UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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: MARCH 31
Date of reporting period: MARCH 31, 2010
ITEM 1. REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - ANNUAL REPORT FOR PERIOD ENDING MARCH 31, 2010
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA NEW YORK MONEY MARKET FUND]
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ANNUAL REPORT
USAA NEW YORK MONEY MARKET FUND
MARCH 31, 2010
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FUND OBJECTIVE
HIGH LEVEL OF CURRENT INTEREST INCOME THAT IS EXEMPT FROM FEDERAL INCOME TAX AND
NEW YORK STATE AND NEW YORK CITY PERSONAL INCOME TAXES AND A FURTHER OBJECTIVE
OF PRESERVING CAPITAL AND MAINTAINING LIQUIDITY.
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TYPES OF INVESTMENTS
Invests in high-quality New York tax-exempt securities with remaining maturities
of 397 days or less.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
INVESTMENT OVERVIEW 7
FINANCIAL INFORMATION
Distributions to Shareholders 12
Report of Independent Registered
Public Accounting Firm 13
Portfolio of Investments 14
Notes to Portfolio of Investments 18
Financial Statements 19
Notes to Financial Statements 22
EXPENSE EXAMPLE 31
TRUSTEES' AND OFFICERS' INFORMATION 33
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
"THE PERFORMANCE OF OUR TAX-EXEMPT
BOND FUNDS REMAINED STRONG DESPITE [PHOTO OF DANIEL S. McNAMARA]
VOLATILE MARKET CONDITIONS."
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MAY 2010
As I write to you, it has been more than a year since the stock market reached a
bottom and began its remarkable recovery. The fixed income market has also
experienced a rally as the flight to quality reversed and investors moved out of
ultra-safe U.S. Treasuries into almost every other type of bond. And yet, fear
and uncertainty seem to linger. Many people remain on the sidelines with large
amounts of money in money market funds, which are yielding almost zero.
Relief from these low yields is unlikely -- at least in the near term. At the
time of this writing, the Federal Reserve (the Fed) is cautiously and
methodically unwinding its alphabet soup of stimulus programs. If the economy
and financial markets remain stable, Fed governors may consider an increase in
short-term interest rates. However, I don't expect them to act until they are
sure that unemployment has peaked -- a determination they may not be able to
make until well into the second half of 2010.
Under the circumstances, investors would be well advised to review how much they
have in their money market accounts. If the money isn't required for two or
three years, it has the potential to earn higher yields in short- and
intermediate-term bond funds. However, investors certainly should not take a lot
of risk with their immediate or emergency spending needs, in which case a money
market fund, savings account or a short-term certificate of deposit should be
considered, in my opinion. For future needs such as retirement, a diversified
portfolio of stock and bond funds may make even more sense. However, if timing
is a concern, investors might consider making changes gradually, moving assets
out of their money market funds and into other investments. I encourage you to
contact a USAA service representative with any questions or for assistance
updating your financial plan. They are available to help you free of charge.
Tax-exempt municipal bonds performed well over the past year and I believe they
remain attractive given their yields and tax-exempt status.
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2 | USAA NEW YORK MONEY MARKET FUND
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Going forward, tax rates are likely to rise as the federal government looks for
ways to fund growing budget deficits. The federal government is also phasing in
a 3.8% increase in the tax on unearned income, which does not appear to include
the income generated by tax-exempt securities.
Despite the media hyperbole about the budget challenges of state and local
governments, investors continue to embrace tax-exempt municipal bonds. Why?
First, state and local governments are dealing with their fiscal challenges by
raising taxes, cutting services and renegotiating or restructuring their
long-term commitments. Second, municipal securities are of relatively high
quality. In fact, some ratings agencies are about to adopt a methodology
allowing them to assess municipal bonds on a scale comparable to the one used
for corporate bonds. In doing so, a surprising number of municipal bonds (in the
tens of thousands) have been upgraded. The change is, in my opinion, an
acknowledgment that municipal issuers default less often than corporations.
But at USAA Investment Management Company, we have never invested based solely
on ratings. We do our own credit work, focusing on income generation and on
whether our shareholders are being adequately compensated for risk. As a result,
the performance of our tax-exempt bond funds remained strong despite volatile
market conditions. Going forward, however, shareholders should expect their
tax-exempt bond funds to return to their traditional role as an
income-accumulation vehicle, rather than one of asset appreciation, over the
coming months.
Rest assured, we will continue doing all we can to help you with your investment
needs. We sincerely appreciate the confidence you have in us.
Sincerely,
/s/ Daniel S. McNamara
Daniel S. McNamara
President
USAA Investment Management Company
Investment/Insurance: Not FDIC Insured o Not Bank Issued, Guaranteed or
Underwritten o May Lose Value
Investment and insurance products are not deposits, not insured by FDIC or any
government agency, not guaranteed by the Bank. Investments and certain insurance
products may lose value.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
There may be tax consequences associated with the transfer of assets. Indirect
transfers may be subject to taxation and penalties. Consult with your own
advisors regarding your particular situation.
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
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[PHOTO OF JOHN C. BONNELL] [PHOTO OF DALE R. HOFFMANN]
JOHN C. BONNELL, CFA DALE R. HOFFMANN
USAA Investment Management Company USAA Investment Management Company
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o HOW DID THE USAA NEW YORK MONEY MARKET FUND (THE FUND) PERFORM FROM APRIL 1,
2009, TO MARCH 31, 2010?
The Fund performed well for the reporting period ended March 31, 2010.
During the reporting period, the Fund ranked 2 out of 68 New York tax-exempt
money funds for the one-year period, and returned 0.37%, compared to the
category's average return of 0.10%, according to iMoneyNet, Inc. For the
five- and 10-year periods, the Fund ranked 15 out of 56 funds (returning
2.03%) and 10 out of 29 funds (returning 1.78%), respectively. Rankings are
based on 12-month net compound unannualized returns.
o WHAT WERE THE MARKET CONDITIONS?
Short-term interest rates remained at record lows throughout the reporting
period. Although economic conditions improved, unemployment remained high
and the housing market has been slow to recover. Inflation was not an
immediate threat, allowing the Federal Reserve (the Fed) to hold the federal
funds target rate at a range between zero and 0.25% throughout the entire
reporting period.
Refer to page 8 for benchmark definition.
Past performance is no guarantee of future results.
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4 | USAA NEW YORK MONEY MARKET FUND
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Yields on short-term tax-exempt securities dropped as demand outstripped
supply. Even as financial markets stabilized, many investors remained on the
sidelines, opting for the safety and liquidity of money market funds rather
than the higher yields offered in longer maturities. Demand was particularly
strong for municipal variable rate demand notes (VRDNs), which were in short
supply as an increasing number of issuers funded their borrowing needs
through the issuance of longer-term securities. The SIFMA Municipal Swap
Index, the index of seven-day VRDNs, began the period at 0.54% on April 1,
2009, fell to an all-time low of 0.15% on January 6, 2010, and ended the
period at 0.29%.
The Bond Buyer One-Year Note Index began the period at 0.79%, fell to 0.39%
on March 11, 2010, and ended the period at 0.48%.
o WHAT WERE YOUR STRATEGIES IN THIS ENVIRONMENT?
To maintain the safety and liquidity of your Fund, we concentrated our
purchases in VRDNs. Most of the VRDNs owned by the Fund possess a feature
guaranteeing the payment of both principal and interest. VRDNs also provide
flexibility because they can be sold at par value (100% of face value) with
a notice of seven days or less. With yields at extraordinary low levels,
there was little advantage in extending the portfolio's weighted average
maturity.
To evaluate and monitor each of the Fund's holdings, we continued to rely
on our seasoned team of credit analysts. Their skill and hard work have
helped us avoid credit problems in our tax-exempt money market funds.
The SIFMA Index, produced by Municipal Market Data, is a seven-day
high-grade market index comprised of tax-exempt variable-rate demand
obligations from Municipal Market Data's extensive database. o The Bond
Buyer One-Year Note Index is based on estimated yields for theoretical new
one-year note issues from 10 state and local issuers: California, Colorado,
Idaho, Los Angeles County, Michigan, New Jersey, New York City,
Pennsylvania, Texas, and Wisconsin. The index is an unweighted average of
the average estimated bid-side yields for the 10 issues.
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MANAGERS' COMMENTARY ON THE FUND | 5
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o WHAT ARE THE CONDITIONS IN THE STATE OF NEW YORK?
The state of New York continues to battle a lingering recession. Significant
job losses in the financial sector have had a negative effect on the
economies of both New York City and the overall downstate region. State
revenues are weaker than expected, and a large budget gap has emerged. On a
positive note, the state has taken measures to ensure it has adequate cash.
In this regard, federal stimulus money has helped. New York's debt burden
remains higher than average. At the end of the reporting period, the state's
general obligation bonds were rated Aa3 by Moody's Investors Service, AA by
Standard & Poor's Rating Services, and AA- by Fitch Ratings, Ltd.
o WHAT IS THE OUTLOOK?
We expect short-term interest rates to remain at historic lows until the Fed
sees evidence of sustained economic growth. In our opinion, a rate hike is
contingent on inflationary trends, real estate conditions and the level of
unemployment and is unlikely until late 2010 or early 2011. Until the Fed
changes it stance on interest rates, shareholders should expect to see
little change in the Fund's yield. Once rate increases begin, your Fund is
positioned to benefit quickly from rising short-term rates.
We will continue to focus on maintaining the safety and liquidity of
your Fund, while striving to maximize the tax-exempt income you receive. To
make the Fund as tax efficient as possible, we will also continue to avoid
issues subject to the alternative minimum tax, also known as the "AMT", for
individuals.
Thank you for the confidence you have placed in us.
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6 | USAA NEW YORK MONEY MARKET FUND
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INVESTMENT OVERVIEW
USAA NEW YORK MONEY MARKET FUND (Ticker Symbol: UNYXX)
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3/31/10 3/31/09
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Net Assets $121.5 Million $150.5 Million
Net Asset Value Per Share $1.00 $1.00
Dollar-Weighted Average
Portfolio Maturity 11 Days 12 Days
Dollar-weighted average portfolio maturity is obtained by multiplying the dollar
value of each investment by the number of days left to its maturity, then adding
those figures together and dividing them by the total dollar value of the Fund's
portfolio.
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AVERAGE ANNUAL TOTAL RETURNS AND 7-DAY YIELD AS OF 3/31/10
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1 Year 5 Years 10 Years 7-Day Yield
0.37% 2.03% 1.78% 0.01%
*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. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
usaa.com.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
Total return equals income return and assumes 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.
Yields and returns fluctuate. The seven-day yield quotation more closely
reflects current earnings of the Fund than the total return quotation.
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INVESTMENT OVERVIEW | 7
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o 7-DAY YIELD COMPARISON o
[CHART OF 7-DAY YIELD COMPARISON]
USAA NEW YORK
iMONEYNET AVERAGE MONEY MARKET FUND
3/30/2009 0.31% 0.60%
4/27/2009 0.29 0.86
5/26/2009 0.18 0.74
6/29/2009 0.10 0.70
7/27/2009 0.06 0.50
8/24/2009 0.04 0.42
9/28/2009 0.04 0.32
10/26/2009 0.02 0.06
11/30/2009 0.02 0.01
12/31/2009 0.02 0.01
1/31/2010 0.01 0.01
2/28/2010 0.01 0.01
3/31/2010 0.02 0.01
[END CHART]
Data represent the last Monday of each month. Ending date 3/29/10.
The graph tracks the USAA New York Money Market Fund's seven-day yield against
iMoneyNet, Inc. state-specific New York institutional and retail state tax-free
and municipal money funds, an average of money market fund yields. iMoneyNet,
Inc. is an organization that tracks the performance of money market funds.
Past performance is no guarantee of future results.
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8 | USAA NEW YORK MONEY MARKET FUND
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TOP 10 INDUSTRIES
AS OF 3/31/10
(% of Net Assets)
Education .......................................................... 15.0%
Community Service .................................................. 13.1%
Toll Roads ......................................................... 12.4%
Special Assessment/Tax/Fee ......................................... 11.6%
Hospital ........................................................... 11.0%
Nursing/CCRC ....................................................... 9.3%
Packaged Foods & Meat .............................................. 8.5%
Buildings .......................................................... 4.9%
Water/Sewer Utility ................................................ 4.0%
Sales Tax .......................................................... 2.5%
You will find a complete list of securities that the Fund owns on pages 14-17.
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INVESTMENT OVERVIEW | 9
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o PORTFOLIO MIX -- 3/31/2010 o
[PIE CHART OF PORTFOLIO MIX]
VARIABLE-RATE DEMAND NOTES 96.0%
FIXED-RATE INSTRUMENTS 2.5%
PUT BONDS 1.0%
[END CHART]
Percentages are of the net assets of the Fund and may not equal 100%.
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10 | USAA NEW YORK MONEY MARKET FUND
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o CUMULATIVE PERFORMANCE OF $10,000 o
[CHART OF CUMULATIVE PERFORMANCE]
USAA NEW YORK
MONEY MARKET FUND
03/31/00 $10,000.00
04/30/00 10,026.49
05/31/00 10,064.31
06/30/00 10,095.93
07/31/00 10,126.00
08/31/00 10,157.55
09/30/00 10,188.37
10/31/00 10,223.06
11/30/00 10,255.67
12/31/00 10,285.73
01/31/01 10,312.69
02/28/01 10,338.43
03/31/01 10,361.35
04/30/01 10,389.81
05/31/01 10,415.77
06/30/01 10,435.87
07/31/01 10,455.68
08/31/01 10,471.89
09/30/01 10,485.99
10/31/01 10,501.10
11/30/01 10,513.32
12/31/01 10,523.17
01/31/02 10,531.46
02/28/02 10,538.94
03/31/02 10,546.97
04/30/02 10,556.22
05/31/02 10,566.50
06/30/02 10,573.82
07/31/02 10,581.43
08/31/02 10,589.66
09/30/02 10,597.73
10/31/02 10,607.80
11/30/02 10,616.81
12/31/02 10,623.83
01/31/03 10,629.80
02/28/03 10,635.80
03/31/03 10,641.55
04/30/03 10,648.20
05/31/03 10,655.36
06/30/03 10,660.47
07/31/03 10,663.85
08/31/03 10,667.62
09/30/03 10,671.88
10/31/03 10,676.27
11/30/03 10,680.86
12/31/03 10,686.01
01/31/04 10,690.10
02/29/04 10,693.74
03/31/04 10,697.65
04/30/04 10,702.48
05/31/04 10,706.83
06/30/04 10,711.34
07/31/04 10,716.01
08/31/04 10,721.57
09/30/04 10,729.13
10/31/04 10,739.38
11/30/04 10,749.11
12/31/04 10,759.99
01/31/05 10,770.07
02/28/05 10,781.24
03/31/05 10,793.65
04/30/05 10,810.52
05/31/05 10,829.86
06/30/05 10,845.62
07/31/05 10,860.93
08/31/05 10,878.32
09/30/05 10,897.46
10/31/05 10,915.62
11/30/05 10,936.38
12/31/05 10,961.33
01/31/06 10,982.27
02/28/06 11,003.66
03/31/06 11,028.50
04/30/06 11,052.34
05/31/06 11,079.32
06/30/06 11,109.46
07/31/06 11,135.99
08/31/06 11,163.90
09/30/06 11,192.35
10/31/06 11,219.37
11/30/06 11,247.14
12/31/06 11,278.37
01/31/07 11,305.32
02/28/07 11,331.90
03/31/07 11,361.85
04/30/07 11,390.36
05/31/07 11,421.79
06/30/07 11,452.27
07/31/07 11,481.03
08/31/07 11,514.64
09/30/07 11,542.51
10/31/07 11,571.77
11/30/07 11,601.65
12/31/07 11,629.69
01/31/08 11,655.13
02/29/08 11,675.20
03/31/08 11,698.43
04/30/08 11,717.77
05/31/08 11,739.30
06/30/08 11,754.67
07/31/08 11,770.57
08/31/08 11,788.08
09/30/08 11,818.44
10/31/08 11,855.20
11/30/08 11,867.51
12/31/08 11,878.08
01/31/09 11,881.89
02/28/09 11,885.46
03/31/09 11,890.58
04/30/09 11,897.94
05/31/09 11,905.86
06/30/09 11,912.34
07/31/09 11,918.15
08/31/09 11,922.41
09/30/09 11,925.48
10/31/09 11,926.67
11/30/09 11,926.78
12/31/09 11,934.88
01/31/10 11,934.97
02/28/10 11,935.06
03/31/10 11,935.16
[END CHART]
Data from 3/31/00 through 3/31/10.
The graph illustrates the performance of a hypothetical $10,000 investment in
the USAA New York Money Market Fund.
Past performance is no guarantee of future results. The cumulative performance
quoted does not reflect the deduction of taxes that a shareholder would pay on
reinvested net investment income and realized capital gain distributions or on
the redemption of fund shares. Some income may be subject to federal, state, or
local taxes. For seven-day yield information, please refer to the Fund's
Investment Overview.
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INVESTMENT OVERVIEW | 11
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DISTRIBUTIONS TO SHAREHOLDERS
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The following federal tax information related to the Fund's fiscal year ended
March 31, 2010, is provided for information purposes only and should not be used
for reporting to federal or state revenue agencies. Federal tax information for
the calendar year will be reported to you on Form 1099-DIV in January 2011.
The net investment income distributed by the Fund during the fiscal year ended
March 31, 2010, was 100% tax-exempt for federal income tax purposes.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund has
not designated any long-term realized capital gains for the fiscal year ended
March 31, 2010.
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12 | USAA NEW YORK MONEY MARKET FUND
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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THE SHAREHOLDERS AND BOARD OF TRUSTEES OF USAA NEW YORK MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the USAA New York Money Market Fund (one of the
portfolios constituting USAA Mutual Funds Trust) (the "Fund") as of March 31,
2010, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of March 31, 2010, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA New York Money Market Fund at March 31, 2010, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
San Antonio, Texas
May 18, 2010
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 13
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PORTFOLIO OF INVESTMENTS
March 31, 2010
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o CATEGORIES AND DEFINITIONS
VARIABLE-RATE DEMAND NOTES (VRDNS) -- provide the right to sell the security
at face value on either that day or within the rate-reset period. The
interest rate is adjusted at a stipulated daily, weekly, monthly, quarterly,
or other specified time interval to reflect current market conditions. The
effective maturity of these instruments is deemed to be less than 397 days
in accordance with detailed regulatory requirements.
PUT BONDS -- provide the right to sell the bond at face value at specific
tender dates prior to final maturity. The put feature shortens the effective
maturity of the security.
FIXED-RATE INSTRUMENTS -- consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the
market price of a fixed-rate instrument generally varies inversely to the
movement of interest rates.
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 values of the securities.
The Fund's investments consist of securities meeting the requirements to
qualify at the time of purchase as "eligible securities" under the
Securities and Exchange Commission (SEC) rules applicable to money market
funds. With respect to quality, eligible securities generally consist of
securities rated in one of the two highest categories for short-term
securities or, if not rated, of comparable quality at the
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14 | USAA NEW YORK MONEY MARKET FUND
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time of purchase. USAA Investment Management Company (the Manager) also
attempts to minimize credit risk in the Fund through rigorous internal
credit research.
(INS) Principal and interest payments are insured by one of the following:
Assured Guaranty Corp., Assured Guaranty Municipal Corp., or
Berkshire Hathaway Assurance 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.
(LIQ) Liquidity enhancement that may, under certain circumstances, provide
for repayment of principal and interest upon demand from one of the
following: Citibank, N.A., Dexia Credit Local, JPMorgan Chase Bank,
N.A., or Morgan Stanley.
(LOC) Principal and interest payments are guaranteed by a bank letter of
credit or other bank credit agreement.
o PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
IDA Industrial Development Authority/Agency
MTA Metropolitan Transportation Authority
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PORTFOLIO OF INVESTMENTS | 15
<PAGE>
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INVESTMENTS
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PRINCIPAL
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (96.0%)
NEW YORK (91.9%)
$ 4,115 Albany IDA (LOC - RBS Citizens, N.A.) 0.39% 5/01/2035 $ 4,115
1,600 Broome County IDA (LOC - Manufacturers & Traders Trust Co.) 0.34 7/01/2023 1,600
2,750 Chautauqua County IDA (LOC - PNC Bank, N.A.) 0.29 8/01/2030 2,750
6,000 Chautauqua County IDA (LOC - PNC Bank, N.A.) 0.35 12/01/2031 6,000
5,980 Dormitory Auth. (LIQ)(LOC - Dexia Credit Local)(a) 0.54 5/15/2022 5,980
5,470 Dormitory Auth. (LOC - Allied Irish Banks plc) 0.40 9/01/2026 5,470
1,400 Dormitory Auth. (LOC - Federal Home Loan Bank of Boston) 0.27 6/01/2034 1,400
5,340 Dormitory Auth. (LOC - Key Bank, N.A.) 0.39 7/01/2038 5,340
1,865 Dutchess County IDA (LOC - JPMorgan Chase Bank, N.A.) 0.30 10/01/2017 1,865
5,075 Erie County IDA (LOC - Sovereign Bank) 0.35 11/15/2036 5,075
2,675 Essex County IDA (LOC - Key Bank, N.A.) 0.39 3/01/2032 2,675
1,400 Long Island Power Auth. (LOC - Bayerische Landesbank) 0.36 5/01/2033 1,400
4,530 Monroe County IDA (LOC - Manufacturers & Traders Trust Co.) 0.54 12/01/2034 4,530
4,000 MTA (INS)(LIQ)(a) 0.30 3/01/2012 4,000
600 MTA (INS)(LIQ) 0.33 11/01/2022 600
1,530 New York City (LIQ)(LOC - Dexia Credit Local)(a) 0.54 2/01/2016 1,530
1,400 New York City Housing Dev. Corp. (LOC - Bank of America, N.A.) 0.34 11/01/2048 1,400
1,075 New York City IDA (LOC - Manufacturers & Traders Trust Co.) 0.54 12/01/2027 1,075
3,455 New York City Municipal Water Finance Auth. (LIQ)(a) 0.29 6/15/2013 3,455
1,500 New York City Municipal Water Finance Auth. (LIQ)(a) 0.30 6/15/2013 1,500
4,500 New York City Transitional Finance Auth. (LIQ)(a) 0.30 11/01/2030 4,500
4,200 Oneida County IDA (LOC - Manufacturers & Traders Trust Co.) 0.34 6/01/2030 4,200
4,600 Oneida County IDA (LOC - RBS Citizens, N.A.) 0.54 7/01/2037 4,600
5,185 Ontario County IDA (LOC - ABN AMRO Bank N.V.) 1.24 3/01/2028 5,185
2,300 Ontario County IDA (LOC - Key Bank, N.A.) 0.50 7/01/2030 2,300
3,000 Port Auth. of New York and New Jersey 0.35 11/16/2012 3,000
4,795 Thruway Auth. (LIQ)(a) 0.32 4/01/2013 4,795
10,360 Triborough Bridge and Tunnel Auth. (LOC - Bayerische Landesbank) 0.32 1/01/2032 10,360
5,000 Troy IDA (LOC - Allied Irish Banks plc) 0.38 9/01/2042 5,000
================================================================================
16 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------------------
$ 5,060 Wayne County IDA (LOC - ABN AMRO Bank N.V.) 1.24% 6/01/2012 $ 5,060
875 Westchester County IDA (LOC - JPMorgan Chase Bank, N.A.) 0.33 10/01/2028 875
--------
111,635
--------
PUERTO RICO (4.1%)
5,000 Highway and Transportation Auth. (INS)(LIQ)(a) 0.39 7/01/2041 5,000
--------
Total Variable-Rate Demand Notes (cost: $116,635) 116,635
--------
PUT BONDS (1.0%)
PUERTO RICO (1.0%)
1,280 Industrial, Medical and Environmental Pollution
Control Facilities Financing Auth. (cost: $1,280) 0.95 3/01/2023 1,280
--------
FIXED-RATE INSTRUMENTS (2.5%)
NEW YORK (2.5%)
3,000 Erie County Fiscal Stability Auth. (cost: $3,004) 2.00 5/19/2010 3,004
--------
TOTAL INVESTMENTS (COST: $120,919) $120,919
========
----------------------------------------------------------------------------------------------------
($ 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
----------------------------------------------------------------------------------------------------
Variable-Rate Demand Notes $- $116,635 $- $116,635
Put Bonds - 1,280 - 1,280
Fixed-Rate Instruments - 3,004 - 3,004
----------------------------------------------------------------------------------------------------
Total $- $120,919 $- $120,919
----------------------------------------------------------------------------------------------------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
March 31, 2010
--------------------------------------------------------------------------------
o GENERAL NOTES
Values of securities are determined by procedures and practices discussed in
Note 1 to the financial statements.
The cost of securities at March 31, 2010, for federal income tax purposes,
was $120,919,000.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
o SPECIFIC NOTES
(a) 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 the Manager under
liquidity guidelines approved by the Board of Trustees, unless otherwise
noted as illiquid.
See accompanying notes to financial statements.
================================================================================
18 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
March 31, 2010
--------------------------------------------------------------------------------
ASSETS
Investments in securities (amortized cost approximates market value) $120,919
Cash 79
Receivables:
Capital shares sold 559
USAA Investment Management Company (Note 4D) 19
Interest 123
--------
Total assets 121,699
--------
LIABILITIES
Payables:
Capital shares redeemed 125
Accrued management fees 37
Accrued transfer agent's fees 6
Other accrued expenses and payables 38
--------
Total liabilities 206
--------
Net assets applicable to capital shares outstanding $121,493
========
NET ASSETS CONSIST OF:
Paid-in capital $121,461
Accumulated net realized gain on investments 32
--------
Net assets applicable to capital shares outstanding $121,493
========
Capital shares outstanding, unlimited number of shares
authorized, no par value 121,461
========
Net asset value, redemption price, and offering price per share $ 1.00
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 19
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Year ended March 31, 2010
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $1,237
------
EXPENSES
Management fees 479
Administration and servicing fees 139
Transfer agent's fees 108
Custody and accounting fees 26
Postage 3
Shareholder reporting fees 13
Trustees' fees 11
Professional fees 61
Guarantee program fee (Note 1F) 26
Other 10
------
Total expenses 876
Expenses reimbursed (86)
------
Net expenses 790
------
NET INVESTMENT INCOME 447
------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain 74
------
Increase in net assets resulting from operations $ 521
======
See accompanying notes to financial statements.
================================================================================
20 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Years ended March 31,
--------------------------------------------------------------------------------
2010 2009
------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 447 $ 2,349
Net realized gain on investments 74 51
--------------------------
Increase in net assets resulting from operations 521 2,400
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (447) (2,349)
Net realized gains (90) (6)
--------------------------
Distributions to shareholders (537) (2,355)
--------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 73,418 196,036
Reinvested dividends 532 2,332
Cost of shares redeemed (102,934) (176,070)
--------------------------
Increase (decrease) in net assets from capital
share transactions (28,984) 22,298
--------------------------
Net increase (decrease) in net assets (29,000) 22,343
NET ASSETS
Beginning of year 150,493 128,150
--------------------------
End of year $ 121,493 $ 150,493
==========================
CHANGE IN SHARES OUTSTANDING
Shares sold 73,418 196,036
Shares issued for dividends reinvested 532 2,332
Shares redeemed (102,934) (176,070)
--------------------------
Increase (decrease) in shares outstanding (28,984) 22,298
==========================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 21
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
March 31, 2010
--------------------------------------------------------------------------------
(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 annual report pertains only to the USAA New York
Money Market Fund (the Fund), which is classified as diversified under the 1940
Act. The Fund's investment objective is to provide New York investors with a
high level of current interest income that is exempt from federal income tax and
New York State and New York City personal income taxes, with a further objective
of preserving capital and maintaining liquidity.
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. Pursuant to Rule 2a-7 under the 1940 Act, securities in the Fund are
valued at amortized cost, which approximates market value. This method
values a security at its cost on the date of purchase and, thereafter,
assumes a constant amortization to maturity of any premiums or
discounts.
2. Securities for which amortized cost valuations are considered unreliable
or whose values have been materially affected by a significant event are
valued in good faith at fair value, using methods determined by USAA
Investment Management Company (the Manager), an affiliate of the Fund,
under valuation procedures and procedures to stabilize net asset value
(NAV) approved by the Trust's Board of Trustees.
================================================================================
22 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
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.
For example, money market securities are valued using amortized cost, in
accordance with rules under the 1940 Act. Generally, amortized cost
approximates the current fair value of a security, but since the value is
not obtained from a quoted price in an active market, such securities are
reflected as Level 2.
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.
Interest income is recorded daily on the accrual basis. Premiums and
discounts are amortized over the life of the
================================================================================
NOTES TO FINANCIAL STATEMENTS | 23
<PAGE>
================================================================================
respective securities using the straight-line method. The Fund concentrates
its investments in New York tax-exempt securities and, therefore, may be
exposed to more credit risk than portfolios with a broader geographical
diversification.
E. 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.
F. GUARANTEE PROGRAM -- Subject to certain terms and conditions, the U.S.
Department of the Treasury's Temporary Guarantee Program for Money Market
Funds (the Program) provided coverage to shareholders for amounts held in
participating money market funds as of the close of business on September
19, 2008, for the term of the Program of September 19, 2008, through
September 18, 2009 (Program Term). The Fund was responsible for payment of
fees required to continue its participation in the Program without regard to
any waivers or expense limitations in effect for the Fund. The participation
fee for the Program Term was 0.04% of the number of shares outstanding of
the Fund as of September 19, 2008. For the year ended March 31, 2010, the
Fund recorded $26,000, as guarantee program fee on the statement of
operations. Effective September 18, 2009, the Program has expired.
G. EXPENSES PAID INDIRECTLY -- 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 year ended March
31, 2010, these custodian and other bank credits reduced the Fund's expenses
by less than $500.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising
================================================================================
24 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
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.
For the year ended March 31, 2010, the Fund paid CAPCO facility fees of $1,000,
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 year ended March 31,
2010.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 25
<PAGE>
================================================================================
(3) DISTRIBUTIONS
The character of any distributions made during the year from net investment
income or net realized gains is determined in accordance with federal tax
regulations and may differ from those determined in accordance with U.S.
generally accepted accounting principles. Also, due to the timing of
distributions, the fiscal year in which amounts are distributed may differ from
the year that the income or realized gains were recorded by the Fund.
The tax character of distributions paid during the years ended March 31, 2010,
and March 31, 2009, was as follows:
2010 2009
---------------------------------
Tax-exempt income $447,000 $2,349,000
Ordinary income* 90,000 6,000
As of March 31, 2010, the components of net assets representing distributable
earnings on a tax basis were as follows:
Undistributed ordinary income* $32,000
*Represents short-term realized capital gains, which are taxable as ordinary
income.
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. Distributions of realized gains from security transactions
not offset by capital losses are made annually in the succeeding fiscal year or
as otherwise required to avoid the payment of federal taxes.
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 year ended March
31, 2010, the Fund did not incur any income tax, interest, or penalties. As of
March 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 year
================================================================================
26 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
ended March 31, 2010, and each of the three preceding fiscal years, 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) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager carries out the Fund's investment policies
and manages the Fund's portfolio pursuant to an Advisory Agreement.
Management fees are accrued daily and paid monthly as a percentage of
aggregate average net assets of the USAA New York Bond and USAA New York
Money Market funds combined, which on an annual basis is equal to 0.50% of
the first $50 million, 0.40% of that portion over $50 million but not over
$100 million, and 0.30% of that portion over $100 million. These fees are
allocated on a proportional basis to each Fund monthly based upon average
net assets. For the year ended March 31, 2010, the Fund incurred total
management fees, paid or payable to the Manager, of $479,000, resulting in
an effective annualized management fee of 0.35% of the Fund's average net
assets for the same period.
B. 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 0.10% of the Fund's average net assets. For the year
ended March 31, 2010, the Fund incurred administration and servicing fees,
paid or payable to the Manager, of $139,000.
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 year ended March 31, 2010, the Fund reimbursed the
Manager $6,000 for these compliance and legal services. These expenses are
included in the professional fees on the Fund's statement of operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
<PAGE>
================================================================================
C. 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 $25.50 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 year ended March 31, 2010, the Fund
incurred transfer agent's fees, paid or payable to SAS, of $108,000.
D. EXPENSE LIMITATION -- The Manager has voluntarily agreed to limit the annual
expenses of the Fund to 0.60% of its average annual net assets, excluding
extraordinary expenses, such as the guarantee program fee, and before
reductions of any expenses paid indirectly, and will reimburse the Fund for
all expenses in excess of that amount. Additionally, effective November 9,
2009, the Manager has voluntarily agreed, on a temporary basis, to reimburse
management, administrative, or other fees to limit the Fund's expenses and
attempt to prevent a negative yield. The Manager may modify or terminate
these voluntary agreements at any time. For the year ended March 31, 2010,
the Fund incurred reimbursable expenses of $86,000, of which $19,000 was
receivable from the Manager.
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.
(5) 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.
(6) 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
================================================================================
28 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
were issued, and has determined there were no events that require recognition or
disclosure in the Fund's financial statements.
(7) NEW ACCOUNTING PRONOUNCEMENTS
A. DERIVATIVES AND HEDGING -- In March 2008, the Financial Accounting Standards
Board issued 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. The accounting standard is effective for financial
statements issued for fiscal years and interim periods beginning after
November 15, 2008. The Manager has evaluated the accounting standard, and
due to the Fund's investment restrictions pertaining to derivative
instruments, has determined that there is no impact on the Fund's financial
statement disclosures.
B. FAIR VALUE MEASUREMENTS -- In January 2010, the Financial Accounting
Standards Board issued amended guidance for improving disclosures about fair
value measurements that adds new disclosure requirements about significant
transfers between Level 1, Level 2, and Level 3, 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 | 29
<PAGE>
================================================================================
(8) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2010 2009 2008 2007 2006
---------------------------------------------------------------------
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .00(a) .02 .03 .03 .02
Net realized and unrealized
gain on investments .00(a) .00(a) .00(a) .00(a) -
---------------------------------------------------------------------
Total from investment operations .00(a) .02 .03 .03 .02
---------------------------------------------------------------------
Less distributions from:
Net investment income (.00)(a) (.02) (.03) (.03) (.02)
Realized capital gains (.00)(a) (.00)(a) (.00)(a) - -
---------------------------------------------------------------------
Total distributions (.00)(a) (.02) (.03) (.03) (.02)
---------------------------------------------------------------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=====================================================================
Total return (%)* .37 1.64 2.97 3.03(b) 2.16
Net assets at end of period (000) $121,493 $150,493 $128,150 $105,847 $84,046
Ratios to average net assets:**
Expenses including guarantee
program fee (%)
Including reimbursements(c) .57(d) .62 .60 .60(b) .60
Excluding reimbursements(c) .63 .63 .61 .69(b) .64
Expenses excluding guarantee
program fee (%)
Including reimbursements(c) .55(d) .60 .60 .60(b) .60
Excluding reimbursements(c) .61 .61 .61 .69(b) .64
Net investment income (%) .32 1.61 2.90 2.99 2.14
* 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 iMoneyNet reported return.
** For the year ended March 31, 2010, average net assets were $138,432,000.
(a) Represents less than $0.01 per share.
(b) For the year ended March 31, 2007, the Manager voluntarily reimbursed the Fund for excise tax expense 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%)(+) (.01%) (.01%)
+ Represents less than 0.01% of average net assets.
(d) Effective November 9, 2009, in addition to the Fund's 0.60% annual expense cap, the Manager has voluntarily
agreed, on a temporary basis, to reimburse management, administrative, or other fees to limit the Fund's
expenses and attempt to prevent a negative yield. For the year ended March 31, 2010, this additional
reimbursement was 0.05% of the Fund's average net assets.
================================================================================
30 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
EXPENSE EXAMPLE
March 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 October 1, 2009, through
March 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 information to compare
================================================================================
EXPENSE EXAMPLE | 31
<PAGE>
================================================================================
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 OCTOBER 1, 2009 -
OCTOBER 1, 2009 MARCH 31, 2010 MARCH 31, 2010
----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,000.80 $2.49
Hypothetical
(5% return before expenses) 1,000.00 1,022.44 2.52
* Expenses are equal to the Fund's annualized expense ratio of 0.50%, which is
net of any reimbursements and expenses paid indirectly and includes
extraordinary expenses, multiplied by the average account value over the
period, multiplied by 182 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 0.08% for the six-month period of
October 1, 2009, through March 31, 2010.
================================================================================
32 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
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TRUSTEES' AND OFFICERS' INFORMATION
TRUSTEES AND OFFICERS OF THE TRUST
--------------------------------------------------------------------------------
The Board of Trustees of the Trust consists of six Trustees. These Trustees and
the Trust's Officers supervise the business affairs of the USAA family of funds.
The Board of Trustees is responsible for the general oversight of the funds'
business and for assuring that the funds are managed in the best interests of
each fund's respective shareholders. The Board of Trustees periodically reviews
the funds' investment performance as well as the quality of other services
provided to the funds and their shareholders by each of the fund's service
providers, including USAA Investment Management Company (IMCO) and its
affiliates. The term of office for each Trustee shall be 20 years or until the
Trustee reaches age 70. All members of the Board of Trustees shall be presented
to shareholders for election or re-election, as the case may be, at least once
every five years. Vacancies on the Board of Trustees can be filled by the action
of a majority of the Trustees, provided that at least two-thirds of the Trustees
have been elected by the shareholders.
Set forth below are the Trustees and Officers of the Trust, their respective
offices and principal occupations during the last five years, length of time
served, and information relating to any other directorships held. Each serves on
the Board of Trustees of the USAA family of funds consisting of one registered
investment company offering 46 individual funds as of March 31, 2010. Unless
otherwise indicated, the business address of each is 9800 Fredericksburg Road,
San Antonio, TX 78288.
If you would like more information about the funds' Trustees, you may call (800)
531-USAA (8722) to request a free copy of the funds' statement of additional
information (SAI).
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TRUSTEES' AND OFFICERS' INFORMATION | 33
<PAGE>
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INTERESTED TRUSTEE(1)
--------------------------------------------------------------------------------
CHRISTOPHER W. CLAUS(2, 4)
Trustee
Born: December 1960
Year of Election or Appointment: 2001
Chair of the Board of Directors, IMCO (11/04-present); President, IMCO
(2/01-10/09); Chief Investment Officer, IMCO (2/07-2/08); Chief Executive
Officer, IMCO (2/01-2/07); Chair of the Board of Directors, USAA Financial
Advisors, Inc. (FAI) (1/07-present); President, FAI (12/07-10/09); President,
Financial Advice and Solutions Group (FASG) USAA (9/09-present); President,
Financial Services Group, USAA (1/07-9/09). Mr. Claus serves as Chair of the
Board of Directors of USAA Investment Corporation, USAA Shareholder Account
Services (SAS), USAA Financial Planning Services Insurance Agency, Inc. (FPS),
and FAI. He also is Vice Chair for USAA Life Insurance Company (USAA Life).
NON-INTERESTED (INDEPENDENT) TRUSTEES
--------------------------------------------------------------------------------
BARBARA B. DREEBEN(3, 4, 5, 6)
Trustee
Born: June 1945
Year of Election or Appointment: 1994
President, Postal Addvantage (7/92-present), a postal mail list management
service. Mrs. Dreeben holds no other directorships of any publicly held
corporations or other investment companies outside the USAA family of funds.
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34 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
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ROBERT L. MASON, Ph.D.(3, 4, 5, 6)
Trustee
Born: June 1946
Year of Election or Appointment: 1997
Institute Analyst, Southwest Research Institute (3/02-present), which focuses in
the fields of technological research. Dr. Mason holds no other directorships of
any publicly held corporations or other investment companies outside the USAA
family of funds.
BARBARA B. OSTDIEK, Ph.D.(3, 4, 5, 6, 7)
Trustee
Born: March 1964
Year of Election or Appointment: 2007
Academic Director of the El Paso Corporation Finance Center at Jesse H. Jones
Graduate School of Management at Rice University (7/02-present); Associate
Professor of Finance at Jesse H. Jones Graduate School of Management at Rice
University (7/01-present). Dr. Ostdiek holds no other directorships of any
publicly held corporations or other investment companies outside the USAA family
of funds.
MICHAEL F. REIMHERR(3, 4, 5, 6)
Trustee
Born: August 1945
Year of Election or Appointment: 2000
President of Reimherr Business Consulting (5/95-present), an organization that
performs business valuations of large companies to include the development of
annual business plans, budgets, and internal financial reporting. Mr. Reimherr
holds no other directorships of any publicly held corporations or other
investment companies outside the USAA family of funds.
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TRUSTEES' AND OFFICERS' INFORMATION | 35
<PAGE>
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RICHARD A. ZUCKER(2, 3, 4, 5, 6)
Trustee and Chair of the Board of Trustees
Born: July 1943
Year of Election or Appointment: 1992(+)
Vice President, Beldon Roofing Company (7/85-present). Mr. Zucker holds no other
directorships of any publicly held corporations or other investment companies
outside the USAA family of funds.
(1) Indicates the Trustee is an employee of IMCO or affiliated companies and
is considered an "interested person" under the Investment Company Act of
1940.
(2) Member of Executive Committee
(3) Member of Audit Committee
(4) Member of Pricing and Investment Committee
(5) Member of Corporate Governance Committee
(6) The address for all non-interested trustees is that of the USAA Funds,
P.O. Box 659430, San Antonio, TX 78265-9430.
(7) Dr. Ostdiek was appointed the Audit Committee Financial Expert for the
Funds' Board in November 2008.
(+) Mr. Zucker was elected as Chair of the Board in 2005.
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36 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
================================================================================
INTERESTED OFFICERS(1)
--------------------------------------------------------------------------------
DANIEL S. McNAMARA
Vice President
Born: June 1966
Year of Appointment: 2009
President and Director, IMCO, FAI, FPS, and SAS (10/09-present); President, Banc
of America Investment Advisors (9/07-9/09); Managing Director, Planning and
Financial Products Group, Bank of America (9/01-9/09).
CLIFFORD A. GLADSON
Vice President
Born: November 1950
Year of Appointment: 2002
Senior Vice President, Fixed Income Investments, IMCO (9/02-present).
Mr. Gladson also serves as a Director for SAS.
JOHN P. TOOHEY
Vice President
Born: March 1968
Year of Appointment: 2009
Vice President, Equity Investments, IMCO (2/09-present); Managing Director, AIG
Investments (12/00-1/09).
MARK S. HOWARD
Secretary
Born: October 1963
Year of Appointment: 2002
Senior Vice President and Deputy General Counsel, Business & Regulatory
Services, USAA (10/08-present); Senior Vice President, USAA Life/IMCO/ FPS
General Counsel, USAA (10/03-10/08). Mr. Howard also holds the Officer positions
of Senior Vice President, Secretary, and Counsel for USAA Life, FAI, and FPS,
and is an Assistant Secretary of USAA, IMCO, and SAS.
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TRUSTEES' AND OFFICERS' INFORMATION | 37
<PAGE>
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ROBERTO GALINDO, Jr.
Treasurer
Born: November 1960
Year of Appointment: 2000
Assistant Vice President, Portfolio Accounting/Financial Administration, USAA
(12/02-present); Assistant Treasurer, USAA family of funds (7/00-2/08).
CHRISTOPHER P. LAIA
Assistant Secretary
Born: January 1960
Year of Appointment: 2008
Vice President, FASG General Counsel, USAA (10/08-present); Vice President,
Securities Counsel, USAA (6/07-10/08); General Counsel, Secretary, and Partner,
Brown Advisory (6/02-6/07). Mr. Laia also holds the Officer positions of Vice
President and Secretary, IMCO and SAS, and Vice President and Assistant
Secretary, FAI and FPS.
WILLIAM A. SMITH
Assistant Treasurer
Born: June 1948
Year of Appointment: 2009
Vice President, Senior Financial Officer, and Treasurer, FASG, FAI, and SAS
(2/09-present); Senior Financial Officer, USAA Life (2/07-present); consultant,
Robert Half/Accounttemps (8/06-1/07); Chief Financial Officer, California State
Automobile Association (8/04-12/05).
JEFFREY D. HILL
Chief Compliance Officer
Born: December 1967
Year of Appointment: 2004
Assistant Vice President, Mutual Funds Compliance, USAA (9/04-present).
(1) Indicates those Officers who are employees of IMCO or affiliated companies
and are considered "interested persons" under the Investment Company
Act of 1940.
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38 | USAA NEW YORK MONEY MARKET FUND
<PAGE>
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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.
--------------------------------------------------------------------------------
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 Web site 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)
=============================================================================
40865-0510 (C)2010, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
On September 24, 2009, the Board of Trustees of USAA Mutual Funds Trust approved
a Code of Ethics (Sarbanes Code) applicable solely to its senior financial
officers, including its principal executive officer (President), as defined
under the Sarbanes-Oxley Act of 2002 and implementing regulations of the
Securities and Exchange Commission. A copy of the Sarbanes Code is attached as
an Exhibit to this Form N-CSR.
No waivers (explicit or implicit) have been granted from a provision of the
Sarbanes Code.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
On November 18, 2008, the Board of Trustees of USAA Mutual Funds Trust
designated Dr. Barbara B. Ostdiek, Ph.D. as the Board's audit committee
financial expert. Dr. Ostdiek has served as an Associate Professor of Management
at Rice University since 2001. Dr. Ostdiek also has served as an Academic
Director at El Paso Corporation Finance Center since 2002. Dr. Ostdiek is an
independent trustee who serves as a member of the Audit Committee, Pricing and
Investment Committee and the Corporate Governance Committee of the Board of
Trustees of USAA Mutual Funds Trust.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The Registrant, USAA Mutual Funds Trust, consists of 46 funds in
all. Only 12 funds of the Registrant have a fiscal year-end of March 31 and are
included within this report (the Funds). The aggregate fees accrued or billed by
the Registrant's independent auditor, Ernst & Young LLP, for professional
services rendered for the audit of the Registrant's annual financial statements
and services provided in connection with statutory and regulatory filings by the
Registrant for the Funds for fiscal years ended March 31, 2010 and 2009 were
$244,354 and $268,065, respectively.
(b) AUDIT RELATED FEE. The aggregate fees accrued or paid to Ernst & Young, LLP
by USAA Shareholder Account Services (SAS) for professional services rendered
for audit related services related to the annual study of internal controls of
the transfer agent for fiscal years ended March 31, 2010 and 2009 were $61,513
and $63,500, respectively. All services were preapproved by the Audit Committee.
(c) TAX FEES. No such fees were billed by Ernst & Young LLP for the review of
federal, state and city income and tax returns and excise tax calculations for
fiscal years ended March 31, 2010 and 2009.
(d) ALL OTHER FEES. No such fees were billed by Ernst & Young LLP for fiscal
years ended March 31, 2010 and 2009.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICY. All audit and non-audit services to
be performed for the Registrant by Ernst & Young LLP must be pre-approved by the
Audit Committee. The Audit Committee Charter also permits the Chair of the Audit
Committee to pre-approve any permissible non-audit service that must be
commenced prior to a scheduled meeting of the Audit Committee. All non-audit
services were pre-approved by the Audit Committee or its Chair, consistent with
the Audit Committee's preapproval procedures.
(2) Not applicable.
(f) Not applicable.
(g) The aggregate non-audit fees billed by Ernst & Young LLP for services
rendered to the Registrant and the Registrant's investment adviser, IMCO, and
the Funds' transfer agent, SAS, for March 31, 2010 and 2009 were $104,896 and
$108,000, respectively.
(h) Ernst & Young LLP provided non-audit services to IMCO in 2010 and 2009 that
were not required to be pre-approved by the Registrant's Audit Committee because
the services were not directly related to the operations of the Registrant's
Funds. The Board of Trustees will consider Ernst & Young LLP's independence and
will consider whether the provision of these non-audit services to IMCO is
compatible with maintaining Ernst & Young LLP's independence.
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 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
considering by the Trust's Board in approving the Trust's advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). Code of Ethics pursuant to Item 2 of Form N-CSR is filed hereto exactly
as set forth below:
CODE OF ETHICS
FOR PRINCIPAL EXECUTIVE OFFICER
AND SENIOR FINANCIAL OFFICERS
USAA MUTUAL FUNDS TRUST
I. PURPOSE OF THE CODE OF ETHICS
USAA Mutual Funds Trust (the Trust or the Funds) has adopted this code
of ethics (the Code) to comply with Section 406 of the Sarbanes-Oxley Act of
2002 (the Act) and implementing regulations of the Securities and Exchange
Commission (SEC). The Code applies to the Trust's Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer (each a Covered
Officer), as detailed in Appendix A.
The purpose of the Code is to promote:
- honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between the Covered
Officers' personal and professional relationships;
- full, fair, accurate, timely and understandable disclosure in
reports and documents that the Trust files with, or submits
to, the SEC and in other public communications made by the
Trust;
- compliance with applicable laws and governmental rules and
regulations;
- prompt internal reporting of violations of the Code to the
Chief Legal Officer of the Trust, the President of the Trust
(if the violation concerns the Treasurer), the CEO of USAA,
and if deemed material to the Funds' financial condition or
reputation, the Chair of the Trust's Board of Trustees; and
- accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business
ethics and should be sensitive to actual and apparent conflicts of interest.
II. CONFLICTS OF INTEREST
A. DEFINITION OF A CONFLICT OF INTEREST.
A conflict of interest exists when a Covered Officer's private interest
influences, or reasonably appears to influence, the Covered Officer's judgment
or ability to act in the best interests of the Funds and their shareholders. For
example, a conflict of interest could arise if a Covered Officer, or an
immediate family member, receives personal benefits as a result of his or her
position with the Funds.
Certain conflicts of interest arise out of relationships between
Covered Officers and the Funds and are already subject to conflict of interest
provisions in the Investment Company Act of 1940 (the 1940 Act) and the
Investment Advisers Act of 1940 (the Advisers Act). For example, Covered
Officers may not individually engage in certain transactions with the Funds
because of their status as "affiliated persons" of the Funds. The USAA Funds'
and USAA Investment Management Company's (IMCO) compliance programs and
procedures are designed to prevent, or identify and correct, violations of these
provisions. This Code does not, and is not intended to, repeat or replace these
programs and procedures, and such conflicts fall outside of the parameters of
this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts could arise from, or as a result of, the contractual
relationships between the Funds and IMCO of which the Covered Officers are also
officers or employees. As a result, this Code recognizes that the Covered
Officers will, in the normal course of their duties (whether formally for the
Funds or for IMCO, or for both), be involved in establishing policies and
implementing decisions that will have different effects on IMCO and the Funds.
The participation of Covered Officers in such activities is inherent in the
contractual relationship between the Funds and IMCO and is consistent with the
performance by the Covered Officers of their duties as officers of the Funds.
Thus, if performed in compliance with the provisions of the 1940 Act and the
Advisers Act, such activities will be deemed to have been handled ethically.
B. GENERAL RULE. Covered Officers Should Avoid Actual and Apparent
Conflicts of Interest.
Conflicts of interest, other than the conflicts described in the two
preceding paragraphs, are covered by the Code. The following list provides
examples of conflicts of interest under the Code, but Covered Officers should
keep in mind that these examples are not exhaustive. The overarching principle
is that the personal interest of a Covered Officer should not be placed
improperly before the interest of the Funds and their shareholders.
Each Covered Officer must not engage in conduct that constitutes an
actual conflict of interest between the Covered Officer's personal interest and
the interests of the Funds and their shareholders. Examples of actual conflicts
of interest are listed below but are not exclusive. Each Covered Officer must
not:
- use his personal influence or personal relationships improperly to
influence investment decisions or financial reporting by the Funds
whereby the Covered Officer would benefit personally to the
detriment of the Funds and their shareholders;
- cause the Funds to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit of the Funds and their shareholders.
- accept gifts, gratuities, entertainment or any other benefit from
any person or entity that does business or is seeking to do
business with the Funds DURING CONTRACT NEGOTIATIONS.
- accept gifts, gratuities, entertainment or any other benefit with
a market value over $100 per person, per year, from or on behalf
of any person or entity that does, or seeks to do, business with
or on behalf of the Funds.
- EXCEPTION. Business-related entertainment such as meals,
and tickets to sporting or theatrical events, which are
infrequent and not lavish are excepted from this
prohibition. Such entertainment must be appropriate as to
time and place, reasonable and customary in nature, modest
in cost and value, incidental to the business, and not so
frequent as to raise any question of impropriety
(Customary Business Entertainment).
Certain situations that could present the appearance of a conflict of
interest should be discussed with, and approved by, or reported to, an
appropriate person. Examples of these include:
- service as a director on the board or an officer of any public or
private company, other than a USAA company or the Trust, must be
approved by the USAA Funds' and Investment Code of Ethics
Committee and reported to the Trust.
- the receipt of any non-nominal (I.E., valued over $25) gifts from
any person or entity with which a Trust has current or prospective
business dealings must be reported to the Chief Legal Officer. For
purposes of this Code, the individual holding the title of
Secretary of the Trust shall be considered the Chief Legal Officer
of the Trust.
- the receipt of any business-related entertainment from any person
or entity with which the Funds have current or prospective
business dealings must be approved in advance by the Chief Legal
Officer unless such entertainment qualifies as Customary Business
Entertainment.
- any ownership interest in, or any consulting or employment
relationship with, any of the Trust's service providers, other
than IMCO or any other USAA company, must be approved by the CEO
of USAA and reported to the Trust's Board.
- any material direct or indirect financial interest in commissions,
transaction charges or spreads paid by the Funds for effecting
portfolio transactions or for selling or redeeming shares other
than an interest arising from the Covered Officer's employment,
such as compensation or equity ownership should be approved by the
CEO of USAA and reported to the Trust's Board.
III. DISCLOSURE AND COMPLIANCE REQUIREMENTS
- Each Covered Officer should familiarize himself with the
disclosure requirements applicable to the Funds, and the
procedures and policies implemented to promote full, fair,
accurate, timely and understandable disclosure by the Trust.
- Each Covered Officer should not knowingly misrepresent, or
cause others to misrepresent, facts about the Funds to others,
whether within or outside the Funds, including to the Funds'
Trustees and auditors, and to government regulators and
self-regulatory organizations.
- Each Covered Officer should, to the extent appropriate within
his area of responsibility, consult with other officers and
employees of the Funds and IMCO with the goal of promoting
full, fair, accurate, timely and understandable disclosure in
the reports and documents filed by the Trust with, or
submitted to, the SEC, and in other public communications made
by the Funds.
- Each Covered Officer is responsible for promoting compliance
with the standards and restrictions imposed by applicable
laws, rules and regulations, and promoting compliance with the
USAA Funds' and IMCO's operating policies and procedures.
- A Covered Officer should not retaliate against any person
who reports a potential violation of this Code in good faith.
- A Covered Officer should notify the Chief Legal Officer
promptly if he knows of any violation of the Code. Failure
to do so itself is a violation of this Code.
IV. REPORTING AND ACCOUNTABILITY
A. INTERPRETATION OF THE CODE. The Chief Legal Officer of the Trust
is responsible for applying this Code to specific situations in
which questions are presented under it and has the authority to
interpret the Code in any particular situation. The Chief Legal
Officer should consult, if appropriate, the USAA Funds' outside
counsel or counsel for the Independent Trustees. However, any
approvals or waivers sought by a Covered Officer will be
reported initially to the CEO of USAA and will be considered by
the Trust's Board of Trustees.
B. REQUIRED REPORTS
- EACH COVERED OFFICER MUST:
- Upon adoption of the Code, affirm in writing to the
Board that he has received, read and understands the
Code.
- Annually thereafter affirm to the Chief Legal Officer
that he has complied with the requirements of the Code.
- THE CHIEF LEGAL OFFICER MUST:
- report to the Board about any matter or situation
submitted by a Covered Officer for interpretation under
the Code, and the advice given by the Chief Legal
Officer;
- report annually to the Board and the Corporate
Governance Committee describing any issues that arose
under the Code, or informing the Board and Corporate
Governance Committee that no reportable issues occurred
during the year.
C. INVESTIGATION PROCEDURES
The Funds will follow these procedures in investigating and enforcing
this Code:
- INITIAL COMPLAINT. All complaints or other inquiries
concerning potential violations of the Code must be reported
to the Chief Legal Officer. The Chief Legal Officer shall be
responsible for documenting any complaint. The Chief Legal
Officer also will report immediately to the President of the
Trust (if the complaint involves the Treasurer), the CEO of
USAA and the Chair of the Trust's Audit Committee (if the
complaint involves the President) any material potential
violations that could have a material effect on the Funds'
financial condition or reputation. For all other complaints,
the Chief Legal Officer will report quarterly to the Board.
- INVESTIGATIONS. The Chief Legal Officer will take all
appropriate action to investigate any potential violation
unless the CEO of USAA directs another person to undertake
such investigation. The Chief Legal Officer may utilize USAA's
Office of Ethics to do a unified investigation under this Code
and USAA's Code of Conduct. The Chief Legal Officer may direct
the Trust's outside counsel or the counsel to the Independent
Trustees (if any) to participate in any investigation under
this Code.
- STATUS REPORTS. The Chief Legal Officer will provide monthly
status reports to the Board about any alleged violation of the
Code that could have a material effect on the Funds' financial
condition or reputation, and quarterly updates regarding all
other alleged violations of the Code.
- VIOLATIONS OF THE CODE. If after investigation, the Chief
Legal Officer, or other investigating person, believes that a
violation of the Code has occurred, he will report immediately
to the CEO of USAA the nature of the violation, and his
recommendation regarding the materiality of the violation. If,
in the opinion of the investigating person, the violation
could materially affect the Funds' financial condition or
reputation, the Chief Legal Officer also will notify the Chair
of the Trust's Audit Committee. The Chief Legal Officer will
inform, and make a recommendation to, the Board, which will
consider what further action is appropriate. Appropriate
action could include: (1) review of, and modifications to, the
Code or other applicable policies or procedures;
(2) notifications to appropriate personnel of IMCO or USAA;
(3) dismissal of the Covered Officer; and/or (4) other
disciplinary actions including reprimands or fines.
- The Board of Trustees understands that Covered
Officers also are subject to USAA's Code of Business
Conduct. If a violation of this Code also violates
USAA's Code of Business Conduct, these procedures do
not limit or restrict USAA's ability to discipline
such Covered Officer under USAA's Code of Business
Conduct. In that event, the Chairman of the Board of
Trustees will report to the Board the action taken by
USAA with respect to a Covered Officer.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Funds for
purposes of Section 406 of the Act and the implementing regulations adopted by
the SEC applicable to registered investment companies. If other policies and
procedures of the Trust, IMCO, or other service providers govern or purport to
govern the behavior or activities of Covered Officers, they are superseded by
this Code to the extent that they overlap, conflict with, or are more lenient
than the provisions of this Code. The Investment Code of Ethics (designated to
address 1940 Act and Advisers Act requirements) and IMCO's more detailed
compliance policies and procedures (including its Insider Trading Policy) are
separate requirements applying to Covered Officers and other IMCO employees, and
are not part of this Code. Also, USAA's Code of Conduct imposes separate
requirements on Covered Officers and all employees of USAA, and also is not part
of this Code.
VI. AMENDMENTS
Any amendment to this Code, other than amendments to Appendix A, must
be approved or ratified by majority vote of the Board of Trustees.
VII. CONFIDENTIALITY AND DOCUMENT RETENTION
The Chief Legal Officer shall retain material investigation documents
and reports required to be prepared under the Code for six years from the date
of the resolution of any such complaint. All reports and records prepared or
maintained pursuant to this Code will be considered confidential and shall be
maintained and protected accordingly. Except as otherwise required by law or
this Code, such matters shall not be disclosed to anyone other than the Trust's
Board of Trustees and counsel for the Independent Trustees (if any), the Trust
and its counsel, IMCO, and other personnel of USAA as determined by the Trust's
Chief Legal Officer or the Chair of the Trust's Board of Trustees.
Approved and adopted by IMCO's Code of Ethics Committee: June 12, 2003.
Approved and adopted by the Boards of Directors/Trustees of USAA Mutual Fund,
Inc., USAA Tax-Exempt Fund, Inc., USAA Investment Trust & USAA State Tax-Free
Trust: June 25, 2003.
Approved and adopted by the Board of Trustees of USAA Life Investment Trust:
August 20, 2003.
Approved and adopted as amended by IMCO's Code of Ethics Committee: August 15,
2005.
Approved and adopted as amended by the Boards of Directors/Trustees of USAA
Mutual Fund, Inc., USAA Tax-Exempt Fund, Inc., USAA Investment Trust & USAA
State Tax-Free Trust: September 14, 2005.
Approved and adopted as amended by the Board of Trustees of USAA Life Investment
Trust: December 8, 2005.
Approved and adopted as amended by IMCO's Code of Ethics Committee: August 16,
2006.
Approved and adopted by the Board of Trustees of USAA Mutual Funds Trust:
September 13, 2006.
Approved and adopted by IMCO's Code of Ethics Committee: August 28, 2007.
Approved and adopted by the Investment Code of Ethics Committee: August 29,
2008.
Approved and adopted as amended by the Board of Trustees of USAA Mutual Funds
Trust: September 19, 2008.
Approved and adopted by the Investment Code of Ethics Committee: August 17,
2009.
Approved and adopted by the Board of Trustees of USAA Mutual Funds Trust:
September 24, 2009.
APPENDIX A
COVERED OFFICERS
PRESIDENT
TREASURER
(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 March 31, 2010
By:* /s/ CHRISTOPHER P. LAIA
--------------------------------------------------------------
Signature and Title: Christopher P. Laia, Secretary
Date: 05/26/2010
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /s/ CHRISTOPHER W. CLAUS
-----------------------------------------------------
Signature and Title: Christopher W. Claus, President
Date: 05/27/2010
------------------------------
By:* /s/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 05/26/2010
------------------------------
*Print the name and title of each signing officer under his or her signature.
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