UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: CHRISTOPHER P. LAIA
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: JULY 31,
Date of reporting period: JANUARY 31, 2010
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2010
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA VALUE FUND]
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SEMIANNUAL REPORT
USAA VALUE 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
Invests primarily in equity securities of companies that are considered to be
undervalued.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Investment Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
FUND RECOGNITION 7
INVESTMENT OVERVIEW 9
FINANCIAL INFORMATION
Portfolio of Investments 15
Notes to Portfolio of Investments 23
Financial Statements 24
Notes to Financial Statements 27
EXPENSE EXAMPLE 44
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 VALUE 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
Barrow, Hanley, Mewhinney & Strauss, LLC TIMOTHY J. CULLER, CFA
JAMES S. McCLURE, CFA
MARK GIAMBRONE, CPA JOHN P. HARLOE, CFA
JAMES P. BARROW
RAY NIXON, Jr.
ROBERT J. CHAMBERS, CFA
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o HOW DID THE USAA VALUE FUND (THE FUND SHARES) PERFORM?
For the six-month period ended January 31, 2010, the Fund Shares had a total
return of 12.20%. This compares to returns of 10.70% for the Russell 3000
Value Index (the Index) and 10.24% for the Lipper Multi-Cap Value Funds
Index.
o BEYOND SECTORS AND INDIVIDUAL HOLDINGS, WHAT LED TO THE STRONG PERFORMANCE?
For us, 2009 was a tale of two markets. In the first half of the year, we
were buying high-quality companies with strong balance sheets that we
believed had good leverage to an economic recovery. These companies, which
normally trade at a premium valuation, were only trading at a market
multiple. Examples include Intel Corp., Medtronic, Inc., and ADS. As we
expected, the market started to reward these companies with premium
valuations as the year progressed.
In the reporting period, as we were benefiting from our earlier purchases,
we focused on stable, consistent businesses that were left behind in the
early-to-mid stages of the rally. These companies,
Refer to page 11 for benchmark definitions.
Past performance is no guarantee of future results.
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4 | USAA VALUE FUND
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which include Sysco Foods Corp., Johnson & Johnson, and Raytheon Co., offer
decent earnings growth, low valuations relative to the market, and
dividends. Once again, we've started to see the market come around to our
point of view. Overall, we've been opportunistic, taking what the market
gives us while sticking to our valuation discipline.
o FOR THE SIX-MONTH REPORTING PERIOD, WHAT SECTORS HAD THE BIGGEST IMPACT ON
PERFORMANCE?
Even though we were underweight in the financials sector, we had outstanding
stock selection, so on an attribution basis it was our best sector relative
to the Index. We also benefited from an underweight position in the energy
sector, and to a lesser degree from good stock selection within it.
The only sector that meaningfully detracted from index-relative performance
was health care, where we were hurt by both an overweight position in the
Index-lagging group as well as poor stock selection.
o HOW IS THE FUND POSITIONED MOVING INTO THE SECOND HALF OF THE REPORTING YEAR?
As of the end of the reporting period, we held a significant overweight
position in health care stocks. We anticipate a continued turnaround in the
sector as investors recognize -- as they did in 1994 -- that health care
reform, even if it were to pass, is not going to destroy value in solid
companies. Also, as of the date of this writing, we have an overweight
position in the information technology sector, where even though stocks have
risen, we're seeing a commensurate (or better) rise in earnings and
prospects. The information technology stocks we own are trading at
reasonable multiples and some pay, what we believe to be, good dividends.
Finally, even though the industrials sector has not been strong lately, we
have been adding to the group because earnings are strong.
You will find a complete list of securities that the Fund owns on pages
15-22.
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MANAGERS' COMMENTARY ON THE FUND | 5
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We ended the reporting period underweight in the financials sector, but have
been adjusting our exposure within the group. We're more attracted to large
money-center and trust banks but have begun to reduce positions in regional
banks, especially those with exposure to commercial real estate, haven't
repaid Troubled Asset Relief Program (also known as "TARP") funds, and/or
have reached our valuation targets. As of the date of this writing, we also
plan to stay underweight in the energy sector.
o WHAT'S YOUR OUTLOOK?
In the wake of an historic 10-month stock market rally, we're looking for
more modest returns this year. We think expectations, especially on the
revenue side, have gotten ahead of the fundamentals. Corporate management
teams did a great job of cost cutting to keep bottom-line earnings intact,
but now we need revenues to keep the earnings momentum going. That will be
tough given the lack of consumer and business confidence. We do see the
economy continuing to improve, especially in the first half of the year, but
it will remain a slow process. We think dividends will be an important part
of the total return from stocks this year. Furthermore, we think that active
management will be crucial as we seek to find companies that can deliver
revenue growth in a slow recovery.
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6 | USAA VALUE FUND
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FUND RECOGNITION
USAA VALUE FUND SHARES
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OVERALL MORNINGSTAR RATING(TM)
out of 1,104 large value funds for
the period ended January 31, 2010:
OVERALL RATING
* * * *
3-YEAR
* * * *
out of 1,104 funds
5-YEAR
* * * *
out of 914 funds
10-YEAR
N/A
The Overall Morningstar Rating for a fund is derived from a weighted average of
the performance figures associated with its three-, five-, and 10-year (if
applicable) Morningstar Rating metrics. Ratings are based on risk-adjusted
returns.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. For each fund with at least
a three-year history, Morningstar calculates a Morningstar Rating(TM) based on a
Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's
monthly performance (including the effects of sales charges, loads, and
redemption fees), placing more emphasis on downward variations and rewarding
consistent performance. The top 10% of the funds in each broad asset class
receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars,
the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.
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FUND RECOGNITION | 7
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LIPPER LEADERS (OVERALL)
[5] [5] [5]
TOTAL RETURN CONSISTENT TAX
RETURN EFFICIENCY
The Value Fund Shares are listed as a Lipper Leader for Total Return, Consistent
Return, and Tax Efficiency among 284, 279, and 269 funds within the Lipper
Multi-Cap Value Funds category for the overall period ended January 31, 2010.
The Value Fund Shares received a Lipper Leader rating for Total Return among 219
funds for the five-year period and a score of 4 among 284 funds for the
three-year period, respectively, for the overall period ending January 31, 2010.
The Value Fund Shares received a Lipper Leader rating for Consistent Return for
among 277 and 214 funds for the three- and five-year periods, respectively, and
received a Lipper Leader rating for Tax Efficiency among 269 and 207 funds for
the three- and five-year periods, respectively, for the overall period ending
January 31, 2010. Lipper ratings for Total Return reflect funds' historical
total return performance relative to peers as of January 31, 2010. Lipper
ratings for Consistent Return reflect funds' historical risk-adjusted returns,
adjusted for volatility, relative to peers as of January 31, 2010. Lipper
ratings for Tax Efficiency reflect funds' historical success in postponing
taxable distributions relative to peers as of January 31, 2010. Tax efficiency
offers no benefit to investors in tax-sheltered accounts such as 401(k) plans.
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Ratings are subject to change every month and are based on an equal-weighted
average of percentile ranks for the Tax Efficiency 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 VALUE FUND
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INVESTMENT OVERVIEW
USAA VALUE FUND SHARES (Symbol: UVALX)
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1/31/10 7/31/09
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Net Assets $400.0 Million $347.5 Million
Net Asset Value Per Share $11.45 $10.33
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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 Since Inception 8/03/01
12.20% 38.64% 1.14% 4.43%
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EXPENSE RATIO**
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Before Reimbursement 1.41% After Reimbursement 1.15%
*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 1.15% 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]
USAA VALUE RUSSELL 3000 LIPPER MULTI-CAP
FUND SHARES VALUE INDEX VALUE FUNDS INDEX
7/31/2001 $10,000.00 $10,000.00 $10,000.00
8/31/2001 10,020.00 9,624.40 9,628.60
9/30/2001 9,160.00 8,919.93 8,641.98
10/31/2001 9,520.00 8,863.95 8,819.73
11/30/2001 10,530.00 9,387.67 9,457.95
12/31/2001 11,164.18 9,633.61 9,732.41
1/31/2002 11,184.24 9,574.07 9,605.78
2/28/2002 11,063.87 9,592.65 9,480.12
3/31/2002 11,766.02 10,066.13 9,964.06
4/30/2002 11,605.53 9,774.24 9,670.98
5/31/2002 11,485.16 9,792.88 9,661.61
6/30/2002 10,532.24 9,257.91 8,922.43
7/31/2002 9,649.54 8,359.25 8,181.78
8/31/2002 9,669.60 8,415.37 8,312.01
9/30/2002 8,796.93 7,502.75 7,410.88
10/31/2002 9,047.70 8,026.75 7,807.65
11/30/2002 9,318.53 8,541.61 8,389.17
12/31/2002 9,120.12 8,171.02 8,018.86
1/31/2003 8,928.01 7,970.96 7,853.61
2/28/2003 8,847.12 7,754.64 7,652.14
3/31/2003 8,796.57 7,772.28 7,680.89
4/30/2003 9,241.45 8,460.16 8,348.20
5/31/2003 9,898.67 9,028.34 9,046.01
6/30/2003 10,111.00 9,144.20 9,112.49
7/31/2003 10,100.89 9,303.39 9,237.82
8/31/2003 10,383.99 9,463.79 9,527.22
9/30/2003 10,252.55 9,370.22 9,417.49
10/31/2003 10,838.99 9,958.06 9,936.42
11/30/2003 11,031.10 10,112.18 10,148.24
12/31/2003 11,632.37 10,715.19 10,647.69
1/31/2004 11,694.03 10,917.63 10,872.66
2/29/2004 11,981.75 11,149.86 11,079.81
3/31/2004 11,848.17 11,071.92 10,982.86
4/30/2004 11,591.27 10,777.21 10,781.07
5/31/2004 11,694.03 10,888.61 10,831.76
6/30/2004 12,238.65 11,168.96 11,136.92
7/31/2004 11,971.48 10,981.46 10,818.71
8/31/2004 12,043.41 11,133.66 10,856.45
9/30/2004 12,361.96 11,328.10 11,076.03
10/31/2004 12,495.55 11,515.35 11,221.41
11/30/2004 13,307.35 12,134.57 11,809.06
12/31/2004 13,806.13 12,530.73 12,235.27
1/31/2005 13,662.43 12,285.54 11,969.13
2/28/2005 14,148.79 12,678.84 12,284.94
3/31/2005 14,060.36 12,497.57 12,110.98
4/30/2005 13,750.86 12,238.35 11,821.12
5/31/2005 14,104.58 12,569.70 12,205.88
6/30/2005 14,425.14 12,742.72 12,356.16
7/31/2005 14,922.56 13,142.62 12,773.37
8/31/2005 14,756.75 13,063.47 12,677.96
9/30/2005 14,889.40 13,228.66 12,784.34
10/31/2005 14,403.03 12,893.02 12,470.97
11/30/2005 14,756.75 13,325.61 12,889.90
12/31/2005 14,949.62 13,389.20 13,010.36
1/31/2006 15,381.30 13,960.50 13,439.30
2/28/2006 15,426.74 14,037.92 13,460.42
3/31/2006 15,676.66 14,272.07 13,681.44
4/30/2006 16,119.69 14,604.55 13,952.89
5/31/2006 15,676.66 14,214.21 13,593.60
6/30/2006 15,619.86 14,312.63 13,566.14
7/31/2006 15,653.94 14,609.44 13,609.07
8/31/2006 15,915.21 14,871.31 13,871.09
9/30/2006 16,267.37 15,154.00 14,183.27
10/31/2006 16,744.49 15,674.96 14,683.19
11/30/2006 17,119.36 16,040.95 14,988.96
12/31/2006 17,435.52 16,380.76 15,231.27
1/31/2007 17,728.25 16,593.51 15,489.89
2/28/2007 17,599.45 16,339.82 15,225.03
3/31/2007 17,927.32 16,587.39 15,354.61
4/30/2007 18,524.50 17,160.33 15,985.35
5/31/2007 19,273.92 17,780.24 16,596.41
6/30/2007 18,946.05 17,365.05 16,302.47
7/31/2007 18,044.41 16,504.65 15,546.37
8/31/2007 18,138.09 16,701.46 15,577.46
9/30/2007 18,536.21 17,234.62 15,988.96
10/31/2007 18,665.02 17,251.24 16,054.89
11/30/2007 17,985.87 16,372.16 15,241.08
12/31/2007 17,660.65 16,215.24 15,073.02
1/31/2008 17,014.23 15,564.53 14,342.48
2/29/2008 16,306.83 14,915.04 13,834.46
3/31/2008 15,697.00 14,829.06 13,558.52
4/30/2008 16,477.58 15,531.84 14,251.35
5/31/2008 16,867.87 15,550.29 14,506.80
6/30/2008 15,270.12 14,062.50 13,167.54
7/31/2008 15,184.74 14,070.87 13,022.34
8/31/2008 15,416.48 14,344.66 13,168.98
9/30/2008 14,196.82 13,322.39 11,949.64
10/31/2008 11,647.73 10,985.45 9,759.26
11/30/2008 10,781.78 10,158.14 9,110.73
12/31/2008 11,288.87 10,336.96 9,398.19
1/31/2009 10,428.18 9,124.93 8,591.18
2/28/2009 9,130.89 7,901.90 7,646.36
3/31/2009 9,929.22 8,579.61 8,311.85
4/30/2009 11,064.34 9,534.60 9,215.70
5/31/2009 11,575.77 10,092.09 9,766.20
6/30/2009 11,688.04 10,021.69 9,699.76
7/31/2009 12,885.53 10,867.97 10,495.09
8/31/2009 13,446.86 11,432.17 10,948.02
9/30/2009 13,808.60 11,884.28 11,388.35
10/31/2009 13,496.75 11,486.22 11,103.20
11/30/2009 14,344.98 12,111.58 11,596.77
12/31/2009 14,760.43 12,379.70 11,896.87
1/31/2010 14,457.38 12,030.35 11,570.28
[END CHART]
*Data from 7/31/01 to 1/31/10.
*The performance of the Russell 3000 Value Index and the Lipper Multi-Cap Value
Funds Index is calculated from the end of the month, July 31, 2001, while the
Fund's inception date is August 3, 2001. There may be a slight variation of the
performance numbers because of this difference.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
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10 | USAA VALUE FUND
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The graph on page 10 illustrates the comparison of a $10,000 hypothetical
investment in the USAA Value Fund Shares to the following benchmarks:
o The unmanaged Russell 3000(R) Value Index measures the performance of those
Russell 3000 Index companies with lower price-to-book ratios and lower
forecasted growth values. The stocks in this index are also members of
either the unmanaged Russell 1000(R) Value or the unmanaged Russell 2000(R)
Value indexes.
o The unmanaged Lipper Multi-Cap Value Funds Index tracks the total return
performance of the 30 largest funds within the Lipper Multi-Cap Value Funds
category.
Indexes are unmanaged and you cannot invest directly in an Index.
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INVESTMENT OVERVIEW | 11
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USAA VALUE FUND INSTITUTIONAL SHARES*
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1/31/10 7/31/09
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Net Assets $62.8 Million $29.4 Million
Net Asset Value Per Share $11.44 $10.34
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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
12.35% 38.99% -2.88%
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EXPENSE RATIO***
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0.90%
*The USAA Value 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 EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING EXPENSES, BEFORE
REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND INCLUDING ANY ACQUIRED FUND FEES
AND EXPENSES, AS REPORTED IN THE INSTITUTIONAL SHARES' PROSPECTUS DATED DECEMBER
1, 2009, AND IS CALCULATED AS A PERCENTAGE OF AVERAGE NET ASSETS. 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
0.91% OF THE INSTITUTIONAL SHARES' AVERAGE DAILY NET ASSETS. IF THE
INSTITUTIONAL SHARES' TOTAL ANNUAL OPERATING EXPENSE RATIO IS LOWER THAN 0.91%,
THE INSTITUTIONAL SHARES WILL OPERATE AT THE LOWER EXPENSE RATIO. 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. THIS EXPENSE RATIO 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.
================================================================================
12 | USAA VALUE FUND
<PAGE>
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA VALUE FUND LIPPER MULTI-CAP RUSSELL 3000
INSTITUTIONAL SHARES VALUE FUNDS VALUE INDEX
7/31/2008 $10,000.00 $10,000.00 $10,000.00
8/31/2008 10,177.13 10,112.61 10,194.58
9/30/2008 9,371.98 9,176.26 9,468.06
10/31/2008 7,689.21 7,494.25 7,807.23
11/30/2008 7,117.55 6,996.23 7,219.27
12/31/2008 7,454.67 7,216.98 7,346.36
1/31/2009 6,885.67 6,597.26 6,484.98
2/28/2009 6,036.30 5,871.72 5,615.78
3/31/2009 6,555.82 6,382.76 6,097.43
4/30/2009 7,306.24 7,076.84 6,776.13
5/31/2009 7,644.34 7,499.57 7,172.32
6/30/2009 7,726.80 7,448.56 7,122.29
7/31/2009 8,518.44 8,059.30 7,723.74
8/31/2009 8,897.78 8,407.11 8,124.71
9/30/2009 9,136.92 8,745.24 8,446.01
10/31/2009 8,930.76 8,526.27 8,163.12
11/30/2009 9,499.76 8,905.29 8,607.55
12/31/2009 9,771.02 9,135.74 8,798.10
1/31/2010 9,570.25 8,884.95 8,549.82
[END CHART]
*Data from 7/31/08 to 1/31/10.
See page 11 for benchmark definitions.
The graph illustrates the comparison of a $10,000 hypothetical investment in
the USAA Value Fund Institutional Shares to the benchmarks.
*The performance of the Lipper Multi-Cap Value Funds Index and the Russell 3000
Value 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.
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.
================================================================================
INVESTMENT OVERVIEW | 13
<PAGE>
================================================================================
TOP 10 EQUITY HOLDINGS
AS OF 1/31/2010
(% of Net Assets of the Fund)
Stanley Works ............................................... 2.3%
Occidental Petroleum Corp. .................................. 2.1%
Capital One Financial Corp. ................................. 2.1%
Pfizer, Inc. ................................................ 2.1%
WellPoint, Inc. ............................................. 2.0%
Imperial Tobacco Group plc ADR .............................. 2.0%
PNC Financial Services Group, Inc. .......................... 1.9%
Bristol-Myers Squibb Co. .................................... 1.9%
American Express Co. ........................................ 1.8%
Illinois Tool Works, Inc. ................................... 1.7%
o SECTOR ASSET ALLOCATION* -- 1/31/2010 o
[PIE CHART OF SECTOR ASSET ALLOCATION]
FINANCIALS 17.2%
INDUSTRIALS 14.7%
INFORMATION TECHNOLOGY 14.1%
CONSUMER DISCRETIONARY 13.1%
HEALTH CARE 12.6%
ENERGY 8.9%
CONSUMER STAPLES 7.3%
MONEY MARKET INSTRUMENTS 6.0%
UTILITIES 5.2%
TELECOMMUNICATION SERVICES 2.3%
MATERIALS 1.8%
[END CHART]
*Excludes short-term investments purchased with cash collateral fr om securities
loaned.
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 15-22.
================================================================================
14 | USAA VALUE FUND
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2010 (unaudited)
---------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------
COMMON STOCKS (97.2%)
CONSUMER DISCRETIONARY (13.1%)
------------------------------
APPAREL & ACCESSORIES & LUXURY GOODS (0.6%)
113,200 Hanesbrands, Inc.* $ 2,600
--------
APPAREL RETAIL (1.0%)
86,400 Limited Brands, Inc. 1,643
144,200 Men's Wearhouse, Inc. 2,906
--------
4,549
--------
AUTO PARTS & EQUIPMENT (1.2%)
261,700 American Axle & Manufacturing Holdings, Inc.*(a) 2,447
162,700 Gentex Corp. 3,119
--------
5,566
--------
AUTOMOTIVE RETAIL (0.4%)
46,700 Advance Auto Parts, Inc. 1,842
--------
CASINOS & GAMING (0.9%)
63,800 Ameristar Casinos, Inc. 945
187,500 International Game Technology 3,439
--------
4,384
--------
COMPUTER & ELECTRONICS RETAIL (0.3%)
83,000 GameStop Corp. "A"* 1,641
--------
GENERAL MERCHANDISE STORES (0.5%)
76,200 Family Dollar Stores, Inc. 2,353
--------
HOME IMPROVEMENT RETAIL (0.9%)
145,000 Home Depot, Inc. 4,062
--------
HOMEFURNISHING RETAIL (0.2%)
39,700 Aaron's, Inc. 1,106
--------
HOTELS, RESORTS, & CRUISE LINES (1.9%)
198,100 Carnival Corp.* 6,603
78,100 Royal Caribbean Cruises Ltd.*(a) 2,037
--------
8,640
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
HOUSEHOLD APPLIANCES (2.9%)
206,400 Stanley Works (a) $ 10,578
37,700 Whirlpool Corp. 2,834
--------
13,412
--------
LEISURE PRODUCTS (0.3%)
114,100 Brunswick Corp. 1,224
--------
PUBLISHING (1.2%)
26,000 John Wiley & Sons, Inc. "A" 1,086
214,300 Valassis Communications, Inc.* 4,485
--------
5,571
--------
RESTAURANTS (0.1%)
53,900 CKE Restaurants, Inc. 451
--------
SPECIALIZED CONSUMER SERVICES (0.1%)
94,700 Service Corp. International 726
--------
SPECIALTY STORES (0.6%)
157,300 Cabela's, Inc.*(a) 2,536
15,800 MarineMax, Inc.* 142
--------
2,678
--------
Total Consumer Discretionary 60,805
--------
CONSUMER STAPLES (7.3%)
-----------------------
DISTILLERS & VINTNERS (0.9%)
59,200 Diageo plc ADR 3,978
--------
FOOD DISTRIBUTORS (0.6%)
95,200 Sysco Corp. 2,665
--------
PERSONAL PRODUCTS (0.3%)
36,300 NBTY, Inc.* 1,616
--------
TOBACCO (5.5%)
204,200 Altria Group, Inc. 4,056
145,100 Imperial Tobacco Group plc ADR 9,286
24,600 Lorillard, Inc. 1,862
170,000 Philip Morris International, Inc. 7,737
45,000 Reynolds American, Inc. 2,394
--------
25,335
--------
Total Consumer Staples 33,594
--------
ENERGY (8.9%)
-------------
INTEGRATED OIL & GAS (6.2%)
78,700 BP plc ADR 4,417
143,700 ConocoPhillips 6,897
================================================================================
16 | USAA VALUE FUND
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
172,200 Marathon Oil Corp. $ 5,133
50,600 Murphy Oil Corp. 2,585
124,700 Occidental Petroleum Corp. 9,769
--------
28,801
--------
OIL & GAS EXPLORATION & PRODUCTION (0.7%)
23,750 Encore Acquisition Co.* 1,131
119,600 EXCO Resources, Inc. 2,098
--------
3,229
--------
OIL & GAS STORAGE & TRANSPORTATION (2.0%)
173,300 El Paso Corp. 1,759
351,300 Spectra Energy Corp. 7,465
--------
9,224
--------
Total Energy 41,254
--------
FINANCIALS (17.2%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (0.4%)
43,200 Ameriprise Financial, Inc. 1,652
--------
CONSUMER FINANCE (5.4%)
215,400 American Express Co. 8,112
260,900 Capital One Financial Corp. 9,617
679,500 SLM Corp.* 7,155
--------
24,884
--------
DIVERSIFIED BANKS (1.6%)
268,500 Wells Fargo & Co. 7,634
--------
INSURANCE BROKERS (0.6%)
106,600 Willis Group Holdings plc 2,796
--------
LIFE & HEALTH INSURANCE (0.4%)
41,700 Torchmark Corp. 1,872
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (2.6%)
346,459 Bank of America Corp. 5,259
172,700 JPMorgan Chase & Co. 6,725
--------
11,984
--------
PROPERTY & CASUALTY INSURANCE (2.3%)
94,000 Allstate Corp. 2,813
90,200 Axis Capital Holdings Ltd. 2,598
42,400 Chubb Corp. 2,120
218,700 Fidelity National Financial, Inc. "A" 2,821
17,500 XL Capital Ltd. "A" 294
--------
10,646
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
REGIONAL BANKS (2.6%)
204,300 Fifth Third Bancorp $ 2,541
161,200 PNC Financial Services Group, Inc. 8,935
167,400 United Community Banks, Inc.* 752
--------
12,228
--------
REITs - MORTGAGE (0.7%)
178,500 Annaly Capital Management, Inc. 3,102
--------
THRIFTS & MORTGAGE FINANCE (0.6%)
176,100 New York Community Bancorp, Inc. 2,647
--------
Total Financials 79,445
--------
HEALTH CARE (12.6%)
-------------------
HEALTH CARE DISTRIBUTORS (0.6%)
80,600 Cardinal Health, Inc. 2,666
--------
HEALTH CARE EQUIPMENT (1.4%)
75,100 Baxter International, Inc. 4,325
53,700 Medtronic, Inc. 2,303
--------
6,628
--------
HEALTH CARE SERVICES (1.1%)
113,600 Omnicare, Inc. 2,840
43,500 Quest Diagnostics, Inc. 2,422
--------
5,262
--------
MANAGED HEALTH CARE (4.6%)
89,200 CIGNA Corp. 3,012
148,600 Coventry Health Care, Inc.* 3,400
170,100 UnitedHealth Group, Inc. 5,613
146,100 WellPoint, Inc.* 9,310
--------
21,335
--------
PHARMACEUTICALS (4.9%)
360,200 Bristol-Myers Squibb Co. 8,774
67,500 Johnson & Johnson 4,243
507,752 Pfizer, Inc. 9,475
--------
22,492
--------
Total Health Care 58,383
--------
INDUSTRIALS (14.7%)
-------------------
AEROSPACE & DEFENSE (5.6%)
50,000 Goodrich Corp. 3,095
187,500 Honeywell International, Inc. 7,245
43,300 ITT Corp. 2,092
================================================================================
18 | USAA VALUE FUND
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
73,800 L-3 Communications Holdings, Inc. $ 6,150
142,200 Raytheon Co. 7,456
--------
26,038
--------
BUILDING PRODUCTS (0.4%)
82,700 Simpson Manufacturing Co., Inc. 2,040
--------
CONSTRUCTION & ENGINEERING (0.4%)
97,600 Insituform Technologies, Inc. "A"* 1,999
--------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (1.2%)
87,800 Oshkosh Corp. 3,167
115,200 Terex Corp.* 2,252
--------
5,419
--------
DIVERSIFIED SUPPORT SERVICES (0.3%)
106,603 Comfort Systems USA, Inc. 1,251
--------
ELECTRICAL COMPONENTS & EQUIPMENT (1.6%)
128,400 Emerson Electric Co. 5,334
41,700 Regal-Beloit Corp. 1,976
--------
7,310
--------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.7%)
49,000 Administaff, Inc. 1,119
134,200 Korn/Ferry International* 1,986
--------
3,105
--------
INDUSTRIAL CONGLOMERATES (0.8%)
218,100 General Electric Co. 3,507
--------
INDUSTRIAL MACHINERY (3.1%)
51,400 Eaton Corp. 3,148
4,700 Flowserve Corp. 424
44,100 Harsco Corp. 1,312
181,800 Illinois Tool Works, Inc. 7,925
30,600 SPX Corp. 1,666
--------
14,475
--------
OFFICE SERVICES & SUPPLIES (0.2%)
34,800 Avery Dennison Corp. 1,131
--------
TRUCKING (0.4%)
51,100 Ryder System, Inc. 1,860
--------
Total Industrials 68,135
--------
INFORMATION TECHNOLOGY (14.1%)
------------------------------
APPLICATION SOFTWARE (0.5%)
261,000 Mentor Graphics Corp.* 2,093
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (1.2%)
405,300 Nokia Corp. ADR $ 5,548
--------
COMPUTER HARDWARE (3.3%)
53,800 Diebold, Inc. 1,429
150,500 Hewlett-Packard Co. 7,084
57,200 International Business Machines Corp. 7,001
--------
15,514
--------
DATA PROCESSING & OUTSOURCED SERVICES (1.3%)
45,600 Alliance Data Systems Corp.*(a) 2,711
63,400 Computer Sciences Corp.* 3,253
--------
5,964
--------
ELECTRONIC COMPONENTS (1.3%)
86,600 Littelfuse, Inc.* 2,603
434,800 Vishay Intertechnology, Inc.* 3,279
--------
5,882
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.6%)
124,600 Cognex Corp. 2,040
37,200 FARO Technologies, Inc.* 672
--------
2,712
--------
ELECTRONIC MANUFACTURING SERVICES (0.9%)
90,200 Mercury Computer Systems, Inc.* 1,077
95,900 Plexus Corp.* 3,261
--------
4,338
--------
IT CONSULTING & OTHER SERVICES (0.4%)
40,800 Maximus, Inc. 1,953
--------
SEMICONDUCTOR EQUIPMENT (1.2%)
257,900 Applied Materials, Inc. 3,141
271,900 Brooks Automation, Inc.* 2,268
--------
5,409
--------
SEMICONDUCTORS (1.9%)
311,500 Intel Corp. 6,043
102,000 Microchip Technology, Inc. 2,633
--------
8,676
--------
SYSTEMS SOFTWARE (1.5%)
252,200 Microsoft Corp. 7,107
--------
Total Information Technology 65,196
--------
MATERIALS (1.8%)
----------------
DIVERSIFIED CHEMICALS (1.1%)
153,200 E.I. du Pont de Nemours & Co. 4,996
--------
================================================================================
20 | USAA VALUE FUND
<PAGE>
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
SPECIALTY CHEMICALS (0.5%)
349,500 PolyOne Corp.* $ 2,604
--------
STEEL (0.2%)
69,100 Gibraltar Industries, Inc.* 963
--------
Total Materials 8,563
--------
TELECOMMUNICATION SERVICES (2.3%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (2.3%)
220,230 AT&T, Inc. 5,585
164,400 Verizon Communications, Inc. 4,837
--------
Total Telecommunication Services 10,422
--------
UTILITIES (5.2%)
----------------
ELECTRIC UTILITIES (2.2%)
185,300 Duke Energy Corp. 3,063
63,100 Entergy Corp. 4,815
62,400 Pinnacle West Capital Corp. 2,235
--------
10,113
--------
MULTI-UTILITIES (3.0%)
169,000 CenterPoint Energy, Inc. 2,357
155,200 Dominion Resources, Inc. 5,814
121,150 MDU Resources Group, Inc. 2,668
147,100 Xcel Energy, Inc. 3,057
--------
13,896
--------
Total Utilities 24,009
--------
Total Common Stocks (cost: $431,093) 449,806
--------
MONEY MARKET INSTRUMENTS (6.0%)
MONEY MARKET FUNDS (6.0%)
27,885,213 State Street Institutional Liquid Reserve Fund, 0.13%(b)
(cost: $27,885) 27,885
--------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED (3.0%)
MONEY MARKET FUNDS (1.4%)
6,726,233 BlackRock Liquidity Funds TempFund Portfolio, 0.11%(b) 6,726
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<PAGE>
================================================================================
--------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.6%)
$5,600 Credit Suisse First Boston LLC, 0.11%, acquired on
1/29/2010 and due 2/01/2010 at $5,600 (collateralized
by $5,630 of U.S. Treasury, 3.63%, due 8/15/2019;
market value $5,714) $ 5,600
1,600 Deutsche Bank Securities, Inc., 0.11%, acquired on
1/29/2010 and due 2/01/2010 at $1,600 (collateralized
by $1,331 of Fannie Mae(c), 6.63%, due 11/15/2030;
market value $1,633) 1,600
--------
Total Repurchase Agreements 7,200
--------
Total Short-term Investments Purchased With Cash
Collateral From Securities Loaned (cost: $13,926) 13,926
--------
TOTAL INVESTMENTS (COST: $472,904) $491,617
========
------------------------------------------------------------------------------------------------
($ 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 $449,806 $ - $- $449,806
Money Market Instruments:
Money Market Funds 27,885 - - 27,885
Short-Term Investments
Purchased with Cash
Collateral from Securities
Loaned:
Money Market Funds 6,726 - - 6,726
Repurchase Agreements - 7,200 - 7,200
------------------------------------------------------------------------------------------------
Total $484,417 $7,200 $- $491,617
------------------------------------------------------------------------------------------------
================================================================================
22 | USAA VALUE FUND
<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.
Investments in foreign securities were 5.1% of net assets at January 31,
2010.
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in
U.S. dollars.
REIT Real estate investment trust
o SPECIFIC NOTES
(a) The security or a portion thereof was out on loan as of January 31, 2010.
(b) Rate represents the money market fund annualized seven-day yield at
January 31, 2010.
(c) Securities issued by government-sponsored enterprises are supported only
by the right of the government-sponsored enterprise to borrow from the
U.S. Treasury, the discretionary authority of the U.S. government to
purchase the government-sponsored enterprises' obligations, or by the
credit of the issuing agency, instrumentality, or corporation, and are
neither issued nor guaranteed by the U.S. Treasury.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (including securities
on loan of $13,386) (cost of $472,904) $491,617
Receivables:
Capital shares sold:
Affiliated transactions (Note 8) 150
Nonaffiliated transactions 300
USAA Investment Management Company (Note 7D) 248
Dividends and interest 606
Securities sold 2,167
Other 3
--------
Total assets 495,091
--------
LIABILITIES
Payables:
Upon return of securities loaned 13,926
Securities purchased 17,413
Capital shares redeemed (nonaffiliated transactions) 478
Accrued management fees 312
Accrued transfer agent's fees 44
Other accrued expenses and payables 69
--------
Total liabilities 32,242
--------
Net assets applicable to capital shares outstanding $462,849
========
NET ASSETS CONSIST OF:
Paid-in capital $488,089
Accumulated undistributed net investment income 174
Accumulated net realized loss on investments (44,127)
Net unrealized appreciation of investments 18,713
--------
Net assets applicable to capital shares outstanding $462,849
========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $400,011/34,929 shares outstanding) $ 11.45
========
Institutional Shares (net assets of $62,838/5,492 shares
outstanding) $ 11.44
========
See accompanying notes to financial statements.
================================================================================
24 | USAA VALUE FUND
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 4,859
Interest 17
Securities lending (net) 13
-------
Total income 4,889
-------
EXPENSES
Management fees 1,687
Administration and servicing fees:
Fund Shares 291
Institutional Shares 10
Transfer agent's fees:
Fund Shares 646
Institutional Shares 10
Custody and accounting fees:
Fund Shares 36
Institutional Shares 4
Postage:
Fund Shares 25
Shareholder reporting fees:
Fund Shares 16
Trustees' fees 5
Registration fees:
Fund Shares 18
Professional fees 41
Other 8
-------
Total expenses 2,797
Expenses paid indirectly (15)
Expenses reimbursed:
Fund Shares (382)
-------
Net expenses 2,400
-------
NET INVESTMENT INCOME 2,489
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 3,083
Change in net unrealized appreciation/depreciation 40,175
-------
Net realized and unrealized gain 43,258
-------
Increase in net assets resulting from operations $45,747
=======
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 25
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited), and year ended July 31,
2009
--------------------------------------------------------------------------------
1/31/2010 7/31/2009
-------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 2,489 $ 6,246
Net realized gain (loss) on investments 3,083 (40,396)
Change in net unrealized appreciation/depreciation
of investments 40,175 (16,357)
-----------------------
Increase (decrease) in net assets resulting from
operations 45,747 (50,507)
-----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares (4,916) (6,079)
Institutional Shares* (684) (224)
-----------------------
Distributions to shareholders (5,600) (6,303)
-----------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 6)
Fund Shares 15,292 21,914
Institutional Shares* 30,481 26,562
-----------------------
Total net increase in net assets from
capital share transactions 45,773 48,476
-----------------------
Capital contribution from USAA Transfer Agency
Company:
Institutional Shares* - 8
-----------------------
Net increase (decrease) in net assets 85,920 (8,326)
NET ASSETS
Beginning of period 376,929 385,255
-----------------------
End of period $462,849 $376,929
=======================
Accumulated undistributed net investment income:
End of period $ 174 $ 3,285
=======================
*Institutional Shares were initiated on August 1, 2008.
See accompanying notes to financial statements.
================================================================================
26 | USAA VALUE FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940 (the 1940 Act), as amended, is an open-end management investment company
organized as a Delaware statutory trust consisting of 46 separate funds. The
information presented in this semiannual report pertains only to the USAA Value
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: Value Fund Shares (Fund Shares) and Value
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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
<PAGE>
================================================================================
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If
no last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
2. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the
foreign markets may be closed. Therefore, the calculation of the Fund's
net asset value (NAV) may not take place at the same time the prices of
certain foreign securities held by the Fund are determined. In most
cases, events affecting the values of foreign securities that occur
between the time of their last quoted sales or official closing prices
and the close of normal trading on the NYSE on a day the Fund's NAV is
calculated will not be reflected in the value of the Fund's foreign
securities. However, the Manager and the Fund's subadviser, if
applicable, will monitor for events that would materially affect the
value of the Fund's foreign securities. The Fund's subadviser has
agreed to notify the Manager of significant events it identifies that
would materially affect the value of the Fund's foreign securities. If
the Manager determines that a particular event would materially affect
the value of the Fund's foreign securities, then the Manager, under
valuation procedures approved by the Trust's Board of Trustees, will
consider such available information that it deems relevant to determine
a fair value for the affected foreign securities.
================================================================================
28 | USAA VALUE FUND
<PAGE>
================================================================================
In addition, the Fund may use information from an external vendor or
other sources to adjust the foreign market closing prices of foreign
equity securities to reflect what the Fund believes to be the fair
value of the securities as of the close of the NYSE. Fair valuation of
affected foreign equity securities may occur frequently based on an
assessment that events that occur on a fairly regular basis (such as
U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
6. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before
the pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadviser, if applicable, under valuation procedures approved by the
Trust's Board of Trustees. The effect of fair value pricing is that
securities may not be priced on the basis of quotations from the
primary market in which they are traded and the actual price realized
from the sale of a security may differ materially from the fair value
price. Valuing these securities at fair value is intended to cause the
Fund's NAV to be more reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited
to, obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
<PAGE>
================================================================================
duration of any restrictions on disposition of the securities, and an
evaluation of the forces that influenced the market in which the
securities are purchased and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments
is based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses
from sales of investment securities are computed on the identified cost
basis. Dividend income, less foreign taxes, if any, is recorded on the
ex-dividend date. If the ex-dividend date has passed, certain dividends
from foreign securities are recorded upon notification.
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30 | USAA VALUE FUND
<PAGE>
================================================================================
Interest income is recorded daily on the accrual basis. Discounts and
premiums on short-term securities are amortized on a straight-line basis
over the life of the respective securities.
E. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers. These agreements are
collateralized by underlying securities. The collateral obligations are
marked-to-market daily to ensure their value is equal to or in excess of
the repurchase agreement price plus accrued interest and are held by the
Fund, either through its regular custodian or through a special "tri-party"
custodian that maintains separate accounts for both the Fund and its
counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit risk, and the Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
F. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
<PAGE>
================================================================================
trade and settlement dates on security transactions, and from the
difference between amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent of the
amounts received. At the end of the Fund's fiscal year, these net realized
foreign currency gains/losses are reclassified from accumulated net
realized gain/loss to accumulated undistributed net investment income on
the statement of assets and liabilities as such amounts are treated as
ordinary income/loss for tax purposes. Net unrealized foreign currency
exchange gains/losses arise from changes in the value of assets and
liabilities, other than investments in securities, resulting from changes
in the exchange rate.
G. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition,
through arrangements with the Fund's custodian and other banks utilized by
the Fund for cash management purposes, realized credits, if any, generated
from cash balances in the Fund's 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 $15,000 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.
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32 | USAA VALUE FUND
<PAGE>
================================================================================
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $750 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA funds that are party to the loan agreement are assessed facility fees
by CAPCO based on the funds' assessed proportionate share of CAPCO's operating
expenses related to obtaining and maintaining CAPCO's funding programs in total
(in no event to exceed 0.13% annually of the amount of the committed loan
agreement). Prior to September 25, 2009, the maximum annual facility fee was
0.07% of the amount of the committed loan agreement. The facility fees are
allocated among the funds based on their respective average net assets for the
period.
For the six-month period ended January 31, 2010, the Fund paid CAPCO facility
fees of $1,000, which represents 1.0% 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 $25,727,000, for federal
income tax purposes, which, if not offset by subsequent capital gains, will
expire in 2017. It is unlikely that the Trust's
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
<PAGE>
================================================================================
Board of Trustees will authorize a distribution of capital gains realized in the
future until the capital loss carryovers have been used or expire.
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the six-month period
ended January 31, 2010, the Fund did not incur any income tax, interest, or
penalties. As of January 31, 2010, the Manager has reviewed all open tax years
and concluded that there was no impact to the Fund's net assets or results of
operations. Tax years ended July 31, 2006, through July 31, 2009, remain
subject to examination by the Internal Revenue Service and state taxing
authorities. On an ongoing basis, the Manager will monitor its tax positions to
determine if adjustments to this conclusion are necessary.
(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
$92,212,000 and $45,208,000, 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 $55,602,000 and $36,889,000, respectively, resulting in net
unrealized appreciation of $18,713,000.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Wachovia Global
Securities Lending (Wachovia), may lend its securities to qualified financial
institutions, such as certain broker-dealers, to earn additional
================================================================================
34 | USAA VALUE FUND
<PAGE>
================================================================================
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 $13,000, which is net of
the 20% income retained by Wachovia. As of January 31, 2010, the Fund loaned
securities having a fair market value of approximately $13,386,000 and received
cash collateral of $13,926,000 for the loans, which was invested in short-term
investments, as noted in the Fund's portfolio of investments.
(6) CAPITAL SHARE TRANSACTIONS
At January 31, 2010, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
<PAGE>
================================================================================
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated Target Funds. Capital share transactions were as
follows, in thousands:
SIX-MONTH
PERIOD ENDED YEAR ENDED
1/31/2010 7/31/2009
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------
FUND SHARES:
Shares sold 4,426 $ 50,338 9,217 $ 83,334
Shares issued from reinvested
dividends 414 4,860 684 6,016
Shares redeemed (3,535) (39,906) (7,214) (67,436)
-----------------------------------------
Net increase from capital
share transactions 1,305 $ 15,292 2,687 $ 21,914
=========================================
INSTITUTIONAL SHARES
(INITIATED ON AUGUST 1, 2008):
Shares sold 2,746 $ 31,532 3,034 $ 28,189
Shares issued from reinvested
dividends 58 684 26 224
Shares redeemed (160) (1,735) (212) (1,851)
-----------------------------------------
Net increase from capital
share transactions 2,644 $ 30,481 2,848 $ 26,562
=========================================
(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 for
allocating
================================================================================
36 | USAA VALUE FUND
<PAGE>
================================================================================
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
Multi-Cap Value Funds Index over the performance period. The Lipper
Multi-Cap Value Funds Index tracks the total return performance of the 30
largest funds in the Lipper Multi-Cap Value Funds category. The performance
period for each class consists of the current month plus the previous 35
months. The performance adjustment for the Institutional Shares includes
the performance of the Fund Shares for periods prior to August 1, 2008. The
following table is utilized to determine the extent of the performance
adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
----------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
Each class's annual performance adjustment rate is multiplied by the
average net assets of each respective class over the entire performance
period, which is then multiplied by a fraction, the numerator of which is
the number of days in the month and the denominator of which is 365 (366 in
leap years). The resulting amount is the performance adjustment; a positive
adjustment in the case of overperformance, or a negative adjustment in the
case of underperformance.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
<PAGE>
================================================================================
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper Multi-Cap Value 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 $1,687,000, which
included a performance adjustment for the Fund Shares and Institutional
Shares of $78,000 and $1,000, respectively. For the Fund Shares and
Institutional Shares, the performance adjustments were 0.04% and less than
0.01%, respectively.
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into an investment
subadvisory agreement with Barrow, Hanley, Mewhinney & Strauss, LLC (BHMS),
under which BHMS directs the investment and reinvestment of the Fund's
assets (as allocated from time to time by the Manager). The Manager (not the
Fund) pays BHMS a subadvisory fee based on the aggregate net assets that
BHMS manages in the USAA Value Fund and the USAA Growth & Income Fund
combined, in the annual amount of 0.75% on the first $15 million in assets,
0.55% on assets over $15 million and up to $25 million, 0.45% on assets over
$25 million and up to $100 million, 0.35% on assets over $100 million and up
to $200 million, 0.25% on assets over $200 million and up to $1 billion, and
0.15% on assets over $1 billion. For the six-month period ended January 31,
2010, the Manager incurred subadvisory fees, paid or payable to BHMS, of
$658,000.
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 Institutional Shares incurred
administration and servicing fees, paid or payable to the Manager, of
$291,000 and $10,000, respectively.
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38 | USAA VALUE FUND
<PAGE>
================================================================================
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 $10,000 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 1.15% and 0.91%, 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 of $382,000, of which $248,000 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 six-month period ended January 31, 2010, the Fund Shares and
Institutional Shares incurred transfer agent's fees, paid or payable to
SAS, of $646,000 and $10,000, respectively.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
<PAGE>
================================================================================
F. UNDERWRITING SERVICES -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
(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 $150,000 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 0.7%
USAA Target Retirement 2020 Fund 1.8
USAA Target Retirement 2030 Fund 3.9
USAA Target Retirement 2040 Fund 4.8
USAA Target Retirement 2050 Fund 2.3
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.
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40 | USAA VALUE FUND
<PAGE>
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(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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
<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 $ 10.33 $ 12.45 $ 15.41 $ 13.78 $ 13.50 $ 11.65
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .06 .19 .19 .15 .15 .11
Net realized and unrealized gain (loss) 1.20 (2.11) (2.54) 1.93 .49 2.67
-------------------------------------------------------------------------
Total from investment operations 1.26 (1.92) (2.35) 2.08 .64 2.78
-------------------------------------------------------------------------
Less distributions from:
Net investment income (.14) (.20) (.17) (.15) (.12) (.15)
Realized capital gains - - (.44) (.30) (.24) (.78)
-------------------------------------------------------------------------
Total distributions - (.20) (.61) (.45) (.36) (.93)
-------------------------------------------------------------------------
Net asset value at end of period $ 11.45 $ 10.33 $ 12.45 $ 15.41 $ 13.78 $ 13.50
=========================================================================
Total Return (%)* 12.20 (15.14) (15.85) 15.27(a) 4.90 24.65
Net assets at end of period (000) $400,011 $347,492 $385,255 $476,791 $345,089 $231,135
Ratios to average net assets:**
Expenses (%)(b) 1.15(c) 1.15 1.15 1.15(a) 1.15 1.15
Expenses, excluding reimbursements (%)(b) 1.35(c) 1.41 1.25 1.24(a) 1.26 1.27
Net investment income (%) 1.14(c) 2.00 1.36 1.11 1.27 1.14
Portfolio turnover (%) 11 26 21 24 26 22
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period.
Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper
reported return.
** For the six-month period ended January 31, 2010, average net assets were $384,560,000.
(a) 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.
(b) 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%)(+) (.01%) (.01%) (.01%) (.01%) (.02%)
(+) Represents less than 0.01% of average net assets.
(c) Annualized. The ratio is not necessarily indicative of 12 months of operations.
================================================================================
42 | USAA VALUE FUND
<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 $ 10.34 $ 12.42
----------------------------
Income (loss) from investment operations:
Net investment income(a) .07 .18
Net realized and unrealized gain (loss)(a) 1.20 (2.05)
----------------------------
Total from investment operations(a) 1.27 (1.87)
----------------------------
Less distributions from:
Net investment income (.17) (.21)
----------------------------
Net asset value at end of period $ 11.44 $ 10.34
============================
Total return (%)* 12.24 (14.73)
Net assets at end of period (000) $62,838 $29,437
Ratios to average net assets:**
Expenses (%)(b),(c) .90 .90
Net investment income (%)(b) 1.33 2.06
Portfolio turnover (%) 11 26
* 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
$40,708,000.
*** Institutional Shares were initiated on August 1, 2008.
(a) Calculated using average shares. For the period ended January 31, 2010,
average shares were 3,709,000.
(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%.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
<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
================================================================================
44 | USAA VALUE FUND
<PAGE>
================================================================================
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of other
funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as 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 $1,122.00 $6.10
Hypothetical
(5% return before expenses) 1,000.00 1,019.46 5.80
INSTITUTIONAL SHARES
Actual 1,000.00 1,122.40 4.81
Hypothetical
(5% return before expenses) 1,000.00 1,020.67 4.58
* Expenses are equal to the annualized expense ratio of 1.14% for Fund Shares
and 0.90% 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 12.20% for Fund Shares and 12.24% for Institutional Shares
for the six-month period of August 1, 2009, through January 31, 2010.
================================================================================
EXPENSE EXAMPLE | 45
<PAGE>
================================================================================
TRUSTEES Christopher W. Claus
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Richard A. Zucker
--------------------------------------------------------------------------------
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, AND San Antonio, Texas 78265-9825
DISTRIBUTOR
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "Products & Services"
SELF-SERVICE 24/7 click "Investments," then
AT USAA.COM "Mutual Funds"
OR CALL Under "My Accounts" go to
(800) 531-USAA "Investments." View account balances,
(8722) or click "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge (i) at usaa.com; and
(ii) on the SEC's website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
<PAGE>
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
At USAA.COM click: MY DOCUMENTS
Set preferences to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
============================================================================
40847-0310 (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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