UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: ADYM W. RYGMYR
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: JULY 31
Date of reporting period: JANUARY 31, 2013
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2013
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA SCIENCE & TECHNOLOGY FUND]
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SEMIANNUAL REPORT
USAA SCIENCE & TECHNOLOGY FUND
FUND SHARES o ADVISER SHARES
JANUARY 31, 2013
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PRESIDENT'S MESSAGE
"AS I WRITE TO YOU, INVESTORS ARE SHOWING [PHOTO OF DANIEL S. McNAMARA]
A GROWING APPETITE FOR RISK."
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MARCH 2013
At the beginning of January of this year, the "fiscal cliff" had been averted.
However, the deal reached by Congress was less than perfect and on March 1,
sequestration took effect after Congress was unable to come up with a long-term
plan to resolve our nation's toughest fiscal challenges. Due to the legally-
mandated sequestration, I expect the country's fiscal condition to remain in
flux.
As part of the fiscal cliff agreement, lawmakers blocked some large tax
increases, but they allowed the payroll tax holiday to expire and raised the tax
rate on individuals earning more than $400,000 a year ($450,000 for couples).
They also approved a smaller-than-expected increase in the capital gains tax.
However, Congress delayed action on the "sequester," until spring, which
mandates automatic, across-the-board spending cuts.
In the meantime, U.S. economic growth appears to have slowed. After generating
3.1% real gross domestic product (GDP) growth in the third quarter of 2012, the
U.S. economy contracted during the fourth quarter. Looking ahead, I believe U.S.
economic growth to remain below 2%, although the housing market, which continues
to improve, is a bright spot. Although Congress has allowed the sequester to be
implemented, the effect of spending cuts alone should not have a material impact
on the growth of U.S. GDP. Nonetheless, along with the January tax increases,
this could further weaken economic growth over the next few calendar quarters.
The U.S. Federal Reserve (the Fed) continues to do all it can to boost economic
growth and reduce unemployment. During September 2012, it launched a third round
of quantitative easing (QE3), making an open-ended commitment to buy
mortgage-backed securities. The Fed went even further in December of last year,
making a commitment -- also open ended -- to buy long-term U.S. Treasury
securities every month starting in January 2013. By the end of the reporting
period, the U.S. central bank was pumping money into the U.S. economy. The Fed
also has kept short-term interest rates at exceptionally low levels and is
unlikely to raise rates in the near future. However, according to minutes from
recent meetings, Fed governors are debating the timing of a rate increase
relative to certain economic thresholds.
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As I write to you, investors are showing a growing appetite for risk. U.S. stock
prices, as represented by the S&P 500(R) Index, climbed during the reporting
period. But I am troubled that few of these gains can be attributed to earnings
and dividends. Approximately two thirds of the price appreciation was the result
of multiple expansions. In other words, investors appeared to favor stocks for
their own sake, not for the earnings growth of the underlying companies
themselves. This suggests that some people are investing in stocks just because
their prices are rising, which indicates a certain amount of complacency.
Indeed, at the time of this writing, the "fear index," the VIX (a measure of
market volatility), is extremely low.
Meanwhile, fixed-income securities were less in favor. Some observers even
predicted the "demise" of bonds as an asset class. Hyperbole aside, I believe
that many people forget how large and diverse the fixed-income market is. It
comprises many types of bonds, U.S. Treasuries, mortgage-backed securities,
investment-grade bonds, high-yield bonds, municipal securities, and more. Many
of these fixed-income asset classes perform differently from each other. For
example, during the reporting period, investment-grade corporate bonds
outperformed U.S. Treasury securities and high-yield bonds outperformed
investment-grade corporate bonds. That said, I believe that bonds will not
experience the same level of price appreciation they have experienced in recent
years. In my opinion, fixed-income securities have returned to their historic
role as an income-accumulation vehicle.
Looking ahead, our short-term outlook is cautious. The U.S. economy remains
fragile and no one knows how the looming sequester will affect GDP growth. In
this environment, we believe our disciplined investment approach -- which seeks
to identify attractive opportunities while minimizing potential risks -- is
particularly advantageous. On behalf of everyone at USAA Asset Management
Company, thank you for allowing us to serve your investment needs. We appreciate
your continued confidence.
Sincerely,
/S/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Asset Management Company
VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market
Volatility Index, a popular measure of the implied volatility of S&P 500 index.
As interest rates rise, bond prices fall. o Past performance is no guarantee of
future results. o Rebalancing and diversification do not protect against losses
or guarantee that an investor's goal will be met.
The S&P 500 Index is a well-known stock market index that includes common stocks
of 500 companies from several industrial sectors representing a significant
portion of the market value of all stocks publicly traded in the United States.
Most of these stocks are listed on the New York Stock Exchange.
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TABLE OF CONTENTS
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FUND OBJECTIVE 1
MANAGERS' COMMENTARY 2
INVESTMENT OVERVIEW 4
FINANCIAL INFORMATION
Portfolio of Investments 9
Notes to Portfolio of Investments 17
Financial Statements 19
Notes to Financial Statements 22
EXPENSE EXAMPLE 42
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)2013, USAA. All rights reserved.
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FUND OBJECTIVE
THE USAA SCIENCE & TECHNOLOGY FUND'S (THE FUND) INVESTMENT OBJECTIVE IS
LONG-TERM CAPITAL APPRECIATION.
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TYPES OF INVESTMENTS
The Fund normally invests at least 80% of its assets in equity securities of
companies expected to benefit from the development and use of scientific and
technological advances and improvements. This 80% policy may be changed upon at
least 60 days' written notice to shareholders. The Fund may invest up to 50% of
its assets in foreign securities purchased in either foreign or U.S. markets.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Asset Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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FUND OBJECTIVE | 1
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MANAGERS' COMMENTARY ON THE FUND
Wellington Management Company, LLP
JOHN F. AVERILL, CFA BRUCE L. GLAZER
NICOLAS B. BOULLET ANITA M. KILLIAN, CFA
ANN C. GALLO MICHAEL T. MASDEA
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o HOW DID THE USAA SCIENCE & TECHNOLOGY FUND (THE FUND SHARES) PERFORM DURING
THE REPORTING PERIOD?
At the end of the reporting period, the Fund Shares had a total return of
9.97%. This compares to returns of 9.91% for the S&P 500(R) Index (the Index)
and 9.07% for the Lipper Science & Technology Funds Index.
The Fund is subadvised by Wellington Management Company, LLP (Wellington
Management).
o HOW DID THE FUND'S TECHNOLOGY PORTION PERFORM?
The Fund's technology portfolio outperformed the S&P North American
Technology Index. Strong security selection in semiconductors &
semiconductor equipment and computers and peripherals was somewhat offset by
weaker stock selection in communications equipment, internet software &
services, and internet & catalog retail. Our underweight allocations to
computers & peripherals and internet & catalog retail contributed positively
to relative return. However, this was partially offset by a modest "out of
benchmark" allocation to machinery and electrical equipment. Positions in
Apple, Inc., Intel Corp., and Microsoft Corp. were among the top
contributors during the period.
Refer to page 5 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Mircosoft Corp. was sold out of the Fund prior to January 31, 2013.
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2 | USAA SCIENCE & TECHNOLOGY FUND
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Holdings in Google, Inc. "A", Cisco Systems, Inc., and Skyworks Solutions
were the largest individual detractors against performance.
o HOW DID THE FUND'S HEALTH CARE PORTION PERFORM?
Stock selection, particularly within biotechnology and pharmaceuticals,
detracted from relative results, more than offsetting favorable selection in
health services. Sector allocation, a result of Wellington Management's
stock-by-stock investment process, also contributed to relative performance,
mainly due to an overweight position in biotechnology and an underweight to
pharmaceuticals. The largest detractors from relative return included
positions in ABIOMED, Inc. and Teva Pharmaceutical Industries Ltd. ADR. Not
owning Celgene Corp. also hurt relative results. Positions in Merck & Co.,
Inc. and CIGNA Corp. were the largest relative contributors during the
period. Not owning Express Scripts also was additive.
o WHAT IS WELLINGTON MANAGEMENT'S OUTLOOK FOR THE HEALTH CARE SECTOR?
While the U.S. election and the "fiscal cliff" are behind us, we believe
that further Medicare and Medicaid cuts are inevitable as Congress seeks to
avoid sequestration, address the debt ceiling, and fund appropriations.
While painful, this approach will undoubtedly result in more targeted,
thoughtful changes than the across-the-board cut to Medicare reimbursement
currently dictated by sequestration. While it is impossible to predict the
eventual details, the outcome seems clear: The bar has been raised for
companies seeking reimbursement for health care products and services in the
United States and across the globe. Going forward, success will accrue to
companies able to offer a demonstrable improvement over current standards of
care, or alternatively, to companies able to offer their current level of
care at a lower cost. This is one of the key tenets upon which we have
structured the Fund's portfolio.
On behalf of our colleagues at USAA, we thank you for your investment in
the Fund.
Skyworks Solutions was sold out of the Fund prior to January 31, 2013.
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MANAGERS' COMMENTARY ON THE FUND | 3
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INVESTMENT OVERVIEW
USAA SCIENCE & TECHNOLOGY FUND SHARES (FUND SHARES) (Ticker Symbol: USSCX)
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1/31/13 7/31/12
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Net Assets $383.2 Million $354.5 Million
Net Asset Value Per Share $15.66 $14.24
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AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/13
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8/1/12-1/31/13* 1 Year 5 Years 10 Years
9.97% 17.92% 6.11% 9.94%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/12
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1 Year 5 Years 10 Years
18.11% 2.67% 9.37%
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EXPENSE RATIO AS OF 7/31/12**
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1.38%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2012, and
is calculated as a percentage of average net assets. The expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
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4 | USAA SCIENCE & TECHNOLOGY FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA LIPPER
SCIENCE & TECHNOLOGY SCIENCE & TECHNOLOGY
FUND SHARES FUNDS INDEX S&P 500 INDEX
1/31/2003 $10,000.00 $10,000.00 $10,000.00
2/28/2003 9,901.15 10,039.54 9,849.96
3/31/2003 9,983.53 10,032.65 9,945.59
4/30/2003 10,823.72 10,970.78 10,764.82
5/31/2003 11,894.56 12,235.06 11,331.98
6/30/2003 12,108.73 12,320.41 11,476.54
7/31/2003 12,718.29 12,982.26 11,678.89
8/31/2003 13,360.79 13,932.15 11,906.66
9/30/2003 13,245.47 13,559.84 11,780.22
10/31/2003 14,596.38 14,923.61 12,446.62
11/30/2003 14,942.34 15,149.55 12,556.13
12/31/2003 15,172.98 15,220.96 13,214.63
1/31/2004 15,782.54 15,969.35 13,457.18
2/29/2004 15,650.74 15,717.36 13,644.23
3/31/2004 15,255.35 15,385.38 13,438.39
4/30/2004 14,497.53 14,325.48 13,227.43
5/31/2004 15,238.88 15,039.08 13,408.95
6/30/2004 15,551.89 15,301.28 13,669.69
7/31/2004 13,970.35 13,630.58 13,217.26
8/31/2004 13,311.37 13,081.80 13,270.72
9/30/2004 13,805.60 13,690.72 13,414.45
10/31/2004 14,316.31 14,464.07 13,619.39
11/30/2004 15,090.61 15,270.51 14,170.45
12/31/2004 15,650.74 15,847.26 14,652.65
1/31/2005 14,827.02 14,897.20 14,295.49
2/28/2005 14,810.54 14,935.70 14,596.33
3/31/2005 14,217.46 14,537.52 14,337.86
4/30/2005 14,135.09 13,954.49 14,065.94
5/31/2005 15,172.98 15,194.52 14,513.49
6/30/2005 15,189.46 15,017.66 14,534.09
7/31/2005 16,112.03 15,923.97 15,074.59
8/31/2005 16,326.19 15,823.34 14,937.05
9/30/2005 16,474.46 16,129.32 15,058.03
10/31/2005 16,210.87 15,780.51 14,807.00
11/30/2005 17,199.34 16,654.11 15,367.04
12/31/2005 17,397.03 16,698.49 15,372.30
1/31/2006 18,616.14 17,726.25 15,779.41
2/28/2006 18,154.86 17,435.24 15,822.23
3/31/2006 18,451.40 17,869.63 16,019.18
4/30/2006 18,616.14 17,867.08 16,234.28
5/31/2006 17,479.41 16,514.22 15,767.03
6/30/2006 17,149.92 16,212.72 15,788.41
7/31/2006 16,738.06 15,431.75 15,885.80
8/31/2006 17,611.20 16,291.72 16,263.77
9/30/2006 18,056.01 16,819.89 16,682.89
10/31/2006 18,517.30 17,267.84 17,226.52
11/30/2006 19,060.96 18,008.99 17,554.10
12/31/2006 19,077.43 17,823.06 17,800.34
1/31/2007 19,258.65 18,109.90 18,069.54
2/28/2007 19,077.43 17,978.77 17,716.12
3/31/2007 19,159.80 18,077.59 17,914.28
4/30/2007 20,000.00 18,697.46 18,707.79
5/31/2007 21,021.42 19,422.30 19,360.60
6/30/2007 21,021.42 19,666.15 19,038.96
7/31/2007 20,708.40 19,648.04 18,448.66
8/31/2007 21,202.64 20,060.79 18,725.21
9/30/2007 22,075.78 21,112.15 19,425.51
10/31/2007 22,866.56 22,397.36 19,734.51
11/30/2007 21,466.23 20,709.00 18,909.47
12/31/2007 21,285.01 20,809.37 18,778.29
1/31/2008 19,176.28 18,114.00 17,651.93
2/29/2008 18,500.82 17,667.28 17,078.50
3/31/2008 18,187.81 17,547.81 17,004.75
4/30/2008 19,670.51 18,891.47 17,832.94
5/31/2008 20,642.50 19,953.66 18,063.92
6/30/2008 19,143.33 18,205.82 16,541.07
7/31/2008 18,797.36 17,829.59 16,402.02
8/31/2008 19,110.38 18,162.90 16,639.27
9/30/2008 16,441.52 15,499.33 15,156.59
10/31/2008 12,998.35 12,695.98 12,611.07
11/30/2008 11,614.50 11,232.02 11,706.17
12/31/2008 12,075.78 11,632.89 11,830.73
1/31/2009 11,762.77 11,373.32 10,833.56
2/28/2009 10,840.20 10,931.76 9,680.02
3/31/2009 12,075.78 12,140.38 10,527.95
4/30/2009 13,261.94 13,643.42 11,535.57
5/31/2009 13,887.97 14,214.66 12,180.79
6/30/2009 14,316.31 14,488.09 12,204.95
7/31/2009 15,518.95 15,675.62 13,128.10
8/31/2009 15,963.76 16,063.71 13,602.08
9/30/2009 16,721.58 17,035.19 14,109.65
10/31/2009 16,177.92 16,457.74 13,847.53
11/30/2009 17,215.82 17,268.76 14,678.15
12/31/2009 18,204.28 18,368.29 14,961.67
1/31/2010 17,100.49 17,061.36 14,423.44
2/28/2010 17,644.15 17,752.56 14,870.24
3/31/2010 18,780.89 18,973.40 15,767.58
4/30/2010 18,945.63 19,397.75 16,016.52
5/31/2010 17,528.83 18,069.75 14,737.59
6/30/2010 16,556.84 16,987.03 13,966.10
7/31/2010 17,545.30 18,061.46 14,944.61
8/31/2010 16,639.21 17,141.71 14,269.95
9/30/2010 18,813.84 19,339.55 15,543.46
10/31/2010 19,571.66 20,435.38 16,134.88
11/30/2010 19,555.19 20,527.01 16,136.95
12/31/2010 20,675.45 21,647.38 17,215.40
1/31/2011 21,416.80 22,380.93 17,623.44
2/28/2011 22,108.73 23,170.97 18,227.20
3/31/2011 22,108.73 22,995.56 18,234.45
4/30/2011 23,080.72 23,827.07 18,774.47
5/31/2011 23,113.67 23,499.60 18,561.95
6/30/2011 22,553.54 22,729.66 18,252.54
7/31/2011 21,845.14 22,086.44 17,881.38
8/31/2011 20,345.96 20,430.52 16,910.03
9/30/2011 19,324.55 19,092.61 15,721.27
10/31/2011 21,350.91 21,459.98 17,439.50
11/30/2011 20,873.15 20,879.53 17,400.96
12/31/2011 20,560.13 20,389.66 17,578.96
1/31/2012 21,878.09 22,098.22 18,366.76
2/29/2012 23,014.83 23,535.04 19,160.98
3/31/2012 24,168.04 24,579.10 19,791.55
4/30/2012 24,102.14 23,914.60 19,667.32
5/31/2012 22,388.80 21,801.72 18,485.30
6/30/2012 23,360.79 22,495.65 19,246.94
7/31/2012 23,459.64 22,323.03 19,514.26
8/31/2012 24,283.36 23,355.69 19,953.77
9/30/2012 24,827.02 23,769.80 20,469.41
10/31/2012 23,344.32 22,358.86 20,091.46
11/30/2012 24,102.14 22,921.71 20,208.01
12/31/2012 24,283.36 23,350.66 20,392.20
1/31/2013 25,799.01 24,348.75 21,448.41
[END CHART]
Data from 1/31/03 to 1/31/13.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Science & Technology Fund Shares to the following benchmarks:
o The unmanaged Lipper Science & Technology Funds Index tracks the total return
performance of the 30 largest funds in the Lipper Science & Technology Funds
category.
o The unmanaged, broad-based composite S&P 500 Index represents the weighted
average performance of a group of 500 widely held, publicly traded stocks.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index.
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INVESTMENT OVERVIEW | 5
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USAA SCIENCE & TECHNOLOGY FUND ADVISER SHARES (ADVISER SHARES)
(Ticker Symbol: USTCX)
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1/31/13 7/31/12
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Net Assets $7.7 Million $6.9 Million
Net Asset Value Per Share $15.56 $14.16
>
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AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/13
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8/1/12-1/31/13* 1 Year Since Inception 8/01/10
9.89% 17.70% 15.56%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/12
--------------------------------------------------------------------------------
1 Year Since Inception 8/01/10
17.78% 13.25%
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EXPENSE RATIO AS OF 7/31/12**
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1.63%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2012, and
is calculated as a percentage of average net assets. The expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
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6 | USAA SCIENCE & TECHNOLOGY FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA LIPPER
SCIENCE & TECHNOLOGY SCIENCE & TECHNOLOGY
FUND ADVISER SHARES S&P 500 INDEX FUNDS INDEX
7/31/2010 $10,000.00 $10,000.00 $10,000.00
8/31/2010 9,308.12 9,548.56 9,490.77
9/30/2010 10,525.83 10,400.72 10,707.64
10/31/2010 10,950.18 10,796.45 11,314.36
11/30/2010 10,940.96 10,797.84 11,365.09
12/31/2010 11,568.27 11,519.47 11,985.40
1/31/2011 11,974.17 11,792.50 12,391.54
2/28/2011 12,361.62 12,196.50 12,828.96
3/31/2011 12,352.40 12,201.36 12,731.84
4/30/2011 12,896.68 12,562.70 13,192.22
5/31/2011 12,905.90 12,420.50 13,010.91
6/30/2011 12,592.25 12,213.46 12,584.62
7/31/2011 12,195.57 11,965.10 12,228.49
8/31/2011 11,346.86 11,315.13 11,311.67
9/30/2011 10,784.13 10,519.69 10,570.92
10/31/2011 11,909.59 11,669.42 11,881.64
11/30/2011 11,642.07 11,643.64 11,560.27
12/31/2011 11,466.79 11,762.74 11,289.04
1/31/2012 12,195.57 12,289.89 12,235.01
2/29/2012 12,822.88 12,821.33 13,030.53
3/31/2012 13,468.63 13,243.27 13,608.59
4/30/2012 13,431.73 13,160.15 13,240.68
5/31/2012 12,472.32 12,369.21 12,070.86
6/30/2012 13,007.38 12,878.85 12,455.06
7/31/2012 13,062.73 13,057.72 12,359.49
8/31/2012 13,514.76 13,351.82 12,931.24
9/30/2012 13,819.19 13,696.85 13,160.52
10/31/2012 12,998.15 13,443.95 12,379.33
11/30/2012 13,404.06 13,521.94 12,690.96
12/31/2012 13,505.54 13,645.19 12,928.45
1/31/2013 14,354.24 14,351.94 13,481.06
[END CHART]
Data from 7/31/10 to 1/31/13.*
See page 5 for benchmark definitions.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Science & Technology Fund Adviser Shares to the benchmarks.
*The performance of the Lipper Science & Technology Funds Index and the S&P 500
Index is calculated from the end of the month, July 31, 2010, while the Adviser
Shares' inception date is August 1, 2010. There may be a slight variation of
performance numbers because of this difference.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index.
================================================================================
INVESTMENT OVERVIEW | 7
================================================================================
o TOP 10 HOLDINGS o
AS OF 1/31/13
(% of Net Assets)
Cisco Systems, Inc. ........................................................ 4.1%
Amazon.com, Inc. ........................................................... 3.3%
QUALCOMM, Inc. ............................................................. 2.9%
Priceline.com, Inc. ........................................................ 2.8%
Oracle Corp. ............................................................... 2.8%
eBay, Inc. ................................................................. 2.6%
Visa, Inc. "A" ............................................................. 2.5%
Facebook, Inc. "A" ......................................................... 2.4%
International Business Machines Corp. ...................................... 2.2%
EMC Corp. .................................................................. 1.9%
o ASSET ALLOCATION -- 1/31/2013 o
[PIE CHART OF ASSET ALLOCATION]
INFORMATION TECHNOLOGY 63.6%
HEALTH CARE 24.4%
CONSUMER DISCRETIONARY 8.4%
MONEY MARKET INSTRUMENTS 1.9%
CONSUMER STAPLES 1.1%
INDUSTRIALS 0.8%
[END CHART]
Percentages are of the net assets of the Fund and may not equal 100%.
You will find a complete list of securities that the Fund owns on pages 9-16.
================================================================================
8 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2013 (unaudited)
----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------------------------
EQUITY SECURITIES (98.3%)
COMMON STOCKS (97.5%)
CONSUMER DISCRETIONARY (8.4%)
-----------------------------
BROADCASTING (0.8%)
274,700 Pandora Media, Inc.* $ 3,164
--------
INTERNET RETAIL (6.8%)
48,160 Amazon.com, Inc.* 12,786
44,990 Expedia, Inc. 2,936
15,690 Priceline.com, Inc.* 10,755
--------
26,477
--------
MOVIES & ENTERTAINMENT (0.8%)
57,970 Time Warner, Inc. 2,929
--------
Total Consumer Discretionary 32,570
--------
CONSUMER STAPLES (1.1%)
-----------------------
DRUG RETAIL (1.1%)
39,080 CVS Caremark Corp. 2,001
57,800 Walgreen Co. 2,310
--------
4,311
--------
Total Consumer Staples 4,311
--------
HEALTH CARE (24.4%)
-------------------
BIOTECHNOLOGY (5.5%)
14,600 Acorda Therapeutics, Inc.* 422
22,301 Algeta ASA* 683
78,540 Alkermes plc* 1,810
119,500 Anacor Pharmaceuticals, Inc.* 477
64,400 Arena Pharmaceuticals, Inc.* 544
57,400 AVEO Pharmaceuticals, Inc.* 454
7,590 Biogen Idec, Inc.* 1,185
16,900 Cubist Pharmaceuticals, Inc.* 727
192,700 Elan Corp. plc ADR* 2,025
173,700 Exelixis, Inc.* 809
115,880 Gilead Sciences, Inc.* 4,571
37,770 Immunogen, Inc.* 541
30,656 Incyte Corp.* 563
================================================================================
PORTFOLIO OF INVESTMENTS | 9
================================================================================
----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------------------------
32,800 Ironwood Pharmaceuticals, Inc.* $ 421
29,900 NPS Pharmaceuticals, Inc.* 264
17,970 Onyx Pharmaceuticals, Inc.* 1,393
13,299 Prothena Corp. plc* 80
7,300 Puma Biotechnology, Inc.* 169
13,450 Regeneron Pharmaceuticals, Inc.* 2,339
76,600 Rigel Pharmaceuticals, Inc.* 503
27,000 Seattle Genetics, Inc.* 795
19,100 Vertex Pharmaceuticals, Inc.* 855
--------
21,630
--------
HEALTH CARE DISTRIBUTORS (1.6%)
67,240 Cardinal Health, Inc. 2,946
33,210 McKesson Corp. 3,495
--------
6,441
--------
HEALTH CARE EQUIPMENT (5.1%)
31,700 Abbott Laboratories 1,074
77,700 ABIOMED, Inc.* 1,084
312,200 Boston Scientific Corp.* 2,332
37,900 Covidien plc 2,363
51,394 Globus Medical, Inc. "A"* 657
19,300 Heartware International, Inc.* 1,744
28,600 Hologic, Inc.* 682
62,400 Medtronic, Inc. 2,908
29,000 Orthofix International N.V.* 1,106
33,200 St. Jude Medical, Inc. 1,351
24,900 Stryker Corp. 1,560
43,700 Tornier N.V.* 754
49,200 Volcano Corp.* 1,232
13,500 Zimmer Holdings, Inc. 1,007
--------
19,854
--------
HEALTH CARE FACILITIES (0.6%)
33,600 HCA Holdings, Inc. 1,265
57,519 NMC Health plc* 228
36,932 Vanguard Health Systems, Inc.* 516
--------
2,009
--------
HEALTH CARE SUPPLIES (0.1%)
11,900 DENTSPLY International, Inc. 497
--------
HEALTH CARE TECHNOLOGY (0.8%)
42,505 Allscripts - Misys Healthcare Solutions, Inc.* 471
1,495 M3, Inc. 2,437
--------
2,908
--------
================================================================================
10 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.9%)
33,800 Agilent Technologies, Inc. $ 1,514
17,900 Covance, Inc.* 1,194
22,482 MorphoSys AG* 952
--------
3,660
--------
MANAGED HEALTH CARE (2.6%)
35,570 Aetna, Inc. 1,715
51,660 CIGNA Corp. 3,014
88,600 Qualicorp S.A.* 917
80,190 UnitedHealth Group, Inc. 4,427
--------
10,073
--------
PHARMACEUTICALS (7.2%)
19,900 Actavis, Inc.* 1,719
3,334 Alk Abello A/S 252
16,400 Astellas Pharma, Inc. 835
18,800 AstraZeneca plc ADR 906
61,700 Bristol-Myers Squibb Co. 2,230
33,700 Cadence Pharmaceuticals, Inc.* 159
69,500 Daiichi Sankyo Co. Ltd. 1,177
19,100 Dr. Reddy's Laboratories ADR 686
30,700 Eisai Co. Ltd. 1,343
50,600 Eli Lilly and Co. 2,717
58,800 Forest Laboratories, Inc.* 2,134
16,573 H. Lundbeck A/S 262
21,300 Johnson & Johnson 1,575
22,997 Laboratorios Almirall S.A. 285
53,800 Medicines Co.* 1,608
52,600 Merck & Co., Inc. 2,275
40,000 Mylan, Inc.* 1,131
3,900 Ono Pharmaceutical Co., Ltd. 205
35,240 Optimer Pharmaceuticals, Inc.* 327
4,700 Salix Pharmaceuticals Ltd.* 225
109,800 Shionogi & Co. Ltd. 1,962
6,500 Simcere Pharmaceutical Group ADR* 52
66,143 Teva Pharmaceutical Industries Ltd. ADR 2,513
22,659 UCB S.A. 1,308
35,300 XenoPort, Inc.* 296
2,700 Zoetis, Inc.* 70
--------
28,252
--------
Total Health Care 95,324
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 11
================================================================================
----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------------------------
INDUSTRIALS (0.8%)
------------------
RESEARCH & CONSULTING SERVICES (0.8%)
94,485 Huron Consulting Group, Inc.* $ 3,222
--------
INFORMATION TECHNOLOGY (62.8%)
------------------------------
APPLICATION SOFTWARE (5.2%)
35,550 BroadSoft, Inc.* 1,208
273,900 Cadence Design Systems, Inc.* 3,815
36,753 Citrix Systems, Inc.* 2,689
59,260 Intuit, Inc. 3,697
11,570 MicroStrategy, Inc. "A"* 1,160
77,640 Qlik Technologies, Inc.* 1,724
23,493 Salesforce.com, Inc.* 4,044
64,210 Splunk, Inc.* 2,116
--------
20,453
--------
COMMUNICATIONS EQUIPMENT (11.0%)
300,920 Acme Packet, Inc.* 7,273
132,760 Aruba Networks, Inc.* 3,059
780,140 Cisco Systems, Inc. 16,047
92,600 JDS Uniphase Corp.* 1,344
177,190 Juniper Networks, Inc.* 3,966
173,108 QUALCOMM, Inc. 11,430
--------
43,119
--------
COMPUTER HARDWARE (0.8%)
317,000 Advantech Co. Ltd. 1,326
3,860 Apple, Inc. 1,758
--------
3,084
--------
COMPUTER STORAGE & PERIPHERALS (3.2%)
302,620 EMC Corp.* 7,448
101,590 NetApp, Inc.* 3,657
412 Wacom Co. Ltd. 1,343
--------
12,448
--------
DATA PROCESSING & OUTSOURCED SERVICES (7.0%)
33,437 Alliance Data Systems Corp.* 5,270
77,416 Automatic Data Processing, Inc. 4,590
49,430 ExlService Holdings, Inc.* 1,466
302,550 Genpact Ltd. 5,068
47,865 Vantiv, Inc. "A"* 996
63,015 Visa, Inc. "A" 9,951
--------
27,341
--------
================================================================================
12 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS (0.4%)
382,000 Delta Electronics, Inc. $ 1,384
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS (1.2%)
77,000 Anritsu Corp. 984
208,000 Hitachi Ltd. 1,233
84,100 National Instruments Corp. 2,389
--------
4,606
--------
INTERNET SOFTWARE & SERVICES (12.2%)
71,620 Akamai Technologies, Inc.* 2,916
41,900 DeNA Co. Ltd. 1,325
177,849 Dropbox, Inc., acquired 5/01/2012; cost $1,610*(a),(b),(c) 1,622
179,605 eBay, Inc.* 10,045
27,390 Equinix, Inc.* 5,901
305,470 Facebook, Inc. "A"* 9,460
6,645 Google, Inc. "A"* 5,021
108,600 Kakaku.com, Inc. 4,062
17,790 LinkedIn Corp.* 2,202
255,200 Yahoo! Inc.* 5,010
--------
47,564
--------
IT CONSULTING & OTHER SERVICES (6.2%)
86,596 Accenture plc "A" 6,225
58,672 Cognizant Technology Solutions Corp. "A"* 4,587
42,587 International Business Machines Corp. 8,648
234,598 Pactera Technology International Ltd. ADR* 1,884
46,157 Teradata Corp.* 3,077
--------
24,421
--------
SEMICONDUCTOR EQUIPMENT (1.8%)
132,300 ASM Pacific Technology Ltd. 1,670
40,602 ASML Holding N.V. 3,049
56,810 Lam Research Corp.* 2,337
--------
7,056
--------
SEMICONDUCTORS (8.7%)
81,610 Cavium Networks, Inc.* 2,729
115,900 Cypress Semiconductor Corp. 1,190
50,620 Fairchild Semiconductor International, Inc.* 748
271,400 Intel Corp. 5,710
97,830 International Rectifier Corp.* 1,907
106,940 Maxim Integrated Products, Inc. 3,363
136,330 NXP Semiconductors N.V.* 4,089
272,850 ON Semiconductor Corp.* 2,142
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
----------------------------------------------------------------------------------------------
5,348 Samsung Electronics Co. Ltd. $ 7,111
1,415,200 Taiwan Semiconductor Manufacturing Co. Ltd. 4,865
--------
33,854
--------
SYSTEMS SOFTWARE (3.8%)
171,320 Fortinet, Inc.* 4,041
4,290 NetSuite, Inc.* 301
301,370 Oracle Corp. 10,702
--------
15,044
--------
TECHNOLOGY DISTRIBUTORS (1.3%)
61,200 Avnet, Inc.* 2,164
2,198,000 WPG Holdings Ltd. 2,955
--------
5,119
--------
Total Information Technology 245,493
--------
Total Common Stocks (cost: $306,666) 380,920
--------
PREFERRED STOCKS (0.8%)
INFORMATION TECHNOLOGY (0.8%)
-----------------------------
INTERNET SOFTWARE & SERVICES (0.8%)
318,306 FireEye, Inc., acquired 12/27/2012; cost $3,351*(a),(b),(c) 3,351
--------
Total Equity Securities (cost: $310,017) 384,271
--------
MONEY MARKET INSTRUMENTS (1.9%)
MONEY MARKET FUNDS (1.9%)
7,376,638 State Street Institutional Liquid Reserve Fund, 0.14%(d) 7,377
--------
Total Money Market Instruments (cost: $7,377) 7,377
--------
TOTAL INVESTMENTS (COST: $317,394) $391,648
========
================================================================================
14 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
-----------------------------------------------------------------------------------------------------
UNREALIZED
FORWARD CONTRACT APPRECIATION
NUMBER OF CURRENCY SETTLEMENT VALUE (DEPRECIATION)
CONTRACTS COUNTERPARTY CONTRACTS DATE (000) (000)
-----------------------------------------------------------------------------------------------------
CONTRACTS TO SELL (1.2%)
215,471,000 Deutsche Bank AG Japanese Yen 2/01/2013 $2,356 $404
215,471,000 Deutsche Bank AG Japanese Yen 7/01/2013 2,359 9
----------------------
RECEIVABLE AMOUNT ($5,128) $4,715 $413
======================
CONTRACTS TO BUY (0.6%)
215,471,000 Deutsche Bank AG Japanese Yen 2/01/2013 2,356 (9)
----------------------
PAYABLE AMOUNT ($2,365) $2,356 $ (9)
======================
-------------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-------------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
-------------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $379,298 $ - $1,622 $380,920
Preferred Stocks - - 3,351 3,351
Money Market Instruments:
Money Market Funds 7,377 - - 7,377
Forward Currency Contracts to Sell* - 413 - 413
-------------------------------------------------------------------------------------------------------
Total $386,675 $413 $4,973 $392,061
-------------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy* $ - $ (9) $ - $ (9)
-------------------------------------------------------------------------------------------------------
*Forward currency contracts are valued at the unrealized appreciation/
(depreciation) of the contract.
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
Reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining value:
------------------------------------------------------------------------------------------------
COMMON STOCKS PREFERRED STOCKS
------------------------------------------------------------------------------------------------
Balance as of July 31, 2012 $1,610 $ -
Purchases - 3,351
Sales - -
Transfers into Level 3 - -
Transfers out of Level 3 - -
Net realized gain (loss) on investments - -
Change in net unrealized appreciation/depreciation on investments 12 -
------------------------------------------------------------------------------------------------
Balance as of January 31, 2013 $1,622 $3,351
------------------------------------------------------------------------------------------------
For the period of August 1, 2012, through January 31, 2013, there were no
transfers of securities between levels. The Fund's policy is to recognize any
transfers into and out of the levels as of the beginning of the period in which
the event or circumstance that caused the transfer occurred.
================================================================================
16 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2013 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
Investments in foreign securities were 17.6% of net assets at January 31,
2013.
o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S)
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
o SPECIFIC NOTES
(a) Security deemed illiquid by USAA Asset Management Company (the Manager),
under liquidity guidelines approved by the Board of Trustees. The
aggregate market value of these securities at January 31, 2013, was
$4,974,000, which represented 1.3% of the Fund's net assets.
(b) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 17
================================================================================
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.
(c) Security was fair valued at January 31, 2013, by the Manager in
accordance with valuation procedures approved by the Board of Trustees.
(d) Rate represents the money market fund annualized seven-day yield at
January 31, 2013.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
18 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
January 31, 2013 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $317,394) $391,648
Receivables:
Capital shares sold 253
Dividends and interest 60
Securities sold 1,870
Unrealized appreciation on foreign currency contracts held, at value 400
--------
Total assets 394,231
--------
LIABILITIES
Payables:
Payable for return of collateral for securities loaned (Note 5) 30
Securities purchased 2,944
Capital shares redeemed 76
Accrued management fees 254
Accrued transfer agent's fees 10
Other accrued expenses and payables 69
--------
Total liabilities 3,383
--------
Net assets applicable to capital shares outstanding $390,848
========
NET ASSETS CONSIST OF:
Paid-in capital $323,124
Accumulated undistributed net investment loss (911)
Accumulated net realized loss on investments (6,022)
Net unrealized appreciation of investments 74,254
Net unrealized appreciation of foreign currency translations 403
--------
Net assets applicable to capital shares outstanding $390,848
========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $383,167/24,466 shares outstanding) $ 15.66
========
Adviser Shares (net assets of $7,681/493 shares outstanding) $ 15.56
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 19
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended January 31, 2013 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $45) $ 2,427
Interest 4
-------
Total income 2,431
-------
EXPENSES
Management fees 1,467
Administration and servicing fees:
Fund Shares 274
Adviser Shares 6
Transfer agent's fees:
Fund Shares 614
Distribution and service fees (Note 7F):
Adviser Shares 9
Custody and accounting fees:
Fund Shares 68
Adviser Shares 1
Postage:
Fund Shares 24
Shareholder reporting fees:
Fund Shares 21
Trustees' fees 6
Registration fees:
Fund Shares 15
Adviser Shares 13
Professional fees 43
Other 6
-------
Total expenses 2,567
Expenses paid indirectly:
Fund Shares (9)
-------
Net expenses 2,558
-------
NET INVESTMENT LOSS (127)
-------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on:
Investments 26,460
Foreign currency transactions 44
Change in net unrealized appreciation/depreciation of:
Investments 8,919
Foreign currency translations 345
-------
Net realized and unrealized gain 35,768
-------
Increase in net assets resulting from operations $35,641
=======
See accompanying notes to financial statements.
================================================================================
20 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended January 31, 2013 (unaudited),
and year ended July 31, 2012
-------------------------------------------------------------------------------------------
1/31/2013 7/31/2012
-------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss $ (127) $ (1,040)
Net realized gain (loss) on investments 26,460 (1,388)
Net realized gain (loss) on foreign currency transactions 44 (203)
Change in net unrealized appreciation/depreciation of:
Investments 8,919 26,766
Foreign currency translations 345 187
----------------------
Increase in net assets resulting from operations 35,641 24,322
----------------------
NET DECREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (NOTE 6)
Fund Shares (6,281) (13,988)
Adviser Shares 53 17
----------------------
Total net decrease in net assets from capital
share transactions (6,228) (13,971)
----------------------
Net increase in net assets 29,413 10,351
NET ASSETS
Beginning of period 361,435 351,084
----------------------
End of period $390,848 $361,435
======================
Accumulated undistributed net investment loss:
End of period $ (911) $ (784)
======================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 21
================================================================================
NOTES TO FINANCIAL STATEMENTS
January 31, 2013 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940, as amended (the 1940 Act), is an open-end management investment company
organized as a Delaware statutory trust consisting of 50 separate funds. The
information presented in this semiannual report pertains only to the USAA
Science & Technology Fund (the Fund), which is classified as diversified under
the 1940 Act. The Fund's investment objective is long-term capital appreciation.
The Fund has two classes of shares: Science & Technology Fund Shares (Fund
Shares) and Science & Technology Fund Adviser Shares (Adviser Shares). Each
class of shares has equal rights to assets and earnings, except that each class
bears certain class-related expenses specific to the particular class. These
expenses include administration and servicing fees, transfer agent fees,
postage, shareholder reporting fees, distribution and service (12b-1) fees, and
certain registration and custodian fees. Expenses not attributable to a
specific class, income, and realized gains or losses on investments are
allocated to each class of shares based on each class's relative net assets.
Each class has exclusive voting rights on matters related solely to that class
and separate voting rights on matters that relate to both classes. The Adviser
Shares permit investors to purchase shares through financial intermediaries,
banks, broker-dealers, insurance companies, investment advisers, plan sponsors,
and financial professionals that provide various administrative and distribution
services.
A. SECURITY VALUATION -- The Trust's Board of Trustees (the Board) has
established the Valuation Committee (the Committee), and subject to Board
oversight, the Committee administers and oversees the Fund's valuation
policies and procedures which are approved by the Board.
================================================================================
22 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
Among other things, these policies and procedures allow the Fund to utilize
independent pricing services, quotations from securities dealers, and a wide
variety of sources and information to establish and adjust the fair value of
securities as events occur and circumstances warrant.
The Committee reports to the Board on a quarterly basis and makes
recommendations to the Board as to pricing methodologies and services used
by the Fund and presents additional information to the Board regarding
application of the pricing and fair valuation policies and procedures during
the preceding quarter.
The Committee meets as often as necessary to make pricing and fair value
determinations. In addition, the Committee holds regular monthly meetings to
review prior actions taken by the Committee and USAA Asset Management
Company (the Manager). Among other things, these monthly meetings include a
review and analysis of back testing reports, pricing service quotation
comparisons, illiquid securities and fair value determinations, pricing
movements, and daily stale price monitoring.
The value of each security is determined (as of the close of trading on the
New York Stock Exchange (NYSE) on each business day the NYSE is open) as set
forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets, are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If
no last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
2. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE
================================================================================
NOTES TO FINANCIAL STATEMENTS | 23
================================================================================
is open, the foreign markets may be closed. Therefore, the calculation
of the Fund's net asset value (NAV) may not take place at the same time
the prices of certain foreign securities held by the Fund are
determined. In most cases, events affecting the values of foreign
securities that occur between the time of their last quoted sales or
official closing prices and the close of normal trading on the NYSE on
a day the Fund's NAV is calculated will not be reflected in the value
of the Fund's foreign securities. However, the Manager, an affiliate of
the Fund, and the Fund's subadviser, if applicable, will monitor for
events that would materially affect the value of the Fund's foreign
securities. The Fund's subadviser has agreed to notify the Manager of
significant events it identifies that would materially affect the value
of the Fund's foreign securities. If the Manager determines that a
particular event would materially affect the value of the Fund's
foreign securities, then the Manager, under valuation procedures
approved by the Board, will consider such available information that it
deems relevant to determine a fair value for the affected foreign
securities. In addition, the Fund may use information from an external
vendor or other sources to adjust the foreign market closing prices of
foreign equity securities to reflect what the Fund believes to be the
fair value of the securities as of the close of the NYSE. Fair
valuation of affected foreign equity securities may occur frequently
based on an assessment that events that occur on a fairly regular basis
(such as U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
================================================================================
24 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
6. Forward currency contracts are valued on a daily basis using foreign
currency exchange rates obtained from an independent pricing service.
7. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before
the pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadviser, if applicable, under valuation procedures approved by the
Board. The effect of fair value pricing is that securities may not be
priced on the basis of quotations from the primary market in which they
are traded and the actual price realized from the sale of a security
may differ materially from the fair value price. Valuing these
securities at fair value is intended to cause the Fund's NAV to be more
reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any
restrictions on disposition of the securities, and an evaluation of the
forces that influenced the market in which the securities are purchased
and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments is
based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 25
================================================================================
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 2 securities
include all forward currency contracts value based on methods discussed in
Note 1C.
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 the securities valued using significant unobservable inputs, market
quotations were not available from the pricing services. As such, the
securities were valued in good faith using methods determined by the
Manager, under valuation procedures approved by the Board. The valuation of
some securities falling in the Level 3 category are valued at cost. However,
these securities are included in the Level 3 category due to limited market
transparency and or a lack of corroboration to support the quoted prices.
The methods used may include valuation models that rely on significant
assumptions and or unobservable inputs to determine the fair value
measurement for the securities. A market-based approach may be employed
using related or comparable securities, recent transactions, market
multiples, book values and other relevant information or an income-based
approach may be employed whereby estimated future cash flows are discounted
to determine the fair value. In some cases discounts may be applied due to
market liquidity limitations.
Refer to the portfolio of investments for a reconciliation of investments in
which significant unobservable inputs (Level 3) were used in determining
value.
================================================================================
26 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS
FAIR VALUE AT SIGNIFICANT
JANUARY 31, 2013 VALUATION UNOBSERVABLE
ASSETS ($ IN 000'S) TECHNIQUE(S) INPUT(S) RANGE
----------------------------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks $1,622 Market Revenue 3.51x - 6.89x
Comparables Multiple(a)
Discount for lack 0.10x
of marketability(b)
----------------------------------------------------------------------------------------------
(a) Represents amounts used when the reporting entity has determined that
market participants would use such multiples when pricing the security.
(b) Represents amounts used when the reporting entity has determined that
market participants would take into account these discounts when pricing
the security.
Increases in revenue multiples will increase the value of the security while
an increase in the discount for lack of marketability will decrease the
value of the security.
C. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- The Fund may buy, sell, and
enter into certain types of derivatives, including, but not limited to
futures contracts, options, options on futures contracts, and forward
currency contracts, under circumstances in which such instruments are
expected by the portfolio manager to aid in achieving the Fund's investment
objective. The Fund also may use derivatives in circumstances where the
portfolio manager believes they offer an economical means of gaining
exposure to a particular asset class or securities market or to keep cash
on hand to meet shareholder redemptions or other needs while maintaining
exposure to the market. With exchange listed futures contracts and
options, counterparty credit risk to the Fund is limited to the exchange's
clearinghouse which, as counterparty to all exchange traded futures
contracts and options, guarantees the transactions against default from the
actual counterparty to the trade.
FORWARD CURRENCY CONTRACTS -- The Fund is subject to foreign currency
exchange rate risk in the normal course of pursuing its investment
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
================================================================================
objectives. The Fund may enter into transactions to purchase or sell
forward currency contracts in order to gain exposure to, or hedge against,
changes in foreign exchange rates on its investment in securities traded in
foreign countries. Forward currency contracts are agreements to exchange
one currency for another at a future date and at a specified price. When
the Fund believes that the currency of a specific country may deteriorate
relative to the U.S. dollar, it may enter into a forward contract to sell
that currency. The Fund bears the market risk that arises from changes in
foreign exchange rates and the credit risk that a counterparty may fail to
perform under a contract. The Fund's net equity in open forward currency
contracts is included in the statement of assets and liabilities as net
unrealized appreciation or depreciation and is generated from differences
in the forward currency exchange rates at the trade dates of the contracts
and the rates at the reporting date. When the contracts are settled, the
Fund records a realized gain or loss equal to the difference in the forward
currency exchange rates at the trade dates and at the settlement dates.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AS OF JANUARY 31, 2013*
(IN THOUSANDS)
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ASSETS AND ASSETS AND
ACCOUNTED FOR AS LIABILITIES LIABILITIES
HEDGING INSTRUMENTS LOCATION FAIR VALUE LOCATION FAIR VALUE
---------------------------------------------------------------------------------------------------
Foreign exchange contracts Net unrealized $413** Net unrealized $(9)
appreciation of appreciation
foreign currency (depreciation) of
translations foreign currency
translations
---------------------------------------------------------------------------------------------------
* For open derivative instruments as of January 31, 2013, see the portfolio
of investments, which also is indicative of activity for the six-month
period ended January 31, 2013.
** Includes cumulative appreciation (depreciation) of forward currency
contracts as reported on the portfolio of investments.
================================================================================
28 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE
SIX-MONTH PERIOD ENDED JANUARY 31, 2013 (IN THOUSANDS)
DERIVATIVES CHANGE IN UNREALIZED
NOT ACCOUNTED STATEMENT OF APPRECIATION
FOR AS HEDGING OPERATIONS REALIZED GAIN (DEPRECIATION)
INSTRUMENTS LOCATION ON DERIVATIVES ON DERIVATIVES
----------------------------------------------------------------------------------
Foreign Net realized gain on $64 $345
exchange foreign currency
contracts transactions
----------------------------------------------------------------------------------
D. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
E. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses
from sales of investment securities are computed on the identified cost
basis. Dividend income, less foreign taxes, if any, is recorded on the
ex-dividend date. If the ex-dividend date has passed, certain dividends
from foreign securities are recorded upon notification. Interest income is
recorded daily on the accrual basis. Discounts and premiums on short-term
securities are amortized on a straight-line basis over the life of the
respective securities.
F. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers. These agreements are
collateralized by underlying securities. The collateral obligations are
marked-to-market daily to ensure their value is equal to or in excess of
the repurchase agreement price plus accrued interest and are held by the
Fund, either through its regular custodian or through a special "tri-party"
custodian that maintains separate accounts for both the Fund and its
counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
================================================================================
risk, and the Fund's Manager monitors the creditworthiness of sellers with
which the Fund may enter into repurchase agreements.
G. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective
dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts received. At
the end of the Fund's fiscal year, these net realized foreign currency
gains/losses are reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rate.
================================================================================
30 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
H. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition,
through arrangements with the Fund's custodian and other banks utilized by
the Fund for cash management purposes, realized credits, if any, generated
from cash balances in the Fund's bank accounts may be used to directly
reduce the Fund's expenses. Effective January 1, 2013, the Fund's
custodian suspended the bank credit arrangement. For the six-month period
ended January 31, 2013, brokerage commission recapture credits reduced the
Fund Shares by $9,000. For the six-month period ended January 31, 2013,
custodian and other bank credits reduced the Fund's expenses by less than
$500.
I. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business the Trust enters into contracts that contain a variety of
representations and warranties that provide general indemnifications. The
Trust's maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Trust that have not yet
occurred. However, the Trust expects the risk of loss to be remote.
J. 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 $500 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
================================================================================
The USAA Funds that are party to the loan agreement are assessed facility fees
by CAPCO in the amount of 7.0 basis points of the amount of the committed loan
agreement. Prior to September 30, 2012, the Funds were assessed facility fees by
CAPCO in the amount of 7.5 basis points of the amount of the committed loan
agreement. The facility fees are allocated among the Funds based on their
respective average net assets for the period.
For the six-month period ended January 31, 2013, the Fund paid CAPCO facility
fees of $1,000, which represents 0.7% of the total fees paid to CAPCO by the
USAA Funds. The Fund had no borrowings under this agreement during the six-month
period ended January 31, 2013.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year-end of July 31, 2013,
in accordance with applicable tax law.
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually in the succeeding
fiscal year or as otherwise required to avoid the payment of federal taxes.
Under the Regulated Investment Company Modernization Act of 2010 (the Act), a
fund is permitted to carry forward net capital losses indefinitely.
Additionally, such capital losses that are carried forward will retain their
character as short-term and or long-term capital losses. Post-enactment capital
loss carryforwards must be used before pre-enactment capital loss carryforwards.
As a result, pre-enactment capital loss carryforwards may be more likely to
expire unused.
At July 31, 2012, the Fund had pre-enactment capital loss carryforwards of
$26,607,000, and no post-enactment capital loss carryforwards, for federal
income tax purposes. If not offset by subsequent capital gains, the capital loss
carryforwards will expire between 2017 and 2018, as shown below. It is unlikely
that the Board will authorize a distribution of capital gains realized in the
future until the capital loss carryovers have been used or expire.
================================================================================
32 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
PRE-ENACTMENT CAPITAL LOSS CARRYFORWARDS
------------------------------------------
EXPIRES BALANCE
----------- ------------
2017 $10,094,000
2018 16,513,000
-----------
Total $26,607,000
===========
For the six-month period ended January 31, 2013, the Fund did not incur any
income tax, interest, or penalties, and has recorded no liability for net
unrecognized tax benefits relating to uncertain income tax positions. On an
ongoing basis the Manager will monitor its tax positions to determine if
adustments to this conclusion are necessary. The statute of limitations on the
Fund's tax return filings generally remain open for the three preceeding fiscal
reporting year ends and remain subject to examination by the Internal Revenue
Service and state taxing authorities.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2013, were
$182,094,000 and $188,527,000, respectively.
As of January 31, 2013, the cost of securities, including short-term securities,
for federal income tax purposes, was approximately the same as that reported in
the financial statements.
Gross unrealized appreciation and depreciation of investments as of January 31,
2013, were $78,149,000 and $3,895,000, respectively, resulting in net unrealized
appreciation of $74,254,000.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Citibank, N.A.
(Citibank), may lend its securities to qualified financial institutions, such as
certain broker-dealers, to earn additional income. The borrowers are required to
secure their loans continuously with cash collateral in an amount at least equal
to the fair value of the securities loaned, initially in an amount at least
equal to 102% of the fair value of domestic securities loaned and 105% of the
fair value of international securities loaned. Cash
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
================================================================================
collateral is invested in high-quality short-term investments. Cash collateral
requirements are determined daily based on the prior business day's ending value
of securities loaned. Imbalances in cash collateral may occur on days where
market volatility causes security prices to change significantly, and are
adjusted the next business day. The Fund and Citibank retain 80% and 20%,
respectively, of the income earned from the investment of cash received as
collateral, net of any expenses associated with the lending transaction.
Citibank receives no other fees from the Fund for its services as
securities-lending agent. Risks to the Fund in securities-lending transactions
are that the borrower may not provide additional collateral when required or
return the securities when due, and that the value of the short-term investments
will be less than the amount of cash collateral required to be returned to the
borrower. Citibank has agreed to indemnify the Fund against any losses due to
counterparty default in securities-lending transactions. For the six-month
period ended January 31, 2013, the Fund received no securities-lending income.
As of January 31, 2013, the Fund had no securities out on loan. However, a
payable to Lehman Brothers, Inc. of $30,000 remains for unclaimed cash
collateral and interest on prior lending of securities. As of March 1, 2013, the
payable to Lehman Brothers, Inc. has been settled.
(6) CAPITAL SHARE TRANSACTIONS
At January 31, 2013, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
================================================================================
34 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
Capital share transactions for all classes were as follows, in thousands:
SIX-MONTH PERIOD ENDED YEAR ENDED
JANUARY 31, 2013 JULY 31, 2012
--------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------
FUND SHARES:
Shares sold 1,773 $ 26,370 3,393 $ 45,038
Shares issued from
reinvested dividends - - - -
Shares redeemed (2,206) (32,651) (4,475) (59,026)
------------------------------------------------
Net decrease from
capital share transactions (433) $ (6,281) (1,082) $(13,988)
================================================
ADVISER SHARES:
Shares sold 6 $ 92 7 $ 98
Shares issued from
reinvested dividends - - - -
Shares redeemed (3) (39) (6) (81)
------------------------------------------------
Net increase from
capital share transactions 3 $ 53 1 $ 17
================================================
(7) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund,
subject to the authority of and supervision by the Board. The Manager is
authorized to select (with approval of the Board and without shareholder
approval) one or more subadvisers to manage the actual day-to-day
investment of a portion of the Fund's assets. The Manager monitors each
subadviser's performance through quantitative and qualitative analysis, and
periodically recommends to the Board as to whether each subadviser's
agreement should be renewed, terminated, or modified. The Manager also is
responsible for allocating assets to the subadvisers. The allocation for
each subadviser can range from 0% to 100% of the Fund's assets, and the
Manager can change the allocations without shareholder approval.
The investment management fee for the Fund is composed of a base fee and a
performance adjustment. The Fund's base fee is accrued
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
================================================================================
daily and paid monthly at an annualized rate of 0.75% of the Fund's average
net assets for the fiscal year.
The performance adjustment is calculated separately for each share class on
a monthly basis by comparing each class's performance to that of the Lipper
Science & Technology Funds Index over the performance period. The Lipper
Science & Technology Funds Index tracks the total return performance of the
30 largest funds in the Lipper Science & Technology Funds category. The
performance period for each class consists of the current month plus the
previous 35 months. The performance adjustment for the Adviser Shares
includes the performance of the Fund Shares for periods prior to August 1,
2010. The following table is utilized to determine the extent of the
performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
-------------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the
relevant share class of the Fund and its relevant Lipper index, rounded
to the nearest basis point (0.01%). Average net assets of the share class
are calculated over a rolling 36-month period.
Each class's annual performance adjustment rate is multiplied by the
average net assets of each respective class over the entire performance
period, which is then multiplied by a fraction, the numerator of which is
the number of days in the month and the denominator of which is 365 (366 in
leap years). The resulting amount is the performance adjustment; a positive
adjustment in the case of overperformance, or a negative adjustment in the
case of underperformance.
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper Science & Technology Funds Index over that period,
even if the class had overall negative returns during the performance
period.
================================================================================
36 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
For the six-month period ended January 31, 2013, the Fund incurred total
management fees, paid or payable to the Manager, of $1,467,000, which
included a performance adjustment for the Fund Shares and Adviser Shares of
$67,000 and $1,000, respectively. For the Fund Shares and Adviser Shares,
the performance adjustments were 0.04% and 0.01%, respectively.
B. SUBADVISORY AGREEMENT(S) -- The Manager has entered into an investment
subadvisory agreement with Wellington Management Company, LLP (Wellington
Management), under which Wellington Management directs the investment and
reinvestment of the Fund's assets (as allocated from time to time by the
Manager). The Manager (not the Fund) pays Wellington Management a
subadvisory fee in the annual amount of 0.45% of the Fund's average net
assets for the first $100 million in assets that Wellington Management
manages, plus 0.35% of the Fund's average net assets for assets over $100
million that Wellington Management manages. For the six-month period ended
January 31, 2013, the Manager incurred subadvisory fees, paid or payable to
Wellington Management, of $703,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and servicing functions for the Fund. For such services, the
Manager receives a fee accrued daily and paid monthly at an annualized rate
of 0.15% of average net assets for both the Fund Shares and Adviser Shares.
For the six-month period ended January 31, 2013, the Fund Shares and
Adviser Shares incurred administration and servicing fees, paid or payable
to the Manager, of $274,000 and $6,000, respectively.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Board has approved the
reimbursement of a portion of these expenses incurred by the Manager. For
the six-month period ended January 31, 2013, 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 | 37
================================================================================
D. EXPENSE LIMITATION -- The Manager has agreed to limit the annual expenses of
the Adviser Shares to 1.65% of its average net assets, excluding
extraordinary expenses and before reductions of any expenses paid
indirectly, and to reimburse the Adviser Shares for all expenses in excess
of that amount. This expense limitation arrangement may not be changed or
terminated through December 1, 2013, without approval of the Board, and may
be changed or terminated by the Manager at any time after that date. For the
six-month period ended January 31, 2013, the Adviser Shares incurred no
reimbursable expenses.
E. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund. Transfer agent's fees for both the
Fund Shares and Adviser Shares are paid monthly based on an annual charge
of $23 per shareholder account plus out-of-pocket expenses. Each class also
pays SAS fees that are related to the administration and servicing of
accounts that are traded on an omnibus basis. For the six-month period
ended January 31, 2013, the Fund Shares and Adviser Shares incurred
transfer agent's fees, paid or payable to SAS, of $614,000 and less than
$500, respectively.
F. DISTRIBUTION AND SERVICE (12b-1) FEES -- The Fund has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser
Shares. Under the plan, the Adviser Shares pay fees to USAA Investment
Management Company, the distributor, for distribution and shareholder
services. USAA Investment Management Company pays all or a portion of such
fees to intermediaries that make the Adviser Shares available for
investment by their customers. The fee is accrued daily and paid monthly at
an annual rate of 0.25% of the Adviser Shares average net assets. Adviser
Shares are offered and sold without imposition of an initial sales charge
or a contingent deferred sales charge. For the six-month period ended
January 31, 2013, the Adviser Shares incurred distribution and service
(12b-1) fees of $9,000.
================================================================================
38 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
G. UNDERWRITING SERVICES -- USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares on a
continuing best-efforts basis and receives no commissions or fees for this
service.
(8) TRANSACTIONS WITH AFFILIATES
The Manager is indirectly wholly owned by United Services Automobile Association
(USAA), a large, diversified financial services institution. At January 31,
2013, USAA and its affiliates owned 483,000 shares, which represent 97.9% of the
Adviser Shares and 1.9% of the Fund.
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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
================================================================================
(9) FINANCIAL HIGHLIGHTS -- FUND SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31,
------------------------------------------------------------------------------
2013 2012 2011 2010 2009 2008
------------------------------------------------------------------------------
Net asset value at
beginning of period $ 14.24 $ 13.26 $ 10.65 $ 9.42 $ 11.41 $ 12.56
------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment loss (.01) (.02) (.01)(a) (.04)(a) (.05)(a) (.05)(a)
Net realized and
unrealized gain (loss) 1.43 1.00 2.62(a) 1.27(a) (1.94)(a) (1.10)(a)
------------------------------------------------------------------------------
Total from investment
operations 1.42 .98 2.61(a) 1.23(a) (1.99)(a) (1.15)(a)
------------------------------------------------------------------------------
Net asset value at
end of period $ 15.66 $ 14.24 $ 13.26 $ 10.65 $ 9.42 $ 11.41
==============================================================================
Total return (%)* 9.97 7.39 24.51 13.06(b) (17.44) (9.16)
Net assets at end
of period (000) $383,167 $354,495 $344,619 $292,326 $265,003 $317,613
Ratios to average
net assets:**
Expenses (%)(c) 1.37(d) 1.38 1.36 1.45(b) 1.67 1.49
Net investment loss (%) (.06)(d) (.30) (.10) (.37) (.60) (.44)
Portfolio turnover (%) 50 77 109 120 191 134
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in accordance
with U.S. generally accepted accounting principles and could differ from the
Lipper reported return. Total returns for periods of less than one year are
not annualized.
** For the six-month period ended January 31, 2013, average net assets were
$363,263,000.
(a) Calculated using average shares.
(b) During the year ended July 31, 2010, SAS reimbursed the Fund Shares $98,000
for corrections in fees paid for the administration and servicing of certain
accounts. The effect of this reimbursement on the Fund Shares' total return
was less than 0.01%. The reimbursement decreased the Fund Shares' expense
ratios by 0.03%. This decrease is excluded from the expense ratios in the
Financial Highlights table.
(c) Reflects total operating expenses of the Fund Shares before reductions of
any expenses paid indirectly. The Fund Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
(d) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
40 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
(9) FINANCIAL HIGHLIGHTS (CONTINUED) -- ADVISER SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JANUARY 31, JULY 31, JULY 31,
2013 2012 2011***
------------------------------------------------------
Net asset value at beginning of period $14.16 $13.22 $10.84
-----------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.02) (.05) (.06)(a)
Net realized and unrealized gain 1.42 .99 2.44(a)
-----------------------------------------------
Total from investment operations 1.40 .94 2.38(a)
-----------------------------------------------
Net asset value at end of period $15.56 $14.16 $13.22
===============================================
Total return (%)* 9.89 7.11 21.96
Net assets at end of period (000) $7,681 $6,940 $6,465
Ratios to average net assets:**
Expenses (%)(b) 1.59(c) 1.63 1.65(c)
Expenses, excluding reimbursements (%)(b) 1.59(c) 1.63 2.02(c)
Net investment loss (%) (.29)(c) (.55) (.44)(c)
Portfolio turnover (%) 50 77 109
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in accordance
with U.S. generally accepted accounting principles and could differ from the
Lipper reported return. Total returns for periods of less than one year are
not annualized.
** For the six-month period ended January 31, 2013, average net assets were
$7,234,000.
*** Adviser Shares were initiated on August 1, 2010.
(a) Calculated using average shares.
(b) Reflects total operating expenses of the Adviser Shares before reductions of
any expenses paid indirectly. The Adviser Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
================================================================================
EXPENSE EXAMPLE
January 31, 2013 (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, distribution and service
(12b-1) fees, and other Fund operating expenses. This example is intended to
help you understand your indirect costs, also referred to as "ongoing costs" (in
dollars), of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire six-month period of August 1, 2012, through
January 31, 2013.
ACTUAL EXPENSES
The line labeled "actual" under each share class in 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 for your share
class in the "actual" line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class and an assumed rate of return of
5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be
================================================================================
42 | USAA SCIENCE & TECHNOLOGY FUND
================================================================================
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of other
funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the line labeled "hypothetical"
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2012 -
AUGUST 1, 2012 JANUARY 31, 2013 JANUARY 31, 2013
--------------------------------------------------------------
FUND SHARES
Actual $1,000.00 $1,099.70 $7.25
Hypothetical
(5% return before expenses) 1,000.00 1,018.30 6.97
ADVISER SHARES
Actual 1,000.00 1,098.90 8.41
Hypothetical
(5% return before expenses) 1,000.00 1,017.19 8.08
* Expenses are equal to the Fund's annualized expense ratio of 1.37% for Fund
Shares and 1.59% for Adviser Shares, which are net of any expenses paid
indirectly, multiplied by the average account value over the period,
multiplied by 184 days/365 days (to reflect the one-half-year period). The
Fund's actual ending account values are based on its actual total returns of
9.97% for Fund Shares and 9.89% for Adviser Shares for the six-month period
of August 1, 2012, through January 31, 2013.
================================================================================
EXPENSE EXAMPLE | 43
================================================================================
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Paul L. McNamara
--------------------------------------------------------------------------------
ADMINISTRATOR AND USAA Asset Management Company
INVESTMENT ADVISER P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
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 "My Accounts" on
SELF-SERVICE 24/7 usaa.com select "Investments,"
AT USAA.COM then "Mutual Funds"
OR CALL Under "Investments" view
(800) 531-USAA account balances, or click
(8722) "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge (i) at USAA.COM; and
(ii) on the SEC's website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
Under MY PROFILE on USAA.COM select MANAGE PREFERENCES
Set your DOCUMENT PREFERENCES to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
=============================================================================
31704-0313 (C)2013, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended January 31, 2013
By:* /S/ ADYM W. RYGMYR
-----------------------------------------------------------
Signature and Title: ADYM W. RYGMYR, Secretary
Date: 03/26/2013
------------------------------
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/ DANIEL S. MCNAMARA
-----------------------------------------------------
Signature and Title: Daniel S. McNamara, President
Date: 03/27/2013
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 03/27/2013
------------------------------
*Print the name and title of each signing officer under his or her signature.