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 GROWTH FUND - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2010
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA GROWTH FUND]
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SEMIANNUAL REPORT
USAA GROWTH FUND
FUND SHARES o INSTITUTIONAL SHARES
JANUARY 31, 2010
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FUND OBJECTIVE
LONG-TERM GROWTH OF CAPITAL.
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TYPES OF INVESTMENTS
Invest in equity securities of companies that are selected for their growth
potential.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Investment Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
FUND RECOGNITION 8
INVESTMENT OVERVIEW 9
FINANCIAL INFORMATION
Portfolio of Investments 14
Notes to Portfolio of Investments 20
Financial Statements 21
Notes to Financial Statements 24
EXPENSE EXAMPLE 41
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 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. The Renaissance Group LLC
MARK B. BARIBEAU, CFA MICHAEL E. SCHROER, CFA
PAMELA N. CZEKANSKI, CFA PAUL A. RADOMSKI, CPA, CFA
RICHARD SKAGGS, CFA ERIC J. STRANGE, CPA, CFA
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o HOW DID THE USAA GROWTH FUND (THE FUND SHARES) PERFORM?
For the six-month period ended January 31, 2010, the Fund Shares had a total
return of 7.02%. This compares to returns of 8.65% for the Lipper Large-Cap
Growth Funds Index and 9.85% for the Russell 1000 Growth Index (the Index).
Loomis, Sayles & Company, L.P. (Loomis Sayles) and The Renaissance Group LLC
(Renaissance) are subadvisers for the Fund.
o HOW DID THE LOOMIS SAYLES PORTION OF THE FUND PERFORM DURING THE REPORTING
PERIOD?
The six-month reporting period was going extremely well on an Index-relative
basis until January 2010, when some of our largest holdings, particularly in
the information technology and consumer discretionary sectors, sold off
dramatically despite reporting strong revenue and earnings. Interestingly,
some of our strongest-performing stocks for the reporting period, including
Amazon.com, Inc., Priceline.com, Inc., Google, Inc., Apple, Inc., and Visa,
Inc. experienced sharp January pullbacks.
Refer to page 10 for benchmark definitions.
Past performance is no guarantee of future results.
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4 | USAA GROWTH FUND
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Our best sector relative to the Index was consumer discretionary, where we
were overweight. There are many names in the group that we like, particularly
given our view that the consumer is slowly coming back, including Starbucks
Corp., Amazon.com, Inc., and Priceline.com, Inc. We took profits on Urban
Outfitters as it reached what we viewed as full valuation.
Although we had a lot of winners in technology, we were hurt by QUALCOMM,
Inc., which provided a disappointing outlook along with its January 2010
earnings report. The position has since been sold. We remain overweight in
the information technology sector with an emphasis on large-cap global
leaders, which are showing the ability to increase revenues. Examples include
Apple, Inc., Microsoft Corp., Cisco Systems, Inc., and Google, Inc. Recent
earnings reports from the tech bellwethers have been excellent in our view.
We did well in financial services, led by Franklin Resources, Inc. and Visa,
Inc. Among other names, we took profits in Freeport McMoran, exiting our
position in that company.
o WHAT OTHER AREAS HAD A MEANINGFUL NEGATIVE IMPACT ON PERFORMANCE?
We were underweight in health care, which hurt as the sector performed well
in the period. We have added to a couple of names, and will continue to look
for additional opportunities as the market adjusts to the recent earnings
season and the ultimate outcome of health care reform. Among our biggest
health care positions are Medco Health Solutions, Inc., Express Scripts,
Inc., and Mylan, Inc.
We were hurt by our underweight position in producer durables, a sector that
outperformed the Index. Overall, the portfolio has about 40% of its assets
concentrated in the top 15 names. We have smaller positions in our other
holdings, with the hope that some will grow
You will find a complete list of securities that the Fund owns on pages
14-19.
Urban Outfitters 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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into major holdings if they prove to be high growers. At the same time, we
will quickly eliminate these stocks if growth prospects diminish.
o WHAT'S LOOMIS SAYLES' OUTLOOK?
We see the late January/early February 2010 selloff as a probably healthy
correction within an ongoing bull market. Revenue growth will continue to
move to the fore of investor thinking, and it's important to note that 20% of
S&P 500 companies are reporting record revenues. We think the economy is
going to continue to recover, with jobs lagging but improving as the year
goes on, and we expect 2010 gross domestic product growth to be in the 3% to
4% range. We are bullish on U.S. large-cap growth stocks, with the
earlier-stated focus on large-cap technology and consumer discretionary names
with a technology tie-in, such as Priceline.com, Inc. and Amazon.com, Inc.
o HOW DID THE RENAISSANCE PORTION OF THE FUND PERFORM?
Overall, it was a difficult six months as we underperformed the Index. As was
the case through much of 2009, the kinds of companies our process favors were
insufficiently rewarded by the market -- specifically companies with positive
revenue and earnings momentum.
One stock that highlights the difficulties we face is the Apollo Group, Inc.,
a leader in on-line post-secondary education. The company has top-line
revenue growth in excess of 25%, and bottom-line earnings growth of 30%.
However, the stock was down 12% during the reporting period because of fears
about government lending to students. We see these as short-term problems
given the important role additional education must play at a time of high
unemployment. We suspect there will be a moderate solution with the
Department of Education, and are holding our position.
Our asset allocation among sectors was a positive performance factor. We were
overweight in consumer discretionary stocks, and had several of our best
performers there, including Coach, Inc., H&R Block, Inc.,
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6 | USAA GROWTH FUND
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McDonald's Corp., McGraw-Hill Companies, Inc., and Priceline.com, Inc.
However, we were hurt by an underweight to consumer staples, but we've
recently added Proctor & Gamble Co. and Kimberly-Clark Corp. as their
valuations became increasingly attractive.
Our stock selection detracted significantly from performance relative to the
Index. We had an index-neutral weighting in technology, but certain of our
holdings performed poorly including Cognizant Technology Solutions Corp. "A",
Affiliated Computer Services, Inc., and Hewitt Associates, Inc. One area
where allocation and stock selection both detracted was in the materials
sector.
o WHAT'S RENAISSANCE'S OUTLOOK?
We think 2010 will be a decent year. A repeat of 2009 is very unlikely given
that bull markets tend to be explosive early and then gain more slowly. It's
important to note, however, that when the S&P 500 jumps like it did last
year, the gain in the following year averages 16%.
We've made some shifts in allocation. In addition to adding to consumer
staples, we have added Nordstrom, Inc. and Tiffany & Co. in consumer
discretionary given their strong inventory management and Tiffany & Co.'s
strength and expansion overseas. The portfolio today is populated with
high-quality companies trading at attractive valuations, with superior
earnings and growth characteristics.
We thank you for your investment in the Fund and look forward to continuing
to serving you.
McDonald's Corp. and Affiliated Computer Services, Inc. were sold out of the
Fund prior to January 31, 2010.
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MANAGERS' COMMENTARY ON THE FUND | 7
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FUND RECOGNITION
USAA GROWTH FUND
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LIPPER LEADER (OVERALL)
[5]
EXPENSE
The Growth Fund Shares are listed as a Lipper Leader for Expense of 238 funds
within the Lipper Large-Cap Growth Funds category for the overall period ended
January 31, 2010. The Fund Shares received a Lipper Leader rating for Expense
among 238, 206, and 144 funds for the three-, five-, and 10-year periods,
respectively. Lipper ratings for Expense reflect funds' expense minimization
relative to peers with similar load structures as of January 31, 2010.
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Ratings are subject to change every month and are based on an equal-weighted
average of percentile ranks for the Expense metrics over three-, five-, and
10-year periods (if applicable). The highest 20% of funds in each peer group are
named Lipper Leaders, the next 20% receive a score of 4, the middle 20% are
scored 3, the next 20% are scored 2, and the lowest 20% are scored 1. Lipper
ratings are not intended to predict future results, and Lipper does not
guarantee the accuracy of this information. More information is available at
WWW.LIPPERLEADERS.COM. Lipper Leader Copyright 2010, Reuters, All Rights
Reserved.
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8 | USAA GROWTH FUND
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INVESTMENT OVERVIEW
USAA GROWTH FUND SHARES (Symbol: USAAX)
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1/31/10 7/31/09
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Net Assets $625.0 Million $593.1 Million
Net Asset Value Per Share $11.89 $11.12
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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
7.02% 24.49% -2.21% -6.13%
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EXPENSE RATIO**
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Before Reimbursement 1.25% After Reimbursement 1.00%
*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 BEFORE REIMBURSEMENT EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING
EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND INCLUDING ANY
ACQUIRED FUND FEES AND EXPENSES, AND IS CALCULATED AS A PERCENTAGE OF AVERAGE
NET ASSETS. THE AFTER REIMBURSEMENT EXPENSE RATIO REPRESENTS TOTAL ANNUAL
OPERATING EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND
EXCLUDING ANY ACQUIRED FUND FEES AND EXPENSES, AFTER REIMBURSEMENT FROM USAA
INVESTMENT MANAGEMENT COMPANY (IMCO). BEFORE AND AFTER REIMBURSEMENT EXPENSE
RATIOS ARE REPORTED IN THE FUND SHARES' PROSPECTUS DATED DECEMBER 1, 2009. IMCO
HAS AGREED, THROUGH DECEMBER 1, 2010, TO MAKE PAYMENTS OR WAIVE MANAGEMENT,
ADMINISTRATION, AND OTHER FEES TO LIMIT THE EXPENSES OF THE FUND SHARES SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND SHARES (EXCLUSIVE OF COMMISSION
RECAPTURE, EXPENSE OFFSET ARRANGEMENTS, ACQUIRED FUND FEES AND EXPENSES, AND
EXTRAORDINARY EXPENSES) DO NOT EXCEED AN ANNUAL RATE OF 1.00% OF THE FUND
SHARES' AVERAGE DAILY NET ASSETS. THIS REIMBURSEMENT ARRANGEMENT MAY NOT BE
CHANGED OR TERMINATED DURING THIS TIME PERIOD WITHOUT APPROVAL OF THE FUND'S
BOARD OF TRUSTEES AND MAY BE CHANGED OR TERMINATED BY IMCO AT ANY TIME AFTER
DECEMBER 1, 2010. THESE EXPENSE RATIOS MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
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INVESTMENT OVERVIEW | 9
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
RUSSELL 1000 LIPPER LARGE-CAP USAA GROWTH
GROWTH INDEX GROWTH FUNDS INDEX FUND SHARES
1/31/2000 $10,000.00 $10,000.00 $10,000.00
2/29/2000 10,488.86 10,525.93 10,222.03
3/31/2000 11,239.60 11,264.65 10,983.89
4/30/2000 10,704.77 10,393.00 10,557.25
5/31/2000 10,165.72 9,794.71 10,222.03
6/30/2000 10,936.16 10,442.48 10,905.53
7/31/2000 10,480.26 10,230.91 10,666.09
8/31/2000 11,429.18 11,115.76 11,393.12
9/30/2000 10,348.04 10,268.08 10,326.81
10/31/2000 9,858.39 9,725.14 9,859.64
11/30/2000 8,405.20 8,420.33 8,582.69
12/31/2000 8,139.24 8,368.00 8,453.66
1/31/2001 8,701.55 8,611.49 9,032.07
2/28/2001 7,224.27 7,278.31 7,443.67
3/31/2001 6,438.14 6,522.13 6,478.17
4/30/2001 7,252.39 7,222.34 7,434.77
5/31/2001 7,145.66 7,167.42 7,376.93
6/30/2001 6,980.17 6,960.90 7,203.41
7/31/2001 6,805.72 6,711.42 7,003.19
8/31/2001 6,249.19 6,201.24 6,197.87
9/30/2001 5,625.26 5,577.70 5,365.85
10/31/2001 5,920.39 5,809.01 5,801.88
11/30/2001 6,489.13 6,341.29 6,527.12
12/31/2001 6,476.94 6,370.70 6,438.13
1/31/2002 6,362.52 6,226.72 6,273.51
2/28/2002 6,098.47 5,968.97 5,881.97
3/31/2002 6,309.41 6,209.15 6,224.56
4/30/2002 5,794.46 5,795.72 5,655.05
5/31/2002 5,654.28 5,690.08 5,548.27
6/30/2002 5,131.23 5,226.70 4,929.82
7/31/2002 4,849.14 4,833.35 4,600.57
8/31/2002 4,863.64 4,860.07 4,622.82
9/30/2002 4,359.14 4,389.19 4,262.42
10/31/2002 4,759.01 4,727.05 4,560.53
11/30/2002 5,017.49 4,922.75 4,627.27
12/31/2002 4,670.90 4,579.75 4,391.45
1/31/2003 4,557.57 4,474.10 4,289.12
2/28/2003 4,536.64 4,426.02 4,249.08
3/31/2003 4,621.07 4,509.03 4,373.66
4/30/2003 4,962.74 4,839.21 4,631.72
5/31/2003 5,210.45 5,076.25 4,836.38
6/30/2003 5,282.20 5,118.29 4,898.67
7/31/2003 5,413.63 5,266.72 5,023.25
8/31/2003 5,548.28 5,396.30 5,081.09
9/30/2003 5,488.88 5,281.43 5,045.50
10/31/2003 5,797.18 5,601.82 5,325.81
11/30/2003 5,857.87 5,655.12 5,330.26
12/31/2003 6,060.46 5,814.56 5,483.91
1/31/2004 6,184.23 5,926.02 5,546.23
2/29/2004 6,223.52 5,951.67 5,572.94
3/31/2004 6,108.07 5,885.29 5,528.42
4/30/2004 6,037.06 5,753.17 5,434.95
5/31/2004 6,149.58 5,857.39 5,506.17
6/30/2004 6,226.43 5,941.21 5,590.74
7/31/2004 5,874.43 5,589.87 5,243.55
8/31/2004 5,845.42 5,550.43 5,221.29
9/30/2004 5,901.02 5,680.49 5,448.30
10/31/2004 5,993.05 5,748.96 5,559.58
11/30/2004 6,199.21 6,005.43 5,902.33
12/31/2004 6,442.27 6,247.90 6,178.30
1/31/2005 6,227.43 6,032.86 5,937.94
2/28/2005 6,293.70 6,072.35 6,009.16
3/31/2005 6,179.03 5,961.73 5,862.27
4/30/2005 6,061.37 5,832.13 5,728.73
5/31/2005 6,354.63 6,155.84 6,062.57
6/30/2005 6,331.20 6,168.13 6,191.66
7/31/2005 6,640.64 6,478.28 6,467.63
8/31/2005 6,555.12 6,409.15 6,356.35
9/30/2005 6,585.30 6,485.88 6,494.34
10/31/2005 6,521.29 6,443.87 6,436.47
11/30/2005 6,802.66 6,738.81 6,752.51
12/31/2005 6,781.33 6,721.55 6,774.77
1/31/2006 6,900.38 6,904.83 6,992.88
2/28/2006 6,889.42 6,811.69 6,899.40
3/31/2006 6,991.14 6,877.37 6,912.76
4/30/2006 6,981.64 6,866.57 6,819.28
5/31/2006 6,744.99 6,546.23 6,365.25
6/30/2006 6,718.38 6,524.72 6,338.55
7/31/2006 6,590.42 6,357.67 6,142.69
8/31/2006 6,796.03 6,504.87 6,209.46
9/30/2006 6,982.78 6,645.13 6,400.86
10/31/2006 7,228.25 6,845.05 6,596.72
11/30/2006 7,371.69 7,001.44 6,708.00
12/31/2006 7,396.65 7,038.48 6,743.61
1/31/2007 7,586.79 7,220.15 7,010.68
2/28/2007 7,444.18 7,057.17 6,761.41
3/31/2007 7,484.56 7,110.27 6,854.89
4/30/2007 7,836.93 7,398.94 7,050.74
5/31/2007 8,118.86 7,649.50 7,322.27
6/30/2007 7,997.67 7,577.35 7,230.54
7/31/2007 7,873.68 7,481.20 7,137.04
8/31/2007 7,999.15 7,604.49 7,266.16
9/30/2007 8,334.23 8,068.37 7,764.81
10/31/2007 8,617.88 8,428.92 8,236.76
11/30/2007 8,300.42 8,085.28 7,871.67
12/31/2007 8,270.41 8,092.34 8,072.02
1/31/2008 7,625.51 7,399.87 7,070.25
2/29/2008 7,474.06 7,245.71 6,914.42
3/31/2008 7,428.55 7,184.06 6,918.88
4/30/2008 7,818.55 7,626.76 7,341.84
5/31/2008 8,105.13 7,835.00 7,546.65
6/30/2008 7,521.38 7,258.58 7,061.35
7/31/2008 7,378.38 7,115.36 6,834.28
8/31/2008 7,457.83 7,134.35 6,767.50
9/30/2008 6,594.18 6,219.87 5,836.97
10/31/2008 5,433.21 5,133.59 4,826.29
11/30/2008 5,001.11 4,618.61 4,372.16
12/31/2008 5,091.50 4,742.68 4,422.55
1/31/2009 4,846.57 4,497.51 4,266.35
2/28/2009 4,481.97 4,204.15 3,967.35
3/31/2009 4,881.75 4,565.43 4,248.50
4/30/2009 5,350.42 5,049.16 4,525.19
5/31/2009 5,615.65 5,325.58 4,708.16
6/30/2009 5,678.48 5,327.67 4,703.70
7/31/2009 6,081.80 5,729.13 4,962.53
8/31/2009 6,207.93 5,842.15 5,047.32
9/30/2009 6,471.99 6,122.71 5,283.85
10/31/2009 6,384.32 6,001.57 5,158.89
11/30/2009 6,776.53 6,363.57 5,457.89
12/31/2009 6,985.98 6,568.56 5,655.08
1/31/2010 6,681.14 6,224.43 5,311.13
[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 Fund Shares to the following benchmarks:
o The unmanaged Russell 1000(R) Growth Index measures the performance of those
Russell 1000 companies with higher price-to-book ratios and higher forecasted
growth values.
o The unmanaged Lipper Large-Cap Growth Funds Index tracks the total return
performance of the 30 largest funds in the Lipper Large-Cap Growth Funds
category.
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.
Indexes are unmanaged and you cannot invest directly in an index.
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10 | USAA GROWTH FUND
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USAA GROWTH FUND INSTITUTIONAL SHARES*
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1/31/10 7/31/09
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Net Assets $77.2 Million $39.9 Million
Net Asset Value Per Share $11.88 $11.12
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AVERAGE ANNUAL TOTAL RETURN AS OF 1/31/10
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7/31/09 to 1/31/10** 1 Year Since Inception 8/01/08
7.05% 24.65% -14.94%
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EXPENSE RATIO***
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Before Reimbursement 0.89% After Reimbursement 0.87%
*The USAA Growth Fund Institutional Shares (Institutional Shares) commenced
operations on August 1, 2008, and are not offered for sale directly to the
general public. The Institutional Shares are available only to the USAA Target
Retirement Funds.
**Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
***THE BEFORE REIMBURSEMENT EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING
EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND INCLUDING ANY
ACQUIRED FUND FEES AND EXPENSES, AND IS CALCULATED AS A PERCENTAGE OF AVERAGE
NET ASSETS. THE AFTER REIMBURSEMENT EXPENSE RATIO REPRESENTS TOTAL ANNUAL
OPERATING EXPENSES, BEFORE REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND
EXCLUDING ANY ACQUIRED FUND FEES AND EXPENSES, AFTER REIMBURSEMENT FROM IMCO.
BEFORE AND AFTER REIMBURSEMENT EXPENSE RATIOS ARE REPORTED IN THE INSTITUTIONAL
SHARES' PROSPECTUS DATED DECEMBER 1, 2009. IMCO HAS AGREED, THROUGH DECEMBER 1,
2010, TO MAKE PAYMENTS OR WAIVE MANAGEMENT, ADMINISTRATION, AND OTHER FEES TO
LIMIT THE EXPENSES OF THE INSTITUTIONAL SHARES SO THAT THE TOTAL ANNUAL
OPERATING EXPENSES OF THE INSTITUTIONAL SHARES (EXCLUSIVE OF COMMISSION
RECAPTURE, EXPENSE OFFSET ARRANGEMENTS, ACQUIRED FUND FEES AND EXPENSES, AND
EXTRAORDINARY EXPENSES) DO NOT EXCEED AN ANNUAL RATE OF 0.87% OF THE
INSTITUTIONAL SHARES' AVERAGE DAILY NET ASSETS. THIS REIMBURSEMENT ARRANGEMENT
MAY NOT BE CHANGED OR TERMINATED DURING THIS TIME PERIOD WITHOUT APPROVAL OF THE
FUND'S BOARD OF TRUSTEES AND MAY BE CHANGED OR TERMINATED BY IMCO AT ANY TIME
AFTER DECEMBER 1, 2010. THESE EXPENSE RATIOS MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
return quoted does not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
================================================================================
INVESTMENT OVERVIEW | 11
<PAGE>
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
RUSSELL 1000 LIPPER LARGE-CAP USAA GROWTH FUND
GROWTH INDEX GROWTH FUNDS INDEX INSTITUTIONAL SHARES
7/31/2008 $10,000.00 $10,000.00 $10,000.00
8/31/2008 10,107.67 10,026.70 9,980.30
9/30/2008 8,937.16 8,741.47 8,608.01
10/31/2008 7,363.69 7,214.80 7,117.53
11/30/2008 6,778.06 6,491.05 6,447.80
12/31/2008 6,900.56 6,665.41 6,520.15
1/31/2009 6,568.61 6,320.85 6,289.64
2/28/2009 6,074.46 5,908.55 5,854.96
3/31/2009 6,616.28 6,416.31 6,269.88
4/30/2009 7,251.48 7,096.14 6,671.63
5/31/2009 7,610.95 7,484.63 6,941.65
6/30/2009 7,696.10 7,487.57 6,941.65
7/31/2009 8,242.73 8,051.78 7,323.64
8/31/2009 8,413.67 8,210.62 7,448.78
9/30/2009 8,771.55 8,604.93 7,797.83
10/31/2009 8,652.74 8,434.67 7,613.43
11/30/2009 9,184.30 8,943.43 8,054.69
12/31/2009 9,468.18 9,231.53 8,348.25
1/31/2010 9,055.02 8,747.88 7,840.09
[END CHART]
*Data from 7/31/08 to 1/31/10.
See page 10 for benchmark definitions.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Growth Fund Institutional Shares to the benchmarks.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
*The performance of the Russell 1000 Growth Index and the Lipper Large-Cap
Growth Funds Index is calculated from the end of the month, July 31, 2008, while
the Institutional Shares' inception date is August 1, 2008. There may be a
slight variation of performance numbers because of this difference.
================================================================================
12 | USAA GROWTH FUND
<PAGE>
================================================================================
TOP 10 EQUITY HOLDINGS
AS OF 1/31/2010
(% of Net Assets of the Fund)
Apple, Inc. ................................................... 3.2%
Microsoft Corp. ............................................... 3.1%
Cisco Systems, Inc. ........................................... 2.7%
Priceline.com, Inc. ........................................... 2.7%
Franklin Resources, Inc. ...................................... 2.4%
Google, Inc. "A" .............................................. 2.3%
3M Co. ........................................................ 2.2%
Amazon.com, Inc. .............................................. 2.1%
Cognizant Technology Solutions Corp. "A" ...................... 2.1%
Gilead Sciences, Inc. ......................................... 2.0%
o SECTOR ASSET ALLOCATION -- 1/31/2010 o
[PIE CHART OF SECTOR ASSET ALLOCATION]
INFORMATION TECHNOLOGY 35.7%
CONSUMER DISCRETIONARY 20.1%
HEALTH CARE 14.0%
INDUSTRIALS 10.1%
ENERGY 8.3%
FINANCIALS 6.6%
CONSUMER STAPLES 3.0%
MATERIALS 1.0%
MONEY MARKET INSTRUMENTS 2.1%
[END CHART]
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 14-19.
================================================================================
INVESTMENT OVERVIEW | 13
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
COMMON STOCKS (98.8%)
CONSUMER DISCRETIONARY (20.1%)
------------------------------
APPAREL & ACCESSORIES & LUXURY GOODS (0.9%)
178,485 Coach, Inc. $ 6,225
--------
APPAREL RETAIL (2.6%)
198,969 Aeropostale, Inc.* 6,544
140,848 Guess?, Inc. 5,593
140,398 Ross Stores, Inc. 6,449
--------
18,586
--------
AUTO PARTS & EQUIPMENT (0.9%)
218,967 Johnson Controls, Inc. 6,094
--------
AUTOMOTIVE RETAIL (0.9%)
38,798 AutoZone, Inc.* 6,015
--------
BROADCASTING (0.6%)
148,223 Discovery Communications, Inc. "A"* 4,396
--------
CASINOS & GAMING (0.2%)
85,855 International Game Technology 1,575
--------
DEPARTMENT STORES (1.7%)
340,706 Nordstrom, Inc. 11,768
--------
EDUCATION SERVICES (1.8%)
103,684 Apollo Group, Inc. "A"* 6,282
65,789 ITT Educational Services, Inc.* 6,373
--------
12,655
--------
GENERAL MERCHANDISE STORES (0.9%)
128,809 Dollar Tree, Inc.* 6,379
--------
INTERNET RETAIL (4.8%)
119,292 Amazon.com, Inc.* 14,960
96,805 Priceline.com, Inc.* 18,911
--------
33,871
--------
PUBLISHING (1.0%)
208,694 McGraw-Hill Companies, Inc. 7,398
--------
================================================================================
14 | USAA GROWTH FUND
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
RESTAURANTS (1.0%)
310,403 Starbucks Corp.* $ 6,764
--------
SPECIALIZED CONSUMER SERVICES (0.9%)
291,516 H&R Block, Inc. 6,273
--------
SPECIALTY STORES (1.9%)
330,535 Tiffany & Co. 13,423
--------
Total Consumer Discretionary 141,422
--------
CONSUMER STAPLES (3.0%)
-----------------------
HOUSEHOLD PRODUCTS (2.6%)
75,321 Colgate-Palmolive Co. 6,028
102,499 Kimberly-Clark Corp. 6,087
98,481 Procter & Gamble Co. 6,062
--------
18,177
--------
PERSONAL PRODUCTS (0.4%)
55,278 Estee Lauder Companies, Inc. "A" 2,903
--------
Total Consumer Staples 21,080
--------
ENERGY (8.3%)
-------------
INTEGRATED OIL & GAS (0.9%)
81,810 Occidental Petroleum Corp. 6,409
--------
OIL & GAS DRILLING (1.7%)
137,071 Helmerich & Payne, Inc. 5,734
71,940 Transocean Ltd.* 6,096
--------
11,830
--------
OIL & GAS EQUIPMENT & SERVICES (0.8%)
101,238 FMC Technologies, Inc.* 5,383
--------
OIL & GAS EXPLORATION & PRODUCTION (4.9%)
122,283 Anadarko Petroleum Corp. 7,799
118,380 EOG Resources, Inc. 10,704
112,156 Range Resources Corp. 5,159
255,317 Southwestern Energy Co.* 10,948
--------
34,610
--------
Total Energy 58,232
--------
FINANCIALS (6.6%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (3.3%)
29,772 BlackRock, Inc. "A" 6,366
170,998 Franklin Resources, Inc. 16,934
--------
23,300
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE (2.5%)
76,582 Goldman Sachs Group, Inc. $ 11,389
343,920 TD Ameritrade Holding Corp.* 6,108
--------
17,497
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.8%)
138,274 JPMorgan Chase & Co. 5,385
--------
Total Financials 46,182
--------
HEALTH CARE (14.0%)
-------------------
BIOTECHNOLOGY (3.0%)
112,778 Amgen, Inc.* 6,596
292,050 Gilead Sciences, Inc.* 14,097
--------
20,693
--------
HEALTH CARE DISTRIBUTORS (1.8%)
236,443 AmerisourceBergen Corp. 6,445
103,905 McKesson Corp. 6,112
--------
12,557
--------
HEALTH CARE EQUIPMENT (0.7%)
188,363 CareFusion Corp.* 4,850
--------
HEALTH CARE SERVICES (2.2%)
97,919 Express Scripts, Inc.* 8,211
121,107 Medco Health Solutions, Inc.* 7,446
--------
15,657
--------
MANAGED HEALTH CARE (2.0%)
204,321 UnitedHealth Group, Inc. 6,743
115,729 WellPoint, Inc.* 7,374
--------
14,117
--------
PHARMACEUTICALS (4.3%)
113,536 Abbott Laboratories 6,011
61,459 Allergan, Inc. 3,534
177,163 Eli Lilly and Co. 6,236
99,197 Johnson & Johnson 6,235
445,546 Mylan, Inc.* 8,122
--------
30,138
--------
Total Health Care 98,012
--------
INDUSTRIALS (10.1%)
-------------------
AEROSPACE & DEFENSE (1.4%)
81,847 Lockheed Martin Corp. 6,099
35,079 Precision Castparts Corp. 3,692
--------
9,791
--------
================================================================================
16 | USAA GROWTH FUND
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (1.1%)
136,953 United Parcel Service, Inc. "B" $ 7,912
--------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (2.3%)
62,981 Bucyrus International, Inc. 3,299
138,119 Deere & Co. 6,899
136,080 Joy Global, Inc. 6,224
--------
16,422
--------
INDUSTRIAL CONGLOMERATES (2.2%)
186,895 3M Co. 15,043
--------
INDUSTRIAL MACHINERY (3.1%)
98,245 Eaton Corp. 6,016
104,244 Flowserve Corp. 9,400
143,738 Illinois Tool Works, Inc. 6,266
--------
21,682
--------
Total Industrials 70,850
--------
INFORMATION TECHNOLOGY (35.7%)
------------------------------
APPLICATION SOFTWARE (0.7%)
82,613 Salesforce.com, Inc.* 5,250
--------
COMMUNICATIONS EQUIPMENT (4.1%)
652,543 Brocade Communications Systems, Inc.* 4,483
845,902 Cisco Systems, Inc.* 19,008
126,619 QUALCOMM, Inc. 4,962
--------
28,453
--------
COMPUTER HARDWARE (6.0%)
119,116 Apple, Inc.* 22,885
281,331 Hewlett-Packard Co. 13,242
50,161 International Business Machines Corp. 6,139
--------
42,266
--------
COMPUTER STORAGE & PERIPHERALS (3.9%)
763,523 EMC Corp.* 12,728
357,122 QLogic Corp.* 6,139
146,074 Seagate Technology 2,444
160,582 Western Digital Corp.* 6,100
--------
27,411
--------
DATA PROCESSING & OUTSOURCED SERVICES (3.5%)
152,902 Hewitt Associates, Inc. "A"* 6,037
146,558 Visa, Inc. "A" 12,022
342,636 Western Union Co. 6,352
--------
24,411
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS (0.9%)
335,786 Corning, Inc. $ 6,071
--------
INTERNET SOFTWARE & SERVICES (4.1%)
528,871 eBay, Inc.* 12,175
30,736 Google, Inc. "A"* 16,272
--------
28,447
--------
IT CONSULTING & OTHER SERVICES (2.9%)
147,598 Accenture plc "A" 6,050
334,956 Cognizant Technology Solutions Corp. "A"* 14,624
--------
20,674
--------
SEMICONDUCTORS (4.6%)
335,082 Broadcom Corp. "A"* 8,954
119,480 Cree, Inc.* 6,680
307,030 Intel Corp. 5,956
260,598 Marvell Technology Group Ltd.* 4,542
273,509 Texas Instruments, Inc. 6,154
--------
32,286
--------
SYSTEMS SOFTWARE (5.0%)
769,482 Microsoft Corp. 21,684
592,417 Oracle Corp. 13,661
--------
35,345
--------
Total Information Technology 250,614
--------
MATERIALS (1.0%)
---------------
DIVERSIFIED METALS & MINING (0.5%)
53,938 Walter Industries, Inc. 3,502
--------
STEEL (0.5%)
88,131 Cliffs Natural Resources, Inc. 3,521
--------
Total Materials 7,023
--------
Total Common Stocks (cost: $645,718) 693,415
--------
MONEY MARKET INSTRUMENTS (2.1%)
MONEY MARKET FUNDS (2.1%)
14,920,971 State Street Institutional Liquid Reserve Fund,
0.13%(a) (cost: $14,921) 14,921
--------
TOTAL INVESTMENTS (COST: $660,639) $708,336
========
================================================================================
18 | USAA GROWTH FUND
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------
($ 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 $693,415 $- $- $693,415
Money Market Instruments:
Money Market Funds 14,921 - - 14,921
-----------------------------------------------------------------------------------------------
Total $708,336 $- $- $708,336
-----------------------------------------------------------------------------------------------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<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.
o SPECIFIC NOTES
(a) Rate represents the money market fund annualized seven-day yield at
January 31, 2010.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
20 | USAA GROWTH FUND
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $660,639) $ 708,336
Receivables:
Capital shares sold:
Affiliated transactions (Note 8) 188
Nonaffiliated transactions 474
USAA Investment Management Company (Note 7D) 308
Dividends and interest 255
Securities sold 17,709
----------
Total assets 727,270
----------
LIABILITIES
Payables:
Securities purchased 22,820
Capital shares redeemed (nonaffiliated transactions) 554
Bank overdraft 1,149
Accrued management fees 440
Accrued transfer agent's fees 31
Other accrued expenses and payables 77
----------
Total liabilities 25,071
----------
Net assets applicable to capital shares outstanding $ 702,199
==========
NET ASSETS CONSIST OF:
Paid-in capital $1,047,507
Accumulated net realized loss on investments (393,005)
Net unrealized appreciation of investments 47,697
----------
Net assets applicable to capital shares outstanding $ 702,199
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $625,039/52,555 shares outstanding) $ 11.89
==========
Institutional Shares (net assets of $77,160/6,493 shares outstanding) $ 11.88
==========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 21
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 3,419
Interest 10
Securities lending (net) 1
-------
Total income 3,430
-------
EXPENSES
Management fees 2,470
Administration and servicing fees:
Fund Shares 483
Institutional Shares 14
Transfer agent's fees:
Fund Shares 988
Institutional Shares 14
Custody and accounting fees:
Fund Shares 60
Institutional Shares 5
Postage:
Fund Shares 52
Shareholder reporting fees:
Fund Shares 22
Trustees' fees 5
Registration fees:
Fund Shares 20
Professional fees 48
Other 11
-------
Total expenses 4,192
Expenses paid indirectly (42)
Expenses reimbursed:
Fund Shares (719)
Institutional Shares (2)
-------
Net expenses 3,429
-------
NET INVESTMENT INCOME 1
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 25,386
Change in net unrealized appreciation/depreciation 19,062
-------
Net realized and unrealized gain 44,448
-------
Increase in net assets resulting from operations $44,449
=======
See accompanying notes to financial statements.
================================================================================
22 | USAA GROWTH FUND
<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 $ 1 $ 1,798
Net realized gain (loss) on investments 25,386 (241,678)
Change in net unrealized appreciation/depreciation
of investments 19,062 21,878
------------------------
Increase (decrease) in net assets resulting
from operations 44,449 (218,002)
------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares (619) (1,181)
Institutional Shares* (138) (42)
------------------------
Distributions to shareholders (757) (1,223)
------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 6)
Fund Shares (9,819) 6,344
Institutional Shares* 35,257 39,171
------------------------
Total net increase in net assets from
capital share transactions 25,438 45,515
------------------------
Capital contribution from USAA Transfer Agency Company:
Institutional Shares* - 16
------------------------
Net increase (decrease) in net assets 69,130 (173,694)
NET ASSETS
Beginning of period 633,069 806,763
------------------------
End of period $702,199 $ 633,069
========================
Accumulated undistributed net investment income:
End of period $ - $ 756
========================
* Institutional Shares were initiated on August 1, 2008.
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 23
<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
Fund (the Fund), which is classified as diversified under the 1940 Act. The
Fund's investment objective is long-term growth of capital.
The Fund has two classes of shares: Growth Fund Shares (Fund Shares) and Growth
Fund Institutional Shares (Institutional Shares). Each class of shares has equal
rights to assets and earnings, except that each class bears certain
class-related expenses specific to the particular class. These expenses include
administration and servicing fees, transfer agent fees, postage, shareholder
reporting fees, and certain registration and custodian fees. Expenses not
attributable to a specific class, income, and realized gains or losses on
investments are allocated to each class of shares based on each class's relative
net assets. Each class has exclusive voting rights on matters related solely to
that class and separate voting rights on matters that relate to both classes.
The Institutional Shares are currently offered for sale only to the USAA Target
Retirement Funds (Target Funds) and not to the general public. The Target Funds
are managed by USAA Investment Management Company (the Manager), an affiliate of
the Fund.
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities
================================================================================
24 | USAA GROWTH FUND
<PAGE>
================================================================================
exchange or the Nasdaq over-the-counter markets are valued at the last
sales price or official closing price on the exchange or primary market
on which they trade. Equity securities traded primarily on foreign
securities exchanges or markets are valued at the last quoted sales
price, or the most recently determined official closing price calculated
according to local market convention, available at the time the Fund is
valued. If no last sale or official closing price is reported or
available, the average of the bid and asked prices generally is used.
2. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the foreign
markets may be closed. Therefore, the calculation of the Fund's net asset
value (NAV) may not take place at the same time the prices of certain
foreign securities held by the Fund are determined. In most cases, events
affecting the values of foreign securities that occur between the time of
their last quoted sales or official closing prices and the close of
normal trading on the NYSE on a day the Fund's NAV is calculated will not
be reflected in the value of the Fund's foreign securities. However, the
Manager and the Fund's 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 25
<PAGE>
================================================================================
occur on a fairly regular basis (such as U.S. market movements) are
significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
6. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before the
pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
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
================================================================================
26 | USAA GROWTH FUND
<PAGE>
================================================================================
orderly transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments is
based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices (unadjusted)
in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon notification. Interest income is recorded daily
on the accrual basis. Discounts and premiums on short-term securities are
amortized on a straight-line basis over the life of the respective
securities.
E. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
<PAGE>
================================================================================
These agreements are collateralized by underlying securities. The collateral
obligations are marked-to-market daily to ensure their value is equal to or
in excess of the repurchase agreement price plus accrued interest and are
held by the Fund, either through its regular custodian or through a special
"tri-party" custodian that maintains separate accounts for both the Fund and
its counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit risk, and the Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
F. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective dates
of such transactions.
2. Market value of securities, other assets, and liabilities at the exchange
rate obtained from an independent pricing service on a daily basis.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar
================================================================================
28 | USAA GROWTH FUND
<PAGE>
================================================================================
equivalent of the amounts received. At the end of the Fund's fiscal year,
these net realized foreign currency gains/losses are reclassified from
accumulated net realized gain/loss to accumulated undistributed net
investment income on the statement of assets and liabilities as such amounts
are treated as ordinary income/loss for tax purposes. Net unrealized foreign
currency exchange gains/losses arise from changes in the value of assets and
liabilities, other than investments in securities, resulting from changes in
the exchange rate.
G. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition, through
arrangements with the Fund's custodian and other banks utilized by the Fund
for cash management purposes, realized credits, if any, generated from cash
balances in the Fund's bank accounts may be used to directly reduce the
Fund's expenses. For the six-month period ended January 31, 2010, brokerage
commission recapture credits and custodian and other bank credits reduced the
Fund's expenses by $42,000 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
<PAGE>
================================================================================
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $750 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA funds that are party to the loan agreement are assessed facility fees
by CAPCO based on the funds' assessed proportionate share of CAPCO's operating
expenses related to obtaining and maintaining CAPCO's funding programs in total
(in no event to exceed 0.13% annually of the amount of the committed loan
agreement). Prior to September 25, 2009, the maximum annual facility fee was
0.07% of the amount of the committed loan agreement. The facility fees are
allocated among the funds based on their respective average net assets for the
period.
For the six-month period ended January 31, 2010, the Fund paid CAPCO facility
fees of $2,000, which represents 1.6% 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 and realized gains from security
transactions not offset by capital losses are made annually in the succeeding
fiscal year or as otherwise required to avoid the payment of federal taxes. At
July 31, 2009, the Fund had capital loss carryovers of $269,889,000, for federal
income tax purposes, which, if not offset by subsequent capital gains, will
expire between 2011 and 2017, as shown below. It is unlikely that the Trust's
Board of Trustees will authorize a
================================================================================
30 | USAA GROWTH FUND
<PAGE>
================================================================================
distribution of capital gains realized in the future until the capital loss
carryovers have been used or expire.
CAPITAL LOSS CARRYOVERS
--------------------------------------
EXPIRES BALANCE
----------- ------------
2011 $173,799,000
2017 96,090,000
------------
Total $269,889,000
============
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the six-month period
ended 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.
(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
$442,583,000 and $418,735,000, 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 $68,150,000 and $20,453,000, respectively, resulting in net
unrealized appreciation of $47,697,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
<PAGE>
================================================================================
(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 January 31,
2010, the Fund received securities-lending income of $1,000, which is net of the
20% income retained by Wachovia. As of January 31, 2010, the Fund had no
securities out on loan.
(6) CAPITAL SHARE TRANSACTIONS
At January 31, 2010, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
================================================================================
32 | USAA GROWTH FUND
<PAGE>
================================================================================
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated Target Funds. Capital share transactions were as
follows, in thousands:
SIX-MONTH PERIOD YEAR ENDED
ENDED 1/31/2010 7/31/2009
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------
FUND SHARES:
Shares sold 4,092 $ 48,976 9,116 $ 95,724
Shares issued from reinvested
dividends 49 611 119 1,164
Shares redeemed (4,902) (59,406) (8,485) (90,544)
--------------------------------------------
Net increase (decrease) from
capital share transactions (761) $ (9,819) 750 $ 6,344
============================================
INSTITUTIONAL SHARES
(INITIATED ON AUGUST 1, 2008):
Shares sold 3,430 $ 41,709 4,235 $ 45,551
Shares issued from reinvested
dividends 11 138 4 42
Shares redeemed (538) (6,590) (649) (6,422)
--------------------------------------------
Net increase from capital
share transactions 2,903 $ 35,257 3,590 $ 39,171
============================================
(7) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to the
Fund pursuant to an Advisory Agreement. Under this agreement, the Manager is
responsible for managing the business and affairs of the Fund, subject to the
authority of and supervision by the Trust's Board of Trustees. The Manager is
authorized to select (with approval of the Trust's Board of Trustees and
without shareholder approval) one or more subadvisers to manage the actual
day-to-day investment of a portion of the Fund's assets. The Manager monitors
each subadviser's performance through quantitative and qualitative analysis,
and periodically recommends to the Trust's Board of Trustees as to whether
each subadviser's agreement should be renewed, terminated, or modified. The
Manager also is responsible
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
<PAGE>
================================================================================
for allocating assets to the subadvisers. The allocation for each subadviser
can range from 0% to 100% of the Fund's assets, and the Manager can change
the allocations without shareholder approval.
The investment management fee for the Fund is composed of a base fee and a
performance adjustment. The Fund's base fee is accrued daily and paid monthly
at an annualized rate of 0.75% of the Fund's average net assets for the
fiscal year.
The performance adjustment is calculated separately for each share class on a
monthly basis by comparing each class's performance to that of the Lipper
Large-Cap Growth Funds Index over the performance period. The Lipper
Large-Cap Growth Funds Index tracks the total return performance of the 30
largest funds in the Lipper Large-Cap Growth Funds category. The performance
period for each class consists of the current month plus the previous 35
months. The performance adjustment for the Institutional Shares includes the
performance of the Fund Shares for periods prior to August 1, 2008. The
following table is utilized to determine the extent of the performance
adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
-----------------------------------------------------------------------------
1.00% to 4.00% 0.04%
4.01% to 7.00% 0.05%
7.01% and greater 0.06%
(1)Based on the difference between average annual performance of the Fund and
its relevant index, rounded to the nearest 0.01%. Average net assets are
calculated over a rolling 36-month period.
Each class's annual performance adjustment rate is multiplied by the average
net assets of each respective class over the entire performance period, which
is then multiplied by a fraction, the numerator of which is the number of
days in the month and the denominator of which is 365 (366 in leap years).
The resulting amount is the performance adjustment; a positive adjustment in
the case of overperformance, or a negative adjustment in the case of
underperformance.
================================================================================
34 | USAA GROWTH FUND
<PAGE>
================================================================================
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper Large-Cap Growth Funds Index over that period, even if
the class 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 $2,470,000, which
included a performance adjustment for the Fund Shares and Institutional
Shares of $(160,000) and $(1,000), respectively. For the Fund Shares and
Institutional Shares, the performance adjustments were (0.05)% and (0.01)%,
respectively.
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into investment
subadvisory agreements with Loomis, Sayles & Company, L.P. (Loomis Sayles)
and The Renaissance Group LLC (Renaissance), under which Loomis Sayles and
Renaissance 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 Loomis Sayles a subadvisory fee in the annual
amount of 0.20% of the portion of the Fund's average daily 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
$395,000.
The Manager (not the Fund) pays Renaissance a subadvisory fee in the annual
amount of 0.20% of the portion of the Fund's average daily net assets that
Renaissance manages. For the six-month period ended January 31, 2010, the
Manager incurred subadvisory fees, paid or payable to Renaissance, of
$307,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and shareholder servicing functions for the Fund. For such
services, the Manager receives a fee accrued daily and paid monthly at an
annualized rate of 0.15% and 0.05% of average net assets of the Fund Shares
and Institutional Shares, respectively. For the six-month period ended
January 31, 2010, the Fund Shares and
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
<PAGE>
================================================================================
Institutional Shares incurred administration and servicing fees, paid or
payable to the Manager, of $483,000 and $14,000, respectively.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Trust's Board of Trustees
has approved the reimbursement of a portion of these expenses incurred by the
Manager. For the six-month period ended January 31, 2010, the Fund reimbursed
the Manager $16,000 for these compliance and legal services. These expenses
are included in the professional fees on the Fund's statement of operations.
D. EXPENSE LIMITATION -- The Manager has agreed, through December 1, 2010, to
limit the annual expenses of the Fund Shares and the Institutional shares to
1.00% and 0.87%, respectively, of their average annual net assets, excluding
extraordinary expenses and before reductions of any expenses paid indirectly,
and will reimburse the Fund Shares and Institutional Shares for all expenses
in excess of those amounts. This expense limitation arrangement may not be
changed or terminated through December 1, 2010, without approval of the
Trust's Board of Trustees, and may be changed or terminated by the Manager at
any time after that date. For the six-month period ended January 31, 2010,
the Fund incurred reimbursable expenses from the Manager for the Fund Shares
and the Institutional Shares of $719,000 and $2,000, respectively, of which
$308,000 was receivable from the Manager.
E. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services (SAS), an affiliate of the Manager, provides transfer agent
services to the Fund. Transfer agent's fees for Fund Shares are paid monthly
based on an annual charge of $23 per shareholder account plus out-of-pocket
expenses. The Fund Shares also pay SAS fees that are related to the
administration and servicing of accounts that are traded on an omnibus basis.
Transfer agent's fees for Institutional Shares are paid monthly based on a
fee accrued daily at an annualized rate of 0.05% of the Institutional Shares'
average net assets, plus out-of-pocket expenses. For the
================================================================================
36 | USAA GROWTH FUND
<PAGE>
================================================================================
six-month period ended January 31, 2010, the Fund Shares and Institutional
Shares incurred transfer agent's fees, paid or payable to SAS, of $988,000
and $14,000, respectively.
F. UNDERWRITING SERVICES -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
(8) TRANSACTIONS WITH AFFILIATES
The Fund is one of 13 USAA mutual funds in which the affiliated Target Funds may
invest. The Target Funds do not invest in the Fund for the purpose of exercising
management or control. As of January 31, 2010, the Fund recorded a receivable
for capital shares sold of $188,000 and a payable for capital shares redeemed of
less than $500 for the Target Funds' purchases and redemptions of Institutional
Shares. As of January 31, 2010, the Target Funds owned the following percent of
the total outstanding shares of the Fund:
OWNERSHIP %
--------------------------------------------------------------------------------
USAA Target Retirement Income Fund 0.6%
USAA Target Retirement 2020 Fund 1.5
USAA Target Retirement 2030 Fund 3.2
USAA Target Retirement 2040 Fund 3.9
USAA Target Retirement 2050 Fund 1.8
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(9) SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date but before the
financial statements are issued are categorized as recognized or non-recognized
for financial statement purposes. The Manager has evaluated subsequent events
through 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
<PAGE>
================================================================================
(10) 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.
================================================================================
38 | USAA GROWTH FUND
<PAGE>
================================================================================
(11) FINANCIAL HIGHLIGHTS -- FUND SHARES
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 $ 11.12 $ 15.35 $ 16.03 $ 13.80 $ 14.53 $ 11.78
------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment
income (loss) (.00)(a),(b) .03 .00(b) (.02)(a) .00(b) .00(b)
Net realized and
unrealized gain (loss) .78(a) (4.24) (.68) 2.25(a) (.73) 2.75
------------------------------------------------------------------------------------
Total from investment
operations .78(a) (4.21) (.68) 2.23(a) (.73) 2.75
------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.01) (.02) - (.00)(b) - -
------------------------------------------------------------------------------------
Net asset value at end
of period $ 11.89 $ 11.12 $ 15.35 $ 16.03 $ 13.80 $ 14.53
====================================================================================
Total return (%)* 7.02 (27.39) (4.24) 16.19(c) (5.02) 23.34
Net assets at end of
period (000) $625,039 $593,140 $806,763 $883,484 $863,797 $933,849
Ratios to average
net assets:**
Expenses (%)(d) 1.00(g) 1.00 1.00 1.00(c) 1.00 1.00
Expenses, excluding
reimbursements (%)(d) 1.22(g) 1.25 1.17 1.21(c) 1.23 1.21
Net investment
income (loss) (%) (.01)(g) .31 .02 (.14) .02 .00(e)
Portfolio turnover (%) 62 136 156(f) 107 128 128
* 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 $638,415,000.
(a) Calculated using average shares. For the six-month period ended January 31, 2010, average shares were
52,995,000.
(b) Represents less than $0.01 per share.
(c) For the year ended July 31, 2007, SAS voluntarily reimbursed the Fund Shares for a portion of the transfer
agent's fees incurred. The reimbursement had no effect on the Fund Shares' total return or ratio of expenses
to average net assets.
(d) Reflects total operating expenses of the Fund Shares before reductions of any expenses paid indirectly. The Fund
Shares' expenses paid indirectly decreased the expense ratios as follows:
(.01) (.03%) (.03%) (.02%) (.03%) (.04%)
(e) Represents less than 0.01%.
(f) Reflects increased trading activity due to changes in subadvisors.
(g) Annualized. The ratio is not necessarily indicative of 12 months of operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
<PAGE>
================================================================================
(11) FINANCIAL HIGHLIGHTS (CONTINUED) -- INSTITUTIONAL SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED PERIOD ENDED
JANUARY 31, JULY 31,
2010 2009***
-----------------------------------
Net asset value at beginning of period $ 11.12 $ 15.23
------------------------------
Income (loss) from investment operations:
Net investment income .01 .03(a)
Net realized and unrealized gain (loss) .78 (4.11)(a)
------------------------------
Total from investment operations .79 (4.08)(a)
------------------------------
Less distributions from:
Net investment income (.03) (.03)
------------------------------
Net asset value at end of period $ 11.88 $ 11.12
==============================
Total return (%)* 7.05 (26.76)
Net assets at end of period (000) $77,160 $39,929
Ratios to average net assets:**
Expenses (%)(b),(c) .87 .87
Expenses, excluding reimbursements (%)(b),(c) .87 .89
Net investment income (%)(b) .10 .32
Portfolio turnover (%) 62 136
* 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
$57,318,000.
*** Institutional Shares were initiated on August 1, 2008.
(a) Calculated using average shares.
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(c) Reflects total operating expenses of the Institutional Shares before
reductions of any expenses paid indirectly. The Institutional Shares'
expenses paid indirectly decreased the expense ratios by less than 0.01%.
================================================================================
40 | USAA GROWTH 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 line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class and an assumed rate of return of
5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or
================================================================================
EXPENSE EXAMPLE | 41
<PAGE>
================================================================================
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as 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
---------------------------------------------------------------------------------------------
FUND SHARES
Actual $1,000.00 $1,070.20 $5.17
Hypothetical
(5% return before expenses) 1,000.00 1,020.21 5.04
INSTITUTIONAL SHARES
Actual 1,000.00 1,070.50 4.54
Hypothetical
(5% return before expenses) 1,000.00 1,020.82 4.43
* Expenses are equal to the annualized expense ratio of 0.99% for Fund Shares
and 0.87% for Institutional Shares, which are net of any reimbursements and
expenses paid indirectly, multiplied by the average account value over the
period, multiplied by 184 days/365 days (to reflect the one-half-year period).
The Fund's actual ending account values are based on its actual total returns
of 7.02% for Fund Shares and 7.05% for Institutional Shares for the six-month
period of August 1, 2009, through January 31, 2010.
================================================================================
42 | USAA GROWTH 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.
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<PAGE>
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23420-0310 (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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