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 SCIENCE & TECHNOLOGY FUND]
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SEMIANNUAL REPORT
USAA SCIENCE & TECHNOLOGY FUND
JANUARY 31, 2010
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FUND OBJECTIVE
LONG-TERM CAPITAL APPRECIATION.
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TYPES OF INVESTMENTS
Normally invest at least 80% of the Fund's assets in equity securities of
companies expected to benefit from the development and use of scientific and
technological advances and improvements.
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 13
Notes to Portfolio of Investments 19
Financial Statements 21
Notes to Financial Statements 24
EXPENSE EXAMPLE 37
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 SCIENCE & TECHNOLOGY 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
Wellington Management Company, LLP ANN C. GALLO
JOHN F. AVERILL, CFA BRUCE L. GLAZER
NICOLAS B. BOULLET ANITA M. KILLIAN, CFA
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o HOW DID THE USAA SCIENCE & TECHNOLOGY FUND (THE FUND) PERFORM?
For the six-month period ended January 31, 2010, the Fund had a total return
of 10.19%. This compares to returns of 9.87% for the S&P 500 Index (the
Index) and 8.84% for the Lipper Science & Technology Funds Index.
As of January 31, 2010, roughly 71% of the Fund's assets were invested in
technology-related stocks and 25% were invested in healthcare-related
companies.
o HOW DID THE FUND'S TECHNOLOGY PORTION PERFORM DURING THE REPORTING PERIOD?
Technology, as a sector, underperformed the broader market, but the Fund's
technology portion modestly outperformed the S&P North American Technology
Index, primarily due to good stock selection in
The S&P North American Technology Sector Index is the technology sub-index
of the S&P North American Sector Indices. The S&P North American Technology
Sector index family is designed as equity benchmarks for U.S. traded
technology-related securities.
Refer to page 10 for benchmark definitions.
Past performance is no guarantee of future results.
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4 | USAA SCIENCE & TECHNOLOGY FUND
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computers & peripherals, underweight exposure to semiconductors and
semiconductor equipment, and overweight exposure to information technology
(IT) services. Seagate Technology, Intel Corp., and Tencent Holdings Ltd.
were the leading contributors to performance relative to the Index.
Stock selection was less favorable within the communications equipment,
semiconductors and semiconductor equipment, and internet software and
services sub-sectors. Our lack of exposure to internet and catalog retail
also hurt relative returns. Not owning Amazon.com, Inc., and holding
positions in TriQuint Semiconductor, Inc. and Netease.com, Inc., were the
top detractors from index-relative performance.
o WHAT'S WELLINGTON MANAGEMENT'S OUTLOOK FOR THE TECHNOLOGY SECTOR?
Globally, business is improving rapidly from the depressed levels of early
2009. We continue to see strengthening demand in personal computers (PCs) as
PC unit growth accelerates in response to the long-anticipated PC refresh
cycle. On the heels of the recovery in semiconductors early in 2009,
enterprise spending has improved globally, and we expect carrier spending
and IT services to follow these industries to more stable ground. Disc drive
industry fundamentals continue to look healthy with low inventories and
strong demand.
Asian electronics companies continue to prefer to transact business within
Asia, given that the majority of the electronics supply chain is located and
supported by Asian companies. Asian brands continue to gain global
popularity. We are geared to this theme via our exposure to Taiwanese
electronics and semiconductor stocks. In addition, China, with the world's
largest internet population, is becoming a huge viable market for its local
internet companies.
You will find a complete list of securities that the Fund owns on pages
13-18.
TriQuint Semiconductor, Inc. was sold out of the Fund prior to January 31,
2010.
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MANAGERS' COMMENTARY ON THE FUND | 5
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As we look toward the second half of 2010, we believe that the cyclical-led
rebound will decelerate, which may lead to outperformance in later cycle
technology sectors such as services and software. The sector should continue
to grow faster than the global economy at large, and the potential benefits
of technological progress remain undiminished. Once the cyclical recovery is
complete, we believe the focus will be to return to quality, long-term
secular growth companies that have the ability to deliver double-digit
growth against a low-growth global economic backdrop. The rapidly changing
global technology industry continues to offer considerable opportunities to
investors. As new developments make existing technologies obsolete and allow
for the creation of new products and services, we believe the sector remains
a very attractive investment area.
o HOW DID THE FUND'S HEALTH CARE PORTION PERFORM?
Health care stocks, as a whole, also did better than the overall market, and
the Fund's health care portion outperformed the S&P 500 Health Care Index.
Stock selection in biotechnology and health care equipment and suppliers
were the leading contributors to index-relative performance. Incyte Corp.,
Johnson & Johnson, and Covidien plc were the leading individual contributors
relative to the Index. Underweight exposure to pharmaceutical stocks and an
overweight exposure to biotechnology stocks hurt relative returns, with the
biggest detractors being our positions in Medicines Co. and Shionogi & Co.
Ltd. We did not have any positions in Abbott Laboratories, which also hurt
relative returns.
o WHAT'S WELLINGTON MANAGEMENT'S OUTLOOK FOR THE HEALTH CARE SECTOR?
We feel the portfolio is well positioned for what lies ahead. As we have
postulated in the past, we believe most of the initiatives that will be
included in a final U.S. health care bill will be incremental in
Johnson & Johnson was sold out of the Fund prior to January 31, 2010.
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6 | USAA SCIENCE & TECHNOLOGY FUND
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nature and will build upon our existing systems, with the addition of new
programs or exchanges targeted to the uninsured. The surprising results of
the Massachusetts Senatorial election in early January 2010 further supports
our view that the country's political and economic realities will preclude
meaningfully negative reform from being enacted. While the bill that
ultimately emerges is likely to address the country's health care "access"
problem, it will do little to address the even greater problem of
"affordability." Nonetheless, while the growing regulatory burdens and the
intensifying focus on cost containment will pressure companies throughout
the health care system, we believe the impact will be manageable and, more
importantly, that many stocks are discounting an outcome that is
unrealistically negative.
On behalf of our colleagues at USAA, we thank you for your investment in the
Fund.
The USAA Science & Technology Fund may be more volatile than funds that
diversify across many industries because of the short life cycles and
competitive pressures of many of the products or services of the companies
this Fund invests in.
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MANAGERS' COMMENTARY ON THE FUND | 7
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FUND RECOGNITION
USAA SCIENCE & TECHNOLOGY FUND
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OVERALL MORNINGSTAR RATING(TM)
out of 194 technology funds
for the period ended January 31, 2010:
OVERALL RATING
* * * *
3-YEAR
* * *
out of 194 funds
5-YEAR
* * *
out of 183 funds
10-YEAR
* * * *
out of 96 funds
The Overall Morningstar Rating for a fund is derived from a weighted average of
the performance figures associated with its three-, five-, and 10-year (if
applicable) Morningstar Rating metrics. Ratings are based on risk-adjusted
returns.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. For each fund with at least
a three-year history, Morningstar calculates a Morningstar Rating(TM) based on a
Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's
monthly performance (including the effects of sales charges, loads, and
redemption fees), placing more emphasis on downward variations and rewarding
consistent performance. The top 10% of the funds in each broad asset class
receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars,
the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.
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8 | USAA SCIENCE & TECHNOLOGY FUND
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INVESTMENT OVERVIEW
USAA SCIENCE & TECHNOLOGY FUND (Symbol: USSCX)
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1/31/10 7/31/09
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Net Assets $292.5 Million $265.0 Million
Net Asset Value Per Share $10.38 $9.42
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AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/10
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7/31/09 to 1/31/10* 1 Year 5 Years 10 Years
10.19% 45.38% 2.89% -5.82%
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EXPENSE RATIO**
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1.68%
* Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
**THE EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING EXPENSES, BEFORE
REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND INCLUDING ANY ACQUIRED FUND FEES
AND EXPENSES, AS REPORTED IN THE FUND'S PROSPECTUS DATED DECEMBER 1, 2009, AND
IS CALCULATED AS A PERCENTAGE OF AVERAGE NET ASSETS. THIS EXPENSE RATIO MAY
DIFFER FROM THE EXPENSE RATIO DISCLOSED IN THE FINANCIAL HIGHLIGHTS.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
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INVESTMENT OVERVIEW | 9
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA SCIENCE & LIPPER SCIENCE &
S&P 500 INDEX TECHNOLOGY FUND TECHNOLOGY FUNDS INDEX
1/31/2000 $10,000.00 $10,000.00 $10,000.00
2/29/2000 9,810.70 11,993.65 12,693.57
3/31/2000 10,770.48 11,702.80 12,307.23
4/30/2000 10,446.43 10,999.47 10,870.45
5/31/2000 10,232.10 10,306.72 9,558.79
6/30/2000 10,484.36 11,443.68 11,007.61
7/31/2000 10,320.44 11,131.68 10,425.38
8/31/2000 10,961.49 12,638.82 12,007.38
9/30/2000 10,382.80 11,649.92 10,776.11
10/31/2000 10,338.90 10,475.94 9,594.45
11/30/2000 9,523.79 8,207.30 7,120.92
12/31/2000 9,570.40 8,492.86 7,046.50
1/31/2001 9,909.95 9,074.56 7,760.85
2/28/2001 9,006.34 6,694.87 5,738.45
3/31/2001 8,435.79 5,764.15 4,897.65
4/30/2001 9,091.34 6,779.48 5,853.88
5/31/2001 9,152.25 6,388.15 5,580.93
6/30/2001 8,929.49 6,208.36 5,488.75
7/31/2001 8,841.59 5,674.25 5,049.13
8/31/2001 8,288.09 4,970.91 4,418.23
9/30/2001 7,618.81 3,849.81 3,470.16
10/31/2001 7,764.09 4,473.82 3,995.66
11/30/2001 8,359.65 5,267.05 4,577.50
12/31/2001 8,432.88 5,187.73 4,599.64
1/31/2002 8,309.82 5,092.54 4,519.18
2/28/2002 8,149.56 4,547.86 3,915.56
3/31/2002 8,456.06 4,965.63 4,272.27
4/30/2002 7,943.39 4,368.06 3,763.68
5/31/2002 7,884.87 4,124.80 3,566.80
6/30/2002 7,323.23 3,601.27 3,096.96
7/31/2002 6,752.35 3,289.26 2,766.29
8/31/2002 6,796.68 3,252.25 2,700.97
9/30/2002 6,058.02 2,786.89 2,325.34
10/31/2002 6,591.23 3,209.94 2,677.18
11/30/2002 6,979.18 3,622.42 3,085.87
12/31/2002 6,569.17 3,183.50 2,696.21
1/31/2003 6,397.08 3,209.94 2,680.36
2/28/2003 6,301.10 3,178.21 2,690.96
3/31/2003 6,362.28 3,204.65 2,689.11
4/30/2003 6,886.34 3,474.35 2,940.56
5/31/2003 7,249.16 3,818.09 3,279.43
6/30/2003 7,341.64 3,886.83 3,302.31
7/31/2003 7,471.08 4,082.50 3,479.71
8/31/2003 7,616.79 4,288.74 3,734.31
9/30/2003 7,535.90 4,251.72 3,634.52
10/31/2003 7,962.20 4,685.35 4,000.06
11/30/2003 8,032.26 4,796.40 4,060.62
12/31/2003 8,453.51 4,870.44 4,079.76
1/31/2004 8,608.67 5,066.10 4,280.36
2/29/2004 8,728.33 5,023.80 4,212.81
3/31/2004 8,596.65 4,896.88 4,123.83
4/30/2004 8,461.70 4,653.62 3,839.74
5/31/2004 8,577.81 4,891.59 4,031.01
6/30/2004 8,744.61 4,992.07 4,101.29
7/31/2004 8,455.19 4,484.40 3,653.48
8/31/2004 8,489.39 4,272.87 3,506.39
9/30/2004 8,581.34 4,431.52 3,669.60
10/31/2004 8,712.44 4,595.45 3,876.89
11/30/2004 9,064.95 4,844.00 4,093.04
12/31/2004 9,373.42 5,023.80 4,247.63
1/31/2005 9,144.94 4,759.39 3,992.98
2/28/2005 9,337.39 4,754.10 4,003.30
3/31/2005 9,172.05 4,563.72 3,896.58
4/30/2005 8,998.09 4,537.28 3,740.30
5/31/2005 9,284.40 4,870.44 4,072.67
6/30/2005 9,297.58 4,875.73 4,025.27
7/31/2005 9,643.34 5,171.87 4,268.19
8/31/2005 9,555.35 5,240.61 4,241.22
9/30/2005 9,632.75 5,288.21 4,323.23
10/31/2005 9,472.16 5,203.60 4,229.74
11/30/2005 9,830.42 5,520.89 4,463.90
12/31/2005 9,833.84 5,584.35 4,475.79
1/31/2006 10,094.22 5,975.67 4,751.27
2/28/2006 10,121.61 5,827.60 4,673.27
3/31/2006 10,247.59 5,922.79 4,789.70
4/30/2006 10,385.20 5,975.67 4,789.02
5/31/2006 10,086.30 5,610.79 4,426.40
6/30/2006 10,099.97 5,505.02 4,345.59
7/31/2006 10,162.27 5,372.82 4,136.26
8/31/2006 10,404.06 5,653.09 4,366.76
9/30/2006 10,672.18 5,795.88 4,508.33
10/31/2006 11,019.94 5,943.95 4,628.40
11/30/2006 11,229.50 6,118.46 4,827.05
12/31/2006 11,387.02 6,123.74 4,777.22
1/31/2007 11,559.23 6,181.91 4,854.10
2/28/2007 11,333.15 6,123.74 4,818.95
3/31/2007 11,459.91 6,150.19 4,845.44
4/30/2007 11,967.53 6,419.88 5,011.59
5/31/2007 12,385.14 6,747.75 5,205.87
6/30/2007 12,179.38 6,747.75 5,271.23
7/31/2007 11,801.76 6,647.28 5,266.38
8/31/2007 11,978.67 6,805.92 5,377.01
9/30/2007 12,426.65 7,086.20 5,658.81
10/31/2007 12,624.32 7,340.03 6,003.29
11/30/2007 12,096.54 6,890.53 5,550.75
12/31/2007 12,012.62 6,832.36 5,577.65
1/31/2008 11,292.09 6,155.47 4,855.20
2/29/2008 10,925.25 5,938.66 4,735.46
3/31/2008 10,878.08 5,838.18 4,703.44
4/30/2008 11,407.88 6,314.12 5,063.59
5/31/2008 11,555.64 6,626.12 5,348.29
6/30/2008 10,581.45 6,144.90 4,879.81
7/31/2008 10,492.50 6,033.84 4,778.97
8/31/2008 10,644.28 6,134.32 4,868.31
9/30/2008 9,695.79 5,277.63 4,154.38
10/31/2008 8,067.41 4,172.40 3,402.98
11/30/2008 7,488.53 3,728.19 3,010.58
12/31/2008 7,568.21 3,876.26 3,118.03
1/31/2009 6,930.31 3,775.78 3,048.46
2/28/2009 6,192.39 3,479.64 2,930.10
3/31/2009 6,734.81 3,876.26 3,254.06
4/30/2009 7,379.40 4,257.01 3,656.92
5/31/2009 7,792.15 4,457.96 3,810.04
6/30/2009 7,807.61 4,595.45 3,883.33
7/31/2009 8,398.15 4,981.49 4,201.63
8/31/2009 8,701.36 5,124.27 4,305.65
9/30/2009 9,026.05 5,367.53 4,566.04
10/31/2009 8,858.38 5,193.02 4,411.26
11/30/2009 9,389.74 5,526.18 4,628.64
12/31/2009 9,571.10 5,843.47 4,923.36
1/31/2010 9,226.80 5,489.16 4,573.05
[END CHART]
Data from 1/31/00 to 1/31/10.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Science & Technology Fund to the following benchmarks:
o The unmanaged, broad-based composite S&P 500 Index represents the weighted
average performance of a group of 500 widely held, publicly traded stocks.
o The unmanaged Lipper Science & Technology Funds Index tracks the total return
performance of the 30 largest funds in the Lipper Science & Technology Funds
category.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
Indexes are unmanaged and you cannot invest directly in an Index.
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10 | USAA SCIENCE & TECHNOLOGY FUND
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TOP 10 EQUITY HOLDINGS
AS OF 1/31/2010
(% of Net Assets)
Microsoft Corp. ...................................... 6.8%
Apple, Inc. .......................................... 6.1%
Oracle Corp. ......................................... 4.5%
Cisco Systems, Inc. .................................. 3.2%
Western Union Co. .................................... 3.0%
Seagate Technology ................................... 2.9%
Google, Inc. "A" ..................................... 2.8%
Accenture plc "A" .................................... 2.1%
Alliance Data Systems Corp. .......................... 2.0%
International Business Machines Corp. ................ 1.8%
You will find a complete list of securities that the Fund owns on pages 13-18.
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INVESTMENT OVERVIEW | 11
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o SECTOR ASSET ALLOCATION* -- 1/31/2010 o
[PIE CHART OF SECTOR ASSET ALLOCATION]
INFORMATION TECHNOLOGY 71.4%
HEALTH CARE 25.2%
CONSUMER DISCRETIONARY 2.0%
TELECOMMUNICATION SERVICES 0.6%
CONSUMER STAPLES 0.3%
MONEY MARKET INSTRUMENTS 0.7%
[END CHART]
*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%.
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12 | USAA SCIENCE & TECHNOLOGY FUND
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PORTFOLIO OF INVESTMENTS
January 31, 2010 (unaudited)
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
EQUITY SECURITIES (99.5%)
COMMON STOCKS (99.5%)
CONSUMER DISCRETIONARY (2.0%)
-----------------------------
CONSUMER ELECTRONICS (0.5%)
1,686,000 Skyworth Digital Technology Co. Ltd.(a) $ 1,618
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EDUCATION SERVICES (0.8%)
19,010 Apollo Group, Inc. "A"* 1,152
5,580 Strayer Education, Inc.(b) 1,159
--------
2,311
--------
HOTELS, RESORTS, & CRUISE LINES (0.7%)
------------------------------------
61,200 Ctrip.com International Ltd. ADR* 1,915
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Total Consumer Discretionary 5,844
--------
CONSUMER STAPLES (0.3%)
-----------------------
DRUG RETAIL (0.3%)
23,250 CVS Caremark Corp. 752
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HEALTH CARE (25.2%)
-------------------
BIOTECHNOLOGY (5.1%)
34,100 3SBio, Inc. ADR* 390
16,900 Affymax, Inc.* 355
10,400 AMAG Pharmaceuticals, Inc.* 458
32,900 Amgen, Inc.* 1,924
69,100 Amylin Pharmaceuticals, Inc.* 1,242
111,600 Celera Corp.* 751
31,500 Celgene Corp.* 1,789
26,400 Celldex Therapeutics, Inc.* 118
12,200 Cephalon, Inc.* 779
135,248 Cytokinetics, Inc.* 408
19,000 Gilead Sciences, Inc.* 917
219,772 Incyte Corp.*(b) 2,347
118,400 Ligand Pharmaceuticals, Inc. "B"* 210
20,800 OSI Pharmaceuticals, Inc.* 712
27,100 Regeneron Pharmaceuticals, Inc.* 722
9,700 Rigel Pharmaceuticals, Inc.* 80
================================================================================
PORTFOLIO OF INVESTMENTS | 13
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
50,500 Seattle Genetics, Inc.* $ 521
80,300 Sigma Technologies International, Inc.*(b) 501
21,000 Vertex Pharmaceuticals, Inc.* 806
--------
15,030
--------
HEALTH CARE DISTRIBUTORS (2.1%)
47,800 AmerisourceBergen Corp. 1,303
60,300 Cardinal Health, Inc. 1,994
47,900 McKesson Corp. 2,818
--------
6,115
--------
HEALTH CARE EQUIPMENT (5.5%)
16,600 ABIOMED, Inc.* 131
23,600 Baxter International, Inc. 1,359
16,600 Beckman Coulter, Inc. 1,085
17,300 CareFusion Corp.* 445
52,300 China Medical Technologies, Inc. ADR(b) 684
50,500 Covidien plc 2,553
17,981 DiaSorin S.p.A.(a) 638
29,000 Hospira, Inc.* 1,469
7,600 Masimo Corp.* 211
85,000 Medtronic, Inc. 3,646
49,200 St. Jude Medical, Inc.* 1,856
96,300 Volcano Corp.* 1,908
--------
15,985
--------
HEALTH CARE FACILITIES (0.1%)
16,900 Psychiatric Solutions, Inc.* 373
--------
HEALTH CARE SERVICES (0.2%)
12,900 Fresenius Medical Care AG & Co. ADR 653
--------
HEALTH CARE TECHNOLOGY (0.1%)
8,200 Eclipsys Corp.* 137
--------
LIFE SCIENCES TOOLS & SERVICES (0.5%)
28,300 Parexel International Corp.* 547
21,000 Thermo Fisher Scientific, Inc.* 969
--------
1,516
--------
MANAGED HEALTH CARE (3.1%)
56,700 Aetna, Inc. 1,699
33,800 Coventry Health Care, Inc.* 773
32,800 Health Net, Inc.* 796
105,320 UnitedHealth Group, Inc. 3,476
35,200 WellPoint, Inc.* 2,243
--------
8,987
--------
================================================================================
14 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
PHARMACEUTICALS (8.5%)
13,900 AstraZeneca plc ADR(b) $ 646
70,800 Daiichi Sankyo Co. Ltd.(a) 1,476
35,100 Eisai Co. Ltd.(a) 1,308
264,600 Elan Corp. plc ADR* 1,971
13,600 Eli Lilly and Co. 479
67,100 Forest Laboratories, Inc.* 1,989
5,051 Ipsen S.A.(a) 272
34,200 King Pharmaceuticals, Inc.* 411
66,300 Medicines Co.* 550
108,600 Merck & Co., Inc. 4,146
254,400 Pfizer, Inc. 4,747
3,572 Roche Holdings AG(a) 600
93,000 Shionogi & Co. Ltd.(a) 1,914
35,643 Teva Pharmaceutical Industries Ltd. ADR 2,022
21,955 UCB S.A.(a) 982
22,800 Warner Chilcott plc "A"* 623
21,000 Watson Pharmaceuticals, Inc.* 806
--------
24,942
--------
Total Health Care 73,738
--------
INFORMATION TECHNOLOGY (71.4%)
------------------------------
APPLICATION SOFTWARE (1.5%)
49,690 Adobe Systems, Inc.* 1,605
55,600 Longtop Financial Technologies Ltd. ADR* 1,927
106,700 TiVo, Inc.* 963
--------
4,495
--------
COMMUNICATIONS EQUIPMENT (7.3%)
138,000 Ciena Corp.* 1,759
423,975 Cisco Systems, Inc.* 9,527
43,890 Juniper Networks, Inc.* 1,090
124,298 QUALCOMM, Inc. 4,871
63,600 Research In Motion Ltd.* 4,004
--------
21,251
--------
COMPUTER HARDWARE (11.0%)
669,357 Acer, Inc.(a) 1,842
93,660 Apple, Inc.* 17,994
238,640 Dell, Inc.* 3,078
88,516 Hewlett-Packard Co. 4,166
42,720 International Business Machines Corp. 5,229
--------
32,309
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS (5.0%)
73,540 NetApp, Inc.* $ 2,142
244,380 QLogic Corp.* 4,201
496,100 Seagate Technology 8,300
--------
14,643
--------
DATA PROCESSING & OUTSOURCED SERVICES (8.7%)
99,665 Alliance Data Systems Corp.*(b) 5,926
96,315 Automatic Data Processing, Inc. 3,929
71,050 Genpact Ltd.* 985
261,610 TIVIT Terceirizacao De Tecnologia e Servicos S.A. 2,137
45,235 Visa, Inc. "A" 3,711
465,470 Western Union Co. 8,630
--------
25,318
--------
ELECTRONIC COMPONENTS (1.9%)
188,900 Corning, Inc. 3,416
688,200 Delta Electronics, Inc.(a) 2,080
--------
5,496
--------
ELECTRONIC MANUFACTURING SERVICES (0.5%)
372,786 Hon Hai Precision Industry Corp. Ltd.(a) 1,564
--------
HOME ENTERTAINMENT SOFTWARE (0.6%)
40,102 Shanda Interactive Entertainment Ltd. ADR*(b) 1,853
--------
INTERNET SOFTWARE & SERVICES (6.7%)
3,766 Baidu, Inc. ADR* 1,550
33,970 Equinix, Inc.* 3,269
15,575 Google, Inc. "A"* 8,246
56,900 NetEase.com, Inc.* 1,866
87,200 Tencent Holdings Ltd.(a) 1,617
22,700 VistaPrint N.V.* 1,271
123,226 Yahoo!, Inc.* 1,850
--------
19,669
--------
IT CONSULTING & OTHER SERVICES (3.4%)
148,315 Accenture plc "A" 6,079
34,700 Gartner, Inc.* 743
3,171,000 Hi Sun Technology Ltd.*(a) 1,766
168,220 Sapient Corp.* 1,304
--------
9,892
--------
SEMICONDUCTOR EQUIPMENT (0.5%)
171,700 ASM Pacific Technology Ltd.(a) 1,416
--------
SEMICONDUCTORS (11.4%)
316,500 Applied Micro Circuits Corp.* 2,320
180,300 Broadcom Corp. "A"* 4,818
================================================================================
16 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
570,000 Epistar Corp.(a) $ 1,820
3,922 Epistar Corp. GDR*(a) 71
182,000 Intel Corp. 3,531
222,740 Marvell Technology Group Ltd.* 3,882
282,310 Maxim Integrated Products, Inc. 4,935
137,000 Media Tek, Inc.(a) 2,219
379,930 ON Semiconductor Corp.* 2,739
161,000 Richtek Technology Corp.(a) 1,592
130,700 Skyworks Solutions, Inc.* 1,658
168,520 Texas Instruments, Inc. 3,792
--------
33,377
--------
SYSTEMS SOFTWARE (12.9%)
82,610 BMC Software, Inc.* 3,192
46,400 Check Point Software Technologies Ltd.* 1,484
704,484 Microsoft Corp. 19,853
566,580 Oracle Corp. 13,065
--------
37,594
--------
Total Information Technology 208,877
--------
TELECOMMUNICATION SERVICES (0.6%)
---------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.6%)
39,500 American Tower Corp. "A"* 1,677
--------
Total Common Stocks (cost: $270,118) 290,888
--------
WARRANTS (0.0%)
HEALTH CARE (0.0%)
------------------
BIOTECHNOLOGY (0.0%)
14,450 Cytokinetics, Inc., acquired 5/19/2009; cost $0*(a),(c) 4
--------
Total Equity Securities (cost: $270,118) 290,892
--------
MONEY MARKET INSTRUMENTS (0.7%)
MONEY MARKET FUNDS (0.7%)
2,076,704 State Street Institutional Liquid Reserve Fund, 0.13%(d) (cost: $2,077) 2,077
--------
SHORT-TERM INVESTMENTS PURCHASED WITH
CASH COLLATERAL FROM SECURITIES LOANED (3.1%)
MONEY MARKET FUNDS (1.4%)
13,761 AIM Short-Term Investment Co. Liquid Assets Portfolio, 0.15%(d) 14
4,194,571 BlackRock Liquidity Funds TempFund Portfolio, 0.11%(d) 4,194
--------
Total Money Market Funds 4,208
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) SECURITY (000)
-----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.7%)
$3,600 Credit Suisse First Boston LLC, 0.11%, acquired on 1/29/2010
and due 2/01/2010 at $3,600 (collateralized by $3,620 of
U.S. Treasury, 3.63%, due 8/15/2019; market value $3,674) $ 3,600
1,400 Deutsche Bank Securities, Inc., 0.11%, acquired on 1/29/2010
and due 2/01/2010 at $1,400 (collateralized by $1,429 of
Fannie Mae(e), 0.09%(f), due 5/10/2010; market value $1,429) 1,400
--------
Total Repurchase Agreements 5,000
--------
Total Short-Term Investments Purchased With Cash Collateral
From Securities Loaned (cost: $9,208) 9,208
--------
TOTAL INVESTMENTS (COST: $281,403) $302,177
========
-----------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-----------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $263,955 $26,933 $- $290,888
Warrants - 4 - 4
Money Market Instruments:
Money Market Funds 2,077 - - 2,077
Short-Term Investments Purchased
With Cash Collateral From
Securities Loaned:
Money Market Funds 4,208 - - 4,208
Repurchase Agreements - 5,000 - 5,000
-----------------------------------------------------------------------------------------------
Total $270,240 $31,937 $- $302,177
-----------------------------------------------------------------------------------------------
================================================================================
18 | USAA SCIENCE & TECHNOLOGY 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%. Investments in foreign securities were 16.2% of net assets at January
31, 2010. A category percentage of 0.0% represents less than 0.1% of net
assets.
o CATEGORIES & DEFINITIONS
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.
GDR Global depositary receipts are receipts issued by a U.S. or foreign
bank evidencing ownership of foreign shares. Dividends are paid in
U.S. dollars.
o SPECIFIC NOTES
(a) Security was fair valued at January 31, 2010, by USAA Investment
Management Company (the Manager) in accordance with valuation procedures
approved by the Board of Trustees.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
(b) The security or a portion thereof was out on loan as of January 31, 2010.
(c) 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 $4,000, which represented less than
0.1% of the Fund's net assets.
(d) Rate represents the money market fund annualized seven-day yield at
January 31, 2010.
(e) Securities issued by government-sponsored enterprises are supported only
by the right of the government-sponsored enterprise to borrow from the
U.S. Treasury, the discretionary authority of the U.S. government to
purchase the government-sponsored enterprises' obligations, or by the
credit of the issuing agency, instrumentality, or corporation, and are
neither issued nor guaranteed by the U.S. Treasury.
(f) Zero-coupon security. Rate represents the effective yield at the date of
purchase.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
20 | USAA SCIENCE & TECHNOLOGY 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 $8,826)
(cost of $281,403) $ 302,177
Receivables:
Capital shares sold 159
Dividends and interest 79
Securities sold 15,217
Other 6
Unrealized appreciation on foreign currency contracts held, at value 2
---------
Total assets 317,640
---------
LIABILITIES
Payables:
Upon return of securities loaned 9,208
Securities purchased 15,360
Capital shares redeemed 314
Accrued management fees 189
Accrued transfer agent's fees 6
Other accrued expenses and payables 77
---------
Total liabilities 25,154
---------
Net assets applicable to capital shares outstanding $ 292,486
=========
NET ASSETS CONSIST OF:
Paid-in capital $ 422,125
Accumulated undistributed net investment loss (724)
Accumulated net realized loss on investments (149,690)
Net unrealized appreciation of investments 20,774
Net unrealized appreciation of foreign currency translations 1
---------
Net assets applicable to capital shares outstanding $ 292,486
=========
Capital shares outstanding, unlimited number of shares authorized, no par value 28,180
=========
Net asset value, redemption price, and offering price per share $ 10.38
=========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 21
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $13) $ 1,276
Interest 3
Securities lending (net) 64
-------
Total income 1,343
-------
EXPENSES
Management fees 1,036
Administration and servicing fees 220
Transfer agent's fees 712
Custody and accounting fees 59
Postage 48
Shareholder reporting fees 22
Trustees' fees 5
Registration fees 15
Professional fees 34
Other 7
-------
Total expenses 2,158
Expenses paid indirectly (4)
Transfer agent's fees reimbursed (Note 6D) (98)
-------
Net expenses 2,056
-------
NET INVESTMENT LOSS (713)
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments 21,625
Foreign currency transactions (4)
Change in net unrealized appreciation/depreciation of:
Investments 6,067
Foreign currency translations 1
-------
Net realized and unrealized gain 27,689
-------
Increase in net assets resulting from operations $26,976
=======
See accompanying notes to financial statements.
================================================================================
22 | USAA SCIENCE & TECHNOLOGY 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 loss $ (713) $ (1,371)
Net realized gain (loss) on investments 21,625 (78,579)
Net realized loss on foreign currency transactions (4) (11)
Change in net unrealized appreciation/depreciation of:
Investments 6,067 25,127
Foreign currency translations 1 4
-----------------------
Increase (decrease) in net assets resulting from operations 26,976 (54,830)
-----------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 26,923 40,992
Cost of shares redeemed (26,416) (38,772)
-----------------------
Increase in net assets from capital share transactions 507 2,220
-----------------------
Net increase (decrease) in net assets 27,483 (52,610)
NET ASSETS
Beginning of period 265,003 317,613
-----------------------
End of period $292,486 $265,003
=======================
Accumulated undistributed net investment loss:
End of period $ (724) $ (11)
=======================
CHANGE IN SHARES OUTSTANDING
Shares sold 2,582 4,995
Shares redeemed (2,542) (4,696)
-----------------------
Increase in shares outstanding 40 299
=======================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 23
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
January 31, 2010 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940 (the 1940 Act), as amended, is an open-end management investment company
organized as a Delaware statutory trust consisting of 46 separate funds. The
information presented in this semiannual report pertains only to the USAA
Science & Technology Fund (the Fund), which is classified as diversified under
the 1940 Act. The Fund's investment objective is long-term capital appreciation.
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If no
last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
2. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the
foreign markets may be closed. Therefore, the calculation of the Fund's
net asset value (NAV) may not take place at the
================================================================================
24 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
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
subadviser, if applicable, will monitor for events that would materially
affect the value of the Fund's foreign securities. The Fund's subadviser
has agreed to notify the Manager of significant events it identifies
that would materially affect the value of the Fund's foreign securities.
If the Manager determines that a particular event would materially
affect the value of the Fund's foreign securities, then the Manager,
under valuation procedures approved by the Trust's Board of Trustees,
will consider such available information that it deems relevant to
determine a fair value for the affected foreign securities. In
addition, the Fund may use information from an external vendor or other
sources to adjust the foreign market closing prices of foreign equity
securities to reflect what the Fund believes to be the fair value of the
securities as of the close of the NYSE. Fair valuation of affected
foreign equity securities may occur frequently based on an assessment
that events that occur on a fairly regular basis (such as U.S. market
movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
6. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially
================================================================================
NOTES TO FINANCIAL STATEMENTS | 25
<PAGE>
================================================================================
affected by events occurring after the close of their primary markets
but before the pricing of the Fund, are valued in good faith at fair
value, using methods determined by the Manager in consultation with the
Fund's subadviser, if applicable, under valuation procedures approved by
the Trust's Board of Trustees. The effect of fair value pricing is that
securities may not be priced on the basis of quotations from the primary
market in which they are traded and the actual price realized from the
sale of a security may differ materially from the fair value price.
Valuing these securities at fair value is intended to cause the Fund's
NAV to be more reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and 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.
================================================================================
26 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon notification. Interest income is recorded
daily on the accrual basis. Discounts and premiums on short-term securities
are amortized on a straight-line basis over the life of the respective
securities.
E. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers. These agreements are
collateralized by underlying securities. The collateral obligations are
marked-to-market daily to ensure their value is equal to or in excess of the
repurchase agreement price plus accrued interest and are held by the Fund,
either through its regular custodian or through a special "tri-party"
custodian that maintains separate accounts for both the Fund and its
counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit risk, and the Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
F. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
<PAGE>
================================================================================
U.S. dollars, foreign currency amounts are translated into U.S. dollars on
the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective
dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts received. At
the end of the Fund's fiscal year, these net realized foreign currency
gains/losses are reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rate.
G. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition,
through arrangements with the Fund's custodian and other banks utilized by
the Fund for cash management purposes, realized credits, if any, generated
from cash balances in the Fund's bank accounts may be used to directly
reduce the Fund's expenses.
================================================================================
28 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
For the six-month period ended January 31, 2010, brokerage commission
recapture credits and custodian and other bank credits reduced the Fund's
expenses by $4,000 and less than $500, respectively.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business the Trust enters into contracts that contain a variety of
representations and warranties that provide general indemnifications. The
Trust's maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Trust that have not yet
occurred. However, the Trust expects the risk of loss to be remote.
I. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $750 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA funds that are party to the loan agreement are assessed facility fees
by CAPCO based on the funds' assessed proportionate share of CAPCO's operating
expenses related to obtaining and maintaining CAPCO's funding programs in total
(in no event to exceed 0.13% annually of the amount of the committed loan
agreement). Prior to September 25, 2009, the maximum annual facility fee was
0.07% of the amount of the committed loan agreement. The facility fees are
allocated among the funds based on their respective average net assets for the
period.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
<PAGE>
================================================================================
For the six-month period ended January 31, 2010, the Fund paid CAPCO facility
fees of $1,000, which represents 0.7% of the total fees paid to CAPCO by the
USAA funds. The Fund had no borrowings under this agreement during the six-month
period ended January 31, 2010.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year-end of July 31, 2010,
in accordance with applicable tax law.
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually in the succeeding
fiscal year or as otherwise required to avoid the payment of federal taxes. At
July 31, 2009, the Fund had capital loss carryovers of $105,683,000, for federal
income tax purposes, which, if not offset by subsequent capital gains, will
expire between 2011 and 2017, as shown below. It is unlikely that the Trust's
Board of Trustees will authorize a distribution of capital gains realized in the
future until the capital loss carryovers have been used or expire.
CAPITAL LOSS CARRYOVERS
-----------------------------------------
EXPIRES BALANCE
----------- ------------
2011 $ 91,257,000
2017 14,426,000
------------
Total $105,683,000
============
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.
================================================================================
30 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
Tax years ended July 31, 2006, through July 31, 2009, remain subject to
examination by the Internal Revenue Service and state taxing authorities. On an
ongoing basis, the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2010, were
$188,530,000 and $187,421,000, 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 $36,708,000 and $15,934,000, respectively, resulting in net
unrealized appreciation of $20,774,000.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Wachovia Global
Securities Lending (Wachovia), may lend its securities to qualified financial
institutions, such as certain broker-dealers, to earn additional income. The
borrowers are required to secure their loans continuously with cash collateral
in an amount at least equal to the fair value of the securities loaned,
initially in an amount at least equal to 102% of the fair value of domestic
securities loaned and 105% of the fair value of international securities loaned.
Cash collateral is invested in high-quality short-term investments. Cash
collateral requirements are determined daily based on the prior business day's
ending value of securities loaned. Imbalances in cash collateral may occur on
days where market volatility causes security prices to change significantly, and
are adjusted the next business day. The Fund and Wachovia retain 80% and 20%,
respectively, of the income earned from the investment of cash received as
collateral, net of any expenses associated with the lending transaction.
Wachovia receives no other fees from the Fund for its services as
securities-lending agent. Risks to the Fund in securities-lending transactions
are that the borrower may not provide additional collateral when required or
return
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
<PAGE>
================================================================================
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 $64,000, 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 $8,826,000 and received
cash collateral of $9,208,000 for the loans, which was invested in short-term
investments, as noted in the Fund's portfolio of investments.
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund,
subject to the authority of and supervision by the Trust's Board of
Trustees. The Manager is authorized to select (with approval of the Trust's
Board of Trustees and without shareholder approval) one or more subadvisers
to manage the actual day-to-day investment of 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 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 Science & Technology Funds Index over the
performance period. The Lipper Science & Technology
================================================================================
32 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
Funds Index tracks the total return performance of the 30 largest funds in
the Lipper Science & Technology 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 Science & Technology Funds Index over that period,
even if the Fund had overall negative returns during the performance period.
For the six-month period ended January 31, 2010, the Fund incurred total
management fees, paid or payable to the Manager, of $1,036,000, which
included a (0.04)% performance adjustment of $(62,000).
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into an investment
subadvisory agreement with Wellington Management Company, LLP (Wellington
Management), under which Wellington Management directs the investment and
reinvestment of the Fund's assets (as allocated from time to time by the
Manager). The Manager
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
<PAGE>
================================================================================
(not the Fund) pays Wellington Management a subadvisory fee in the annual
amount of 0.45% of the Fund's average daily net assets for the first $100
million in assets that Wellington Management manages, plus 0.35% of the
Fund's average daily net assets for assets over $100 million that Wellington
Management manages. For the six-month period ended January 31, 2010, the
Manager incurred subadvisory fees, paid or payable to Wellington Management,
of $563,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and shareholder servicing functions for the Fund. For such
services, the Manager receives a fee accrued daily and paid monthly at an
annualized rate of 0.15% of the Fund's average net assets. For the six-month
period ended January 31, 2010, the Fund incurred administration and
servicing fees, paid or payable to the Manager, of $220,000.
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 $7,000 for these compliance and legal services. These
expenses are included in the professional fees on the Fund's statement of
operations.
D. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund based on an annual charge of $23 per
shareholder account plus out-of-pocket expenses. The Fund also pays SAS
fees that are related to the administration and servicing of accounts that
are traded on an omnibus basis. For the six-month period ended January 31,
2010, the Fund incurred transfer agent's fees, paid or payable to SAS, of
$712,000.
During the six-month period, SAS reimbursed the Fund $98,000 for corrections
in fees paid for the administration and servicing of certain accounts.
================================================================================
34 | USAA SCIENCE & TECHNOLOGY FUND
<PAGE>
================================================================================
E. UNDERWRITING SERVICES -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
(7) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(8) SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date but before the
financial statements are issued are categorized as recognized or non-recognized
for financial statement purposes. The Manager has evaluated subsequent events
through the date the financial statements were issued, and has determined there
were no events that required recognition or disclosure in the Fund's financial
statements.
(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 | 35
<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 $ 9.42 $ 11.41 $ 12.56 $ 10.16 $ 9.78 $ 8.48
---------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment loss(a) (.03) (.05) (.05) (.10) (.10) (.02)
Net realized and
unrealized gain (loss)(a) .99 (1.94) (1.10) 2.50 .48 1.32
---------------------------------------------------------------------------------
Total from investment
operations(a) .96 (1.99) (1.15) 2.40 .38 1.30
---------------------------------------------------------------------------------
Net asset value at end
of period $ 10.38 $ 9.42 $ 11.41 $ 12.56 $ 10.16 $ 9.78
=================================================================================
Total return (%)* 10.19(e) (17.44) (9.16) 23.62(b) 3.89 15.33
Net assets at end
of period (000) $292,486 $265,003 $317,613 $367,454 $333,539 $331,968
Ratios to average
net assets:**
Expenses (%)(d) 1.47(c),(e) 1.67 1.49 1.51(b) 1.55 1.59
Net investment loss (%) (.49)(c) (.60) (.44) (.84) (.91) (.18)
Portfolio turnover (%) 66 191 134 112 105 131
* 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 $290,492,000.
(a) Calculated using average shares. For the six-month period ended January 31, 2010, average shares were 28,128,000.
(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) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(d) 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%)(+) (.01%) (.02%) (.05%)
(+) Represents less than 0.01% of average net assets.
(e) During the period ended January 31, 2010, SAS reimbursed the Fund $98,000 for corrections in fees paid for the
administration and servicing of certain accounts. The effect of this reimbursement on the Fund's total return was
less than 0.01%. The reimbursement decreased the Fund's expense ratios by 0.07%. This decrease is excluded from
the expense ratios in the Financial Highlights table.
================================================================================
36 | USAA SCIENCE & TECHNOLOGY 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 | 37
<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 $1,101.90 $7.42
Hypothetical
(5% return before expenses) 1,000.00 1,018.15 7.12
* Expenses are equal to the Fund's annualized expense ratio of 1.40%, which is
net of any expenses paid indirectly, multiplied by the average account value
over the period, multiplied by 184 days/365 days (to reflect the one-half-year
period). The Fund's ending account value on the first line in the table is
based on its actual total return of 10.19% for the six-month period of August
1, 2009, through January 31, 2010.
================================================================================
38 | USAA SCIENCE & TECHNOLOGY 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)
=============================================================================
31704-0310 (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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