/31/2007 15,249.93 14,181.47 13,352.56
11/30/2007 14,604.43 13,544.22 12,751.44
12/31/2007 14,505.14 13,420.64 12,674.28
1/31/2008 13,496.90 12,666.95 11,906.07
2/29/2008 13,013.96 12,333.19 11,536.27
3/31/2008 12,827.56 12,159.63 11,467.92
4/30/2008 13,564.68 12,770.78 12,041.42
5/31/2008 13,912.05 13,083.78 12,288.11
6/30/2008 12,837.74 12,040.63 11,274.08
7/31/2008 12,608.50 11,864.43 11,184.17
8/31/2008 12,710.38 11,977.68 11,357.87
9/30/2008 11,376.36 10,642.16 10,289.95
10/31/2008 9,223.61 8,631.78 8,464.93
11/30/2008 8,364.22 7,878.50 7,796.71
12/31/2008 8,491.87 8,126.46 7,945.87
1/31/2009 7,859.68 7,551.77 7,279.05
2/28/2009 7,150.60 6,853.19 6,516.53
3/31/2009 7,754.10 7,406.64 7,087.34
4/30/2009 8,628.04 8,365.94 7,833.16
5/31/2009 9,090.72 8,881.87 8,251.12
6/30/2009 9,009.33 8,873.89 8,279.23
7/31/2009 9,738.66 9,609.99 8,923.65
8/31/2009 10,073.29 9,937.58 9,242.51
9/30/2009 10,558.01 10,388.34 9,629.74
10/31/2009 10,317.47 10,084.60 9,382.06
11/30/2009 10,918.82 10,634.81 9,915.19
12/31/2009 11,232.12 10,995.16 10,197.74
1/31/2010 10,793.17 10,590.59 9,830.14
[END CHART]
Data from 1/31/00 to 1/31/10.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Growth & Income Fund to the following benchmarks:
o The unmanaged Lipper Multi-Cap Core Funds Index tracks the total return
performance of the 30 largest funds in the Lipper Multi-Cap Core Funds
category.
o The unmanaged Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which
represents approximately 98% of the investable U.S. equity market.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
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INVESTMENT OVERVIEW | 11
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TOP 10 EQUITY HOLDINGS
AS OF 1/31/2010
(% of Net Assets)
Microsoft Corp. ............................................. 2.5%
Pfizer, Inc. ................................................ 2.0%
Wells Fargo & Co. ........................................... 1.9%
Procter & Gamble Co. ........................................ 1.8%
Apple, Inc. ................................................. 1.7%
Exxon Mobil Corp. ........................................... 1.5%
Hewlett-Packard Co. ......................................... 1.5%
JPMorgan Chase & Co. ........................................ 1.5%
Bank of America Corp. ....................................... 1.4%
AT&T, Inc. .................................................. 1.3%
o SECTOR ASSET ALLOCATION* -- 1/31/2010 o
[PIE CHART OF SECTOR ASSET ALLOCATION]
INFORMATION TECHNOLOGY 19.5%
HEALTH CARE 15.3%
FINANCIALS 14.1%
CONSUMER DISCRETIONARY 12.5%
INDUSTRIALS 11.3%
ENERGY 10.7%
CONSUMER STAPLES 6.5%
UTILITIES 3.9%
MATERIALS 3.0%
TELECOMMUNICATION SERVICES 1.5%
EXCHANGE-TRADED FUNDS** 0.5%
MONEY MARKET INSTRUMENTS 1.1%
[END CHART]
* Excludes short-term investments purchased with cash collateral from
securities loaned.
** Exchange-traded funds (ETFs) are baskets of securities and are traded, like
individual stocks, on an exchange. These particular ETFs represent multiple
sectors.
Percentages are of the net assets of the Fund and may not equal 100%.
You will find a complete list of securities that the Fund owns on pages 13-25.
================================================================================
12 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2010 (unaudited)
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
EQUITY SECURITIES (98.8%)
COMMON STOCKS (98.3%)
CONSUMER DISCRETIONARY (12.5%)
------------------------------
ADVERTISING (0.8%)
524,100 Interpublic Group of Companies, Inc.* $ 3,386
118,900 Omnicom Group, Inc. 4,197
----------
7,583
----------
APPAREL & ACCESSORIES & LUXURY GOODS (0.6%)
85,460 Coach, Inc. 2,981
92,200 Hanesbrands, Inc.* 2,118
70,200 True Religion Apparel, Inc.* 1,355
----------
6,454
----------
APPAREL RETAIL (1.4%)
41,600 Aeropostale, Inc.* 1,368
61,280 Buckle, Inc.(a) 1,859
175,000 Chico's FAS, Inc.* 2,235
88,000 Guess?, Inc. 3,495
95,000 J. Crew Group, Inc.* 3,725
44,100 Limited Brands, Inc. 839
11,000 TJX Companies, Inc. 418
----------
13,939
----------
AUTO PARTS & EQUIPMENT (0.7%)
119,800 BorgWarner, Inc.* 4,204
120,000 Johnson Controls, Inc. 3,339
----------
7,543
----------
AUTOMOBILE MANUFACTURERS (0.4%)
350,000 Ford Motor Co.* 3,794
----------
AUTOMOTIVE RETAIL (0.3%)
35,300 Advance Auto Parts, Inc. 1,392
46,900 O'Reilly Automotive, Inc.* 1,773
----------
3,165
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
BROADCASTING (0.3%)
40,200 CBS Corp. "B" $ 520
69,000 Discovery Communications, Inc. "A"* 2,046
----------
2,566
----------
CABLE & SATELLITE (0.8%)
527,200 Comcast Corp. "A" 8,346
----------
CASINOS & GAMING (0.4%)
151,955 International Game Technology 2,787
54,500 Las Vegas Sands Corp.* 845
----------
3,632
----------
COMPUTER & ELECTRONICS RETAIL (0.1%)
59,400 GameStop Corp. "A"* 1,174
----------
DEPARTMENT STORES (0.5%)
145,095 Nordstrom, Inc. 5,012
----------
EDUCATION SERVICES (0.2%)
13,700 Apollo Group, Inc. "A"* 830
8,400 ITT Educational Services, Inc.* 814
----------
1,644
----------
GENERAL MERCHANDISE STORES (0.2%)
56,900 Family Dollar Stores, Inc. 1,757
----------
HOME IMPROVEMENT RETAIL (0.8%)
64,500 Home Depot, Inc. 1,807
278,540 Lowe's Companies, Inc. 6,030
----------
7,837
----------
HOMEBUILDING (0.1%)
1,200 NVR, Inc.* 821
----------
HOMEFURNISHING RETAIL (0.2%)
55,000 Bed Bath & Beyond, Inc.* 2,129
----------
HOTELS, RESORTS, & CRUISE LINES (1.0%)
253,100 Carnival Corp.* 8,436
50,000 Royal Caribbean Cruises Ltd.*(a) 1,304
----------
9,740
----------
HOUSEHOLD APPLIANCES (0.8%)
105,500 Stanley Works 5,407
38,000 Whirlpool Corp. 2,857
----------
8,264
----------
HOUSEWARES & SPECIALTIES (0.5%)
132,800 Fortune Brands, Inc. 5,521
----------
================================================================================
14 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
INTERNET RETAIL (0.8%)
37,000 Amazon.com, Inc.* $ 4,640
20,000 Priceline.com, Inc.* 3,907
----------
8,547
----------
MOVIES & ENTERTAINMENT (0.4%)
155,600 Viacom, Inc. "B"* 4,534
----------
RESTAURANTS (0.7%)
26,560 McDonald's Corp. 1,658
30,000 Panera Bread Co. "A"* 2,143
150,000 Starbucks Corp.* 3,268
----------
7,069
----------
SPECIALIZED CONSUMER SERVICES (0.1%)
90,000 Service Corp. International 690
----------
SPECIALTY STORES (0.4%)
44,745 Staples, Inc. 1,050
65,000 Tiffany & Co. 2,639
----------
3,689
----------
Total Consumer Discretionary 125,450
----------
CONSUMER STAPLES (6.5%)
-----------------------
DISTILLERS & VINTNERS (0.2%)
26,400 Diageo plc ADR 1,774
----------
FOOD DISTRIBUTORS (0.1%)
47,000 Sysco Corp. 1,316
----------
FOOD RETAIL (0.4%)
191,200 Kroger Co. 4,097
----------
HOUSEHOLD PRODUCTS (1.8%)
290,485 Procter & Gamble Co. 17,879
----------
HYPERMARKETS & SUPER CENTERS (0.4%)
36,000 BJ's Wholesale Club, Inc.* 1,216
56,760 Wal-Mart Stores, Inc. 3,033
----------
4,249
----------
PACKAGED FOODS & MEAT (0.2%)
35,700 H.J. Heinz Co. 1,558
----------
PERSONAL PRODUCTS (0.8%)
181,100 Avon Products, Inc. 5,458
42,000 Estee Lauder Companies, Inc. "A" 2,206
----------
7,664
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
SOFT DRINKS (1.1%)
194,690 PepsiCo, Inc. $ 11,607
----------
TOBACCO (1.5%)
90,900 Altria Group, Inc. 1,805
64,600 Imperial Tobacco Group plc ADR 4,135
19,500 Lorillard, Inc. 1,476
129,655 Philip Morris International, Inc. 5,901
31,300 Reynolds American, Inc. 1,665
----------
14,982
----------
Total Consumer Staples 65,126
----------
ENERGY (10.7%)
--------------
COAL & CONSUMABLE FUELS (0.5%)
14,895 CONSOL Energy, Inc. 694
91,400 Peabody Energy Corp. 3,850
----------
4,544
----------
INTEGRATED OIL & GAS (4.5%)
35,000 BP plc ADR 1,964
109,200 Chevron Corp. 7,876
64,000 ConocoPhillips 3,072
242,170 Exxon Mobil Corp. 15,603
80,000 Hess Corp. 4,623
216,000 Marathon Oil Corp. 6,439
36,800 Murphy Oil Corp. 1,880
55,500 Occidental Petroleum Corp. 4,348
----------
45,805
----------
OIL & GAS DRILLING (0.9%)
42,500 Atwood Oceanics, Inc.* 1,424
165,500 Noble Corp. 6,673
11,870 Transocean Ltd.* 1,006
----------
9,103
----------
OIL & GAS EQUIPMENT & SERVICES (0.9%)
131,300 Baker Hughes, Inc. 5,945
49,000 FMC Technologies, Inc.* 2,606
33,485 Halliburton Co. 978
----------
9,529
----------
OIL & GAS EXPLORATION & PRODUCTION (3.4%)
50,000 Anadarko Petroleum Corp. 3,189
73,820 Apache Corp. 7,291
62,800 EOG Resources, Inc. 5,678
54,925 Noble Energy, Inc. 4,061
================================================================================
16 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
62,000 Range Resources Corp. $ 2,852
70,000 Southwestern Energy Co.* 3,002
161,318 Ultra Petroleum Corp.* 7,411
14,900 Whiting Petroleum Corp.* 992
----------
34,476
----------
OIL & GAS STORAGE & TRANSPORTATION (0.5%)
123,300 El Paso Corp. 1,251
167,950 Spectra Energy Corp. 3,569
----------
4,820
----------
Total Energy 108,277
----------
FINANCIALS (14.1%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (2.3%)
169,515 Ameriprise Financial, Inc. 6,482
170,600 Bank of New York Mellon Corp. 4,963
11,000 BlackRock, Inc. "A" 2,352
36,000 Franklin Resources, Inc. 3,565
135,000 Invesco Ltd. ADR 2,606
58,000 T. Rowe Price Group, Inc. 2,878
----------
22,846
----------
CONSUMER FINANCE (1.2%)
95,800 American Express Co. 3,608
146,100 Capital One Financial Corp. 5,385
340,400 SLM Corp.* 3,585
----------
12,578
----------
DIVERSIFIED BANKS (1.9%)
684,060 Wells Fargo & Co. 19,448
----------
DIVERSIFIED CAPITAL MARKETS (0.3%)
255,570 UBS AG* 3,325
----------
INSURANCE BROKERS (0.2%)
82,200 Willis Group Holdings plc 2,156
----------
INVESTMENT BANKING & BROKERAGE (0.8%)
11,840 Goldman Sachs Group, Inc. 1,761
90,000 Jefferies Group, Inc.*(a) 2,298
142,900 Morgan Stanley 3,827
----------
7,886
----------
LIFE & HEALTH INSURANCE (1.3%)
160,600 AFLAC, Inc. 7,778
211,400 Principal Financial Group, Inc. 4,873
----------
12,651
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
MULTI-LINE INSURANCE (0.5%)
191,375 Hartford Financial Services Group, Inc. $ 4,591
----------
OTHER DIVERSIFIED FINANCIAL SERVICES (2.9%)
946,000 Bank of America Corp. 14,360
380,450 JPMorgan Chase & Co. 14,815
----------
29,175
----------
PROPERTY & CASUALTY INSURANCE (1.4%)
64,600 ACE Ltd.* 3,183
41,800 Allstate Corp. 1,251
183,212 Assured Guaranty Ltd. 4,152
63,100 Axis Capital Holdings Ltd. 1,817
32,100 Chubb Corp. 1,605
143,800 Fidelity National Financial, Inc. "A" 1,855
8,480 XL Capital Ltd. "A" 142
----------
14,005
----------
REGIONAL BANKS (0.9%)
42,600 City National Corp. 2,104
142,600 Fifth Third Bancorp 1,774
95,100 PNC Financial Services Group, Inc. 5,271
----------
9,149
----------
REITs - MORTGAGE (0.2%)
130,500 Annaly Capital Management, Inc. 2,268
----------
THRIFTS & MORTGAGE FINANCE (0.2%)
126,500 New York Community Bancorp, Inc. 1,901
----------
Total Financials 141,979
----------
HEALTH CARE (15.3%)
-------------------
BIOTECHNOLOGY (2.0%)
120,020 Amgen, Inc.* 7,019
37,300 Cephalon, Inc.* 2,381
57,200 Genzyme Corp.* 3,103
164,900 Gilead Sciences, Inc.* 7,960
----------
20,463
----------
HEALTH CARE DISTRIBUTORS (0.4%)
95,000 AmerisourceBergen Corp. 2,590
52,200 Cardinal Health, Inc. 1,726
----------
4,316
----------
HEALTH CARE EQUIPMENT (3.2%)
33,400 Baxter International, Inc. 1,924
123,000 CareFusion Corp.* 3,167
================================================================================
18 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
222,570 Covidien plc $ 11,253
5,000 Intuitive Surgical, Inc.* 1,640
193,375 Medtronic, Inc. 8,294
133,870 St. Jude Medical, Inc.* 5,051
----------
31,329
----------
HEALTH CARE SERVICES (1.4%)
46,000 Express Scripts, Inc.* 3,858
104,300 Medco Health Solutions, Inc.* 6,412
94,700 Omnicare, Inc. 2,367
33,600 Quest Diagnostics, Inc. 1,871
----------
14,508
----------
HEALTH CARE TECHNOLOGY (0.2%)
26,000 Cerner Corp.* 1,967
----------
LIFE SCIENCES TOOLS & SERVICES (0.9%)
68,700 Life Technologies Corp.* 3,415
32,500 Millipore Corp.* 2,241
40,040 Thermo Fisher Scientific, Inc.* 1,848
29,600 Waters Corp.* 1,687
----------
9,191
----------
MANAGED HEALTH CARE (2.0%)
57,900 CIGNA Corp. 1,955
102,500 Coventry Health Care, Inc.* 2,345
39,900 Humana, Inc.* 1,940
297,965 UnitedHealth Group, Inc. 9,833
65,028 WellPoint, Inc.* 4,144
----------
20,217
----------
PHARMACEUTICALS (5.2%)
22,395 Abbott Laboratories 1,185
99,500 Allergan, Inc. 5,721
41,100 AstraZeneca plc ADR(a) 1,911
160,300 Bristol-Myers Squibb Co. 3,905
17,235 Eli Lilly and Co. 607
29,900 Johnson & Johnson 1,879
256,590 Merck & Co., Inc. 9,797
220,000 Mylan, Inc.* 4,011
72,000 Perrigo Co. 3,188
1,085,629 Pfizer, Inc. 20,258
----------
52,462
----------
Total Health Care 154,453
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
INDUSTRIALS (11.3%)
-------------------
AEROSPACE & DEFENSE (3.6%)
14,585 Boeing Co. $ 884
122,700 General Dynamics Corp. 8,203
40,400 Goodrich Corp. 2,501
154,465 Honeywell International, Inc. 5,969
16,600 ITT Corp. 802
44,100 L-3 Communications Holdings, Inc. 3,675
60,925 Precision Castparts Corp. 6,412
138,000 Raytheon Co. 7,235
----------
35,681
----------
AIR FREIGHT & LOGISTICS (1.4%)
142,120 FedEx Corp. 11,135
48,000 United Parcel Service, Inc. "B" 2,773
----------
13,908
----------
AIRLINES (0.3%)
302,500 Southwest Airlines Co. 3,427
----------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (1.3%)
42,000 Bucyrus International, Inc. 2,200
40,000 Deere & Co. 1,998
55,000 Joy Global, Inc. 2,516
173,950 PACCAR, Inc. 6,267
----------
12,981
----------
ELECTRICAL COMPONENTS & EQUIPMENT (0.3%)
69,590 Emerson Electric Co. 2,891
----------
HEAVY ELECTRICAL EQUIPMENT (0.1%)
63,645 ABB Ltd. ADR* 1,148
----------
INDUSTRIAL CONGLOMERATES (0.9%)
38,000 3M Co. 3,059
394,225 General Electric Co. 6,339
----------
9,398
----------
INDUSTRIAL MACHINERY (2.7%)
67,100 Eaton Corp. 4,109
32,100 Flowserve Corp. 2,895
236,800 Illinois Tool Works, Inc. 10,322
21,205 Ingersoll-Rand PLC 688
109,200 Pall Corp. 3,764
44,000 Parker-Hannifin Corp. 2,460
21,000 SPX Corp. 1,143
================================================================================
20 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
21,300 Valmont Industries, Inc. $ 1,480
----------
26,861
----------
OFFICE SERVICES & SUPPLIES (0.1%)
22,700 Avery Dennison Corp. 738
----------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
68,500 WESCO International, Inc.* 1,899
----------
TRUCKING (0.4%)
121,600 Ryder System, Inc. 4,426
----------
Total Industrials 113,358
----------
INFORMATION TECHNOLOGY (19.5%)
------------------------------
APPLICATION SOFTWARE (0.9%)
185,700 Autodesk, Inc.* 4,418
85,500 Intuit, Inc.* 2,531
38,000 Salesforce.com, Inc.* 2,415
----------
9,364
----------
COMMUNICATIONS EQUIPMENT (2.4%)
375,000 Brocade Communications Systems, Inc.* 2,576
450,010 Cisco Systems, Inc.* 10,112
60,000 F5 Networks, Inc.* 2,966
180,400 Nokia Corp. ADR 2,470
144,180 QUALCOMM, Inc. 5,650
----------
23,774
----------
COMPUTER HARDWARE (3.6%)
87,900 Apple, Inc.* 16,887
324,425 Hewlett-Packard Co. 15,271
35,730 International Business Machines Corp. 4,373
----------
36,531
----------
COMPUTER STORAGE & PERIPHERALS (1.3%)
376,170 EMC Corp.* 6,271
41,200 NetApp, Inc.* 1,200
319,900 Seagate Technology 5,352
----------
12,823
----------
DATA PROCESSING & OUTSOURCED SERVICES (1.8%)
61,300 Alliance Data Systems Corp.*(a) 3,645
47,700 Computer Sciences Corp.* 2,447
18,000 MasterCard, Inc. "A" 4,498
55,000 Visa, Inc. "A" 4,511
155,765 Western Union Co. 2,888
----------
17,989
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS (0.5%)
95,000 Amphenol Corp. "A" $ 3,785
48,370 Corning, Inc. 874
----------
4,659
----------
INTERNET SOFTWARE & SERVICES (1.6%)
158,400 eBay, Inc.* 3,646
21,265 Google, Inc. "A"* 11,258
61,300 VeriSign, Inc.* 1,405
----------
16,309
----------
IT CONSULTING & OTHER SERVICES (0.4%)
95,000 Cognizant Technology Solutions Corp. "A"* 4,148
----------
SEMICONDUCTOR EQUIPMENT (0.4%)
309,400 Applied Materials, Inc. 3,768
----------
SEMICONDUCTORS (3.0%)
73,400 Analog Devices, Inc. 1,979
266,700 Broadcom Corp. "A"* 7,126
71,000 Cree, Inc.* 3,970
177,145 Intel Corp. 3,437
129,900 Intersil Corp. "A" 1,750
301,600 Marvell Technology Group Ltd.* 5,257
130,230 Maxim Integrated Products, Inc. 2,276
65,800 Microchip Technology, Inc. 1,698
120,600 National Semiconductor Corp. 1,599
110,000 NVIDIA Corp.* 1,693
----------
30,785
----------
SYSTEMS SOFTWARE (3.6%)
46,500 BMC Software, Inc.* 1,797
907,865 Microsoft Corp. 25,584
103,445 Oracle Corp. 2,385
40,000 Red Hat, Inc.* 1,089
130,500 VMware, Inc. "A"* 5,926
----------
36,781
----------
Total Information Technology 196,931
----------
MATERIALS (3.0%)
----------------
CONSTRUCTION MATERIALS (0.3%)
34,035 Martin Marietta Materials, Inc. 2,695
----------
DIVERSIFIED CHEMICALS (0.2%)
68,200 E.I. du Pont de Nemours & Co. 2,224
----------
================================================================================
22 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
DIVERSIFIED METALS & MINING (0.5%)
11,695 Rio Tinto plc ADR $ 2,269
35,000 Walter Industries, Inc. 2,272
----------
4,541
----------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.9%)
24,900 Agrium, Inc. 1,403
56,500 Monsanto Co. 4,287
70,260 Mosaic Co. 3,760
----------
9,450
----------
GOLD (0.1%)
24,520 Barrick Gold Corp. 854
----------
METAL & GLASS CONTAINERS (0.6%)
89,900 Ball Corp. 4,566
77,100 Pactiv Corp.* 1,739
----------
6,305
----------
STEEL (0.4%)
16,900 Allegheny Technologies, Inc. 690
48,000 Cliffs Natural Resources, Inc. 1,918
88,100 Steel Dynamics, Inc. 1,337
----------
3,945
----------
Total Materials 30,014
----------
TELECOMMUNICATION SERVICES (1.5%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (1.5%)
508,945 AT&T, Inc. 12,907
73,200 Verizon Communications, Inc. 2,153
----------
Total Telecommunication Services 15,060
----------
UTILITIES (3.9%)
----------------
ELECTRIC UTILITIES (2.9%)
289,000 American Electric Power Co., Inc. 10,014
82,400 Duke Energy Corp. 1,362
28,100 Entergy Corp. 2,144
174,300 Exelon Corp. 7,952
111,100 FirstEnergy Corp. 4,846
10,185 FPL Group, Inc. 497
79,900 Pepco Holdings, Inc. 1,312
47,900 Pinnacle West Capital Corp. 1,716
----------
29,843
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
472,300 Dynegy, Inc. "A"* $ 765
----------
MULTI-UTILITIES (0.9%)
138,300 CenterPoint Energy, Inc. 1,929
68,500 Dominion Resources, Inc. 2,566
78,700 MDU Resources Group, Inc. 1,733
126,900 Xcel Energy, Inc. 2,637
----------
8,865
----------
Total Utilities 39,473
----------
Total Common Stocks (cost: $939,336) 990,121
----------
EXCHANGE-TRADED FUNDS (0.5%)
27,900 MidCap SPDR Trust Series 1(a) 3,557
8,000 SPDR Trust Series 1 859
----------
Total Exchange-Traded Funds (cost: $4,530) 4,416
----------
Total Equity Securities (cost: $943,866) 994,537
----------
MONEY MARKET INSTRUMENTS (1.1%)
MONEY MARKET FUNDS (1.1%)
11,067,802 State Street Institutional Liquid Reserve Fund, 0.13%(b) (cost: $11,068) 11,068
----------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (1.2%)
MONEY MARKET FUNDS (1.0%)
10,265,422 BlackRock Liquidity Funds TempFund Portfolio, 0.11%(b) 10,265
----------
---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.2%)
$200 Credit Suisse First Boston LLC, 0.11%,
acquired on 1/29/2010 and due 2/01/2010 at
$200 (collateralized by $205 of U.S. Treasury,
3.63%, due 8/15/2019; market value $208) 200
================================================================================
24 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
---------------------------------------------------------------------------------------------------
$1,600 Deutsche Bank Securities, Inc., 0.11%,
acquired on 1/29/2010 and due 2/01/2010 at $1,600
(collateralized by $1,633 of Fannie Mae(c), 0.09%(d),
due 5/10/2010; market value $1,633) $ 1,600
----------
Total Repurchase Agreements 1,800
----------
Total Short-Term Investments Purchased With Cash Collateral
From Securities Loaned (cost: $12,065) 12,065
----------
TOTAL INVESTMENTS (COST: $966,999) $1,017,670
==========
---------------------------------------------------------------------------------------------------
($ 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 $ 990,121 $ - $- $ 990,121
Exchange-Traded Funds 4,416 - - 4,416
Money Market Instruments:
Money Market Funds 11,068 - - 11,068
Short-Term Investments
Purchased With Cash
Collateral From Securities
Loaned:
Money Market Funds 10,265 - - 10,265
Repurchase Agreements - 1,800 - 1,800
---------------------------------------------------------------------------------------------------
Total $1,015,870 $1,800 $- $1,017,670
---------------------------------------------------------------------------------------------------
================================================================================
PORTFOLIO OF INVESTMENTS | 25
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
The Fund may rely on certain Securities and Exchange Commission (SEC)
exemptive orders or rules that permit funds meeting various conditions to
invest in an exchange-traded fund (ETF) in amounts exceeding limits set forth
in the Investment Company Act of 1940 that would otherwise be applicable.
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
REIT Real estate investment trust
SPDR Exchange-traded funds, managed by State Street Global Advisers, that
represent a portfolio of stocks designed to closely track a specific
market index. SPDR is an acronym for the first member of the fund
family, Standard & Poor's Depositary Receipt, which tracks the S&P 500
Index. SPDRs are traded on securities exchanges.
================================================================================
26 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
o SPECIFIC NOTES
(a) The security or a portion thereof was out on loan as of January 31,
2010.
(b) Rate represents the money market fund annualized seven-day yield at
January 31, 2010.
(c) 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.
(d) Zero-coupon security. Rate represents the effective yield at the date
of purchase.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 27
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (including securities
on loan of $11,594) (cost of $966,999) $1,017,670
Receivables:
Capital shares sold 499
Dividends and interest 773
Securities sold 15,227
Other 13
----------
Total assets 1,034,182
----------
LIABILITIES
Payables:
Upon return of securities loaned 12,065
Securities purchased 13,712
Capital shares redeemed 790
Accrued management fees 500
Accrued transfer agent's fees 30
Other accrued expenses and payables 120
----------
Total liabilities 27,217
----------
Net assets applicable to capital shares outstanding $1,006,965
==========
NET ASSETS CONSIST OF:
Paid-in capital $1,303,441
Accumulated overdistribution of net investment loss (134)
Accumulated net realized loss on investments (347,013)
Net unrealized appreciation of investments 50,671
----------
Net assets applicable to capital shares outstanding $1,006,965
==========
Capital shares outstanding, unlimited number of shares
authorized, no par value 80,270
==========
Net asset value, redemption price, and offering price per share $ 12.54
==========
See accompanying notes to financial statements.
================================================================================
28 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $13) $ 7,849
Interest 14
Securities lending (net) 76
--------
Total income 7,939
--------
EXPENSES
Management fees 2,977
Administration and servicing fees 765
Transfer agent's fees 1,305
Custody and accounting fees 108
Postage 76
Shareholder reporting fees 31
Trustees' fees 5
Registration fees 22
Professional fees 53
Other 11
--------
Total expenses 5,353
Expenses paid indirectly (24)
Transfer agent's fees reimbursed (Note 6D) (167)
--------
Net expenses 5,162
--------
NET INVESTMENT INCOME 2,777
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 25,037
Change in net unrealized appreciation/depreciation 72,707
--------
Net realized and unrealized gain 97,744
--------
Increase in net assets resulting from operations $100,521
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 29
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited), and year ended
July 31, 2009
--------------------------------------------------------------------------------
1/31/2010 7/31/2009
--------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 2,777 $ 8,926
Net realized gain (loss) on investments 25,037 (325,260)
Change in net unrealized appreciation/depreciation
of investments 72,707 12,059
------------------------
Increase (decrease) in net assets resulting
from operations 100,521 (304,275)
------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,222) (9,327)
------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 55,093 126,823
Reinvested dividends 3,165 9,165
Cost of shares redeemed (75,718) (188,203)
------------------------
Decrease in net assets from capital share
transactions (17,460) (52,215)
------------------------
Net increase (decrease) in net assets 79,839 (365,817)
------------------------
NET ASSETS
Beginning of period 927,126 1,292,943
------------------------
End of period $1,006,965 $ 927,126
========================
Accumulated undistributed (overdistribution of) net
investment income:
End of period $ (134) $ 311
========================
CHANGE IN SHARES OUTSTANDING
Shares sold 4,388 12,058
Shares issued for dividends reinvested 246 873
Shares redeemed (6,028) (18,303)
------------------------
Decrease in shares outstanding (1,394) (5,372)
========================
See accompanying notes to financial statements.
================================================================================
30 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940 (the 1940 Act), as amended, is an open-end management investment company
organized as a Delaware statutory trust consisting of 46 separate funds. The
information presented in this semiannual report pertains only to the USAA Growth
& Income Fund (the Fund), which is classified as diversified under the 1940 Act.
The Fund's investment objectives are capital growth and, secondarily, current
income.
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If no
last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
2. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the
foreign markets may be closed. Therefore, the calculation
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
<PAGE>
================================================================================
of the Fund's net asset value (NAV) may not take place at the same time
the prices of certain foreign securities held by the Fund are
determined. In most cases, events affecting the values of foreign
securities that occur between the time of their last quoted sales or
official closing prices and the close of normal trading on the NYSE on a
day the Fund's NAV is calculated will not be reflected in the value of
the Fund's foreign securities. However, USAA Investment Management
Company (the Manager), an affiliate of the Fund, and the Fund's
subadvisers, if applicable, will monitor for events that would
materially affect the value of the Fund's foreign securities. The Fund's
subadvisers have agreed to notify the Manager of significant events they
identify that would materially affect the value of the Fund's foreign
securities. If the Manager determines that a particular event would
materially affect the value of the Fund's foreign securities, then the
Manager, under valuation procedures approved by the Trust's Board of
Trustees, will consider such available information that it deems
relevant to determine a fair value for the affected foreign securities.
In addition, the Fund may use information from an external vendor or
other sources to adjust the foreign market closing prices of foreign
equity securities to reflect what the Fund believes to be the fair value
of the securities as of the close of the NYSE. Fair valuation of
affected foreign equity securities may occur frequently based on an
assessment that events that occur on a fairly regular basis (such as
U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
================================================================================
32 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
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
subadvisers, if applicable, under valuation procedures approved by the
Trust's Board of Trustees. The effect of fair value pricing is that
securities may not be priced on the basis of quotations from the primary
market in which they are traded and the actual price realized from the
sale of a security may differ materially from the fair value price.
Valuing these securities at fair value is intended to cause the Fund's
NAV to be more reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any restrictions
on disposition of the securities, and an evaluation of the forces that
influenced the market in which the securities are purchased and sold.
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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
<PAGE>
================================================================================
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses
from sales of investment securities are computed on the identified cost
basis. Dividend income, less foreign taxes, if any, is recorded on the
ex-dividend date. If the ex-dividend date has passed, certain dividends
from foreign securities are recorded upon notification. Interest income is
recorded daily on the accrual basis. Discounts and premiums on short-term
securities are amortized on a straight-line basis over the life of the
respective securities.
E. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers. These agreements are
collateralized by underlying securities. The collateral obligations are
marked-to-market daily to ensure their value is equal to or in excess of
the repurchase agreement price plus accrued interest and are held by the
Fund, either through its regular custodian or through a special "tri-party"
custodian that maintains separate accounts for both the Fund and its
counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit risk, and the Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
F. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in
================================================================================
34 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
U.S. dollars, foreign currency amounts are translated into U.S. dollars on
the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective dates
of such transactions.
2. Market value of securities, other assets, and liabilities at the exchange
rate obtained from an independent pricing service on a daily basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts received. At
the end of the Fund's fiscal year, these net realized foreign currency
gains/losses are reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rate.
G. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition,
through arrangements with the Fund's custodian and other banks utilized by
the Fund for cash management purposes, realized credits, if any, generated
from cash balances in the Fund's
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
<PAGE>
================================================================================
bank accounts may be used to directly reduce the Fund's expenses. For the
six-month period ended January 31, 2010, brokerage commission recapture
credits and custodian and other bank credits reduced the Fund's expenses by
$24,000 and less than $500, respectively.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business the Trust enters into contracts that contain a variety of
representations and warranties that provide general indemnifications. The
Trust's maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Trust that have not yet
occurred. However, the Trust expects the risk of loss to be remote.
I. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(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
================================================================================
36 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
committed loan agreement. The facility fees are allocated among the funds based
on their respective average net assets for the period.
For the six-month period ended January 31, 2010, the Fund paid CAPCO facility
fees of $2,600, which represents 2.4% of the total fees paid to CAPCO by the
USAA funds. The Fund had no borrowings under this agreement during the six-month
period ended January 31, 2010.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year-end of July 31, 2010,
in accordance with applicable tax law.
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 July 31, 2009, the Fund had capital loss carryovers
of $117,708,000, for federal income tax purposes, which, if not offset by
subsequent capital gains, will expire in 2017. 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.
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the six-month period
ended January 31, 2010, the Fund did not incur any income tax, interest, or
penalties. As of January 31, 2010, 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 July 31, 2006, through July 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
<PAGE>
================================================================================
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2010, were
$407,896,000 and $419,345,000, respectively.
As of January 31, 2010, the cost of securities, including short-term securities,
for federal income tax purposes, was approximately the same as that reported in
the financial statements.
Gross unrealized appreciation and depreciation of investments as of January 31,
2010, were $116,177,000 and $65,506,000, respectively, resulting in net
unrealized appreciation of $50,671,000.
(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 six-month period ended
================================================================================
38 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
January 31, 2010, the Fund received securities-lending income of $76,000, which
is net of the 20% income retained by Wachovia. As of January 31, 2010, the Fund
loaned securities having a fair market value of approximately $11,594,000 and
received cash collateral of $12,065,000 for the loans which was invested in
short-term investments, as noted in the Fund's portfolio of investments.
(6) 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 the subadvisers. The allocation for each subadviser can range
from 0% to 100% of the Fund's assets, and the Manager can change the
allocations without shareholder approval.
The investment management fee for the Fund is composed of a base fee and a
performance adjustment. The base fee is accrued daily and paid monthly at
an annualized rate of 0.60% of the Fund's average net assets for the fiscal
year.
The performance adjustment is calculated monthly by comparing the Fund's
performance to that of the Lipper Multi-Cap Core Funds Index over the
performance period. The Lipper Multi-Cap Core Funds Index tracks the total
return performance of the 30 largest funds in the Lipper Multi-Cap Core
Funds category. The performance period for the Fund consists of the current
month plus the previous 35 months. The following table is utilized to
determine the extent of the performance adjustment:
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
<PAGE>
================================================================================
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
----------------------------------------------------------------------------
1.00% to 4.00% 0.04%
4.01% to 7.00% 0.05%
7.01% and greater 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
The annual performance adjustment rate is multiplied by the average net
assets of the Fund over the entire performance period, which is then
multiplied by a fraction, the numerator of which is the number of days in
the month and the denominator of which is 365 (366 in leap years). The
resulting amount is the performance adjustment; a positive adjustment in
the case of overperformance, or a negative adjustment in the case of
underperformance.
Under the performance fee arrangement, the Fund will pay a positive
performance fee adjustment for a performance period whenever the Fund
outperforms the Lipper Multi-Cap Core Funds Index over that period, even if
the Fund had overall negative returns during the performance period.
For the six-month period ended January 31, 2010, the Fund incurred total
management fees, paid or payable to the Manager, of $2,977,000, which
included a (0.02)% performance adjustment of $(83,000).
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into investment
subadvisory agreements with Wellington Management Company, LLP (Wellington
Management), Loomis, Sayles & Company, L.P. (Loomis Sayles), Barrow,
Hanley, Mewhinney & Strauss, LLC (BHMS), and UBS Global Asset Management
(Americas) Inc. (UBS), under which Wellington Management, Loomis Sayles,
BHMS, and UBS direct the investment and reinvestment of portions of the
Fund's assets (as allocated from time to time by the Manager).
The Manager (not the Fund) pays Wellington Management a subadvisory fee in
an annual amount of 0.20% of the portion of the
================================================================================
40 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
Fund's average net assets that Wellington Management manages. For the
six-month period ended January 31, 2010, the Manager incurred subadvisory
fees, paid or payable to Wellington Management, of $232,000.
The Manager (not the Fund) pays Loomis Sayles a subadvisory fee in an
annual amount of 0.20% of the portion of the Fund's average net assets that
Loomis Sayles manages. For the six-month period ended January 31, 2010, the
Manager incurred subadvisory fees, paid or payable to Loomis Sayles, of
$204,000.
The Manager (not the Fund) pays BHMS a subadvisory fee based on the
aggregate net assets that BHMS manages in the USAA Value Fund and the USAA
Growth & Income Fund combined, in an annual amount of 0.75% of the first
$15 million of assets, 0.55% on assets over $15 million and up to $25
million, 0.45% on assets over $25 million and up to $100 million, 0.35% on
assets over $100 million and up to $200 million, 0.25% on assets over $200
million and up to $1 billion, and 0.15% on assets over $1 billion. For the
six-month period ended January 31, 2010, the Manager incurred subadvisory
fees, paid or payable to BHMS, of $310,000.
The Manager (not the Fund) pays UBS a subadvisory fee in the annual amount
of 0.20% of the portion of the Fund's average net assets that UBS manages.
For the six-month period ended January 31, 2010, the Manager incurred
subadvisory fees, paid or payable to UBS, of $381,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and shareholder servicing functions for the Fund. For such
services, the Manager receives a fee accrued daily and paid monthly at an
annualized rate of 0.15% of the Fund's average net assets. For the
six-month period ended January 31, 2010, the Fund incurred administration
and servicing fees, paid or payable to the Manager, of $765,000.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
<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 six-month period ended
January 31, 2010, the Fund reimbursed the Manager $23,000 for these
compliance and legal services. These expenses are included in the
professional fees on the Fund's statement of operations.
D. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund based on an annual charge of $23 per
shareholder account plus out-of-pocket expenses. The Fund also pays SAS
fees that are related to the administration and servicing of accounts that
are traded on an omnibus basis. For the six-month period ended January 31,
2010, the Fund incurred transfer agent's fees, paid or payable to SAS, of
$1,305,000.
During the six-month period, SAS reimbursed the Fund $167,000 for
corrections in fees paid for the administration and servicing of certain
accounts.
E. UNDERWRITING SERVICES -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
(7) 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.
(8) SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date but before the
financial statements are issued are categorized as recognized or non-recognized
for financial statement purposes. The Manager has evaluated subsequent events
through 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.
================================================================================
42 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
(9) NEW ACCOUNTING PRONOUNCEMENT
In January 2010, the Financial Accounting Standards Board issued amended
guidance for improving disclosure about fair value measurements that adds new
disclosure requirements about transfers into and out of Levels 1 and 2 and
separate disclosures about purchases, sales, issuances, and settlements in the
reconciliation for fair value measurements using significant unobservable inputs
(Level 3). It also clarifies existing disclosure requirements relating to the
levels of disaggregation for fair value measurement and inputs and valuation
techniques used to measure fair value. The amended guidance is effective for
financial statements for fiscal years and interim periods beginning after
December 15, 2009, except for disclosures about purchases, sales, issuances and
settlements in the rollforward of activity in Level 3 fair value measurements,
which are effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. The Manager is in the process of
evaluating the impact of this guidance on the Fund's financial statement
disclosures.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31,
------------------------------------------------------------------------------
2010 2009 2008 2007 2006 2005
------------------------------------------------------------------------------
Net asset value at beginning of period $ 11.35 $ 14.86 $ 19.26 $ 18.14 $ 19.16 $ 17.72
------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .03 .11 .12 .13 .10 .13
Net realized and unrealized gain (loss) 1.20 (3.51) (1.80) 3.08 .16 2.61
------------------------------------------------------------------------------
Total from investment operations 1.23 (3.40) (1.68) 3.21 .26 2.74
------------------------------------------------------------------------------
Less distributions from:
Net investment income (.04) (.11) (.11) (.13) (.10) (.13)
Realized capital gains - - (2.61) (1.96) (1.18) (1.17)
------------------------------------------------------------------------------
Total distributions (.04) (.11) (2.72) (2.09) (1.28) (1.30)
------------------------------------------------------------------------------
Net asset value at end of period $ 12.54 $ 11.35 $ 14.86 $ 19.26 $ 18.14 $ 19.16
==============================================================================
Total return (%)* 10.83(b) (22.81) (10.69) 18.46(a) 1.22 15.79
Net assets at end of period (000) $1,006,965 $927,126 $1,292,943 $1,531,563 $1,376,986 $1,329,900
Ratios to average net assets:**
Expenses (%)(c) 1.05(b),(d) 1.12 1.00 .99(a) 1.01 1.00
Net investment income (%) .54(d) .99 .74 .57 .59 .69
Portfolio turnover (%) 42 100 83 119 179 81
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period.
Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper
reported return.
** For the six-month period ended January 31, 2010, average net assets were $1,011,189,000.
(a) For the year ended July 31, 2007, SAS voluntarily reimbursed the Fund for a portion of the transfer agent's fees
incurred. The reimbursement had no effect on the Fund's total return or ratio of expenses to average net assets.
(b) During the period ended January 31, 2010, SAS reimbursed the Fund $167,000 for corrections in fees paid for the
administration and servicing of certain accounts. The effect of this reimbursement on the Fund's total return was less
than 0.01%. The reimbursement decreased the Fund's expense ratios by 0.03%. This decrease is excluded from the expense
ratios in the Financial Highlights table.
(c) Reflects total operating expenses of the Fund before reductions of any expenses paid indirectly. The Fund's expenses
paid indirectly decreased the expense ratios as follows:
(.01%) (.01%) (.01%) (.01%) (.02%) (.02%)
(d) Annualized. The ratio is not necessarily indicative of 12 months of operations.
================================================================================
44 | USAA GROWTH & INCOME FUND
<PAGE>
================================================================================
EXPENSE EXAMPLE
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, and other Fund operating
expenses. This example is intended to help you understand your indirect costs,
also referred to as "ongoing costs" (in dollars), of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire six-month period of August 1, 2009, through
January 31, 2010.
ACTUAL EXPENSES
The first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested at the beginning of the period, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this
================================================================================
EXPENSE EXAMPLE | 45
<PAGE>
================================================================================
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2009 -
AUGUST 1, 2009 JANUARY 31, 2010 JANUARY 31, 2010
------------------------------------------------------
Actual $1,000.00 $1,108.30 $5.37
Hypothetical
(5% return before expenses) 1,000.00 1,020.11 5.14
* Expenses are equal to the Fund's annualized expense ratio of 1.01%, which is
net of any 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 ending account value on the first line in the table is
based on its actual total return of 10.83% for the six-month period of
August 1, 2009, through January 31, 2010.
================================================================================
46 | USAA GROWTH & INCOME 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 website 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 without charge (i) at USAA.COM; and
(ii) on the SEC's website 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 website 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)
============================================================================
23432-0310 (C)2010, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended January 31, 2010
By:* /S/ CHRISTOPHER P. LAIA
-----------------------------------------------------------
Signature and Title: Christopher P. Laia, Assistant Secretary
Date: March 31, 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: April 1, 2010
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: March 31, 2010
------------------------------
*Print the name and title of each signing officer under his or her signature.
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