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 FIRST START GROWTH FUND]
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SEMIANNUAL REPORT
USAA FIRST START GROWTH FUND
JANUARY 31, 2010
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FUND OBJECTIVE
TO SEEK LONG-TERM CAPITAL GROWTH WITH REDUCED VOLATILITY OVER TIME.
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TYPES OF INVESTMENTS
Invests primarily in equity securities when the Fund's managers believe the
reward characteristics outweigh the risk in the market. To reduce the overall
volatility to investors, the Fund will generally invest between 20% and 80% of
the Fund's assets in bonds and money market instruments, depending on the
managers' view of the overall direction of the stock and bond markets. Although
the Fund typically will invest primarily in U.S. securities, it may invest
without limit in foreign securities. The Fund at times may implement an index
option-based strategy.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Investment Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
FUND RECOGNITION 8
INVESTMENT OVERVIEW 9
FINANCIAL INFORMATION
Portfolio of Investments 14
Notes to Portfolio of Investments 45
Financial Statements 49
Notes to Financial Statements 52
EXPENSE EXAMPLE 71
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 FIRST START GROWTH FUND
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they could stall the recovery. An inordinate delay could unleash inflation. At
the very least, the Fed is likely to keep short-term interest rates low until
the recovery is well underway. As I write to you, inflation does not appear to
be an immediate threat because employment remains weak and excess capacity
remains high. As a result, most businesses lack pricing power. However, I am
concerned about the projections for continued deficit spending, which could feed
inflation as the decade progresses.
So, how do we invest in this challenging environment? Money market yields are at
record lows. Bonds have experienced a remarkable rally, but their prices have
moved close to historic norms. Equities, which rebounded from their March 2009
lows, gave back some of their gains toward the end of the reporting period.
Under the circumstances, I plan to keep my guard up and stay focused on my
investment plan. During the market decline, many investors were not
appropriately positioned relative to their time horizon or risk tolerance. With
this in mind, I recently took some time to reflect on my own goals, reconsider
my risk tolerance, make a few changes to my investment strategy, and reposition
my portfolio. I encourage you to do the same. If you would like assistance,
please call one of our trained service representatives. They are available to
help you -- free of charge.
At USAA Investment Management Company, we are proud to provide you with what we
consider an exceptional value -- outstanding service, world-class investment
talent, and a broad array of no-load mutual funds. Thank you for the opportunity
to help you with your investment needs.
Sincerely,
/s/ Daniel S. McNamara
Daniel S. McNamara
President
USAA Investment Management Company
Mutual fund operating expenses apply and continue throughout the life of the
fund. o As interest rates rise, bond prices fall.
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PRESIDENT'S MESSAGE | 3
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MANAGERS' COMMENTARY ON THE FUND
USAA Investment Management Company Credit Suisse Asset Management, LLC
ARNOLD J. ESPE, CFA JORDAN LOW, CFA
Bonds and Money Market Instruments U.S. Stocks
WASIF A. LATIF Credit Suisse Securities (USA) LLC's
JOHN P. TOOHEY, CFA Volaris Volatility Management Group
Exchange-Traded Funds*
YIRONG LI, CFA
DEFINA MALUKI, CFA
Index Options
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o HOW DID THE USAA FIRST START GROWTH FUND (THE FUND) PERFORM?
For the six-month period ended January 31, 2010, the Fund had a total return
of 14.36%. This compares to a total return of 10.16% for the Russell 3000
Value Index, 8.12% for the Lipper Flexible Portfolio Funds Index, and 3.87%
for the Barclays Capital U.S. Aggregate Bond Index.
USAA Investment Management Company (IMCO) manages the Fund along with two
subadvisers. Credit Suisse Asset Management, LLC (Credit Suisse) manages the
U.S. equity portion of the Fund and Credit Suisse Securities (USA) LLC's
Volaris Volatility Management Group (Volaris Group) manages an equity hedging
strategy for the Fund.
Refer to page 11 for benchmark definitions.
Past performance is no guarantee of future results.
*Effective July 17, 2009, Ron Sweet retired and is no longer a manager of the
Fund.
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4 | USAA FIRST START GROWTH FUND
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o PLEASE PUT THE FUND'S CONTINUING STRONG PERFORMANCE DURING THE REPORTING
PERIOD IN PERSPECTIVE.
The Fund invests in U.S. stocks, U.S. bonds, and international developed
market stocks. The fact that the Fund outperformed all three groups
represents generally positive asset allocation decisions by IMCO's investment
group and, more importantly, very strong performance from the U.S. bond
portion. Fixed-income positions we had taken ahead of and during the
financial crisis continued to appreciate as credit markets normalized over
the reporting period. In the fixed income manager's view, "it was a
once-in-a-century opportunity to buy bonds at tremendous discounts." During
the reporting period, the U.S. bond portion had a total return of 25.00%,
compared to 6.02% for the Lipper Intermediate Debt Funds Average.
o WHAT KIND OF BONDS GAVE THE FUND THE BIGGEST RETURNS DURING THE REPORTING
PERIOD?
It was the sectors that had been most beaten up during the credit crisis,
specifically commercial mortgage-backed securities (CMBS), bonds issued by
financial companies, and to a lesser degree asset backed securities (ABS). Of
these, ABS -- which are collateralized by items like credit card receivables
-- have come back to normal valuations. We see potential for more capital
appreciation in financials and CMBS, but we're being very careful in both
groups, applying the full weight of our research capabilities.
o WHAT'S YOUR OUTLOOK FOR THE BOND MARKET?
For two-plus years, the major risk has been credit-related, with investors
(including us) focusing on the probability of being paid back. Now and over
the next few years, we see interest rate risk becoming increasingly dominant.
With rates so low, largely due to government support that is slowly being
withdrawn, we believe interest rates will go up, and rising rates cause lower
bond prices. We're managing risk first by taking some profits as certain
bonds
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MANAGERS' COMMENTARY ON THE FUND | 5
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we own get back to normal valuations. Next, we have lowered exposure to
rising rates by cutting back our average maturity, buying shorter-term and
floating-rate securities. We're also holding more cash than usual so that we
are ready to deploy assets when rates rise. We have a big yield advantage
over the peer group average. We're also minimizing our holdings of U.S.
Treasury and residential mortgage-backed securities at these low interest
rate levels, although we may increase our positions if there's a spike in
rates.
o HOW WAS THE FUND ALLOCATED DURING THE REPORTING PERIOD?
We began and ended the period neutral in terms of stocks versus bonds,
although we did slightly overweight bonds for about three months in the
middle of the period. We continued to have roughly 8% of assets invested in
international developed markets through a low-cost exchange-traded fund (ETF)
for diversification purposes, which was a slight drag on overall performance.
Our U.S. equity manager, Credit Suisse, implemented our U.S. stock market
allocation, which was neutral in terms of value and growth. In addition to
tactical asset allocation, we attempt to control risk using an equity hedging
strategy that's managed by the Volaris Group. The strategy involves selling
index call or corresponding ETF options and purchasing index put or
corresponding ETF options or put spread options against a highly-correlated
stock portfolio. This carefully managed equity hedging strategy allows us to
create collars on our stock market exposures that effectively limit downside
(and upside) potential. We work closely with Volaris Group to actively manage
the equity hedging strategy based on market conditions.
Mortgage-backed securities have prepayment, credit, interest rate, and
extension risks. Generally, when interest rates decline, prepayments
accelerate beyond the initial pricing assumptions and may cause the average
life of the securities to shorten. Also the market value may decline when
interest rates rise because prepayments decrease beyond the initial pricing
assumptions and may cause the average life of the securities to extend.
o Options are considered speculative investment strategies.
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6 | USAA FIRST START GROWTH FUND
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o WHAT'S YOUR OUTLOOK FOR THE ECONOMY AND STOCK MARKET?
The initial reading of fourth quarter U.S. gross domestic product growth came
in at 5.7%, well above the 2.2% growth recorded in the third quarter, and was
driven by an improving inventory cycle. The manufacturing sector continues to
lead the economic recovery. Various housing market indicators, including the
S&P Case/Shiller Index, continue to point to a stabilization in housing
prices.
Unfortunately, unemployment remains stubbornly high, presaging continuing
weakness in consumer spending and indicating hesitance by employers to take
on new workers. Employment is historically a lagging indicator, but we have
long been concerned that it may be a co-incident indicator in this recovery
given the de-leveraging taking place at both the financial institution and
household levels.
At current valuation levels, the stock market is discounting a strong
recovery in corporate profits. Our bias will be to quickly, but prudently,
adjust our stock exposure based on the weight of the evidence coming through
from companies. We thank you for your investment in the Fund.
Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks.
Investment returns may fluctuate and are subject to market volatility, so
that an investor's shares, when redeemed or sold, may be worth more or less
than their original cost.
As interest rates rise, existing bond prices fall. o Foreign investing is
subject to additional risks, such as currency fluctuations, market
illiquidity, and political instability.
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MANAGERS' COMMENTARY ON THE FUND | 7
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FUND RECOGNITION
USAA FIRST START GROWTH FUND
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LIPPER LEADERS (OVERALL)
[5]
TAX
EFFICIENCY
The Fund is listed as a Lipper Leader for Tax Efficiency among 544 funds within
the Lipper Mixed-Asset Target Allocation Growth Funds category for the overall
period ended January 31, 2010. The Fund received a Lipper Leader rating for Tax
Efficiency among 544, 429, and 234 funds for the three-, five-, and 10-year
periods, respectively. 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 FIRST START GROWTH FUND
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INVESTMENT OVERVIEW
USAA FIRST START GROWTH FUND (Symbol: UFSGX)
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1/31/10 7/31/09
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Net Assets $196.2 Million $172.4 Million
Net Asset Value Per Share $9.35 $8.45
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AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/10
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7/31/09 to 1/31/10* 1 Year 5 Years 10 Years
14.36% 44.44% 2.13% -4.41%
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EXPENSE RATIO**
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Before Reimbursement 2.70% After Reimbursement 1.38%
*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'S 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 SO THAT THE
TOTAL ANNUAL OPERATING EXPENSES OF THE FUND (EXCLUSIVE OF COMMISSION RECAPTURE,
EXPENSE OFFSET ARRANGEMENTS, ACQUIRED FUND FEES AND EXPENSES, AND EXTRAORDINARY
EXPENSES) DO NOT EXCEED AN ANNUAL RATE OF 1.38% OF THE FUND'S 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]
BARCLAYS CAPITAL
U.S. AGGREGATE LIPPER FLEXIBLE PORTFOLIO USAA FIRST
BOND INDEX FUNDS INDEX RUSSELL 3000 INDEX START GROWTH FUND
1/31/2000 $10,000.00 $10,000.00 $10,000.00 $10,000.00
2/29/2000 10,120.94 10,087.61 10,092.69 10,464.97
3/31/2000 10,254.27 10,543.69 10,883.34 11,029.14
4/30/2000 10,224.90 10,329.48 10,499.80 10,812.15
5/31/2000 10,220.21 10,181.12 10,204.90 10,557.97
6/30/2000 10,432.84 10,397.62 10,507.04 10,942.34
7/31/2000 10,527.54 10,335.92 10,321.33 10,638.56
8/31/2000 10,680.13 10,825.85 11,086.78 11,469.31
9/30/2000 10,747.27 10,553.58 10,584.80 10,576.57
10/31/2000 10,818.39 10,499.18 10,434.09 10,037.20
11/30/2000 10,995.28 10,051.55 9,472.36 8,437.69
12/31/2000 11,199.25 10,223.30 9,631.54 8,747.68
1/31/2001 11,382.40 10,391.84 9,961.03 9,268.44
2/28/2001 11,481.55 9,819.15 9,050.91 7,575.95
3/31/2001 11,539.19 9,384.46 8,460.92 6,745.20
4/30/2001 11,491.30 9,859.98 9,139.44 7,613.14
5/31/2001 11,560.61 9,928.74 9,212.85 7,445.75
6/30/2001 11,604.29 9,780.33 9,042.97 7,259.76
7/31/2001 11,863.73 9,733.46 8,893.94 6,739.00
8/31/2001 11,999.59 9,368.30 8,368.87 6,100.43
9/30/2001 12,139.42 8,800.89 7,630.53 5,040.30
10/31/2001 12,393.44 9,009.50 7,808.06 5,443.27
11/30/2001 12,222.57 9,401.18 8,409.46 5,951.64
12/31/2001 12,144.96 9,486.00 8,527.99 5,895.85
1/31/2002 12,243.27 9,349.74 8,421.05 5,778.05
2/28/2002 12,361.92 9,226.07 8,248.85 5,598.26
3/31/2002 12,156.27 9,485.00 8,610.52 5,833.85
4/30/2002 12,392.00 9,204.75 8,158.78 5,412.28
5/31/2002 12,497.29 9,151.24 8,064.25 5,362.68
6/30/2002 12,605.35 8,667.55 7,483.75 4,810.91
7/31/2002 12,757.45 8,168.00 6,888.77 4,364.54
8/31/2002 12,972.85 8,229.54 6,921.31 4,364.54
9/30/2002 13,182.96 7,650.34 6,194.09 4,209.55
10/31/2002 13,122.91 8,040.05 6,687.30 4,370.74
11/30/2002 13,119.42 8,382.07 7,091.96 4,339.74
12/31/2002 13,390.41 8,090.94 6,691.01 4,147.55
1/31/2003 13,401.84 7,952.49 6,527.29 4,085.55
2/28/2003 13,587.28 7,872.91 6,419.90 4,035.96
3/31/2003 13,576.81 7,923.79 6,487.41 4,159.95
4/30/2003 13,688.84 8,376.59 7,017.16 4,376.94
5/31/2003 13,944.07 8,788.10 7,440.75 4,612.52
6/30/2003 13,916.39 8,878.56 7,541.16 4,693.12
7/31/2003 13,448.53 8,920.29 7,714.15 4,879.11
8/31/2003 13,537.82 9,102.61 7,885.10 4,996.90
9/30/2003 13,896.18 9,110.96 7,799.50 4,965.90
10/31/2003 13,766.58 9,468.92 8,271.52 5,306.88
11/30/2003 13,799.55 9,568.54 8,385.45 5,288.28
12/31/2003 13,939.98 9,954.22 8,769.00 5,337.88
1/31/2004 14,052.13 10,097.21 8,951.92 5,368.88
2/29/2004 14,204.23 10,233.49 9,072.52 5,455.67
3/31/2004 14,310.61 10,189.80 8,964.83 5,468.07
4/30/2004 13,938.29 9,934.35 8,779.47 5,313.08
5/31/2004 13,882.46 10,003.24 8,907.06 5,362.68
6/30/2004 13,960.92 10,178.69 9,084.09 5,399.88
7/31/2004 14,099.30 9,906.56 8,740.57 5,127.09
8/31/2004 14,368.25 9,953.52 8,776.57 5,189.09
9/30/2004 14,407.23 10,115.24 8,911.48 5,393.68
10/31/2004 14,528.05 10,253.93 9,057.85 5,356.48
11/30/2004 14,412.17 10,619.54 9,478.91 5,641.66
12/31/2004 14,544.78 10,900.04 9,816.66 5,945.44
1/31/2005 14,636.11 10,725.96 9,555.19 5,734.66
2/28/2005 14,549.71 10,928.16 9,765.53 5,778.05
3/31/2005 14,474.98 10,734.24 9,600.36 5,703.66
4/30/2005 14,670.89 10,538.09 9,391.78 5,685.06
5/31/2005 14,829.61 10,781.28 9,747.64 5,914.45
6/30/2005 14,910.47 10,860.42 9,815.74 5,982.64
7/31/2005 14,774.74 11,207.92 10,218.43 6,193.43
8/31/2005 14,964.14 11,207.47 10,121.02 6,094.23
9/30/2005 14,810.00 11,370.12 10,209.56 6,249.23
10/31/2005 14,692.79 11,214.88 10,018.35 6,230.63
11/30/2005 14,757.77 11,483.97 10,408.06 6,528.21
12/31/2005 14,898.08 11,591.49 10,417.41 6,584.00
1/31/2006 14,898.92 11,966.09 10,765.46 6,714.20
2/28/2006 14,948.38 11,914.92 10,784.60 6,627.40
3/31/2006 14,801.69 12,104.50 10,971.02 6,577.81
4/30/2006 14,774.86 12,240.75 11,090.05 6,472.41
5/31/2006 14,759.09 11,960.16 10,734.98 6,112.83
6/30/2006 14,790.38 11,947.58 10,753.98 6,057.04
7/31/2006 14,990.38 11,987.29 10,743.91 5,964.04
8/31/2006 15,219.85 12,198.80 11,006.73 6,038.44
9/30/2006 15,353.54 12,333.24 11,253.12 6,218.23
10/31/2006 15,455.11 12,658.84 11,658.21 6,348.42
11/30/2006 15,634.40 12,941.96 11,911.87 6,453.81
12/31/2006 15,543.67 13,071.82 12,054.52 6,519.81
1/31/2007 15,537.29 13,227.07 12,283.97 6,607.50
2/28/2007 15,776.88 13,175.41 12,082.46 6,538.60
3/31/2007 15,777.36 13,299.11 12,208.22 6,588.71
4/30/2007 15,862.44 13,713.97 12,695.90 6,795.39
5/31/2007 15,742.22 14,022.57 13,158.57 6,926.91
6/30/2007 15,695.65 13,958.97 12,912.13 6,839.23
7/31/2007 15,826.58 13,817.69 12,471.79 6,701.44
8/31/2007 16,020.56 13,808.31 12,650.81 6,739.02
9/30/2007 16,142.09 14,352.58 13,112.03 6,926.91
10/31/2007 16,287.10 14,734.64 13,352.56 7,033.38
11/30/2007 16,579.99 14,385.84 12,751.44 6,820.44
12/31/2007 16,626.56 14,322.79 12,674.28 6,786.02
1/31/2008 16,905.85 13,857.27 11,906.07 6,454.99
2/29/2008 16,929.32 13,769.65 11,536.27 6,372.24
3/31/2008 16,987.08 13,586.50 11,467.92 6,295.85
4/30/2008 16,951.58 14,076.76 12,041.42 6,423.16
5/31/2008 16,827.28 14,299.72 12,288.11 6,537.75
6/30/2008 16,813.68 13,657.36 11,274.08 6,219.46
7/31/2008 16,799.96 13,399.09 11,184.17 6,149.43
8/31/2008 16,959.40 13,353.29 11,357.87 6,181.26
9/30/2008 16,731.61 12,102.27 10,289.95 5,729.28
10/31/2008 16,336.67 10,241.18 8,464.93 4,920.82
11/30/2008 16,868.43 9,664.27 7,796.71 4,583.43
12/31/2008 17,497.78 10,023.27 7,945.87 4,688.25
1/31/2009 17,343.39 9,597.91 7,279.05 4,411.31
2/28/2009 17,277.93 8,950.45 6,516.53 4,114.59
3/31/2009 17,518.12 9,543.49 7,087.34 4,338.78
4/30/2009 17,601.87 10,307.79 7,833.16 4,767.38
5/31/2009 17,729.54 10,964.18 8,251.12 5,156.42
6/30/2009 17,830.38 10,784.23 8,279.23 5,288.30
7/31/2009 18,117.98 11,661.90 8,923.65 5,571.84
8/31/2009 18,305.58 11,946.04 9,242.51 5,789.43
9/30/2009 18,497.87 12,452.57 9,629.74 6,086.16
10/31/2009 18,589.21 12,258.26 9,382.06 6,099.35
11/30/2009 18,829.88 12,781.16 9,915.19 6,244.41
12/31/2009 18,535.54 12,946.81 10,197.74 6,405.74
1/31/2010 18,818.68 12,608.38 9,830.14 6,371.67
[END CHART]
Data from 1/31/00 to 1/31/10.
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.
================================================================================
10 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
The graph on page 10 illustrates the comparison of a $10,000 hypothetical
investment in the USAA First Start Growth Fund to the following benchmarks:
o The unmanaged Barclays Capital U.S. Aggregate Bond Index covers the U.S.
investment-grade fixed-rate bond market, including government and credit
securities, agency mortgage pass-through securities, asset-backed securities,
and commercial mortgage-backed securities that have remaining maturities of
more than one year.
o The unmanaged Lipper Flexible Portfolio Funds Index tracks the total return
performance of the 30 largest funds within the Lipper Flexible Portfolio
Funds category.
o The unmanaged Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market.
Indexes are unmanaged and you cannot invest directly in an Index.
================================================================================
INVESTMENT OVERVIEW | 11
<PAGE>
================================================================================
TOP 10 EQUITY HOLDINGS
AS OF 1/31/2010
(% of Net Assets)
iShares MSCI EAFE Index Fund*................. 9.3%
Humana, Inc. ................................. 1.2%
Texas Instruments, Inc. ...................... 1.2%
International Business Machines Corp. ........ 1.1%
Public Service Enterprise Group, Inc. ........ 1.1%
Estee Lauder Companies, Inc. "A".............. 1.0%
Goldman Sachs Group, Inc. .................... 0.9%
Amgen, Inc. .................................. 0.8%
Apple, Inc. .................................. 0.8%
Western Digital Corp. ........................ 0.8%
* Pursuant to a Securities and Exchange Commission (SEC) exemptive order and a
related agreement with iShares Trust (iShares), the Fund may invest in iShares
in amounts exceeding limits set forth in the Investment Company Act of 1940
that would otherwise be applicable.
Foreign investing is subject to additional risk, such as currency fluctuations,
market illiquidity, and political instability.
You will find a complete list of securities that the Fund owns on pages 14-44.
================================================================================
12 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
o SECTOR ASSET ALLOCATION* -- 1/31/2010 o
[PIE CHART OF SECTOR ASSET ALLOCATION]
FINANCIALS 41.0%
INFORMATION TECHNOLOGY 10.8%
EXCHANGE-TRADED FUNDS** 9.3%
CONSUMER DISCRETIONARY 6.9%
HEALTH CARE 6.5%
ENERGY 4.9%
UTILITIES 4.5%
CONSUMER STAPLES 4.4%
INDUSTRIALS 3.3%
MATERIALS 1.7%
TELECOMMUNICATION SERVICES 1.1%
U.S. GOVERNMENT 0.5%
MONEY MARKET INSTRUMENTS*** 6.3%
[END CHART]
* Excludes options.
** Exchange-traded funds (ETFs) are baskets of securities and are traded, like
individual stocks, on an exchange. These particular ETFs represent multiple
sectors.
*** Excludes short-term investments purchased with cash collateral from
securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
INVESTMENT OVERVIEW | 13
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2010 (unaudited)
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES (56.9%)
COMMON STOCKS (46.7%)
CONSUMER DISCRETIONARY (6.8%)
-----------------------------
ADVERTISING (0.1%)
6,028 Harte Hanks, Inc. $ 64
12,600 National Cinemedia, Inc. 189
600 Omnicom Group, Inc. 21
--------
274
--------
APPAREL & ACCESSORIES & LUXURY GOODS (0.2%)
500 Carter's, Inc.* 13
300 Cherokee, Inc. 5
600 Coach, Inc. 21
464 Fossil, Inc.* 15
1,000 Jones Apparel Group, Inc. 14
2,000 Liz Claiborne, Inc.* 10
300 Lululemon Athletica, Inc.* 8
400 Phillips-Van Heusen Corp. 16
300 Polo Ralph Lauren Corp. 25
100 VF Corp. 7
5,000 Warnaco Group, Inc.* 194
--------
328
--------
APPAREL RETAIL (0.8%)
7,600 Aeropostale, Inc.* 250
400 AnnTaylor Stores Corp.* 5
1,150 Buckle, Inc. 35
600 Cato Corp. "A" 12
2,500 Charming Shoppes, Inc.* 15
300 Citi Trends, Inc.* 9
2,500 Dress Barn, Inc.* 59
909 Finish Line, Inc. "A" 10
24,900 Gap, Inc. 475
400 Genesco, Inc.* 9
300 Gymboree Corp.* 12
2,000 Hot Topic, Inc.* 12
1,000 J. Crew Group, Inc.* 39
168 Jos. A.Bank Clothiers, Inc.* 7
2,300 Pacific Sunwear of California, Inc.* 8
9,120 Ross Stores, Inc. 419
2,300 Stage Stores, Inc. 30
2,400 TJX Companies, Inc. 91
--------
1,497
--------
AUTO PARTS & EQUIPMENT (0.1%)
4,800 American Axle & Manufacturing Holdings, Inc.* 45
1,800 ArvinMeritor, Inc.* 17
2,600 Dana Holding Corp.* 27
1,100 Exide Technologies* 8
700 Gentex Corp. 13
1,400 Johnson Controls, Inc. 39
900 Modine Manufacturing Co.* 9
1,400 Tenneco, Inc.* 25
500 TRW Automotive Holdings Corp.* 12
442 WABCO Holdings, Inc. 11
--------
206
--------
AUTOMOBILE MANUFACTURERS (0.1%)
9,600 Ford Motor Co.* 104
200 Thor Industries, Inc. 6
--------
110
--------
AUTOMOTIVE RETAIL (0.5%)
20,100 Advance Auto Parts, Inc. 793
900 Asbury Automotive Group, Inc.* 10
500 AutoNation, Inc.* 9
2,600 Group 1 Automotive, Inc.* 76
1,000 Pep Boys - Manny, Moe & Jack 8
--------
896
--------
================================================================================
14 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
BROADCASTING (0.0%)
1,900 Belo Corp. "A" $ 12
1,000 CBS Corp. "B" 13
400 DG FastChannel, Inc.* 11
--------
36
--------
CABLE & SATELLITE (0.3%)
1,000 Cablevision Systems Corp. "A" 26
13,200 Comcast Corp. "A" 209
8,900 DIRECTV "A"* 270
2,100 DISH Network Corp. "A" 38
500 Knology, Inc.* 6
700 Liberty Global, Inc. "A"* 18
400 Scripps Networks Interactive "A" 17
900 Time Warner Cable, Inc. 39
2,000 Virgin Media, Inc. 28
--------
651
--------
CATALOG RETAIL (0.0%)
900 HSN, Inc.* 17
2,500 Liberty Media Corp. Interactive "A"* 26
400 School Specialty, Inc.* 9
--------
52
--------
COMPUTER & ELECTRONICS RETAIL (0.4%)
21,100 Best Buy Co., Inc. 773
900 GameStop Corp. "A"* 18
1,300 hhgregg, Inc.* 27
600 RadioShack Corp. 12
1,100 Rent-A-Center, Inc.* 22
--------
852
--------
CONSUMER ELECTRONICS (0.0%)
900 Garmin Ltd. 29
--------
DEPARTMENT STORES (0.6%)
2,200 J. C. Penney Co., Inc. 55
22,600 Kohl's Corp.* 1,138
3,100 Macy's, Inc. 49
2,600 Saks, Inc.* 17
200 Sears Holdings Corp.* 19
--------
1,278
--------
DISTRIBUTORS (0.0%)
400 Core-Mark Holding Co., Inc.* 12
600 LKQ Corp.* 11
--------
23
--------
EDUCATION SERVICES (0.4%)
500 Apollo Group, Inc. "A"* 30
700 Career Education Corp.* 15
32,900 Corinthian Colleges, Inc.* 461
4,300 DeVry, Inc. 263
300 Grand Canyon Education, Inc.* 6
400 ITT Educational Services, Inc.* 39
400 Universal Technical Institute, Inc.* 7
--------
821
--------
FOOTWEAR (0.6%)
800 Brown Shoe Co., Inc. 10
2,400 Crocs, Inc.* 18
14,152 NIKE, Inc. "B" 902
1,800 Steven Madden Ltd.* 72
4,800 Timberland Co. "A"* 83
700 Wolverine World Wide, Inc. 18
--------
1,103
--------
GENERAL MERCHANDISE STORES (0.5%)
13,531 99 Cents Only Stores* 176
4,900 Big Lots, Inc.* 139
8,800 Dollar Tree, Inc.* 436
4,500 Family Dollar Stores, Inc. 139
3,392 Target Corp. 174
--------
1,064
--------
HOME FURNISHINGS (0.1%)
2,600 La-Z-Boy, Inc.* 27
2,141 Leggett & Platt, Inc. 39
2,100 Tempur-Pedic International, Inc.* 52
--------
118
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
HOME IMPROVEMENT RETAIL (0.1%)
4,100 Home Depot, Inc. $ 115
2,900 Lowe's Companies, Inc. 63
--------
178
--------
HOMEBUILDING (0.0%)
300 Cavco Industries, Inc.* 11
--------
HOMEFURNISHING RETAIL (0.0%)
400 Aaron's, Inc. 11
400 Bed Bath & Beyond, Inc.* 16
1,400 Haverty Furniture Companies, Inc. 17
1,900 Pier 1 Imports, Inc.* 10
900 Williams-Sonoma, Inc. 17
--------
71
--------
HOTELS, RESORTS, & CRUISE LINES (0.1%)
1,100 Carnival Corp.* 37
1,800 Gaylord Entertainment Co.* 35
300 Hyatt Hotels Corp. "A"* 9
800 Interval Leisure Group, Inc.* 10
1,600 Orient-Express Hotels Ltd. "A"* 16
900 Royal Caribbean Cruises Ltd.* 23
200 Starwood Hotels & Resorts Worldwide, Inc. 7
600 Wyndham Worldwide Corp. 12
--------
149
--------
HOUSEHOLD APPLIANCES (0.0%)
1,200 Helen of Troy Ltd.* 28
382 Whirlpool Corp. 29
--------
57
--------
HOUSEWARES & SPECIALTIES (0.1%)
9,300 American Greetings Corp. "A" 172
500 Jarden Corp. 15
1,000 Newell Rubbermaid, Inc. 13
300 Tupperware Brands Corp. 13
--------
213
--------
INTERNET RETAIL (0.1%)
600 Amazon.com, Inc.* 75
200 Blue Nile, Inc.* 10
600 Expedia, Inc.* 13
300 Netflix, Inc.* 19
640 NutriSystem, Inc. 13
400 Priceline.com, Inc.* 78
--------
208
--------
LEISURE FACILITIES (0.0%)
200 Vail Resorts, Inc.* 7
--------
LEISURE PRODUCTS (0.1%)
3,300 Callaway Golf Co. 25
400 Hasbro, Inc. 12
2,600 Mattel, Inc. 51
800 Polaris Industries, Inc. 36
2,100 Smith & Wesson Holding Corp.* 8
--------
132
--------
MOVIES & ENTERTAINMENT (0.6%)
3,945 AOL, Inc.* 95
800 Cinemark Holdings, Inc. 11
500 DreamWorks Animation SKG, Inc. "A"* 19
1,100 IMAX Corp.* 14
1,300 Liberty Media Corp. - Capital "A"* 34
3,326 Live Nation, Inc.* 38
5,200 News Corp. "A" 66
10,000 News Corp. "B" 147
21,400 Time Warner, Inc. 587
2,500 Viacom, Inc. "A"* 77
4,092 Walt Disney Co. 121
--------
1,209
--------
PHOTOGRAPHIC PRODUCTS (0.0%)
6,100 Eastman Kodak Co.* 37
--------
PUBLISHING (0.2%)
5,727 McGraw-Hill Companies, Inc. 203
800 Meredith Corp. 25
1,900 Morningstar, Inc.* 90
--------
318
--------
================================================================================
16 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
RESTAURANTS (0.4%)
400 BJ's Restaurants, Inc.* $ 8
5,500 Bob Evans Farms, Inc. 154
800 Buffalo Wild Wings, Inc.* 37
900 California Pizza Kitchen, Inc.* 12
700 Cheesecake Factory, Inc.* 15
300 Chipotle Mexican Grill, Inc. "A"* 29
3,200 Darden Restaurants, Inc. 118
2,200 McDonald's Corp. 137
1,400 P.F. Chang's China Bistro, Inc.* 54
261 Panera Bread Co. "A"* 19
600 Peet's Coffee & Tea, Inc.* 20
1,400 Ruby Tuesday, Inc.* 10
1,300 Starbucks Corp.* 28
26 Steak N Shake Co.* 8
2,600 Wendy's/Arby's Group, Inc. "A" 12
1,100 Yum! Brands, Inc. 38
--------
699
--------
SPECIALIZED CONSUMER SERVICES (0.2%)
400 Brinks Home Security Holdings, Inc.* 16
9,700 H&R Block, Inc. 209
7,000 Hillenbrand, Inc. 128
410 Regis Corp. 7
300 Steiner Leisure Ltd.* 12
1,800 Stewart Enterprises, Inc. "A" 9
--------
381
--------
SPECIALTY STORES (0.1%)
1,800 Barnes & Noble, Inc.(a) 31
500 Dick's Sporting Goods, Inc.* 11
500 Jo-Ann Stores, Inc.* 18
3,100 OfficeMax, Inc.* 40
500 PetSmart, Inc. 13
1,400 Sally Beauty Holdings, Inc.* 12
1,200 Staples, Inc. 28
295 Tractor Supply Co.* 15
--------
168
--------
TIRES & RUBBER (0.1%)
6,300 Cooper Tire & Rubber Co. 107
--------
Total Consumer Discretionary 13,283
--------
CONSUMER STAPLES (3.5%)
-----------------------
AGRICULTURAL PRODUCTS (0.1%)
1,673 Archer-Daniels-Midland Co. 50
900 Bunge Ltd. 53
800 Fresh Del Monte Produce, Inc.* 16
--------
119
--------
DRUG RETAIL (0.1%)
3,000 CVS Caremark Corp. 97
1,700 Walgreen Co. 61
--------
158
--------
FOOD DISTRIBUTORS (0.1%)
404 Andersons, Inc. 11
200 Nash Finch Co. 7
1,000 Sysco Corp. 28
2,300 United Natural Foods, Inc.* 62
--------
108
--------
FOOD RETAIL (0.2%)
700 Casey's General Stores, Inc. 22
1,600 Kroger Co. 34
900 Ruddick Corp. 26
1,206 Safeway, Inc. 27
200 Village Super Market, Inc. "A" 5
1,010 Weis Markets, Inc. 36
700 Whole Foods Market, Inc.* 19
18,900 Winn Dixie Stores, Inc.* 191
--------
360
--------
HOUSEHOLD PRODUCTS (0.7%)
1,722 Central Garden & Pet Co.* 16
1,300 Central Garden & Pet Co. "A"* 11
500 Clorox Co. 30
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
3,500 Colgate-Palmolive Co. $ 280
7,100 Kimberly-Clark Corp. 422
9,600 Procter & Gamble Co. 591
--------
1,350
--------
HYPERMARKETS & SUPER CENTERS (0.1%)
1,100 Costco Wholesale Corp. 63
4,200 Wal-Mart Stores, Inc. 225
--------
288
--------
PACKAGED FOODS & MEAT (0.7%)
300 Calavo Growers, Inc. 5
300 Chiquita Brands International, Inc.* 4
700 ConAgra Foods, Inc. 16
700 Dean Foods Co.* 12
900 Del Monte Foods Co. 10
300 Diamond Foods, Inc. 11
1,300 General Mills, Inc. 93
300 Green Mountain Coffee Roasters, Inc.* 25
3,969 H. J. Heinz Co. 173
14,506 Hershey Co. 528
3,100 Hormel Foods Corp. 120
400 Imperial Sugar Co. 7
600 J & J Snack Foods Corp. 25
400 Kellogg Co. 22
2,900 Kraft Foods, Inc. "A" 80
3,209 Lancaster Colony Corp. 175
1,900 Lance, Inc. 42
1,900 Sara Lee Corp. 23
1,366 Smart Balance, Inc.* 8
700 Smithfield Foods, Inc.* 11
300 TreeHouse Foods, Inc.* 12
1,500 Tyson Foods, Inc. "A" 21
--------
1,423
--------
PERSONAL PRODUCTS (1.0%)
500 Alberto-Culver Co. 14
700 Avon Products, Inc. 21
100 Chattem, Inc.* 10
486 Elizabeth Arden, Inc.* 8
37,400 Estee Lauder Companies, Inc. "A" 1,964
500 Herbalife Ltd. 20
1,400 Mead Johnson Nutrition Co. 63
400 Nu Skin Enterprises, Inc. "A" 9
--------
2,109
--------
SOFT DRINKS (0.5%)
4,400 Coca-Cola Co. 239
900 Coca-Cola Enterprises, Inc. 18
700 Dr. Pepper Snapple Group, Inc. 19
300 Hansen Natural Corp.* 11
400 Pepsi Bottling Group, Inc. 15
300 PepsiAmericas, Inc. 9
11,100 PepsiCo, Inc. 662
--------
973
--------
Total Consumer Staples 6,888
--------
ENERGY (3.8%)
--------------
COAL & CONSUMABLE FUELS (0.2%)
804 Alpha Natural Resources, Inc.* 33
6,700 CONSOL Energy, Inc. 312
1,900 International Coal Group, Inc.* 7
400 Massey Energy Co. 15
400 Peabody Energy Corp. 17
2,500 USEC, Inc.* 10
--------
394
--------
INTEGRATED OIL & GAS (1.8%)
9,600 Chevron Corp. 692
6,600 ConocoPhillips 317
19,900 Exxon Mobil Corp. 1,282
600 Hess Corp. 35
1,443 Marathon Oil Corp. 43
570 Murphy Oil Corp. 29
15,500 Occidental Petroleum Corp. 1,214
--------
3,612
--------
================================================================================
18 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
OIL & GAS DRILLING (0.0%)
400 Atwood Oceanics, Inc.* $ 14
300 Diamond Offshore Drilling, Inc. 28
2,400 Hercules Offshore, Inc.* 9
3,200 Parker Drilling Co.* 15
1,008 Pioneer Drilling Co.* 8
460 Rowan Companies, Inc.* 10
--------
84
--------
OIL & GAS EQUIPMENT & SERVICES (1.3%)
300 Bristow Group, Inc.* 11
400 Cameron International Corp.* 15
800 CARBO Ceramics, Inc. 53
800 Complete Production Services, Inc.* 10
6,600 Dresser-Rand Group, Inc.* 195
400 Exterran Holdings, Inc.* 8
25,000 FMC Technologies, Inc.* 1,329
556 Global Industries Ltd.* 4
1,500 Halliburton Co. 44
2,200 ION Geophysical Corp.* 10
2,700 Key Energy Services, Inc.* 26
200 Lufkin Industries, Inc. 13
700 National-Oilwell Varco, Inc. 29
400 Natural Gas Services Group, Inc.* 6
300 Oceaneering International, Inc.* 16
900 Oil States International, Inc.* 33
5,400 RPC, Inc. 67
7,900 Schlumberger Ltd. 501
300 Seacor Holdings, Inc.* 21
300 Smith International, Inc. 9
400 Tidewater, Inc. 19
4,500 Willbros Group, Inc.* 69
--------
2,488
--------
OIL & GAS EXPLORATION & PRODUCTION (0.4%)
1,100 Anadarko Petroleum Corp. 70
1,300 Apache Corp. 128
200 Arena Resources, Inc.* 8
500 Atlas Energy, Inc. 15
2,500 BPZ Resources, Inc.* 15
1,800 Brigham Exploration Co.* 23
1,300 Chesapeake Energy Corp. 32
200 Clayton Williams Energy, Inc.* 7
300 Contango Oil & Gas Co.* 15
1,000 Devon Energy Corp. 67
600 EOG Resources, Inc. 54
700 GMX Resources, Inc.* 7
4,700 Gran Tierra Energy, Inc.* 23
700 McMoRan Exploration Co.* 11
500 Newfield Exploration Co.* 24
200 Noble Energy, Inc. 15
900 Northern Oil and Gas, Inc.* 10
600 Penn Virginia Corp. 15
800 Petrohawk Energy Corp.* 18
500 Pioneer Natural Resources Co. 22
600 Range Resources Corp. 28
700 Rex Energy Corp.* 9
700 Southwestern Energy Co.* 30
1,256 VAALCO Energy, Inc. 5
4,500 W&T Offshore, Inc. 40
1,400 XTO Energy, Inc. 62
--------
753
--------
OIL & GAS REFINING & MARKETING (0.0%)
1,400 Valero Energy Corp. 26
300 World Fuel Services Corp. 7
--------
33
--------
OIL & GAS STORAGE & TRANSPORTATION (0.1%)
800 El Paso Corp. 8
400 Frontline Ltd. 12
700 Golar LNG Ltd.* 8
1,700 Knightsbridge Tankers Ltd. 25
900 Nordic American Tanker Shipping Ltd. 27
920 Ship Finance International Ltd. 13
500 Southern Union Co. 11
1,000 Spectra Energy Corp. 21
1,100 Williams Companies, Inc. 23
--------
148
--------
Total Energy 7,512
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
FINANCIALS (7.2%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.4%)
3,800 Allied Capital Corp.* $ 16
5,934 American Capital Ltd.* 22
300 Ameriprise Financial, Inc. 11
4,678 Apollo Investment Corp. 48
2,122 Ares Capital Corp. 26
2,500 Bank of New York Mellon Corp. 73
200 BlackRock, Inc. "A" 43
100 Capital Southwest Corp. 8
500 Federated Investors, Inc. "B" 13
3,100 Franklin Resources, Inc. 307
805 Hercules Technology Growth Capital, Inc. 8
1,900 Invesco Ltd. ADR 37
300 Northern Trust Corp. 15
700 Och-Ziff Capital Management Group LLC 9
1,500 Penson Worldwide, Inc.* 13
1,200 Prospect Capital Corp. 14
2,053 State Street Corp. 88
400 T. Rowe Price Group, Inc. 20
105 Virtus Investments Partners, Inc.* 2
400 Waddell & Reed Financial, Inc. "A" 12
200 Westwood Holdings Group, Inc. 7
--------
792
--------
CONSUMER FINANCE (0.2%)
1,000 Advance America, Cash Advance Centers, Inc. 5
5,100 American Express Co. 192
1,200 Capital One Financial Corp. 44
1,400 Discover Financial Services 19
500 Dollar Financial Corp.* 11
1,100 SLM Corp.* 12
700 World Acceptance Corp.* 28
--------
311
--------
DIVERSIFIED BANKS (0.8%)
700 Banco Latinoamericano de Exportaciones S.A. "E" 10
14,300 U.S.Bancorp 358
44,800 Wells Fargo & Co. 1,274
--------
1,642
--------
DIVERSIFIED REAL ESTATE ACTIVITIES (0.0%)
700 Forestar Group, Inc.* 13
200 Tejon Ranch Co.* 6
--------
19
--------
INSURANCE BROKERS (0.1%)
1,700 Aon Corp. 66
511 Arthur J. Gallagher & Co. 12
700 Marsh & McLennan Companies, Inc. 15
--------
93
--------
INVESTMENT BANKING & BROKERAGE (1.2%)
2,100 Charles Schwab Corp. 39
263 Evercore Partners, Inc. "A" 8
11,600 Goldman Sachs Group, Inc. 1,725
5,400 Greenhill & Co., Inc. 420
800 Investment Technology Group, Inc.* 16
500 Knight Capital Group, Inc. "A"* 8
500 Lazard Ltd. "A" 19
2,600 Morgan Stanley 70
500 Raymond James Financial, Inc. 13
600 SWS Group, Inc. 7
800 TD Ameritrade Holding Corp.* 14
700 TradeStation Group, Inc.* 5
--------
2,344
--------
LIFE & HEALTH INSURANCE (0.2%)
1,010 AFLAC, Inc. 49
800 American Equity Investment Life Insurance Co. 6
================================================================================
20 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
4,300 Conseco, Inc.* $ 21
2,600 Lincoln National Corp. 64
1,300 MetLife, Inc. 46
100 National Western Life Insurance Co. "A" 16
700 Principal Financial Group, Inc. 16
2,100 Protective Life Corp. 35
1,100 Prudential Financial, Inc. 55
400 StanCorp Financial Group, Inc. 17
500 Torchmark Corp. 23
2,100 Unum Group 41
--------
389
--------
MULTI-LINE INSURANCE (0.1%)
600 American Financial Group, Inc. 15
500 American International Group, Inc.* 12
500 Assurant, Inc. 16
1,300 Genworth Financial, Inc. "A"* 18
1,000 Hartford Financial Services Group, Inc. 24
500 HCC Insurance Holdings, Inc. 13
1,602 Horace Mann Educators Corp. 19
800 Loews Corp. 29
700 Unitrin, Inc. 15
--------
161
--------
MULTI-SECTOR HOLDINGS (0.0%)
1,000 Compass Diversified Holdings 12
700 PICO Holdings, Inc.* 22
--------
34
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.6%)
15,900 Bank of America Corp. 241
104,300 Citigroup, Inc.* 346
12,987 JPMorgan Chase & Co. 506
--------
1,093
--------
PROPERTY & CASUALTY INSURANCE (1.0%)
400 Allied World Assurance Co. Holdings Ltd. 18
1,300 Allstate Corp. 39
60,300 Ambac Financial Group, Inc.*(a) 42
600 Argo Group International Holdings Ltd.* 16
600 Aspen Insurance Holdings Ltd. 16
1,300 Assured Guaranty Ltd. 30
1,100 Axis Capital Holdings Ltd. 32
1,000 Baldwin & Lyons, Inc. "B" 24
7,200 Chubb Corp. 360
400 CNA Financial Corp.* 9
500 Donegal Group, Inc. "A" 7
2,018 Employers Holdings, Inc. 27
742 First American Corp. 22
300 FPIC Insurance Group, Inc.* 11
1,500 Harleysville Group, Inc. 48
1,000 Hilltop Holdings, Inc.* 11
300 Infinity Property & Casualty Corp. 12
1,200 Meadowbrook Insurance Group, Inc. 8
200 Navigators Group, Inc.* 9
300 ProAssurance Corp.* 15
1,200 Progressive Corp. 20
300 RLI Corp. 15
239 Safety Insurance Group, Inc. 8
7,650 Selective Insurance Group, Inc. 118
3,643 State Auto Financial Corp. 57
19,800 Travelers Companies, Inc. 1,003
800 United American Indemnity Ltd. "A"* 6
300 United Fire & Casualty Co. 5
600 W.R. Berkley Corp. 15
100 White Mountains Insurance Group Ltd. 32
400 XL Capital Ltd. "A" 7
--------
2,042
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
REAL ESTATE SERVICES (0.0%)
3,333 Altisource Portfolio Solutions S.A.* $ 77
--------
REGIONAL BANKS (0.8%)
206 Arrow Financial Corp. 5
300 BancFirst Corp. 12
500 BancorpSouth, Inc. 11
400 Bank of Hawaii Corp. 18
700 Bank of the Ozarks, Inc. 21
1,400 BB&T Corp. 39
1,400 Boston Private Financial Holdings, Inc. 10
600 Cardinal Financial Corp. 6
1,625 Cathay General Bancorp 16
800 Chemical Financial Corp. 17
39 Citizens & Northern Corp. -
700 City Holding Co. 22
1,900 Columbia Banking System, Inc. 36
2,500 Community Bank System, Inc. 52
300 Community Trust Bancorp, Inc. 8
1,600 Cullen/Frost Bankers, Inc. 82
3,495 CVB Financial Corp. 34
540 East West Bancorp, Inc. 9
1,400 Fifth Third Bancorp 17
189 First Citizens BancShares, Inc. "A" 32
3,225 First Commonwealth Financial Corp. 19
1,100 First Financial Bancorp 18
1,362 First Financial Bankshares, Inc. 72
500 First Financial Corp. 14
2,605 First Midwest Bancorp, Inc. 34
1,008 Firstmerit Corp. 21
7,200 Fulton Financial Corp. 67
400 Hancock Holding Co. 16
516 Home BancShares, Inc. 13
5,165 Huntington Bancshares, Inc. 25
200 IBERIABANK Corp. 11
400 Independent Bank Corp. 9
1,900 International Bancshares Corp. 40
2,000 KeyCorp 14
500 Lakeland Financial Corp. 9
417 M&T Bank Corp. 31
700 MB Financial, Inc. 14
1,900 National Penn Bancshares, Inc. 11
1,500 NBT Bancorp, Inc. 31
500 Old National Bancorp 6
200 Park National Corp. 11
1,148 PNC Financial Services Group, Inc. 64
600 Prosperity Bancshares, Inc. 24
2,565 Regions Financial Corp. 16
1,000 Renasant Corp. 14
4,100 S&T Bancorp, Inc. 72
600 S.Y. Bancorp, Inc. 13
700 Sandy Spring Bancorp, Inc. 8
400 SCBT Financial Corp. 12
1,000 Signature Bank* 35
600 Simmons First National Corp. "A" 16
525 Southside Bancshares, Inc. 11
200 Suffolk Bancorp 5
1,100 SunTrust Banks, Inc. 27
2,300 Susquehanna Bancshares, Inc. 18
200 SVB Financial Group* 9
900 Texas Capital Bancshares, Inc.* 15
300 Tompkins Financial Corp. 12
600 TriCo Bancshares 10
2,200 UMB Financial Corp. 87
5,920 Umpqua Holdings Corp. 73
500 Union Bankshares Corp. 6
1,627 United Community Banks, Inc.* 7
400 WesBanco, Inc. 6
2,300 Westamerica Bancorp 128
--------
1,621
--------
================================================================================
22 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
REINSURANCE (0.2%)
300 Arch Capital Group Ltd.* $ 21
4,200 Endurance Specialty Holdings Ltd. 151
200 Enstar Group Ltd.* 13
400 Everest Reinsurance Group Ltd. 34
2,772 Flagstone Reinsurance Holdings Ltd. 29
1,000 Greenlight Capital Re Ltd. "A"* 24
1,100 Maiden Holdings Ltd. 8
1,000 Max Capital Group Ltd. 23
1,800 Montpelier Re Holdings Ltd. 30
400 PartnerRe Ltd. 30
1,100 Platinum Underwriters Holdings Ltd. 40
500 RenaissanceRe Holdings Ltd. 27
300 Transatlantic Holdings, Inc. 15
600 Validus Holdings Ltd. 16
--------
461
--------
REITs - DIVERSIFIED (0.1%)
1,100 Colonial Properties Trust 12
7,355 Cousins Properties, Inc. 56
1,300 Investors Real Estate Trust 11
600 Liberty Property Trust, Inc. 18
3 One Liberty Properties, Inc. -
400 PS Business Parks, Inc. 19
614 Vornado Realty Trust 40
1,200 Washington REIT 32
--------
188
--------
REITs - INDUSTRIAL (0.1%)
500 AMB Property Corp. 12
4,300 DCT Industrial Trust, Inc. 21
500 DuPont Fabros Technology, Inc. 8
600 EastGroup Properties, Inc. 23
600 First Potomac Realty Trust 8
1,000 ProLogis 13
--------
85
--------
REITs - MORTGAGE (0.4%)
33,400 Annaly Capital Management, Inc. 580
2,200 Anworth Mortgage Asset Corp. 15
1,300 Capstead Mortgage Corp. 17
4,800 Chimera Investment Corp. 19
800 Hatteras Financial Corp. 22
4,700 MFA Mortgage Investments, Inc. 35
1,100 Redwood Trust, Inc. 16
900 Starwood Property Trust, Inc. 18
--------
722
--------
REITs - OFFICE (0.1%)
200 Alexandria Real Estate
Equities, Inc. 12
2,100 BioMed Realty Trust, Inc. 31
400 Boston Properties, Inc. 26
300 Corporate Office Properties Trust 11
400 Digital Realty Trust, Inc. 19
1,300 Franklin Street Properties Corp. 16
600 Highwoods Properties, Inc. 18
800 Kilroy Realty Corp. 23
1,958 Lexington Realty Trust 12
400 Mack-Cali Realty Corp. 13
400 Parkway Properties, Inc. 8
300 SL Green Realty Corp. 14
--------
203
--------
REITs - RESIDENTIAL (0.1%)
1,100 American Campus Communities, Inc. 28
300 AvalonBay Communities, Inc. 23
300 Camden Property Trust 12
400 Equity LifeStyle Properties, Inc. 19
700 Equity Residential Properties Trust 23
200 Essex Property Trust, Inc. 16
================================================================================
PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
700 Home Properties, Inc. $ 31
600 Mid-America Apartment Communities, Inc. 28
900 Post Properties, Inc. 16
300 Sun Communities, Inc. 5
--------
201
--------
REITs - RETAIL (0.2%)
823 Acadia Realty Trust 13
1,600 CBL & Associates Properties, Inc. 16
3,000 Developers Diversified Realty Corp. 25
800 Equity One, Inc. 13
300 Federal Realty Investment Trust 19
351 Getty Realty Corp. 8
1,600 Inland Real Estate Corp. 14
417 Macerich Co. 13
1,800 National Retail Properties, Inc. 36
800 Pennsylvania REIT 7
500 Realty Income Corp.(a) 14
300 Regency Centers Corp. 10
921 Simon Property Group, Inc. 66
800 Tanger Factory Outlet Centers, Inc. 31
300 Taubman Centers, Inc. 10
400 Urstadt Biddle Properties, Inc. "A" 6
500 Weingarten Realty Investors 9
--------
310
--------
REITs - SPECIALIZED (0.5%)
2,987 DiamondRock Hospitality Co.* 24
800 Entertainment Properties Trust 28
1,900 Extra Space Storage, Inc. 22
900 HCP, Inc. 26
500 Health Care REIT, Inc. 21
2,400 Healthcare Realty Trust, Inc. 50
500 Hospitality Properties Trust 11
1,021 Host Hotels & Resorts, Inc.* 11
500 LTC Properties, Inc. 13
1,700 Medical Properties Trust, Inc. 17
500 National Health Investors, Inc. 17
500 Nationwide Health Properties, Inc. 16
1,700 OMEGA Healthcare Investors, Inc. 32
500 Plum Creek Timber Co., Inc. 18
900 Potlatch Corp. 28
6,150 Public Storage 487
1,000 Rayonier, Inc. 42
600 Senior Housing Properties Trust 13
500 Sovran Self Storage, Inc. 17
1,804 Sunstone Hotel Investors, Inc.* 15
1,700 U-Store-It Trust 12
500 Ventas, Inc. 21
--------
941
--------
SPECIALIZED FINANCE (0.0%)
1,300 MarketAxess Holdings, Inc. 18
700 Moody's Corp. 19
400 MSCI, Inc. "A"* 12
300 NYSE Euronext 7
200 Portfolio Recovery Associates, Inc.* 9
--------
65
--------
THRIFTS & MORTGAGE FINANCE (0.1%)
900 Bank Mutual Corp. 6
800 BankFinancial Corp. 8
400 Berkshire Hills Bancorp, Inc. 7
800 Brookline Bancorp, Inc. 8
400 Danvers Bancorp, Inc. 5
700 Essa Bancorp, Inc. 8
================================================================================
24 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
700 Hudson City Bancorp, Inc. $ 9
4,742 Kearny Financial Corp. 46
3,500 MGIC Investment Corp.* 21
500 New York Community Bancorp, Inc. 8
2,600 NewAlliance Bancshares, Inc. 30
2,900 Provident Financial Services, Inc. 33
731 Provident New York Bancorp 6
2,100 Radian Group, Inc. 14
7,210 TrustCo Bank Corp. NY 43
--------
252
--------
Total Financials 14,046
--------
HEALTH CARE (6.5%)
------------------
BIOTECHNOLOGY (1.2%)
7,900 Alkermes, Inc.* 86
26,000 Amgen, Inc.* 1,521
800 Biogen Idec, Inc.* 43
1,700 Celera Corp.* 11
1,100 Celgene Corp.* 63
1,000 Enzon Pharmaceuticals, Inc.* 10
400 Genomic Health, Inc.* 7
1,300 Genzyme Corp.* 71
2,200 Gilead Sciences, Inc.* 106
900 Human Genome Sciences, Inc.* 24
2,177 Immunogen, Inc.* 15
13,900 Incyte Corp.* 148
700 Martek Biosciences Corp.* 15
300 Medivation, Inc.* 10
900 Momenta Pharmaceuticals, Inc.* 13
700 Myriad Genetics, Inc.* 16
300 Onyx Pharmaceuticals, Inc.* 9
1,820 PDL BioPharma, Inc. 12
400 Pharmasset, Inc.* 8
700 Protalix BioTherapeutics, Inc.* 5
800 Regeneron Pharmaceuticals, Inc.* 21
1,000 Sangamo Biosciences, Inc.* 6
700 Seattle Genetics, Inc.* 7
300 United Therapeutics Corp.* 18
200 Vertex Pharmaceuticals, Inc.* 8
--------
2,253
--------
HEALTH CARE DISTRIBUTORS (0.1%)
600 AmerisourceBergen Corp. 16
600 Cardinal Health, Inc. 20
2,100 Henry Schein, Inc.* 113
400 McKesson Corp. 24
200 MWI Veterinary Supply, Inc.* 8
200 Owens & Minor, Inc. 8
--------
189
--------
HEALTH CARE EQUIPMENT (0.8%)
900 Abaxis, Inc.* 22
1,200 ABIOMED, Inc.* 9
1,100 AngioDynamics, Inc.* 18
1,100 Baxter International, Inc. 63
300 Beckman Coulter, Inc. 20
1,100 Becton, Dickinson and Co. 83
3,123 Boston Scientific Corp.* 27
100 C.R. Bard, Inc. 8
1,300 CareFusion Corp.* 33
700 Conceptus, Inc.* 14
600 Cyberonics, Inc.* 11
1,000 DexCom, Inc.* 9
200 Edwards Lifesciences Corp.* 18
4,315 Greatbatch, Inc.* 85
300 Hospira, Inc.* 15
700 Insulet Corp.* 10
100 Intuitive Surgical, Inc.* 33
505 Invacare Corp. 13
700 IRIS International, Inc.* 7
2,100 Kinetic Concepts, Inc.* 87
600 Masimo Corp.* 17
3,300 Medtronic, Inc. 142
================================================================================
PORTFOLIO OF INVESTMENTS | 25
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
600 Natus Medical, Inc.* $ 8
300 Orthofix International N.V.* 9
1,500 Orthovita, Inc.* 5
300 ResMed, Inc.* 15
500 Somanetics Corp.* 8
300 SonoSite, Inc.* 8
800 St. Jude Medical, Inc.* 30
900 Steris Corp. 23
8,600 Stryker Corp. 447
700 Symmetry Medical, Inc.* 6
9,400 Thoratec Corp.* 266
500 Varian Medical Systems, Inc.* 25
1,100 Volcano Corp.* 22
300 Zimmer Holdings, Inc.* 17
400 ZOLL Medical Corp.* 11
--------
1,644
--------
HEALTH CARE FACILITIES (0.1%)
900 AmSurg Corp.* 19
400 Community Health Systems, Inc.* 13
1,100 Hanger Orthopedic Group, Inc.* 18
1,800 HealthSouth Corp.* 33
6,706 Kindred Healthcare, Inc.* 113
200 National Healthcare Corp. 7
1,800 Psychiatric Solutions, Inc.* 40
2,400 Tenet Healthcare Corp.* 13
--------
256
--------
HEALTH CARE SERVICES (0.3%)
200 Air Methods Corp.* 6
700 Amedisys, Inc.* 38
400 Bio-Reference Laboratories, Inc.* 15
1,100 Catalyst Health Solutions, Inc.* 43
191 CorVel Corp.* 6
635 Cross Country Healthcare, Inc.* 6
100 Emergency Medical Services Corp. "A"* 5
400 Express Scripts, Inc.* 34
900 Gentiva Health Services, Inc.* 23
400 Healthways, Inc.* 7
300 HMS Holdings Corp.* 14
500 inVentiv Health, Inc.* 8
300 IPC The Hospitalist Co., Inc.* 10
100 Laboratory Corp. of America Holdings* 7
200 Landauer, Inc. 12
384 Lincare Holdings, Inc.* 14
5,000 Medco Health Solutions, Inc.* 307
700 Odyssey Healthcare, Inc.* 10
500 Omnicare, Inc. 13
500 Quest Diagnostics, Inc. 28
372 RehabCare Group, Inc.* 11
496 ResCare, Inc.* 4
--------
621
--------
HEALTH CARE SUPPLIES (0.1%)
2,700 Align Technology, Inc.* 51
300 Cooper Companies, Inc. 10
200 Haemonetics Corp.* 11
3,600 Immucor Corp.* 67
400 Inverness Medical Innovations, Inc.* 16
600 Merit Medical Systems, Inc.* 11
600 Neogen Corp.* 13
1,300 RTI Biologics, Inc.* 4
22 TranS1, Inc.* -
--------
183
--------
HEALTH CARE TECHNOLOGY (0.1%)
400 Cerner Corp.* 30
400 Computer Programs and Systems, Inc. 15
700 IMS Health, Inc. 15
1,400 Omnicell, Inc.* 17
700 Vital Images, Inc.* 10
--------
87
--------
================================================================================
26 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.6%)
2,500 Affymetrix, Inc.* $ 13
900 Bio-Rad Laboratories, Inc. "A"* 84
3,100 Exelixis, Inc.* 20
200 Life Technologies Corp.* 10
500 Luminex Corp.* 7
1,100 Nektar Therapeutics* 13
2,000 Sequenom, Inc.* 8
1,000 Thermo Fisher Scientific, Inc.* 46
18,376 Waters Corp.* 1,047
--------
1,248
--------
MANAGED HEALTH CARE (1.6%)
1,815 Aetna, Inc. 54
300 AMERIGROUP Corp.* 8
935 CIGNA Corp. 32
530 Coventry Health Care, Inc.* 12
1,010 HealthSpring, Inc.* 17
49,400 Humana, Inc.* 2,402
600 Magellan Health Services, Inc.* 24
1,300 Molina Healthcare, Inc.* 29
3,700 UnitedHealth Group, Inc. 122
4,800 WellCare Health Plans, Inc.* 150
3,900 WellPoint, Inc.* 248
--------
3,098
--------
PHARMACEUTICALS (1.6%)
3,100 Abbott Laboratories 164
4,900 Allergan, Inc. 282
440 Biomimetic Therapeutics, Inc.* 5
14,100 Bristol-Myers Squibb Co. 344
2,100 Eli Lilly and Co. 74
14,028 Endo Pharmaceuticals Holdings, Inc.* 282
2,800 Forest Laboratories, Inc.* 83
1,300 Impax Laboratories, Inc.* 17
6,700 Johnson & Johnson 421
1,200 MAP Pharmaceuticals, Inc.* 18
15,300 Medicines Co.* 127
715 Medicis Pharmaceutical Corp. "A" 17
19,145 Merck & Co., Inc. 731
4,300 Mylan, Inc.* 78
19,284 Pfizer, Inc. 360
1,300 Salix Pharmaceuticals Ltd.* 38
376 Teva Pharmaceutical Industries Ltd. ADR 21
384 Valeant Pharmaceuticals International* 13
800 ViroPharma, Inc.* 8
2,000 VIVUS, Inc.* 17
400 Watson Pharmaceuticals, Inc.* 15
--------
3,115
--------
Total Health Care 12,694
--------
INDUSTRIALS (3.3%)
------------------
AEROSPACE & DEFENSE (0.8%)
200 AeroVironment, Inc.* 7
828 Alliant Techsystems, Inc.* 65
200 American Science and Engineering, Inc. 16
500 Applied Signal Technology, Inc. 9
1,400 Boeing Co. 85
2,200 Cubic Corp. 86
1,000 GenCorp, Inc.* 6
700 General Dynamics Corp. 47
400 Goodrich Corp. 25
500 HEICO Corp. 21
1,600 Honeywell International, Inc. 62
3,400 ITT Corp. 164
100 L-3 Communications Holdings, Inc. 8
5,400 Lockheed Martin Corp. 402
800 Northrop Grumman Corp. 45
================================================================================
PORTFOLIO OF INVESTMENTS | 27
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
200 Precision Castparts Corp. $ 21
8,800 Raytheon Co. 461
500 Rockwell Collins, Inc. 27
1,500 United Technologies Corp. 101
--------
1,658
--------
AIR FREIGHT & LOGISTICS (0.1%)
700 C.H. Robinson Worldwide, Inc. 39
800 FedEx Corp. 63
1,800 United Parcel Service, Inc. "B" 104
800 UTi Worldwide, Inc. 11
--------
217
--------
AIRLINES (0.3%)
8,670 AirTran Holdings, Inc.* 42
2,220 Alaska Air Group, Inc.* 69
1,800 Allegiant Travel Co.* 92
300 Copa Holdings S.A. "A" 16
1,300 Delta Air Lines, Inc.* 16
5,900 JetBlue Airways Corp.* 29
1,100 Southwest Airlines Co. 12
20,000 UAL Corp.* 245
3,400 US Airways Group, Inc.* 18
--------
539
--------
BUILDING PRODUCTS (0.3%)
1,200 AAON, Inc. 25
9,500 Armstrong World Industries, Inc.* 346
10,387 Griffon Corp.* 122
400 Lennox International, Inc. 15
800 Quanex Building Products Corp. 13
1,212 Trex Co., Inc.* 19
--------
540
--------
COMMERCIAL PRINTING (0.0%)
1,000 Cenveo, Inc.* 7
400 Courier Corp. 6
310 Deluxe Corp. 6
800 R.R. Donnelley & Sons Co. 16
--------
35
--------
CONSTRUCTION & ENGINEERING (0.1%)
400 AECOM Technology Corp.* 11
2,422 Dycom Industries, Inc.* 20
300 EMCOR Group, Inc.* 7
2,592 Fluor Corp. 117
1,000 Granite Construction, Inc. 31
800 Great Lakes Dredge & Dock Corp. 5
500 Jacobs Engineering Group, Inc.* 19
700 KBR, Inc. 13
600 Shaw Group, Inc.* 19
400 Sterling Construction Co., Inc.* 8
--------
250
--------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.3%)
400 Bucyrus International, Inc. 21
1,200 Caterpillar, Inc. 63
200 Cummins, Inc. 9
700 Deere & Co. 35
10,560 Federal Signal Corp. 69
4,200 Force Protection, Inc.* 21
400 Joy Global, Inc. 18
500 Manitowoc Co., Inc. 6
10,200 Navistar International Corp.* 377
400 Oshkosh Corp. 15
500 PACCAR, Inc. 18
600 Trinity Industries, Inc. 9
--------
661
--------
DIVERSIFIED SUPPORT SERVICES (0.0%)
800 Cintas Corp.* 20
800 Comfort Systems USA, Inc. 9
398 G & K Services, Inc. "A" 10
700 Mobile Mini, Inc.* 10
--------
49
--------
ELECTRICAL COMPONENTS & EQUIPMENT (0.3%)
800 A.O. Smith Corp. 34
200 Acuity Brands, Inc. 7
================================================================================
28 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
300 American Superconductor Corp.* $ 12
1,100 Belden, Inc. 25
400 Brady Corp. "A" 11
5,400 Emerson Electric Co. 224
500 Encore Wire Corp. 10
3,700 EnerSys* 72
300 First Solar, Inc.* 34
333 Franklin Electric Co., Inc. 9
1,500 FuelCell Energy, Inc.* 4
700 General Cable Corp.* 20
600 GrafTech International Ltd.* 8
300 Harbin Electric, Inc.* 5
600 Rockwell Automation, Inc. 29
300 SunPower Corp. "A"* 6
500 Thomas & Betts Corp.* 17
1,400 Woodward Governor Co. 36
--------
563
--------
ENVIRONMENTAL & FACILITIES SERVICES (0.1%)
493 ABM Industries, Inc. 9
5,708 Energy Solutions, Inc. 48
300 Republic Services, Inc. 8
300 Tetra Tech, Inc.* 7
1,100 Waste Management, Inc. 35
--------
107
--------
HEAVY ELECTRICAL EQUIPMENT (0.0%)
6,400 Capstone Turbine Corp.*(a) 8
--------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.0%)
300 Heidrick & Struggles International, Inc. 8
700 Kforce, Inc.* 9
1,007 Towers Watson & Co. "A" 44
900 TrueBlue, Inc.* 13
--------
74
--------
INDUSTRIAL CONGLOMERATES (0.4%)
3,200 3M Co. 257
500 Carlisle Companies, Inc. 17
24,200 General Electric Co. 389
1,700 McDermott International, Inc.* 40
300 Raven Industries, Inc. 9
2,900 Tredegar Corp. 47
--------
759
--------
INDUSTRIAL MACHINERY (0.2%)
600 Altra Holdings, Inc.* 7
300 Badger Meter, Inc. 11
1,900 Blount International, Inc.* 21
1,100 Briggs & Stratton Corp. 18
200 CIRCOR International, Inc. 6
330 Crane Co. 10
400 Danaher Corp. 28
200 Dover Corp. 9
200 Eaton Corp. 12
400 EnPro Industries, Inc.* 10
300 Flowserve Corp. 27
379 Gorman-Rupp Co. 9
355 Harsco Corp. 11
700 Illinois Tool Works, Inc. 30
600 John Bean Technologies Corp. 10
100 K-Tron International, Inc.* 15
600 Kadant, Inc.* 9
300 Kaydon Corp. 10
200 L.B. Foster Co. "A"* 5
3,500 Mueller Water Products, Inc. "A" 16
200 Nordson Corp. 11
50 Omega Flex, Inc. 1
400 Pall Corp. 14
200 Parker-Hannifin Corp. 11
700 RBC Bearings, Inc.* 16
754 Robbins & Myers, Inc. 17
400 Sun Hydraulics Corp. 9
2,010 Tennant Co. 48
500 Timken Co. 11
200 Watts Water Technologies, Inc. "A" 6
--------
418
--------
MARINE (0.0%)
1,300 Eagle Bulk Shipping, Inc.* 6
500 Genco Shipping & Trading Ltd.* 10
500 Kirby Corp.* 16
--------
32
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 29
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
OFFICE SERVICES & SUPPLIES (0.1%)
400 Avery Dennison Corp. $ 13
1,500 Herman Miller, Inc. 26
5,100 Sykes Enterprises, Inc.* 122
--------
161
--------
RAILROADS (0.1%)
400 Burlington Northern Santa Fe Corp. 40
900 CSX Corp. 39
600 Norfolk Southern Corp. 28
900 Union Pacific Corp. 54
--------
161
--------
RESEARCH & CONSULTING SERVICES (0.1%)
200 Advisory Board Co.* 6
500 CRA International, Inc.* 13
400 Equifax, Inc. 13
400 Exponent, Inc.* 11
300 FTI Consulting, Inc.* 12
1,500 Navigant Consulting, Inc.* 20
800 Verisk Analytics, Inc. "A"* 23
--------
98
--------
SECURITY & ALARM SERVICES (0.0%)
465 Brink's Co. 11
400 GeoEye, Inc.* 10
--------
21
--------
TRADING COMPANIES & DISTRIBUTORS (0.1%)
1,000 Aircastle Ltd. 9
2,000 Beacon Roofing Supply, Inc.* 34
700 Interline Brands, Inc.* 12
1,100 Rush Enterprises, Inc. "A"* 12
1,800 WESCO International, Inc.* 50
--------
117
--------
TRUCKING (0.0%)
1,800 Avis Budget Group, Inc.* 19
500 Dollar Thrifty Automotive Group, Inc.* 12
600 Marten Transport, Ltd.* 11
400 Ryder System, Inc. 15
600 Saia, Inc.* 7
1,000 Werner Enterprises, Inc. 20
--------
84
--------
Total Industrials 6,552
--------
INFORMATION TECHNOLOGY (10.8%)
------------------------------
APPLICATION SOFTWARE (0.3%)
1,039 Actuate Corp.* 5
800 Adobe Systems, Inc.* 26
800 Advent Software, Inc.* 30
1,772 ANSYS, Inc.* 74
2,500 AsiaInfo Holdings, Inc.* 60
700 Autodesk, Inc.* 17
300 Blackbaud, Inc. 7
900 Bottomline Technologies, Inc.* 16
200 Citrix Systems, Inc.* 8
1,400 Compuware Corp.* 11
200 Concur Technologies, Inc.* 8
300 Ebix, Inc.* 4
1,000 Epicor Software Corp.* 8
1,800 Fair Isaac Corp. 39
1,000 Henry Jack & Associates, Inc. 22
1,600 Imation Corp.* 14
800 Informatica Corp.* 19
600 Intuit, Inc.* 18
607 JDA Software Group, Inc.* 16
500 Manhattan Associates, Inc.* 10
900 Mentor Graphics Corp.* 7
100 MicroStrategy, Inc. "A"* 9
400 NetScout Systems, Inc.* 6
500 Parametric Technology Corp.* 8
500 Pegasystems, Inc. 17
1,200 S1 Corp.* 7
400 Salesforce.com, Inc.* 25
300 Solera Holdings, Inc. 10
600 SuccessFactors, Inc.* 10
700 Synopsys, Inc.* 15
400 Taleo Corp. "A"* 8
2,200 TIBCO Software, Inc.* 20
1,100 TiVo, Inc.* 10
================================================================================
30 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
700 Tyler Technologies, Inc.* $ 13
900 Ultimate Software Group, Inc.* 27
--------
604
--------
COMMUNICATIONS EQUIPMENT (0.9%)
2,100 3Com Corp.* 16
800 Acme Packet, Inc.* 8
22,600 ADC Telecommunications, Inc.* 120
700 ARRIS Group, Inc.* 7
700 Aruba Networks, Inc.* 7
1,200 Aviat Networks Inc.* 9
200 Black Box Corp. 6
10,700 Cisco Systems, Inc.* 240
2,000 Harmonic, Inc.* 12
2,700 Juniper Networks, Inc.* 67
4,500 Motorola, Inc.* 28
1,200 Plantronics, Inc. 32
1,000 Polycom, Inc.* 22
30,500 QUALCOMM, Inc. 1,195
2,000 Riverbed Technology, Inc.* 45
1,000 ShoreTel, Inc.* 5
420 Sycamore Networks, Inc. 8
700 Tekelec* 11
--------
1,838
--------
COMPUTER HARDWARE (2.0%)
1,000 3PAR, Inc.* 10
7,800 Apple, Inc.* 1,498
4,200 Avid Technology, Inc.* 53
2,100 Cray, Inc.* 10
3,200 Dell, Inc.* 41
500 Diebold, Inc. 13
4,500 Hewlett-Packard Co. 212
17,400 International Business Machines Corp. 2,130
2,400 Palm, Inc.* 25
400 Stratasys, Inc.* 9
600 Teradata Corp.* 17
--------
4,018
--------
COMPUTER STORAGE & PERIPHERALS (1.5%)
2,500 Adaptec, Inc.* 8
300 Compellent Technologies, Inc.* 6
55,500 EMC Corp.* 925
400 Lexmark International, Inc. "A"* 10
11,300 NetApp, Inc.* 329
1,700 Netezza Corp.* 16
600 SanDisk Corp.* 15
3,600 Seagate Technology 60
200 STEC, Inc.* 3
1,100 Synaptics, Inc.*(a) 28
40,649 Western Digital Corp.* 1,544
--------
2,944
--------
DATA PROCESSING & OUTSOURCED SERVICES (0.5%)
1,200 Affiliated Computer Services, Inc. "A"* 74
300 Alliance Data Systems Corp.* 18
1,400 Automatic Data Processing, Inc. 57
620 Broadridge Financial Solutions, Inc. 13
200 Cass Information Systems, Inc. 6
1,600 Convergys Corp.* 17
1,265 CSG Systems International, Inc.* 24
800 Fidelity National Information Services, Inc. 19
26,300 Global Cash Access Holdings, Inc.* 213
1,409 Global Payments, Inc. 63
400 Hewitt Associates, Inc. "A"* 16
600 Lender Processing Services, Inc. 23
800 MasterCard, Inc. "A" 200
400 NeuStar, Inc. "A"* 9
1,100 Paychex, Inc. 32
200 TNS, Inc.* 4
600 Total System Services, Inc. 9
1,000 Visa, Inc. "A" 82
5,700 Western Union Co. 106
378 Wright Express Corp.* 11
--------
996
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 31
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS (0.1%)
200 Amphenol Corp. "A" $ 8
3,200 Corning, Inc. 58
300 Dolby Laboratories, Inc. "A"* 15
700 DTS, Inc.* 20
500 Littelfuse, Inc.* 15
400 Rogers Corp.* 10
1,600 Technitrol, Inc. 7
582 Universal Display Corp.* 6
--------
139
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
400 Agilent Technologies, Inc.* 11
5,400 Checkpoint Systems, Inc.* 86
600 Cognex Corp. 10
700 FARO Technologies, Inc.* 13
700 FLIR Systems, Inc.* 21
2,400 L-1 Identity Solutions, Inc.* 18
300 MTS Systems Corp. 8
800 Newport Corp.* 7
700 OSI Systems, Inc.* 18
--------
192
--------
ELECTRONIC MANUFACTURING SERVICES (0.1%)
700 CTS Corp. 5
704 Echelon Corp.* 6
3,800 Jabil Circuit, Inc. 55
490 Maxwell Technologies, Inc.* 7
400 Park Electrochemical Corp. 11
1,966 Sanmina-SCI Corp.* 26
900 TTM Technologies, Inc.* 9
--------
119
--------
HOME ENTERTAINMENT SOFTWARE (0.1%)
2,200 Activision Blizzard, Inc.* 23
1,000 Electronic Arts, Inc.* 16
5,700 Take-Two Interactive Software, Inc.* 53
3,800 THQ, Inc.* 19
--------
111
--------
INTERNET SOFTWARE & SERVICES (0.6%)
2,700 Art Technology Group, Inc.* 12
500 comScore, Inc.* 7
300 Constant Contact, Inc.* 5
300 Dealertrack Holdings, Inc.* 6
600 Digital River, Inc.* 15
2,100 eBay, Inc.* 48
1,100 Google, Inc. "A"* 582
800 Internet Capital Group, Inc.* 5
400 J2 Global Communications, Inc.* 8
1,000 Loopnet, Inc.* 9
1,000 ModusLink Global Solutions, Inc.* 10
3,300 Move, Inc.* 6
1,100 NIC, Inc. 9
43 Open Text Corp.* 2
1,500 Rackspace Hosting, Inc.* 27
800 Sohu.com, Inc.* 40
1,200 Terremark Worldwide, Inc.* 10
1,186 United Online, Inc. 8
2,900 ValueClick, Inc.* 27
15,100 VeriSign, Inc.* 346
600 Vocus, Inc.* 10
2,000 Yahoo!, Inc.* 30
--------
1,222
--------
IT CONSULTING & OTHER SERVICES (0.1%)
2,400 Acxiom Corp.* 37
1,400 Amdocs Ltd.* 40
600 Cognizant Technology Solutions Corp. "A"* 26
200 Forrester Research, Inc.* 5
700 Gartner, Inc.* 15
800 Integral Systems, Inc.* 6
600 ManTech International Corp. "A"* 29
200 Maximus, Inc. 9
300 NCI, Inc. "A"* 9
500 RightNow Technologies, Inc.* 8
600 SAIC, Inc.* 11
1,000 Sapient Corp.* 8
700 SRA International, Inc. "A"* 12
790 Unisys Corp.* 23
--------
238
--------
================================================================================
32 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT (0.4%)
1,300 Advanced Energy Industries, Inc.* $ 17
2,800 Amkor Technology, Inc.* 16
2,100 Applied Materials, Inc. 26
1,400 Brooks Automation, Inc.* 12
200 Cymer, Inc.* 6
2,800 Entegris, Inc.* 10
1,500 KLA-Tencor Corp. 42
1,500 Kulicke & Soffa Industries, Inc.* 7
500 Novellus Systems, Inc.* 11
1,200 Photronics, Inc.* 5
1,500 Teradyne, Inc.* 14
13,300 Tessera Technologies, Inc.* 228
2,500 Ultratech, Inc.* 34
8,800 Veeco Instruments, Inc.* 280
--------
708
--------
SEMICONDUCTORS (2.4%)
500 Actel Corp.* 5
1,400 Advanced Micro Devices, Inc.* 10
400 Altera Corp. 9
800 Analog Devices, Inc. 22
1,500 Applied Micro Circuits Corp.* 11
300 Atheros Communications, Inc.* 10
2,100 Atmel Corp.* 10
1,100 Broadcom Corp. "A"* 29
800 Ceva, Inc.* 10
1,400 Cirrus Logic, Inc.* 10
400 Cree, Inc.* 22
1,100 Cypress Semiconductor Corp.* 11
800 Exar Corp.* 6
34,100 Intel Corp. 662
700 Intersil Corp. "A" 9
1,500 Kopin Corp.* 6
19,200 Linear Technology Corp. 501
2,200 LSI Corp.* 11
3,700 Marvell Technology Group Ltd.* 64
900 Maxim Integrated Products, Inc. 16
3,900 Micron Technology, Inc.* 34
1,400 NVIDIA Corp.* 22
11,400 RF Micro Devices, Inc.* 44
9,394 Semtech Corp.* 141
1,100 Silicon Laboratories, Inc.* 46
900 Skyworks Solutions, Inc.* 11
400 Standard Microsystems Corp.* 8
99,800 Texas Instruments, Inc. 2,245
2,800 TriQuint Semiconductor, Inc.* 17
400 Volterra Semiconductor Corp.* 8
28,300 Xilinx, Inc. 667
1,200 Zoran Corp.* 13
--------
4,690
--------
SYSTEMS SOFTWARE (1.6%)
3,600 Ariba, Inc.* 45
1,400 BMC Software, Inc.* 54
1,300 CA, Inc. 29
200 McAfee, Inc.* 8
600 MICROS Systems, Inc.* 17
43,500 Microsoft Corp. 1,226
2,500 Novell, Inc.* 11
500 Opnet Technologies, Inc. 6
20,700 Oracle Corp. 477
44,500 Red Hat, Inc.* 1,211
1,200 SonicWALL, Inc.* 9
400 Sourcefire, Inc.* 8
400 Sybase, Inc.* 16
2,800 Symantec Corp.* 48
800 TeleCommunication Systems, Inc. "A"* 7
700 VMware, Inc. "A"* 32
--------
3,204
--------
TECHNOLOGY DISTRIBUTORS (0.1%)
500 Avnet, Inc.* 13
2,800 Brightpoint, Inc.* 16
700 Ingram Micro, Inc. "A"* 12
1,000 Insight Enterprises, Inc.* 12
================================================================================
PORTFOLIO OF INVESTMENTS | 33
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
100 SYNNEX Corp.* $ 3
5,100 Tech Data Corp.* 208
--------
264
--------
Total Information Technology 21,287
--------
MATERIALS (1.5%)
----------------
ALUMINUM (0.0%)
1,900 Alcoa, Inc. 24
300 Century Aluminum Co.* 4
--------
28
--------
COMMODITY CHEMICALS (0.1%)
600 Celanese Corp. "A" 17
3,300 Westlake Chemical Corp. 68
--------
85
--------
DIVERSIFIED CHEMICALS (0.1%)
300 Ashland, Inc. 12
400 Cabot Corp. 10
2,300 Dow Chemical Co. 62
1,700 E.I.du Pont de Nemours & Co. 56
1,297 Eastman Chemical Co. 73
900 Huntsman Corp. 11
400 Olin Corp. 7
200 PPG Industries, Inc. 12
600 Solutia, Inc.* 8
--------
251
--------
DIVERSIFIED METALS & MINING (0.5%)
400 Brush Engineered Materials, Inc.* 7
300 Compass Minerals International, Inc. 19
12,400 Freeport-McMoRan Copper & Gold, Inc. 827
900 Horsehead Holding Corp.* 9
400 Southern Copper Corp. 11
300 Walter Industries, Inc. 19
--------
892
--------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.3%)
2,900 CF Industries Holdings, Inc. 269
1,200 Monsanto Co. 91
500 Mosaic Co. 27
871 Scotts Miracle-Gro Co. "A" 34
7,400 Terra Industries, Inc. 234
--------
655
--------
FOREST PRODUCTS (0.0%)
2,300 Louisiana-Pacific Corp.* 16
700 Weyerhaeuser Co. 28
--------
44
--------
GOLD (0.1%)
1,100 Allied Nevada Gold Corp.* 14
1,100 Newmont Mining Corp. 47
300 Royal Gold, Inc. 13
--------
74
--------
INDUSTRIAL GASES (0.0%)
300 Air Products & Chemicals,
Inc. 23
500 Praxair, Inc. 37
--------
60
--------
METAL & GLASS CONTAINERS (0.0%)
200 AEP Industries, Inc.* 7
500 AptarGroup, Inc. 18
400 BWAY Holding Co.* 7
600 Myers Industries, Inc. 5
525 Pactiv Corp.* 12
--------
49
--------
PAPER PACKAGING (0.0%)
400 Bemis Co., Inc. 11
200 Rock-Tenn Co. "A" 9
600 Sealed Air Corp. 12
500 Sonoco Products Co. 14
--------
46
--------
PAPER PRODUCTS (0.1%)
800 Buckeye Technologies, Inc.* 9
200 Clearwater Paper Corp.* 10
600 Domtar Corp.* 29
700 Glatfelter 10
1,100 International Paper Co. 25
860 Schweitzer-Mauduit International, Inc. 65
1,400 Wausau Paper Corp.* 12
--------
160
--------
================================================================================
34 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
PRECIOUS METALS & MINERALS (0.1%)
1,600 Coeur d'Alene Mines Corp.* $ 23
5,500 Hecla Mining Co.* 25
6,900 Stillwater Mining Co.* 69
--------
117
--------
SPECIALTY CHEMICALS (0.1%)
505 A. Schulman, Inc. 11
750 Balchem Corp. 15
200 Cytec Industries, Inc. 7
400 Ecolab, Inc. 18
900 H.B. Fuller Co. 18
500 Innospec, Inc. 5
400 Lubrizol Corp. 29
400 Newmarket Corp. 36
2,000 PolyOne Corp.* 15
2,100 RPM International, Inc. 39
300 Sensient Technologies Corp. 8
700 Sigma-Aldrich Corp. 34
500 Valspar Corp. 13
400 W.R. Grace & Co.* 10
--------
258
--------
STEEL (0.1%)
400 Cliffs Natural Resources, Inc. 16
900 Nucor Corp. 37
700 Reliance Steel & Aluminum Co. 28
5,400 Worthington Industries, Inc. 78
--------
159
--------
Total Materials 2,878
--------
TELECOMMUNICATION SERVICES (1.1%)
---------------------------------
ALTERNATIVE CARRIERS (0.1%)
4,431 Cogent Communications Group, Inc.* 49
1,800 Global Crossing Ltd.* 25
2,600 PAETEC Holding Corp.* 8
2,000 Premiere Global Services, Inc.* 16
--------
98
--------
INTEGRATED TELECOMMUNICATION SERVICES (0.7%)
1,500 Alaska Communications Systems Group, Inc. 12
23,000 AT&T, Inc. 583
100 Atlantic Tele-Network, Inc. 5
1,800 Cbeyond, Inc.* 22
600 CenturyTel, Inc. 20
4,700 Cincinnati Bell, Inc.* 14
800 General Communication, Inc. "A"* 5
10,400 Qwest Communications International, Inc. 44
24,400 Verizon Communications, Inc. 718
--------
1,423
--------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
1,000 American Tower Corp. "A"* 43
400 Crown Castle International Corp.* 15
1,715 NII Holdings, Inc."B"* 56
400 NTELOS Holdings Corp. 7
300 Shenandoah Telecommunications Co. 5
20,700 Sprint Nextel Corp.* 68
5,300 Syniverse Holdings, Inc.* 89
700 Telephone & Data Systems, Inc. 22
4,247 U.S. Cellular Corp.* 155
8,800 USA Mobility, Inc. 91
--------
551
--------
Total Telecommunication Services 2,072
--------
UTILITIES (2.2%)
----------------
ELECTRIC UTILITIES (0.7%)
600 Allegheny Energy, Inc. 13
1,100 American Electric Power Co., Inc. 38
600 Cleco Corp. 16
600 DPL, Inc. 16
2,800 Duke Energy Corp. 46
================================================================================
PORTFOLIO OF INVESTMENTS | 35
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
500 Edison International $ 17
1,200 El Paso Electric Co.* 23
300 Entergy Corp. 23
15,000 Exelon Corp. 684
4,200 FirstEnergy Corp. 183
1,000 FPL Group, Inc. 49
600 Great Plains Energy, Inc. 11
900 MGE Energy, Inc. 30
900 Portland General Electric Co. 17
1,100 PPL Corp. 32
400 Progress Energy, Inc. 16
1,700 Southern Co. 54
--------
1,268
--------
GAS UTILITIES (0.1%)
300 Chesapeake Utilities Corp. 9
400 National Fuel Gas Co. 19
1,200 New Jersey Resources Corp. 44
700 Nicor, Inc. 29
1,500 Northwest Natural Gas Co. 65
400 Piedmont Natural Gas Co., Inc. 10
200 Questar Corp. 8
1,600 Southwest Gas Corp. 44
500 UGI Corp. 12
--------
240
--------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
1,700 AES Corp.* 22
200 Constellation Energy Group, Inc. 6
795 Mirant Corp.* 11
6,800 NRG Energy, Inc.* 164
400 Ormat Technologies, Inc. 14
--------
217
--------
MULTI-UTILITIES (1.3%)
700 Black Hills Corp. 18
2,457 CH Energy Group, Inc. 97
400 Consolidated Edison, Inc. 18
1,000 Dominion Resources, Inc. 37
500 DTE Energy Co. 21
1,600 NorthWestern Corp. 39
3,906 NSTAR 134
900 PG&E Corp. 38
5,900 PNM Resources, Inc. 69
68,200 Public Service Enterprise Group, Inc. 2,086
600 Sempra Energy 30
900 TECO Energy, Inc. 14
700 Xcel Energy, Inc. 15
--------
2,616
--------
WATER UTILITIES (0.0%)
1,000 California Water Service Group 36
300 Connecticut Water Service, Inc. 7
600 Middlesex Water Co. 11
600 SJW Corp. 13
--------
67
--------
Total Utilities 4,408
--------
Total Common Stocks (cost: $93,004) 91,620
--------
PREFERRED SECURITIES (0.9%)
CONSUMER STAPLES (0.4%)
-----------------------
AGRICULTURAL PRODUCTS (0.4%)
10,000 Dairy Farmers of America, Inc., 7.88%, cumulative redeemable, perpetual(b) 788
--------
FINANCIALS (0.5%)
-----------------
LIFE & HEALTH INSURANCE (0.5%)
15,000 Delphi Financial Group, Inc., 7.38%, perpetual 276
25,000 Delphi Financial Group, Inc., 8.00% 611
--------
887
--------
================================================================================
36 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
REINSURANCE (0.0%)
500 Ram Holdings Ltd., 7.50%, non-cumulative, perpetual* $ 36
--------
Total Financials 923
--------
GOVERNMENT (0.0%)
-----------------
U.S.GOVERNMENT (0.0%)
20,000 Fannie Mae, 8.25%, perpetual* 23
10,000 Freddie Mac, 8.38%, perpetual* 11
--------
Total Government 34
--------
Total Preferred Securities (cost: $2,849) 1,745
--------
WARRANTS (0.0%)
ENERGY (0.0%)
-------------
COAL & CONSUMABLE FUELS (0.0%)
20 GreenHunter Energy, Inc., acquired 7/15/08;*(c),(d)
(cost: $0) -
--------
EXCHANGE-TRADED FUNDS (9.3%)
347,988 iShares MSCI EAFE Index Fund
(cost: $22,410) 18,262
--------
Total Equity Securities
(cost: $118,263) 111,627
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON
(000) RATE MATURITY
-------------------------------------------------------------------------------------------------------------
BONDS (38.0%)
CORPORATE OBLIGATIONS (18.3%)
CONSUMER DISCRETIONARY (0.1%)
-----------------------------
APPAREL & ACCESSORIES & LUXURY GOODS (0.1%)
$ 250 Kellwood Co. 7.63% 10/15/2017 128
--------
CONSUMER STAPLES (0.5%)
-----------------------
DRUG RETAIL (0.5%)
1,000 CVS Caremark Corp.(e) 6.30 6/01/2037 930
--------
ENERGY (0.5%)
-------------
OIL & GAS STORAGE & TRANSPORTATION (0.5%)
1,000 Enbridge Energy Partners, LP(e) 8.05 10/01/2037 997
--------
FINANCIALS (14.9%)
------------------
CONSUMER FINANCE (0.5%)
500 American Express Co.(e) 6.80 9/01/2066 468
611 Capital One Financial Corp.(e) 7.69 8/15/2036 580
--------
1,048
--------
DIVERSIFIED BANKS (1.5%)
500 Comerica Capital Trust II(e) 6.58 2/20/2037 410
1,000 First Tennessee Bank, N.A.(e) 5.65 4/01/2016 914
================================================================================
PORTFOLIO OF INVESTMENTS | 37
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
$ 1,000 USB Realty Corp.(b),(e) 6.09% -(f) $ 772
1,000 Wachovia Capital Trust III 5.80 -(f) 783
--------
2,879
--------
INVESTMENT BANKING & BROKERAGE (1.0%)
1,000 First Republic Bank Corp.(e) 7.75 9/15/2012 1,086
1,000 Goldman Sachs Capital II(e) 5.79 -(f) 787
--------
1,873
--------
LIFE & HEALTH INSURANCE (1.9%)
1,000 Great-West Life & Annuity Insurance Co.(b),(e) 7.15 5/16/2046 900
1,250 Lincoln National Corp.(e) 7.00 5/17/2066 1,059
500 Nationwide Mutual Insurance Co.(b) 5.81 12/15/2024 424
500 Prudential Financial, Inc.(e) 8.88 6/15/2038 545
1,000 StanCorp Financial Group, Inc.(e) 6.90 6/01/2067 791
--------
3,719
--------
MULTI-LINE INSURANCE (1.8%)
1,232 Genworth Financial, Inc.(e) 6.15 11/15/2066 878
1,000 Glen Meadow(b),(e) 6.51 2/12/2067 778
1,925 ILFC E-Capital Trust I(b) 5.90 12/21/2065 1,097
1,000 Oil Insurance Ltd.(b),(e) 7.56 -(f) 792
--------
3,545
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.5%)
1,000 General Electric Capital Corp.(e) 6.38 11/15/2067 885
--------
PROPERTY & CASUALTY INSURANCE (2.0%)
1,000 Allstate Corp.(g) 6.13 5/15/2037 940
500 Fund American Companies, Inc.(e) 5.88 5/15/2013 516
500 Liberty Mutual Group, Inc.(e) 7.30 6/15/2014 530
1,000 Progressive Corp.(e) 6.70 6/15/2037 921
1,000 Travelers Companies, Inc.(e) 6.25 3/15/2037 942
--------
3,849
--------
REGIONAL BANKS (3.5%)
500 City National Capital Trust I(e) 9.63 2/01/2040 537
1,000 Fifth Third Capital Trust IV(e) 6.50 4/15/2037 778
150 First Empire Capital Trust I 8.23 2/01/2027 139
1,000 Fulton Capital Trust I(e) 6.29 2/01/2036 642
1,000 Huntington Capital III(e) 6.65 5/15/2037 676
1,000 Manufacturers & Traders Trust Co.(e) 5.63 12/01/2021 873
645 PNC Preferred Funding Trust(b),(e) 6.52 -(f) 509
500 PNC Preferred Funding Trust III(b) 8.70 -(f) 518
================================================================================
38 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
$ 500 Regions Financing Trust II(e) 6.63% 5/15/2047 $ 337
400 Susquehanna Bancshares, Inc.(e) 2.10(h) 5/01/2014 300
1,000 TCF National Bank(e) 5.50 2/01/2016 837
1,200 Webster Capital Trust IV(e) 7.65 6/15/2037 804
--------
6,950
--------
REITs - DIVERSIFIED (0.5%)
1,000 Washington REIT(e) 5.25 1/15/2014 1,035
--------
REITs - INDUSTRIAL (0.2%)
500 ProLogis(e) 2.25 4/01/2037 471
--------
REITs - OFFICE (0.2%)
500 Brandywine Operating Partnership, LP(e) 5.70 5/01/2017 468
--------
REITs - RETAIL (0.9%)
1,000 Developers Diversified Realty Corp. 5.38 10/15/2012 974
500 New Plan Excel Realty Trust, Inc.(e) 5.13 9/15/2012 443
577 New Plan Excel Realty Trust, Inc., acquired
2/20/09; cost $196(d) 7.68 11/02/2026 426
--------
1,843
--------
REITs - SPECIALIZED (0.4%)
850 Ventas Realty, LP 6.75 4/01/2017 837
--------
Total Financials 29,402
--------
UTILITIES (2.3%)
----------------
ELECTRIC UTILITIES (1.1%)
233 FPL Group Capital, Inc. 6.65 6/15/2067 222
188 Oglethorpe Power Corp.(e) 6.97 6/30/2011 190
60 Power Contract Financing, LLC(b) 6.26 2/01/2010 60
1,000 PPL Capital Funding, Inc.(e) 6.70 3/30/2067 876
1,000 Texas Competitive Electric Holding Co., LLC(i) 3.73 10/10/2014 817
--------
2,165
--------
GAS UTILITIES (0.2%)
500 Southern Union Co.(e) 7.20 11/01/2066 448
--------
MULTI-UTILITIES (1.0%)
1,000 Dominion Resources, Inc.(e) 7.50 6/30/2066 996
1,000 Puget Sound Energy, Inc. 6.97 6/01/2067 895
--------
1,891
--------
Total Utilities 4,504
--------
Total Corporate Obligations (cost: $31,127) 35,961
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 39
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
EURODOLLAR AND YANKEE OBLIGATIONS (4.0%)
ENERGY (0.6%)
-------------
INTEGRATED OIL & GAS (0.6%)
$ 125 PEMEX Finance Ltd. 9.03% 2/15/2011 $ 129
1,000 Trans-Canada Pipelines Ltd. 6.35 5/15/2067 950
--------
Total Energy 1,079
--------
FINANCIALS (3.2%)
-----------------
DIVERSIFIED BANKS (0.9%)
1,000 Barclays Bank plc(b) 8.55 -(f) 970
500 BayernLB Capital Trust I 6.20 -(f) 205
1,000 BOI Capital Funding Number 3, LP(j),(b) 6.11 -(f) 580
500 Landsbanki Islands hf, acquired
10/12/07;cost $500(b),(d),(k) 7.43 -(f) 1
--------
1,756
--------
DIVERSIFIED CAPITAL MARKETS (0.5%)
1,000 UBS Preferred Funding Trust I 8.62 -(f) 966
--------
DIVERSIFIED REAL ESTATE ACTIVITIES (0.3%)
500 Brookfield Asset Management, Inc.(e) 7.13 6/15/2012 534
--------
MULTI-LINE INSURANCE (0.5%)
1,000 ING Capital Funding Trust III 8.44 -(f) 915
--------
PROPERTY & CASUALTY INSURANCE (0.3%)
500 Allied World Assurance Holdings Ltd.(e) 7.50 8/01/2016 545
--------
REGIONAL BANKS (0.2%)
1,000 Glitnir Banki hf, acquired 9/11/06 and 10/18/06;
cost $1,017(b),(d),(k) 7.45 -(f) 2
500 Unicredito Italiano Capital Trust II(b) 9.20 -(f) 500
--------
502
--------
REINSURANCE (0.5%)
500 Max USA Holdings Ltd.(b),(e) 7.20 4/14/2017 520
500 Platinum Underwriters Finance, Inc.(e) 7.50 6/01/2017 529
--------
1,049
--------
Total Financials 6,267
--------
MATERIALS (0.2%)
----------------
DIVERSIFIED METALS & MINING (0.2%)
500 Glencore Finance S.A. 8.00 -(f) 488
--------
Total Eurodollar and Yankee Obligations
(cost: $9,227) 7,834
--------
================================================================================
40 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (5.6%)
FINANCIALS (5.6%)
-----------------
ASSET-BACKED FINANCING (5.6%)
$ 100 Aerco Ltd.(b),(e) 0.75%(h) 7/15/2025 $ 90
500 AESOP Funding II, LLC(b),(e) 9.31 10/20/2013 564
425 American Express Credit Account
Master Trust(e) 0.50(h) 9/15/2014 413
500 American Express Credit Account
Master Trust(b),(e) 0.58(h) 9/15/2016 474
500 Banc of America Securities Auto Trust(e) 5.51 2/19/2013 501
500 Bank of America Credit Card Trust(e) 0.52(h) 6/15/2014 482
500 Bank One Issuance Trust(e) 4.77 2/16/2016 517
1,000 Bank One Issuance Trust(e) 1.03(h) 2/15/2017 951
204 Capital One Auto Finance Trust (INS) 4.71 6/15/2012 205
500 Citibank Credit Card Issuance Trust(e) 6.30(h) 6/20/2014 535
500 CPS Auto Receivables Trust (INS)(e) 6.48 7/15/2013 517
500 Credit Acceptance Auto Loan Trust(b),(e) 5.68 5/15/2017 510
1,000 GE Capital Credit Card Master Note Trust(e) 0.50(h) 3/15/2013 1,000
1,000 HSBC Private Label Credit Card Master
Note Trust(e) 0.34(h) 12/16/2013 999
500 MBNA Master Credit Card Note Trust(e) 6.80 7/15/2014 535
732 Prestige Auto Receivables Trust "A"(b) 5.67(h) 4/15/2017 732
500 Rental Car Finance Corp.(b) 0.37(h) 7/25/2013 449
500 Triad Automobile Receivables Owners Trust 5.43 7/14/2014 510
854 Trinity Rail Leasing, LP(b) 5.90 5/14/2036 786
150 USXL Funding, LLC (INS)(b) 5.38 4/15/2014 150
--------
Total Asset-Backed Securities (cost: $9,931) 10,920
--------
COMMERCIAL MORTGAGE SECURITIES (9.6%)
FINANCIALS (9.6%)
------------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (9.6%)
1,140 Banc of America Commercial Mortgage, Inc.(e) 5.81 7/10/2044 884
230 Banc of America Commercial Mortgage, Inc. 5.68 7/10/2046 199
1,000 Banc of America Commercial Mortgage, Inc.(e) 5.18 9/10/2047 510
500 Bear Stearns Commercial Mortgage
Securities, Inc.(e) 5.69 6/11/2050 469
1,000 Commercial Mortgage Loan Trust(e) 6.02 12/10/2049 725
1,000 Credit Suisse Commercial Mortgage Trust(e) 6.22 2/15/2041 880
745 Credit Suisse First Boston Mortgage
Securities Corp.(e) 5.10 8/15/2038 592
1,000 GE Capital Commercial Mortgage Corp.(e) 6.07 6/10/2038 1,018
================================================================================
PORTFOLIO OF INVESTMENTS | 41
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
$ 1,000 GE Capital Commercial Mortgage Corp.(e) 5.61% 12/10/2049 $ 670
500 GMAC Commercial Mortgage Securities, Inc.(e) 4.75 5/10/2043 440
247 Government Lease Trust(b) 6.48 5/18/2011 254
642 GS Mortgage Securities Corp. II(e) 4.30 1/10/2040 656
378 JP Morgan Chase Commercial Mortgage
Securities Corp. 5.33 12/15/2044 245
1,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(e) 4.82 9/12/2037 1,010
1,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(e) 5.49 4/15/2043 1,052
500 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(e) 5.81 6/12/2043 505
500 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(e) 5.33 12/15/2044 295
1,000 LB-UBS Commercial Mortgage Trust(e) 4.85 9/15/2031 1,025
690 Merrill Lynch Mortgage Trust 5.23 11/12/2037 602
500 Merrill Lynch Mortgage Trust(e) 5.83 6/12/2050 437
1,000 Merrill Lynch Mortgage Trust(e) 5.69 2/12/2051 900
1,000 ML-CFC Commercial Mortgage Trust(e) 5.42 8/12/2048 639
500 ML-CFC Commercial Mortgage Trust 5.96 8/12/2049 394
232 ML-CFC Commercial Mortgage Trust 5.70 9/12/2049 192
1,000 Morgan Stanley Capital I, Inc.(e) 5.39 3/12/2044 1,053
860 Morgan Stanley Capital I, Inc.(e) 5.81 12/12/2049 803
1,000 Morgan Stanley Capital I, Inc.(e) 4.77 7/15/2056 790
1,000 Prudential Mortgage Capital Funding, LLC(e) 6.76 5/10/2034 1,036
655 Wachovia Bank Commercial Mortgage Trust 5.42 1/15/2045 619
--------
Total Commercial Mortgage Securities (cost: $17,183) 18,894
--------
U.S. TREASURY SECURITIES (0.5%)
NOTES (0.5%)
1,000 3.38%, 11/15/2019 (cost: $970) 981
--------
Total Bonds (cost: $68,438) 74,590
--------
-------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
-------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS (6.2%)
MONEY MARKET FUNDS (6.2%)
12,305,860 State Street Institutional Liquid Reserve Fund, 0.13%(l)
(cost: $12,306) 12,306
--------
================================================================================
42 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
-------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS PURCHASED WITH
CASH COLLATERAL FROM SECURITIES LOANED (0.1%)
REPURCHASE AGREEMENTS (0.0%)
$51 Credit Suisse First Boston LLC, 0.11%, acquired
on 1/29/2010 and due 2/01/2010 at $51
(collateralized by $55 of U.S. Treasury, 3.63%,
due 8/15/2019;market value $56) $ 51
--------
-------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
-------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (0.1%)
72,580 BlackRock Liquidity Funds TempFund Portfolio, 0.11%(l) 72
--------
Total Short-Term Investments Purchased With Cash
Collateral From Securities Loaned (cost: $123) 123
--------
TOTAL INVESTMENTS (COST: $199,130) $198,646
========
-------------------------------------------------------------------------------------------------------------
NUMBER
OF CONTRACTS
-------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS (0.3%)
316 Put - On Russell 2000 Index expiring February 20, 2010 at 570 164
162 Put - On S&P 500 Index expiring February 20, 2010 at 1,025 141
162 Put - On S&P 500 Index expiring March 20, 2010 at 1,025 321
--------
TOTAL PURCHASED OPTIONS (COST: $438) $ 626
========
WRITTEN OPTIONS (0.0%)
(316) Call - On Russell 2000 Index expiring February 20, 2010 at 640 (46)
(162) Put - On S&P 500 Index expiring February 20, 2010 at 900 (14)
--------
TOTAL WRITTEN OPTIONS (PREMIUMS RECEIVED: $606) $ (60)
========
================================================================================
PORTFOLIO OF INVESTMENTS | 43
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-----------------------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $ 91,620 $ - $- $ 91,620
Preferred Securities 622 1,123 - 1,745
Warrants - - - -
Exchange-Traded Funds 18,262 - - 18,262
Bonds:
Corporate Obligations - 35,961 - 35,961
Eurodollar and Yankee Obligations - 7,834 - 7,834
Asset-Backed Securities - 10,920 - 10,920
Commercial Mortgage Securities - 18,894 - 18,894
U.S. Treasury Securities - 981 - 981
Money Market Instruments:
Money Market Funds 12,306 - - 12,306
Short-Term Investments Purchased
With Cash Collateral From
Securities Loaned:
Repurchase Agreements - 51 - 51
Money Market Funds 72 - - 72
Purchased Options 626 - - 626
-----------------------------------------------------------------------------------------------------------------
Total $123,508 $75,764 $- $199,272
-----------------------------------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------------------------------
Written Options $(60) $- $- $(60)
-----------------------------------------------------------------------------------------------------------------
The following is a reconciliation of assets in which significant unobservable
inputs (Level 3) were used in determining value:
-----------------------------------------------------------------------------------------------------------------
CORPORATE ASSET-BACKED
OBLIGATIONS SECURITIES
-----------------------------------------------------------------------------------------------------------------
Balance as of July 31, 2009 $ 445 $ 504
Net realized gain (loss) 39 -
Change in net unrealized appreciation/depreciation 336 60
Net purchases (sales) (820) -
Transfers in and/or out of Level 3 - (564)
-----------------------------------------------------------------------------------------------------------------
Balance as of January 31, 2010 $ - $ -
-----------------------------------------------------------------------------------------------------------------
================================================================================
44 | USAA FIRST START GROWTH 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 13.4% of net assets at January 31,
2010.
The Fund may rely on certain Securities and Exchange Commission (SEC)
exemptive orders or rules that permit funds meeting various conditions to
invest in an exchange-traded fund (ETF) in amounts exceeding limits set
forth in the Investment Company Act of 1940 that would otherwise be
applicable.
o CATEGORIES AND DEFINITIONS
ASSET-BACKED AND COMMERCIAL MORTGAGE-BACKED SECURITIES -- Asset-backed
securities represent a participation in, or are secured by and payable from,
a stream of payments generated by particular assets. Commercial
mortgage-backed securities reflect an interest in, and are secured by,
mortgage loans on commercial real property. The weighted average life is
likely to be substantially shorter than the stated final maturity as a
result of scheduled and unscheduled principal repayments. Rates on
commercial mortgage-backed securities may change slightly over time as
underlying mortgages pay down.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 45
<PAGE>
================================================================================
EURODOLLAR AND YANKEE OBLIGATIONS -- Eurodollar obligations are
dollar-denominated instruments that are issued outside the U.S. capital
markets by foreign corporations and financial institutions and by foreign
branches of U.S. corporations and financial institutions. Yankee obligations
are dollar-denominated instruments that are issued by foreign issuers in the
U.S. capital markets.
WARRANTS -- entitle the holder to buy a proportionate amount of common stock
at a specified price for a stated period.
o PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
iShares Exchange-traded funds, managed by Barclays Global Fund Advisors,
that represent a portfolio of stocks designed to closely track a
specific market index. iShares funds are traded on securities
exchanges.
REIT Real estate investment trust.
CREDIT ENHANCEMENTS -- add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
interest payments when due. The enhancement may be provided by a
high-quality bank, insurance company or other corporation, or a collateral
trust. The enhancements do not guarantee the market values of the securities.
(INS) Principal and interest payments are insured by Financial Guaranty
Insurance Co. or Assured Guaranty Municipal Corp. Although bond
insurance reduces the risk of loss due to default by an issuer,
such bonds remain subject to the risk that value may fluctuate for
other reasons, and there is no assurance that the insurance company
will meet its obligations.
================================================================================
46 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
o SPECIFIC NOTES
(a) The security or a portion thereof was out on loan as of January 31, 2010.
(b) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by Rule
144A, and as such has been deemed liquid by USAA Investment Management
Company (the Manager) under liquidity guidelines approved by the Board
of Trustees, unless otherwise noted as illiquid.
(c) Security was fair valued at January 31, 2010, by the Manager in
accordance with valuation procedures approved by the Board of Trustees.
(d) Security deemed illiquid by the Manager, under liquidity guidelines
approved by the Board of Trustees. The aggregate market value of these
securities at January 31, 2010, was $429,000, which represented 0.2% of
the Fund's net assets.
(e) At January 31, 2010, the security, or a portion thereof, is segregated
to cover the notional value of outstanding written call options.
(f) Security is perpetual and has no final maturity date but may be subject
to calls at various dates in the future.
(g) At January 31, 2010, portions of these securities were segregated to
cover delayed-delivery and/or when-issued purchases.
(h) Variable-rate or floating-rate security -- interest rate is adjusted
periodically. The interest rate disclosed represents the current rate at
January 31, 2010.
(i) At January 31, 2010, the aggregate market value of securities purchased
on a delayed-delivery basis was $817,000.
(j) Security is currently trading without accrued interest.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 47
<PAGE>
================================================================================
(k) Currently the issuer is in default with respect to interest and/or
principal payments.
(l) Rate represents the money market fund annualized seven-day yield at
January 31, 2010.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
48 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (including securities
on loan of $103) (cost of $199,130) $198,646
Purchased options, at market value (cost of $438) 626
Cash 11
Receivables:
Capital shares sold 86
USAA Investment Management Company (Note 6D) 356
Dividends and interest 1,036
Securities sold 3,023
Other 1
--------
Total assets 203,785
--------
LIABILITIES
Payables:
Upon return of securities loaned 125
Securities purchased 7,062
Capital shares redeemed 82
Written options, at market value (premiums received of $606) 60
Accrued management fees 127
Accrued transfer agent's fees 3
Other accrued expenses and payables 111
--------
Total liabilities 7,570
--------
Net assets applicable to capital shares outstanding $196,215
========
NET ASSETS CONSIST OF:
Paid-in capital $255,737
Accumulated undistributed net investment income 392
Accumulated net realized loss on investments, options, and
futures transactions (60,164)
Net unrealized appreciation of investments and options 250
--------
Net assets applicable to capital shares outstanding $196,215
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 20,983
========
Net asset value, redemption price, and offering price per share $ 9.35
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 49
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 1,192
Interest 3,441
Securities lending (net) 13
-------
Total income 4,646
-------
EXPENSES
Management fees 711
Administration and servicing fees 143
Transfer agent's fees 955
Custody and accounting fees 175
Postage 58
Shareholder reporting fees 33
Trustees' fees 5
Registration fees 21
Professional fees 34
Other 5
-------
Total expenses 2,140
Expenses reimbursed (821)
-------
Net expenses 1,319
-------
NET INVESTMENT INCOME 3,327
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS, AND FUTURES CONTRACTS
Net realized gain (loss) on:
Investments 11,639
Options (2,536)
Futures transactions (7)
Change in net unrealized appreciation/depreciation of:
Investments 10,382
Options 1,868
-------
Net realized and unrealized gain 21,346
-------
Increase in net assets resulting from operations $24,673
=======
See accompanying notes to financial statements.
================================================================================
50 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited), and year ended
July 31, 2009
--------------------------------------------------------------------------------
1/31/2010 7/31/2009
--------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 3,327 $ 5,510
Net realized gain (loss) on investments 11,639 (30,621)
Net realized gain (loss) on options (2,536) 2,982
Net realized gain (loss) on futures transactions (7) 3
Change in net unrealized appreciation/depreciation of:
Investments 10,382 5,335
Options 1,868 (625)
Futures contracts - 4
------------------------
Increase (decrease) in net assets resulting
from operations 24,673 (17,412)
------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,431) (4,804)
------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 11,431 21,446
Reinvested dividends 6,401 4,791
Cost of shares redeemed (12,274) (21,915)
------------------------
Increase in net assets from capital
share transactions 5,558 4,322
------------------------
Capital contribution from USAA Transfer Agency Company - 3
------------------------
Net increase (decrease) in net assets 23,800 (17,891)
NET ASSETS
Beginning of period 172,415 190,306
------------------------
End of period $196,215 $172,415
========================
Accumulated undistributed net investment income:
End of period $ 392 $ 3,496
========================
CHANGE IN SHARES OUTSTANDING
Shares sold 1,232 2,840
Shares issued for dividends reinvested 679 695
Shares redeemed (1,323) (2,831)
------------------------
Increase in shares outstanding 588 704
========================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 51
<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 First
Start Growth Fund (the Fund), which is classified as diversified under the 1940
Act. The Fund's investment objective is to seek long-term capital growth with
reduced volatility over time.
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
================================================================================
52 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
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, USAA Investment Management
Company (the Manager), an affiliate of the Fund, and the Fund's
subadvisers, if applicable, will monitor for events that would
materially affect the value of the Fund's foreign securities. The Fund's
subadvisers have agreed to notify the Manager of significant events they
identify that would materially affect the value of the Fund's foreign
securities. If the Manager determines that a particular event would
materially affect the value of the Fund's foreign securities, then the
Manager, under valuation procedures approved by the Trust's Board of
Trustees, will consider such available information that it deems
relevant to determine a fair value for the affected foreign securities.
In addition, the Fund may use information from an external vendor or
other sources to adjust the foreign market closing prices of foreign
equity securities to reflect what the Fund believes to be the fair
value of the securities as of the close of the NYSE. Fair valuation of
affected foreign equity securities may occur frequently based on an
assessment that events that occur on a fairly regular basis (such as
U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Debt securities with maturities greater than 60 days are valued each
business day by a pricing service (the Service) approved by
================================================================================
NOTES TO FINANCIAL STATEMENTS | 53
<PAGE>
================================================================================
the Trust's Board of Trustees. The Service uses an evaluated mean
between quoted bid and asked prices or the last sales price to price
securities when, in the Service's judgment, these prices are readily
available and are representative of the securities' market values. For
many securities, such prices are not readily available. The Service
generally prices these securities based on methods that include
consideration of yields or prices of securities of comparable quality,
coupon, maturity, and type; indications as to values from dealers in
securities; and general market conditions.
6. Repurchase agreements are valued at cost, which approximates market
value.
7. Futures are valued based upon the last sale price at the close of
market on the principal exchange on which they are traded.
8. Options are valued by a pricing service at the National Best Bid/Offer
(NBBO) composite price, which is derived from the best available bid
and ask prices in all participating options exchanges determined to
most closely reflect market value of the options at the time of
computation of the Fund's NAV.
9. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before
the pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadvisers, if applicable, under valuation procedures approved by the
Trust's Board of Trustees. The effect of fair value pricing is that
securities may not be priced on the basis of quotations from the
primary market in which they are traded and the actual price realized
from the sale of a security may differ materially from the fair value
price. Valuing these securities at fair value is intended to cause the
Fund's NAV to be more reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing
================================================================================
54 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
services, broker-dealers, or widely used quotation systems. General
factors considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any restrictions
on disposition of the securities, and an evaluation of the forces that
influenced the market in which the securities are purchased and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments
is based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- On February 1, 2009, the
Fund adopted an accounting standard that requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features
in derivative agreements, if any.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 55
<PAGE>
================================================================================
The Fund may buy, sell, and enter into certain types of derivatives,
including, but not limited to futures contracts, options, and options on
futures contracts under circumstances in which such instruments are
expected by the portfolio manager to aid in achieving the Fund's investment
objective. The Fund also may use derivatives in circumstances where the
portfolio manager believes they offer an economical means of gaining
exposure to a particular asset class or securities market or to keep cash
on hand to meet shareholder redemptions or other needs while maintaining
exposure to the market. With exchange listed futures contracts and
options, counterparty credit risk to the Fund is limited to the exchange's
clearinghouse which, as counterparty to all exchange traded futures
contracts and options, guarantees the transactions against default from the
actual counterparty to the trade.
FUTURES CONTRACTS -- The Fund is subject to equity price risk, interest
rate risk, and foreign currency exchange rate risk in the normal course of
pursuing its investment objectives. The Fund may use futures contracts to
gain exposure to, or hedge against, changes in the value of equities,
interest rates, or foreign currencies. A futures contract represents a
commitment for the future purchase or sale of an asset at a specified price
on a specified date. Upon entering into such contracts, the Fund is
required to deposit with the broker in either cash or securities an initial
margin in an amount equal to a certain percentage of the contract amount.
Subsequent payments (variation margin) are made or received by the Fund
each day, depending on the daily fluctuations in the value of the contract,
and are recorded for financial statement purposes as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Upon entering into
such contracts, the Fund bears the risk of interest or exchange rates or
securities prices moving unexpectedly in an unfavorable direction, in which
case, the Fund may not achieve the anticipated benefits of the futures
contracts.
================================================================================
56 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
OPTION TRANSACTIONS -- The Fund is subject to equity price risk in the
normal course of pursuing its investment objectives. The Fund may use
options on underlying instruments, namely, equity securities, ETFs, and
equity indexes, to gain exposure to, or hedge against, changes in the value
of equity securities, ETFs, or equity indexes. A call option gives the
purchaser the right to buy, and the writer the obligation to sell, the
underlying instrument at a specified price during a specified period.
Conversely, a put option gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying instrument at a specified
price during a specified period. The purchaser of the option pays a premium
to the writer of the option.
Premiums paid for purchased options are included in the Fund's statement of
assets and liabilities as an investment. If a purchased option expires
unexercised, the premium paid is recognized as a realized loss. If a
purchased call option on a security is exercised, the cost of the security
acquired includes the exercise price and the premium paid. If a purchased
put option on a security is exercised, the realized gain or loss on the
security sold is determined from the exercise price, the original cost of
the security, and the premium paid. The risk associated with purchasing a
call or put option is limited to the premium paid.
Premiums received from writing options are included in the Fund's statement
of assets and liabilities as a liability. If a written option expires
unexercised, the premium received is recognized as a realized gain. If a
written call option on a security is exercised, the realized gain or loss
on the security sold is determined from the exercise price, the original
cost of the security, and the premium received. If a written put option on
a security is exercised, the cost of the security acquired is the exercise
price paid less the premium received. The Fund, as a writer of an option,
bears the market risk of an unfavorable change in the price of the security
underlying the written option.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 57
<PAGE>
================================================================================
In an attempt to reduce the Fund's volatility over time, the Fund may
implement a strategy that involves writing (selling) index call or
corresponding ETF options and purchasing index put or corresponding ETF
options or index put spread options against a highly correlated stock
portfolio. The combination of the diversified stock portfolio with the index
call and put or corresponding ETF options is designed to provide the Fund
with consistent returns over a wide range of equity market environments.
This strategy may not fully protect the Fund against declines in the
portfolio's value, and the Fund could experience a loss. Options on
securities indexes or corresponding ETF options are different from options
on individual securities in that the holder of the index options contract
has the right to receive an amount of cash equal to the difference between
the exercise price and the closing price of the underlying index on exercise
date. If an option on an index is exercised, the realized gain or loss is
determined from the exercise price, the value of the underlying index, and
the amount of the premium.
FAIR VALUES OF DERIVATIVE INSTRUMENTS
(IN THOUSANDS)
ASSETS 1/31/2010 7/31/2009
-----------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING INSTRUMENTS LIABILITIES LIABILITIES
UNDER STATEMENT 133 LOCATION FAIR VALUE LOCATION FAIR VALUE
-----------------------------------------------------------------------------------------------
Equity contracts Purchased options $626 Purchased options $80
-----------------------------------------------------------------------------------------------
LIABILITIES 1/31/2010 7/31/2009
-----------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING INSTRUMENTS LIABILITIES LIABILITIES
UNDER STATEMENT 133 LOCATION FAIR VALUE LOCATION FAIR VALUE
-----------------------------------------------------------------------------------------------
Equity contracts Written options $60 Written options $1,155
-----------------------------------------------------------------------------------------------
================================================================================
58 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF CHANGES IN NET
ASSETS DURING THE SIX-MONTH PERIODS ENDED JANUARY 31, 2010, AND JULY 31,
2009*
(IN THOUSANDS)
DERIVATIVES
NOT ACCOUNTED
FOR AS HEDGING STATEMENT OF CHANGE IN UNREALIZED
INSTRUMENTS CHANGES IN APPRECIATION
UNDER NET ASSETS REALIZED GAIN (LOSS) (DEPRECIATION)
STATEMENT 133 LOCATION ON DERIVATIVES ON DERIVATIVES
--------------------------------------------------------------------------------------------------
1/31/2010 7/31/2009* 1/31/2010 7/31/2009*
--------------------------------------------------------------------------------------------------
Equity contracts Net realized gain $(2,536) $(746) $1,868 $(1,523)
(loss) on options and
futures transactions/
Change in net
unrealized
appreciation/
depreciation of
options and futures
contracts
Interest rate Net realized gain (7) - - -
contracts (loss) on futures
transactions
--------------------------------------------------------------------------------------------------
Total $(2,543) $(746) $1,868 $(1,523)
--------------------------------------------------------------------------------------------------
*The statement of changes reflects the year ended July 31, 2009, while the
schedule reflects the period February 1, 2009 - July 31, 2009. This
accounting standard was effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008.
D. 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.
E. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon notification. Interest income is recorded daily
on the accrual basis. Discounts and
================================================================================
NOTES TO FINANCIAL STATEMENTS | 59
<PAGE>
================================================================================
premiums are amortized over the life of the respective securities, using the
effective yield method for long-term securities and the straight-line method
for short-term securities.
F. 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.
G. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective
dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from
================================================================================
60 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
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.
H. SECURITIES PURCHASED ON A DELAYED-DELIVERY OR WHEN-ISSUED BASIS -- Delivery
and payment for securities that have been purchased by the Fund on a
delayed-delivery or when-issued basis can take place a month or more after
the trade date. During the period prior to settlement, these securities do
not earn interest, are subject to market fluctuation, and may increase or
decrease in value prior to their delivery. The Fund maintains segregated
assets with a market value equal to or greater than the amount of its
purchase commitments. The purchase of securities on a delayed-delivery or
when-issued basis may increase the volatility of the Fund's NAV to the
extent that the Fund makes such purchases while remaining substantially
fully invested. As of January 31, 2010, the Fund's outstanding
delayed-delivery commitments, including interest purchased, were $788,000;
none of which were when-issued securities.
I. 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, custodian and other bank credits reduced the Fund's expenses by less
than $500. For the six-month period ended January 31, 2010, the Fund did
not incur any brokerage commission recapture credits.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 61
<PAGE>
================================================================================
J. 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.
K. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $750 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA funds that are party to the loan agreement are assessed facility fees
by CAPCO based on the funds' assessed proportionate share of CAPCO's operating
expenses related to obtaining and maintaining CAPCO's funding programs in total
(in no event to exceed 0.13% annually of the amount of the committed loan
agreement). Prior to September 25, 2009, the maximum annual facility fee was
0.07% of the amount of the committed loan agreement. The facility fees are
allocated among the funds based on their respective average net assets for the
period.
For the six-month period ended January 31, 2010, the Fund paid CAPCO facility
fees of less than $500, which represents 0.4% of the total fees paid to CAPCO by
the USAA funds. The Fund had no borrowings under this agreement during the
six-month period ended January 31, 2010.
================================================================================
62 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
(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 $48,424,000, for federal
income tax purposes, which, if not offset by subsequent capital gains, will
expire between 2010 and 2017, as shown below. It is unlikely that the Trust's
Board of Trustees will authorize a distribution of capital gains realized in the
future until the capital loss carryovers have been used or expire.
CAPITAL LOSS CARRYOVERS
----------------------------------------
EXPIRES BALANCE
--------- -----------
2010 $ 153,000
2011 41,042,000
2017 7,229,000
-----------
Total $48,424,000
===========
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the six-month period
ended January 31, 2010, the Fund did not incur any income tax, interest, or
penalties. As of January 31, 2010, the Manager has reviewed all open tax years
and concluded that there was no impact to the Fund's net assets or results of
operations. Tax years ended July 31, 2006, through July 31, 2009, remain subject
to examination by the Internal Revenue Service and state taxing authorities. On
an ongoing basis, the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 63
<PAGE>
================================================================================
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2010, were
$182,913,000 and $188,685,000, 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 $14,016,000 and $14,312,000, respectively, resulting in net
unrealized depreciation of $296,000.
For the six-month period ended January 31, 2010, transactions in written call
and put options* were as follows:
PREMIUMS
NUMBER OF RECEIVED
CONTRACTS (000's)
----------------------------------
Outstanding at July 31, 2009 640 $ 507
Options written 4,562 4,644
Options terminated in closing
purchase transactions (4,053) (4,427)
Options expired (671) (118)
----------------------------------
Outstanding at January 31, 2010 478 $ 606
==================================
*Refer to Note 1C for a discussion of derivative instruments and how they are
accounted for in the Fund's financial statements.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Wachovia Global
Securities Lending (Wachovia), may lend its securities to qualified financial
institutions, such as certain broker-dealers, to earn additional income. The
borrowers are required to secure their loans continuously with cash collateral
in an amount at least equal to the fair value of the securities loaned,
initially in an amount at least equal to 102% of the fair value of domestic
securities loaned and 105% of the fair value of international securities loaned.
Cash collateral is invested in high-quality short-term investments. Cash
collateral requirements are determined
================================================================================
64 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
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
$103,000 and received cash collateral of $125,000 for the loans. Of this amount,
$124,000 was invested in short-term investments, as noted in the Fund's
portfolio of investments, and $1,000 remained in cash.
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund
and for directly managing the day-to-day investment of a portion of the
Fund's assets, subject to the authority of and supervision by the Trust's
Board of Trustees. The Manager is also authorized to select (with approval
of the Trust's Board of Trustees and without shareholder approval) one or
more subadvisers to manage the 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 assets to the subadvisers. The allocation for each
================================================================================
NOTES TO FINANCIAL STATEMENTS | 65
<PAGE>
================================================================================
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 monthly by comparing the Fund's
performance to that of the Lipper Flexible Portfolio Funds Index over the
performance period. The Lipper Flexible Portfolio Funds Index tracks the
total return performance of the 30 largest funds in the Lipper Flexible
Portfolio Funds category. The performance period for the Fund consists of
the current month plus the previous 35 months. The following table is
utilized to determine the extent of the performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
---------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
The annual performance adjustment rate is multiplied by the average net
assets of the Fund over the entire performance period, which is then
multiplied by a fraction, the numerator of which is the number of days in
the month and the denominator of which is 365 (366 in leap years). The
resulting amount is the performance adjustment; a positive adjustment in
the case of overperformance, or a negative adjustment in the case of
underperformance.
Under the performance fee arrangement, the Fund will pay a positive
performance fee adjustment for a performance period whenever the Fund
outperforms the Lipper Flexible Portfolio Funds Index over that period,
even if the Fund had overall negative returns during the performance period.
================================================================================
66 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
For the six-month period ended January 31, 2010, the Fund incurred total
management fees, paid or payable to the Manager, of $711,000, which
included a (0.01)% performance adjustment of $(6,000).
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into an investment
subadvisory agreements with Credit Suisse Asset Management, LLC (Credit
Suisse), under which Credit Suisse directs the investment and reinvestment
of the portion of the Fund's assets invested in equity securities (as
allocated from time to time by the Manager) and with Credit Suisse
Securities (USA) LLC (CSSU) for its Volaris Volatility Management Group
(Volaris Group), under which the Volaris Group directs the investment and
reinvestment of the portion of the Fund's assets invested in index options
(as allocated from time to time by the Manager).
The Manager (not the Fund) pays Credit Suisse a subadvisory fee in the
annual amount of 0.15% of the portion of the Fund's average daily net
assets that Credit Suisse manages. For the six-month period ended January
31, 2010, the Manager incurred subadvisory fees, paid or payable to Credit
Suisse, of $72,000.
The Manager (not the Fund) pays CSSU's Volaris Group a subadvisory fee
based on the total notional amount of the options contracts that CSSU's
Volaris Group manages in the USAA Balanced Strategy Fund, the USAA
Cornerstone Strategy Fund, the USAA First Start Growth Fund, the USAA Total
Return Strategy Fund, and the USAA Global Opportunities Fund, in an annual
amount of 0.23% on the first $50 million of the total notional amount;
0.20% on the total notional amount over $50 million and up to $250 million;
0.12% on the total notional amount over $250 million and up to $500
million; 0.10% on the total notional amount over $500 million and up to $2
billion; and 0.08% on the total notional amount over $2 billion. The
notional amount is based on the daily closing price of the index that
underlies the written options strategy for the Fund. For the six-month
period ended January 31, 2010, the Manager incurred subadvisory fees for
the Fund, paid or payable to CSSU's Volaris Group, of $35,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 67
<PAGE>
================================================================================
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and shareholder servicing functions for the Fund. For such
services, the Manager receives a fee accrued daily and paid monthly at an
annualized rate of 0.15% of the Fund's average net assets. For the six-month
period ended January 31, 2010, the Fund incurred administration and
servicing fees, paid or payable to the Manager, of $143,000.
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 $4,000 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 to 1.38% of its average annual net
assets, excluding extraordinary expenses and before reductions of any
expenses paid indirectly, and will reimburse the Fund for all expenses in
excess of that amount. 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 of $821,000, of which
$356,000 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 based on an annual charge of $23 per
shareholder account plus out-of-pocket expenses. The Fund also pays SAS
fees that are related to the administration and servicing of accounts that
are traded on an omnibus basis. For the six-month period ended January 31,
2010, the Fund incurred transfer agent's fees, paid or payable to SAS, of
$955,000.
================================================================================
68 | USAA FIRST START GROWTH FUND
<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.
(7) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(8) SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date but before the
financial statements are issued are categorized as recognized or non-recognized
for financial statement purposes. The Manager has evaluated subsequent events
through the date the financial statements were issued, and has determined there
were no events that required recognition or disclosure in the Fund's financial
statements.
(9) NEW ACCOUNTING PRONOUNCEMENT
In January 2010, the Financial Accounting Standards Board issued amended
guidance for improving disclosure about fair value measurements that adds new
disclosure requirements about transfers into and out of Levels 1 and 2 and
separate disclosures about purchases, sales, issuances, and settlements in the
reconciliation for fair value measurements using significant unobservable inputs
(Level 3). It also clarifies existing disclosure requirements relating to the
levels of disaggregation for fair value measurement and inputs and valuation
techniques used to measure fair value. The amended guidance is effective for
financial statements for fiscal years and interim periods beginning after
December 15, 2009, except for disclosures about purchases, sales, issuances and
settlements in the rollforward of activity in Level 3 fair value measurements,
which are effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. The Manager is in the process of
evaluating the impact of this guidance on the Fund's financial statement
disclosures.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 69
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31,
------------------------------------------------------------------------------
2010 2009 2008 2007 2006 2005
------------------------------------------------------------------------------
Net asset value at
beginning of period $ 8.45 $ 9.66 $ 10.70 $ 9.62 $ 9.99 $ 8.27
------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment
income (loss) .16 .28 .23 .17 .02 (.03)(a)
Net realized and
unrealized gain (loss) 1.06 (1.24) (1.09) 1.02 (.39) 1.75(a)
------------------------------------------------------------------------------
Total from investment
operations 1.22 (.96) (.86) 1.19 (.37) 1.72(a)
------------------------------------------------------------------------------
Less distributions from:
Net investment income (.32) (.25) (.18) (.11) - -
------------------------------------------------------------------------------
Net asset value at end
of period $ 9.35 $ 8.45 $ 9.66 $ 10.70 $ 9.62 $ 9.99
==============================================================================
Total return (%)* 14.35 (9.39) (8.24) 12.36(b) (3.70) 20.80
Net assets at end
of period (000) $196,215 $172,415 $190,306 $220,295 $222,403 $230,380
Ratios to average
net assets:**
Expenses (%)(c),(d) 1.38(e) 1.38 1.38 1.39(b) 1.45 1.45
Expenses, excluding
reimbursements (%)(c) 2.24(e) 2.67 2.18 2.22(b) 2.21 2.31
Net investment
income (loss) (%) 3.48(e) 3.62 2.17 1.57 .24 (.33)
Portfolio turnover (%) 101 216(f) 113 135 227 75
* 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 $189,726,000.
(a) Calculated using average shares.
(b) For the year ended July 31, 2007, SAS voluntarily reimbursed the Fund for a portion of the transfer
agent's fees incurred. The reimbursement had no effect on the Fund's total return or ratio of expenses to
average net assets.
(c) Reflects total operating expenses of the Fund before reductions of any expenses paid indirectly.
The Fund's expenses paid indirectly decreased the expense ratios as follows:
(.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+) (.03%) (.01%)
(+) Represents less than 0.01% of average net assets.
(d) Effective October 1, 2006, the Manager voluntarily agreed to limit the annual expenses of the Fund to
1.38% of the Fund's average net assets. Prior to this date, the voluntary expense limit was 1.45%.
(e) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(f) Reflects increased trading activity due to asset allocation changes.
================================================================================
70 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
EXPENSE EXAMPLE
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, and other Fund operating
expenses. This example is intended to help you understand your indirect costs,
also referred to as "ongoing costs" (in dollars), of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire six-month period of August 1, 2009, through
January 31, 2010.
ACTUAL EXPENSES
The first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested at the beginning of the period, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this
================================================================================
EXPENSE EXAMPLE | 71
<PAGE>
================================================================================
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2009 -
AUGUST 1, 2009 JANUARY 31, 2010 JANUARY 31, 2010
--------------------------------------------------------------
Actual $1,000.00 $1,143.50 $7.46
Hypothetical
(5% return before expenses) 1,000.00 1,018.25 7.02
* Expenses are equal to the Fund's annualized expense ratio of 1.38%, which is
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 ending account value on the
first line in the table is based on its actual total return of 14.35% for the
six-month period of August 1, 2009, through January 31, 2010.
================================================================================
72 | USAA FIRST START GROWTH FUND
<PAGE>
================================================================================
TRUSTEES Christopher W. Claus
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Richard A. Zucker
--------------------------------------------------------------------------------
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, AND San Antonio, Texas 78265-9825
DISTRIBUTOR
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "Products & Services"
SELF-SERVICE 24/7 click "Investments," then
AT USAA.COM "Mutual Funds"
OR CALL Under "My Accounts" go to
(800) 531-USAA "Investments." View account balances,
(8722) or click "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge (i) at USAA.COM; and
(ii) on the SEC's website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
<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)
===========================================================================
31703-0310 (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:* 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:* CHRISTOPHER W. CLAUS
-----------------------------------------------------
Signature and Title: Christopher W. Claus, President
Date: APRIL 1, 2010
------------------------------
By:* 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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