UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: CHRISTOPHER P. LAIA
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: MAY 31,
Date of reporting period: NOVEMBER 30, 2009
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED NOVEMBER 30, 2009
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA CORNERSTONE STRATEGY FUND]
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SEMIANNUAL REPORT
USAA CORNERSTONE STRATEGY FUND
NOVEMBER 30, 2009
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FUND OBJECTIVE
ACHIEVE A POSITIVE, INFLATION-ADJUSTED RATE OF RETURN OVER THE LONG TERM.
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TYPES OF INVESTMENTS
Using preset target ranges, the Fund's strategy is to invest its assets mostly
in stocks (divided into the categories of U.S., international, real estate,
precious metals and minerals, and other alternative investment strategies) and
to a much lesser extent in bonds and money market instruments. The Fund may at
times implement an equity hedging strategy and a global tactical asset
allocation overlay strategy.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Investment Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE 2
MANAGERS' COMMENTARY 4
INVESTMENT OVERVIEW 11
FINANCIAL INFORMATION
Portfolio of Investments 16
Notes to Portfolio of Investments 79
Financial Statements 84
Notes to Financial Statements 87
EXPENSE EXAMPLE 107
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA INVESTMENT MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2010, USAA. All rights reserved.
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PRESIDENT'S MESSAGE
"IN MY OPINION, THOSE WHO WERE DIVERSIFIED
WEATHERED THE STORM BETTER THAN THOSE [PHOTO OF DANIEL S. McNAMARA]
WHO WERE AGGRESSIVELY POSITIONED."
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DECEMBER 2009
As we head into 2010, I wish you a healthy and prosperous new year. I am honored
to be the new president of the USAA Investment Management Company, an
organization with a rich history of service and accomplishment.
At the time of this writing, the financial markets appear to be back on track --
an excellent time, in my opinion, to take stock of the past year. At the
beginning of 2009, stocks seemed priced for extinction. In the fixed income
market, credit spreads (or, the difference in bond yields) had widened to record
levels as investors fled to the safety of U.S. Treasury securities. The U.S.
economy was in a deep recession. Home prices continued to fall and unemployment
steadily increased, leading to a sharp decline in consumer spending.
In March 2009, however, world stock prices reversed course. For example, the S&P
500 Index rose 64% between the market bottom on March 6, 2009, and November 30,
2009. The fixed income market experienced record price appreciation, and the
prices of oil and other commodities such as gold and precious metals increased.
The dollar weakened, making U.S. goods and services less expensive to buyers
around the world. Meanwhile, the federal government's fiscal stimulus spending,
including its "cash for clunkers" program, seemed to help stabilize the economy.
In the third quarter, the U.S. gross domestic product grew at 2.2%.
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2 | USAA CORNERSTONE STRATEGY FUND
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I believe the worst of the crisis appears to be over. Nevertheless, risk
remains. And no one knows exactly what will happen next. This makes it an
opportune time for all of us to take stock of our investment portfolios.
Looking back at the market decline, many investors were not appropriately
positioned relative to their risk tolerance. In my opinion, those who were
diversified weathered the storm better than those who were aggressively
positioned.
With this in mind, I have undertaken a review of my own investment portfolio.
Like a medical exam helps me to take care of my physical health, a portfolio
checkup helps me to monitor my financial health. The process gives me the
opportunity to reflect on my goals, re-evaluate my risk tolerance, consider
changes in my investment strategy, and reposition my portfolio accordingly. I
urge you to do the same. Our trained service representatives are standing ready
to assist you -- free of charge.
At USAA Investment Management Company, we stand ready to help you with your
investment needs. We continue to offer what we consider an excellent value --
some of the industry's top investment talent, first-class service, and no-load
mutual funds. On behalf of all us, thank you for your business and the trust you
have placed in us.
Sincerely,
/s/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Investment Management Company
Diversification does not guarantee a profit or prevent a loss. o Mutual fund
operating expenses apply and continue throughout the life of the Fund. o Past
performance is no guarantee of future results.
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PRESIDENT'S MESSAGE | 3
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MANAGERS' COMMENTARY ON THE FUND
USAA Investment Management Company* Credit Suisse Asset Management, LLC
ARNOLD J. ESPE, CFA JORDAN LOW, CFA
Bonds and Money Market Instruments U.S. Equity Securities
MARK W. JOHNSON, CFA Quantitative Management Associates LLC
DAN DENBOW, CFA
Precious Metals and Minerals, MARGARET S. STUMPP, Ph.D.
Real Estate Securities TED LOCKWOOD
JOHN VAN BELLE, Ph.D.
JOHN P. TOOHEY, CFA International Equity Securities
WASIF A. LATIF
U.S. Equity Securities and Credit Suisse Securities (USA) LLC's
International Equity Securities Volaris Volatility Management Group**
Batterymarch Financial Management, Inc. YIRONG LI, CFA
DEFINA MALUKI, CFA
ADAM J. PETRYK, CFA Index Options
MICHAEL P. McELROY, CFA
U.S. and International Equity
Securities
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o HOW DID THE USAA CORNERSTONE STRATEGY FUND (THE FUND) PERFORM DURING THE
REPORTING PERIOD?
For the six-month reporting period ended November 30, 2009, the Fund had a
total return of 20.10%. This compares to a return of 16.65% for the Lipper
Global Flexible Portfolio Funds Index and 20.50% for the S&P 500 Index(R).
Refer to page 12 for benchmark definitions.
Past performance is no guarantee of future results.
*Effective July 17, 2009, Ron Sweet no longer is a co-manager of the Fund.
**Effective June 30, 2009, Laura B. Friedman no longer is a co-manager of the
Fund.
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4 | USAA CORNERSTONE STRATEGY FUND
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USAA Investment Management Company (IMCO) serves as the Fund's adviser and
manages certain portfolios of the Fund. Credit Suisse Asset Management, LLC
(Credit Suisse) manages U.S. stocks for the Fund, and Credit Suisse Securities
(USA) LLC's Volaris Volatility Management Group (Volaris Group) is responsible
for managing a strategy that involves selling index call or corresponding
exchange-traded fund (ETF) options and purchasing index put or corresponding
ETF options or put spread options against a highly correlated stock portfolio
in an attempt to reduce the Fund's volatility. This strategy is also referred
to as an "equity hedging strategy." Quantitative Management Associates LLC
(QMA) manages a portion of the Fund's international stocks assets.
Batterymarch Financial Management, Inc. (Batterymarch) manages U.S. and
international stocks for the Fund.
o WHAT LED TO THE FUND'S STRONG PERFORMANCE DURING THE REPORTING PERIOD?
There were a number of positive performance factors, but most instrumental was
the outstanding performance from the U.S. bond portion of the Fund. Asset
allocation also played a role, as the Fund was overweight in emerging market
stocks. Our underweight position in developed international markets had little
impact in terms of asset allocation as these markets slightly underperformed
the S&P 500 Index; additionally, there was some index-relative
underperformance by our international sub-advisers. We were neutral in U.S.
large-cap stocks and were underweight in real estate investment trusts
(REITs). The underweight position in REITs detracted from relative performance
as these markets snapped back sharply. Taken together, our asset allocation
decisions were a small, positive performance factor.
Index collars are generally employed to protect unrealized profits from the
portfolio being protected, and the index option class chosen will generally
have an underlying index that most closely tracks the performance of the
portfolio. While losses may be limited so are potential gains.
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MANAGERS' COMMENTARY ON THE FUND | 5
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o WHAT OTHER FACTORS HAD AN IMPACT ON THE FUND'S PERFORMANCE?
Our U.S. equity manager, Credit Suisse, implemented our U.S. stock market
allocation using a diversified, quantitative approach. Their stock selection
had a mildly negative impact on performance. We also continued to use the
Volaris Group's equity hedging strategy, putting S&P 500 and Russell 2000
Index collars on a portion of the Fund. These collars effectively limit the
Fund's downside (and upside) performance potential and give us the flexibility
to quickly change the Fund's risk profile. In the rapidly rising stock markets
of the reporting period, use of these collars had a negative impact on
performance. However, in light of the strong market rally since March 2009,
and arguably extended valuations, the collars remained in place. The Fund has
a small exposure to Deutsche iGAP Investment Trust "B" (iGAP), a global macro
hedge fund, which had a slightly positive absolute return. During the
reporting period, the Fund was exposed to a managed commodities mutual fund in
an attempt to further diversify the Fund and build in protections against the
longer-term potential for inflation and a falling dollar.
o PLEASE DISCUSS THE PERFORMANCE OF THE FUND'S U.S. BOND PORTION.
During the reporting period, the bond portion had a total return of 30.73%,
compared to 9.28% for the Lipper Intermediate Investment Grade Debt Funds
Average. This superb performance, both absolute and relative, reflected a
continuation of trends that started to take hold in March 2009, when bonds
with any credit risk at all were trading at what we believed to be extremely
oversold levels. We maintained and added to our positions back then when there
was virtually no confidence in the credit markets, and subsequently have
benefited as the markets rapidly normalized and many investors re-embraced
risk.
As the market rally has continued, we have taken some profits by trimming
oversized positions and selling bonds that approached
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6 | USAA CORNERSTONE STRATEGY FUND
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our estimate of appropriate trading levels. We have done well with
investment-grade corporate bonds, commercial mortgage-backed securities,
asset-backed securities and subordinated financial debt, and are still finding
some value in these areas. We have reduced our position in REITs given their
strong run-up, and are diversifying by seeking out new issuers.
o ARE YOU CONCERNED ABOUT INFLATION IN THE U.S. BOND PORTION?
We are very concerned about inflation longer term because of the huge amount
of U.S. government spending and monetary stimulus. However, the immediate
problem the Federal Reserve Board is fighting is the potential for deflation.
We are beginning to position the U.S. bond portion for a potentially
inflationary future and higher interest rates. We have a significantly
shorter average duration (a measure of interest rate sensitivity) than our
Lipper peer group, and hold a minimal position in U.S. Treasury securities.
This is in line with our view that longer-term U.S. Treasuries and agency
mortgage-backed securities offer unattractive yields and are highly vulnerable
to rising interest rates.
o HOW DID THE INTERNATIONAL DEVELOPED MARKETS PORTFOLIO MANAGED BY QMA PERFORM?
The QMA portion underperformed the Morgan Stanley Capital International-
Europe, Australasia and Far East Index (the MSCI-EAFE Index(R)), which we
believe was not unusual for managers using a quantitative approach. We
maintained a large, highly-diversified portfolio, holding 362 securities as
of November 30, 2009.
The major factor contributing to QMA's underperformance was the sharp,
relatively sudden rebound in earnings expectations, which occurred after a
period when these same expectations had been dramatically lowered. Such
extreme shifts can be difficult for our quantitative stock selection process
to be reflected in the portfolio composition over a short timeframe. In
addition, certain Japanese stocks in the energy sector, which were held in the
portfolio for risk
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MANAGERS' COMMENTARY ON THE FUND | 7
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control purposes, detracted from performance. As the period progressed and
economic and market conditions improved, key aspects of our quantitative stock
selection process began to show positive results.
We are optimistic about international developed stock markets overall, noting
that the MSCI-EAFE Index is still recovering and needs to rise by
approximately 50% to get back to its October 2007 peak. As long as economic
growth continues, even at a relatively slow pace, we believe that markets
should be able to approach their October 2007 levels within the next
three-to-five years. The factors in our quantitative stock selection process
tend to be challenged when there are dramatic changes in outlook.
Specifically, the news factor can be challenged because it relies on the
general direction of earnings forecasts; our value factor can be challenged
because companies that appear cheap can get even cheaper. However, our process
should once again do well if, as we expect, the economy continues to normalize
and fundamentals once again become a leading driver of market performance.
o HOW DID THE GLOBAL STOCK MARKET PORTFOLIO MANAGED BY BATTERYMARCH PERFORM?
Batterymarch uses a disciplined framework to compare global stocks across
multiple perspectives. IMCO regularly provides the Batterymarch team with a
set of portfolio-construction guidelines that serve as a benchmark against
which to manage risk. Stock selection was the primary driver of performance,
which lagged our IMCO benchmark during the period.
Almost all of the relative underpeformance came from stock selection within
the United States, particularly in the industrials, consumer discretionary
and, to a lesser extent, consumer staples sectors. In the industrials sector,
our holdings were concentrated in more defensive names such as Lockheed Martin
Corp. and Navistar International Corp., as opposed to capital goods-related
industrial stocks, which performed better. We also were too defensively
positioned in consumer stocks. Our stock selection in emerging markets,
however, was strong.
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8 | USAA CORNERSTONE STRATEGY FUND
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After having gone through a difficult period of extreme volatility and a
narrowly focused market where our process struggled, Batterymarch's
multi-factor framework is now performing much better. This framework includes
reviewing valuations, cash flow, growth, expectations, and technical factors.
As of the end of the period, we held a diversified portfolio of 163 stocks on
a largely sector-neutral basis. Some of our largest relative overweight
positions at the stock level are in emerging markets, where we prefer Latin
American companies over Asian stocks. We also are finding value among non-U.S.
banks, some U.S. non-bank financial stocks, and defensive, lower-price point
retailers such as TJX Companies, Inc., Dollar Tree Inc., Target Corp., and
Family Dollar Stores, Inc.
o WHAT'S USAA'S OUTLOOK?
Our views about the nature of the U.S. economic recovery have remained
remarkably stable over the past six months. We think it will be muted, with
trend economic growth more volatile and significantly lower than we've enjoyed
in recent decades. Access to credit will remain tight; securitization markets
have yet to fully heal and banks' lending standards remain stringent, though
they have loosened recently for some types of loans. Consumers and businesses
will continue to focus on rebuilding their balance sheets, choosing saving
over borrowing and spending. Unemployment will be structurally higher. Taxes
will likely increase.
We don't believe that U.S. consumer spending will be strong enough to create a
robust recovery. However, the growth of overseas markets for American
products, along with even a small increase in U.S. business spending and
inventory restocking, should keep the economy growing, albeit at a slow pace.
At current valuation levels, we believe the S&P 500 Index is discounting a
strong cyclical recovery in the economy and corporate profits. We are slightly
underweight in stocks relative to bonds, having reduced stock exposure
multiple times in 2009. Our bias will be to further
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MANAGERS' COMMENTARY ON THE FUND | 9
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reduce stock exposure should the weight of the evidence make it appear that
stocks will not meet, in our opinion, aggressive consensus revenue and
earnings expectations for 2010. We remain overweight in emerging markets and
precious metals and minerals stocks, have a neutral weighting in U.S.
large-cap stocks, and have an underweight position in U.S. small-cap,
international developed market, and REIT stocks.
We believe the Fund is an exceptional single-fund solution for investors who
want actively managed access to the full range of global asset classes,
including alternative investments. We continue to look to build in protections
against a variety of risks, including inflation and sharp market selloffs as
evidenced by the iGAP hedge fund and our new commodity mutual fund exposure,
as well as our use of exchange-traded funds, equity option collars, and
precious metals and minerals investments. We thank you for your investment in
the Fund.
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10 | USAA CORNERSTONE STRATEGY FUND
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INVESTMENT OVERVIEW
USAA CORNERSTONE STRATEGY FUND (Ticker Symbol: USCRX)
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11/30/09 5/31/09
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Net Assets $1,916.7 Million $1,604.0 Million
Net Asset Value Per Share $20.67 $17.21
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AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/09
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5/31/09 to 11/30/09* 1 YEAR 5 YEARS 10 YEARS
20.10% 37.32% 2.66% 3.58%
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EXPENSE RATIO**
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BEFORE REIMBURSEMENT 1.46% AFTER REIMBURSEMENT 1.19%
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
**THE BEFORE REIMBURSEMENT EXPENSE RATIO REPRESENTS THE TOTAL ANNUAL OPERATING
EXPENSES INCLUDING ANY ACQUIRED FUND FEES AND EXPENSES, BEFORE REDUCTIONS OF ANY
EXPENSES PAID INDIRECTLY, AS REPORTED IN THE FUND'S PROSPECTUS DATED OCTOBER 1,
2009, AND IS CALCULATED AS A PERCENTAGE OF AVERAGE NET ASSETS. THE AFTER
REIMBURSEMENT EXPENSE RATIO REPRESENTS TOTAL ANNUAL OPERATING EXPENSES, BEFORE
REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND EXCLUDING ANY ACQUIRED FUND FEES
AND EXPENSES, AFTER REIMBURSEMENT FROM USAA INVESTMENT MANAGEMENT COMPANY (IMCO)
AS REPORTED IN THE FUND'S PROSPECTUS DATED OCTOBER 1, 2009. IMCO HAS VOLUNTARILY
AGREED TO LIMIT THE FUND'S TOTAL ANNUAL OPERATING EXPENSES TO 1.19%, BEFORE
REDUCTIONS OF ANY EXPENSES PAID INDIRECTLY AND EXCLUDING ANY ACQUIRED FUND FEES
AND EXPENSES, AND TO REIMBURSE THE FUND FOR EXPENSES IN EXCESS OF THIS AMOUNT.
IMCO CAN MODIFY OR TERMINATE THIS ARRANGEMENT AT ANY TIME. THESE EXPENSE RATIOS
MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
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INVESTMENT OVERVIEW | 11
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA CORNERSTONE LIPPER GLOBAL
STRATEGY FUND FLEXIBLE FUNDS INDEX S&P 500 INDEX(R)
11/30/99 $10,000.00 $10,000.00 $10,000.00
12/31/99 10,400.88 10,672.43 10,588.96
01/31/00 10,104.63 10,454.35 10,056.95
02/29/00 10,016.55 11,035.99 9,866.57
03/31/00 10,633.08 10,982.38 10,831.81
04/30/00 10,541.00 10,614.80 10,505.92
05/31/00 10,516.98 10,448.08 10,290.37
06/30/00 10,733.16 10,822.60 10,544.06
07/31/00 10,647.03 10,688.95 10,379.21
08/31/00 10,870.65 11,053.51 11,023.91
09/30/00 10,580.77 10,727.40 10,441.92
10/31/00 10,485.52 10,519.51 10,397.78
11/30/00 10,295.02 10,113.05 9,578.02
12/31/00 10,686.50 10,522.44 9,624.90
01/31/01 10,874.87 10,658.47 9,966.39
02/28/01 10,468.84 10,120.98 9,057.63
03/31/01 10,117.22 9,621.73 8,483.83
04/30/01 10,615.34 10,112.34 9,143.11
05/31/01 10,577.67 10,034.99 9,204.37
06/30/01 10,414.42 9,888.33 8,980.35
07/31/01 10,439.54 9,748.33 8,891.94
08/31/01 10,196.76 9,507.59 8,335.29
09/30/01 9,489.35 8,880.75 7,662.19
10/31/01 9,581.43 9,090.61 7,808.31
11/30/01 10,041.88 9,419.04 8,407.25
12/31/01 10,182.20 9,430.64 8,480.90
01/31/02 10,016.71 9,369.63 8,357.14
02/28/02 10,073.32 9,292.77 8,195.97
03/31/02 10,413.02 9,550.90 8,504.21
04/30/02 10,273.66 9,422.22 7,988.62
05/31/02 10,264.95 9,533.05 7,929.77
06/30/02 9,899.12 9,174.03 7,364.93
07/31/02 9,337.31 8,630.98 6,790.80
08/31/02 9,411.35 8,673.92 6,835.39
09/30/02 8,875.67 8,140.36 6,092.52
10/31/02 9,202.30 8,483.08 6,628.76
11/30/02 9,585.55 8,823.51 7,018.93
12/31/02 9,341.61 8,599.09 6,606.58
01/31/03 9,080.63 8,462.77 6,433.51
02/28/03 8,954.63 8,374.23 6,336.98
03/31/03 8,950.13 8,365.35 6,398.51
04/30/03 9,517.11 8,851.81 6,925.56
05/31/03 9,998.59 9,325.47 7,290.44
06/30/03 10,142.58 9,438.24 7,383.45
07/31/03 10,219.08 9,511.95 7,513.63
08/31/03 10,435.07 9,712.75 7,660.16
09/30/03 10,439.57 9,861.25 7,578.81
10/31/03 10,921.05 10,238.53 8,007.54
11/30/03 11,092.04 10,402.77 8,078.00
12/31/03 11,556.65 10,751.25 8,501.65
01/31/04 11,701.84 10,994.31 8,657.69
02/29/04 11,910.56 11,148.89 8,778.03
03/31/04 11,810.74 11,199.01 8,645.60
04/30/04 11,606.56 10,876.04 8,509.88
05/31/04 11,706.38 10,926.32 8,626.66
06/30/04 11,937.79 11,078.57 8,794.41
07/31/04 11,588.41 10,796.18 8,503.34
08/31/04 11,592.95 10,838.57 8,537.74
09/30/04 11,797.13 11,098.91 8,630.20
10/31/04 11,969.55 11,302.47 8,762.05
11/30/04 12,464.12 11,825.76 9,116.58
12/31/04 12,886.60 12,162.41 9,426.80
01/31/05 12,669.33 11,946.50 9,197.02
02/28/05 12,968.68 12,226.86 9,390.57
03/31/05 12,746.58 11,999.32 9,224.28
04/30/05 12,553.45 11,873.68 9,049.33
05/31/05 12,809.34 12,101.22 9,337.27
06/30/05 12,852.80 12,233.15 9,350.52
07/31/05 13,229.40 12,524.84 9,698.26
08/31/05 13,321.14 12,596.83 9,609.77
09/30/05 13,403.22 12,828.46 9,687.60
10/31/05 13,108.70 12,582.85 9,526.10
11/30/05 13,388.73 12,893.03 9,886.40
12/31/05 13,599.10 13,233.97 9,889.84
01/31/06 13,961.54 13,770.54 10,151.70
02/28/06 13,930.02 13,760.32 10,179.25
03/31/06 14,108.61 13,952.15 10,305.95
04/30/06 14,365.99 14,245.77 10,444.34
05/31/06 13,919.52 13,893.28 10,143.74
06/30/06 13,940.53 13,786.12 10,157.49
07/31/06 14,056.08 13,799.22 10,220.14
08/31/06 14,371.24 14,093.29 10,463.31
09/30/06 14,492.05 14,260.36 10,732.96
10/31/06 14,870.24 14,581.49 11,082.70
11/30/06 15,248.44 14,929.85 11,293.45
12/31/06 15,477.72 15,088.81 11,451.87
01/31/07 15,669.16 15,226.50 11,625.06
02/28/07 15,611.15 15,152.58 11,397.69
03/31/07 15,785.18 15,273.93 11,525.17
04/30/07 16,197.07 15,646.08 12,035.68
05/31/07 16,539.34 15,965.62 12,455.66
06/30/07 16,382.71 15,936.51 12,248.74
07/31/07 16,098.45 15,861.06 11,868.97
08/31/07 16,104.25 15,805.59 12,046.88
09/30/07 16,736.59 16,364.83 12,497.42
10/31/07 17,200.69 16,742.06 12,696.21
11/30/07 16,510.34 16,267.01 12,165.43
12/31/07 16,410.93 16,104.87 12,081.03
01/31/08 15,606.02 15,536.55 11,356.39
02/29/08 15,486.28 15,484.63 10,987.47
03/31/08 15,240.15 15,402.83 10,940.03
04/30/08 15,732.41 15,890.52 11,472.84
05/31/08 16,078.32 16,053.69 11,621.45
06/30/08 15,160.32 15,192.76 10,641.71
07/31/08 14,827.71 14,886.78 10,552.26
08/31/08 14,628.14 14,754.41 10,704.89
09/30/08 13,204.58 13,377.37 9,751.01
10/31/08 10,976.10 11,268.26 8,113.35
11/30/08 10,350.79 10,642.79 7,531.18
12/31/08 10,754.86 10,891.63 7,611.31
01/31/09 10,046.58 10,284.45 6,969.78
02/28/09 9,283.29 9,548.88 6,227.65
03/31/09 9,792.15 10,096.05 6,773.17
04/30/09 10,686.10 10,852.96 7,421.42
05/31/09 11,834.47 11,700.37 7,836.52
06/30/09 11,958.25 11,764.71 7,852.07
07/31/09 12,673.41 12,529.97 8,445.98
08/31/09 13,072.25 12,951.33 8,750.91
09/30/09 13,759.90 13,394.27 9,077.46
10/31/09 13,780.53 13,196.83 8,908.83
11/30/09 14,213.74 13,648.74 9,443.21
[END CHART]
Data from 11/30/99 to 11/30/09.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Cornerstone Strategy Fund to the following benchmarks:
o The unmanaged Lipper Global Flexible Funds Index tracks the total return
performance of the 30 largest funds within the Lipper Global Flexible
Portfolio Funds category.
o The unmanaged 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 fund distributions or the redemption of fund shares.
================================================================================
12 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
TOP 3 HOLDINGS IN EACH CATEGORY* -- 11/30/2009
(% of Net Assets)
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY SECURITIES
iShares MSCI Emerging Markets Index ETF** 5.4%
iShares MSCI EAFE Index ETF 1.0%
Vale S.A. "A" 0.2%
BONDS
Fifth Third Capital Trust IV 0.4%
Glen Meadow 0.4%
Oil Casualty Insurance Ltd. 0.4%
U.S. EQUITY SECURITIES
SPDR Trust Series 1 ETF** 6.9%
Microsoft Corp. 0.7%
Exxon Mobil Corp. 0.6%
OTHER ALTERNATIVE INVESTMENT STRATEGIES
Deutsche iGAP Investment Trust "B" 2.4%
PIMCO Commodity Real Return Strategy Fund 0.8%
PRECIOUS METALS AND MINERALS SECURITIES
Compania de Minas Buenaventura S.A. ADR 0.2%
IAMGOLD Corp. 0.2%
Silver Wheaton Corp. 0.2%
GLOBAL REAL ESTATE EQUITY SECURITIES
SPDR DJ Wilshire International Real Estate ETF 0.7%
ING International Real Estate Fund 0.7%
Annaly Capital Management, Inc. 0.1%
* Excludes money market instruments.
** Pursuant to a Securities and Exchange Commission (SEC) exemptive order, the
Fund may invest in an amount that exceeds the Fund's limitations as set forth
in the Investment Company Act of 1940 that would otherwise be applicable.
You will find a complete list of securities that the Fund owns on pages 16-78.
Foreign and precious metals and minerals investing is subject to additional
risks, such as currency fluctuations, market illiquidity, and political
instability.
================================================================================
INVESTMENT OVERVIEW | 13
<PAGE>
================================================================================
TOP 10 INDUSTRIES*
AS OF 11/30/09
(% of Net Assets)
Commercial Mortgage-Backed Securities ..................... 7.4%
Diversified Banks ......................................... 4.8%
Asset-Backed Financing .................................... 4.1%
Multi-Line Insurance ...................................... 2.9%
Regional Banks ............................................ 2.8%
Integrated Oil & Gas ...................................... 2.7%
Gold ...................................................... 2.4%
Pharmaceuticals ........................................... 2.4%
Life & Health Insurance ................................... 2.3%
Electric Utilities ........................................ 2.2%
* Excludes U.S. government and exchange-traded funds.
================================================================================
14 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
o ASSET ALLOCATION -- 11/30/2009* o
[PIE CHART OF ASSET ALLOCATION]
U.S. EQUITY SECURITIES 38.5%
BONDS 30.7%
INTERNATIONAL EQUITY SECURITIES 22.6%
PRECIOUS METALS AND MINERALS SECURITIES 3.1%
GLOBAL REAL ESTATE EQUITY SECURITIES 3.1%
MONEY MARKET INSTRUMENTS* 1.6%
[END CHART]
* Excludes futures, options, and short-term investments purchased with cash
collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
INVESTMENT OVERVIEW | 15
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
November 30, 2009 (unaudited)
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
U.S. EQUITY SECURITIES (38.5%)
COMMON STOCKS (27.7%)
CONSUMER DISCRETIONARY (4.1%)
-----------------------------
ADVERTISING (0.0%)
1,900 Arbitron, Inc. $ 41
1,100 Clear Channel Outdoor Holdings, Inc. "A"* 10
7,562 Harte Hanks, Inc. 73
3,500 Interpublic Group of Companies, Inc.* 22
17,800 National Cinemedia, Inc. 260
2,200 Omnicom Group, Inc. 81
------------
487
------------
APPAREL & ACCESSORIES & LUXURY GOODS (0.2%)
2,500 American Apparel, Inc.* 7
1,100 Carter's, Inc.* 24
1,200 Cherokee, Inc. 22
54,865 Coach, Inc. 1,906
674 Columbia Sportswear Co. 26
2,093 Fossil, Inc.* 65
1,500 Fuqi International, Inc.*(a) 33
1,100 G-III Apparel Group, Ltd.* 19
4,600 Jones Apparel Group, Inc. 78
8,300 Liz Claiborne, Inc.* 35
1,471 Maidenform Brands, Inc.* 21
1,300 Movado Group, Inc. 13
1,000 Oxford Inds, Inc. 21
700 Perry Ellis International, Inc.* 10
500 Phillips-Van Heusen Corp. 20
1,800 Polo Ralph Lauren Corp. 138
500 Under Armour, Inc. "A"* 13
200 UniFirst Corp. 9
400 VF Corp. 29
1,600 Volcom, Inc.* 25
26,400 Warnaco Group, Inc.* 1,075
------------
3,589
------------
APPAREL RETAIL (0.6%)
400 Abercrombie & Fitch Co. "A" 16
37,500 Aeropostale, Inc.* 1,181
700 American Eagle Outfitters, Inc. 11
3,100 Buckle, Inc.(a) 85
2,200 Cato Corp. "A" 42
9,700 Charming Shoppes, Inc.* 47
700 Chico's FAS, Inc. 10
2,900 Christopher & Banks Corp. 17
1,200 Citi Trends, Inc.* 33
5,600 Coldwater Creek, Inc.* 24
1,200 Collective Brands, Inc.* 23
10,840 Dress Barn, Inc.* 233
1,000 DSW, Inc. "A"* 23
3,600 Finish Line, Inc. "A" 32
1,300 Foot Locker, Inc. 12
58,640 Gap, Inc. 1,256
1,800 Genesco, Inc.* 47
300 Guess?, Inc. 11
7,600 Gymboree Corp.* 303
5,200 Hot Topic, Inc.* 30
1,200 J. Crew Group, Inc.* 51
400 Jos. A. Bank Clothiers, Inc.* 16
3,500 Limited Brands, Inc. 58
2,900 Men's Wearhouse, Inc. 59
1,900 New York & Co., Inc.* 7
5,300 Pacific Sunwear of California, Inc.* 18
111,135 Ross Stores, Inc.(b) 4,888
700 Shoe Carnival, Inc.* 13
================================================================================
16 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
3,200 Stage Stores, Inc. $ 39
2,000 Stein Mart, Inc.* 20
2,145 Talbots, Inc.* 14
61,226 TJX Companies, Inc. 2,350
700 Urban Outfitters, Inc.* 22
7,900 Wet Seal, Inc. "A"* 23
1,600 Zumiez, Inc.* 17
------------
11,031
------------
AUTO PARTS & EQUIPMENT (0.1%)
30,200 American Axle & Manufacturing Holdings, Inc.(a) 189
1,800 Amerigon, Inc.* 12
2,400 ArvinMeritor, Inc.* 19
500 BorgWarner, Inc. 15
10,400 Dana Holding Corp.* 76
964 Dorman Products, Inc.* 14
4,785 Exide Technologies* 36
500 Federal-Mogul Corp.* 7
1,200 Gentex Corp. 20
5,600 Johnson Controls, Inc. 152
3,900 Modine Manufacturing Co.* 41
300 Quantum Fuel Systems Technologies Worldwide, Inc.*(a) -
3,000 Spartan Motors, Inc. 16
1,200 Standard Motor Products, Inc.* 11
1,100 Stoneridge, Inc.* 8
6,800 Superior Industries International, Inc. 97
3,000 Tenneco, Inc.* 43
600 TRW Automotive Holdings Corp.* 13
16,250 WABCO Holdings, Inc. 384
1,200 Wonder Auto Technology, Inc.* 14
------------
1,167
------------
AUTOMOBILE MANUFACTURERS (0.1%)
115,500 Ford Motor Co.* 1,027
2,500 Winnebago Industries, Inc.* 27
------------
1,054
------------
AUTOMOTIVE RETAIL (0.2%)
58,738 Advance Auto Parts, Inc. 2,309
800 Americas Car Mart, Inc.* 19
6,400 Asbury Automotive Group, Inc.* 68
9,600 AutoNation, Inc.* 170
100 AutoZone, Inc.* 15
1,400 CarMax, Inc.* 28
13,700 Group 1 Automotive, Inc.* 346
1,400 Midas, Inc.* 10
400 Monro Muffler Brake, Inc. 12
700 O'Reilly Automotive, Inc.* 27
3,200 Penske Automotive Group, Inc.* 47
4,000 Pep Boys - Manny, Moe & Jack 32
2,300 Sonic Automotive, Inc. "A" 20
------------
3,103
------------
BROADCASTING (0.0%)
8,100 Belo Corp. "A" 38
4,700 CBS Corp. "B" 60
1,600 DG FastChannel, Inc.* 43
340 Liberty Media-Starz* 17
3,500 Sinclair Broadcast Group, Inc. "A" 13
------------
171
------------
CABLE & SATELLITE (0.4%)
2,700 Cablevision Systems Corp. "A" 67
202,000 Comcast Corp. "A" 2,963
80,300 DIRECTV "A"* 2,540
2,060 DISH Network Corp. "A" 43
1,400 Knology, Inc.* 14
55,300 Liberty Global, Inc. "A"* 1,067
4,500 Mediacom Communications Corp. "A"* 18
2,600 Outdoor Channel Holdings, Inc.* 15
900 RCN Corp. 8
800 Scripps Networks Interactive "A" 32
================================================================================
PORTFOLIO OF INVESTMENTS | 17
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
2,800 Time Warner Cable, Inc. $ 117
7,600 Virgin Media, Inc. 125
------------
7,009
------------
CASINOS & GAMING (0.0%)
5,100 Ameristar Casinos, Inc. 89
1,000 Bally Technologies, Inc.* 41
2,500 Churchill Downs, Inc. 86
2,100 International Game Technology 40
2,000 Las Vegas Sands Corp.* 31
4,300 Shuffle Master, Inc.* 35
6,300 WMS Industries, Inc.* 245
300 Wynn Resorts Ltd. 19
------------
586
------------
CATALOG RETAIL (0.0%)
3,700 HSN, Inc.* 66
8,700 Liberty Media Corp. Interactive "A"* 93
1,500 School Specialty, Inc.* 34
------------
193
------------
COMPUTER & ELECTRONICS RETAIL (0.1%)
2,500 Best Buy Co., Inc. 107
26,900 GameStop Corp. "A"* 656
3,100 hhgregg, Inc.* 60
7,300 RadioShack Corp. 138
24,300 Rent-A-Center, Inc.* 430
900 Rex Stores Corp.* 12
------------
1,403
------------
CONSUMER ELECTRONICS (0.0%)
3,100 Garmin Ltd.(a) 93
800 Universal Electronics, Inc.* 17
------------
110
------------
DEPARTMENT STORES (0.2%)
800 Dillard's, Inc. "A" 14
52,100 J.C. Penney Co., Inc. 1,497
44,600 Kohl's Corp.* 2,370
2,900 Macy's, Inc. 47
1,700 Nordstrom, Inc. 57
2,100 Retail Ventures, Inc.* 17
7,000 Saks, Inc.* 43
300 Sears Holdings Corp.* 21
------------
4,066
------------
DISTRIBUTORS (0.0%)
800 Core-Mark Holding Co., Inc.* 24
1,000 Genuine Parts Co. 36
800 LKQ Corp.* 14
------------
74
------------
EDUCATION SERVICES (0.2%)
48,984 Apollo Group, Inc. "A"* 2,796
1,100 Bridgepoint Education, Inc.* 18
1,000 Career Education Corp.* 26
84,300 Corinthian Colleges, Inc.* 1,249
300 DeVry, Inc. 16
1,300 Grand Canyon Education, Inc.* 25
2,000 ITT Educational Services, Inc.* 182
100 Strayer Education, Inc. 20
1,600 Universal Technical Institute, Inc.* 30
------------
4,362
------------
FOOTWEAR (0.1%)
3,400 Brown Shoe Co., Inc. 35
30,800 Crocs, Inc.* 150
100 Deckers Outdoor Corp.* 9
1,200 Iconix Brand Group, Inc.* 13
16,983 NIKE, Inc. "B" 1,102
2,300 Skechers U.S.A., Inc. "A"* 51
2,900 Steven Madden Ltd.* 103
7,100 Timberland Co. "A"* 119
1,000 Wolverine World Wide, Inc. 26
------------
1,608
------------
GENERAL MERCHANDISE STORES (0.6%)
11,704 99 Cents Only Stores* 141
44,759 Big Lots, Inc.* 1,032
60,506 Dollar Tree, Inc.* 2,963
104,329 Family Dollar Stores, Inc. 3,183
================================================================================
18 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
9,200 Fred's, Inc. "A" $ 90
85,325 Target Corp. 3,973
------------
11,382
------------
HOME FURNISHINGS (0.0%)
3,800 Furniture Brands International, Inc.* 16
30,700 La-Z-Boy, Inc.* 293
1,900 Leggett & Platt, Inc. 37
3,700 Sealy Corp.* 10
5,400 Tempur-Pedic International, Inc.* 116
------------
472
------------
HOME IMPROVEMENT RETAIL (0.1%)
42,819 Home Depot, Inc. 1,172
11,700 Lowe's Companies, Inc. 255
1,200 Lumber Liquidators, Inc.* 28
600 Sherwin-Williams Co. 37
------------
1,492
------------
HOMEBUILDING (0.0%)
3,100 Beazer Homes USA, Inc.* 13
600 Cavco Industries, Inc.* 21
4,300 Hovnanian Enterprises, Inc. "A"* 17
1,500 M/I Homes, Inc.* 17
500 Meritage Homes Corp. 9
2,300 Pulte Homes, Inc. 21
600 Ryland Group, Inc. 11
8,400 Standard Pacific Corp.* 27
500 Toll Brothers, Inc. 10
------------
146
------------
HOMEFURNISHING RETAIL (0.0%)
900 Aaron's, Inc. 22
1,600 Bed Bath & Beyond, Inc.* 60
1,500 Haverty Furniture Companies, Inc. 18
7,400 Pier 1 Imports, Inc.* 28
------------
128
------------
HOTELS, RESORTS, & CRUISE LINES (0.0%)
1,650 Ambassadors Group, Inc. 19
4,700 Carnival Corp.* 151
3,400 Interval Leisure Group, Inc.* 39
1,100 Marcus Corp. 14
4,000 Royal Caribbean Cruises Ltd.* 98
1,300 Starwood Hotels & Resorts Worldwide, Inc. 42
18,600 Wyndham Worldwide Corp. 345
------------
708
------------
HOUSEHOLD APPLIANCES (0.1%)
2,700 Helen of Troy Ltd.* 55
1,033 iRobot Corp.* 15
20,072 Whirlpool Corp. 1,489
------------
1,559
------------
HOUSEWARES & SPECIALTIES (0.0%)
16,200 American Greetings Corp. "A" 335
900 Fortune Brands, Inc. 35
835 Jarden Corp. 23
100 National Presto Industries, Inc. 9
2,200 Newell Rubbermaid, Inc. 32
1,500 Tupperware Brands Corp. 70
------------
504
------------
INTERNET RETAIL (0.1%)
2,500 Amazon.com, Inc.* 340
7,400 drugstore.com, Inc.* 22
17,900 Expedia, Inc.* 456
800 Netflix, Inc.* 47
1,700 NutriSystem, Inc. 42
3,000 Orbitz Worldwide, Inc.* 18
1,240 Overstock.com, Inc.* 18
1,900 PetMed Express, Inc. 31
500 Priceline.com, Inc.* 107
1,700 Shutterfly, Inc.* 25
800 Stamps.com, Inc.* 7
4,000 Ticketmaster Entertainment, Inc.* 42
------------
1,155
------------
LEISURE FACILITIES (0.0%)
900 Life Time Fitness, Inc.* 20
312 Vail Resorts, Inc.* 12
------------
32
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
LEISURE PRODUCTS (0.0%)
30,100 Brunswick Corp. $ 302
6,700 Callaway Golf Co. 48
800 Hasbro, Inc. 24
500 JAKKS Pacific, Inc. 6
10,200 Mattel, Inc. 199
900 Polaris Industries, Inc. 39
800 Pool Corp. 15
1,700 Rc2 Corp.* 23
4,900 Smith & Wesson Holding Corp.* 24
1,600 Sturm Ruger & Co., Inc.(a) 17
------------
697
------------
MOTORCYCLE MANUFACTURERS (0.0%)
1,800 Harley-Davidson, Inc. 52
------------
MOVIES & ENTERTAINMENT (0.4%)
1,100 Ascent Media Corp.* 25
700 Cinemark Holdings, Inc. 9
4,748 CKX, Inc.* 26
800 DreamWorks Animation SKG, Inc. "A"* 27
8,800 Live Nation, Inc.* 63
1,900 LodgeNet Interactive Corp.* 9
1,200 Marvel Entertainment, Inc.* 62
51,700 News Corp. "A" 592
45,000 News Corp. "B"(a) 616
177,458 Time Warner, Inc. 5,452
10,700 Viacom, Inc. "A"* 335
6,200 Walt Disney Co. 187
------------
7,403
------------
PHOTOGRAPHIC PRODUCTS (0.0%)
21,600 Eastman Kodak Co.* 87
------------
PUBLISHING (0.0%)
2,400 E.W. Scripps Co. "A"* 15
1,900 Gannett Co., Inc. 19
1,200 Global Sources Ltd.* 7
600 Interactive Data Corp. 15
3,200 Journal Communications, Inc. "A" 11
2,100 Martha Stewart Living Omnimedia, Inc. "A"* 10
2,100 McGraw-Hill Companies, Inc. 63
1,000 Meredith Corp. 26
7,900 Morningstar, Inc.* 366
1,100 New York Times Co. "A"* 9
300 Scholastic Corp. 8
9,800 Valassis Communications, Inc.* 145
100 Washington Post Co. "B" 42
------------
736
------------
RESTAURANTS (0.5%)
2,200 AFC Enterprises, Inc.* 17
1,600 BJ's Restaurants, Inc.* 27
28,600 Bob Evans Farms, Inc. 722
895 Buffalo Wild Wings, Inc.* 36
1,500 California Pizza Kitchen, Inc.* 19
12,900 Cheesecake Factory* 243
600 Chipotle Mexican Grill, Inc. "A"* 50
300 Cracker Barrel Old Country Store, Inc. 11
171,900 Darden Restaurants, Inc. 5,403
1,000 Jack in the Box, Inc.* 19
4,800 Krispy Kreme Doughnuts, Inc.* 15
26,297 McDonald's Corp.(b) 1,663
1,500 O'Charley's, Inc.* 10
5,657 P.F. Chang's China Bistro, Inc.* 185
574 Panera Bread Co. "A"* 36
400 Papa John's International, Inc. 9
1,000 Peet's Coffee & Tea, Inc.* 33
1,200 Red Robin Gourmet Burgers, Inc.* 19
5,300 Ruby Tuesday, Inc.* 34
5,000 Starbucks Corp.* 109
================================================================================
20 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
2,049 Steak n Shake Co.* $ 24
900 Texas Roadhouse, Inc. "A" 9
9,800 Wendy's/Arby's Group, Inc. "A" 40
3,500 Yum! Brands, Inc. 123
------------
8,856
------------
SPECIALIZED CONSUMER SERVICES (0.0%)
800 Brinks Home Security Holdings, Inc.* 26
500 Coinstar, Inc.* 13
2,600 H&R Block, Inc. 53
8,500 Hillenbrand, Inc. 156
2,300 Jackson Hewitt Tax Service, Inc. 9
500 Matthews International Corp. "A" 17
600 Pre-Paid Legal Services, Inc.* 23
7,900 Regis Corp. 124
1,100 Sotheby's Holdings, Inc. "A" 21
1,300 Steiner Leisure Ltd.* 51
6,800 Stewart Enterprises, Inc. "A" 32
------------
525
------------
SPECIALTY STORES (0.0%)
900 Barnes & Noble, Inc. 21
1,700 Big 5 Sporting Goods Corp. 28
21,500 Blockbuster, Inc. "A"*(a) 14
600 Cabela's, Inc. 7
500 Dick's Sporting Goods, Inc.* 10
1,600 Jo-Ann Stores, Inc.* 53
2,300 Office Depot, Inc.* 14
8,000 OfficeMax, Inc.* 85
1,200 PetSmart, Inc. 31
6,600 Sally Beauty Holdings, Inc.* 46
4,900 Staples, Inc. 114
800 Tiffany & Co. 34
1,050 Tractor Supply Co.* 49
500 Ulta Salon, Cosmetics & Fragrance, Inc. 8
1,100 West Marine, Inc.* 8
1,800 Zale Corp.* 9
------------
531
------------
TEXTILES (0.0%)
3,600 Unifi, Inc.* 11
------------
TIRES & RUBBER (0.1%)
24,900 Cooper Tire & Rubber Co. 446
46,000 Goodyear Tire & Rubber Co.* 631
------------
1,077
------------
Total Consumer Discretionary 77,566
------------
CONSUMER STAPLES (2.9%)
-----------------------
AGRICULTURAL PRODUCTS (0.1%)
2,200 AgFeed Industries, Inc.*(a) 12
48,560 Archer-Daniels-Midland Co. 1,496
3,500 Bunge Ltd. 217
400 Corn Products International, Inc. 11
2,000 Darling International, Inc.* 14
3,300 Fresh Del Monte Produce, Inc.* 72
------------
1,822
------------
BREWERS (0.0%)
200 Boston Beer Co., Inc. "A" 9
1,600 Molson Coors Brewing Co. "B" 72
------------
81
------------
DISTILLERS & VINTNERS (0.0%)
1,300 Constellation Brands, Inc. "A"* 22
------------
DRUG RETAIL (0.2%)
47,850 CVS Caremark Corp. 1,484
11,500 Rite Aid Corp.* 15
63,117 Walgreen Co. 2,454
------------
3,953
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTORS (0.0%)
1,555 Andersons, Inc. $ 41
647 Nash Finch Co. 21
4,000 Sysco Corp. 108
4,000 United Natural Foods, Inc.* 101
------------
271
------------
FOOD RETAIL (0.2%)
200 Arden Group, Inc. "A" 19
4,000 Casey's General Stores, Inc. 122
11,300 Great Atlantic & Pacific Tea Company, Inc.* 126
700 Ingles Markets, Inc. "A" 11
5,300 Kroger Co. 121
2,800 Pantry, Inc.* 41
1,000 Ruddick Corp. 27
100,073 Safeway, Inc. 2,252
1,300 SUPERVALU, Inc. 18
2,200 Susser Holdings Corp.* 23
500 Village Super Market, Inc. "A" 15
2,490 Weis Markets, Inc. 87
19,200 Whole Foods Market, Inc.* 492
39,100 Winn Dixie Stores, Inc.* 421
------------
3,775
------------
HOUSEHOLD PRODUCTS (0.5%)
5,100 Central Garden & Pet Co. "A"* 42
300 Church & Dwight Co., Inc. 18
10,800 Clorox Co. 651
15,700 Colgate-Palmolive Co. 1,322
300 Energizer Holdings, Inc.* 17
52,081 Kimberly-Clark Corp. 3,436
68,814 Procter & Gamble Co. 4,290
600 WD-40 Co. 19
------------
9,795
------------
HYPERMARKETS & SUPER CENTERS (0.2%)
2,800 Costco Wholesale Corp. 168
70,270 Wal-Mart Stores, Inc.(b) 3,833
------------
4,001
------------
PACKAGED FOODS & MEAT (0.6%)
700 American Dairy, Inc.*(a) 17
300 American Italian Pasta Co. 10
2,300 B&G Foods, Inc. "A" 20
900 Calavo Growers, Inc. 15
1,800 Campbell Soup Co. 63
13,900 Chiquita Brands International, Inc.* 236
3,000 ConAgra Foods, Inc. 67
80,975 Dean Foods Co.* 1,288
62,488 Del Monte Foods Co. 656
1,300 Diamond Foods, Inc. 40
600 Farmer Brothers Co. 10
4,400 General Mills, Inc. 299
500 Green Mountain Coffee Roasters, Inc.* 31
5,000 H.J. Heinz Co. 212
400 Hain Celestial Group, Inc.* 7
24,400 Hershey Co. 863
9,100 Hormel Foods Corp. 341
1,500 Imperial Sugar Co. 23
4,600 J & J Snack Foods Corp. 166
800 J.M. Smucker Co. 47
1,600 Kellogg Co. 84
220,831 Kraft Foods, Inc. "A" 5,870
4,800 Lancaster Colony Corp. 229
2,200 Lance, Inc. 54
700 McCormick & Co., Inc. 25
300 Sanderson Farms, Inc. 12
5,100 Sara Lee Corp. 62
5,298 Smart Balance, Inc.* 29
1,300 Smithfield Foods, Inc.* 20
400 Tootsie Roll Industries, Inc. 10
500 TreeHouse Foods, Inc.* 17
76,800 Tyson Foods, Inc. "A" 923
1,800 Zhongpin, Inc.* 25
------------
11,771
------------
PERSONAL PRODUCTS (0.4%)
900 Alberto-Culver Co. 25
5,300 American Oriental Bioengineering, Inc.* 21
3,100 Avon Products, Inc. 106
================================================================================
22 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,000 Bare Escentuals, Inc.* $ 13
300 Chattem, Inc.* 20
800 China Sky One Medical, Inc.* 13
939 Elizabeth Arden, Inc.* 14
152,200 Estee Lauder Companies, Inc. "A" 7,128
1,937 Herbalife Ltd. 81
900 Mead Johnson Nutrition Co.(a) 39
1,800 Nu Skin Enterprises, Inc. "A" 48
2,800 Prestige Brands Holdings, Inc.* 20
1,500 Revlon, Inc. "A"* 27
------------
7,555
------------
SOFT DRINKS (0.3%)
300 Coca-Cola Bottling Co. Consolidated 14
17,000 Coca-Cola Co. 972
98,128 Coca-Cola Enterprises, Inc. 1,928
2,000 Dr. Pepper Snapple Group, Inc.* 52
700 Hansen Natural Corp.* 25
800 National Beverage Corp.* 9
1,200 Pepsi Bottling Group, Inc. 46
500 PepsiAmericas, Inc. 15
38,000 PepsiCo, Inc. 2,364
------------
5,425
------------
TOBACCO (0.4%)
7,100 Alliance One International, Inc.* 34
214,058 Altria Group, Inc.(b) 4,026
33,160 Lorillard, Inc.(b) 2,583
24,200 Philip Morris International, Inc. 1,164
1,500 Reynolds American, Inc. 75
2,600 Universal Corp. 112
600 Vector Group Ltd. 8
------------
8,002
------------
Total Consumer Staples 56,473
------------
ENERGY (2.6%)
-------------
COAL & CONSUMABLE FUELS (0.0%)
990 Alpha Natural Resources, Inc.* 37
1,000 Arch Coal, Inc. 21
2,400 CONSOL Energy, Inc. 110
7,500 International Coal Group, Inc.* 31
1,900 James River Coal Co.* 35
700 Massey Energy Co. 26
1,000 Patriot Coal Corp.* 12
2,000 Peabody Energy Corp. 89
10,900 USEC, Inc.* 40
------------
401
------------
INTEGRATED OIL & GAS (1.3%)
66,417 Chevron Corp.(b) 5,183
94,260 ConocoPhillips 4,880
160,600 Exxon Mobil Corp.(b) 12,056
2,000 Hess Corp. 116
74,760 Marathon Oil Corp.(b) 2,439
1,445 Murphy Oil Corp. 82
10,200 Occidental Petroleum Corp. 824
1,200 SandRidge Energy, Inc.* 11
------------
25,591
------------
OIL & GAS DRILLING (0.3%)
1,900 Bronco Drilling Co., Inc.* 10
300 Diamond Offshore Drilling, Inc. 30
1,100 ENSCO International, Inc.(b) 48
600 Helmerich & Payne, Inc. 23
6,500 Hercules Offshore, Inc.* 33
2,000 Nabors Industries Ltd.* 41
72,029 Noble Corp.(b) 2,976
7,700 Parker Drilling Co.* 38
4,228 Pioneer Drilling Co.* 26
1,200 Pride International, Inc.* 38
1,000 Rowan Companies, Inc.* 25
18,250 Transocean Ltd.* 1,558
------------
4,846
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 23
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES (0.2%)
4,800 Allis-Chalmers Energy, Inc.* $ 15
1,000 Baker Hughes, Inc. 41
900 BJ Services Co. 17
300 Bristow Group, Inc.* 10
1,500 Cameron International Corp.* 57
705 CARBO Ceramics, Inc. 42
600 Dawson Geophysical Co.* 13
800 Dresser-Rand Group, Inc.*(b) 22
400 Dril-Quip, Inc.* 22
800 FMC Technologies, Inc.* 44
8,410 Global Industries Ltd.* 49
1,100 Gulf Island Fabrication, Inc. 24
300 GulfMark Offshore, Inc. 8
6,000 Halliburton Co. 176
300 Hornbeck Offshore Services, Inc. 7
8,600 ION Geophysical Corp.* 47
10,000 Key Energy Services, Inc.* 76
2,100 Matrix Service Co.* 18
36,835 National-Oilwell Varco, Inc. 1,585
1,300 Natural Gas Services Group, Inc.* 23
7,300 Newpark Resources, Inc.* 20
700 Oceaneering International, Inc.* 38
300 Oil States International, Inc.* 11
400 OYO Geospace Corp.* 13
1,045 PHI, Inc.* 18
3,700 RPC, Inc. 36
8,300 Schlumberger Ltd. 530
405 Seacor Holdings, Inc.* 31
1,400 Smith International, Inc. 38
1,200 Superior Well Services, Inc.* 16
600 Tidewater, Inc. 27
2,300 Willbros Group, Inc.* 36
------------
3,110
------------
OIL & GAS EXPLORATION & PRODUCTION (0.7%)
22,660 Anadarko Petroleum Corp. 1,349
60,510 Apache Corp. 5,765
800 Apco Oil and Gas International, Inc. 18
600 Arena Resources, Inc.* 25
1,400 Atlas Energy, Inc. 36
2,000 ATP Oil & Gas Corp.* 32
1,000 Berry Petroleum Co. "A" 27
600 Bill Barrett Corp.* 17
7,900 BPZ Resources, Inc.* 58
2,900 Brigham Exploration Co.* 30
500 Cabot Oil & Gas Corp. 19
6,100 Chesapeake Energy Corp. 146
500 Cimarex Energy Co. 23
1,200 Clayton Williams Energy, Inc.* 34
2,600 Comstock Resources, Inc.* 97
300 Concho Resources, Inc.* 12
1,000 Contango Oil & Gas Co.* 44
1,600 Denbury Resources, Inc.* 21
7,300 Devon Energy Corp. 492
200 Encore Acquisition Co.* 9
7,400 EOG Resources, Inc. 640
300 Goodrich Petroleum Corp.* 7
13,200 Gran Tierra Energy, Inc.* 75
2,200 Gulfport Energy Corp.* 21
2,700 Harvest Natural Resources, Inc.* 16
1,000 McMoRan Exploration Co. 7
1,200 Newfield Exploration Co.* 51
1,000 Noble Energy, Inc. 65
3,000 Northern Oil and Gas, Inc.* 27
20,100 Oilsands Quest, Inc.* 24
================================================================================
24 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
900 Panhandle Oil & Gas, Inc. "A" $ 19
1,100 Penn Virginia Corp. 20
2,000 Petrohawk Energy Corp.* 45
3,000 PetroQuest Energy, Inc.* 17
1,100 Pioneer Natural Resources Co. 46
800 Plains Exploration & Production Co.* 22
8,300 Range Resources Corp. 391
1,700 Rex Energy Corp.* 15
2,300 Southwestern Energy Co.* 101
1,800 Toreador Resources Corp. 15
4,800 VAALCO Energy, Inc. 20
2,800 W&T Offshore, Inc. 29
64,700 XTO Energy, Inc. 2,746
------------
12,673
------------
OIL & GAS REFINING & MARKETING (0.0%)
1,900 Clean Energy Fuels Corp.* 22
500 Sunoco, Inc. 13
800 Tesoro Corp. 10
3,800 Valero Energy Corp. 61
3,200 Western Refining, Inc.* 15
400 World Fuel Services Corp. 21
------------
142
------------
OIL & GAS STORAGE & TRANSPORTATION (0.1%)
4,200 Crosstex Energy, Inc. 21
4,700 El Paso Corp. 45
2,713 Golar LNG Ltd. 34
1,400 Knightsbridge Tankers Ltd. 18
500 Overseas Shipholding Group, Inc. 19
700 Southern Union Co. 15
4,400 Spectra Energy Corp. 85
1,100 Teekay Corp. 26
93,581 Williams Companies, Inc. 1,861
------------
2,124
------------
Total Energy 48,887
------------
FINANCIALS (3.7%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.3%)
14,500 Allied Capital Corp. 51
22,635 American Capital Ltd.* 67
1,800 Ameriprise Financial, Inc. 69
13,693 Apollo Investment Corp. 132
8,268 Ares Capital Corp. 96
59,100 Bank of New York Mellon Corp. 1,574
600 BlackRock, Inc. "A" 136
37,300 Blackstone Group LP 516
1,600 Calamos Asset Management, Inc. "A" 17
300 Capital Southwest Corp. 24
200 Diamond Hill Investment Group, Inc. 12
600 Eaton Vance Corp. 18
1,100 Epoch Holding Corp. 11
600 Federated Investors, Inc. "B" 16
1,400 Franklin Resources, Inc. 151
500 GAMCO Investors, Inc. "A" 23
1,700 Gladstone Capital Corp. 13
5,000 GLG Partners, Inc.* 15
3,127 Hercules Technology Growth Capital, Inc. 31
900 Legg Mason, Inc. 26
5,400 MCG Capital Corp.* 21
1,700 MVC Capital, Inc. 18
1,723 NGP Capital Resources Co. 13
1,500 Northern Trust Corp. 74
1,929 PennantPark Investment Corp. 16
1,700 Penson Worldwide, Inc.* 15
4,300 Prospect Capital Corp. 47
1,600 Safeguard Scientifics, Inc.* 15
46,860 State Street Corp. 1,935
1,600 T. Rowe Price Group, Inc. 78
1,000 U.S. Global Investors, Inc. "A" 13
================================================================================
PORTFOLIO OF INVESTMENTS | 25
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
475 Virtus Investments Partners, Inc.* $ 7
900 Waddell & Reed Financial, Inc. "A" 26
600 Westwood Holdings Group, Inc. 21
------------
5,297
------------
CONSUMER FINANCE (0.4%)
3,900 Advance America, Cash Advance Centers, Inc. 24
58,887 American Express Co. 2,463
12,500 AmeriCredit Corp.* 231
103,700 Capital One Financial Corp. 3,978
1,080 Cardtronics, Inc.* 12
300 Cash America International, Inc. 10
500 Credit Acceptance Corp.* 17
76,415 Discover Financial Services 1,181
1,900 Dollar Financial Corp.* 46
1,300 First Cash Financial Services, Inc.* 25
600 Nelnet, Inc. "A" 11
6,400 SLM Corp.* 70
1,300 World Acceptance Corp.* 38
------------
8,106
------------
DIVERSIFIED BANKS (0.3%)
900 Comerica, Inc. 26
72,500 U.S. Bancorp 1,749
129,594 Wells Fargo & Co. 3,634
------------
5,409
------------
INSURANCE BROKERS (0.0%)
2,200 Aon Corp. 85
2,713 Arthur J. Gallagher & Co. 61
800 eHealth, Inc.* 10
3,500 Marsh & McLennan Companies, Inc. 79
900 National Financial Partners Corp. 8
------------
243
------------
INVESTMENT BANKING & BROKERAGE (0.8%)
3,800 BGC Partners, Inc. "A" 16
5,200 Broadpoint Gleacher Security Group, Inc.* 28
6,500 Charles Schwab Corp. 119
1,300 Duff & Phelps Corp. "A" 22
858 Evercore Partners, Inc. "A" 27
1,400 FBR Capital Markets Corp.* 9
5,100 GFI Group, Inc. 25
50,328 Goldman Sachs Group, Inc. 8,539
1,019 International Assets Holding Corp.* 17
1,900 Investment Technology Group, Inc.* 35
600 Jefferies Group, Inc.* 14
5,035 KBW, Inc.* 124
2,100 Knight Capital Group, Inc. "A"* 31
4,700 LaBranche & Co., Inc.* 12
144,485 Morgan Stanley 4,563
1,800 Piper Jaffray Co., Inc.* 78
800 Raymond James Financial, Inc. 19
1,500 Sanders Morris Harris Group, Inc. 7
500 Stifel Financial Corp.* 27
2,000 SWS Group, Inc. 25
57,101 TD Ameritrade Holding Corp.* 1,121
2,700 TradeStation Group, Inc.* 20
------------
14,878
------------
LIFE & HEALTH INSURANCE (0.4%)
53,458 AFLAC, Inc. 2,461
2,600 American Equity Investment Life Insurance Co. 19
2,344 Citizens, Inc.* 15
15,900 Conseco, Inc.* 76
900 Delphi Financial Group, Inc. "A" 20
================================================================================
26 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
3,100 Lincoln National Corp. $ 71
60,929 MetLife, Inc. 2,083
200 National Western Life Insurance Co. "A" 34
9,400 Phoenix Companies, Inc.* 23
1,314 Presidential Life Corp. 13
2,000 Principal Financial Group, Inc. 51
2,100 Protective Life Corp. 35
41,490 Prudential Financial, Inc. 2,068
605 StanCorp Financial Group, Inc. 23
528 Torchmark Corp. 23
40,984 Unum Group 780
------------
7,795
------------
MULTI-LINE INSURANCE (0.3%)
500 American Financial Group, Inc. 12
60,795 American International Group, Inc.*(a) 1,727
1,900 American National Insurance Co. 206
600 Assurant, Inc. 18
205,500 Genworth Financial, Inc. "A"* 2,213
86,000 Hartford Financial Services Group, Inc. 2,103
3,900 HCC Insurance Holdings, Inc. 102
3,300 Horace Mann Educators Corp. 40
5,500 Loews Corp. 195
2,100 Unitrin, Inc. 47
------------
6,663
------------
MULTI-SECTOR HOLDINGS (0.0%)
3,000 Compass Diversified Holdings 33
1,100 Leucadia National Corp.* 24
3,200 PICO Holdings, Inc.* 96
------------
153
------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.6%)
103,696 Bank of America Corp. 1,644
556,773 Citigroup, Inc. 2,288
163,875 JPMorgan Chase & Co. 6,963
------------
10,895
------------
PROPERTY & CASUALTY INSURANCE (0.2%)
1,400 Allied World Assurance Co. Holdings Ltd. 67
3,800 Allstate Corp. 108
197,600 Ambac Financial Group, Inc.*(a) 152
730 American Physicians Capital, Inc. 20
1,300 American Safety Insurance Holdings Ltd.* 20
1,500 Amerisafe, Inc.* 25
4,900 Assured Guaranty Ltd. 111
700 Baldwin & Lyons, Inc. "B" 16
6,100 Chubb Corp. 306
800 Cincinnati Financial Corp. 20
500 CNA Financial Corp.* 11
700 CNA Surety Corp.* 9
1,600 Donegal Group, Inc. "A" 23
12,882 Employers Holdings, Inc. 197
2,800 Erie Indemnity Co. "A" 104
1,400 Fidelity National Financial, Inc. "A" 19
1,493 First American Corp. 47
1,100 First Mercury Financial Corp. 14
700 FPIC Insurance Group, Inc.* 25
700 Hanover Insurance Group, Inc. 29
2,600 Harleysville Group, Inc. 82
700 Hilltop Holdings, Inc. 9
600 Infinity Property & Casualty Corp. 24
3,500 MBIA, Inc.* 12
4,690 Meadowbrook Insurance Group, Inc. 32
400 National Interstate Corp. 7
================================================================================
PORTFOLIO OF INVESTMENTS | 27
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,200 Navigators Group, Inc.* $ 56
700 NYMAGIC, Inc. 12
1,200 Old Republic International Corp. 13
600 OneBeacon Insurance Group Ltd. "A" 8
2,600 PMA Capital Corp. "A"* 17
1,500 ProAssurance Corp.* 80
4,800 Progressive Corp.* 80
600 RLI Corp. 30
901 Safety Insurance Group, Inc. 32
1,800 SeaBright Insurance Holdings, Inc.* 20
11,450 Selective Insurance Group, Inc. 179
3,057 State Auto Financial Corp. 50
1,400 Stewart Information Services Corp. 15
754 Tower Group, Inc. 19
17,100 Travelers Companies, Inc.(b) 896
1,300 United Fire & Casualty Co. 22
1,200 W.R. Berkley Corp. 30
200 White Mountains Insurance Group Ltd. 65
2,400 XL Capital Ltd. "A" 44
1,400 Zenith National Insurance Corp. 40
------------
3,197
------------
REAL ESTATE DEVELOPMENT (0.0%)
600 Avatar Holdings, Inc.* 9
------------
REAL ESTATE SERVICES (0.0%)
5,805 Altisource Portfolio Solutions S.A.* 94
------------
REGIONAL BANKS (0.3%)
1,400 1st Source Corp. 20
1,000 Ames National Corp. 19
718 Arrow Financial Corp. 18
1,200 BancFirst Corp. 45
900 BancorpSouth, Inc. 21
500 Bank of Hawaii Corp. 23
6,500 Bank of the Ozarks, Inc. 173
5,200 BB&T Corp. 129
400 BOK Financial Corp. 19
5,500 Boston Private Financial Holdings, Inc. 26
100 Bryn Mawr Bank Corp. 2
600 Camden National Corp. 18
969 Capital City Bank Group, Inc. 12
6,600 CapitalSource, Inc. 24
2,400 Cardinal Financial Corp. 20
2,395 Cathay General Bancorp 19
1,475 CenterState Banks of Florida, Inc. 12
2,500 Chemical Financial Corp. 59
161 Citizens & Northern Corp. 1
2,800 City Holding Co. 91
2,400 Cobiz Financial, Inc. 10
2,200 Columbia Banking System, Inc. 32
2,700 Community Bank System, Inc. 50
900 Community Trust Bancorp, Inc. 21
2,005 Cullen/Frost Bankers, Inc. 96
1,800 CVB Financial Corp. 14
3,135 East West Bancorp, Inc. 46
25,800 F.N.B. Corp. 168
1,100 Farmers Capital Bank Corp. 10
5,400 Fifth Third Bancorp 54
1,144 First Bancorp 15
6,800 First BanCorp 11
1,400 First Bancorp, Inc. 21
3,200 First Busey Corp. 11
1,056 First Citizens BancShares, Inc. "A" 166
6,835 First Commonwealth Financial Corp. 29
1,145 First Community Bancshares, Inc. 13
4,200 First Financial Bancorp 56
================================================================================
28 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,450 First Financial Bankshares, Inc. $ 75
2,100 First Financial Corp. 60
1,400 First Horizon National Corp.* 19
4,015 First Midwest Bancorp, Inc. 42
1,942 Firstmerit Corp. 41
14,700 Fulton Financial Corp. 127
1,300 Glacier Bancorp, Inc. 17
800 Great Southern Bancorp, Inc. 18
2,900 Hancock Holding Co. 120
3,711 Harleysville National Corp. 22
1,027 Heartland Financial USA, Inc. 14
2,696 Home BancShares, Inc. 62
19,200 Huntington Bancshares, Inc. 73
400 IBERIABANK Corp. 23
1,700 Independent Bank Corp. 35
1,900 International Bancshares Corp. 32
800 Investors Bancorp, Inc. 9
6,600 KeyCorp 39
2,500 Lakeland Bancorp, Inc. 15
1,100 Lakeland Financial Corp. 19
600 M&T Bank Corp. 39
3,000 MainSource Financial Group, Inc. 16
3,700 Marshall & Ilsley Corp. 21
4,200 MB Financial, Inc. 78
700 Metro Bancorp, Inc.* 7
2,600 Nara Bancorp, Inc. 26
7,500 National Penn Bancshares, Inc. 41
7,000 NBT Bancorp, Inc. 144
1,100 Northfield Bancorp, Inc. 14
6,400 Old National Bancorp 75
1,400 Pacific Continental Corp. 14
500 Pacwest Bancorp 9
1,591 Park National Corp. 95
1,100 Pinnacle Financial Partners, Inc.* 13
4,100 PNC Financial Services Group, Inc. 234
14,600 PrivateBancorp, Inc. 144
1,600 Prosperity Bancshares, Inc. 64
12,325 Regions Financial Corp. 72
1,800 Renasant Corp. 26
700 Republic Bancorp, Inc. "A" 13
12,300 S&T Bancorp, Inc. 196
1,000 S.Y. Bancorp, Inc. 22
2,100 Sandy Spring Bancorp, Inc. 20
1,100 SCBT Financial Corp. 29
800 Signature Bank* 25
1,200 Simmons First National Corp. "A" 30
1,100 Smithtown Bancorp, Inc. 7
1,190 Southside Bancshares, Inc. 24
2,000 StellarOne Corp. 20
6,900 Sterling Bancshares, Inc. 35
800 Suffolk Bancorp 22
5,000 SunTrust Banks, Inc. 118
8,600 Susquehanna Bancshares, Inc. 49
600 SVB Financial Group* 23
7,400 Synovus Financial Corp. 14
2,900 Texas Capital Bancshares, Inc.* 42
600 Tompkins Financial Corp. 24
1,700 TowneBank 21
1,200 TriCo Bancshares 21
1,200 Trustmark Corp. 23
5,200 UMB Financial Corp. 204
13,870 Umpqua Holdings Corp. 163
1,900 Union Bankshares Corp. 22
10,900 United Bankshares, Inc.(a) 186
6,367 United Community Banks, Inc.* 25
1,600 Univest Corp. 26
1,305 Valley National Bancorp 17
================================================================================
PORTFOLIO OF INVESTMENTS | 29
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,200 Washington Trust Bancorp, Inc. $ 18
700 Webster Financial Corp. 9
2,000 WesBanco, Inc. 26
4,700 Westamerica Bancorp 250
3,714 Western Alliance Bancorp.* 15
13,900 Whitney Holding Corp. 112
900 Wilmington Trust Corp. 11
1,600 Wilshire Bancorp, Inc. 11
1,000 Wintrust Financial Corp. 26
900 Zions Bancorp 12
------------
5,479
------------
REINSURANCE (0.0%)
1,400 Arch Capital Group Ltd.* 98
4,000 Maiden Holdings Ltd. 30
3,800 Max Capital Group Ltd. 83
4,200 Platinum Underwriters Holdings Ltd. 148
300 Reinsurance Group of America, Inc. "A" 14
500 Transatlantic Holdings, Inc. 27
------------
400
------------
SPECIALIZED FINANCE (0.0%)
1,100 Asset Acceptance Capital Corp.* 6
300 CME Group, Inc. 99
1,100 Encore Capital Group, Inc.* 19
1,000 Financial Federal Corp. 27
10,600 Interactive Brokers Group, Inc. "A"* 180
400 IntercontinentalExchange, Inc.* 43
500 Life Partners Holdings, Inc. 9
2,500 MarketAxess Holdings, Inc. 31
2,000 Moody's Corp. 47
1,225 MSCI, Inc. "A"* 37
800 NASDAQ OMX Group, Inc.* 15
1,600 NYSE Euronext 40
7,900 PHH Corp.* 109
400 Portfolio Recovery Associates, Inc.* 18
------------
680
------------
THRIFTS & MORTGAGE FINANCE (0.1%)
1,900 Abington Bancorp, Inc. 13
1,800 Astoria Financial Corp. 19
3,500 Bank Mutual Corp. 24
1,700 BankFinancial Corp. 16
1,900 Beneficial Mutual Bancorp, Inc.* 18
1,100 Berkshire Hills Bancorp, Inc. 21
1,300 Brookline Bancorp, Inc. 12
1,300 Clifton Savings Bancorp, Inc. 12
1,700 Danvers Bancorp, Inc. 23
1,200 Essa Bancorp, Inc. 15
1,300 First Financial Holdings, Inc. 17
1,100 First Niagara Financial Group, Inc. 14
1,900 Flushing Financial Corp. 21
1,300 Home Federal Bancorp, Inc. 16
4,600 Hudson City Bancorp, Inc. 61
3,758 Kearny Financial Corp. 37
10,000 MGIC Investment Corp.*(a) 40
500 NASB Financial, Inc. 12
2,600 New York Community Bancorp, Inc. 30
1,800 NewAlliance Bancshares, Inc. 21
3,000 Northwest Bancorp, Inc. 69
1,400 OceanFirst Financial Corp. 14
13,610 Ocwen Financial Corp.* 127
2,200 People's United Financial, Inc. 36
6,000 PMI Group, Inc. 11
1,100 Provident Financial Services, Inc. 12
================================================================================
30 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
2,759 Provident New York Bancorp $ 23
6,700 Radian Group, Inc. 30
1,200 Rockville Financial, Inc. 13
23,650 TrustCo Bank Corp. NY 146
1,300 United Financial Bancorp, Inc. 17
1,600 ViewPoint Financial Group 21
1,900 Westfield Financial, Inc. 16
500 WSFS Financial Corp. 13
------------
990
------------
Total Financials 70,288
------------
HEALTH CARE (3.8%)
------------------
BIOTECHNOLOGY (0.7%)
700 Acorda Therapeutics, Inc.* 17
1,100 Affymax, Inc.* 22
400 Alexion Pharmaceuticals, Inc.* 18
7,600 Alkermes, Inc.* 68
2,609 Alnylam Pharmaceuticals, Inc.* 44
116,811 Amgen, Inc.*(b) 6,582
7,500 Arena Pharmaceuticals, Inc.* 27
3,600 ArQule, Inc.* 13
81,400 Biogen Idec, Inc.* 3,821
17,200 Celera Corp.* 107
3,000 Celgene Corp.* 166
300 Cephalon, Inc.* 17
1,000 Cepheid* 12
1,833 Cubist Pharmaceuticals, Inc.* 31
3,800 Cytokinetics, Inc.* 12
600 Dendreon Corp.* 16
5,900 Dyax Corp.* 22
3,734 Enzon Pharmaceuticals, Inc.* 36
5,080 Facet Biotech Corp.* 83
2,900 Genomic Health, Inc.* 55
8,100 Genzyme Corp.* 411
1,300 Geron Corp. 7
8,300 Gilead Sciences, Inc.* 382
1,900 GTx, Inc.*(a) 7
4,300 Human Genome Sciences, Inc.* 120
4,771 Immunogen, Inc.* 38
5,500 Immunomedics, Inc.* 17
96,000 Incyte Corp.* 800
1,100 InterMune, Inc.* 12
2,100 Isis Pharmaceuticals, Inc.* 23
9,300 Ligand Pharmaceuticals, Inc. "B"* 18
2,500 Martek Biosciences Corp.* 44
2,200 Maxygen, Inc.* 12
600 Medivation, Inc.* 18
1,700 Metabolix, Inc.* 19
3,400 Momenta Pharmaceuticals, Inc.* 34
21,100 Myriad Genetics, Inc.* 488
4,400 Nabi Biopharmaceuticals* 22
5,100 Novavax, Inc.*(a) 15
4,100 NPS Pharmaceuticals, Inc.* 13
1,400 Onyx Pharmaceuticals, Inc.* 40
2,300 Orexigen Therapeutics, Inc.* 15
3,120 PDL BioPharma, Inc. 20
1,800 Pharmasset, Inc.* 36
3,100 Protalix BioTherapeutics, Inc.* 31
900 Regeneron Pharmaceuticals, Inc.* 17
2,500 Repligen Corp.* 12
3,600 Sangamo Biosciences, Inc.* 20
1,200 Savient Pharmaceuticals, Inc.* 16
5,800 Seattle Genetics, Inc.* 54
1,100 Theravance, Inc.* 14
600 United Therapeutics Corp.* 27
================================================================================
PORTFOLIO OF INVESTMENTS | 31
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,000 Vertex Pharmaceuticals, Inc.* $ 39
3,500 Vical, Inc.* 10
3,000 ZymoGenetics, Inc.* 18
------------
14,038
------------
HEALTH CARE DISTRIBUTORS (0.1%)
50,043 AmerisourceBergen Corp. 1,236
2,800 Cardinal Health, Inc. 90
1,100 Chindex International, Inc.* 15
17,000 Henry Schein, Inc.* 844
1,900 McKesson Corp. 118
900 MWI Veterinary Supply, Inc.* 33
1,200 Owens & Minor, Inc. 47
500 Patterson Companies, Inc.* 13
1,000 PSS World Medical, Inc.* 19
------------
2,415
------------
HEALTH CARE EQUIPMENT (0.4%)
1,785 Abaxis, Inc.* 40
1,900 ABIOMED, Inc.* 16
3,200 Accuray, Inc.* 17
2,700 Alphatec Holdings, Inc.* 12
1,900 American Medical Systems Holdings, Inc.* 33
200 Analogic Corp. 8
2,100 AngioDynamics, Inc.* 33
5,900 Baxter International, Inc. 322
800 Beckman Coulter, Inc. 52
14,500 Becton, Dickinson and Co. 1,085
199,989 Boston Scientific Corp.* 1,674
1,000 C.R. Bard, Inc. 82
1,100 Cantel Medical Corp.* 20
2,500 Conceptus, Inc.* 42
2,100 CryoLife, Inc.* 12
2,300 Cyberonics, Inc.* 41
3,800 DexCom, Inc.* 28
400 Edwards Lifesciences Corp.* 33
8,600 ev3, Inc.* 109
700 Exactech, Inc.* 11
6,000 Greatbatch, Inc.* 110
800 Hill-Rom Holdings, Inc. 18
1,600 Hologic, Inc.* 23
1,000 Hospira, Inc.* 47
390 IDEXX Laboratories, Inc.* 19
2,300 Insulet Corp.* 28
300 Integra Lifesciences Holdings Corp. 10
200 Intuitive Surgical, Inc.* 56
2,200 Invacare Corp. 55
1,400 IRIS International, Inc.* 16
700 Kensey Nash Corp.* 16
21,000 Kinetic Concepts, Inc.* 708
1,600 Masimo Corp.* 42
16,600 Medtronic, Inc. 704
1,200 Micrus Endovascular Corp.* 16
2,300 Natus Medical, Inc.* 31
1,000 NuVasive, Inc.* 32
2,000 NxStage Medical, Inc.* 14
6,000 Orthovita, Inc.* 22
1,400 Palomar Medical Technologies, Inc.* 13
900 ResMed, Inc.* 45
300 Sirona Dental Systems, Inc. 9
1,100 Somanetics Corp.* 16
1,900 SonoSite, Inc.* 43
2,700 Spectranetics Corp.* 15
2,700 St. Jude Medical, Inc.* 99
2,400 Stereotaxis, Inc.* 9
1,300 Steris Corp. 42
2,400 Stryker Corp. 121
1,345 SurModics, Inc.* 30
2,900 Symmetry Medical, Inc.* 23
1,600 Synovis Life Technologies, Inc.* 19
51,900 Thoratec Corp.* 1,546
3,700 TomoTherapy, Inc.* 13
================================================================================
32 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,200 Varian Medical Systems, Inc.* $ 56
3,600 Volcano Corp.* 53
1,500 Zimmer Holdings, Inc.* 89
1,700 ZOLL Medical Corp.* 42
------------
7,920
------------
HEALTH CARE FACILITIES (0.1%)
700 AmSurg Corp.* 15
800 Assisted Living Concepts, Inc.* 19
900 Community Health Systems, Inc.* 27
900 Ensign Group, Inc. 12
2,000 Hanger Orthopedic Group, Inc.* 27
7,200 HealthSouth Corp.* 126
6,458 Kindred Healthcare, Inc.* 96
1,155 MedCath Corp.* 8
600 National Healthcare Corp. 21
10,100 Psychiatric Solutions, Inc.* 224
1,600 Skilled Healthcare Group, Inc. "A"* 11
800 Sun Healthcare Group, Inc. 7
3,600 Sunrise Senior Living, Inc.* 11
12,100 Tenet Healthcare Corp.* 55
938 U.S. Physical Therapy, Inc.* 14
300 Universal Health Services, Inc. "B" 17
------------
690
------------
HEALTH CARE SERVICES (0.1%)
838 Air Methods Corp.* 29
500 Almost Family, Inc.* 18
500 Amedisys, Inc.* 18
2,700 AMN Healthcare Services, Inc.* 22
600 athenahealth, Inc.* 25
1,000 Bio-Reference Laboratories, Inc.* 33
7,900 Catalyst Health Solutions, Inc.* 269
400 Chemed Corp. 18
609 CorVel Corp.* 18
2,505 Cross Country Healthcare, Inc.* 21
600 DaVita, Inc.* 36
800 Emergency Medical Services Corp. "A"* 39
1,700 Express Scripts, Inc.* 146
2,610 Gentiva Health Services, Inc.* 62
3,018 HMS Holdings Corp.* 133
1,500 inVentiv Health, Inc.* 24
1,300 IPC The Hospitalist Co., Inc.* 41
700 Laboratory Corp. of America Holdings* 51
500 Landauer, Inc. 28
16,200 LHC Group, Inc.* 498
885 Lincare Holdings, Inc.* 31
4,000 Medco Health Solutions, Inc.* 253
1,700 Nighthawk Radiology Holdings, Inc.* 9
2,600 Odyssey Healthcare, Inc.* 38
1,100 Omnicare, Inc. 25
900 Providence Service Corp.* 13
1,000 Quest Diagnostics, Inc. 58
1,469 RehabCare Group, Inc.* 41
2,025 ResCare, Inc.* 26
------------
2,023
------------
HEALTH CARE SUPPLIES (0.1%)
29,700 Align Technology, Inc.* 486
100 Atrion Corp. 14
600 Cooper Companies, Inc. 20
800 DENTSPLY International, Inc. 27
800 Haemonetics Corp.* 43
500 ICU Medical, Inc.* 17
7,200 Immucor Corp.* 133
================================================================================
PORTFOLIO OF INVESTMENTS | 33
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
600 Inverness Medical Innovations, Inc.* $ 25
1,200 Medical Action Industries, Inc.* 15
700 Meridian Bioscience, Inc. 14
2,200 Merit Medical Systems, Inc.* 36
1,100 Neogen Corp.* 36
2,100 Quidel Corp.* 26
4,900 RTI Biologics, Inc.* 20
78 TranS1, Inc.* -
500 West Pharmaceutical Services, Inc. 19
------------
931
------------
HEALTH CARE TECHNOLOGY (0.0%)
900 Cerner Corp.* 68
800 Computer Programs and Systems, Inc. 37
900 Eclipsys Corp.* 17
1,100 IMS Health, Inc. 23
600 MedAssets, Inc.* 14
2,500 Omnicell, Inc.* 26
800 Phase Forward, Inc.* 12
1,600 Vital Images, Inc.* 20
------------
217
------------
LIFE SCIENCES TOOLS & SERVICES (0.1%)
2,200 Accelrys, Inc.* 12
32,200 Affymetrix, Inc.* 153
1,800 Albany Molecular Research, Inc.* 15
800 Bio-Rad Laboratories, Inc. "A"* 77
800 Bruker Corp. 9
2,300 Cambrex Corp.* 12
200 Charles River Laboratories International, Inc.* 6
975 Clinical Data, Inc.* 15
300 Covance, Inc.* 16
1,300 Dionex Corp.* 91
3,000 Enzo Biochem, Inc.* 16
2,400 eResearch Technology, Inc.* 14
13,200 Exelixis, Inc.* 90
700 Illumina, Inc.* 20
1,200 Kendle International, Inc.* 18
1,000 Life Technologies Corp.* 50
500 Mettler Toledo International, Inc.* 50
25,600 Nektar Therapeutics* 223
600 Pharmaceutical Product Development, Inc. 13
4,600 Sequenom, Inc.*(a) 19
2,900 Thermo Fisher Scientific, Inc.* 137
700 Varian, Inc.* 36
18,700 Waters Corp.* 1,099
------------
2,191
------------
MANAGED HEALTH CARE (0.8%)
47,190 Aetna, Inc. 1,374
3,300 AMERIGROUP Corp.* 78
1,000 Centene Corp.* 19
95,275 CIGNA Corp. 3,056
35,635 Coventry Health Care, Inc.* 803
700 Health Net, Inc. 15
2,370 HealthSpring, Inc.* 39
94,700 Humana, Inc.* 3,931
1,486 Magellan Health Services, Inc.* 55
3,100 Molina Healthcare, Inc.* 65
1,600 Triple-S Management Corp. "B"* 26
135,734 UnitedHealth Group, Inc.(b) 3,891
600 WellCare Health Plans, Inc.* 20
47,450 WellPoint, Inc.* 2,564
------------
15,936
------------
PHARMACEUTICALS (1.4%)
51,008 Abbott Laboratories 2,779
2,000 Allergan, Inc. 116
1,100 Ardea Biosciences, Inc.* 15
================================================================================
34 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
900 Auxilium Pharmaceuticals, Inc.* $ 31
1,241 Biomimetic Therapeutics, Inc.* 13
2,800 BMP Sunstone Corp.* 11
137,811 Bristol-Myers Squibb Co.(b) 3,488
3,100 Cypress Bioscience, Inc.* 16
4,100 DepoMed, Inc.* 13
11,000 Discovery Laboratories, Inc.* 8
97,233 Eli Lilly and Co. 3,571
27,618 Endo Pharmaceuticals Holdings, Inc.* 608
41,708 Forest Laboratories, Inc.* 1,279
4,900 Impax Laboratories, Inc.* 56
4,900 Inspire Phamaceutical, Inc.* 29
42,341 Johnson & Johnson 2,661
1,700 King Pharmaceuticals, Inc.* 20
50,500 Medicines Co.* 396
1,000 Medicis Pharmaceutical Corp. "A" 24
141,745 Merck & Co., Inc. 5,133
132,700 Mylan, Inc.* 2,371
1,300 Obagi Medical Products, Inc.* 15
2,300 Optimer Pharmaceuticals, Inc.* 25
2,945 Pain Therapeutics, Inc.* 15
300 Perrigo Co. 12
218,260 Pfizer, Inc.(b) 3,966
2,200 Pozen, Inc.* 16
4,600 Questcor Pharmaceuticals, Inc.* 20
4,500 Salix Pharmaceuticals Ltd.* 103
4,900 SuperGen, Inc.* 13
5,689 Valeant Pharmaceuticals International* 186
2,900 ViroPharma, Inc.* 22
4,000 VIVUS, Inc.* 32
1,500 Watson Pharmaceuticals, Inc.* 56
------------
27,119
------------
Total Health Care 73,480
------------
INDUSTRIALS (2.3%)
-----------------
AEROSPACE & DEFENSE (0.8%)
400 AAR Corp.* 7
12,963 Alliant Techsystems, Inc.* 1,111
600 American Science and Engineering, Inc. 42
1,500 Applied Signal Technology, Inc. 30
1,200 Argon ST, Inc.* 22
5,600 Boeing Co. 294
5,809 Cubic Corp. 202
1,500 Curtiss-Wright Corp. 43
1,200 DigitalGlobe, Inc.* 28
800 Ducommun, Inc. 15
5,757 DynCorp International, Inc. "A"* 80
1,200 Esterline Technologies Corp.* 48
4,100 GenCorp, Inc.* 32
43,707 General Dynamics Corp. 2,880
800 Goodrich Corp. 47
1,900 HEICO Corp. 71
1,700 Herley Industries, Inc.* 20
1,500 Hexcel Corp.* 16
5,500 Honeywell International, Inc. 212
6,800 ITT Corp. 352
15,422 L-3 Communications Holdings, Inc. 1,209
1,400 Ladish Co., Inc.* 19
28,100 Lockheed Martin Corp.(b) 2,170
52,200 Northrop Grumman Corp.(b) 2,861
1,000 Orbital Sciences Corp.* 13
================================================================================
PORTFOLIO OF INVESTMENTS | 35
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
900 Precision Castparts Corp. $ 93
63,523 Raytheon Co.(b) 3,273
1,000 Rockwell Collins, Inc. 53
1,040 Spirit AeroSystems Holdings, Inc. "A"* 19
5,000 TASER International, Inc.* 21
700 Teledyne Technologies, Inc.* 23
6,300 United Technologies Corp.(b) 424
------------
15,730
------------
AIR FREIGHT & LOGISTICS (0.1%)
300 Atlas Air Worldwide Holdings, Inc. 9
10,900 C.H. Robinson Worldwide, Inc. 608
760 Dynamex, Inc.* 13
1,300 Expeditors International of Washington, Inc. 41
4,900 FedEx Corp. 414
400 Forward Air Corp. 9
600 Hub Group, Inc. "A"* 16
11,800 United Parcel Service, Inc. "B" 678
------------
1,788
------------
AIRLINES (0.0%)
10,700 AirTran Holdings, Inc.* 44
1,800 Alaska Air Group, Inc.* 54
200 Allegiant Travel Co. 8
2,500 AMR Corp.* 15
6,000 Delta Air Lines, Inc.* 49
1,200 Hawaiian Holdings, Inc. 8
21,100 JetBlue Airways Corp.* 116
3,800 Republic Airways Holdings, Inc.* 26
1,800 SkyWest, Inc. 26
5,500 Southwest Airlines Co. 51
6,100 UAL Corp.* 47
13,000 US Airways Group, Inc.* 48
------------
492
------------
BUILDING PRODUCTS (0.2%)
1,100 AAON, Inc. 21
750 American Woodmark Corp. 15
200 Ameron International Corp. 11
2,300 Apogee Enterprises, Inc. 31
33,500 Armstrong World Industries, Inc.* 1,388
3,187 Griffon Corp.* 33
1,400 Insteel Industries, Inc. 16
500 Lennox International, Inc. 18
77,900 Masco Corp. 1,058
3,100 Quanex Building Products Corp. 50
1,200 Simpson Manufacturing Co., Inc. 30
1,327 Trex Co., Inc.* 24
300 Universal Forest Products, Inc. 11
------------
2,706
------------
COMMERCIAL PRINTING (0.0%)
5,100 Cenveo, Inc.* 39
400 Consolidated Graphics, Inc. 12
1,800 Courier Corp. 24
22,190 Deluxe Corp. 286
2,200 InnerWorkings, Inc.* 11
800 M & F Worldwide Corp.* 26
5,200 R.R. Donnelley & Sons Co. 107
------------
505
------------
CONSTRUCTION & ENGINEERING (0.4%)
900 AECOM Technology Corp.* 23
2,855 Dycom Industries, Inc.* 22
1,400 EMCOR Group, Inc.* 33
114,300 Fluor Corp. 4,855
1,100 Granite Construction, Inc. 33
3,300 Great Lakes Dredge & Dock Corp. 19
================================================================================
36 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
400 Insituform Technologies, Inc. "A"* $ 8
800 Jacobs Engineering Group, Inc.* 28
111,963 KBR, Inc. 2,086
500 Layne Christensen Co.* 13
350 MasTec, Inc.* 4
700 Michael Baker Corp.* 27
700 Northwest Pipe Co.* 18
1,300 Pike Electric Corp.* 12
1,200 Quanta Services, Inc.* 23
900 Shaw Group, Inc.* 26
1,000 Sterling Construction Co., Inc.* 17
400 URS Corp.* 17
1,611 Vinci S.A. 89
------------
7,353
------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.1%)
300 AGCO Corp. 9
500 Bucyrus International, Inc. 26
700 Cascade Corp. 16
4,400 Caterpillar, Inc. 257
1,500 Cummins, Inc. 67
3,500 Deere & Co. 187
13,313 Federal Signal Corp. 76
6,700 Force Protection, Inc.* 35
600 Joy Global, Inc. 32
358 Lindsay Corp. 13
7,100 Manitowoc Co., Inc. 70
24,158 Navistar International Corp.* 797
900 Oshkosh Corp. 36
2,300 PACCAR, Inc. 85
800 Trinity Industries, Inc. 15
------------
1,721
------------
DIVERSIFIED SUPPORT SERVICES (0.0%)
1,200 Cintas Corp. 34
3,100 Comfort Systems USA, Inc. 35
900 Enernoc, Inc.* 24
1,543 G & K Services, Inc. "A" 34
800 Healthcare Services Group, Inc. 16
1,100 Iron Mountain, Inc.* 27
2,900 Mobile Mini, Inc.* 44
400 Viad Corp. 7
------------
221
------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.1%)
900 A. O. Smith Corp. 38
900 Acuity Brands, Inc. 29
4,100 Advanced Battery Technology, Inc.*(a) 14
1,600 American Superconductor Corp.* 53
700 AMETEK, Inc. 26
800 Baldor Electric Co. 21
3,800 Belden, Inc. 84
1,700 Brady Corp. "A" 50
3,200 China BAK Battery, Inc.* 10
13,600 Emerson Electric Co. 563
1,200 Encore Wire Corp. 24
5,200 Ener1, Inc.* 30
800 Energy Conversion Devices, Inc. 8
4,800 EnerSys* 109
500 First Solar, Inc.* 60
1,233 Franklin Electric Co., Inc. 34
5,600 FuelCell Energy, Inc.*(a) 17
1,200 Fushi Copperweld, Inc.* 10
5,500 General Cable Corp.* 161
2,500 GrafTech International Ltd.* 37
3,500 GT Solar International, Inc.*(a) 17
1,200 Harbin Electric, Inc.* 24
1,000 La Barge, Inc.* 11
1,600 LSI Industries, Inc. 12
6,800 Microvision, Inc.*(a) 22
400 Powell Industries, Inc.* 14
400 Preformed Line Products Co. 16
700 Regal-Beloit Corp. 33
================================================================================
PORTFOLIO OF INVESTMENTS | 37
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
900 Rockwell Automation, Inc. $ 39
500 Roper Industries, Inc. 26
800 SunPower Corp. "A"* 16
932 SunPower Corp. "B"* 17
700 Thomas & Betts Corp.* 26
1,600 Vicor Corp.* 13
3,200 Woodward Governor Co. 74
------------
1,738
------------
ENVIRONMENTAL & FACILITIES SERVICES (0.0%)
3,091 ABM Industries, Inc. 57
600 Clean Harbors, Inc.* 32
5,482 Energy Solutions, Inc. 47
2,700 Metalico, Inc.* 11
2,300 Republic Services, Inc. 65
600 Rollins, Inc. 11
600 Standard Packaging Corp.* 9
400 Stericycle, Inc.* 22
1,400 Tetra Tech, Inc.* 37
3,900 Waste Management, Inc. 128
1,500 Waste Services, Inc.* 12
------------
431
------------
HEAVY ELECTRICAL EQUIPMENT (0.0%)
3,300 Broadwind Energy, Inc.* 24
15,700 Capstone Turbine Corp.*(a) 20
1,600 Comverge, Inc.* 16
------------
60
------------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.0%)
1,000 CDI Corp. 12
1,300 Heidrick & Struggles International, Inc. 37
2,100 Kelly Services, Inc. "A"* 22
2,300 Kforce, Inc.* 30
800 Manpower, Inc. 39
3,000 On Assignment, Inc.* 19
900 Robert Half International, Inc. 20
4,660 Spherion Corp.* 24
3,600 TrueBlue, Inc.* 44
900 Volt Information Sciences, Inc.* 8
1,030 Watson Wyatt Worldwide, Inc. "A" 43
------------
298
------------
INDUSTRIAL CONGLOMERATES (0.3%)
5,000 3M Co. 387
700 Carlisle Companies, Inc. 22
220,900 General Electric Co. 3,539
6,100 McDermott International, Inc.* 128
1,300 Raven Industries, Inc. 35
948 Standex International Corp. 17
2,100 Textron, Inc. 42
5,600 Tredegar Corp. 81
50,484 Tyco International Ltd. 1,811
------------
6,062
------------
INDUSTRIAL MACHINERY (0.1%)
1,500 3D Systems Corp.* 16
1,500 Actuant Corp. "A" 24
1,600 Albany International Corp. "A" 29
2,100 Altra Holdings, Inc.* 24
600 Ampco-Pittsburgh Corp. 17
1,481 Badger Meter, Inc. 52
1,300 Barnes Group, Inc. 20
3,200 Blount International, Inc.* 31
1,000 Briggs & Stratton Corp. 19
1,200 Chart Industries, Inc.* 20
1,114 China Fire & Security Group, Inc.* 14
700 CIRCOR International, Inc. 17
1,900 CLARCOR, Inc. 61
3,400 Colfax Corp.* 42
2,000 Crane Co. 56
1,700 Danaher Corp. 121
400 Donaldson Co., Inc. 17
1,200 Dover Corp. 49
1,000 Dynamic Materials Corp. 19
================================================================================
38 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,100 Eaton Corp. $ 70
1,600 EnPro Industries, Inc.* 37
1,000 ESCO Technologies, Inc.* 33
600 Flowserve Corp. 60
1,179 Gorman-Rupp Co. 29
800 Graham Corp. 15
655 Harsco Corp. 20
3,200 Illinois Tool Works, Inc. 156
2,400 John Bean Technologies Corp. 41
300 K-Tron International, Inc.* 29
1,000 Kadant, Inc.* 14
1,000 Kaydon Corp. 36
800 L.B. Foster Co. "A"* 22
500 Lincoln Electric Holdings, Inc. 26
200 Middleby Corp. 9
1,088 Mueller Industries, Inc. 26
14,100 Mueller Water Products, Inc. "A" 71
4,600 Nordson Corp. 247
250 Omega Flex, Inc. 4
600 Pall Corp. 19
1,000 Parker-Hannifin Corp. 54
400 Pentair, Inc. 12
1,100 PMFG, Inc.* 16
1,900 RBC Bearings, Inc.* 44
477 Robbins & Myers, Inc. 11
1,481 Sun Hydraulics Corp. 35
1,400 Tecumseh Products Co. "A"* 16
2,050 Tennant Co. 56
1,100 Timken Co. 27
300 Watts Water Technologies, Inc. "A" 9
------------
1,892
------------
MARINE (0.0%)
500 Alexander & Baldwin, Inc. 15
2,500 Genco Shipping & Trading Ltd.*(a) 59
2,400 Horizon Lines, Inc. "A" 13
400 International Shipholding Corp. 13
500 Kirby Corp.* 17
------------
117
------------
OFFICE SERVICES & SUPPLIES (0.1%)
4,500 ACCO Brands Corp.* 29
2,200 APAC Customer Services, Inc.* 12
700 Avery Dennison Corp. 26
900 Herman Miller, Inc. 14
1,000 HNI Corp. 25
700 ICT Group, Inc.* 11
3,300 Interface, Inc. "A" 25
1,900 Kimball International, Inc. "B" 16
800 Knoll, Inc. 8
3,100 Mine Safety Appliances Co. 77
1,300 Pitney Bowes, Inc. 30
5,500 Steelcase, Inc. "A" 30
13,452 Sykes Enterprises, Inc.* 330
400 United Stationers, Inc.* 20
------------
653
------------
RAILROADS (0.1%)
2,400 Burlington Northern Santa Fe Corp. 236
22,400 CSX Corp. 1,063
1,600 Genesee & Wyoming, Inc. "A"* 50
300 Kansas City Southern 9
2,700 Norfolk Southern Corp. 139
4,300 Union Pacific Corp. 272
------------
1,769
------------
RESEARCH & CONSULTING SERVICES (0.0%)
900 Advisory Board Co.* 24
500 Corporate Executive Board Co. 11
900 CRA International, Inc.* 22
1,900 Diamond Management & Technology Consultants, Inc. 12
200 Dun & Bradstreet Corp. 16
================================================================================
PORTFOLIO OF INVESTMENTS | 39
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
800 Equifax, Inc. $ 23
1,200 Exponent, Inc.* 32
700 FTI Consulting, Inc.* 32
2,000 Hill International, Inc.* 12
700 ICF International, Inc.* 19
2,000 Navigant Consulting, Inc.* 27
300 VSE Corp. 14
------------
244
------------
SECURITY & ALARM SERVICES (0.0%)
1,425 Brink's Co. 32
900 Cornell Companies, Inc.* 20
500 Corrections Corp. of America* 12
800 GEO Group, Inc.* 16
1,500 GeoEye, Inc.* 47
------------
127
------------
TRADING COMPANIES & DISTRIBUTORS (0.0%)
2,000 Aceto Corp. 10
900 Applied Industrial Technologies, Inc. 19
10,900 Beacon Roofing Supply, Inc.* 168
700 Fastenal Co. 26
2,200 H&E Equipment Services, Inc.* 20
1,400 Houston Wire & Cable Co. 16
2,600 Interline Brands, Inc.* 44
500 Kaman Corp. 11
4,500 Rush Enterprises, Inc. "A"* 48
1,200 TAL International Group, Inc. 16
700 Textainer Group Holding Ltd. 11
900 United Rentals, Inc. 8
200 W.W. Grainger, Inc. 20
500 Watsco, Inc. 25
2,400 WESCO International, Inc.* 63
------------
505
------------
TRUCKING (0.0%)
2,700 AMERCO* 138
2,200 Avis Budget Group, Inc.* 22
1,800 Celadon Group, Inc.* 17
1,700 Dollar Thrifty Automotive Group, Inc.* 31
1,400 Knight Transportation, Inc. 24
2,400 Marten Transport, Ltd.* 41
300 Old Dominion Freight Line, Inc.* 8
139 Patriot Transportation Holding, Inc.* 13
600 Ryder System, Inc. 24
1,100 Saia, Inc.* 16
900 Werner Enterprises, Inc. 17
1,600 YRC Worldwide, Inc.*(a) 2
------------
353
------------
Total Industrials 44,765
------------
INFORMATION TECHNOLOGY (6.0%)
-----------------------------
APPLICATION SOFTWARE (0.1%)
3,873 Actuate Corp.* 16
3,700 Adobe Systems, Inc.* 130
2,200 Advent Software, Inc.* 83
2,820 ANSYS, Inc.* 110
1,875 Autodesk, Inc.* 44
2,000 Blackbaud, Inc. 45
500 Blackboard, Inc.* 21
2,700 Bottomline Technologies, Inc.* 44
1,100 Citrix Systems, Inc.* 42
19,000 Compuware Corp.* 132
924 Concur Technologies, Inc.* 34
1,500 Deltek, Inc.* 11
500 Ebix, Inc.* 26
3,800 Epicor Software Corp.* 29
300 FactSet Research Systems, Inc. 22
11,300 Fair Isaac Corp. 206
================================================================================
40 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
2,500 Henry Jack & Associates, Inc. $ 57
1,400 I2 Technologies, Inc.* 26
2,900 Informatica Corp.* 65
1,000 Interactive Intelligence, Inc.* 17
2,000 Intuit, Inc.* 58
2,099 JDA Software Group, Inc.* 49
1,800 Kenexa Corp.* 20
8,100 Lawson Software, Inc.* 53
1,800 Manhattan Associates, Inc.* 42
2,000 Mentor Graphics Corp.* 15
700 MicroStrategy, Inc. "A"* 61
1,700 Monotype Imaging Holdings, Inc.* 13
500 Net 1 U.E.P.S Technologies, Inc. 9
1,600 NetScout Systems, Inc.* 20
1,200 Nuance Communications, Inc.* 18
2,700 Parametric Technology Corp.* 41
3,300 Pegasystems, Inc. 95
1,500 PROS Holdings, Inc.* 12
1,300 Quest Software, Inc.* 22
4,500 S1 Corp.* 27
1,200 Salesforce.com, Inc.* 75
2,300 Smith Micro Software, Inc.* 15
900 Solarwinds, Inc.* 17
1,600 Solera Holdings, Inc. 56
3,600 SuccessFactors, Inc.* 54
3,100 Symyx Technologies, Inc.* 13
1,500 Synchronoss Technologies, Inc.* 20
1,300 Synopsys, Inc.* 29
602 Taleo Corp. "A"* 12
8,300 TIBCO Software, Inc.* 71
18,200 TiVo, Inc.* 180
2,800 Tyler Technologies, Inc.* 56
566 Ultimate Software Group, Inc.* 15
------------
2,328
------------
COMMUNICATIONS EQUIPMENT (0.6%)
27,100 3Com Corp.* 200
1,400 Acme Packet, Inc.* 14
97,200 ADC Telecommunications, Inc.* 596
900 ADTRAN, Inc. 19
2,000 Airvana, Inc.* 12
1,100 Anaren, Inc.* 15
2,500 ARRIS Group, Inc.* 25
2,200 Aruba Networks, Inc.* 18
900 Avocent Corp.* 22
884 Bel Fuse, Inc. "B" 16
2,900 Bigband Networks, Inc.* 10
500 Black Box Corp. 14
800 Blue Coat Systems, Inc.* 21
2,700 Brocade Communications Systems, Inc.* 19
163,877 Cisco Systems, Inc.*(b) 3,835
2,000 Cogo Group, Inc.* 11
500 Comtech Telecommunications Corp.* 14
2,000 Digi International, Inc.* 16
7,800 EchoStar Corp. "A"* 152
5,800 Emcore Corp.* 5
1,300 EMS Technologies, Inc.* 17
7,200 Extreme Networks, Inc.* 16
300 F5 Networks, Inc.* 14
1,700 Globecomm Systems, Inc.* 14
7,700 Harmonic, Inc.* 39
800 Harris Corp. 35
4,805 Harris Stratex Networks, Inc. "A"* 30
600 Hughes Communications, Inc.* 15
6,100 Infinera Corp.* 50
700 InterDigital, Inc.* 17
2,600 Ixia* 17
2,600 JDS Uniphase Corp.* 19
================================================================================
PORTFOLIO OF INVESTMENTS | 41
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
13,900 Juniper Networks, Inc.* $ 363
900 Loral Space & Communications, Inc.* 30
199,000 Motorola, Inc. 1,594
700 Netgear, Inc.* 14
2,600 Network Equipment Technologies, Inc.* 9
7,000 Neutral Tandem, Inc.* 162
900 Oclaro, Inc.* 1
1,300 Oplink Communications, Inc.* 22
5,400 Plantronics, Inc. 125
8,500 Polycom, Inc.* 183
12,300 Powerwave Technologies, Inc.* 17
83,900 QUALCOMM, Inc. 3,776
1,900 Riverbed Technology, Inc.* 39
2,600 SeaChange International, Inc.* 15
3,600 ShoreTel, Inc.* 18
4,900 Sonus Networks, Inc.* 11
1,800 Starent Networks Corp.* 62
15,800 Sycamore Networks, Inc.* 45
3,500 Symmetricom, Inc.* 15
2,000 Tekelec* 28
2,600 Tellabs, Inc.* 15
1,800 Viasat, Inc.* 55
------------
11,916
------------
COMPUTER HARDWARE (1.1%)
3,200 3PAR, Inc.* 33
27,026 Apple, Inc.*(b) 5,403
9,600 Avid Technology, Inc.* 114
3,300 Cray, Inc.* 23
155,971 Dell, Inc.* 2,202
500 Diebold, Inc. 13
84,756 Hewlett-Packard Co. 4,158
67,480 International Business Machines Corp.(b) 8,526
3,500 Palm, Inc.*(a) 38
2,400 Silicon Graphics International Corp.* 15
1,700 Stratasys, Inc.* 25
87,800 Sun Microsystems, Inc.* 747
1,900 Super Micro Computer, Inc.* 18
1,600 Teradata Corp.* 47
------------
21,362
------------
COMPUTER STORAGE & PERIPHERALS (0.7%)
10,100 Adaptec, Inc.* 32
1,300 Compellent Technologies, Inc.* 27
316,800 EMC Corp.* 5,332
3,700 Emulex Corp.* 36
1,200 Intermec, Inc.* 15
1,700 Intevac, Inc.* 21
2,100 Isilon Systems, Inc.* 12
500 Lexmark International, Inc. "A"* 13
39,800 NetApp, Inc.* 1,227
3,800 Netezza Corp.* 39
2,600 Novatel Wireless, Inc.* 22
1,200 QLogic Corp.* 21
750 Rimage Corp.* 12
2,900 SanDisk Corp.* 57
13,100 Seagate Technology 198
7,100 STEC, Inc.* 88
2,800 Synaptics, Inc.* 75
138,063 Western Digital Corp.* 5,086
------------
12,313
------------
DATA PROCESSING & OUTSOURCED SERVICES (0.3%)
3,600 Affiliated Computer Services, Inc. "A"* 199
500 Alliance Data Systems Corp.* 30
3,800 Automatic Data Processing, Inc. 165
1,712 Broadridge Financial Solutions, Inc. 38
800 Cass Information Systems, Inc. 22
21,756 Computer Sciences Corp.* 1,203
================================================================================
42 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
900 Convergys Corp.* $ 10
21,374 CSG Systems International, Inc.* 414
4,800 Euronet Worldwide, Inc.* 102
1,200 ExlService Holdings, Inc.* 19
1,100 Fidelity National Information Services, Inc. 25
900 Fiserv, Inc.* 42
1,600 Genpact Ltd.* 21
26,700 Global Cash Access Holdings, Inc.* 199
400 Global Payments, Inc. 20
19,324 Hewitt Associates, Inc. "A"* 776
2,700 infoGROUP, Inc.* 22
500 Lender Processing Services, Inc. 21
3,100 MasterCard, Inc. "A" 747
6,700 Moneygram International, Inc.* 17
1,500 NeuStar, Inc. "A"* 35
2,000 Online Resources Corp.* 11
2,000 Paychex, Inc. 63
2,600 Syntel, Inc. 98
2,200 TNS, Inc.* 55
1,000 Total System Services, Inc. 17
4,800 VeriFone Holdings, Inc.* 64
10,100 Visa, Inc. "A" 818
4,800 Western Union Co. 89
3,000 Wright Express Corp.* 87
------------
5,429
------------
ELECTRONIC COMPONENTS (0.0%)
1,000 Amphenol Corp. "A" 41
1,300 AVX Corp. 16
13,100 Corning, Inc. 218
600 Dolby Laboratories, Inc. "A"* 27
1,600 DTS, Inc.* 48
1,700 Littelfuse, Inc.* 44
1,300 Rogers Corp.* 37
4,100 Technitrol, Inc. 21
2,396 Universal Display Corp.* 26
4,100 Vishay Intertechnology, Inc.* 30
------------
508
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.0%)
2,700 Agilent Technologies, Inc.* 78
7,900 Checkpoint Systems, Inc.* 112
3,400 China Security & Surveillance Technology, Inc.* 21
600 Cognex Corp. 10
300 Coherent, Inc. 8
2,700 Daktronics, Inc. 23
2,200 Electro Scientific Industries, Inc.* 21
1,500 FARO Technologies, Inc.* 29
1,300 FLIR Systems, Inc.* 37
11,500 L-1 Identity Solutions, Inc.* 71
1,200 Measurement Specialties, Inc.* 11
1,292 MTS Systems Corp. 33
2,900 Newport Corp.* 21
1,300 OSI Systems, Inc.* 27
------------
502
------------
ELECTRONIC MANUFACTURING SERVICES (0.0%)
1,000 Benchmark Electronics, Inc.* 18
2,700 CTS Corp. 25
2,645 Echelon Corp.* 29
600 IPG Photonics Corp. 9
1,200 Jabil Circuit, Inc. 16
1,810 Maxwell Technologies, Inc.* 30
1,900 Mercury Computer Systems, Inc.* 20
3,100 Methode Electronics, Inc. 25
1,200 Molex, Inc. 22
800 Multi-Fineline Electronix, Inc.* 20
1,600 Park Electrochemical Corp. 38
================================================================================
PORTFOLIO OF INVESTMENTS | 43
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
600 Plexus Corp.* $ 16
2,000 Radisys Corp.* 19
3,300 Smart Modular Technologies, Inc.* 15
600 Trimble Navigation Ltd.* 13
3,500 TTM Technologies, Inc.* 36
------------
351
------------
HOME ENTERTAINMENT SOFTWARE (0.1%)
65,700 Activision Blizzard, Inc.* 748
2,600 Electronic Arts, Inc.* 44
400 Rosetta Stone, Inc.* 7
16,300 Take-Two Interactive Software, Inc.* 184
5,900 THQ, Inc.* 29
------------
1,012
------------
INTERNET SOFTWARE & SERVICES (0.6%)
1,000 Akamai Technologies, Inc.* 24
10,200 Art Technology Group, Inc.* 41
1,700 comScore, Inc.* 27
2,100 Constant Contact, Inc.* 38
1,200 CyberSource Corp.* 21
500 Dealertrack Holdings, Inc. 9
1,200 Dice Holdings, Inc.* 6
1,100 Digital River, Inc.* 28
2,600 DivX, Inc.* 13
59,900 EarthLink, Inc. 493
7,600 eBay, Inc.* 186
100 Equinix, Inc.* 10
15,000 Google, Inc. "A"* 8,745
2,800 Infospace, Inc.* 23
4,500 Internap Network Services Corp.* 17
2,200 Internet Brands, Inc. "A"* 15
3,000 Internet Capital Group, Inc.* 19
4,100 J2 Global Communications, Inc.* 82
2,500 Limelight Networks, Inc.* 9
1,200 Liquidity Services, Inc.* 10
1,700 Loopnet, Inc.* 17
100 MercadoLibre, Inc.* 5
3,800 ModusLink Global Solutions, Inc.* 31
10,400 Move, Inc.* 16
3,900 NIC, Inc. 34
2,300 Perficient, Inc.* 19
1,100 Rackspace Hosting, Inc.* 20
6,700 RealNetworks, Inc.* 22
16,900 Sohu.com, Inc.*(a) 942
1,700 Switch & Data Facilities Co., Inc.* 31
4,500 Terremark Worldwide, Inc.* 28
3,007 United Online, Inc. 20
10,600 ValueClick, Inc.* 100
23,800 VeriSign, Inc.* 534
1,600 Vocus, Inc.* 26
2,100 Web Com Group, Inc.* 12
1,477 WebMD Health Corp. "A"* 54
8,100 Yahoo!, Inc.* 121
------------
11,848
------------
IT CONSULTING & OTHER SERVICES (0.1%)
45,506 Accenture plc "A" 1,868
15,524 Acxiom Corp.* 179
500 CACI International, Inc. "A"* 23
2,200 China Information Security Technology, Inc.* 13
5,500 CIBER, Inc.* 17
2,700 Cognizant Technology Solutions Corp. "A"* 119
900 Forrester Research, Inc.* 23
1,645 Gartner, Inc.* 31
1,800 iGATE Corp. 17
1,500 ManTech International Corp. "A"* 65
1,000 Maximus, Inc. 46
1,600 MPS Group, Inc.* 22
600 NCI, Inc. "A"* 15
3,000 Ness Technologies, Inc.* 15
1,700 RightNow Technologies, Inc.* 24
================================================================================
44 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
3,000 SAIC, Inc.* $ 53
1,700 Sapient Corp.* 13
700 SRA International, Inc. "A"* 13
700 Unisys Corp.* 22
1,100 Virtusa Corp.* 10
------------
2,588
------------
OFFICE ELECTRONICS (0.0%)
2,800 Xerox Corp. 22
------------
SEMICONDUCTOR EQUIPMENT (0.1%)
3,745 Advanced Energy Industries, Inc.* 41
29,700 Amkor Technology, Inc.* 165
9,200 Applied Materials, Inc. 113
500 ATMI, Inc. 8
5,600 Brooks Automation, Inc.* 41
1,900 Cohu, Inc. 22
500 Cymer, Inc.* 17
10,600 Entegris, Inc.* 44
600 FEI Co.* 15
1,000 FormFactor, Inc.* 17
1,600 KLA-Tencor Corp. 50
5,953 Kulicke & Soffa Industries, Inc.* 27
700 Lam Research Corp.* 24
1,500 MEMC Electronic Materials, Inc.* 18
900 MKS Instruments, Inc.* 13
1,100 Novellus Systems, Inc.* 23
4,300 Photronics, Inc.* 17
1,000 Rubicon Technology, Inc.*(a) 17
2,600 Rudolph Technologies, Inc.* 17
1,800 Semitool, Inc.* 20
1,600 Teradyne, Inc.* 14
42,200 Tessera Technologies, Inc.* 999
1,900 Ultratech, Inc.* 25
2,700 Veeco Instruments, Inc.* 74
------------
1,821
------------
SEMICONDUCTORS (1.1%)
2,100 Actel Corp.* 24
3,600 Advanced Analogic Technologies, Inc.* 11
7,300 Advanced Micro Devices, Inc.* 51
1,900 Altera Corp. 40
5,500 ANADIGICS, Inc.* 17
2,500 Analog Devices, Inc. 75
5,500 Applied Micro Circuits Corp.* 41
1,200 Atheros Communications, Inc.* 34
12,000 Atmel Corp.* 48
3,800 Broadcom Corp. "A"* 111
1,600 Ceva, Inc.* 19
5,400 Cirrus Logic, Inc.* 29
1,400 Cree, Inc.* 67
4,800 Cypress Semiconductor Corp.* 46
500 Diodes, Inc. 9
2,000 DSP Group, Inc.* 13
4,400 Entropic Communications, Inc.* 13
2,900 Exar Corp.* 20
300 Hittite Microwave Corp.* 11
18,800 Integrated Device Technology, Inc.* 106
288,192 Intel Corp. 5,533
1,000 International Rectifier Corp.* 19
1,200 Intersil Corp. "A" 15
1,900 IXYS Corp.* 12
5,800 Kopin Corp.* 25
2,000 Linear Technology Corp. 54
12,500 LSI Corp.* 66
13,800 Marvell Technology Group Ltd.* 213
20,900 Maxim Integrated Products, Inc. 368
2,500 Micrel, Inc. 18
================================================================================
PORTFOLIO OF INVESTMENTS | 45
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,100 Microchip Technology, Inc. $ 29
63,400 Micron Technology, Inc.* 477
1,400 Microsemi Corp.* 21
3,600 MIPS Technologies, Inc.* 14
1,500 National Semiconductor Corp. 22
400 NVE Corp.* 15
8,400 NVIDIA Corp.* 110
900 OmniVision Technologies, Inc.* 13
2,300 ON Semiconductor Corp.* 18
2,000 Pericom Semiconductor Corp.* 21
1,900 PMC-Sierra, Inc.* 15
21,500 RF Micro Devices, Inc.* 93
21,835 Semtech Corp.* 350
2,100 Sigma Designs, Inc.* 24
6,100 Silicon Image, Inc.* 13
2,000 Silicon Laboratories, Inc.* 84
59,400 Skyworks Solutions, Inc.* 731
1,800 Standard Microsystems Corp.* 35
891 Supertex, Inc.* 21
1,192 Techwell, Inc.* 14
421,302 Texas Instruments, Inc. 10,655
8,600 TriQuint Semiconductor, Inc.* 47
1,812 Volterra Semiconductor Corp.* 30
38,500 Xilinx, Inc. 872
33,400 Zoran Corp.* 305
------------
21,137
------------
SYSTEMS SOFTWARE (1.2%)
1,500 ArcSight, Inc.* 34
32,400 Ariba, Inc.* 351
4,900 BMC Software, Inc.* 190
31,063 CA, Inc. 687
700 CommVault Systems, Inc.* 15
2,800 DemandTec, Inc.* 25
1,500 Double-Take Software, Inc.* 13
3,000 FalconStor Software, Inc.* 12
900 McAfee, Inc.* 34
1,300 MICROS Systems, Inc.* 37
447,509 Microsoft Corp. 13,161
9,200 Novell, Inc.* 36
1,200 Opnet Technologies, Inc. 13
132,623 Oracle Corp.(b) 2,928
400 Quality Systems, Inc. 24
2,400 Radiant Systems, Inc.* 23
93,800 Red Hat, Inc.* 2,504
900 Rovi Corp.* 27
4,290 SonicWALL, Inc.* 33
1,800 Sourcefire, Inc.* 35
27,184 Sybase, Inc.* 1,094
27,600 Symantec Corp.* 490
3,100 TeleCommunication Systems, Inc. "A"* 26
2,100 VASCO Data Security International, Inc.* 14
2,100 VMware, Inc. "A"* 88
------------
21,894
------------
TECHNOLOGY DISTRIBUTORS (0.0%)
600 Anixter International, Inc.* 26
700 Arrow Electronics, Inc.* 18
1,000 Avnet, Inc.* 27
8,800 Brightpoint, Inc.* 63
1,500 Electro Rent Corp. 15
1,400 Ingram Micro, Inc. "A"* 24
3,700 Insight Enterprises, Inc.* 38
300 ScanSource, Inc. 7
4,100 SYNNEX Corp.* 116
8,900 Tech Data Corp.* 375
------------
709
------------
Total Information Technology 115,740
------------
MATERIALS (0.7%)
---------------
ALUMINUM (0.0%)
6,900 Alcoa, Inc. 87
3,400 Century Aluminum Co.* 33
200 Kaiser Alum Corp. 8
------------
128
------------
================================================================================
46 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
COMMODITY CHEMICALS (0.0%)
3,000 Calgon Carbon Corp.* $ 42
13,500 Celanese Corp. "A" 402
1,900 NL Industries, Inc. 13
2,500 Spartech Corp. 27
6,700 Westlake Chemical Corp. 175
------------
659
------------
CONSTRUCTION MATERIALS (0.0%)
4,000 Headwaters, Inc.* 19
100 Martin Marietta Materials, Inc. 8
800 Vulcan Materials Co. 39
------------
66
------------
DIVERSIFIED CHEMICALS (0.1%)
3,200 Ashland, Inc. 115
3,700 Cabot Corp. 85
11,100 Dow Chemical Co. 308
6,800 E.I. du Pont de Nemours & Co. 235
800 Eastman Chemical Co. 48
400 FMC Corp. 22
1,400 Huntsman Corp. 13
1,455 LSB Industries, Inc.* 18
1,400 Olin Corp. 24
1,000 PPG Industries, Inc. 59
2,300 ShengdaTech, Inc.* 15
2,400 Solutia, Inc.* 26
------------
968
------------
DIVERSIFIED METALS & MINING (0.0%)
500 AMCOL International Corp. 14
1,600 Brush Engineered Materials, Inc.* 28
400 Compass Minerals International, Inc. 26
3,500 Freeport-McMoRan Copper & Gold, Inc.* 290
5,200 General Moly, Inc.* 12
3,500 Horsehead Holding Corp.* 39
400 RTI International Metals, Inc. 8
1,300 Southern Copper Corp. 45
600 Walter Industries, Inc. 41
------------
503
------------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.3%)
1,600 American Vanguard Corp. 12
21,600 CF Industries Holdings, Inc.(b) 1,844
600 Intrepid Potash, Inc.* 18
18,600 Monsanto Co. 1,502
1,500 Mosaic Co. 81
600 Scotts Miracle-Gro Co. "A" 24
28,300 Terra Industries, Inc. 1,092
------------
4,573
------------
FOREST PRODUCTS (0.0%)
7,300 Louisiana-Pacific Corp.* 46
1,400 Weyerhaeuser Co. 54
------------
100
------------
INDUSTRIAL GASES (0.0%)
1,400 Air Products & Chemicals, Inc. 116
300 Airgas, Inc. 14
2,100 Praxair, Inc. 172
------------
302
------------
METAL & GLASS CONTAINERS (0.1%)
500 AEP Industries, Inc.* 19
500 AptarGroup, Inc. 18
500 Ball Corp. 25
700 BWAY Holding Co.* 11
900 Crown Holdings, Inc.* 23
2,550 Myers Industries, Inc. 21
1,000 Owens-Illinois, Inc.* 31
84,985 Pactiv Corp.* 2,069
500 Silgan Holdings, Inc. 27
------------
2,244
------------
PAPER PACKAGING (0.0%)
800 Bemis Co., Inc. 23
2,400 Boise, Inc.* 12
800 Rock-Tenn Co. "A" 36
================================================================================
PORTFOLIO OF INVESTMENTS | 47
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
1,300 Sealed Air Corp. $ 29
600 Sonoco Products Co. 17
------------
117
------------
PAPER PRODUCTS (0.1%)
5,500 Buckeye Technologies, Inc.* 53
900 Clearwater Paper Corp.* 44
1,700 Glatfelter 19
50,314 International Paper Co. 1,280
1,800 KapStone Paper & Packaging Corp.* 13
1,300 MeadWestvaco Corp. 36
1,000 Schweitzer-Mauduit International, Inc. 62
2,200 Wausau Paper Corp. 22
------------
1,529
------------
SPECIALTY CHEMICALS (0.1%)
1,813 A. Schulman, Inc. 30
300 Arch Chemicals, Inc. 8
1,600 Balchem Corp. 51
400 Cytec Industries, Inc. 14
12,200 Ecolab, Inc. 548
4,300 Ferro Corp. 28
1,500 H.B. Fuller Co. 30
1,400 Innophos Holdings, Inc. 35
1,900 Innospec, Inc. 17
300 International Flavors & Fragrances, Inc. 12
2,100 Landec Corp.* 13
900 Lubrizol Corp. 65
400 Minerals Technologies, Inc. 21
900 Nalco Holding Co. 22
800 Newmarket Corp. 84
500 OM Group, Inc.* 15
7,600 PolyOne Corp.* 55
900 Quaker Chemical Corp. 17
800 Rockwood Holdings, Inc.* 18
700 RPM International, Inc. 14
1,000 Sensient Technologies Corp. 25
900 Sigma-Aldrich Corp. 48
600 Stepan Co. 38
1,000 Valspar Corp. 26
1,700 W.R. Grace & Co.* 39
1,700 Zep, Inc. 30
------------
1,303
------------
STEEL (0.0%)
500 AK Steel Holding Corp. 10
600 Allegheny Technologies, Inc. 21
1,300 AM Castle & Co. 17
1,000 Cliffs Natural Resources, Inc. 44
2,200 Gibraltar Industries, Inc. 33
1,000 Haynes International, Inc. 27
2,500 Nucor Corp. 106
700 Olympic Steel, Inc. 19
200 Reliance Steel & Aluminum Co. 8
800 Schnitzer Steel Industries, Inc. "A" 36
1,100 Steel Dynamics, Inc. 19
1,300 United States Steel Corp. 58
8,735 Worthington Industries, Inc. 102
------------
500
------------
Total Materials 12,992
------------
TELECOMMUNICATION SERVICES (0.7%)
--------------------------------
ALTERNATIVE CARRIERS (0.0%)
1,100 Abovenet, Inc.* 57
54,714 Cogent Communications Group, Inc.* 466
29,900 Level 3 Communications, Inc.* 37
10,100 PAETEC Holding Corp.* 37
10,200 Premiere Global Services, Inc.* 77
------------
674
------------
INTEGRATED TELECOMMUNICATION SERVICES (0.5%)
5,400 Alaska Communications Systems Group, Inc. 39
202,707 AT&T, Inc. 5,461
================================================================================
48 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
500 Atlantic Tele-Network, Inc. $ 23
1,500 Cbeyond, Inc.* 19
2,205 CenturyTel, Inc. 79
17,500 Cincinnati Bell, Inc.* 52
1,800 Frontier Communications Corp. 14
3,900 General Communication, Inc. "A"* 24
2,100 Iowa Telecommunication Services, Inc. 33
37,700 Qwest Communications International, Inc. 138
82,200 Verizon Communications, Inc.(b) 2,586
2,800 Windstream Corp. 28
------------
8,496
------------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
3,200 American Tower Corp. "A"* 131
2,400 Crown Castle International Corp.* 88
7,400 ICO Global Communications Holdings Ltd.* 6
1,500 Leap Wireless International, Inc.* 22
105,550 NII Holdings, Inc. "B"* 3,145
1,900 NTELOS Holdings Corp. 32
600 SBA Communications Corp. "A"* 19
3,200 Shenandoah Telecommunications Co. 54
84,000 Sprint Nextel Corp.* 312
20,900 Syniverse Holdings, Inc.* 331
2,100 Telephone & Data Systems, Inc. 64
4,871 U.S. Cellular Corp.* 182
16,400 USA Mobility, Inc. 164
------------
4,550
------------
Total Telecommunication Services 13,720
------------
UTILITIES (0.9%)
---------------
ELECTRIC UTILITIES (0.3%)
6,800 Allegheny Energy, Inc. 149
500 Allete, Inc. 17
3,600 American Electric Power Co., Inc. 116
900 Central Vermont Public Service Corp. 17
1,300 Cleco Corp. 33
27,193 DPL, Inc. 730
15,600 Duke Energy Corp. 260
2,300 Edison International 78
2,000 El Paso Electric Co.* 40
1,000 Empire District Electric Co. 18
1,200 Entergy Corp. 94
32,500 Exelon Corp. 1,566
20,143 FirstEnergy Corp. 868
36,904 FPL Group, Inc. 1,918
800 Great Plains Energy, Inc. 14
909 Hawaiian Electric Industries, Inc. 18
1,100 IdaCorp, Inc. 33
3,100 MGE Energy, Inc. 106
1,100 Northeast Utilities 27
1,200 NV Energy, Inc. 14
1,400 Pepco Holdings, Inc. 23
600 Pinnacle West Capital Corp. 21
1,300 Portland General Electric Co. 26
3,700 PPL Corp. 113
2,200 Progress Energy, Inc. 86
8,200 Southern Co. 263
600 UIL Holdings Corp. 16
800 UniSource Energy Corp. 24
------------
6,688
------------
GAS UTILITIES (0.1%)
700 Chesapeake Utilities Corp. 22
300 Energen Corp. 13
700 EQT Corp. 29
600 Laclede Group, Inc. 19
================================================================================
PORTFOLIO OF INVESTMENTS | 49
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
3,400 National Fuel Gas Co. $ 159
1,200 New Jersey Resources Corp. 42
1,000 Nicor, Inc. 39
1,050 Northwest Natural Gas Co. 45
700 ONEOK, Inc. 28
2,200 Piedmont Natural Gas Co., Inc. 52
1,000 Questar Corp. 40
600 South Jersey Industries, Inc. 22
1,600 Southwest Gas Corp. 42
25,494 UGI Corp. 598
800 WGL Holdings, Inc. 25
------------
1,175
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
63,144 AES Corp.* 804
1,100 Constellation Energy Group, Inc. 35
2,160 Mirant Corp.* 31
20,500 NRG Energy, Inc.* 491
1,300 Ormat Technologies, Inc. 54
6,300 RRI Energy, Inc.* 31
------------
1,446
------------
MULTI-UTILITIES (0.4%)
500 Alliant Energy Corp. 14
1,500 Ameren Corp. 39
900 Avista Corp. 19
800 Black Hills Corp. 19
2,100 Calpine Corp.* 23
2,600 CenterPoint Energy, Inc. 34
2,672 CH Energy Group, Inc. 108
1,400 CMS Energy Corp. 20
1,800 Consolidated Edison, Inc. 77
4,500 Dominion Resources, Inc. 164
38,721 DTE Energy Co. 1,553
1,200 MDU Resources Group, Inc. 27
2,000 NiSource, Inc. 28
800 NorthWestern Corp. 21
800 NSTAR 27
1,100 OGE Energy Corp. 38
3,569 PG&E Corp. 151
3,900 PNM Resources, Inc. 43
75,200 Public Service Enterprise Group, Inc. 2,358
700 SCANA Corp. 25
35,674 Sempra Energy 1,896
1,300 TECO Energy, Inc. 19
700 Wisconsin Energy Corp. 32
3,200 Xcel Energy, Inc. 65
------------
6,800
------------
WATER UTILITIES (0.0%)
1,000 American States Water Co. 33
2,400 American Water Works Co., Inc. 53
700 Aqua America, Inc. 12
992 Cadiz, Inc.* 13
1,000 California Water Service Group 37
1,100 Connecticut Water Service, Inc. 25
1,200 Middlesex Water Co. 19
900 SJW Corp. 19
------------
211
------------
Total Utilities 16,320
------------
Total Common Stocks (cost: $484,362) 530,231
------------
PREFERRED SECURITIES (0.7%)
CONSUMER STAPLES (0.4%)
----------------------
AGRICULTURAL PRODUCTS (0.4%)
80,000 Dairy Farmers of America, Inc., 7.88%, cumulative redeemable, perpetual(c) 6,492
------------
================================================================================
50 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
FINANCIALS (0.3%)
-----------------
LIFE & HEALTH INSURANCE (0.3%)
130,000 Delphi Financial Group, Inc., 7.38%, perpetual $ 2,270
165,000 Delphi Financial Group, Inc., 8.00% 3,721
------------
5,991
------------
THRIFTS & MORTGAGE FINANCE (0.0%)
12,000 Washington Mutual Capital Trust, 5.38%, cumulative convertible, perpetual* 103
------------
Total Financials 6,094
------------
GOVERNMENT (0.0%)
-----------------
U.S. GOVERNMENT (0.0%)
140,000 Fannie Mae, 8.25%, perpetual 112
80,000 Freddie Mac, 8.38%, perpetual 66
------------
Total Government 178
------------
Total Preferred Securities (cost: $17,498) 12,764
------------
WARRANTS (0.0%)
ENERGY (0.0%)
-------------
COAL & CONSUMABLE FUELS (0.0%)
90 GreenHunter Energy, Inc., acquired 07/15/2008; cost: $0*(a),(d),(e) -
------------
INVESTMENT COMPANIES (7.7%)
1,756,419 PIMCO Commodity Real Return Strategy Fund 14,982
1,204,379 SPDR Trust Series 1 ETF 132,337
------------
Total Investment Companies (cost: $144,048) 147,319
------------
HEDGE FUNDS (2.4%)
2,866,972 Deutsche iGAP Investment Trust "B", acquired 10/01/2008;
cost: $50,000*(d),(f) 46,646
------------
Total U.S. Equity Securities (cost: $695,908) 736,960
------------
INTERNATIONAL EQUITY SECURITIES (22.6%)
COMMON STOCKS (15.6%)
CONSUMER DISCRETIONARY (1.4%)
-----------------------------
APPAREL & ACCESSORIES & LUXURY GOODS (0.0%)
1,200 FGX International Holdings Ltd.* 20
719 Lululemon Athletica, Inc.* 19
13,866 Swatch Group Ltd. 662
------------
701
------------
APPAREL RETAIL (0.1%)
4,700 Fast Retailing Co. 853
15,074 Hennes & Mauritz AB "B" 891
------------
1,744
------------
AUTO PARTS & EQUIPMENT (0.1%)
300 Autoliv, Inc. 12
11,300 Denso Corp. 316
10,000 NHK Spring Co. 89
16,100 Toyota Industries Corp. 442
------------
859
------------
AUTOMOBILE MANUFACTURERS (0.4%)
29,060 Bayerische Motoren Werke AG 1,371
3,034 Daimler AG 154
67,000 Honda Motor Co. Ltd. 2,093
190,000 Mitsubishi Motors Corp.*(a) 257
229,500 Nissan Motor Co. Ltd.* 1,662
================================================================================
PORTFOLIO OF INVESTMENTS | 51
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
60,500 Toyota Motor Corp. $ 2,408
2,218 Volkswagen AG(a) 273
------------
8,218
------------
AUTOMOTIVE RETAIL (0.0%)
900 USS Co. Ltd. 56
------------
BROADCASTING (0.0%)
900 Central European Media Enterprises Ltd. "A"* 22
------------
CABLE & SATELLITE (0.0%)
28,990 SES 617
------------
CASINOS & GAMING (0.1%)
28,652 OPAP S.A. 687
78,822 Tabcorp Holdings Ltd. 518
178,763 Tatts Group Ltd. 395
------------
1,600
------------
CATALOG RETAIL (0.1%)
168,583 Home Retail Group 816
------------
COMPUTER & ELECTRONICS RETAIL (0.1%)
32,443 JB Hi-Fi Ltd. 689
1,800 KS Holdings Corp. 60
------------
749
------------
CONSUMER ELECTRONICS (0.1%)
51,000 Panasonic Corp. 655
66,000 Sharp Corp. 754
35,900 Sony Corp. 966
------------
2,375
------------
DEPARTMENT STORES (0.1%)
111,058 Marks & Spencer Group plc 705
13,597 Next plc 442
9,631 PPR 1,166
------------
2,313
------------
DISTRIBUTORS (0.0%)
5,000 Jardine Cycle & Carriage Ltd. 88
62,000 Li & Fung Ltd. 249
140,449 Pacific Brands Ltd.* 168
------------
505
------------
FOOTWEAR (0.0%)
36,500 Yue Yuen Industrial Holdings, Ltd. 103
------------
GENERAL MERCHANDISE STORES (0.0%)
40,240 Harvey Norman Holding Ltd. 158
------------
HOME IMPROVEMENT RETAIL (0.1%)
297,401 Kingfisher plc 1,160
------------
HOMEBUILDING (0.0%)
4,000 Sekisui Chemical Co. Ltd. 24
------------
HOMEFURNISHING RETAIL (0.0%)
2,650 Nitori Co. 222
------------
HOTELS, RESORTS, & CRUISE LINES (0.0%)
8,658 Carnival plc* 290
6,300 Orient-Express Hotels Ltd. "A"* 53
------------
343
------------
HOUSEHOLD APPLIANCES (0.0%)
13,347 Electrolux AB "B"* 327
------------
INTERNET RETAIL (0.0%)
17,567 Wotif.com Holdings Ltd. 101
------------
LEISURE PRODUCTS (0.0%)
9,100 Heiwa Corp. 94
------------
MOVIES & ENTERTAINMENT (0.1%)
38,485 Vivendi S.A. 1,109
------------
PUBLISHING (0.0%)
35,029 Fairfax Media Ltd. 53
5,511 Pearson plc 75
4,241 Reed Elsevier N.V. 49
20,613 Reed Elsevier plc 154
------------
331
------------
SPECIALIZED CONSUMER SERVICES (0.0%)
4,277 Dignity plc 41
------------
TIRES & RUBBER (0.1%)
25,200 Bridgestone Corp. 401
10,756 Compagnie Generale des Establissements Michelin 816
================================================================================
52 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
65,913 Pirelli & Co. S.p.A.* $ 42
14,700 Sumitomo Rubber Industries, Ltd. 115
------------
1,374
------------
Total Consumer Discretionary 25,962
------------
CONSUMER STAPLES (1.4%)
----------------------
AGRICULTURAL PRODUCTS (0.2%)
180,040 Golden Agri-Resources Ltd.* 60
16,093 Graincorp Ltd. 90
37,722 Suedzucker AG 824
404,000 Wilmar International Ltd. 1,839
------------
2,813
------------
BREWERS (0.2%)
27,161 Anheuser-Busch 1,356
9,200 Asahi Breweries Ltd. 163
8,486 Heineken Holding N.V. 350
14,925 Heineken N.V. 702
10,000 Kirin Holdings Co. Ltd. 163
------------
2,734
------------
DISTILLERS & VINTNERS (0.1%)
127,612 Diageo plc 2,152
------------
DRUG RETAIL (0.0%)
1,600 Cawachi Ltd. 31
------------
FOOD DISTRIBUTORS (0.1%)
80,156 Metcash Ltd. 343
504,077 Olam International Ltd.(a) 958
------------
1,301
------------
FOOD RETAIL (0.2%)
39,420 Alimentation Couche-Tard, Inc. 816
6,366 Casino Guichard-Perrachon S.A. 547
4,605 Delhaize Group 349
13,485 Jeronimo Martins SGPS S.A. 132
36,934 Koninklijke Ahold N.V. 498
1,393 Rallye S.A. 49
63,930 Tesco plc 445
35,899 Woolworths Ltd. 922
------------
3,758
------------
HOUSEHOLD PRODUCTS (0.1%)
2,584 Henkel AG & Co. KGaA 112
37,714 Reckitt Benckiser Group plc 1,923
------------
2,035
------------
HYPERMARKETS & SUPER CENTERS (0.0%)
27,702 Wesfarmers Ltd. 756
------------
PACKAGED FOODS & MEAT (0.3%)
33,572 Cadbury plc 445
240,172 Goodman Fielder Ltd. 337
247 Lindt & Spruengli 567
69,888 Nestle S.A. 3,304
2,000 Toyo Suisan Kaisha Ltd. 54
12,689 Unilever N.V. 389
44,144 Unilever plc 1,296
------------
6,392
------------
SOFT DRINKS (0.0%)
67,896 Coca-Cola Amatil Ltd. 659
------------
TOBACCO (0.2%)
58,611 British America Tobacco plc 1,781
58,419 Imperial Tobacco Group plc 1,699
42 Japan Tobacco, Inc. 124
33,578 Swedish Match 723
------------
4,327
------------
Total Consumer Staples 26,958
------------
ENERGY (1.3%)
------------
COAL & CONSUMABLE FUELS (0.1%)
512,000 Yanzhou Coal Mining Co. Ltd. "H" 1,020
------------
INTEGRATED OIL & GAS (1.0%)
12,826 BG Group plc 233
486,891 BP plc(g) 4,603
67,774 ENI S.p.A. 1,679
================================================================================
PORTFOLIO OF INVESTMENTS | 53
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
31,976 Lukoil Oil Co. $ 1,858
10,554 OMV AG 447
32,900 Petroleo Brasileiro S.A. ADR 1,687
35,189 Repsol YPF S.A. 967
105,474 Royal Dutch Shell plc "A"(g) 3,124
95,823 Royal Dutch Shell plc "B"(g) 2,738
47,161 Total S.A.(g) 2,918
------------
20,254
------------
OIL & GAS EQUIPMENT & SERVICES (0.1%)
70,752 Acergy S.A 1,042
3,950 Aker ASA 107
280 Technip S.A. 19
9,649 Tenaris S.A. 190
------------
1,358
------------
OIL & GAS EXPLORATION & PRODUCTION (0.0%)
10,843 Alliance Oil Co. Ltd.* 157
------------
OIL & GAS REFINING & MARKETING (0.1%)
49,000 Cosmo Oil Co. Ltd. 106
8,306 Hellenic Petroleum S.A. 97
2,200 Idemitsu Kosan Co. Ltd. 135
219,000 Nippon Oil Corp. 932
------------
1,270
------------
OIL & GAS STORAGE & TRANSPORTATION (0.0%)
4,200 DHT Maritime, Inc. 17
1,300 Frontline Ltd.(a) 35
4,000 General Maritime Corp. 28
3,400 Nordic American Tanker Shipping Ltd.(a) 109
3,581 Ship Finance International Ltd. 47
------------
236
------------
Total Energy 24,295
------------
FINANCIALS (4.1%)
----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.0%)
36,556 3i Group plc 162
3,100 Invesco Ltd. ADR 69
------------
231
------------
CONSUMER FINANCE (0.0%)
2,300 SFCG Co. Ltd., acquired 06/26/2008 & 07/16/2008; cost: $274*(d),(e) -
------------
DIVERSIFIED BANKS (2.7%)
36,888 Australia and New Zealand Banking Group Ltd. 748
339,417 Banca Intesa S.p.A.* 1,470
258,931 Banco Bilbao Vizcaya Argentaria S.A. 4,878
117,041 Banco Espirito Santo S.A. 819
2,300 Banco Latinoamericano de Exportaciones S.A. "E" 32
35,101 Banco Popolare Di Milano Scarl (BPM) 273
29,137 Banco Popular Espanol S.A. 247
251,923 Banco Santander S.A.(g) 4,316
2,076,000 Bank of China Ltd. "H" 1,168
1,825 Bank of Piraeus* 27
685,565 Barclays plc 3,297
27,795 BNP Paribas S.A. 2,296
156,500 BOC Hong Kong Holdings Ltd. 360
441,502 Bumiputra-Commerce Holdings Berhad 1,645
1,369,965 China CITIC Bank "H" 1,131
1,714,277 China Construction Bank Corp. "H" 1,524
23,112 Commonwealth Bank of Australia 1,118
33,463 Credit Agricole S.A. 692
43,423 Danske Bank A/S* 935
100,000 DBS Group Holdings Ltd. 1,035
134,460 Dexia*(a) 1,015
52,800 DnB NOR ASA* 594
23,226 Erste Bank der Oesterreichischen Sparkassen AG 944
12,000 Hang Seng Bank 176
================================================================================
54 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
368,093 HSBC Holdings plc(g) $ 4,281
1,891,894 Industrial and Commercial Bank of China Ltd. "H" 1,599
198,280 Intesa Sanpaolo 648
97,362 Lloyds TSB Group plc* 88
93,200 Mitsubishi UFJ Financial Group, Inc. 520
43,188 National Australia Bank Ltd. 1,132
26,200 National Bank of Canada 1,568
81,108 National Bank of Greece S.A.* 2,387
38,776 OTP Bank* 1,156
27,000 Overseas Chinese Town Asia Holdings Ltd. 164
78,156 Standard Chartered plc 1,908
38,700 Sumitomo Mitsui Financial Group, Inc. 1,276
24,043 Svenska Handelsbanken AB "A" 689
327,361 UniCredito Italiano S.p.A.* 1,118
15,000 United Overseas Bank Ltd. 204
57,831 Westpac Banking Corp. 1,279
------------
50,757
------------
DIVERSIFIED CAPITAL MARKETS (0.4%)
59,035 Credit Suisse Group 3,056
30,821 Deutsche Bank AG 2,224
268,080 Investec plc 1,896
31,902 UBS AG* 495
------------
7,671
------------
INVESTMENT BANKING & BROKERAGE (0.1%)
191,000 Daiwa Securities Group, Inc. 1,027
2,000 Lazard Ltd. "A" 78
46,607 Marfin Investment Group S.A.* 147
7,900 MF Global Ltd.* 50
------------
1,302
------------
LIFE & HEALTH INSURANCE (0.2%)
38,463 AEGON N.V.* 277
87,100 AMP Ltd. 493
4,550 CNP Assurances 487
844,989 Legal & General Group plc 1,075
786,949 Old Mutual plc* 1,469
49,430 Prudential plc 509
------------
4,310
------------
MULTI-LINE INSURANCE (0.3%)
12,816 Allianz Holding AG 1,575
275,938 Aviva plc 1,681
31,867 AXA S.A. 759
2,198 Topdanmark A/S* 315
6,125 Zurich Financial Services AG 1,320
------------
5,650
------------
MULTI-SECTOR HOLDINGS (0.0%)
3,250 Compagnie Nationale a Portefeuille 171
5,900 Corporacion Financiera Alba S.A. 317
4,407 Groupe Bruxelles Lambert S.A. 401
------------
889
------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.0%)
92,893 ING Groep N.V.* 865
------------
PROPERTY & CASUALTY INSURANCE (0.0%)
2,636 Argo Group International Holdings Ltd.* 77
2,200 Aspen Insurance Holdings Ltd. 57
3,900 Axis Capital Holdings Ltd. 109
60,684 Suncorp Metway 488
2,900 United American Indemnity Ltd. "A"* 20
------------
751
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 55
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
REGIONAL BANKS (0.1%)
23,000 Bank of Kyoto, Ltd. $ 211
29,274 Bendigo Bank Ltd. 238
11,000 Chiba Bank Ltd. 72
215,000 Fukuoka Financial Group, Inc. 781
23,000 Hachijuni Bank Ltd. 147
207,000 Hokuhoku Financial Group, Inc. 484
1,900 Oriental Financial Group, Inc. 18
18,600 Resona Holdings, Inc. 199
74,200 Sapporo Hokuyo Holdings, Inc. 276
19,000 Suruga Bank Ltd. 187
9,000 Yamaguchi Financial Group, Inc. 94
------------
2,707
------------
REINSURANCE (0.2%)
5,500 Endurance Specialty Holdings Ltd. 206
107 Enstar Group Ltd.* 8
1,600 Everest Reinsurance Group Ltd. 136
3,304 Flagstone Reinsurance Holdings Ltd. 36
2,400 Greenlight Capital Re Ltd. "A"* 58
26,069 Hannover Rueckversicherungs* 1,242
7,100 Montpelier Re Holdings Ltd. 119
4,471 Muenchener Rueckversicherungs-Gesellschaft AG 701
1,500 PartnerRe Ltd. 116
1,600 RenaissanceRe Holdings Ltd. 85
13,029 SCOR SE 318
2,500 Validus Holdings Ltd. 66
------------
3,091
------------
SPECIALIZED FINANCE (0.1%)
56,800 Hong Kong Exchanges & Clearing Ltd. 1,013
5,080 Mitsubishi UFJ Lease & Finance Co., Ltd. 152
------------
1,165
------------
Total Financials 79,389
------------
HEALTH CARE (1.1%)
-----------------
HEALTH CARE DISTRIBUTORS (0.0%)
3,800 Toho Holdings Co. Ltd. 53
------------
HEALTH CARE EQUIPMENT (0.1%)
1,300 Orthofix International N.V.* 39
3,480 Synthes, Inc. 458
11,000 Terumo Corp. 622
3,284 William Demant Holding A/S* 237
------------
1,356
------------
HEALTH CARE SUPPLIES (0.0%)
4,538 Essilor International SA 263
4,000 Nipro Corp. 86
------------
349
------------
PHARMACEUTICALS (1.0%)
11,600 Astellas Pharma, Inc. 428
48,133 AstraZeneca plc 2,151
14,019 Bayer AG 1,073
144,267 GlaxoSmithKline plc 2,983
45,320 H Lundbeck A/S 853
10,000 Kyorin Co. Ltd. 156
71,132 Novartis AG 3,948
7,782 Novo Nordisk A/S 522
15,093 Roche Holdings AG 2,469
47,858 Sanofi-Aventis S.A. 3,616
40,600 Takeda Pharmaceutical Co. Ltd. 1,691
5,393 Teva Pharmaceutical Industries Ltd. ADR 285
------------
20,175
------------
Total Health Care 21,933
------------
================================================================================
56 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
INDUSTRIALS (1.6%)
-----------------
AEROSPACE & DEFENSE (0.1%)
56,211 BAE Systems plc(g) $ 304
30,204 European Aeronautic Defense and Space Co. N.V.(a) 540
697,920 Rolls Royce Group plc "c", acquired 10/28/2009; cost: $1(d),(e)* -
11,632 Rolls-Royce Group plc* 91
37,356 Safran S.A. 625
------------
1,560
------------
AIR FREIGHT & LOGISTICS (0.0%)
5,976 TNT N.V. 173
2,700 UTi Worldwide, Inc. 35
9,000 Yamato Holdings Co. Ltd. 125
------------
333
------------
AIRLINES (0.1%)
539,237 Cathay Pacific Airways* 927
800 Copa Holdings S.A. "A" 40
304,510 Qantas Airways Ltd. 725
------------
1,692
------------
AIRPORT SERVICES (0.0%)
51,696 MAp Group 126
------------
BUILDING PRODUCTS (0.1%)
153,000 Asahi Glass Co. Ltd. 1,336
32,181 Hastie Group Ltd. 52
------------
1,388
------------
COMMERCIAL PRINTING (0.0%)
16,000 Dai Nippon Printing Co. Ltd. 197
26,000 Toppan Printing Co. Ltd. 211
------------
408
------------
CONSTRUCTION & ENGINEERING (0.1%)
3,613 Balfour Beatty plc 15
4,738 Bouygues S.A. 236
19,200 Daelim Industrial Co. Ltd. 1,361
4,283 Imtech N.V. 110
1,816 Kier Group plc 27
5,377 Obrascon Huarte Lain S.A. 147
------------
1,896
------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.0%)
6,400 Hitachi Construction Machinery Co. Ltd. 149
146,000 Mitsui Engineering & Shipbuilding Co., Ltd. 360
58,000 SembCorp Marine Ltd. 147
------------
656
------------
DIVERSIFIED SUPPORT SERVICES (0.0%)
35,054 Cape plc* 132
------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.1%)
7,474 Prysmian S.p.A. 126
8,028 Schneider Electric S.A. 878
83,800 Sumitomo Electric Industries Ltd. 991
------------
1,995
------------
ENVIRONMENTAL & FACILITIES SERVICES (0.0%)
22,581 Serco Group plc 192
------------
HEAVY ELECTRICAL EQUIPMENT (0.1%)
9,771 ABB Ltd.* 179
20,937 Alstom S.A. 1,466
72,000 Mitsubishi Electric Corp.* 508
------------
2,153
------------
HIGHWAYS & RAILTRACKS (0.1%)
2,585 Atlantia S.p.A. 67
760,707 Macquarie Infrastructure Group 906
3,461 Societe des Autoroutes Paris-Rhin-Rhone 288
------------
1,261
------------
INDUSTRIAL CONGLOMERATES (0.3%)
127,000 Fraser & Neave Ltd. 365
141,000 Hutchison Whampoa Ltd. 954
4,400 Jardine Matheson Holdings Ltd. 130
28,000 Keppel Corp. Ltd. 164
================================================================================
PORTFOLIO OF INVESTMENTS | 57
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
53,322 Koninklijke Philips Electronics N.V. $ 1,458
20,615 LG Corp. 1,128
89,000 SembCorp Industries 238
7,580 Siemens AG 743
------------
5,180
------------
INDUSTRIAL MACHINERY (0.2%)
21,000 Amada Co. Ltd. 121
9,096 Atlas Copco AB 129
37,728 Kone Oyj "B" 1,527
2,110 Metso Corp. 68
34,613 Wartsila Corp. OYJ "B" 1,292
------------
3,137
------------
MARINE (0.0%)
5,000 Eagle Bulk Shipping, Inc.* 28
2,876 Kuehne & Nagel International AG 278
------------
306
------------
MARINE PORTS & SERVICES (0.0%)
66,000 Kamigumi Co. Ltd. 521
------------
OFFICE SERVICES & SUPPLIES (0.0%)
1,593 Societe BIC S.A. 111
------------
RAILROADS (0.0%)
58 Central Japan Railway Co. 419
------------
RESEARCH & CONSULTING SERVICES (0.0%)
1,324 Bureau Veritas S.A. 66
25,175 Experian plc 237
------------
303
------------
TRADING COMPANIES & DISTRIBUTORS (0.4%)
3,800 Aircastle Ltd. 34
255,000 Itochu Corp. 1,749
77,000 Marubeni Corp. 406
50,500 Mitsubishi Corp. 1,139
54,100 Mitsui & Co. Ltd. 716
358,000 Noble Group Ltd. 802
119,200 Sumitomo Corp. 1,172
48,200 Toyota Tsusho Corp. 645
------------
6,663
------------
TRUCKING (0.0%)
32,000 ComfortDelGro Corp. Ltd. 34
45,862 FirstGroup plc 295
12,000 Seino Holdings Co. Ltd. 88
------------
417
------------
Total Industrials 30,849
------------
INFORMATION TECHNOLOGY (0.8%)
-----------------------------
APPLICATION SOFTWARE (0.1%)
20,600 AsiaInfo Holdings, Inc.* 507
14,000 SAP AG 669
------------
1,176
------------
COMMUNICATIONS EQUIPMENT (0.0%)
27,000 Japan Radio Co., Ltd. 45
26,452 Nokia Oyj 348
8,000 VTech Holdings Ltd. 78
------------
471
------------
COMPUTER HARDWARE (0.1%)
200,000 Fujitsu Ltd. 1,189
72,000 NEC Corp.*(a) 182
------------
1,371
------------
COMPUTER STORAGE & PERIPHERALS (0.0%)
12,600 Seiko Epson Corp. 195
------------
DATA PROCESSING & OUTSOURCED SERVICES (0.1%)
72,309 Computershare Ltd. 708
------------
ELECTRONIC COMPONENTS (0.2%)
19,900 HOYA Corp. 508
2,600 Kyocera Corp. 207
3,700 Mabuchi Motor Co. 181
15,700 Murata Manufacturing Co., Ltd. 746
14,500 Nidec Corp. 1,273
107,000 Nippon Electric Glass Co. Ltd. 1,273
------------
4,188
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.0%)
17,900 FUJIFILM Holdings Corp. 488
------------
================================================================================
58 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
HOME ENTERTAINMENT SOFTWARE (0.0%)
1,200 Nintendo Co. Ltd. $ 294
------------
INTERNET SOFTWARE & SERVICES (0.1%)
68,200 Tencent Holdings Ltd. 1,261
38,969 United Internet AG* 526
------------
1,787
------------
IT CONSULTING & OTHER SERVICES (0.0%)
5,200 Amdocs Ltd.* 138
1,090 OBIC Co., Ltd. 181
12,707 Ordina N.V.* 93
------------
412
------------
OFFICE ELECTRONICS (0.0%)
7,200 Canon, Inc. 277
870 Neopost S.A. 76
------------
353
------------
SEMICONDUCTOR EQUIPMENT (0.0%)
600 Tokyo Electron Ltd. 33
------------
SEMICONDUCTORS (0.2%)
96,417 Infineon Technologies AG* 462
4,600 Rohm Co. 302
4,299 Samsung Electronics Co. Ltd. 2,662
162,800 United Microelectronics Corp. ADR* 552
------------
3,978
------------
Total Information Technology 15,454
------------
MATERIALS (1.6%)
---------------
ALUMINUM (0.0%)
10,800 Norsk Hydro ASA* 76
------------
COMMODITY CHEMICALS (0.1%)
84,000 Denki Kagaku Kogyo Kabushiki Kaisha 353
56,000 Kaneka Corp. 371
35,000 Kuraray Co. 421
------------
1,145
------------
CONSTRUCTION MATERIALS (0.1%)
630 Ciments Francais S.A. 67
20,133 HeidelbergCement AG 1,336
2,156 Holcim Ltd.* 155
12,573 Lafarge S.A.(a) 1,033
------------
2,591
------------
DIVERSIFIED CHEMICALS (0.2%)
7,966 AkzoNobel N.V. 505
22,595 BASF AG 1,363
30,000 Mitsubishi Gas Chemical Co., Inc. 136
101,000 Nippon Soda Co., Ltd. 344
10,000 Nissan Chemical Industries, Ltd. 132
18,694 Orica Ltd. 428
6,908 Solvay S.A. 729
------------
3,637
------------
DIVERSIFIED METALS & MINING (0.8%)
9,230 Anglo American Capital plc* 395
76,011 BHP Billiton Ltd.(g) 2,875
65,406 BHP Billiton plc 1,999
8,000 Dowa Holdings Co. Ltd. 43
82,945 Eurasian Natural Resources Corp. plc 1,175
15,481 First Quantum Minerals Ltd. 1,208
22,674 Kazakhmys plc* 460
36,434 KGHM Polska Miedz S.A. 1,418
2,506 Rio Tinto Ltd. 164
26,822 Rio Tinto plc 1,363
126,527 Straits Resources Ltd.* 191
63,000 Sumitomo Metal Mining Co. Ltd. 1,033
149,146 Xstrata plc* 2,623
------------
14,947
------------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.0%)
21,781 Incitec Pivot Ltd. 57
------------
INDUSTRIAL GASES (0.0%)
705 Air Liquide S.A. 82
6,173 Linde AG 759
------------
841
------------
PAPER PACKAGING (0.0%)
15,340 Huhtamaki Oyj 206
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 59
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
PAPER PRODUCTS (0.2%)
1,200 Domtar Corp.* $ 68
151,414 Mondi plc 825
2,900 Nippon Paper Group, Inc. 79
103,368 Svenska Cellulosa AB 1,423
43,037 UPM-Kymmene Oyj 547
------------
2,942
------------
SPECIALTY CHEMICALS (0.0%)
17,000 Daicel Chemical Industries, Ltd. 101
15,100 JSR Corp. 290
7,000 Nippon Synthetic Chemical Industry Co., Ltd. 49
14,000 Tokuyama Corp. 80
------------
520
------------
STEEL (0.2%)
32,996 ArcelorMittal ADR 1,286
176,633 Bluescope Steel Ltd. 438
17,700 JFE Holdings, Inc. 582
5,800 Maruichi Steel Tube Ltd. 110
60,000 Nippon Steel Corp. 223
81,965 Onesteel Ltd. 225
5,364 ThyssenKrupp AG 195
16,200 Yamato Kogyo Co. 508
------------
3,567
------------
Total Materials 30,529
------------
TELECOMMUNICATION SERVICES (1.3%)
---------------------------------
ALTERNATIVE CARRIERS (0.0%)
2,400 Global Crossing Ltd.* 27
------------
INTEGRATED TELECOMMUNICATION SERVICES (0.7%)
351,783 BT Group plc 811
41,371 France Telecom S.A. 1,076
55,763 Koninklijke (Royal) KPN N.V. 989
61,547 Nippon Telegraph & Telephone Corp. 2,670
161,615 Portugal Telecom SGPS S.A. 1,954
2,533 Swisscom AG 985
1,071,791 Telecom Italia S.p.A. 1,395
115,285 Telefonica S.A.(g) 3,310
37,174 Teliasonera AB 264
------------
13,454
------------
WIRELESS TELECOMMUNICATION SERVICES (0.6%)
76,229 America Movil S.A.B. de C.V. ADR "L" 3,688
225 KDDI Corp. 1,215
22,057 Mobile TeleSystems ADR 1,105
9,300 SoftBank Corp. 223
2,235,882 Vodafone Group plc 5,043
------------
11,274
------------
Total Telecommunication Services 24,755
------------
UTILITIES (1.0%)
----------------
ELECTRIC UTILITIES (0.5%)
30,000 Cheung Kong Infrastructure Holdings, Ltd. 111
53,701 E.ON AG 2,124
181,304 EDP-Energias de Portugal 832
316,297 Enel S.p.A.(g) 1,893
6,129 Fortum Oyj 156
75,003 Iberdrola S.A. 712
71,524 Iride S.p.A. 136
88,300 Kansai Electric Power Co., Inc. 2,196
1,000 Okinawa Electric Power Co., Inc. 61
56,803 Public Power Corp.* 1,146
25,870 SP Ausnet 20
2,900 Tohoku Electric Power Co., Inc. 61
------------
9,448
------------
GAS UTILITIES (0.2%)
34,828 Gas Natural SDG S.A. 722
166,000 Osaka Gas Co. Ltd. 605
251,350 Snam Rete Gas S.p.A. 1,262
------------
2,589
------------
================================================================================
60 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.0%)
11,500 Electric Power Development Co. Ltd. $ 357
12,138 International Power plc 55
------------
412
------------
MULTI-UTILITIES (0.3%)
12,858 AGL Energy Ltd. 163
12,212 Gaz de France S.A. 510
176,838 National Grid plc 1,921
30,385 RWE AG 2,769
------------
5,363
------------
WATER UTILITIES (0.0%)
1,200 Consolidated Water Co. Ltd. 16
18,522 Severn Trent plc 320
------------
336
------------
Total Utilities 18,148
------------
Total Common Stocks (cost: $291,792) 298,272
------------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
$(000)/SHARES
-------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES (0.6%)
CONSUMER DISCRETIONARY (0.0%)
-----------------------------
AUTOMOBILE MANUFACTURERS (0.0%)
4,033 Volkswagen AG 342
------------
FINANCIALS (0.4%)
-----------------
DIVERSIFIED BANKS (0.2%)
57,377 Banco Bradesco S.A. 1,193
112,650 Banco Itau Holding Financeira S.A. 2,435
------------
3,628
------------
REINSURANCE (0.2%)
3,000 Ram Holdings Ltd., 7.50%, non-cumulative, perpetual* 196
$ 4,500 Swiss Re Capital I LP, 6.85%, perpetual(c) 3,336
------------
3,532
------------
Total Financials 7,160
------------
MATERIALS (0.2%)
----------------
DIVERSIFIED METALS & MINING (0.2%)
212,526 Vale S.A. "A" 5,129
------------
Total Preferred Securities (cost: $10,534) 12,631
------------
-------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
-------------------------------------------------------------------------------------------------------------
RIGHTS (0.0%)
FINANCIALS (0.0%)
-----------------
DIVERSIFIED BANKS (0.0%)
11,733 DnB NOR ASA* 33
71,292 Fortis, acquired 10/13/2008; cost: $0(d),(e) -
130,465 Lloyds Banking Group plc* 38
------------
71
------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.0%)
92,893 ING Groep N.V.* 230
------------
Total Financials 301
------------
INDUSTRIALS (0.0%)
------------------
CONSTRUCTION & ENGINEERING (0.0%)
5,377 Obrascon Huarte Lain S.A.* 11
------------
Total Rights (cost: $253) 312
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 61
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES (6.4%)
343,699 iShares MSCI EAFE Index ETF $ 19,048
2,545,102 iShares MSCI Emerging Markets Index ETF 103,128
------------
Total Investment Companies (cost: $97,128) 122,176
------------
Total International Equity Securities (cost: $399,707) 433,391
------------
PRECIOUS METALS AND MINERALS SECURITIES (3.1%)
GOLD (2.4%)
AFRICAN GOLD COMPANIES (0.2%)
50,000 AngloGold Ashanti Ltd. ADR 2,202
180,000 Gold Fields Ltd. ADR 2,660
------------
4,862
------------
AUSTRALIAN GOLD COMPANIES (0.3%)
900,000 Lihir Gold Ltd. 2,967
90,000 Newcrest Mining Ltd. 3,033
------------
6,000
------------
EUROPEAN GOLD COMPANIES (0.2%)
35,000 Randgold Resources Ltd. ADR 2,966
------------
NORTH AMERICAN GOLD COMPANIES (1.5%)
40,000 Agnico-Eagle Mines Ltd. 2,506
5,000 Allied Nevada Gold Corp.* 65
60,000 Barrick Gold Corp.(a) 2,562
240,000 Eldorado Gold Corp.*(a) 3,178
200,000 Gammon Gold, Inc.* 2,310
60,000 Goldcorp, Inc. 2,520
170,000 IAMGOLD Corp. 3,222
120,000 Kinross Gold Corp. 2,402
56,000 Newmont Mining Corp. 3,004
200,000 Red Back Mining, Inc.* 2,899
44,800 Royal Gold, Inc. 2,411
200,000 Yamana Gold, Inc. 2,666
------------
29,745
------------
SOUTH AMERICAN GOLD COMPANIES (0.2%)
90,000 Compania de Minas Buenaventura S.A. ADR 3,614
------------
Total Gold 47,187
------------
PLATINUM GROUP METALS (0.3%)
105,000 Impala Platinum Holdings Ltd. 2,435
100,000 Lonmin plc* 2,920
3,800 Stillwater Mining Co.* 36
------------
Total Platinum Group Metals 5,391
------------
SILVER (0.4%)
1,500 Coeur d'Alene Mines Corp.* 34
63,790 Fresnillo plc 885
20,600 Hecla Mining Co.*(a) 136
110,000 Pan American Silver Corp.* 2,776
200,000 Silver Wheaton Corp.* 3,214
------------
Total Silver 7,045
------------
Total Precious Metals and Minerals Securities (cost: $35,823) 59,623
------------
GLOBAL REAL ESTATE EQUITY SECURITIES (3.1%)
COMMON STOCKS (1.7%)
DIVERSIFIED REAL ESTATE ACTIVITIES (0.2%)
400 Consolidated-Tomoka Land Co. 14
180,000 Hang Lung Properties Ltd. 654
24,000 Henderson Land Development Co. Ltd. 169
================================================================================
62 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
63,000 Sun Hung Kai Properties Ltd. $ 931
26,000 Swire Pacific Ltd. 298
900 Tejon Ranch Co.* 24
18,000 UOL Group Ltd. 47
106,000 Wharf (Holdings) Ltd. 572
133,000 Wheelock & Co. Ltd. 433
------------
Total Diversified Real Estate Activities 3,142
------------
REAL ESTATE DEVELOPMENT (0.0%)
23,000 Cheung Kong Holdings Ltd. 290
------------
REAL ESTATE OPERATING COMPANIES (0.0%)
50,038 Citycon Oyj 213
16,000 Hysan Development Co., Ltd. 45
------------
Total Real Estate Operating Companies 258
------------
REITs - DIVERSIFIED (0.2%)
108,472 BGP Holdings plc, acquired 08/06/2009; cost: $0*(d),(e) -
3,800 CapLease, Inc. 16
4,500 Colonial Properties Trust 49
126,901 Cousins Properties, Inc. 914
117,261 Dexus Property Group 87
696 Fonciere Des Regio 72
2,720 Gecina S.A. 299
108,472 GPT Group 59
4,300 Gramercy Capital Corp.* 12
5,500 Investors Real Estate Trust 49
41,600 Liberty Property Trust, Inc. 1,233
7 One Liberty Properties, Inc. -
1,300 PS Business Parks, Inc. 62
632 Vornado Realty Trust 41
2,200 Washington REIT 57
------------
Total REITs - Diversified 2,950
------------
REITs - INDUSTRIAL (0.1%)
41,900 AMB Property Corp. 987
17,700 DCT Industrial Trust, Inc. 84
2,100 DuPont Fabros Technology, Inc.* 33
900 EastGroup Properties, Inc. 34
4,200 First Industrial Realty Trust, Inc. 19
2,200 First Potomac Realty Trust 26
139,788 Macquarie Goodman Group 77
1,700 Monmouth Real Estate Investment Corp. "A" 12
3,500 ProLogis 46
------------
Total REITs - Industrial 1,318
------------
REITs - MORTGAGE (0.1%)
1,000 American Capital Agency Corp. 26
113,949 Annaly Capital Management, Inc. 2,098
2,800 Anworth Mortgage Asset Corp. 20
1,900 Capstead Mortgage Corp. 27
900 Care Investment Trust, Inc. 7
18,000 Chimera Investment Corp. 73
900 Hatteras Financial Corp. 28
8,100 iStar Financial, Inc.* 20
18,500 MFA Mortgage Investments, Inc. 140
4,800 NorthStar Realty Finance Corp. 16
3,900 Redwood Trust, Inc. 56
------------
Total REITs - Mortgage 2,511
------------
REITs - OFFICE (0.2%)
500 Alexandria Real Estate Equities, Inc. 28
6,800 BioMed Realty Trust, Inc. 93
================================================================================
PORTFOLIO OF INVESTMENTS | 63
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
900 Boston Properties, Inc. $ 60
500 Corporate Office Properties Trust 17
20,500 Digital Realty Trust, Inc. 998
87,400 Duke Realty Corp. 980
5,300 Franklin Street Properties Corp. 60
1,300 Highwoods Properties, Inc. 40
1,600 HRPT Properties Trust 10
2,500 Kilroy Realty Corp. 75
7,798 Lexington Realty Trust 38
39,500 Mack-Cali Realty Corp. 1,212
2 Nippon Building Fund, Inc. 16
1,800 Parkway Properties, Inc. 34
500 SL Green Realty Corp. 22
------------
Total REITs - Office 3,683
------------
REITs - RESIDENTIAL (0.3%)
34,200 American Campus Communities, Inc. 922
1,200 Associated Estates Realty Corp. 12
14,415 AvalonBay Communities, Inc. 1,041
30,500 BRE Properties, Inc. 956
500 Camden Property Trust 19
4,600 Education Realty Trust, Inc. 23
23,500 Equity LifeStyle Properties, Inc. 1,128
33,100 Equity Residential Properties Trust 1,066
400 Essex Property Trust, Inc. 32
500 Home Properties, Inc. 22
1,800 Mid-America Apartment Communities, Inc. 84
52,100 Post Properties, Inc. 960
1,300 Sun Communities, Inc. 25
900 UDR, Inc. 13
------------
Total REITs - Residential 6,303
------------
REITs - RETAIL (0.3%)
3,201 Acadia Realty Trust 52
500 Agree Realty Corp. 12
100 Alexander's, Inc.* 28
8,200 CBL & Associates Properties, Inc.(a) 76
3,200 Cedar Shopping Centers, Inc. 19
42,421 CFS Retail Property Trust 77
3,100 Developers Diversified Realty Corp. 31
800 Equity One, Inc. 13
16,500 Federal Realty Investment Trust 1,061
1,393 Getty Realty Corp. 32
5,100 Glimcher Realty Trust 15
6,500 Inland Real Estate Corp. 51
72,500 Kimco Realty Corp. 893
3,800 Kite Realty Group Trust 12
543 Macerich Co. 16
1,700 National Retail Properties, Inc. 34
3,100 Pennsylvania REIT 23
2,038 Ramco-Gershenson Properties Trust 19
600 Realty Income Corp.(a) 15
27,500 Regency Centers Corp. 920
500 Saul Centers, Inc. 16
17,656 Simon Property Group, Inc. 1,283
800 Tanger Factory Outlet Centers, Inc. 31
28,500 Taubman Centers, Inc.(a) 979
1,075 Unibail-Rodamco 242
1,600 Urstadt Biddle Properties, Inc. "A" 22
600 Weingarten Realty Investors 12
30,921 Westfield Group 346
------------
Total REITs - Retail 6,330
------------
================================================================================
64 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
REITs - SPECIALIZED (0.3%)
5,100 Ashford Hospitality Trust, Inc.* $ 21
2,400 Cogdell Spencer, Inc. 12
12,000 DiamondRock Hospitality Co.* 96
600 Entertainment Properties Trust 19
2,700 Extra Space Storage, Inc. 30
5,200 FelCor Lodging Trust, Inc.* 17
37,800 HCP, Inc. 1,183
1,100 Health Care REIT, Inc. 49
25,300 Healthcare Realty Trust, Inc. 559
700 Hospitality Properties Trust 14
4,200 Host Hotels & Resorts, Inc. 44
3,200 LaSalle Hotel Properties 60
1,900 LTC Properties, Inc. 49
6,600 Medical Properties Trust, Inc. 64
2,000 National Health Investors, Inc. 66
30,600 Nationwide Health Properties, Inc. 1,041
3,500 OMEGA Healthcare Investors, Inc. 63
1,000 Plum Creek Timber Co., Inc. 34
800 Potlatch Corp. 24
18,600 Public Storage 1,480
3,900 Rayonier, Inc. 155
1,100 Senior Housing Properties Trust 23
1,100 Sovran Self Storage, Inc. 36
1,918 Sunstone Hotel Investors, Inc.* 15
6,400 U-Store-It Trust 42
900 Universal Health Realty Income Trust 28
25,300 Ventas, Inc. 1,086
------------
Total REITs - Specialized 6,310
------------
Total Common Stock (cost: $26,295) 33,095
------------
INVESTMENT COMPANIES (1.4%)
1,550,190 ING International Real Estate Fund 13,270
379,166 SPDR DJ Wilshire International Real Estate ETF(a) 13,339
------------
Total Investment Companies (cost: $18,222) 26,609
------------
Total Real Estate Equity Securities (cost: $44,517) 59,704
------------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON
(000) SECURITY RATE MATURITY
-------------------------------------------------------------------------------------------------------------
BONDS (30.7%)
CORPORATE OBLIGATIONS (16.2%)
CONSUMER DISCRETIONARY (0.1%)
-----------------------------
APPAREL & ACCESSORIES & LUXURY GOODS (0.1%)
$ 1,000 Kellwood Co.(h) 12.88% 12/31/2014 530
2,861 Kellwood Co. 7.63 10/15/2017 1,030
------------
Total Consumer Discretionary 1,560
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 65
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES (0.3%)
-----------------------
DRUG RETAIL (0.3%)
$ 7,866 CVS Caremark Corp.(b) 6.30% 6/01/2037 $ 6,768
------------
ENERGY (0.3%)
-------------
OIL & GAS STORAGE & TRANSPORTATION (0.3%)
7,280 Enbridge Energy Partners, LP(b) 8.05 10/01/2037 6,926
------------
FINANCIALS (12.6%)
------------------
CONSUMER FINANCE (0.6%)
3,552 American Express Co.(i) 6.80 9/01/2066 3,037
3,500 Capital One Financial Corp.(b) 7.69 8/15/2036 3,010
7,000 General Motors Acceptance Corp.(b) 6.75 12/01/2014 6,211
------------
12,258
------------
DIVERSIFIED BANKS (1.2%)
4,651 Comerica Capital Trust II(b) 6.58 2/20/2037 3,512
1,000 Emigrant Bancorp, Inc.(b),(c) 6.25 6/15/2014 419
6,500 First Tennessee Bank, N.A.(b) 5.65 4/01/2016 5,804
7,000 Manufacturers & Traders Trust Co.(b) 5.63 12/01/2021 5,739
5,800 USB Realty Corp.(b),(c) 6.09 -(j) 4,060
3,500 Wachovia Capital Trust III(b) 5.80 -(j) 2,432
1,000 Wells Fargo Capital XIII(b) 7.70 -(j) 915
------------
22,881
------------
DIVERSIFIED REAL ESTATE ACTIVITIES (0.3%)
2,000 Brascan Corp.(b) 7.13 6/15/2012 2,070
3,000 Brookfield Asset Management, Inc.(b) 5.80 4/25/2017 2,774
------------
Total Diversified Real Estate Activities 4,844
------------
INVESTMENT BANKING & BROKERAGE (0.4%)
2,000 First Republic Bank Corp.(b) 7.75 9/15/2012 2,199
8,693 Goldman Sachs Capital II(b) 5.79 -(j) 6,433
------------
Total Investment Banking & Brokerage 8,632
------------
LIFE & HEALTH INSURANCE (1.4%)
2,000 Great-West Life & Annuity Insurance Co.(b),(c) 7.15 5/16/2046 1,640
8,000 Lincoln National Corp.(b) 7.00 5/17/2066 6,240
1,300 MetLife Capital Trust X(b),(c) 9.25 4/08/2038 1,365
2,000 MetLife, Inc.(b) 10.75 8/01/2069 2,406
4,000 Nationwide Mutual Insurance Co.(b) 5.81 12/15/2024 3,159
6,500 Prudential Financial, Inc.(b) 8.88 6/15/2038 6,760
7,030 StanCorp Financial Group, Inc.(b) 6.90 6/01/2067 5,042
------------
26,612
------------
================================================================================
66 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
MULTI-LINE INSURANCE (1.9%)
$ 1,000 AGFC Capital Trust I(b),(c) 6.00% 1/15/2067 $ 390
3,000 American International Group, Inc.(b) 8.18 5/15/2058 1,732
10,012 Genworth Financial, Inc.(b) 6.15 11/15/2066 6,483
10,705 Glen Meadow(b),(c) 6.51 2/12/2067 8,056
14,000 ILFC E-Capital Trust I(b),(c) 5.90 12/21/2065 6,580
1,000 ILFC E-Capital Trust II(b),(c) 6.25 12/21/2065 470
11,027 Oil Casualty Insurance Ltd.(b),(c) 8.00 9/15/2034 7,390
7,165 Oil Insurance Ltd.(c) 7.56 -(j) 5,817
------------
36,918
------------
MULTI-SECTOR HOLDINGS (0.1%)
2,000 Leucadia National Corp.(b) 8.65 1/15/2027 1,800
------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.7%)
3,000 AgFirst Farm Credit Bank(b) 6.59 -(j) 1,973
600 Countrywide Financial Corp.(b) 5.00 12/15/2009 600
7,710 General Electric Capital Corp.(b) 6.38 11/15/2067 6,351
5,190 ZFS Finance USA Trust IV(b),(c) 5.88 5/09/2032 4,207
------------
13,131
------------
PROPERTY & CASUALTY INSURANCE (1.2%)
5,000 Allstate Corp.(b) 6.13 5/15/2037 4,213
3,000 Fund American Companies, Inc.(b) 5.88 5/15/2013 2,990
2,070 Liberty Mutual Group, Inc.(b) 7.30 6/15/2014 2,103
7,000 Progressive Corp.(b) 6.70 6/15/2037 5,958
1,000 RLI Corp.(b) 5.95 1/15/2014 1,004
6,500 Travelers Companies, Inc.(b) 6.25 3/15/2037 5,898
------------
22,166
------------
REGIONAL BANKS (2.2%)
3,000 Cullen/Frost Bankers, Inc.(b) 5.75 2/15/2017 2,812
10,000 Fifth Third Capital Trust IV(b) 6.50 4/15/2037 7,050
1,000 First Empire Capital Trust I(b) 8.23 2/01/2027 768
5,000 Fulton Capital Trust I(b) 6.29 2/01/2036 3,297
10,000 Huntington Capital III(b) 6.65 5/15/2037 6,105
4,000 PNC Preferred Funding Trust(b),(c) 6.52 -(j) 2,876
1,979 PNC Preferred Funding Trust III(b),(c) 8.70 -(j) 1,947
6,500 Regions Financing Trust II(b) 6.63 5/15/2047 4,249
1,000 Susquehanna Bancshares, Inc.(b) 2.10(k) 5/01/2014 618
3,000 TCF National Bank(b) 5.50 2/01/2016 2,552
10,000 Webster Capital Trust IV(b) 7.65 6/15/2037 6,250
4,500 Zions Bancorp(b) 5.50 11/16/2015 3,131
------------
41,655
------------
REITs - DIVERSIFIED (0.1%)
2,000 Washington REIT(b) 5.25 1/15/2014 1,948
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 67
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
REITs - INDUSTRIAL (0.3%)
$ 5,000 ProLogis(b) 2.25% 4/01/2037 $ 4,644
1,000 ProLogis(b) 1.88 11/15/2037 890
------------
Total REITs - Industrial 5,534
------------
REITs - OFFICE (0.6%)
3,000 Brandywine Operating Partnership, LP(b) 5.70 5/01/2017 2,724
3,390 Duke Realty, LP(b) 5.95 2/15/2017 3,269
1,426 HRPT Properties Trust(b) 5.75 11/01/2015 1,368
2,715 HRPT Properties Trust(b) 6.25 8/15/2016 2,644
1,000 HRPT Properties Trust(b) 6.25 6/15/2017 936
------------
10,941
------------
REITs - RETAIL (0.8%)
4,000 Developers Diversified Realty Corp.(b) 3.00 3/15/2012 3,675
2,000 Developers Diversified Realty Corp.(b) 5.50 5/01/2015 1,781
2,000 New Plan Excel Realty Trust, Inc.(b) 4.50 2/01/2011 1,710
8,000 New Plan Excel Realty Trust, Inc.(b) 5.13 9/15/2012 5,830
3,000 New Plan Excel Realty Trust, Inc. 5.30 1/15/2015 1,811
413 New Plan Excel Realty Trust, Inc., acquired
02/20/2009; cost: $140(d) 7.68 11/02/2026 281
------------
15,088
------------
REITs - SPECIALIZED (0.2%)
1,000 Hospitality Properties Trust(b) 5.13 2/15/2015 914
3,500 Ventas Realty, LP(b) 6.75 4/01/2017 3,343
------------
4,257
------------
SPECIALIZED FINANCE (0.3%)
10,085 Financial Security Assurance Holdings Ltd.(b),(c) 6.40 12/15/2066 6,202
3,000 Syncora Holdings Ltd.(e) 6.88 -(j) 1
------------
Total Specialized Finance 6,203
------------
THRIFTS & MORTGAGE FINANCE (0.3%)
2,185 Sovereign Bank(b) 2.35(k) 6/20/2013 2,148
1,050 Sovereign Bank(b) 1.99(k) 8/01/2013 1,020
3,000 Sovereign Bank(b) 2.11(k) 4/01/2014 2,909
2,500 Washington Mutual Preferred Funding
Trust I(c),(l) 6.53 -(j) 25
2,000 Washington Mutual Preferred Funding
Trust IV(c),(l) 9.75 -(j) 20
------------
6,122
------------
Total Financials 240,990
------------
INDUSTRIALS (0.3%)
------------------
AIRLINES (0.1%)
1,442 America West Airlines, Inc. Pass-Through
Trust (INS) 7.93 1/02/2019 1,296
------------
================================================================================
68 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.2%)
$ 6,140 Textron Financial Corp.(b),(c) 6.00% 2/15/2067 $ 4,329
------------
Total Industrials 5,625
------------
MATERIALS (0.1%)
----------------
DIVERSIFIED METALS & MINING (0.1%)
1,550 Falconbridge Ltd.(b) 7.35 6/05/2012 1,677
------------
UTILITIES (2.5%)
----------------
ELECTRIC UTILITIES (1.4%)
2,080 Cedar Brakes II, LLC(b),(c) 9.88 9/01/2013 2,130
2,000 FPL Group Capital, Inc.(b) 6.35 10/01/2066 1,837
4,000 FPL Group Capital, Inc.(b) 6.65 6/15/2067 3,715
1,000 FPL Group Capital, Inc.(b) 7.30 9/01/2067 991
7,300 Homer City Funding, LLC(b) 8.14 10/01/2019 6,972
716 Oglethorpe Power Corp.(b) 6.97 6/30/2011 725
510 Power Contract Financing, LLC(c) 6.26 2/01/2010 513
6,500 PPL Capital Funding, Inc.(b) 6.70 3/30/2067 5,647
1,000 SPI Electricity Property Ltd. (INS)(b) 7.25 12/01/2016 1,143
980 Texas Competitive Electric Holding Co., LLC(m) 3.75 10/10/2014 729
980 Texas Competitive Electric Holding Co., LLC(m) 3.75 10/10/2014 735
1,000 West Penn Power Co.(b) 6.63 4/15/2012 1,095
------------
26,232
------------
GAS UTILITIES (0.2%)
5,250 Southern Union Co.(b) 7.20(k) 11/01/2066 4,384
------------
MULTI-UTILITIES (0.9%)
6,500 Dominion Resources, Inc.(b) 7.50 6/30/2066 6,411
5,741 Integrys Energy Group, Inc.(b) 6.11 12/01/2066 4,800
3,000 Puget Sound Energy, Inc. 6.97 6/01/2067 2,651
3,500 Wisconsin Energy Corp.(b) 6.25 5/15/2067 3,093
------------
16,955
------------
Total Utilities 47,571
------------
Total Corporate Obligations (cost: $274,651) 311,117
------------
EURODOLLAR AND YANKEE OBLIGATIONS (2.7%)
ENERGY (0.4%)
-------------
INTEGRATED OIL & GAS (0.4%)
267 PEMEX Finance Ltd. 8.88 11/15/2010 278
500 PEMEX Finance Ltd. 9.03 2/15/2011 516
6,500 Trans-Canada Pipelines Ltd.(b) 6.35 5/15/2067 6,091
------------
6,885
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 69
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
OIL & GAS DRILLING (0.0%)
$ 764 Delek & Avner-Yam Tethys Ltd.(c) 5.33% 8/01/2013 $ 764
------------
Total Energy 7,649
------------
FINANCIALS (2.0%)
-----------------
DIVERSIFIED BANKS (0.4%)
4,125 BayernLB Capital Trust I 6.20 -(j) 1,732
2,500 BNP Paribas Capital Trust(c) 9.00 -(j) 2,475
3,000 BOI Capital Funding Number 3, LP(c) 6.11 -(j) 1,275
2,500 Landsbanki Islands hf, acquired
10/12/2007; cost: $1,000(c),(d),(l) 7.43 -(j) 7
3,000 Royal Bank of Scotland Group plc 7.64 -(j) 1,404
------------
6,893
------------
DIVERSIFIED CAPITAL MARKETS (0.3%)
7,000 UBS Preferred Funding Trust I(b) 8.62 -(j) 6,301
------------
MULTI-LINE INSURANCE (0.4%)
8,000 ING Capital Funding Trust III(b) 8.44 -(j) 6,820
------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.1%)
3,000 ZFS Finance USA Trust II(c) 6.45 12/15/2065 2,625
------------
PROPERTY & CASUALTY INSURANCE (0.1%)
2,500 Allied World Assurance Holdings Ltd.(b) 7.50 8/01/2016 2,690
------------
REGIONAL BANKS (0.2%)
3,000 Glitnir Banki hf, acquired 9/11/2006 and
10/18/2006; cost: $3,051(c),(d),(l) 7.45 -(j) 8
4,500 Unicredito Italiano Capital Trust II(b),(c) 9.20 -(j) 4,275
------------
4,283
------------
REINSURANCE (0.4%)
4,000 Max USA Holdings Ltd.(b),(c) 7.20 4/14/2017 3,384
4,000 Platinum Underwriters Finance, Inc.(b) 7.50 6/01/2017 4,027
------------
7,411
------------
SPECIALIZED FINANCE (0.1%)
1,000 QBE Capital Funding II, LP(c) 6.80 -(j) 833
1,670 QBE Insurance Group Ltd.(c) 5.65 7/01/2023 1,443
------------
Total Specialized Finance 2,276
------------
Total Financials 39,299
------------
================================================================================
70 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
MATERIALS (0.3%)
----------------
DIVERSIFIED METALS & MINING (0.3%)
$ 2,500 Glencore Finance S.A. 8.00% -(j) $ 2,337
2,700 Glencore Funding, LLC(c) 6.00 4/15/2014 2,681
------------
Total Materials 5,018
------------
Total Eurodollar and Yankee Obligations (cost: $55,764) 51,966
------------
ASSET-BACKED SECURITIES (4.1%)
FINANCIALS (4.1%)
-----------------
ASSET-BACKED FINANCING (4.1%)
566 Aerco Ltd.(c) 0.76(k) 7/15/2025 569
4,000 AESOP Funding II, LLC(b),(c) 0.46(k) 3/20/2012 3,816
3,000 AESOP Funding II, LLC(b),(c) 9.31 10/20/2013 3,364
310 Airport Airplanes 0.61(k) 3/15/2019 293
1,500 American Express Credit Account Master Trust(b) 0.51(k) 9/15/2014 1,424
2,500 American Express Credit Account Master Trust(b),(c) 0.59(k) 9/15/2016 2,297
927 AmeriCredit Automobile Receivables Trust(b) 1.99(k) 1/12/2012 929
2,000 AmeriCredit Automobile Receivables Trust(b) 6.96(k) 10/14/2014 2,124
1,500 Banc of America Securities Auto Trust(b) 5.51 2/19/2013 1,501
1,500 Bank of America Credit Card Trust(b) 0.53(k) 6/15/2014 1,379
2,000 Bank One Issuance Trust(b) 4.77 2/16/2016 2,028
5,000 Bank One Issuance Trust(b) 1.04(k) 2/15/2017 4,597
923 Capital One Auto Finance Trust (INS) 4.71 6/15/2012 932
1,882 Capital One Auto Finance Trust 0.27(k) 5/15/2013 1,855
3,500 Capital One Multi-Asset Execution Trust(b) 6.00 8/15/2013 3,567
1,050 Citibank Credit Card Issuance Trust(b) 6.95 2/18/2014 1,105
2,550 Citibank Credit Card Issuance Trust(b) 6.30 6/20/2014 2,629
3,000 CPS Auto Receivables Trust (INS)(b) 6.48 7/15/2013 3,102
3,000 Credit Acceptance Auto Loan Trust(c),(e),(n) 5.68 5/15/2017 3,000
1,500 Discover Card Master Trust I 0.48(k) 5/15/2012 1,499
6,516 GE Capital Credit Card Master Note Trust(b) 0.51(k) 3/15/2013 6,435
3,000 GE Equipment Midticket, LLC 0.56(k) 9/15/2017 2,466
500 Hertz Vehicle Financing, LLC(c) 5.01 2/25/2011 502
2,000 Hertz Vehicle Financing, LLC(b),(c) 5.08 11/25/2011 2,045
1,399 HSBC Automotive Trust(b) 4.94 11/19/2012 1,409
3,000 HSBC Private Label Credit Card Master Note Trust(b) 0.26(k) 12/16/2013 2,994
7,000 HSBC Private Label Credit Card Master Note Trust 0.35(k) 12/16/2013 6,978
2,000 Huntington Auto Trust(b),(c) 4.81 4/16/2012 2,053
1,475 MBNA Master Credit Card Note Trust(b) 6.80 7/15/2014 1,523
3,000 Rental Car Finance Corp.(b),(c) 0.38(k) 7/25/2013 2,592
1,879 SLM Student Loan Trust 0.83(k) 10/25/2038 1,418
72 Triad Automobile Receivables Owners Trust 5.26 11/14/2011 72
================================================================================
PORTFOLIO OF INVESTMENTS | 71
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
$ 3,000 Triad Automobile Receivables Owners Trust(b) 5.43% 7/14/2014 $ 3,048
1,724 Trinity Rail Leasing, LP(c) 5.90 5/14/2036 1,624
992 USXL Funding, LLC (INS)(b),(c) 5.38(k) 4/15/2014 992
------------
Total Financials 78,161
------------
Total Asset-Backed Securities (cost: $72,730) 78,161
------------
COMMERCIAL MORTGAGE SECURITIES (7.4%)
FINANCIALS (7.4%)
-----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (7.4%)
8,045 Banc of America Commercial Mortgage Trust 5.81 7/10/2044 6,304
996 Banc of America Commercial Mortgage, Inc. 7.20 9/15/2032 999
2,000 Banc of America Commercial Mortgage, Inc.(b) 4.77 7/10/2043 1,327
1,200 Banc of America Commercial Mortgage, Inc. 4.95 7/10/2043 809
3,000 Banc of America Commercial Mortgage, Inc.(b) 5.77(k) 5/10/2045 2,141
1,175 Banc of America Commercial Mortgage, Inc. 5.68 7/10/2046 937
638 Bear Stearns Commercial Mortgage Securities, Inc. 4.00 3/13/2040 646
3,500 Bear Stearns Commercial Mortgage Securities, Inc. 5.69 6/11/2050 3,067
3,000 Chase Commercial Mortgage Securities Corp.(b) 6.39 11/18/2030 2,982
4,710 Chase Commercial Mortgage Securities Corp.(b) 7.63 7/15/2032 4,814
4,268 Chase Commercial Mortgage Securities Corp.(b) 7.32 10/15/2032 4,394
1,000 Citigroup Commercial Mortgage Trust 5.23(k) 7/15/2044 477
860 Citigroup Commercial Mortgage Trust 5.70 12/10/2049 770
4,500 Citigroup Commercial Mortgage Trust 6.10 12/10/2049 3,476
6,000 Commercial Mortgage Loan Trust(b) 6.02(k) 12/10/2049 4,417
5,000 Commercial Mortgage Trust(b) 4.58 10/15/2037 4,768
2,500 Credit Suisse Commercial Mortgage Trust 5.83 6/15/2038 1,990
4,000 Credit Suisse Commercial Mortgage Trust(b) 5.83 6/15/2038 3,499
1,050 Credit Suisse Commercial Mortgage Trust(b) 5.55 2/15/2039 706
6,562 Credit Suisse Commercial Mortgage Trust 6.22 2/15/2041 5,884
2,000 Credit Suisse First Boston Mortgage
Securities Corp.(b),(c) 6.65 12/18/2035 2,023
2,500 Credit Suisse First Boston Mortgage
Securities Corp.(b) 5.10 8/15/2038 1,937
2,022 Credit Suisse First Boston Mortgage
Securities Corp. 7.55 4/15/2062 2,051
1,000 GE Capital Commercial Mortgage Corp.(b) 6.07 6/10/2038 1,020
3,355 GE Capital Commercial Mortgage Corp. 5.61 12/10/2049 2,182
2,500 GMAC Commercial Mortgage Securities, Inc.(b) 4.75 5/10/2043 2,219
861 Government Lease Trust(c) 6.48 5/18/2011 888
473 Greenwich Capital Commercial Funding Corp. 4.02 1/05/2036 476
1,000 GS Mortgage Securities Corp. II(b),(c) 6.45 8/05/2018 1,014
2,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(b) 4.99 9/12/2037 1,521
================================================================================
72 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
$ 625 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.00% 10/15/2042 $ 535
2,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(b) 5.49(k) 4/15/2043 2,119
3,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp.(b) 5.81 6/12/2043 2,873
2,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.33(k) 12/15/2044 1,186
2,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.33(k) 12/15/2044 1,294
991 LB-UBS Commercial Mortgage Trust(b) 4.56 9/15/2026 1,008
4,000 LB-UBS Commercial Mortgage Trust(b) 5.87(k) 6/15/2032 4,096
1,500 Merrill Lynch Mortgage Trust 5.23(k) 11/12/2037 1,307
1,000 Merrill Lynch Mortgage Trust 5.38(k) 1/12/2044 538
3,500 Merrill Lynch Mortgage Trust 5.83(k) 6/12/2050 2,949
7,000 Merrill Lynch Mortgage Trust 5.69 2/12/2051 6,148
5,000 Merrill Lynch/Countrywide Commercial
Mortgage Trust(b) 5.36 8/12/2048 4,571
3,000 ML-CFC Commercial Mortgage Trust 5.42 8/12/2048 1,936
3,000 ML-CFC Commercial Mortgage Trust 5.96(k) 8/12/2049 2,237
4,000 ML-CFC Commercial Mortgage Trust(b) 5.70 9/12/2049 3,180
4,000 Morgan Stanley Capital I, Inc.(b) 5.80(k) 8/12/2041 4,369
878 Morgan Stanley Capital I, Inc. 5.15 8/13/2042 569
723 Morgan Stanley Capital I, Inc. 5.17 8/13/2042 448
3,000 Morgan Stanley Capital I, Inc. 5.81 12/12/2049 2,722
5,000 Mortgage Capital Funding, Inc.(b) 7.09(k) 6/18/2030 4,963
2,000 Prudential Mortgage Capital Funding, LLC(b) 6.76 5/10/2034 2,080
3,969 Wachovia Bank Commercial Mortgage Trust(b) 5.00 7/15/2041 4,009
4,654 Wachovia Bank Commercial Mortgage Trust(b) 4.66 4/15/2042 4,628
3,000 Wachovia Bank Commercial Mortgage Trust(b) 4.61 5/15/2044 3,018
4,500 Wachovia Bank Commercial Mortgage Trust 5.42 1/15/2045 4,262
4,000 Wachovia Bank Commercial Mortgage Trust(b) 5.50 10/15/2048 4,062
------------
Total Financials 140,845
------------
Total Commercial Mortgage Securities (cost: $129,857) 140,845
------------
U.S. GOVERNMENT AGENCY ISSUES (0.0%)(o)
INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (0.0%)
3,952 Government National Mortgage Assn. 1.76(k) 7/16/2010 44
------------
MORTGAGE-BACKED PASS-THROUGH SECURITIES (0.0%)
69 Government National Mortgage Assn. I 6.50 5/15/2023 74
64 Government National Mortgage Assn. I 6.50 4/15/2024 69
35 Government National Mortgage Assn. I 7.50 3/15/2017 38
24 Government National Mortgage Assn. I 7.50 3/15/2017 26
================================================================================
PORTFOLIO OF INVESTMENTS | 73
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
$ 8 Government National Mortgage Assn. I 8.00% 6/15/2016 $ 9
5 Government National Mortgage Assn. I 8.00 9/15/2016 5
14 Government National Mortgage Assn. I 8.00 11/15/2016 16
27 Government National Mortgage Assn. I 8.00 3/15/2017 30
5 Government National Mortgage Assn. I 8.50 6/15/2016 5
5 Government National Mortgage Assn. I 8.50 6/15/2016 5
10 Government National Mortgage Assn. I 8.50 7/15/2016 11
2 Government National Mortgage Assn. I 8.50 9/15/2016 2
16 Government National Mortgage Assn. I 8.50 12/15/2016 18
9 Government National Mortgage Assn. I 8.50 12/15/2016 10
14 Government National Mortgage Assn. I 8.50 1/15/2017 16
1 Government National Mortgage Assn. I 8.50 1/15/2017 1
5 Government National Mortgage Assn. I 8.50 2/15/2017 6
2 Government National Mortgage Assn. I 9.00 6/15/2016 2
2 Government National Mortgage Assn. I 9.00 7/15/2016 2
1 Government National Mortgage Assn. I 9.00 8/15/2016 1
2 Government National Mortgage Assn. I 9.00 9/15/2016 2
1 Government National Mortgage Assn. I 9.00 10/15/2016 2
12 Government National Mortgage Assn. I 9.50 9/15/2016 13
13 Government National Mortgage Assn. I 9.50 11/15/2016 15
3 Government National Mortgage Assn. I 9.50 11/15/2016 3
2 Government National Mortgage Assn. I 9.50 11/15/2016 2
21 Government National Mortgage Assn. I 9.50 4/15/2017 22
------------
405
------------
Total U.S. Government Agency Issues (cost: $408) 449
------------
U.S. TREASURY SECURITIES (0.0%)
NOTES (0.0%)
700 1.00%, 7/31/2011 (cost: $700) 706
------------
MUNICIPAL BONDS (0.3%)
CASINOS & GAMING (0.2%)
4,000 Mashantucket (Western) Pequot Tribe, acquired
7/29/2005 and 10/05/2009; cost: $3,410(c),(d) 5.91 9/01/2021 2,200
2,675 Seneca Nation of Indians Capital
Improvements Auth.(b) 6.75 12/01/2013 2,520
------------
4,720
------------
SPECIAL ASSESSMENT/TAX/FEE (0.1%)
1,710 Erie County Tobacco Asset Securitization Corp.(b) 6.00 6/01/2028 1,341
------------
Total Municipal Bonds (cost: $7,743) 6,061
------------
Total Bonds (cost: $541,853) 589,305
------------
================================================================================
74 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS (1.6%)
COMMERCIAL PAPER (0.7%)
FINANCIALS (0.4%)
-----------------
ASSET-BACKED FINANCING (0.4%)
$ 7,999 Hannover Funding Co., LLC(c),(p) 0.40% 12/02/2009 $ 7,999
------------
INDUSTRIALS (0.3%)
------------------
INDUSTRIAL MACHINERY (0.3%)
5,000 Eaton Corp.(c),(p) 0.27 12/14/2009 4,999
------------
Total Commercial Paper 12,998
------------
-------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
-------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (0.8%)
15,984,165 State Street Institutional Liquid Reserve Fund, 0.19%(q) 15,984
------------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
-------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS (0.1%)
$ 800 1.30%, 12/17/2009(r),(s) 800
------------
Total Money Market Instruments (cost: $29,782) 29,782
------------
SHORT-TERM INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED (0.7%)
REPURCHASE AGREEMENTS (0.0%)
200 Credit Suisse First Boston LLC, 0.16%, acquired on
11/30/2009 and due 12/01/2009 at $200
(collateralized by $205 of Fannie Mae(o),(+),
0.10%(s), due 5/12/2010; market value $205) 200
100 Deutsche Bank Securities, Inc., 0.16%, acquired on
11/30/2009 and due 12/01/2009 at $100
(collateralized by $97 of U.S. Treasury,
2.75%, due 10/31/2013; market value $102) 100
------------
Total Repurchase Agreements 300
------------
================================================================================
PORTFOLIO OF INVESTMENTS | 75
<PAGE>
================================================================================
-------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (0.7%)
12,524,106 BlackRock Liquidity Funds TempFund, 0.15%(q) $ 12,524
------------
Total Money Market Funds 12,524
------------
Total Short-term Investments Purchased With Cash Collateral
From Securities Loaned (cost: $12,824) 12,824
------------
TOTAL INVESTMENTS (COST: $1,760,414) $ 1,921,589
============
-------------------------------------------------------------------------------------------------------------
NUMBER OF
CONTRACTS
-------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS (0.1%)
1,168 Put - Russell 2000 Index expiring December 19, 2009 at 550 713
4,414 Put - S&P 500 Index expiring December 19, 2009 at 980 971
------------
TOTAL PURCHASED OPTIONS (COST: $2,433) $ 1,684
============
WRITTEN OPTIONS (0.3%)
(1,050) Call - Russell 2000 Index expiring December 19, 2009 at 620 (184)
(4,414) Call - S&P 500 Index expiring December 19, 2009 at 1,110 (5,473)
(4,414) Put - S&P 500 Index expiring December 19, 2009 at 890 (309)
------------
TOTAL WRITTEN OPTIONS (PREMIUMS RECEIVED: $12,922) $ (5,966)
============
-------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF CONTRACT APPRECIATION/
CONTRACTS EXPIRATION VALUE (DEPRECIATION)
LONG/(SHORT) SECURITY DATE (000) (000)
-------------------------------------------------------------------------------------------------------------
FUTURES (0.0%)
6 SPI 200 Index Futures 12/17/2009 $ 645 $ 16
16 DJ Euro Stoxx 50 Index Futures 12/18/2009 673 (16)
20 Nikkei 225 Index Futures 12/10/2009 925 (72)
------ ------------
TOTAL FUTURES $2,243 $ (72)
====== ============
================================================================================
76 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-----------------------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------------------------------------
U.S. Equity Securities:
Common Stocks $ 530,231 $ - $ - $ 530,231
Preferred Securities 3,890 8,874 - 12,764
Warrants - - - -
Investment Companies 147,319 - - 147,319
Hedge Funds 46,646 - - 46,646
International Equity Securities:
Common Stocks 298,272 - - 298,272
Preferred Securities 9,099 3,532 - 12,631
Rights 312 - - 312
Investment Companies 122,176 - - 122,176
Precious Metals And Minerals Securities:
Gold 47,187 - - 47,187
Platinum Group Metals 5,391 - - 5,391
Silver 7,045 - - 7,045
Real Estate Equity Securities:
Common Stocks 33,095 - - 33,095
Investment Companies 26,609 - - 26,609
Bonds:
Corporate Obligations - 311,116 1 311,117
Eurodollar and Yankee Obligations - 51,966 - 51,966
Asset-Backed Securities - 75,161 3,000 78,161
Commercial Mortgage Securities - 140,845 - 140,845
U.S. Government Agency Issues - 449 - 449
U.S. Treasury Securities - 706 - 706
Municipal Bonds - 6,061 - 6,061
Money Market Instruments:
Commercial Paper - 12,998 - 12,998
Money Market Funds 15,984 - - 15,984
U.S. Treasury Bills - 800 - 800
Short-Term Investments Purchased With
Cash Collateral From Securities Loaned:
Repurchase Agreements - 300 - 300
Money Market Funds 12,524 - - 12,524
Purchased Options 1,684 - - 1,684
Futures* (72) - - (72)
-----------------------------------------------------------------------------------------------------------------
Total $1,307,392 $612,808 $3,001 $1,923,201
-----------------------------------------------------------------------------------------------------------------
*Futures are valued at the unrealized appreciation/depreciation on the
investment.
================================================================================
PORTFOLIO OF INVESTMENTS | 77
<PAGE>
================================================================================
-----------------------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-----------------------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
LIABILITIES FOR IDENTICAL LIABILITIES INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------------------------------------
Written Options $(5,966) $- $- $(5,966)
-----------------------------------------------------------------------------------------------------------------
Reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining value:
-----------------------------------------------------------------------------------------------------------------
CORPORATE ASSET-BACKED
OBLIGATIONS SECURITIES
-----------------------------------------------------------------------------------------------------------------
Balance as of May 31, 2009 $ - $ -
Net realized gain (loss) - -
Change in net unrealized appreciation/depreciation (2) -
Net purchases (sales) - 3,000
Transfers in and/or out of Level 3 3 -
-----------------------------------------------------------------------------------------------------------------
Balance as of November 30, 2009 $ 1 $3,000
-----------------------------------------------------------------------------------------------------------------
================================================================================
78 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
November 30, 2009 (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 27.3% of net assets at November 30,
2009.
The Fund may rely on certain Securities and Exchange Commission (SEC)
exemptive orders or rules that permit funds meeting various conditions to
invest in an exchange-traded fund (ETF) in amounts exceeding limits set forth
in the Investment Company Act of 1940 that would otherwise be applicable.
o CATEGORIES AND DEFINITIONS
HEDGE FUNDS -- private investment funds open to a limited range of investors
and exempt from certain regulations. Deutsche iGAP Investment Trust, managed
by Deutsche Bank Trust Company Americas, invests primarily in a diversified
portfolio of short-term money market investments, and long and short positions
in exchange-traded equity index and government bond index futures, currency
forward contracts, and other derivative instruments.
EURODOLLAR AND YANKEE OBLIGATIONS -- Eurodollar obligations are
dollar-denominated instruments that are issued outside the U.S. capital
markets by foreign corporations and financial institutions and by foreign
branches of U.S. corporations and financial institutions.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 79
<PAGE>
================================================================================
Yankee obligations are dollar-denominated instruments that are issued by
foreign issuers in the U.S. capital markets.
INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS IOs) -- represent
the right to receive only the interest payments on an underlying pool of
commercial mortgage loans. The purchase yield reflects an anticipated yield
based upon interest rates at the time of purchase and the estimated timing and
amount of future cash flows. Coupon rates after purchase vary from period to
period. The principal amount represents the notional amount of the underlying
pool on which current interest is calculated. CMBS IOs are backed by loans
that have various forms of prepayment protection, which include lock-out
provisions, yield maintenance provisions, and prepayment penalties. This
serves to moderate their prepayment risk. CMBS IOs are subject to
default-related prepayments that may have a negative impact on yield.
RIGHTS -- enable the holder to buy a specified number of shares of new issues
of a common stock before it is offered to the public.
WARRANTS -- entitle the holder to buy a proportionate amount of common stock
at a specified price for a stated period.
o PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
iShares Exchange-traded funds, managed by Barclays Global Fund Advisors
(BlackRock, Inc. effective December 1, 2009), that represent a
portfolio of stocks designed to closely track a specific market
index. iShares funds are traded on securities exchanges.
REIT Real estate investment trust
SPDR Exchange-traded funds, managed by State Street Global Advisers,
that represent a portfolio of stocks designed to closely track a
specific market index. SPDR is an acronym for the first member of
the fund family, Standard & Poor's
================================================================================
80 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
Depositary Receipts, which tracks the S&P 500 Index. SPDRs are
traded on securities exchanges.
CREDIT ENHANCEMENTS -- add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
interest payments when due. The enhancement may be provided by a high-quality
bank, insurance company or other corporation, or a collateral trust. The
enhancements do not guarantee the market values of the securities.
(INS) Principal and interest payments are insured by one of the following:
AMBAC Assurance Corp., Financial Guaranty Insurance Co., or
Financial Security Assurance Holdings Ltd. Although bond insurance
reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that value may fluctuate for other
reasons, and there is no assurance that the insurance company will
meet its obligations.
O SPECIFIC NOTES
(a) The security or a portion thereof was out on loan as of November 30, 2009.
(b) At November 30, 2009, the security, or a portion thereof, is segregated to
cover the notional value of outstanding written call options.
(c) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by
Rule 144A, and as such has been deemed liquid by USAA Investment
Management Company (the Manager) under liquidity guidelines approved by
the Board of Trustees, unless otherwise noted as illiquid.
(d) Security deemed illiquid by the Manager, under liquidity guidelines
approved by the Board of Trustees. The aggregate market value of these
securities at November 30, 2009, was $49,142,000, which represented 2.5%
of the Fund's net assets.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 81
<PAGE>
================================================================================
(e) Security was fair valued at November 30, 2009, by the Manager in
accordance with valuation procedures approved by the Board of Trustees.
(f) Restricted security that is not registered under the Securities Act of
1933.
(g) Security, or a portion thereof, is segregated to cover the value of open
futures contracts at November 30, 2009.
(h) Pay-in-kind (PIK) -- security in which the issuer has the option to make
interest or dividend payments in cash or in additional securities. The
security issued with the interest or dividend payment option usually has
the same terms, including maturity date, as the PIK securities.
(i) At November 30, 2009, portions of these securities were segregated to
cover delayed-delivery and/or when-issued purchases.
(j) Security is perpetual and has no final maturity date but may be subject
to calls at various dates in the future.
(k) Variable-rate or floating-rate security -- interest rate is adjusted
periodically. The interest rate disclosed represents the current rate at
November 30, 2009.
(l) Currently the issuer is in default with respect to interest and/or
principal payments.
(m) Senior loan (loan) -- is not registered under the Securities Act of 1933.
The loan contains certain restrictions on resale and cannot be sold
publicly. The interest rate is adjusted periodically, and the rate
disclosed represents the current rate at November 30, 2009. The weighted
average life of the loan is likely to be substantially shorter than the
stated final maturity date due to mandatory or optional prepayments.
Security deemed liquid by the Manager, under liquidity guidelines approved
by the Board of Trustees, unless otherwise noted as illiquid.
================================================================================
82 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
(n) At November 30, 2009, the aggregate market value of securities purchased
on a when-issued basis was $3,000,000.
(o) U.S. government agency issues -- mortgage-backed securities issued by
Government National Mortgage Association (GNMA) and certain other U.S.
government guaranteed securities are supported by the full faith and
credit of the U.S. government. Securities issued by government-sponsored
enterprises, indicated with "+", are supported only by the right of the
government-sponsored enterprise to borrow from the U.S. Treasury, the
discretionary authority of the U.S. government to purchase the government-
sponsored enterprises' obligations, or by the credit of the issuing
agency, instrumentality, or corporation, and are neither issued nor
guaranteed by the U.S. Treasury.
(p) Commercial paper issued in reliance on the "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Unless this commercial paper is subsequently registered, a resale of this
commercial paper in the United States must be effected in a transaction
exempt from registration under the Securities Act of 1933. Section 4(2)
commercial paper is normally resold to other investors through or with the
assistance of the issuer or an investment dealer who makes a market in
this security, and as such has been deemed liquid by the Manager under
liquidity guidelines approved by the Board of Trustees, unless otherwise
noted as illiquid.
(q) Rate represents the money market fund annualized seven-day yield at
November 30, 2009.
(r) Security with a value of $800,000 is segregated as collateral for initial
margin requirements on open futures contracts.
(s) Zero-coupon security. Rate represents the effective yield at the date of
purchase.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 83
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (including securities
on loan of $11,743) (cost of $1,760,414) $1,921,589
Purchased options, at market value (cost of $2,433) 1,684
Cash 743
Cash denominated in foreign currencies (identified cost of $591) 597
Receivables:
Capital shares sold 1,369
USAA Investment Management Company (Note 6D) 1,241
Dividends and interest 11,690
Securities sold 20,459
Other 32
----------
Total assets 1,959,404
----------
LIABILITIES
Payables:
Upon return of securities loaned 12,824
Securities purchased 20,958
Capital shares redeemed 1,416
Written options, at market value (premiums received of $12,922) 5,966
Variation margin on futures contracts 17
Accrued management fees 1,181
Accrued transfer agent's fees 32
Other accrued expenses and payables 354
----------
Total liabilities 42,748
----------
Net assets applicable to capital shares outstanding $1,916,656
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,209,437
Accumulated undistributed net investment income 55,722
Accumulated net realized loss on investments, options, and
futures transactions (515,843)
Net unrealized appreciation of investments, options, and futures contracts 167,310
Net unrealized appreciation of foreign currency translations 30
----------
Net assets applicable to capital shares outstanding $1,916,656
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 92,721
==========
Net asset value, redemption price, and offering price per share $ 20.67
==========
See accompanying notes to financial statements.
================================================================================
84 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $280) $ 11,560
Interest 28,719
Securities lending (net) 191
--------
Total income 40,470
--------
EXPENSES
Management fees 6,663
Administration and servicing fees 1,333
Transfer agent's fees 3,090
Custody and accounting fees 589
Postage 200
Shareholder reporting fees 85
Trustees' fees 5
Registration fees 17
Professional fees 78
Other 21
--------
Total expenses 12,081
Expenses reimbursed (1,509)
--------
Net expenses 10,572
--------
NET INVESTMENT INCOME 29,898
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
OPTIONS, FOREIGN CURRENCY, AND FUTURES CONTRACTS
Net realized gain (loss) on:
Investments:
Unaffiliated transactions 81,799
Affiliated transactions (Note 8) (269)
Foreign currency transactions 68
Options (28,932)
Futures transactions 736
Change in net unrealized appreciation/depreciation of:
Investments 233,837
Foreign currency translations (173)
Options 5,507
Futures contracts (452)
--------
Net realized and unrealized gain 292,121
--------
Increase in net assets resulting from operations $322,019
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 85
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended November 30, 2009 (unaudited), and year ended
May 31, 2009
--------------------------------------------------------------------------------
11/30/2009 5/31/2009
----------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 29,898 $ 52,545
Net realized gain (loss) on investments 81,530 (527,959)
Net realized gain (loss) on foreign currency transactions 68 (1,146)
Net realized gain (loss) on options (28,932) 5,820
Net realized gain (loss) on futures transactions 736 (2,119)
Change in net unrealized appreciation/depreciation of:
Investments 233,837 (122,038)
Foreign currency translations (173) 254
Options 5,507 217
Futures contracts (452) 168
-------------------------
Increase (decrease) in net assets resulting
from operations 322,019 (594,258)
-------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (46,508)
-------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 110,687 261,778
Reinvested dividends - 45,873
Cost of shares redeemed (120,004) (306,735)
-------------------------
Increase (decrease) in net assets from capital
share transactions (9,317) 916
-------------------------
Net increase (decrease) in net assets 312,702 (639,850)
NET ASSETS
Beginning of period 1,603,954 2,243,804
-------------------------
End of period $1,916,656 $1,603,954
=========================
Accumulated undistributed net investment income:
End of period $ 55,722 $ 25,824
=========================
CHANGE IN SHARES OUTSTANDING
Shares sold 5,815 15,003
Shares issued for dividends reinvested - 3,022
Shares redeemed (6,273) (17,677)
-------------------------
Increase (decrease) in shares outstanding (458) 348
=========================
See accompanying notes to financial statements.
================================================================================
86 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940 (the 1940 Act), as amended, is an open-end management investment company
organized as a Delaware statutory trust consisting of 46 separate funds. The
information presented in this semiannual report pertains only to the USAA
Cornerstone Strategy Fund (the Fund), which is classified as diversified under
the 1940 Act. The Fund's investment objective is to achieve a positive,
inflation-adjusted rate of return over the long term.
A. SECURITY VALUATION -- The value of each security is determined (as of the
close of trading on the New York Stock Exchange (NYSE) on each business day
the NYSE is open) as set forth below:
1. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If
no last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
2. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the
foreign markets may be closed. Therefore, the calculation of the Fund's
net asset value (NAV) may not take place at the same time the prices of
certain foreign securities held by the Fund are
================================================================================
NOTES TO FINANCIAL STATEMENTS | 87
<PAGE>
================================================================================
determined. In most cases, events affecting the values of foreign
securities that occur between the time of their last quoted sales or
official closing prices and the close of normal trading on the NYSE on
a day the Fund's NAV is calculated will not be reflected in the value
of the Fund's foreign securities. However, USAA Investment Management
Company (the Manager), an affiliate of the Fund, and the Fund's
subadvisers, if applicable, will monitor for events that would
materially affect the value of the Fund's foreign securities. The Fund's
subadvisers have agreed to notify the Manager of significant events they
identify that would materially affect the value of the Fund's foreign
securities. If the Manager determines that a particular event would
materially affect the value of the Fund's foreign securities, then the
Manager, under valuation procedures approved by the Trust's Board of
Trustees, will consider such available information that it deems
relevant to determine a fair value for the affected foreign securities.
In addition, the Fund may use information from an external vendor or
other sources to adjust the foreign market closing prices of foreign
equity securities to reflect what the Fund believes to be the fair value
of the securities as of the close of the NYSE. Fair valuation of
affected foreign equity securities may occur frequently based on an
assessment that events that occur on a fairly regular basis (such as
U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Debt securities with maturities greater than 60 days are valued each
business day by a pricing service (the Service) approved by the Trust's
Board of Trustees. The Service uses an evaluated mean between quoted bid
and asked prices or the last sales price to price securities when, in
the Service's judgment, these prices are readily available and are
representative of the securities'
================================================================================
88 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
market values. For many securities, such prices are not readily
available. The Service generally prices these securities based on
methods that include consideration of yields or prices of securities of
comparable quality, coupon, maturity, and type; indications as to values
from dealers in securities; and general market conditions.
6. Repurchase agreements are valued at cost, which approximates market
value.
7. Futures are valued based upon the last sale price at the close of market
on the principal exchange on which they are traded.
8. Options are valued by a pricing service at the National Best Bid/Offer
(NBBO) composite price, which is derived from the best available bid and
ask prices in all participating options exchanges determined to most
closely reflect market value of the options at the time of computation
of the Fund's NAV.
9. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before the
pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadvisers, if applicable, under valuation procedures approved by the
Trust's Board of Trustees. The effect of fair value pricing is that
securities may not be priced on the basis of quotations from the primary
market in which they are traded and the actual price realized from the
sale of a security may differ materially from the fair value price.
Valuing these securities at fair value is intended to cause the Fund's
NAV to be more reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited
to, obtaining market quotations from secondary pricing 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 89
<PAGE>
================================================================================
the forces that influenced the market in which the securities are
purchased and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments is
based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
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
in consultation with the Fund's subadvisers, if applicable, under valuation
procedures approved by the Trust's Board of Trustees. The fair value methods
included using inputs such as market quotations obtained from the
broker-dealers from which the Fund purchased the securities. Refer to the
portfolio of investments for a reconciliation of investments in which
significant unobservable inputs (Level 3) were used in determining value.
C. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- On December 1, 2008, the
Fund adopted an accounting standard that requires qualitative
================================================================================
90 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements, if any.
The Fund may buy, sell, and enter into certain types of derivatives,
including, but not limited to futures contracts, options, and options on
futures contracts under circumstances in which such instruments are expected
by the portfolio manager to aid in achieving the Fund's investment
objective. The Fund also may use derivatives in circumstances where the
portfolio manager believes they offer an economical means of gaining
exposure to a particular asset class or securities market or to keep cash on
hand to meet shareholder redemptions or other needs while maintaining
exposure to the market. With exchange listed futures contracts and options,
counterparty credit risk to the Fund is limited to the exchange's
clearinghouse which, as counterparty to all exchange traded futures
contracts and options, guarantees the transactions against default from the
actual counterparty to the trade.
FUTURES CONTRACTS -- The Fund is subject to equity price risk, interest rate
risk, and foreign currency exchange rate risk in the normal course of
pursuing its investment objectives. The Fund may use futures contracts to
gain exposure to, or hedge against, changes in the value of equities,
interest rates, or foreign currencies. A futures contract represents a
commitment for the future purchase or sale of an asset at a specified price
on a specified date. Upon entering into such contracts, the Fund is required
to deposit with the broker in either cash or securities an initial margin in
an amount equal to a certain percentage of the contract amount. Subsequent
payments (variation margin) are made or received by the Fund each day,
depending on the daily fluctuations in the value of the contract, and are
recorded for financial statement purposes as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Upon entering into such
contracts, the Fund bears the risk of interest or exchange rates or
securities prices moving unexpectedly in an unfavorable direction, in which
case, the Fund may not achieve the anticipated benefits of the futures
contracts.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 91
<PAGE>
================================================================================
OPTION TRANSACTIONS -- The Fund is subject to equity price risk in the
normal course of pursuing its investment objectives. The Fund may use
options on underlying instruments, namely, equity securities, ETFs, and
equity indexes, to gain exposure to, or hedge against, changes in the value
of equity securities, ETFs, or equity indexes. A call option gives the
purchaser the right to buy, and the writer the obligation to sell, the
underlying instrument at a specified price during a specified period.
Conversely, a put option gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying instrument at a specified price
during a specified period. The purchaser of the option pays a premium to the
writer of the option.
Premiums paid for purchased options are included in the Fund's statement of
assets and liabilities as an investment. If a purchased option expires
unexercised, the premium paid is recognized as a realized loss. If a
purchased call option on a security is exercised, the cost of the security
acquired includes the exercise price and the premium paid. If a purchased
put option on a security is exercised, the realized gain or loss on the
security sold is determined from the exercise price, the original cost of
the security, and the premium paid. The risk associated with purchasing a
call or put option is limited to the premium paid.
Premiums received from writing options are included in the Fund's statement
of assets and liabilities as a liability. If a written option expires
unexercised, the premium received is recognized as a realized gain. If a
written call option on a security is exercised, the realized gain or loss on
the security sold is determined from the exercise price, the original cost
of the security, and the premium received. If a written put option on a
security is exercised, the cost of the security acquired is the exercise
price paid less the premium received. The Fund, as a writer of an option,
bears the market risk of an unfavorable change in the price of the security
underlying the written option.
In an attempt to reduce the Fund's volatility over time, the Fund may
implement a strategy that involves selling index call or corresponding ETF
options and purchasing index put or corresponding ETF options or put spread
options against a highly correlated stock portfolio to
================================================================================
92 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
reduce the Fund's volatility. The combination of the diversified stock
portfolio with the index call and put options is designed to provide the
Fund with consistent returns over a wide range of equity market
environments. This strategy may not fully protect the Fund against declines
in the portfolio's value, and the Fund could experience a loss. Options on
securities indexes or corresponding ETF options are different from options
on individual securities in that the holder of the index options contract
has the right to receive an amount of cash equal to the difference between
the exercise price and the closing price of the underlying index on exercise
date. If an option on an index is exercised, the realized gain or loss is
determined from the exercise price, the value of the underlying index, and
the amount of the premium.
FAIR VALUES OF DERIVATIVE INSTRUMENTS
(IN THOUSANDS)
ASSETS 11/30/2009 5/31/2009
---------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING INSTRUMENTS LIABILITIES LIABILITIES
UNDER STATEMENT 133 LOCATION FAIR VALUE LOCATION FAIR VALUE
---------------------------------------------------------------------------------------------
Equity contracts Purchased $1,612* Purchased $5,214*
options; Net options; Net
unrealized unrealized
depreciation of depreciation of
investments, investments,
options, and options, and
futures contracts futures contracts
---------------------------------------------------------------------------------------------
*Includes cumulative appreciation (depreciation) of futures contracts as
reported in the portfolio of investments. Only current day's variation margin
is reported within the statement of assets and liabilities.
LIABILITIES 11/30/2009 5/31/2009
---------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING INSTRUMENTS LIABILITIES LIABILITIES
UNDER STATEMENT 133 LOCATION FAIR VALUE LOCATION FAIR VALUE
---------------------------------------------------------------------------------------------
Equity contracts Written options $5,966 Payables: $3,299
Written options
---------------------------------------------------------------------------------------------
================================================================================
NOTES TO FINANCIAL STATEMENTS | 93
<PAGE>
================================================================================
THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF CHANGES IN NET
ASSETS DURING THE SIX-MONTH PERIODS ENDED NOVEMBER 30, 2009, AND
MAY 31, 2009*
(IN THOUSANDS)
DERIVATIVES
NOT ACCOUNTED
FOR AS HEDGING STATEMENT OF CHANGE IN UNREALIZED
INSTRUMENTS CHANGES IN APPRECIATION
UNDER NET ASSETS REALIZED GAIN (LOSS) (DEPRECIATION)
STATEMENT 133 LOCATION ON DERIVATIVES ON DERIVATIVES
----------------------------------------------------------------------------------------------
11/30/2009 5/31/2009* 11/30/2009 5/31/2009*
----------------------------------------------------------------------------------------------
Equity contracts Net realized $(28,196) $(1,939) $5,055 $1,735
gain (loss) on
options and
futures transactions/
change in net
unrealized
appreciation/
depreciation of
options and futures
contracts
---------------------------------------------------------------------------------------------
*The statement of changes reflects the year ended May 31, 2009, while the
schedule reflects the period December 1, 2008 - May 31, 2009. This accounting
standard was effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008.
D. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
E. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon notification. Interest income is recorded
daily on the accrual basis. Discounts and premiums are amortized over the
life of the respective securities, using the effective yield method for
long-term securities and the straight-line method for short-term securities.
================================================================================
94 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
F. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commercial banks or recognized security dealers. These agreements are
collateralized by underlying securities. The collateral obligations are
marked-to-market daily to ensure their value is equal to or in excess of the
repurchase agreement price plus accrued interest and are held by the Fund,
either through its regular custodian or through a special "tri-party"
custodian that maintains separate accounts for both the Fund and its
counterparty, until maturity of the repurchase agreement. Repurchase
agreements are subject to credit risk, and the Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
G. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective
dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 95
<PAGE>
================================================================================
from accumulated net realized gain/loss to accumulated undistributed net
investment income on the statement of assets and liabilities as such amounts
are treated as ordinary income/loss for tax purposes. Net unrealized
foreign currency exchange gains/losses arise from changes in the value of
assets and liabilities, other than investments in securities, resulting from
changes in the exchange rate.
H. SECURITIES PURCHASED ON A DELAYED-DELIVERY OR WHEN-ISSUED BASIS -- Delivery
and payment for securities that have been purchased by the Fund on a
delayed-delivery or when-issued basis can take place a month or more after
the trade date. During the period prior to settlement, these securities do
not earn interest, are subject to market fluctuation, and may increase or
decrease in value prior to their delivery. The Fund maintains segregated
assets with a market value equal to or greater than the amount of its
purchase commitments. The purchase of securities on a delayed-delivery or
when-issued basis may increase the volatility of the Fund's NAV to the
extent that the Fund makes such purchases while remaining substantially
fully invested. As of November 30, 2009, the Fund's outstanding
delayed-delivery commitments, including interest purchased, were $3,000,000;
all of which were when-issued securities.
I. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition,
through arrangements with the Fund's custodian and other banks utilized by
the Fund for cash management purposes, realized credits, if any, generated
from cash balances in the Fund's bank accounts may be used to directly
reduce the Fund's expenses. For the six-month period ended November 30,
2009, brokerage commission recapture credits and custodian and other bank
credits reduced the Fund's expenses by less than $500.
J. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business the Trust enters into contracts that contain a variety of
representations and warranties that provide
================================================================================
96 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
general indemnifications. The Trust's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be
made against the Trust that have not yet occurred. However, the Trust
expects the risk of loss to be remote.
K. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $750 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA funds that are party to the loan agreement are assessed facility fees
by CAPCO based on the funds' assessed proportionate share of CAPCO's operating
expenses related to obtaining and maintaining CAPCO's funding programs in total
(in no event to exceed 0.13% annually of the amount of the committed loan
agreement). Prior to September 25, 2009, the maximum annual facility fee was
0.07% of the amount of the committed loan agreement. The facility fees are
allocated among the funds based on their respective average net assets for the
period.
For the six-month period ended November 30, 2009, the Fund paid CAPCO facility
fees of $5,000, which represents 4.3% 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 November 30, 2009.
(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 May 31, 2010, in
accordance with applicable tax law.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 97
<PAGE>
================================================================================
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually in the succeeding
fiscal year or as otherwise required to avoid the payment of federal taxes. At
May 31, 2009, the Fund had capital loss carryovers of $35,551,000, for federal
income tax purposes, which, if not offset by subsequent capital gains, will
expire in 2017. It is unlikely that the Trust's Board of Trustees will authorize
a distribution of capital gains realized in the future until the capital loss
carryovers have been used or expire.
The Fund is required to evaluate tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Income tax and related interest and penalties would be recognized by
the Fund as tax expense in the statement of operations if the tax positions were
deemed to not meet the more-likely-than-not threshold. For the six-month period
ended November 30, 2009, the Fund did not incur any income tax, interest, or
penalties. As of November 30, 2009, the Manager has reviewed all open tax years
and concluded that there was no impact to the Fund's net assets or results of
operations. Tax years ended May 31, 2006, through May 31, 2009, remain subject
to examination by the Internal Revenue Service and state taxing authorities. On
an ongoing basis, the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended November 30, 2009, were
$1,558,731,000 and $1,574,993,000, respectively.
As of November 30, 2009, 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 November 30,
2009, were $249,031,000 and $88,605,000, respectively, resulting in net
unrealized appreciation of $160,426,000.
================================================================================
98 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
For the six-month period ended November 30, 2009, transactions in written call
and put options* were as follows:
PREMIUMS
NUMBER OF RECEIVED
CONTRACTS (000's)
-------------------------
Outstanding at May 31, 2009 11,164 $ 7,726
Options written 32,206 31,869
Options terminated in closing purchase transactions (21,042) (18,622)
Options expired (12,450) (8,051)
-------------------------
Outstanding at November 30, 2009 9,878 $ 12,922
=========================
*Refer to Note 1C for a discussion of derivative instruments and how they are
accounted for in the Fund's financial statements.
(5) LENDING OF PORTFOLIO SECURITIES
The Fund, through its third-party securities-lending agent, Wachovia Global
Securities Lending (Wachovia), may lend its securities to qualified financial
institutions, such as certain broker-dealers, to earn additional income. The
borrowers are required to secure their loans continuously with cash collateral
in an amount at least equal to the fair value of the securities loaned,
initially in an amount at least equal to 102% of the fair value of domestic
securities loaned and 105% of the fair value of international securities loaned.
Cash collateral is invested in high-quality short-term investments. Cash
collateral requirements are determined daily based on the prior business day's
ending value of securities loaned. Imbalances in cash collateral may occur on
days where market volatility causes security prices to change significantly, and
are adjusted the next business day. The Fund and Wachovia retain 80% and 20%,
respectively, of the income earned from the investment of cash received as
collateral, net of any expenses associated with the lending transaction.
Wachovia receives no other fees from the Fund for its services as securities-
lending agent. Risks to the Fund in securities-lending transactions are that the
borrower may not provide additional collateral when required or return the
securities when due, and that the value of the short-term investments will be
less than the amount of cash collateral required to be returned to the borrower.
Wachovia Bank, N.A., parent company of Wachovia, has agreed to indemnify the
Fund against any losses due to counterparty default in securities-lending
================================================================================
NOTES TO FINANCIAL STATEMENTS | 99
<PAGE>
================================================================================
transactions. For the six-month period ended November 30, 2009, the Fund
received securities-lending income of $191,000, which is net of the 20% income
retained by Wachovia. As of November 30, 2009, the Fund loaned securities having
a fair market value of approximately $11,743,000, which excluded $49,000, of
securities on loan that were sold prior to November 30, 2009. The Fund received
cash collateral of $12,824,000 for the loans, which was invested in short-term
investments, as noted in the Fund's portfolio of investments.
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund and
for directly managing the day-to-day investment of a portion of the Fund's
assets, subject to the authority of and supervision by the Trust's Board of
Trustees. The Manager is also authorized to select (with approval of the
Trust's Board of Trustees and without shareholder approval) one or more
subadvisers to manage the day-to-day investment of a portion of the Fund's
assets. The Manager monitors each subadviser's performance through
quantitative and qualitative analysis, and periodically recommends to the
Trust's Board of Trustees as to whether each subadviser's agreement should
be renewed, terminated, or modified. The Manager also is responsible for
allocating assets to the subadvisers. The allocation for each subadviser can
range from 0% to 100% of the Fund's assets, and the Manager can change the
allocations without shareholder approval.
The investment management fee for the Fund is composed of a base fee and a
performance adjustment. The Fund's base fee is accrued daily and paid
monthly at an annualized rate of 0.75% of the Fund's average net assets for
the fiscal year.
The performance adjustment is calculated monthly by comparing the Fund's
performance to that of the Lipper Global Flexible Funds Index over the
performance period. The Lipper Global Flexible Funds Index tracks the total
return performance of the 30 largest funds in the Lipper Global Flexible
Portfolio Funds category. The performance
================================================================================
100 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
period for the Fund consists of the current month plus the previous 35
months. The following table is utilized to determine the extent of the
performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
---------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
The annual performance adjustment rate is multiplied by the average net
assets of the Fund over the entire performance period, which is then
multiplied by a fraction, the numerator of which is the number of days in
the month and the denominator of which is 365 (366 in leap years). The
resulting amount is the performance adjustment; a positive adjustment in the
case of overperformance, or a negative adjustment in the case of
underperformance.
Under the performance fee arrangement, the Fund will pay a positive
performance fee adjustment for a performance period whenever the Fund
outperforms the Lipper Global Flexible Funds Index over that period, even if
the Fund had overall negative returns during the performance period.
For the six-month period ended November 30, 2009, the Fund incurred total
management fees, paid or payable to the Manager, of $6,663,000. For the
six-month period ended November 30, 2009, the Fund did not incur any
performance adjustment.
B. SUBADVISORY ARRANGEMENTS -- The Manager has entered into investment
subadvisory agreements with Batterymarch Financial Management, Inc.
(Batterymarch), Credit Suisse Asset Management, LLC (Credit Suisse), Credit
Suisse Securities (USA) LLC (CSSU) for its Volaris Volatility Management
Group (Volaris Group), and Quantitative Management Associates LLC (QMA),
under which Batterymarch directs the investment and reinvestment of a
portion of the Fund's assets invested
================================================================================
NOTES TO FINANCIAL STATEMENTS | 101
<PAGE>
================================================================================
in U.S. and international stocks (as allocated from time to time by the
Manager), Credit Suisse directs the investment and reinvestment of a portion
of the Fund's assets invested in U.S. stocks (as allocated from time to time
by the Manager), Volaris Group directs the investment and reinvestment of
the portion of the Fund's assets invested in index options (as allocated
from time to time by the Manager), and QMA directs the investment and
reinvestment of a portion of the Fund's assets invested in international
stocks (as allocated from time to time by the Manager).
The Manager (not the Fund) pays Batterymarch a subadvisory fee based on the
aggregate average net assets that Batterymarch manages in the USAA
Cornerstone Strategy Fund and the USAA Capital Growth Fund combined, in an
annual amount of 0.25% on the first $250 million of assets; 0.21% on assets
over $250 million and up to $500 million; and 0.17% on assets over $500
million. For the six-month period ended November 30, 2009, the Manager
incurred subadvisory fees for the Fund, paid or payable to Batterymarch, of
$352,000.
The Manager (not the Fund) pays Credit Suisse a subadvisory fee in the
annual amount of 0.15% of the portion of the Fund's average net assets that
Credit Suisse manages. For the six-month period ended November 30, 2009, the
Manager incurred subadvisory fees, paid or payable to Credit Suisse, of
$250,000.
The Manager (not the Fund) pays CSSU'S Volaris Group a subadvisory fee based
on the total notional amount of the options contracts that CSSU's Volaris
Group manages in the USAA Balanced Strategy Fund, the USAA Cornerstone
Strategy Fund, the USAA First Start Growth Fund, the USAA Total Return
Strategy Fund, and the USAA Global Opportunities Fund, in an annual amount
of 0.23% on the first $50 million of the total notional amount; 0.20% on the
total notional amount over $50 million and up to $250 million; 0.12% on the
total notional amount over $250 million and up to $500 million; 0.10% on the
total notional amount over $500 million and up to $2 billion and 0.08% on
the total notional amount over $2 billion. The notional amount is based on
the daily closing price of the index that underlies the written options
strategy for the Fund. For the six-month period
================================================================================
102 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
ended November 30, 2009, the Manager incurred subadvisory fees for the Fund,
paid or payable to CSSU's Volaris Group of $341,000.
The Manager (not the Fund) pays QMA a subadvisory fee in the annual amount
of 0.25% of the portion of the Fund's average net assets that QMA manages.
For the six-month period ended November 30, 2009, the Manager incurred
subadvisory fees, paid or payable to QMA, of $290,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and shareholder servicing functions for the Fund. For such
services, the Manager receives a fee accrued daily and paid monthly at an
annualized rate of 0.15% of the Fund's average net assets. For the six-month
period ended November 30, 2009, the Fund incurred administration and
servicing fees, paid or payable to the Manager, of $1,333,000.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Trust's Board of Trustees
has approved the reimbursement of a portion of these expenses incurred by
the Manager. For the six-month period ended November 30, 2009, the Fund
reimbursed the Manager $42,000 for these compliance and legal services.
These expenses are included in the professional fees on the Fund's statement
of operations.
D. EXPENSE LIMITATION -- The Manager has voluntarily agreed to limit the annual
expenses of the Fund to 1.19% of its average annual net assets, excluding
extraordinary expenses and before reductions of any expenses paid
indirectly, and will reimburse the Fund for all expenses in excess of that
amount. The Manager may modify or terminate this voluntary agreement at any
time. For the six-month period ended November 30, 2009, the Fund incurred
reimbursable expenses of $1,509,000, of which $1,241,000 was receivable from
the Manager.
E. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund based on an annual charge of $23 per
shareholder account plus out-of-pocket expenses.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 103
<PAGE>
================================================================================
The Fund also pays SAS fees that are related to the administration and
servicing of accounts that are traded on an omnibus basis. For the six-month
period ended November 30, 2009, the Fund incurred transfer agent's fees,
paid or payable to SAS, of $3,090,000.
F. UNDERWRITING SERVICES -- The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
(7) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(8) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
During the six-month period ended November 30, 2009, in accordance with
affiliated transaction procedures approved by the Trust's Board of Trustees,
purchases and sales of security transactions were executed between the Fund and
the following affiliated USAA funds at the then-current market price with no
brokerage commissions incurred.
NET REALIZED
COST TO GAIN (LOSS) TO
SELLER PURCHASER PURCHASER SELLER
--------------------------------------------------------------------------------
USAA Cornerstone USAA High-Yield $ 455,000 $ 186,000
Strategy Fund Opportunities Fund
USAA Cornerstone USAA Intermediate-Term 1,595,000 (455,000)
Strategy Fund Bond Fund
(9) SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date but before the
financial statements are issued are categorized as recognized or non-recognized
for financial statement purposes. The Manager has evaluated subsequent events
through January 19, 2010, the date the financial statements were issued, and has
determined there were no events that required recognition or disclosure in the
Fund's financial statements.
================================================================================
104 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
(10) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
---------------------------------------------------------------------------------------------
2009 2009 2008 2007 2006 2005
---------------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 17.21 $ 24.17 $ 28.51 $ 26.50 $ 26.53 $ 25.80
---------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .32 .57 .46 .40 .56 .30(a)
Net realized and
unrealized gain (loss) 3.14 (7.02) (1.16) 4.38 1.68 2.13(a)
---------------------------------------------------------------------------------------------
Total from investment
operations 3.46 (6.45) (.70) 4.78 2.24 2.43(a)
---------------------------------------------------------------------------------------------
Less distributions from:
Net investment income - (.51) (.44) (.53) (.22) (.45)
Realized capital gains - - (3.20) (2.24) (2.05) (1.25)
---------------------------------------------------------------------------------------------
Total distributions - (.51) (3.64) (2.77) (2.27) (1.70)
---------------------------------------------------------------------------------------------
Net asset value at end
of period $ 20.67 $ 17.21 $ 24.17 $ 28.51 $ 26.50 $ 26.53
=============================================================================================
Total return (%)* 20.10 (26.39) (2.79) 18.82(b) 8.67 9.42
Net assets at end
of period (000) $1,916,656 $1,603,954 $2,243,804 $2,193,361 $1,712,123 $1,543,380
Ratios to average
net assets:**
Expenses (%)(c) 1.19(d) 1.19 1.19 1.19(b) 1.17 1.18
Expenses, excluding
reimbursements (%)(c) 1.36(d) 1.37 1.21 1.19(b) 1.17 1.18
Net investment income (%) 3.36(d) 3.23 2.06 1.68 2.01 1.15
Portfolio turnover (%) 91 162 175(e) 127 151 65
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during
the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and
could differ from the Lipper reported return.
** For the six-month period ended November 30, 2009, average net assets were $1,773,016,000.
(a) Calculated using average shares.
(b) For the year ended May 31, 2007, SAS voluntarily reimbursed the Fund for a portion of the transfer
agent's fees incurred. The reimbursement had no effect on the Fund's total return or ratio of
expenses to average net assets.
(c) Reflects total operating expenses of the Fund before reductions of any expenses paid indirectly.
The Fund's expenses paid indirectly decreased the expense ratios as follows:
(.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+) (.01%) (.02%)
(+) Represents less than 0.01% of average net assets.
(d) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(e) Reflects increased trading activity due to changes in subadvisers and asset allocation strategies.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 105
<PAGE>
================================================================================
EXPENSE EXAMPLE
November 30, 2009 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, and other Fund operating
expenses. This example is intended to help you understand your indirect costs,
also referred to as "ongoing costs" (in dollars), of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire six-month period of June 1, 2009, through
November 30, 2009.
ACTUAL EXPENSES
The first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested at the beginning of the period, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this
================================================================================
106 | USAA CORNERSTONE STRATEGY FUND
<PAGE>
================================================================================
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JUNE 1, 2009 -
JUNE 1, 2009 NOVEMBER 30, 2009 NOVEMBER 30, 2009
------------------------------------------------------------
Actual $1,000.00 $1,201.00 $6.57
Hypothetical
(5% return before expenses) 1,000.00 1,019.10 6.02
* Expenses are equal to the Fund's annualized expense ratio of 1.19%, which is
net of any reimbursements and expenses paid indirectly, multiplied by the
average account value over the period, multiplied by 183 days/365 days (to
reflect the one-half-year period). The Fund's ending account value on the
first line in the table is based on its actual total return of 20.10% for the
six-month period of June 1, 2009, through November 30, 2009.
================================================================================
EXPENSE EXAMPLE | 107
<PAGE>
================================================================================
TRUSTEES Christopher W. Claus
Barbara B. Dreeben
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Richard A. Zucker
--------------------------------------------------------------------------------
ADMINISTRATOR, USAA Investment Management Company
INVESTMENT ADVISER, P.O. Box 659453
UNDERWRITER, AND San Antonio, Texas 78265-9825
DISTRIBUTOR
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "Products & Services"
SELF-SERVICE 24/7 click "Investments," then
AT USAA.COM "Mutual Funds"
OR CALL Under "My Accounts" go to
(800) 531-USAA "Investments." View account balances,
(8722) or click "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's Web site 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 (i) at USAA.COM; and (ii) on
the SEC's Web site 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 Web site at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
<PAGE>
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
At usaa.com click: MY DOCUMENTS
Set preferences to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
=============================================================================
27800-0110 (C)2010, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended November 30, 2009
By:* CHRISTOPHER P. LAIA
-----------------------------------------------------------
Signature and Title: Christopher P. Laia, Assistant Secretary
Date: 01/26/2010
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* CHRISTOPHER W. CLAUS
-----------------------------------------------------
Signature and Title: Christopher W. Claus, President
Date: 01/27/2010
------------------------------
By:* ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 01/27/2010
------------------------------
*Print the name and title of each signing officer under his or her signature.
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