0000908695-14-000062.txt : 20140407 0000908695-14-000062.hdr.sgml : 20140407 20140407093646 ACCESSION NUMBER: 0000908695-14-000062 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20140131 FILED AS OF DATE: 20140407 DATE AS OF CHANGE: 20140407 EFFECTIVENESS DATE: 20140407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USAA MUTUAL FUNDS TRUST CENTRAL INDEX KEY: 0000908695 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07852 FILM NUMBER: 14747517 BUSINESS ADDRESS: STREET 1: 9800 FREDERICKSBURG ROAD STREET 2: A-3-W CITY: SAN ANTONIO STATE: TX ZIP: 78288-0227 BUSINESS PHONE: 210-498-0226 MAIL ADDRESS: STREET 1: 9800 FREDERICKSBURG ROAD STREET 2: A-3-W CITY: SAN ANTONIO STATE: TX ZIP: 78288-0227 FORMER COMPANY: FORMER CONFORMED NAME: USAA STATE TAX FREE TRUST DATE OF NAME CHANGE: 19940325 FORMER COMPANY: FORMER CONFORMED NAME: USAA STATE TAX EXEMPT TRUST DATE OF NAME CHANGE: 19930707 0000908695 S000012898 High Income Fund C000034867 High Income Fund Shares USHYX C000066837 High Income Fund Institutional Shares UIHIX C000091151 High Income Fund Adviser Shares UHYOX N-CSRS 1 ncsrshif13114.txt USAA HIGH INCOME FUND, 1/31/14 SEMIANN RPT 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: DANIEL J. MAVICO USAA MUTUAL FUNDS TRUST 9800 FREDERICKSBURG ROAD SAN ANTONIO, TX 78288 Registrant's telephone number, including area code: (210) 498-0226 Date of fiscal year end: JULY 31 Date of reporting period: JANUARY 31, 2014 ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS. USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2014 [LOGO OF USAA] USAA(R) [GRAPHIC OF USAA HIGH INCOME FUND] ========================================================== SEMIANNUAL REPORT USAA HIGH INCOME FUND FUND SHARES o INSTITUTIONAL SHARES o ADVISER SHARES JANUARY 31, 2014 ========================================================== ================================================================================ ================================================================================ PRESIDENT'S MESSAGE "IN MY OPINION, THE CONTINUATION OF THE TAPER IS AN INDICATION THAT FED [PHOTO OF DANIEL S. McNAMARA] POLICYMAKERS BELIEVE THE U.S. ECONOMIC RECOVERY IS STRENGTHENING." -------------------------------------------------------------------------------- FEBRUARY 2014 For much of the reporting period, market sentiment was driven by the potential for -- and then the reality of -- Federal Reserve (the Fed) "tapering." The Fed had hinted during the spring of 2013 that it might start reducing its asset purchase program (also known as quantitative easing, or QE) if U.S. economic conditions improved. (In September 2012, the U.S. central bank began purchasing $85 billion of U.S. Treasury securities and mortgage-backed securities every month to push down long-term interest rates and stimulate economic growth.) The Fed also continued to reiterate its "forward guidance" -- the promise to hold short-term interest rates near zero until unemployment falls below 6.5% and inflation rises above 2.5%. In general, equity investors seemed to like the Fed's promise of "low rates for longer" more than they disliked the prospect of the taper. Though stocks had briefly declined in response to the Fed's springtime "taper talk," they moved higher overall during the reporting period, reaching new all-time highs in mid-January 2014. In the bond market, longer-term yields -- especially in five-year, 10-year, and 30-year maturities -- rose on expectations that the Fed would begin tapering sooner rather than later. Bond prices, which move in the opposite direction of yields, declined. However, not all bonds performed the same way during the reporting period. The fixed-income market is, after all, a market of bonds and not a single bond market. It comprises different types of bonds with different maturities and risk characteristics, including U.S. Treasuries, mortgage-backed securities, investment-grade bonds, high-yield bonds, municipal securities and more. While U.S. Treasury securities underperformed during the reporting period, bonds with more exposure to the U.S. economy's health (i.e., those with credit risk) outperformed. In December, the Fed announced it would taper its QE asset purchases by $10 billion beginning in January 2014. It subsequently announced additional tapering of $10 billion in February and suggested it would continue reducing its asset purchases in $10 billion increments through the end of 2014. In my opinion, the continuation of the taper is an indication that Fed policymakers believe the U.S. economic recovery is strengthening. Indeed, near the end of the reporting period, the U.S. Department of Commerce estimated that fourth-quarter gross domestic product growth was 3.2%, which was later revised downward to 2.4% on February 28, 2014. Combined with a third-quarter ================================================================================ ================================================================================ growth rate of 4.1%, the U.S. economy experienced one of its strongest six-month periods in a decade during the second half of 2013. In mid-January, stocks underwent a sell-off. According to some observers, the decline was a response to slowing global economic growth, especially in China and Brazil, as well as currency weakness in Turkey and South Africa. However, in my opinion, the predominant driver of market behavior is how investors interpret macroeconomic data and future earnings trends. Some companies that met or beat earnings expectations in the fourth-quarter 2013 have guided down forecasts for coming quarters. Downward earnings guidance feeds into the belief held by many, including USAA Asset Management Company, that it may be harder than the markets expect for U.S. companies to find the earnings growth needed to support current valuations. Meanwhile, as stocks declined in late January, investors sought safety in U.S. Treasuries and other conservative fixed-income securities. Though yields trended down, they generally remained higher at the end of the reporting period than they were at the beginning. Higher yields mean that investors have the opportunity to reinvest at higher rates and can potentially earn more on new investments. Nevertheless, the shift in market sentiment during January underlines the importance of diversification. Different asset classes, such as stocks and bonds, move up and down at different rates and often at different times. I urge all investors to hold diversified portfolios directly tied to their goals, risk tolerance and time horizon. It is also a good idea to regularly reassess your investment risk and rebalance your portfolio. Regular rebalancing can potentially help you protect your gains and prepare for what happens next. Looking ahead, I expect U.S. economic growth to continue getting stronger, albeit slowly. While some investors may believe the economy is already on a clear path to normalization, I believe the ride will be bumpier than many of us would like. Rest assured we will continue to monitor economic trends, Fed policy, geopolitical events, and other factors that could potentially affect your investments. From all of us at USAA Asset Management Company, thank you for allowing us to help you with your investment needs. Sincerely, /S/ DANIEL S. MCNAMARA Daniel S. McNamara President USAA Investment Management Company Past performance is no guarantee of future results. o As interest rates rise, bond prices generally fall; given the historically low interest rate environment, risks associated with rising interest rates may be heightened. o Diversification is a technique intended to help reduce risk and does not guarantee a profit or prevent a loss. o Financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License # 0E36312), and USAA Financial Advisors, Inc., a registered broker-dealer. ================================================================================ ================================================================================ TABLE OF CONTENTS -------------------------------------------------------------------------------- FUND OBJECTIVE 1 MANAGERS' COMMENTARY 2 INVESTMENT OVERVIEW 7 FINANCIAL INFORMATION Portfolio of Investments 15 Notes to Portfolio of Investments 38 Financial Statements 42 Notes to Financial Statements 45 EXPENSE EXAMPLE 65
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 ASSET 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)2014, USAA. All rights reserved. ================================================================================ ================================================================================ FUND OBJECTIVE THE USAA HIGH INCOME FUND (THE FUND) SEEKS TO PROVIDE AN ATTRACTIVE TOTAL RETURN PRIMARILY THROUGH HIGH CURRENT INCOME AND SECONDARILY THROUGH CAPITAL APPRECIATION. -------------------------------------------------------------------------------- TYPES OF INVESTMENTS The Fund primarily invests its assets in a broad range of U.S. dollar- denominated high-yield securities, including bonds (often referred to as "junk" bonds), convertible securities, leveraged loans, or preferred stocks, with an emphasis on non-investment-grade debt securities. Although the Fund will invest primarily in U.S. securities, it may invest without limit in dollar-denominated foreign securities and to a limited extent in non-dollar-denominated foreign securities, including in each case emerging markets securities. IRA DISTRIBUTION WITHHOLDING DISCLOSURE We generally must withhold federal income tax at a rate of 10% of the taxable portion of your distribution and, if you live in a state that requires state income tax withholding, at your state's set rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. If you wish to make such an election, please call USAA Asset Management Company at (800) 531-USAA (8722). If you must pay estimated taxes, you may be subject to estimated tax penalties if your estimated tax payments are not sufficient and sufficient tax is not withheld from your distribution. For more specific information, please consult your tax adviser. ================================================================================ FUND OBJECTIVE | 1 ================================================================================ MANAGERS' COMMENTARY ON THE FUND -------------------------------------------------------------------------------- [PHOTO OF R. MATTHEW FREUND] [PHOTO OF JULIANNE BASS] R. MATTHEW FREUND, CFA JULIANNE BASS, CFA USAA Asset USAA Asset Management Company Management Company -------------------------------------------------------------------------------- o HOW DID THE USAA HIGH INCOME FUND (THE FUND) PERFORM DURING THE REPORTING PERIOD? The Fund has three share classes: Fund Shares, Institutional Shares, and Adviser Shares. For the six-month reporting period ended January 31, 2014, the Fund Shares, Institutional Shares, and Adviser Shares had a total return of 4.50%, 4.57%, and 4.35%, respectively. This compares to returns of 4.47% for the Lipper High Current Yield Bond Funds Index and 4.65% for the Credit Suisse High Yield Index. At the same time, the Fund Shares, Institutional Shares, and Adviser Shares provided a one-year dividend yield of 5.89%, 6.04%, and 5.62%, respectively, compared to 5.59% for the Lipper High Current Yield Bond Funds average. USAA Asset Management Company is the Fund's investment adviser. The investment adviser provides day-to-day discretionary management for the Fund's assets. o WHAT WERE MARKET CONDITIONS DURING THE REPORTING PERIOD? Though progress was uneven, U.S. economic growth continued to improve during the reporting period, fueling speculation that the U.S Refer to page 8 for benchmark definitions. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. o As interest rates rise, bond prices generally fall; given the historically low interest rate environment, risks associated with rising interest rates may be heightened. o Diversification is a technique to help reduce risk and does not guarantee a profit or prevent a loss. ================================================================================ 2 | USAA HIGH INCOME FUND ================================================================================ o 10-YEAR U.S. TREASURY YIELDS o [CHART OF 10-YEAR U.S. TREASURY YIELDS]
YIELD IN PERCENT 8/1/2013 2.707% 8/2/2013 2.597 8/5/2013 2.634 8/6/2013 2.643 8/7/2013 2.600 8/8/2013 2.590 8/9/2013 2.579 8/12/2013 2.621 8/13/2013 2.720 8/14/2013 2.714 8/15/2013 2.767 8/16/2013 2.826 8/19/2013 2.881 8/20/2013 2.815 8/21/2013 2.894 8/22/2013 2.885 8/23/2013 2.815 8/26/2013 2.786 8/27/2013 2.710 8/28/2013 2.766 8/29/2013 2.763 8/30/2013 2.785 9/3/2013 2.859 9/4/2013 2.898 9/5/2013 2.995 9/6/2013 2.935 9/9/2013 2.913 9/10/2013 2.965 9/11/2013 2.913 9/12/2013 2.910 9/13/2013 2.886 9/16/2013 2.865 9/17/2013 2.848 9/18/2013 2.689 9/19/2013 2.753 9/20/2013 2.735 9/23/2013 2.701 9/24/2013 2.656 9/25/2013 2.629 9/26/2013 2.651 9/27/2013 2.625 9/30/2013 2.611 10/1/2013 2.651 10/2/2013 2.618 10/3/2013 2.605 10/4/2013 2.646 10/7/2013 2.627 10/8/2013 2.633 10/9/2013 2.664 10/10/2013 2.682 10/11/2013 2.688 10/15/2013 2.729 10/16/2013 2.664 10/17/2013 2.590 10/18/2013 2.579 10/21/2013 2.602 10/22/2013 2.513 10/23/2013 2.502 10/24/2013 2.521 10/25/2013 2.510 10/28/2013 2.524 10/29/2013 2.504 10/30/2013 2.539 10/31/2013 2.555 11/1/2013 2.623 11/4/2013 2.604 11/5/2013 2.671 11/6/2013 2.643 11/7/2013 2.601 11/8/2013 2.749 11/12/2013 2.774 11/13/2013 2.700 11/14/2013 2.691 11/15/2013 2.704 11/18/2013 2.667 11/19/2013 2.708 11/20/2013 2.800 11/21/2013 2.785 11/22/2013 2.744 11/25/2013 2.729 11/26/2013 2.709 11/27/2013 2.738 11/29/2013 2.745 12/2/2013 2.796 12/3/2013 2.783 12/4/2013 2.835 12/5/2013 2.873 12/6/2013 2.856 12/9/2013 2.840 12/10/2013 2.802 12/11/2013 2.854 12/12/2013 2.878 12/13/2013 2.866 12/16/2013 2.879 12/17/2013 2.836 12/18/2013 2.894 12/19/2013 2.930 12/20/2013 2.890 12/23/2013 2.928 12/24/2013 2.979 12/26/2013 2.991 12/27/2013 3.001 12/30/2013 2.971 12/31/2013 3.029 1/2/2014 2.990 1/3/2014 2.996 1/6/2014 2.959 1/7/2014 2.940 1/8/2014 2.990 1/9/2014 2.966 1/10/2014 2.859 1/13/2014 2.827 1/14/2014 2.872 1/15/2014 2.892 1/16/2014 2.842 1/17/2014 2.820 1/21/2014 2.830 1/22/2014 2.866 1/23/2014 2.778 1/24/2014 2.716 1/27/2014 2.749 1/28/2014 2.750 1/29/2014 2.678 1/30/2014 2.696 1/31/2014 2.645
[END CHART] Source: Bloomberg Finance L.P. Federal Reserve (the Fed) would announce a reduction -- or "taper" -- in the pace of its monthly purchases of U.S. Treasury securities and mortgage-backed securities. Interest rates increased and bond prices (which move in the opposite direction of rates) declined on expectations of Fed tapering. The yield on a 10-year U.S. Treasury, which began the period at 2.71%, rose to nearly 3% in early September. Meanwhile, stock prices -- which had declined during August -- rose during the first half of September in anticipation of Fed action. After Fed policymakers said in September that it will continue the pace of its bond purchases, stocks declined and the 10-year U.S. Treasury yield drifted down. Stocks were volatile in October amid partisan wrangling over the federal budget, but then rallied strongly when it became apparent the U.S. would avoid a debt default. The 10-year U.S. Treasury yield edged up during October and November as investors sought to divine the timing of a Fed taper. In December, Fed policymakers said it would reduce its January 2014 bond purchases ================================================================================ MANAGERS' COMMENTARY ON THE FUND | 3 ================================================================================ by $10 billion and subsequently announced it would trim an additional $10 billion from its February bond purchases. During January, stock prices fell as the global economy weakened and U.S. corporations reduced their earnings guidance. As investors shifted into the perceived safe haven of U.S. Treasury securities, the yield on a 10-year U.S. Treasury bond declined, ending the reporting period at 2.65%. High-yield bonds generated solid gains during the reporting period, benefiting from investors' push for yield. In addition, and as expected, high-yield bonds outperformed U.S. Treasury securities and underperformed the S&P 500 Index(R). High-yield securities are a unique asset class with characteristics of both stocks and higher-quality bonds, and therefore, their long-term return generally falls between these two asset classes (see the Comparative Returns chart on the page 5), which can provide long-term investors with a significant diversification advantage. During the reporting period, high-yield bonds also benefited from low default expectations. According to J.P. Morgan, the trailing 12-month high-yield default rate at the end of January was 0.63%, which is well below the long-term average of 3.90%. o WHAT WERE YOUR STRATEGIES IN THIS ENVIRONMENT? During the reporting period, we sought to maximize the Fund's income while maintaining an acceptable level of price volatility. We have always believed the Fund should be adequately compensated for any risk taken. As always, we continued to rely on our team of skilled credit analysts to help us identify attractive relative values across asset classes and among high-yield securities. During the reporting period, we found opportunities in airline enhanced equipment trust certificates and junior subordinated debt. We also purchased a select number of new issues and added to some of the portfolio's existing positions. ================================================================================ 4 | USAA HIGH INCOME FUND ================================================================================ o HYBRID ASSET CLASS COMPARATIVE RETURNS o [CHART OF HYBRID ASSET CLASS COMPARATIVE RETURNS]
USAA HIGH CITIGROUP 10-YEAR S&P 500 INDEX INCOME FUND SHARES U.S. TREASURY INDEX 8/01/13 0.00% 0.00% 0.00% 8/02/13 0.17 0.00 1.11 8/05/13 0.03 0.00 0.78 8/06/13 -0.54 0.00 0.77 8/07/13 -0.89 -0.11 1.15 8/08/13 -0.48 0.00 1.36 8/09/13 -0.82 0.00 1.38 8/12/13 -0.93 0.00 1.17 8/13/13 -0.63 -0.11 0.18 8/14/13 -1.13 -0.11 0.20 8/15/13 -2.52 -0.46 -0.17 8/16/13 -2.84 -0.46 -0.89 8/19/13 -3.41 -0.68 -1.38 8/20/13 -3.03 -0.68 -0.77 8/21/13 -3.59 -0.91 -1.11 8/22/13 -2.76 -0.91 -1.50 8/23/13 -2.36 -0.80 -0.80 8/26/13 -2.75 -0.68 -0.68 8/27/13 -4.30 -0.80 0.09 8/28/13 -4.01 -0.74 -0.42 8/29/13 -3.81 -0.74 -0.10 8/30/13 -4.11 -0.74 -0.10 9/02/13 0.00 0.00 -0.09 9/03/13 -3.70 -0.62 -0.94 9/04/13 -2.90 -0.74 -1.33 9/05/13 -2.78 -0.85 -2.02 9/06/13 -2.76 -0.74 -1.68 9/09/13 -1.79 -0.62 -1.31 9/10/13 -1.06 -0.62 -1.81 9/11/13 -0.75 -0.62 -1.47 9/12/13 -1.05 -0.51 -1.37 9/13/13 -0.78 -0.40 -1.27 9/16/13 -0.22 -0.28 -1.06 9/17/13 0.20 -0.17 -0.86 9/18/13 1.42 0.18 0.49 9/19/13 1.25 0.41 0.06 9/20/13 0.52 0.41 0.21 9/23/13 0.05 0.29 0.39 9/24/13 -0.20 0.29 0.91 9/25/13 -0.47 0.29 1.27 9/26/13 -0.10 0.32 1.02 9/27/13 -0.51 0.20 1.25 9/30/13 -1.10 0.09 1.29 10/01/13 -0.30 0.20 1.02 10/02/13 -0.35 0.20 1.21 10/03/13 -1.25 0.20 1.37 10/04/13 -0.55 0.32 1.03 10/07/13 -1.39 0.32 1.19 10/08/13 -2.58 0.32 1.20 10/09/13 -2.51 0.32 1.05 10/10/13 -0.37 0.43 0.75 10/11/13 0.26 0.66 0.79 10/14/13 0.67 0.66 0.81 10/15/13 -0.04 0.66 0.48 10/16/13 1.35 0.89 0.92 10/17/13 2.04 1.24 1.68 10/18/13 2.71 1.47 1.67 10/21/13 2.72 1.58 1.51 10/22/13 3.31 1.81 2.36 10/23/13 2.82 1.81 2.59 10/24/13 3.16 1.92 2.31 10/25/13 3.61 2.15 2.48 10/28/13 3.75 2.15 2.39 10/29/13 4.34 2.23 2.46 10/30/13 3.83 2.23 2.28 10/31/13 3.44 2.23 2.16 11/01/13 3.74 2.23 1.49 11/04/13 4.12 2.23 1.69 11/05/13 3.84 2.11 1.15 11/06/13 4.34 2.23 1.34 11/07/13 2.98 2.23 1.61 11/08/13 4.37 2.00 0.46 11/11/13 4.44 2.00 0.48 11/12/13 4.20 1.88 0.29 11/13/13 5.08 1.88 0.65 11/14/13 5.61 2.00 1.04 11/15/13 6.05 2.11 1.00 11/18/13 5.66 2.34 1.27 11/19/13 5.47 2.34 1.01 11/20/13 5.09 2.23 0.37 11/21/13 5.95 2.34 0.42 11/22/13 6.49 2.46 0.70 11/25/13 6.36 2.58 0.81 11/26/13 6.39 2.58 1.21 11/27/13 6.68 2.70 0.86 11/28/13 0.00 0.00 0.87 11/29/13 6.60 2.70 0.82 12/02/13 6.31 2.70 0.33 12/03/13 5.98 2.70 0.57 12/04/13 5.87 2.58 0.01 12/05/13 5.41 2.70 -0.18 12/06/13 6.61 2.71 -0.32 12/09/13 6.80 2.71 -0.09 12/10/13 6.46 2.83 0.44 12/11/13 5.27 2.83 0.02 12/12/13 4.90 2.71 -0.26 12/13/13 4.89 2.83 -0.15 12/16/13 5.56 2.94 -0.23 12/17/13 5.23 2.87 0.10 12/18/13 6.99 2.99 -0.27 12/19/13 6.94 2.99 -0.61 12/20/13 7.45 3.11 -0.26 12/23/13 8.04 3.11 -0.61 12/24/13 8.36 3.11 -1.06 12/25/13 8.36 3.11 -1.06 12/26/13 8.88 3.23 -1.11 12/27/13 8.86 3.23 -1.21 12/30/13 8.85 3.34 -0.97 12/31/13 9.29 3.34 -1.20 1/01/14 9.29 3.34 -1.20 1/02/14 8.33 3.46 -0.99 1/03/14 8.30 3.58 -1.06 1/06/14 8.03 3.70 -0.76 1/07/14 8.69 3.82 -0.54 1/08/14 8.70 3.82 -1.01 1/09/14 8.74 3.94 -0.75 1/10/14 8.99 4.18 0.12 1/13/14 7.63 4.18 0.44 1/14/14 8.79 4.18 0.08 1/15/14 9.36 4.30 -0.04 1/16/14 9.21 4.41 0.31 1/17/14 8.79 4.41 0.46 1/20/14 0.00 0.00 0.48 1/21/14 9.09 4.53 0.54 1/22/14 9.17 4.53 0.21 1/23/14 8.20 4.53 0.98 1/24/14 5.94 4.30 1.32 1/27/14 5.43 4.18 1.07 1/28/14 6.08 4.30 1.24 1/29/14 5.01 4.26 1.86 1/30/14 6.20 4.38 1.71 1/31/14 5.51 4.50 1.98
[END CHART] Source: Bloomberg L.P. o WHAT IS THE OUTLOOK? Looking ahead, we expect the U.S. economy to continue strengthening during 2014, perhaps at a slightly faster rate than in 2013. This should allow the Fed to continue scaling back its bond-buying program, though we believe the Fed will taper gradually so as not to undermine the economic recovery. Meanwhile, we expect interest rates to continue rising at a modest pace. The S&P 500 Index is an unmanaged index representing the weighted average performance of a group of 500 widely held, publicly traded stocks. o The unmanaged Citigroup 10-year U.S. Treasury Index is a component of the Salomon Smith Barney U.S. Broad Investment-Grade (USBIG) Bond IndexSM; it measures the performance of the most recently auctioned U.S. Treasury issues with 10 years to maturity. The USBIG is an unmanaged, market-capitalization-weighted index and includes fixed-rate U.S. Treasury, government-sponsored, mortgage, asset-backed, and investment-grade issues with a maturity of one year or longer and a minimum amount outstanding of $1 billion in U.S. Treasuries. ================================================================================ MANAGERS' COMMENTARY ON THE FUND | 5 ================================================================================ While interest rates increased during the reporting period, high-yield securities continue to be attractive relative to other fixed-income alternatives. In addition, the high-yield default rate is likely to remain low for the next several years, which is likely to be positive for high-yield debt. High-yield securities tend to perform well when defaults are low. Nevertheless, high-yield bonds are unlikely to experience strong price appreciation in the months ahead. Investors should expect the majority of their return to come from the income provided by the Fund. As always, we recommend shareholders remain disciplined and hold diversified portfolios through all market conditions. We believe high-yield securities can contribute to such diversification. Over the long-term, it is our opinion that the high-yield bond market has the potential to provide a total return greater than high-quality bonds (with less interest-rate sensitivity) and lower than the broad equity markets (with more predictability and higher current income). Thank you for the opportunity to serve your investment needs. Non-investment grade securities are considered speculative and are subject to significant risk. They are sometimes referred to as junk bonds since they represent a greater risk of default than more credit worthy investment-grade securities. ================================================================================ 6 | USAA HIGH INCOME FUND ================================================================================ INVESTMENT OVERVIEW USAA HIGH INCOME FUND SHARES (FUND SHARES) (Ticker Symbol: USHYX)
-------------------------------------------------------------------------------- 1/31/14 7/31/13 -------------------------------------------------------------------------------- Net Assets $1,363.3 Million $1,250.7 Million Net Asset Value Per Share $8.75 $8.79 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14 -------------------------------------------------------------------------------- 8/1/13-1/31/14* 1 Year 5 Years 10 Years 4.50% 7.61% 17.95% 7.89% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years 8.47% 18.54% 8.01% -------------------------------------------------------------------------------- 30-DAY SEC YIELD AS OF 1/31/14** EXPENSE RATIO AS OF 7/31/13*** -------------------------------------------------------------------------------- 4.98% 0.95%
(includes acquired fund fees and expenses of 0.01%) THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT USAA.COM. *Total returns for periods of less than one year are not annualized. This six-month return is cumulative. **Calculated as prescribed by the Securities and Exchange Commission. ***The expense ratio represents the total annual operating expenses, before reductions of any expenses paid indirectly and including any acquired fund fees and expenses, as reported in the Fund's prospectus dated December 1, 2013, and is calculated as a percentage of average net assets. This expense ratio may differ from the expense ratio disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. generally accepted accounting principles or the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. ================================================================================ INVESTMENT OVERVIEW | 7 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
CREDIT SUISSE USAA HIGH LIPPER HIGH CURRENT HIGH YIELD INDEX INCOME FUND SHARES YIELD BOND FUNDS INDEX 1/31/2004 $10,000.00 $10,000.00 $10,000.00 2/29/2004 10,004.62 9,971.83 9,980.44 3/31/2004 10,071.17 10,026.61 10,018.51 4/30/2004 10,057.12 9,993.27 9,995.75 5/31/2004 9,898.52 9,844.55 9,841.29 6/30/2004 10,052.31 9,963.11 9,978.98 7/31/2004 10,180.97 10,032.09 10,058.52 8/31/2004 10,346.96 10,199.04 10,222.67 9/30/2004 10,504.09 10,341.97 10,364.57 10/31/2004 10,684.31 10,509.86 10,548.97 11/30/2004 10,820.36 10,642.44 10,698.70 12/31/2004 10,982.66 10,812.13 10,860.06 1/31/2005 10,980.81 10,790.50 10,833.31 2/28/2005 11,126.29 10,924.39 10,998.86 3/31/2005 10,860.48 10,717.50 10,707.12 4/30/2005 10,753.45 10,634.76 10,582.01 5/31/2005 10,885.25 10,745.30 10,751.59 6/30/2005 11,067.14 10,922.25 10,924.59 7/31/2005 11,218.34 11,071.44 11,094.25 8/31/2005 11,276.20 11,172.28 11,146.95 9/30/2005 11,167.33 11,062.00 11,074.58 10/31/2005 11,062.33 10,970.24 10,983.28 11/30/2005 11,138.12 11,048.34 11,083.35 12/31/2005 11,231.10 11,169.35 11,185.58 1/31/2006 11,375.47 11,308.29 11,329.83 2/28/2006 11,489.70 11,411.41 11,424.82 3/31/2006 11,578.62 11,461.25 11,471.55 4/30/2006 11,656.62 11,523.31 11,537.65 5/31/2006 11,688.60 11,524.64 11,512.42 6/30/2006 11,623.17 11,471.60 11,448.19 7/31/2006 11,722.80 11,579.09 11,535.55 8/31/2006 11,886.02 11,772.24 11,692.66 9/30/2006 12,034.09 11,917.60 11,821.92 10/31/2006 12,200.27 12,091.12 11,992.79 11/30/2006 12,421.90 12,275.27 12,199.85 12/31/2006 12,569.23 12,398.07 12,322.91 1/31/2007 12,713.59 12,509.20 12,454.92 2/28/2007 12,910.46 12,694.72 12,616.42 3/31/2007 12,947.43 12,725.70 12,656.54 4/30/2007 13,130.98 12,898.09 12,831.32 5/31/2007 13,233.02 12,973.46 12,940.67 6/30/2007 13,031.35 12,820.66 12,730.42 7/31/2007 12,621.72 12,490.17 12,317.72 8/31/2007 12,753.52 12,605.90 12,436.51 9/30/2007 13,037.27 12,824.16 12,736.27 10/31/2007 13,139.30 12,875.25 12,845.95 11/30/2007 12,895.30 12,585.84 12,572.90 12/31/2007 12,901.96 12,555.59 12,585.28 1/31/2008 12,697.51 12,268.94 12,328.83 2/29/2008 12,557.21 12,133.70 12,162.75 3/31/2008 12,528.19 12,056.54 12,144.32 4/30/2008 13,020.63 12,350.17 12,599.47 5/31/2008 13,069.61 12,440.56 12,664.44 6/30/2008 12,754.82 12,149.16 12,331.12 7/31/2008 12,582.91 11,986.45 12,171.15 8/31/2008 12,617.47 12,015.01 12,188.09 9/30/2008 11,729.64 11,184.30 11,278.14 10/31/2008 9,871.16 9,705.71 9,460.26 11/30/2008 9,019.56 8,915.83 8,650.12 12/31/2008 9,525.12 9,028.64 8,955.19 1/31/2009 10,084.66 9,361.22 9,345.93 2/28/2009 9,878.18 9,101.10 9,129.69 3/31/2009 10,078.56 9,177.85 9,264.92 4/30/2009 11,094.50 9,989.42 10,164.04 5/31/2009 11,697.66 10,870.19 10,754.99 6/30/2009 12,117.45 11,345.83 11,116.93 7/31/2009 12,852.79 12,021.70 11,821.34 8/31/2009 13,090.69 12,352.88 12,019.37 9/30/2009 13,827.68 13,092.74 12,647.78 10/31/2009 14,079.82 13,394.88 12,834.38 11/30/2009 14,276.13 13,569.63 12,997.93 12/31/2009 14,689.82 13,923.13 13,387.21 1/31/2010 14,876.89 14,240.95 13,556.88 2/28/2010 14,922.18 14,302.30 13,577.32 3/31/2010 15,346.96 14,804.90 14,008.83 4/30/2010 15,702.80 15,172.56 14,313.40 5/31/2010 15,202.78 14,561.27 13,783.56 6/30/2010 15,378.57 14,704.70 13,892.90 7/31/2010 15,853.82 15,165.28 14,389.28 8/31/2010 15,874.15 15,227.14 14,380.66 9/30/2010 16,295.24 15,666.60 14,818.55 10/31/2010 16,680.47 16,083.00 15,230.44 11/30/2010 16,504.31 15,988.41 15,077.10 12/31/2010 16,808.02 16,309.43 15,383.34 1/31/2011 17,146.47 16,623.41 15,704.56 2/28/2011 17,370.14 16,951.02 15,957.60 3/31/2011 17,440.94 17,048.38 15,990.42 4/30/2011 17,683.46 17,360.18 16,241.26 5/31/2011 17,759.81 17,449.78 16,277.13 6/30/2011 17,622.09 17,206.30 16,096.54 7/31/2011 17,863.88 17,331.31 16,230.21 8/31/2011 17,202.85 16,540.43 15,500.71 9/30/2011 16,720.03 15,987.00 14,952.95 10/31/2011 17,618.77 16,668.39 15,824.66 11/30/2011 17,299.53 16,362.28 15,468.24 12/31/2011 17,727.09 16,721.30 15,821.73 1/31/2012 18,199.01 17,215.12 16,348.40 2/29/2012 18,614.37 17,613.58 16,726.52 3/31/2012 18,617.88 17,690.81 16,729.80 4/30/2012 18,811.05 17,809.42 16,878.45 5/31/2012 18,562.24 17,557.25 16,603.80 6/30/2012 18,908.28 17,844.97 16,915.73 7/31/2012 19,240.82 18,196.94 17,225.27 8/31/2012 19,471.88 18,521.05 17,443.24 9/30/2012 19,716.26 18,808.36 17,684.71 10/31/2012 19,885.21 19,088.85 17,837.30 11/30/2012 20,035.49 19,150.56 17,980.06 12/31/2012 20,335.13 19,485.87 18,264.27 1/31/2013 20,599.28 19,860.77 18,529.40 2/28/2013 20,718.14 20,030.21 18,627.09 3/31/2013 20,932.01 20,282.98 18,821.56 4/30/2013 21,317.24 20,630.79 19,175.60 5/31/2013 21,194.31 20,640.49 19,067.30 6/30/2013 20,643.09 20,112.71 18,570.88 7/31/2013 21,054.01 20,452.33 18,935.59 8/31/2013 20,932.75 20,301.33 18,801.13 9/30/2013 21,137.20 20,469.94 19,001.14 10/31/2013 21,648.67 20,908.20 19,460.37 11/30/2013 21,733.89 21,004.27 19,541.26 12/31/2013 21,866.98 21,136.39 19,658.70 1/31/2014 22,033.53 21,372.13 19,781.84
[END CHART] Data from 1/31/04 to 1/31/14. The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA High Income Fund Shares to the following benchmarks: o The Credit Suisse High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the high-yield debt market. o The unmanaged Lipper High Current Yield Bond Funds Index tracks the total return performance of the 30 largest funds in the Lipper High Current Yield Funds category. Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indices does not reflect the deduction of any fees or expenses. ================================================================================ 8 | USAA HIGH INCOME FUND ================================================================================ USAA HIGH INCOME FUND INSTITUTIONAL SHARES (INSTITUTIONAL SHARES) (Ticker Symbol: UIHIX)
-------------------------------------------------------------------------------- 1/31/14 7/31/13 -------------------------------------------------------------------------------- Net Assets $798.6 Million $764.6 Million Net Asset Value Per Share $8.75 $8.78 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14 -------------------------------------------------------------------------------- 8/1/13-1/31/14* 1 Year 5 Years Since Inception 8/01/08 4.57% 7.64% 18.21% 11.33% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13 -------------------------------------------------------------------------------- 1 Year 5 Years Since Inception 8/01/08 8.63% 18.83% 11.31% -------------------------------------------------------------------------------- EXPENSE RATIO AS OF 7/31/13** -------------------------------------------------------------------------------- 0.77% (includes acquired fund fees and expenses of 0.01%) THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT USAA.COM. *Total returns for periods of less than one year are not annualized. This six-month return is cumulative. **The expense ratio represents the total annual operating expenses, before reductions of any expenses paid indirectly and including any acquired fund fees and expenses, as reported in the Fund's prospectus dated December 1, 2013, and is calculated as a percentage of average net assets. This expense ratio may differ from the expense ratio disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. generally accepted accounting principles or the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. The Institutional Shares are available for investment through a USAA discretionary managed account program, and certain advisory programs sponsored by financial intermediaries, such as brokerage firms, investment advisors, financial planners, third-party administrators, and insurance companies. Institutional Shares also are available to institutional investors, which include retirement plans, endowments, foundations, and bank trusts, as well as other persons or legal entities that the Fund may approve from time to time, or for purchase by a USAA Fund participating in a fund-of-funds investment strategy (USAA fund-of-funds) and not to the general public. ================================================================================ INVESTMENT OVERVIEW | 9 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON] USAA HIGH INCOME FUND CREDIT SUISSE LIPPER HIGH CURRENT INSTITUTIONAL SHARES HIGH YIELD INDEX YIELD BOND FUNDS INDEX 7/31/2008 $10,000.00 $10,000.00 $10,000.00 8/31/2008 10,026.02 10,027.47 10,013.91 9/30/2008 9,335.20 9,321.88 9,266.29 10/31/2008 8,103.33 7,844.90 7,772.69 11/30/2008 7,445.43 7,168.10 7,107.07 12/31/2008 7,543.33 7,569.89 7,357.71 1/31/2009 7,823.87 8,014.57 7,678.75 2/28/2009 7,609.28 7,850.48 7,501.09 3/31/2009 7,676.57 8,009.73 7,612.19 4/30/2009 8,357.89 8,817.12 8,350.92 5/31/2009 9,096.76 9,296.47 8,836.46 6/30/2009 9,497.08 9,630.09 9,133.84 7/31/2009 10,065.93 10,214.48 9,712.59 8/31/2009 10,345.72 10,403.55 9,875.29 9/30/2009 10,968.20 10,989.26 10,391.60 10/31/2009 11,223.91 11,189.64 10,544.91 11/30/2009 11,372.72 11,345.65 10,679.29 12/31/2009 11,671.04 11,674.43 10,999.13 1/31/2010 11,939.80 11,823.10 11,138.53 2/28/2010 11,993.82 11,859.09 11,155.32 3/31/2010 12,402.89 12,196.68 11,509.86 4/30/2010 12,729.23 12,479.47 11,760.10 5/31/2010 12,219.38 12,082.09 11,324.77 6/30/2010 12,327.95 12,221.80 11,414.61 7/31/2010 12,733.43 12,599.49 11,822.45 8/31/2010 12,772.39 12,615.65 11,815.36 9/30/2010 13,143.99 12,950.30 12,175.14 10/31/2010 13,512.55 13,256.45 12,513.55 11/30/2010 13,435.99 13,116.45 12,387.57 12/31/2010 13,709.37 13,357.82 12,639.18 1/31/2011 13,976.04 13,626.80 12,903.10 2/28/2011 14,254.25 13,804.56 13,111.00 3/31/2011 14,339.23 13,860.82 13,137.96 4/30/2011 14,587.46 14,053.56 13,344.06 5/31/2011 14,665.36 14,114.23 13,373.53 6/30/2011 14,463.99 14,004.79 13,225.15 7/31/2011 14,588.71 14,196.94 13,334.98 8/31/2011 13,926.64 13,671.61 12,735.61 9/30/2011 13,445.71 13,287.89 12,285.56 10/31/2011 14,021.53 14,002.14 13,001.78 11/30/2011 13,766.01 13,748.44 12,708.93 12/31/2011 14,070.91 14,088.23 12,999.37 1/31/2012 14,488.88 14,463.28 13,432.09 2/29/2012 14,844.97 14,793.38 13,742.76 3/31/2012 14,912.45 14,796.17 13,745.45 4/30/2012 15,014.83 14,949.68 13,867.58 5/31/2012 14,804.97 14,751.95 13,641.93 6/30/2012 15,050.08 15,026.96 13,898.22 7/31/2012 15,349.07 15,291.24 14,152.54 8/31/2012 15,606.31 15,474.87 14,331.62 9/30/2012 15,869.23 15,669.08 14,530.02 10/31/2012 16,093.89 15,803.35 14,655.40 11/30/2012 16,168.58 15,922.79 14,772.69 12/31/2012 16,455.70 16,160.92 15,006.20 1/31/2013 16,774.76 16,370.85 15,224.03 2/28/2013 16,920.46 16,465.31 15,304.29 3/31/2013 17,116.97 16,635.28 15,464.07 4/30/2013 17,432.33 16,941.43 15,754.96 5/31/2013 17,442.77 16,843.74 15,665.98 6/30/2013 16,998.05 16,405.66 15,258.11 7/31/2013 17,267.67 16,732.24 15,557.76 8/31/2013 17,161.63 16,635.87 15,447.29 9/30/2013 17,286.37 16,798.34 15,611.62 10/31/2013 17,679.02 17,204.83 15,988.93 11/30/2013 17,762.06 17,272.55 16,055.39 12/31/2013 17,875.99 17,378.33 16,151.88 1/31/2014 18,056.69 17,510.69 16,253.06
[END CHART] Data from 7/31/08 to 1/31/14.* The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA High Income Fund Institutional Shares to the Fund's benchmarks listed above (see page 8 for benchmark definitions). *The performance of the Credit Suisse High Yield Index and the Lipper High Current Yield Bond Funds Index is calculated from the end of the month, July 31, 2008, while the Institutional Shares' inception date is August 1, 2008. There may be a slight variation of performance numbers because of this difference. Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indices does not reflect the deduction of any fees or expenses. ================================================================================ 10 | USAA HIGH INCOME FUND ================================================================================ USAA HIGH INCOME FUND ADVISER SHARES (ADVISER SHARES) (Ticker Symbol: UHYOX)
-------------------------------------------------------------------------------- 1/31/14 7/31/13 -------------------------------------------------------------------------------- Net Assets $7.8 Million $7.1 Million Net Asset Value Per Share $8.74 $8.79 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14 -------------------------------------------------------------------------------- 8/1/13-1/31/14* 1 Year Since Inception 8/01/10 4.35% 7.19% 10.00% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13 -------------------------------------------------------------------------------- 1 Year Since Inception 8/01/10 8.30% 9.95% -------------------------------------------------------------------------------- 30-DAY SEC YIELD AS OF 1/31/14** -------------------------------------------------------------------------------- Unsubsidized 4.54% Subsidized 4.70% -------------------------------------------------------------------------------- EXPENSE RATIOS AS OF 7/31/13*** -------------------------------------------------------------------------------- Before Reimbursement 1.35% After Reimbursement 1.21%
(includes acquired fund fees and expenses of 0.01%) THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT USAA.COM. *Total returns for periods of less than one year are not annualized. This six-month return is cumulative. **Calculated as prescribed by the Securities and Exchange Commission. ***The expense ratios represent the total annual operating expenses, before reductions of any expenses paid indirectly and including any acquired fund fees and expenses, as reported in the Fund's prospectus dated December 1, 2013, and are calculated as a percentage of average net assets. USAA Asset Management Company (the Manager) has agreed, through December 1, 2014, to make payments or waive management, administration, and other fees so that the total annual operating expenses of the Adviser Shares (exclusive of commission recapture, expense offset arrangements, acquired fund fees and expenses, and extraordinary expenses) do not exceed an annual rate of 1.20% of the Adviser Shares' average net assets. This reimbursement arrangement may not be changed or terminated during this time period without approval of the Fund's Board of Trustees and may be changed or terminated by the Manager at any time after December 1, 2014. These expense ratios may differ from the expense ratios disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. generally accepted accounting principles or the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. ================================================================================ INVESTMENT OVERVIEW | 11 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA HIGH INCOME CREDIT SUISSE LIPPER HIGH CURRENT FUND ADVISER SHARES HIGH YIELD INDEX YIELD BOND FUNDS INDEX 7/31/2010 $10,000.00 $10,000.00 $10,000.00 8/31/2010 10,030.71 10,012.83 9,994.01 9/30/2010 10,316.99 10,278.43 10,298.32 10/31/2010 10,588.61 10,521.42 10,584.57 11/30/2010 10,524.02 10,410.30 10,478.01 12/31/2010 10,732.48 10,601.87 10,690.83 1/31/2011 10,937.44 10,815.36 10,914.07 2/28/2011 11,150.86 10,956.44 11,089.92 3/31/2011 11,212.33 11,001.10 11,112.72 4/30/2011 11,402.05 11,154.07 11,287.05 5/31/2011 11,458.62 11,202.22 11,311.98 6/30/2011 11,296.48 11,115.36 11,186.47 7/31/2011 11,389.73 11,267.87 11,279.37 8/31/2011 10,867.67 10,850.92 10,772.40 9/30/2011 10,488.62 10,546.37 10,391.72 10/31/2011 10,935.08 11,113.26 10,997.53 11/30/2011 10,744.35 10,911.90 10,749.83 12/31/2011 10,977.63 11,181.59 10,995.50 1/31/2012 11,300.22 11,479.26 11,361.51 2/29/2012 11,573.59 11,741.25 11,624.29 3/31/2012 11,622.25 11,743.46 11,626.57 4/30/2012 11,698.18 11,865.31 11,729.87 5/31/2012 11,530.79 11,708.37 11,539.01 6/30/2012 11,703.61 11,926.64 11,755.79 7/31/2012 11,932.28 12,136.39 11,970.90 8/31/2012 12,142.34 12,282.14 12,122.38 9/30/2012 12,342.50 12,436.28 12,290.19 10/31/2012 12,510.75 12,542.85 12,396.25 11/30/2012 12,549.54 12,637.64 12,495.46 12/31/2012 12,766.88 12,826.64 12,692.97 1/31/2013 13,025.23 12,993.26 12,877.22 2/28/2013 13,118.86 13,068.23 12,945.11 3/31/2013 13,281.44 13,203.13 13,080.26 4/30/2013 13,506.02 13,446.12 13,326.30 5/31/2013 13,523.71 13,368.58 13,251.04 6/30/2013 13,160.55 13,020.89 12,906.05 7/31/2013 13,379.59 13,280.09 13,159.51 8/31/2013 13,293.36 13,203.60 13,066.07 9/30/2013 13,385.58 13,332.56 13,205.07 10/31/2013 13,684.01 13,655.18 13,524.21 11/30/2013 13,743.82 13,708.93 13,580.43 12/31/2013 13,826.14 13,792.88 13,662.04 1/31/2014 13,961.33 13,897.93 13,747.62
[END CHART] Data from 7/31/10 to 1/31/14.* The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA High Income Fund Adviser Shares to the Fund's benchmarks listed above (see page 8 for benchmark definitions). *The performance of the Credit Suisse High Yield Index and the Lipper High Current Yield Bond Funds Index is calculated from the end of the month, July 31, 2010, while the Adviser Shares' inception date is August 1, 2010. There may be a slight variation of performance numbers because of this difference. Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indices does not reflect the deduction of any fees or expenses. ================================================================================ 12 | USAA HIGH INCOME FUND ================================================================================ o TOP 10 HOLDINGS* o AS OF 1/31/2014 (% of Net Assets)
COUPON RATE % % OF NET ASSETS ------------------------------- NuStar Logistics, LP ......................... 7.63% 2.1% StanCorp Financial Group, Inc. ............... 6.90% 1.2% PPL Capital Funding, Inc. .................... 6.70% 1.2% Glen Meadow Pass-Through Trust ............... 6.51% 1.1% Lincoln National Corp. ....................... 7.00% 1.1% QBE Capital Funding III Ltd. ................. 7.25% 1.0% Dairy Farmers of America, Inc., 7.88%, cumulative redeemable, perpetual ... 7.88% 1.0% Textron Financial Corp. ...................... 6.00% 0.9% Chesapeake Energy Corp., 5.75%, perpetual .... 5.75% 0.9% Genworth Holdings, Inc. ...................... 6.15% 0.9%
You will find a complete list of securities that the Fund owns on pages 15-37. * Excludes money market instruments. ================================================================================ INVESTMENT OVERVIEW | 13 ================================================================================ o ASSET ALLOCATION -- 1/31/2014 o [PIE CHART OF ASSET ALLOCATION] FINANCIALS 26.0% ENERGY 17.2% CONSUMER DISCRETIONARY 11.1% INDUSTRIALS 9.4% MATERIALS 9.1% TELECOMMUNICATION SERVICES 7.1% UTILITIES 6.4% CONSUMER STAPLES 3.6% INFORMATION TECHNOLOGY 3.1% HEALTH CARE 2.8% MONEY MARKET INSTRUMENTS 1.7% EXCHANGE-TRADED FUNDS* 0.9% MUNCIPAL BONDS 0.1%
[END CHART] Percentages are of the net assets of the Fund and may not equal 100%. *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, as amended, that would otherwise be applicable. ================================================================================ 14 | USAA HIGH INCOME FUND ================================================================================ PORTFOLIO OF INVESTMENTS January 31, 2014 (unaudited)
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- CORPORATE OBLIGATIONS (71.0%) CONSUMER DISCRETIONARY (9.7%) ----------------------------- ADVERTISING (0.6%) $ 233 Clear Channel Communications, Inc.(a) 3.81% 1/29/2016 $ 228 2,240 Clear Channel Communications, Inc.(a) 6.91 1/30/2019 2,178 4,310 Clear Channel Communications, Inc.(a) 7.66 7/30/2019 4,300 5,000 Clear Channel Worldwide Holdings, Inc. 7.63 3/15/2020 5,300 ---------- 12,006 ---------- APPAREL RETAIL (0.9%) 18,162 L Brands, Inc. 6.95 3/01/2033 17,935 2,362 L Brands, Inc. 7.60 7/15/2037 2,397 ---------- 20,332 ---------- AUTO PARTS & EQUIPMENT (0.2%) 1,093 Federal-Mogul Corp.(a) 2.11 12/29/2014 1,087 643 Federal-Mogul Corp.(a) 2.11 12/28/2015 640 2,000 Lear Corp.(b) 4.75 1/15/2023 1,900 ---------- 3,627 ---------- AUTOMOTIVE RETAIL (0.2%) 5,000 CST Brands, Inc. 5.00 5/01/2023 4,825 ---------- BROADCASTING (0.3%) 100 CBS Outdoor Americas Capital, LLC(b) 5.25 2/15/2022 101 100 CBS Outdoor Americas Capital, LLC(b) 5.63 2/15/2024 101 3,000 Sinclair Television Group, Inc. 6.13 10/01/2022 3,045 4,000 Univision Communications, Inc.(b) 8.50 5/15/2021 4,410 ---------- 7,657 ---------- CABLE & SATELLITE (1.5%) 5,000 Cablevision Systems Corp. 8.00 4/15/2020 5,638 5,000 CCO Holdings, LLC(b) 5.25 3/15/2021 4,881 5,000 CCO Holdings, LLC 6.63 1/31/2022 5,250 5,000 CCO Holdings, LLC 5.75 1/15/2024 4,875 5,000 Cequel Communications Holdings I, LLC & Cequel Capital Corp.(b) 6.38 9/15/2020 5,138 7,000 Mediacom Broadband, LLC 6.38 4/01/2023 7,192 ---------- 32,974 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 15 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- CASINOS & GAMING (3.0%) $ 5,000 Caesar's Entertainment Operating Co., Inc. 10.00% 12/15/2018 $ 2,537 4,000 Caesar's Entertainment Operating Co., Inc. 8.50 2/15/2020 3,792 10,000 Caesar's Entertainment Resort Properties, LLC(a) 7.00 10/12/2020 10,137 6,000 Chester Downs & Marina, LLC(b) 9.25 2/01/2020 5,925 1,500 Eldorado Resorts, LLC(b) 8.63 6/15/2019 1,594 2,472 Inn of the Mountain Gods Resort & Casino(b) 9.25 11/30/2020 2,453 4,000 Isle of Capri Casinos 8.88 6/15/2020 4,340 5,000 Marina District Finance Co., Inc. 9.88 8/15/2018 5,400 8,000 MGM Resorts International 8.63 2/01/2019 9,460 3,050 MTR Gaming Group, Inc. 11.50 8/01/2019 3,447 5,000 Pinnacle Entertainment, Inc. 8.75 5/15/2020 5,500 5,000 Scientific Games International, Inc. 6.25 9/01/2020 5,250 3,000 Snoqualmie Entertainment Auth.(b) 4.15(c) 2/01/2014 3,000 850 Snoqualmie Entertainment Auth.(b) 9.13 2/01/2015 850 600 Sugarhouse HSP Gaming Prop Mezz, LP & Sugarhouse HSP Gaming Finance Corp.(b) 6.38 6/01/2021 584 ---------- 64,269 ---------- DEPARTMENT STORES (0.3%) 3,200 Dillard's, Inc. 7.13 8/01/2018 3,696 2,100 Macy's Retail Holdings, Inc. 7.88 8/15/2036 2,355 ---------- 6,051 ---------- HOMEBUILDING (0.7%) 5,000 Beazer Homes USA, Inc. 9.13 5/15/2019 5,400 2,000 D.R. Horton, Inc. 5.75 8/15/2023 2,064 5,000 KB Home 7.50 9/15/2022 5,350 1,596 Taylor Morrison Communities, Inc.(b) 7.75 4/15/2020 1,755 ---------- 14,569 ---------- HOTELS, RESORTS & CRUISE LINES (0.2%) 5,000 Royal Caribbean Cruises Ltd. 5.25 11/15/2022 5,088 ---------- MOVIES & ENTERTAINMENT (0.1%) 2,000 Production Resource Group, Inc. 8.88 5/01/2019 1,560 ---------- PUBLISHING (0.7%) 195 American Media, Inc.(b) 13.50 6/15/2018 211 6,248 McGraw-Hill Global Education Holdings, LLC(a) 9.00 3/22/2019 6,373 7,500 McGraw-Hill Global Education Holdings, LLC(b) 9.75 4/01/2021 8,194 ---------- 14,778 ---------- RESTAURANTS (0.2%) 4,000 NPC International, Inc. 10.50 1/15/2020 4,620 ----------
================================================================================ 16 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- SPECIALIZED CONSUMER SERVICES (0.1%) $ 3,000 Weight Watchers International, Inc.(a),(d) 6.21% 4/02/2020 $ 2,691 ---------- SPECIALTY STORES (0.5%) 4,938 Harbor Freight Tools USA, Inc.(a) 4.75 7/26/2019 5,021 5,000 Michaels Stores, Inc. 7.75 11/01/2018 5,362 ---------- 10,383 ---------- TIRES & RUBBER (0.2%) 5,000 Goodyear Tire & Rubber Co. 6.50 3/01/2021 5,356 ---------- Total Consumer Discretionary 210,786 ---------- CONSUMER STAPLES (1.4%) ----------------------- PACKAGED FOODS & MEAT (1.4%) 5,000 B&G Foods, Inc. 4.63 6/01/2021 4,856 4,882 Chiquita Brands International, Inc.(b) 7.88 2/01/2021 5,285 15,000 Kraft Foods Group, Inc. 3.50 6/06/2022 15,042 5,000 Sun Merger Sub, Inc.(b) 5.88 8/01/2021 5,087 ---------- 30,270 ---------- Total Consumer Staples 30,270 ---------- ENERGY (16.8%) -------------- COAL & CONSUMABLE FUELS (0.5%) 5,000 Alpha Natural Resources 9.75 4/15/2018 5,288 5,000 Arch Coal, Inc. 9.88 6/15/2019 4,400 1,000 James River Coal Co. 7.88 4/01/2019 275 2,000 Peabody Energy Corp. 7.88 11/01/2026 2,065 ---------- 12,028 ---------- OIL & GAS EQUIPMENT & SERVICES (0.7%) 3,000 Basic Energy Services 7.75 2/15/2019 3,165 3,000 Brand Energy & Infrastructure Service, Inc.(b) 8.50 12/01/2021 3,053 5,000 Exterran Partners, LP 6.00 4/01/2021 4,987 4,000 Global Geophysical Services, Inc. 10.50 5/01/2017 3,130 ---------- 14,335 ---------- OIL & GAS EXPLORATION & PRODUCTION (6.8%) 5,000 Alta Mesa Holdings, LP 9.63 10/15/2018 5,388 10,000 Bill Barrett Corp.(e) 7.00 10/15/2022 10,475 5,000 BreitBurn Energy Partners, LP 7.88 4/15/2022 5,344 5,000 Carrizo Oil & Gas, Inc. 8.63 10/15/2018 5,425 2,000 Chaparral Energy, Inc. 8.25 9/01/2021 2,190 5,000 Comstock Resources, Inc. 7.75 4/01/2019 5,350 5,000 EP Energy, LLC & Everest Acquisition Finance, Inc. 9.38 5/01/2020 5,775 1,000 EP Energy, LLC & Everest Acquisition Finance, Inc. 7.75 9/01/2022 1,110
================================================================================ PORTFOLIO OF INVESTMENTS | 17 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- $ 5,000 EV Energy Partners, LP 8.00% 4/15/2019 $ 5,119 5,000 Forest Oil Corp. 7.50 9/15/2020 4,950 2,194 GMX Resources, Inc.(f) 11.00 12/01/2017 1,975 3,000 Halcon Resources Corp.(b) 9.25 2/15/2022 3,038 4,000 Magnum Hunter Resources Corp. 9.75 5/15/2020 4,370 5,000 Midstates Petroleum Co., Inc. & Midstates Petroleum Co., LLC 9.25 6/01/2021 5,225 1,400 Murphy USA, Inc.(b) 6.00 8/15/2023 1,404 5,000 PDC Energy, Inc. 7.75 10/15/2022 5,412 7,300 Penn Virginia Corp. 8.50 5/01/2020 7,993 10,000 Quicksilver Resources, Inc. 7.13 4/01/2016 9,650 7,000 Quicksilver Resources, Inc.(a) 7.00 6/21/2019 6,982 5,000 Resolute Energy Corp. 8.50 5/01/2020 5,250 5,000 Rex Energy Corp. 8.88 12/01/2020 5,525 6,000 Rosetta Resources, Inc. 5.88 6/01/2022 5,962 7,250 Sabine Oil & Gas, LLC 9.75 2/15/2017 7,576 5,000 Samson Investment Co.(a) 5.00 9/25/2018 5,053 5,000 Samson Investment Co.(b) 10.50 2/15/2020 5,525 10,000 Sandridge Energy, Inc. 7.50 2/15/2023 10,237 5,000 Ultra Petroleum Corp.(b) 5.75 12/15/2018 5,188 ---------- 147,491 ---------- OIL & GAS REFINING & MARKETING (0.2%) 5,000 Northern Tier Energy, LLC & Northern Tier Finance Corp. 7.13 11/15/2020 5,325 ---------- OIL & GAS STORAGE & TRANSPORTATION (8.6%) 5,000 Atlas Pipeline, LP & Atlas Pipeline Finance Corp. 6.63 10/01/2020 5,262 5,000 Crestwood Midstream Partners, LP 6.00 12/15/2020 5,162 2,000 Crestwood Midstream Partners, LP(b) 6.13 3/01/2022 2,050 15,000 DCP Midstream, LLC(b) 5.85 5/21/2043 13,950 5,061 El Paso, LLC 7.80 8/01/2031 5,271 2,500 Energy Transfer Equity, LP 7.50 10/15/2020 2,828 5,000 Energy Transfer Partners, LP 3.26(c) 11/01/2066 4,575 12,250 Enterprise Products Operating, LLC 7.00 6/01/2067 12,719 9,000 Enterprise Products Operating, LLC 7.03 1/15/2068 9,999 5,000 Genesis Energy, LP & Genesis Energy Finance Corp. 5.75 2/15/2021 5,100 8,000 Martin Midstream Partners, LP 7.25 2/15/2021 8,320 3,000 NGL Energy Partners, LP(b) 6.88 10/15/2021 3,098 12,000 NGPL PipeCo, LLC(b) 7.12 12/15/2017 11,400 3,000 NGPL PipeCo, LLC(b) 9.63 6/01/2019 2,993 5,000 NGPL PipeCo, LLC(b) 7.77 12/15/2037 4,300 3,000 Niska Gas Storage 8.88 3/15/2018 3,135 1,730 NuStar Logistics, LP 7.63 1/15/2043 45,593
================================================================================ 18 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- $ 5,000 PVR Partners, LP(b) 6.50% 5/15/2021 $ 5,262 13,000 Sabine Pass Liquefaction, LLC(b) 5.63 2/01/2021 13,032 2,000 Sabine Pass LNG, LP 6.50 11/01/2020 2,100 5,000 Southern Union Co. 3.26(c) 11/01/2066 4,075 3,000 Targa Resources Partners, LP 6.88 2/01/2021 3,218 3,000 Targa Resources Partners, LP 5.25 5/01/2023 2,918 1,000 Teekay Corp. 8.50 1/15/2020 1,111 3,000 TEPPCO Partners, LP 7.00 6/01/2067 3,085 5,000 Tesoro Logistics, LP & Tesoro Logistics Finance Corp. 6.13 10/15/2021 5,162 ---------- 185,718 ---------- Total Energy 364,897 ---------- FINANCIALS (14.5%) ------------------ ASSET MANAGEMENT & CUSTODY BANKS (0.9%) 8,461 Walter Investment Management Corp.(a) 4.75 12/11/2020 8,542 10,000 Walter Investment Management Corp.(b) 7.88 12/15/2021 10,175 ---------- 18,717 ---------- CONSUMER FINANCE (0.6%) 4,000 American Express Co. 6.80 9/01/2066 4,320 6,000 Credit Acceptance Corp. 9.13 2/01/2017 6,300 3,000 Credit Acceptance Corp.(b) 6.13 2/15/2021 3,067 ---------- 13,687 ---------- DIVERSIFIED BANKS (1.0%) 4,000 Compass Bank 6.40 10/01/2017 4,463 1,800 USB Realty Corp.(b) 1.39(c) -(g) 1,638 15,000 Wells Fargo & Co. 3.50 3/08/2022 15,200 ---------- 21,301 ---------- INVESTMENT BANKING & BROKERAGE (0.0%) 1,000 Lehman Brothers Holdings, Inc.(h) 5.75 4/25/2011 220 1,500 Lehman Brothers Treasury Co. B.V.(h) 6.88 12/29/2010 461 ---------- 681 ---------- LIFE & HEALTH INSURANCE (3.5%) 3,000 American Equity Investment Life Holding Co. 6.63 7/15/2021 3,142 274 Delphi Financial Group, Inc. 7.38 5/15/2037 6,603 3,000 Forethought Financial Group(b) 8.63 4/15/2021 3,377 23,000 Lincoln National Corp. 7.00 5/17/2066 23,575 2,000 MetLife, Inc. 10.75 8/01/2039 2,970 10,000 Prudential Financial, Inc. 5.20 3/15/2044 9,670 25,465 StanCorp Financial Group, Inc. 6.90 6/01/2067 25,529 ---------- 74,866 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 19 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- MULTI-LINE INSURANCE (2.7%) $ 21,299 Genworth Holdings, Inc. 6.15% 11/15/2066 $ 19,116 25,000 Glen Meadow Pass-Through Trust(b) 6.51 2/12/2067 25,000 15,000 Nationwide Mutual Insurance Co.(b) 5.81 12/15/2024 15,244 ---------- 59,360 ---------- OTHER DIVERSIFIED FINANCIAL SERVICES (1.7%) 4,000 GE Capital Trust I 6.38 11/15/2067 4,390 5,000 General Electric Capital Corp. 6.25 -(g) 5,234 6,034 ILFC E-Capital Trust I(b) 5.46(c) 12/21/2065 5,574 16,362 ILFC E-Capital Trust II(b) 6.25 12/21/2065 15,462 5,000 International Lease Finance Corp. 8.63 1/15/2022 5,962 1,000 Washington Mutual Bank(h) 5.55 6/16/2010 294 ---------- 36,916 ---------- PROPERTY & CASUALTY INSURANCE (1.5%) 10,000 AmTrust Financial Services, Inc.(b) 6.13 8/15/2023 10,100 1,000 Assured Guaranty Municipal Holdings, Inc.(b) 6.40 12/15/2066 790 2,300 Assured Guaranty U.S. Holdings, Inc. 6.40 12/15/2066 2,057 3,780 Hanover Insurance Group, Inc. 8.21 2/03/2027 3,940 5,400 Ironshore Holdings, Inc.(b) 8.50 5/15/2020 6,328 817 Kingsway America, Inc. 7.50 2/01/2014 817 6,000 Liberty Mutual Group, Inc.(b) 7.00 3/15/2037 6,270 2,000 Zenith National Insurance Capital Trust I(b) 8.55 8/01/2028 2,010 ---------- 32,312 ---------- REAL ESTATE DEVELOPMENT (0.1%) 2,500 Howard Hughes Corp.(b) 6.88 10/01/2021 2,619 ---------- REGIONAL BANKS (1.2%) 1,000 AmSouth Bancorp. 6.75 11/01/2025 1,097 6,940 First Tennessee Capital II 6.30 4/15/2034 6,784 1,500 M&T Capital Trust I 8.23 2/01/2027 1,522 2,000 M&T Capital Trust II 8.28 6/01/2027 2,045 10,409 Regions Bank 6.45 6/26/2037 11,329 1,790 Regions Financial Corp. 7.38 12/10/2037 2,050 ---------- 24,827 ---------- REINSURANCE (0.1%) 2,000 Alterra USA Holdings Ltd.(b) 7.20 4/14/2017 2,263 ---------- REITs -- RETAIL (0.3%) 3,000 Brixmor, LLC 5.30 1/15/2015 3,049 2,675 Brixmor, LLC 5.25 9/15/2015 2,715 1,550 Brixmor, LLC 7.50 7/30/2029 1,529 ---------- 7,293 ----------
================================================================================ 20 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- REITs - SPECIALIZED (0.2%) $ 5,000 Aviv Heathcare Properties, LP 6.00% 10/15/2021 $ 5,150 ---------- SPECIALIZED FINANCE (0.7%) 10,000 National Rural Utilities Cooperative Finance Corp. 4.75 4/30/2043 9,425 5,000 PHH Corp. 6.38 8/15/2021 5,037 ---------- 14,462 ---------- Total Financials 314,454 ---------- HEALTH CARE (2.4%) ------------------ HEALTH CARE EQUIPMENT (0.4%) 1,500 Accellent, Inc. 8.38 2/01/2017 1,575 1,500 Accellent, Inc. 10.00 11/01/2017 1,609 5,000 Universal Hospital Services, Inc. 7.63 8/15/2020 5,312 ---------- 8,496 ---------- HEALTH CARE FACILITIES (0.8%) 1,000 Community Health Systems, Inc.(b) 5.13 8/01/2021 1,008 500 Community Health Systems, Inc.(b) 6.88 2/01/2022 513 5,000 HCA Holdings, Inc. 7.75 5/15/2021 5,500 5,000 Kindred Healthcare, Inc. 8.25 6/01/2019 5,388 2,000 Tenet Healthcare Corp. 8.00 8/01/2020 2,190 2,000 Tenet Healthcare Corp. 4.50 4/01/2021 1,945 500 United Surgical Partners International, Inc. 9.00 4/01/2020 561 ---------- 17,105 ---------- HEALTH CARE SERVICES (0.3%) 5,000 Radiation Therapy Services, Inc. 9.88 4/15/2017 4,788 2,000 ResCare, Inc. 10.75 1/15/2019 2,235 ---------- 7,023 ---------- HEALTH CARE SUPPLIES (0.4%) 1,000 DJO Finance, LLC 9.75 10/15/2017 1,035 3,000 DJO Finance, LLC 7.75 4/15/2018 3,083 4,000 VWR Funding, Inc. 7.25 9/15/2017 4,280 ---------- 8,398 ---------- PHARMACEUTICALS (0.5%) 5,000 Valeant Pharmaceuticals International, Inc.(b) 6.38 10/15/2020 5,362 5,000 Valeant Pharmaceuticals International, Inc.(b) 6.75 8/15/2021 5,363 ---------- 10,725 ---------- Total Health Care 51,747 ---------- INDUSTRIALS (8.0%) ------------------ AEROSPACE & DEFENSE (0.9%) 22,500 Textron Financial Corp.(b) 6.00 2/15/2067 20,419 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 21 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- AIRLINES (3.5%) $ 721 America West Airlines, Inc. Pass-Through Trust 6.87% 1/02/2017 $ 757 506 America West Airlines, Inc. Pass-Through Trust 7.12 1/02/2017 516 4,854 American Airlines, Inc. "B" Pass-Through Trust(b) 5.63 1/15/2021 4,860 6,233 American Airlines, Inc. Pass-Through Trust(b) 7.00 1/31/2018 6,669 3,134 Continental Airlines, Inc. "B" Pass-Through Trust 6.25 4/11/2020 3,306 5,000 Continental Airlines, Inc. Pass-Through Trust 6.13 4/29/2018 5,225 3,000 Continental Airlines, Inc. Pass-Through Trust 5.50 4/29/2022 3,060 20,000 Hawaiian Airlines Pass-Through Trust 4.95 1/15/2022 18,700 5,000 United Air Lines, Inc. "B" Pass-Through Trust 5.38 8/15/2021 5,125 4,488 United Air Lines, Inc. Pass-Through Trust(b) 12.00 7/15/2017 5,082 7,000 US Airways Group, Inc. "B" Pass-Through Trust 5.38 5/15/2023 6,860 6,286 US Airways Group, Inc. Pass-Through Trust 8.50 4/22/2017 6,852 5,000 US Airways Group, Inc. Pass-Through Trust 5.45 6/03/2018 5,013 2,645 US Airways Group, Inc. Pass-Through Trust 9.75 10/22/2018 3,081 1,679 US Airways Group, Inc. Pass-Through Trust (INS) 7.08 3/20/2021 1,813 ---------- 76,919 ---------- BUILDING PRODUCTS (0.3%) 5,000 USG Corp.(b) 8.38 10/15/2018 5,425 ---------- COMMERCIAL PRINTING (0.8%) 5,000 Cenveo Corp. 8.88 2/01/2018 4,975 5,035 Harland Clarke Holdings Corp. 6.00(c) 5/15/2015 5,048 6,000 R.R. Donnelley & Sons Co. 8.25 3/15/2019 6,975 ---------- 16,998 ---------- CONSTRUCTION & ENGINEERING (0.1%) 2,000 Zachry Holdings, Inc.(b) 7.50 2/01/2020 2,110 ---------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.2%) 5,000 Navistar International Corp. 8.25 11/01/2021 5,169 ---------- ELECTRICAL COMPONENTS & EQUIPMENT (0.1%) 1,000 Artesyn Escrow, Inc.(b) 9.75 10/15/2020 1,042 ---------- INDUSTRIAL CONGLOMERATES (0.0%) 530 Tomkins, LLC 9.00 10/01/2018 577 ---------- INDUSTRIAL MACHINERY (0.7%) 5,000 Dynacast International, LLC 9.25 7/15/2019 5,544 5,000 Stanley Black & Decker, Inc. 5.75 12/15/2053 5,337 4,542 Thermadyne Holdings Corp. 9.00 12/15/2017 4,872 ---------- 15,753 ---------- MARINE (0.8%) 1,000 Navios Maritime Acquisition Corp.(b) 8.13 11/15/2021 1,025 5,000 Navios Maritime Holdings, Inc. 8.13 2/15/2019 5,125
================================================================================ 22 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- $ 10,000 Navios Maritime Holdings, Inc.(b) 7.38% 1/15/2022 $ 10,100 ---------- 16,250 ---------- RAILROADS (0.4%) 4,135 Florida East Coast Railway Corp. 8.13 2/01/2017 4,320 3,693 Southern Capital Pass-Through Trust(b) 5.70 6/30/2022 4,095 ---------- 8,415 ---------- TRADING COMPANIES & DISTRIBUTORS (0.0%) 1,000 WESCO International, Inc.(b) 5.38 12/15/2021 1,008 ---------- TRUCKING (0.2%) 2,500 Avis Budget Car Rental, LLC & Avis Budget Finance, Inc. 5.50 4/01/2023 2,425 2,000 Jurassic Holdings III, Inc.(b),(d) 6.88 2/15/2021 2,015 ---------- 4,440 ---------- Total Industrials 174,525 ---------- INFORMATION TECHNOLOGY (2.6%) ----------------------------- COMMUNICATIONS EQUIPMENT (0.3%) 3,500 Avaya, Inc.(b) 7.00 4/01/2019 3,474 3,500 Avaya, Inc.(b) 10.50 3/01/2021 3,255 ---------- 6,729 ---------- COMPUTER HARDWARE (0.2%) 5,000 Denali Borrower, LLC & Denali Finance Corp.(b) 5.63 10/15/2020 5,006 ---------- DATA PROCESSING & OUTSOURCED SERVICES (1.2%) 4,750 First Data Corp.(b) 7.38 6/15/2019 5,082 2,000 First Data Corp.(b) 6.75 11/01/2020 2,115 8,000 First Data Corp.(b) 11.25 1/15/2021 8,860 4,000 Lender Processing Services, Inc. 5.75 4/15/2023 4,220 4,000 SunGard Data Systems, Inc. 6.63 11/01/2019 4,210 1,985 SunGard Data Systems, Inc.(a) 4.00 3/09/2020 1,999 ---------- 26,486 ---------- HOME ENTERTAINMENT SOFTWARE (0.3%) 5,000 Activision Blizzard, Inc.(b) 5.63 9/15/2021 5,187 2,000 Activision Blizzard, Inc.(b) 6.13 9/15/2023 2,090 ---------- 7,277 ---------- SYSTEMS SOFTWARE (0.6%) 4,000 BMC Software, Inc.(a) 5.00 9/10/2020 4,003 2,000 BMC Software, Inc.(b) 8.13 7/15/2021 2,075 5,000 Sophia, LP(b) 9.75 1/15/2019 5,563 ---------- 11,641 ---------- Total Information Technology 57,139 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 23 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- MATERIALS (4.3%) ---------------- ALUMINUM (0.2%) $ 4,000 Aleris International, Inc. 7.63% 2/15/2018 $ 4,235 ---------- COMMODITY CHEMICALS (0.5%) 5,000 Hexion U.S. Finance Corp. 8.88 2/01/2018 5,225 5,000 Hexion U.S. Finance Corp. 6.63 4/15/2020 5,212 ---------- 10,437 ---------- DIVERSIFIED METALS & MINING (0.2%) 4,000 Thompson Creek Metals Co., Inc. 7.38 6/01/2018 3,610 ---------- METAL & GLASS CONTAINERS (1.2%) 250 Beverage Packaging Holdings Luxembourg II S.A.(b) 5.63 12/15/2016 256 8,500 Reynolds Group Issuer, Inc. 7.88 8/15/2019 9,392 9,000 Reynolds Group Issuer, Inc. 9.88 8/15/2019 9,990 5,000 Reynolds Group Issuer, Inc. 5.75 10/15/2020 5,138 ---------- 24,776 ---------- PAPER PACKAGING (0.3%) 7,000 Sealed Air Corp.(b) 6.88 7/15/2033 6,895 ---------- PAPER PRODUCTS (0.5%) 8,725 Mercer International, Inc. 9.50 12/01/2017 9,554 4,000 Verso Paper Holdings, LLC 8.75 2/01/2019 2,160 ---------- 11,714 ---------- SPECIALTY CHEMICALS (0.2%) 5,000 Momentive Performance Materials, Inc. 9.00 1/15/2021 4,562 ---------- STEEL (1.2%) 5,456 Allegheny Ludlum Corp. 6.95 12/15/2025 5,978 10,800 Atkore International, Inc. 9.88 1/01/2018 11,664 2,600 Edgen Murray Corp.(b) 8.75 11/01/2020 3,006 4,000 JMC Steel Group(b) 8.25 3/15/2018 4,150 1,000 Severstal Columbus, LLC 10.25 2/15/2018 1,056 ---------- 25,854 ---------- Total Materials 92,083 ---------- TELECOMMUNICATION SERVICES (6.1%) --------------------------------- ALTERNATIVE CARRIERS (0.8%) 10,000 Level 3 Financing, Inc. 8.13 7/01/2019 11,050 1,000 Level 3 Financing, Inc.(b) 6.13 1/15/2021 1,025 5,000 TW Telecom Holdings, Inc. 6.38 9/01/2023 5,238 ---------- 17,313 ----------
================================================================================ 24 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- INTEGRATED TELECOMMUNICATION SERVICES (2.9%) $ 10,000 CenturyLink, Inc. 5.80% 3/15/2022 $ 9,900 5,000 Frontier Communications Corp. 7.63 4/15/2024 4,988 9,000 Frontier Communications Corp. 9.00 8/15/2031 9,045 627 Qwest Corp. 7.38 6/01/2051 15,681 10,000 Verizon Communications, Inc. 4.50 9/15/2020 10,786 10,000 Windstream Corp. 7.50 6/01/2022 10,225 3,000 Windstream Corp. 6.38 8/01/2023 2,805 ---------- 63,430 ---------- WIRELESS TELECOMMUNICATION SERVICES (2.4%) 4,000 MetroPCS Wireless, Inc. 6.63 11/15/2020 4,245 1,600 MetroPCS Wireless, Inc.(b) 6.25 4/01/2021 1,668 2,000 MetroPCS Wireless, Inc.(b) 6.63 4/01/2023 2,082 3,000 NII Capital Corp. 8.88 12/15/2019 1,425 2,000 NII Capital Corp. 7.63 4/01/2021 860 12,000 Sprint Communications, Inc. 7.00 8/15/2020 12,990 6,000 Sprint Communications, Inc. 6.00 11/15/2022 5,925 10,000 Sprint Corp.(b) 7.25 9/15/2021 10,812 5,000 Sprint Corp.(b) 7.88 9/15/2023 5,350 2,000 T-Mobile USA, Inc. 6.13 1/15/2022 2,050 1,000 T-Mobile USA, Inc. 6.73 4/28/2022 1,054 250 T-Mobile USA, Inc. 6.84 4/28/2023 262 2,000 T-Mobile USA, Inc. 6.50 1/15/2024 2,048 ---------- 50,771 ---------- Total Telecommunication Services 131,514 ---------- UTILITIES (5.2%) ---------------- ELECTRIC UTILITIES (2.6%) 10,975 Enel S.p.A.(b) 8.75 9/24/2073 11,935 288 FPL Energy National Wind Portfolio, LLC(b) 6.13 3/25/2019 286 126 FPL Energy Wind Funding, LLC(b) 6.88 6/27/2017 125 2,000 NextEra Energy Capital Holdings, Inc. 6.65 6/15/2067 2,039 2,000 NextEra Energy Capital Holdings, Inc. 7.30 9/01/2067 2,202 24,630 PPL Capital Funding, Inc.(e) 6.70 3/30/2067 24,894 4,000 Texas Competitive Electric Holdings Co., LLC 10.25 11/01/2015 245 16,960 Texas Competitive Electric Holdings Co., LLC(a) 4.73 10/10/2017 11,832 3,000 Texas Competitive Electric Holdings Co., LLC(b) 11.50 10/01/2020 2,228 ---------- 55,786 ---------- GAS UTILITIES (0.2%) 5,000 ONEOK, Inc. 4.25 2/01/2022 4,871 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 25 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.3%) $ 7,000 AES Corp. 7.38% 7/01/2021 $ 7,788 4,795 Calpine Corp.(b) 7.88 1/15/2023 5,310 15,000 Genon Energy, Inc. 9.88 10/15/2020 15,900 ---------- 28,998 ---------- MULTI-UTILITIES (1.1%) 10,790 Integrys Energy Group, Inc. 6.11 12/01/2066 10,891 11,025 Puget Sound Energy, Inc. 6.97 6/01/2067 11,618 ---------- 22,509 ---------- Total Utilities 112,164 ---------- Total Corporate Obligations (cost: $1,454,474) 1,539,579 ---------- EURODOLLAR AND YANKEE OBLIGATIONS (12.4%) CONSUMER DISCRETIONARY (0.4%) ----------------------------- CABLE & SATELLITE (0.3%) 5,000 Nara Cable Funding Ltd.(b) 8.88 12/01/2018 5,450 ---------- HOTELS, RESORTS & CRUISE LINES (0.1%) 2,500 Carlson Wagonlit B.V.(b) 6.88 6/15/2019 2,622 ---------- Total Consumer Discretionary 8,072 ---------- CONSUMER STAPLES (0.7%) ----------------------- PACKAGED FOODS & MEAT (0.7%) 1,300 Fage USA Dairy Industry, Inc.(b) 9.88 2/01/2020 1,378 9,425 JBS S.A. 10.50 8/04/2016 10,603 3,000 Minerva Luxembourg, S.A. 7.75 1/31/2023 2,925 ---------- 14,906 ---------- Total Consumer Staples 14,906 ---------- ENERGY (0.1%) ------------- OIL & GAS EQUIPMENT & SERVICES (0.1%) 2,000 Expro Finance Luxembourg SCA(b) 8.50 12/15/2016 2,091 ---------- OIL & GAS EXPLORATION & PRODUCTION (0.0%) 1,000 OGX Austria GmbH(b),(h) 8.38 4/01/2022 37 ---------- Total Energy 2,128 ---------- FINANCIALS (3.9%) ----------------- DIVERSIFIED BANKS (1.0%) 1,000 Barclays Bank plc(b) 5.93 -(g) 1,060 3,500 BayernLB Capital Trust l 6.20 -(g) 2,975 5,000 Royal Bank of Scotland Group plc 7.64 -(g) 4,950
================================================================================ 26 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- $ 10,000 Royal Bank of Scotland Group plc 9.50% 3/16/2022 $ 11,716 ---------- 20,701 ---------- DIVERSIFIED CAPITAL MARKETS (0.2%) 5,000 Deutsche Bank Capital Trust IV 4.59(c) -(g) 4,600 ---------- LIFE & HEALTH INSURANCE (0.1%) 2,000 Great-West Life & Annuity Insurance Capital, LP(b) 7.15 5/16/2046 2,070 ---------- MULTI-LINE INSURANCE (0.7%) 5,000 AXA S.A.(b) 6.46 -(g) 5,150 9,072 ZFS Finance USA Trust II(b) 6.45 12/15/2065 9,775 ---------- 14,925 ---------- OTHER DIVERSIFIED FINANCIAL SERVICES (0.5%) 2,000 ING Capital Funding Trust III 3.85(c) -(g) 2,005 6,986 ING Groep N.V. 5.78 -(g) 7,213 36 ING Groep N.V. 7.20 -(g) 915 27 ING Groep N.V. 7.38 -(g) 673 ---------- 10,806 ---------- PROPERTY & CASUALTY INSURANCE (1.2%) 22,000 QBE Capital Funding III Ltd.(b) 7.25 5/24/2041 22,747 4,000 XL Group plc 6.50 -(g) 3,940 ---------- 26,687 ---------- REINSURANCE (0.2%) 5,000 Swiss Re Capital I, LP(b) 6.85 -(g) 5,375 ---------- Total Financials 85,164 ---------- INDUSTRIALS (1.3%) ------------------ AEROSPACE & DEFENSE (0.1%) 2,000 Bombardier, Inc.(b) 6.13 1/15/2023 1,980 ---------- AIRLINES (0.9%) 12,000 Air Canada "B" Pass-Through Trust(b) 5.38 5/15/2021 12,000 2,500 Air Canada "C" Pass-Through Trust(b) 6.63 5/15/2018 2,539 5,000 Virgin Australia Holdings Ltd. Pass-Through Trust(b) 7.13 10/23/2018 5,125 ---------- 19,664 ---------- TRADING COMPANIES & DISTRIBUTORS (0.3%) 5,250 Ashtead Capital, Inc.(b) 6.50 7/15/2022 5,644 ---------- Total Industrials 27,288 ---------- INFORMATION TECHNOLOGY (0.2%) ----------------------------- ELECTRONIC MANUFACTURING SERVICES (0.1%) 2,000 MMI International Ltd.(b) 8.00 3/01/2017 1,970 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 27 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT (0.1%) $ 4,000 Global A&T Electronics(b) 10.00% 2/01/2019 $ 3,450 ---------- Total Information Technology 5,420 ---------- MATERIALS (4.2%) ---------------- COMMODITY CHEMICALS (0.5%) 10,000 Braskem Finance Ltd.(d) 6.45 2/03/2024 9,845 ---------- CONSTRUCTION MATERIALS (0.3%) 1,000 CEMEX Finance, LLC(b) 9.38 10/12/2022 1,120 1,000 CEMEX S.A. de C.V.(b) 9.00 1/11/2018 1,085 3,000 CEMEX S.A. de C.V.(b) 6.50 12/10/2019 3,053 ---------- 5,258 ---------- DIVERSIFIED METALS & MINING (0.9%) 15,000 Glencore Funding, LLC(b) 4.13 5/30/2023 14,062 5,000 Vedanta Resources plc(b) 8.25 6/07/2021 5,022 ---------- 19,084 ---------- GOLD (0.6%) 5,000 Eldorado Gold Corp.(b) 6.13 12/15/2020 4,800 5,000 New Gold, Inc.(b) 6.25 11/15/2022 4,825 4,000 Newcrest Finance Property Ltd.(b) 4.20 10/01/2022 3,341 1,000 St. Barbara Ltd.(b) 8.88 4/15/2018 835 ---------- 13,801 ---------- METAL & GLASS CONTAINERS (0.3%) 2,000 Ardagh Packaging Finance plc(b),(d) 6.25 1/31/2019 2,027 4,000 Ardagh Packaging Finance plc(b) 9.13 10/15/2020 4,390 176 Ardagh Packaging Finance plc(b) 7.00 11/15/2020 180 ---------- 6,597 ---------- PAPER PACKAGING (0.3%) 6,200 Smurfit Kappa Treasury Funding Ltd. 7.50 11/20/2025 6,820 ---------- PAPER PRODUCTS (0.2%) 5,000 Sappi Papier Holding GmbH(b) 6.63 4/15/2021 5,050 ---------- PRECIOUS METALS & MINERALS (0.2%) 5,000 Fresnillo plc(b) 5.50 11/13/2023 4,875 ---------- STEEL (0.9%) 15,000 ArcelorMittal 7.50 10/15/2039 14,812 5,000 FMG Resources (August 2006) Pty Ltd.(b) 6.88 4/01/2022 5,419 ---------- 20,231 ---------- Total Materials 91,561 ----------
================================================================================ 28 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES (0.6%) --------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.6%) $ 5,000 Digicel Ltd.(b) 6.00% 4/15/2021 $ 4,862 5,000 Intelsat Jackson Holdings Ltd. 7.25 4/01/2019 5,400 3,500 NII International Telecom SCA(b) 7.88 8/15/2019 2,660 ---------- 12,922 ---------- Total Telecommunication Services 12,922 ---------- UTILITIES (1.0%) ---------------- ELECTRIC UTILITIES (0.7%) 5,000 EDP Finance B.V.(b) 5.25 1/14/2021 5,103 10,000 Electricite De France S.A.(b) 5.25 -(g) 9,679 ---------- 14,782 ---------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.3%) 7,000 AES Gener S.A.(b) 8.38 12/18/2073 7,368 ---------- Total Utilities 22,150 ---------- Total Eurodollar and Yankee Obligations (cost: $255,435) 269,611 ---------- COMMERCIAL MORTGAGE SECURITIES (4.9%) FINANCIALS (4.9%) ----------------- COMMERCIAL MORTGAGE-BACKED SECURITIES (4.9%) 2,444 Banc of America Commercial Mortgage, Inc.(b) 5.31 12/10/2042 2,368 6,900 Banc of America Commercial Mortgage, Inc. 5.42 10/10/2045 6,902 6 Banc of America Commercial Mortgage, Inc.(b) 5.64 9/10/2047 7 495 Banc of America Commercial Mortgage, Inc.(b) 6.14 9/10/2047 516 5,000 Banc of America Commercial Mortgage, Inc. 6.26 2/10/2051 5,250 2,500 Bear Stearns Commercial Mortgage Securities, Inc. 5.49 12/11/2040 2,345 3,176 Bear Stearns Commercial Mortgage Securities, Inc.(b) 5.66 9/11/2041 3,087 5,000 Bear Stearns Commercial Mortgage Securities, Inc. 5.57 1/12/2045 4,922 2,500 Citigroup Commercial Mortgage Trust 5.78 3/15/2049 2,580 2,950 Credit Suisse Commercial Mortgage Pass-Through Trust 5.79 6/15/2038 2,913 15,000 Credit Suisse Commercial Mortgage Pass-Through Trust 0.35 2/15/2040 12,749 3,213 Credit Suisse First Boston Mortgage Securities Corp.(b) 5.02 1/15/2037 3,205 7,110 GE Capital Commercial Mortgage Corp. 5.28 3/10/2044 6,882 5,000 GE Capital Commercial Mortgage Corp. 5.61 12/10/2049 5,206 2,000 GMAC Commercial Mortgage Securities, Inc. 4.97 12/10/2041 1,918 10,000 GS Mortgage Securities Corp. II 5.59 4/10/2038 10,109 6,000 GS Mortgage Securities Corp. II 5.82 8/10/2038 5,983
================================================================================ PORTFOLIO OF INVESTMENTS | 29 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- $ 2,830 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.97% 9/12/2037 $ 2,709 3,750 Merrill Lynch Mortgage Trust 5.19 7/12/2038 3,658 5,000 Merrill Lynch Mortgage Trust 5.69 5/12/2039 5,082 5,000 Merrill Lynch Mortgage Trust 5.05 8/12/2039 4,944 1,445 Morgan Stanley Capital I, Inc. 5.17 8/13/2042 1,475 2,000 Wachovia Bank Commercial Mortgage Trust(b) 4.99 5/15/2044 1,905 4,000 Wachovia Bank Commercial Mortgage Trust 5.38 12/15/2044 4,050 5,000 Wachovia Bank Commercial Mortgage Trust 5.37 11/15/2048 4,732 ---------- 105,497 ---------- INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (0.0%) 673 Credit Suisse First Boston Corp., acquired 6/13/2003; cost $33(i) 1.77 5/17/2040 34 ---------- Total Financials 105,531 ---------- Total Commercial Mortgage Securities (cost: $100,661) 105,531 ---------- MUNICIPAL BONDS (0.1%) CASINOS& GAMING (0.1%) 5,091 Mashantucket (Western) Pequot Tribe(f) (cost: $2,796) 7.35 7/01/2026 3,089 ---------- EXCHANGE-TRADED FUNDS (0.9%) 106 iShares iBoxx High Yield Corporate Bond Fund 9,885 246 SPDR Barclays High Yield Bond Fund 10,034 ---------- Total Exchange-Traded Funds (cost: $19,938) 19,919 ---------- ----------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES ----------------------------------------------------------------------------------------------------------------- EQUITY SECURITIES (8.4%) COMMON STOCKS (4.1%) CONSUMER DISCRETIONARY (1.0%) ----------------------------- APPAREL, ACCESSORIES & LUXURY GOODS (0.1%) 58,400 LVMH Moet Hennessy ADR 2,076 ---------- AUTO PARTS & EQUIPMENT (0.2%) 57,766 Lear Corp. 4,178 427 MD Investors Corp., acquired 10/16/2009; cost $0*(i),(j) 3 ---------- 4,181 ----------
================================================================================ 30 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------- MARKET NUMBER VALUE OF SHARES SECURITY (000) ----------------------------------------------------------------------------------------------- CABLE & SATELLITE (0.3%) 20,000 Charter Communications, Inc. "A"* $ 2,740 72,680 Comcast Corp. "A" 3,958 --------- 6,698 --------- CATALOG RETAIL (0.1%) 10,874 Harry & David Holdings, Inc., acquired 9/13/2011; cost $2,528(i),(j) 1,354 --------- GENERAL MERCHANDISE STORES (0.1%) 40,435 Target Corp. 2,290 --------- HOME FURNISHINGS (0.1%) 54,070 Tempur Sealy International, Inc.* 2,665 --------- HOTELS, RESORTS & CRUISE LINES (0.1%) 25,400 Hyatt Hotels Corp. "A"* 1,214 --------- PUBLISHING (0.0%) 50,096 American Media, Inc., acquired 12/22/2010; cost $969*(i),(j) 609 --------- Total Consumer Discretionary 21,087 --------- CONSUMER STAPLES (0.2%) ----------------------- DRUG RETAIL (0.1%) 28,400 CVS Caremark Corp. 1,923 --------- HOUSEHOLD PRODUCTS (0.0%) 11,242 Kimberly-Clark Corp. 1,230 --------- PACKAGED FOODS & MEAT (0.1%) 25,100 Green Mountain Coffee Roasters, Inc. 2,033 --------- Total Consumer Staples 5,186 --------- ENERGY (0.3%) ------------- INTEGRATED OIL & GAS (0.1%) 8,522 Chevron Corp. 951 32,263 Royal Dutch Shell plc ADR 2,229 --------- 3,180 --------- OIL & GAS EQUIPMENT & SERVICES (0.2%) 88,602 Deepocean Group Holdings AS, acquired 6/28/2011; cost $1,636*(i),(j) 3,757 --------- Total Energy 6,937 --------- FINANCIALS (0.7%) ----------------- LIFE & HEALTH INSURANCE (0.1%) 21,952 MetLife, Inc. 1,077 --------- OTHER DIVERSIFIED FINANCIAL SERVICES (0.0%) 18,507 JPMorgan Chase & Co. 1,025 ---------
================================================================================ PORTFOLIO OF INVESTMENTS | 31 ================================================================================
----------------------------------------------------------------------------------------------- MARKET NUMBER VALUE OF SHARES SECURITY (000) ----------------------------------------------------------------------------------------------- REGIONAL BANKS (0.0%) 27,800 BB&T Corp. $ 1,040 --------- REITs - MORTGAGE (0.4%) 140,100 Hatteras Financial Corp. 2,513 350,600 MFA Financial, Inc. 2,556 263,200 Two Harbors Investment Corp. 2,587 --------- 7,656 --------- SPECIALIZED FINANCE (0.1%) 35,130 CME Group, Inc. 2,626 --------- THRIFTS & MORTGAGE FINANCE (0.1%) 115,241 People's United Financial, Inc. 1,638 --------- Total Financials 15,062 --------- HEALTH CARE (0.4%) ------------------ HEALTH CARE EQUIPMENT (0.0%) 3,407 Diagnostic Services Holdings, acquired 6/01/2009; cost $756*(i),(j) 173 --------- PHARMACEUTICALS (0.4%) 22,300 AbbVie, Inc. 1,098 21,662 Johnson & Johnson 1,916 50,900 Merck & Co., Inc. 2,696 27,607 Novartis AG ADR 2,183 --------- 7,893 --------- Total Health Care 8,066 --------- INDUSTRIALS (0.1%) ------------------ COMMERCIAL PRINTING (0.0%) 518 Quad Graphics, Inc. 12 --------- INDUSTRIAL CONGLOMERATES (0.1%) 83,000 General Electric Co. 2,086 --------- Total Industrials 2,098 --------- INFORMATION TECHNOLOGY (0.3%) ----------------------------- DATA PROCESSING & OUTSOURCED SERVICES (0.1%) 27,798 Automatic Data Processing, Inc. 2,129 --------- SEMICONDUCTORS (0.1%) 74,500 Intel Corp. 1,828 --------- SYSTEMS SOFTWARE (0.1%) 61,150 Microsoft Corp. 2,315 --------- Total Information Technology 6,272 ---------
================================================================================ 32 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------- MARKET NUMBER VALUE OF SHARES SECURITY (000) ----------------------------------------------------------------------------------------------- MATERIALS (0.6%) ---------------- COMMODITY CHEMICALS (0.2%) 61,015 LyondellBasell Industries N.V. "A" $ 4,806 --------- CONSTRUCTION MATERIALS (0.1%) 596 Panolam Holdings Co., acquired 1/20/2010; cost $315*(i),(j) 1,293 --------- GOLD (0.1%) 43,000 Barrick Gold Corp. 829 28,300 Goldcorp, Inc. 704 33,650 Newmont Mining Corp. 727 --------- 2,260 --------- PAPER PRODUCTS (0.2%) 54,650 Clearwater Paper Corp.* 3,113 39,300 International Paper Co. 1,876 534 Resolute Forest Products* 10 --------- 4,999 --------- Total Materials 13,358 --------- TELECOMMUNICATION SERVICES (0.4%) --------------------------------- INTEGRATED TELECOMMUNICATION SERVICES (0.2%) 50,503 AT&T, Inc. 1,683 29,000 CenturyLink, Inc. 837 50,650 Verizon Communications, Inc. 2,432 --------- 4,952 --------- WIRELESS TELECOMMUNICATION SERVICES (0.2%) 40,677 Crown Castle International Corp.* 2,886 --------- Total Telecommunication Services 7,838 --------- UTILITIES (0.1%) ---------------- MULTI-UTILITIES (0.1%) 15,200 Dominion Resources, Inc. 1,032 30,400 NiSource, Inc. 1,045 --------- 2,077 --------- Total Utilities 2,077 --------- Total Common Stocks (cost: $65,085) 87,981 ---------
================================================================================ PORTFOLIO OF INVESTMENTS | 33 ================================================================================
----------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT MARKET $(000)/ VALUE SHARES SECURITY (000) ----------------------------------------------------------------------------------------------- PREFERRED STOCKS (4.3%) CONSUMER STAPLES (1.3%) ----------------------- AGRICULTURAL PRODUCTS (1.3%) 200,000 CHS, Inc., Series B, 7.88%, cumulative redeemable, perpetual $ 5,740 200,000 Dairy Farmers of America, Inc., 7.88%, cumulative redeemable, perpetual(b) 21,762 --------- 27,502 --------- Total Consumer Staples 27,502 --------- ENERGY (0.9%) ------------- OIL & GAS EXPLORATION & PRODUCTION (0.9%) 17,000 Chesapeake Energy Corp., 5.75%, perpetual(b) 19,582 --------- FINANCIALS (2.0%) ----------------- CONSUMER FINANCE (0.5%) 3,000 Ally Financial, Inc., 7.00%, perpetual(b) 2,918 $320,000 GMAC Capital Trust I, 8.13%, cumulative redeemable 8,762 --------- 11,680 --------- DIVERSIFIED BANKS (0.3%) 8,000 US Bancorp, 7.19%, perpetual 6,261 --------- PROPERTY & CASUALTY INSURANCE (0.1%) $3,000 Catlin Insurance Co. Ltd., 7.25%, perpetual(b) 3,120 $2,000 Syncora Holdings Ltd., 6.88%, perpetual(j) - --------- 3,120 --------- REGIONAL BANKS (0.1%) 1,090 M&T Bank Corp., 6.38%, cumulative redeemable, perpetual 1,046 --------- REINSURANCE (0.0%) 3,000 American Overseas Group Ltd., 7.50%, non-cumulative, acquired 1/23/2007 - 3/02/2007; cost $3,109*(i),(j) 750 --------- REITs - INDUSTRIAL (0.5%) 185,741 ProLogis, Inc., Series Q, 8.54%, cumulative redeemable, perpetual 10,587 --------- REITs - OFFICE (0.3%) 240,000 CommonWealth REIT, Series E, 7.25%, cumulative redeemable, perpetual 5,472 --------- REITs - SPECIALIZED (0.2%) 170,000 Felcor Lodging Trust, Inc., Series C, 8.00%, perpetual 4,198 ---------
================================================================================ 34 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------------------- MARKET NUMBER VALUE OF SHARES SECURITY (000) ----------------------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.0%) 20,000 Freddie Mac, 6.02%, perpetual* $ 173 80,000 Freddie Mac, 8.38%, perpetual* 801 --------- 974 --------- Total Financials 44,088 --------- UTILITIES (0.1%) ---------------- ELECTRIC UTILITIES (0.1%) 27,000 Southern California Edison, Series D, 6.50%, cumulative redeemable, perpetual 2,660 --------- Total Preferred Stocks (cost: $90,493) 93,832 --------- WARRANTS (0.0%) CONSUMER DISCRETIONARY (0.0%) ----------------------------- AUTO PARTS & EQUIPMENT (0.0%) 147 Lear Corp.* 22 --------- CABLE & SATELLITE (0.0%) 5,016 Charter Communications Inc. "A"* 469 --------- PUBLISHING (0.0%) 12,745 Reader's Digest Association, Inc.*(j) - --------- Total Consumer Discretionary 491 --------- Total Warrants (cost: $28) 491 --------- Total Equity Securities (cost: $155,606) 182,304 --------- ----------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT COUPON (000) RATE MATURITY ----------------------------------------------------------------------------------------------------------------- MONEY MARKET INSTRUMENTS (1.7%) COMMERCIAL PAPER (1.3%) ENERGY (0.9%) ------------- OIL & GAS EXPLORATION & PRODUCTION (0.9%) $ 13,360 Talisman Energy, Inc.(b),(k) 0.67% 2/03/2014 13,360 --------- 7,296 Talisman Energy, Inc.(b),(k) 0.50 2/05/2014 7,296 --------- 20,656 --------- Total Energy 20,656 ---------
================================================================================ PORTFOLIO OF INVESTMENTS | 35 ================================================================================
----------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------------------- UTILITIES (0.4%) ---------------- ELECTRIC UTILITIES (0.4%) $ 7,820 Northeast Utilities(b),(k) 0.15% 2/04/2014 $ 7,820 ---------- Total Commercial Paper 28,476 ---------- VARIABLE-RATE DEMAND NOTES (0.3%) ENERGY (0.3%) ------------- OIL & GAS REFINING & MARKETING (0.3%) 5,000 Port of Port Arthur Navigation District 0.42 12/01/2039 5,000 ---------- ----------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES ----------------------------------------------------------------------------------------------------------------- MONEY MARKET FUNDS (0.1%) 2,625,000 State Street Institutional Liquid Reserve Fund, 0.06%(l) 2,625 ---------- Total Money Market Instruments (cost: $36,101) 36,101 ---------- TOTAL INVESTMENTS (COST: $2,025,011) $2,156,134 ==========
================================================================================ 36 | USAA HIGH INCOME FUND ================================================================================
----------------------------------------------------------------------------------------------------- ($ 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 ----------------------------------------------------------------------------------------------------- Bonds: Corporate Obligations $ 15,681 $1,523,898 $ - $1,539,579 Eurodollar and Yankee Obligations - 269,611 - 269,611 Commercial Mortgage Securities - 105,531 - 105,531 Municipal Bonds - 3,089 - 3,089 Exchange-Traded Funds 19,919 - - 19,919 Equity Securities: Common Stocks 80,792 - 7,189 87,981 Preferred Stocks 8,762 84,320 750 93,832 Warrants 491 - - 491 Money Market Instruments: Commercial Paper - 28,476 - 28,476 Variable-Rate Demand Notes - 5,000 - 5,000 Money Market Funds 2,625 - - 2,625 ----------------------------------------------------------------------------------------------------- Total $128,270 $2,019,925 $7,939 $2,156,134 -----------------------------------------------------------------------------------------------------
Reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
----------------------------------------------------------------------------------------------------- COMMON STOCKS PREFERRED STOCKS ----------------------------------------------------------------------------------------------------- Balance as of July 31, 2013 $4,159 $750 Purchases - - Sales - - Transfers into Level 3 - - Transfers out of Level 3 - - Net realized gain (loss) on investments - - Change in net unrealized appreciation/depreciation of investments. 3,030 - ----------------------------------------------------------------------------------------------------- Balance as of January 31, 2014 $7,189 $750 -----------------------------------------------------------------------------------------------------
For the period of August 1, 2013, through January 31, 2014, there were no transfers of securities between levels. The Fund's policy is to recognize any transfers into and out of the levels as of the beginning of the period in which the event or circumstance that caused the transfer occurred. ================================================================================ PORTFOLIO OF INVESTMENTS | 37 ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS January 31, 2014 (unaudited) -------------------------------------------------------------------------------- o GENERAL NOTES Market values of securities are determined by procedures and practices discussed in Note 1 to the financial statements. The portfolio of investments category percentages shown represent the percentages of the investments to net assets, and, in total, may not equal 100%. A category percentage of 0.0% represents less than 0.1% of net assets. Investments in foreign securities were 13.2% of net assets at January 31, 2014. 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, as amended, that would otherwise be applicable. o CATEGORIES AND DEFINITIONS EURODOLLAR AND YANKEE OBLIGATIONS -- Eurodollar obligations are dollar-denominated instruments that are issued outside the U.S. capital markets by foreign corporations and financial institutions and by foreign branches of U.S. corporations and financial institutions. Yankee obligations are dollar-denominated instruments that are issued by foreign issuers in the U.S. capital markets. 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 ================================================================================ 38 | USAA HIGH INCOME FUND ================================================================================ 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. VARIABLE-RATE DEMAND NOTES (VRDNs) -- provide the right to sell the security at face value on either that day or within the rate-reset period. The interest rate is adjusted at a stipulated daily, weekly, monthly, quarterly, or other specified time interval to reflect current market conditions. VRDNs will normally trade as if the maturity is the earlier put date, even though stated maturity is longer. WARRANTS -- entitle the holder to buy a proportionate amount of common stock at a specified price for a stated period. 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 MBIA Insurance Corp. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that value may fluctuate for other reasons, and there is no assurance that the insurance company will meet its obligations. ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS | 39 ================================================================================ o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S) ADR American depositary receipts are receipts issued by a U.S. bank evidencing ownership of foreign shares. Dividends are paid in U.S. dollars. REIT Real estate investment trust o SPECIFIC NOTES (a) 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 January 31, 2014. The weighted average life of the loan is likely to be shorter than the stated final maturity date due to mandatory or optional prepayments. The loan is deemed liquid by USAA Asset Management Company (the Manager), under liquidity guidelines approved by the Trust's Board of Trustees (the Board), unless otherwise noted as illiquid. (b) Restricted security that is not registered under the Securities Act of 1933. A resale of this security in the United States may occur in an exempt transaction to a qualified institutional buyer as defined by Rule 144A, and as such has been deemed liquid by the Manager under liquidity guidelines approved by the Board, unless otherwise noted as illiquid. (c) Variable-rate or floating-rate security -- interest rate is adjusted periodically. The interest rate disclosed represents the current rate at January 31, 2014. (d) At January 31, 2014, the aggregate market value of securities purchased on a delayed-delivery basis was $16,578,000, which included when-issued securities of $13,887,000. (e) At January 31, 2014, portions of these securities were segregated to cover delayed-delivery and/or when-issued purchases. ================================================================================ 40 | USAA HIGH INCOME FUND ================================================================================ (f) Pay-in-kind (PIK) -- Security in which the issuer will have or has the option to make all or a portion of the interest or dividend payments in additional securities. (g) Security is perpetual and has no final maturity date but may be subject to calls at various dates in the future. (h) Currently the issuer is in default with respect to interest and/or principal payments. (i) Security deemed illiquid by the Manager, under liquidity guidelines approved by the Board. The aggregate market value of these securities at January 31, 2014, was $7,973,000, which represented 0.4% of the Fund's net assets. (j) Security was fair valued at January 31, 2014, by the Manager in accordance with valuation procedures approved by the Board. The total value of all such securities was $7,939,000, which represented 0.4% of net assets of the Fund. (k) 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, unless otherwise noted as illiquid. (l) Rate represents the money market fund annualized seven-day yield at January 31, 2014. * Non-income-producing security. See accompanying notes to financial statements. ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS | 41 ================================================================================ STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) January 31, 2014 (unaudited) -------------------------------------------------------------------------------- ASSETS Investments in securities, at market value (cost of $2,025,011) $2,156,134 Cash 341 Receivables: Capital shares sold 2,627 Dividends and interest 33,021 Securities sold 2,818 ---------- Total assets 2,194,941 ---------- LIABILITIES Payables: Securities purchased 22,717 Capital shares redeemed 1,293 Accrued management fees 993 Accrued transfer agent's fees 75 Other accrued expenses and payables 113 ---------- Total liabilities 25,191 ---------- Net assets applicable to capital shares outstanding $2,169,750 ========== NET ASSETS CONSIST OF: Paid-in capital $2,030,612 Accumulated undistributed net investment income 1,326 Accumulated net realized gain on investments 6,689 Net unrealized appreciation of investments 131,123 ---------- Net assets applicable to capital shares outstanding $2,169,750 ========== Net asset value, redemption price, and offering price per share: Fund Shares (net assets of $1,363,348/155,946 shares outstanding) $ 8.74 ========== Institutional Shares (net assets of $798,583/91,390 shares outstanding) $ 8.74 ========== Adviser Shares (net assets of $7,819/893 shares outstanding) $ 8.75 ==========
See accompanying notes to financial statements. ================================================================================ 42 | USAA HIGH INCOME FUND ================================================================================ STATEMENT OF OPERATIONS (IN THOUSANDS) Six-month period ended January 31, 2014 (unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of foreign taxes withheld of $20) $ 6,672 Interest 65,620 ------- Total income 72,292 ------- EXPENSES Management fees 5,688 Administration and servicing fees: Fund Shares 983 Institutional Shares 391 Adviser Shares 6 Transfer agent's fees: Fund Shares 1,062 Institutional Shares 391 Adviser Shares 1 Distribution and service fees (Note 6E): Adviser Shares 9 Custody and accounting fees: Fund Shares 100 Institutional Shares 56 Adviser Shares 1 Postage: Fund Shares 32 Institutional Shares 13 Shareholder reporting fees: Fund Shares 19 Institutional Shares 12 Trustees' fees 7 Registration fees: Fund Shares 40 Institutional Shares 13 Adviser Shares 8 Professional fees 76 Other 17 ------- Total expenses 8,925 ------- NET INVESTMENT INCOME 63,367 ------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on: Unaffiliated transactions 11,018 Affiliated transactions (Note 8) 2,979 Change in net unrealized appreciation/depreciation 14,157 ------- Net realized and unrealized gain 28,154 ------- Increase in net assets resulting from operations $91,521 =======
See accompanying notes to financial statements. ================================================================================ FINANCIAL STATEMENTS | 43 ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) Six-month period ended January 31, 2014 (unaudited), and year ended July 31, 2013
----------------------------------------------------------------------------------------------- 1/31/2014 7/31/2013 ----------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income $ 63,367 $ 124,702 Net realized gain on investments 13,997 43,047 Change in net unrealized appreciation/depreciation of investments 14,157 57,303 ------------------------------- Increase in net assets resulting from operations 91,521 225,052 ------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Fund Shares (39,429) (76,922) Institutional Shares (24,006) (46,909) Adviser Shares (217) (382) ------------------------------- Total distributions of net investment income (63,652) (124,213) ------------------------------- Net realized gains: Fund Shares (24,229) (14,530) Institutional Shares (14,384) (10,155) Adviser Shares (141) (79) ------------------------------- Total distributions of net realized gains (38,754) (24,764) ------------------------------- Distributions to shareholders (102,406) (148,977) ------------------------------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Fund Shares 119,413 (275,508) Institutional Shares 38,075 486,358 Adviser Shares 753 1,148 ------------------------------- Total net increase in net assets from capital share transactions 158,241 211,998 ------------------------------- Net increase in net assets 147,356 288,073 NET ASSETS Beginning of period 2,022,394 1,734,321 ------------------------------- End of period $2,169,750 $2,022,394 =============================== Accumulated undistributed net investment income: End of period $ 1,326 $ 1,611 ===============================
See accompanying notes to financial statements. ================================================================================ 44 | USAA HIGH INCOME FUND ================================================================================ NOTES TO FINANCIAL STATEMENTS January 31, 2014 (unaudited) -------------------------------------------------------------------------------- (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act of 1940, as amended (the 1940 Act), is an open-end management investment company organized as a Delaware statutory trust consisting of 52 separate funds. The information presented in this semiannual report pertains only to the USAA High Income Fund (the Fund), which is classified as diversified under the 1940 Act. The Fund's investment objective is to seek to provide an attractive total return primarily through high current income and secondarily through capital appreciation. The Fund consists of three classes of shares: High Income Fund Shares (Fund Shares), High Income Fund Institutional Shares (Institutional Shares), and High Income Fund Adviser Shares (Adviser Shares). Each class of shares has equal rights to assets and earnings, except that each class bears certain class-related expenses specific to the particular class. These expenses include administration and servicing fees, transfer agent fees, postage, shareholder reporting fees, distribution and service (12b-1) fees, and certain registration and custodian fees. Expenses not attributable to a specific class, income, and realized gains or losses on investments are allocated to each class of shares based on each class's relative net assets. Each class has exclusive voting rights on matters related solely to that class and separate voting rights on matters that relate to all classes. The Institutional Shares are available for investment through a USAA discretionary managed account program, and certain advisory programs sponsored by financial intermediaries, such as brokerage firms, investment advisors, financial planners, third-party administrators, ================================================================================ NOTES TO FINANCIAL STATEMENTS | 45 ================================================================================ and insurance companies. Institutional Shares also are available to institutional investors, which include retirement plans, endowments, foundations, and bank trusts, as well as other persons or legal entities that the Fund may approve from time to time, or for purchase by a USAA Fund participating in a fund-of-funds investment strategy (USAA fund-of-funds) and not to the general public. The Adviser Shares permit investors to purchase shares through financial intermediaries, including banks, broker-dealers, insurance companies, investment advisers, plan sponsors, and financial professionals that provide various administrative and distribution services. A. SECURITY VALUATION -- The Trust's Board of Trustees (the Board) has established the Valuation Committee (the Committee), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures which are approved by the Board. Among other things, these policies and procedures allow the Fund to utilize independent pricing services, quotations from securities dealers, and a wide variety of sources and information to establish and adjust the fair value of securities as events occur and circumstances warrant. The Committee reports to the Board on a quarterly basis and makes recommendations to the Board as to pricing methodologies and services used by the Fund and presents additional information to the Board regarding application of the pricing and fair valuation policies and procedures during the preceding quarter. The Committee meets as often as necessary to make pricing and fair value determinations. In addition, the Committee holds regular monthly meetings to review prior actions taken by the Committee and USAA Asset Management Company (the Manager). Among other things, these monthly meetings include a review and analysis of back testing reports, pricing service quotation comparisons, illiquid securities and fair value determinations, pricing movements, and daily stale price monitoring. ================================================================================ 46 | USAA HIGH INCOME FUND ================================================================================ 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. Debt securities with maturities greater than 60 days are valued each business day by a pricing service (the Service) approved by the Board. The Service uses an evaluated mean between quoted bid and asked prices or the last sales price to price securities when, in the Service's judgment, these prices are readily available and are representative of the securities' market values. For many securities, such prices are not readily available. The Service generally prices these securities based on methods that include consideration of yields or prices of securities of comparable quality, coupon, maturity, and type; indications as to values from dealers in securities; and general market conditions. 2. 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. 3. Investments in open-end investment companies, hedge, or other funds, other than ETFs, are valued at their net asset value (NAV) at the end of each business day. 4. Debt securities purchased with original or remaining maturities of 60 days or less may be valued at amortized cost, which approximates market value. 5. Repurchase agreements are valued at cost, which approximates market value. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 47 ================================================================================ 6. 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 under valuation procedures approved by the Board. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be. Fair value methods used by the Manager include, but are not limited to, obtaining market quotations from secondary pricing services, broker-dealers, or widely used quotation systems. General factors considered in determining the fair value of securities include fundamental analytical data, the nature and duration of any restrictions on disposition of the securities, and an evaluation of the forces that influenced the market in which the securities are purchased and sold. B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-level valuation hierarchy disclosed in the portfolio of investments is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 -- inputs to the valuation methodology are quoted prices (unadjusted) in active markets for identical securities. 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 ================================================================================ 48 | USAA HIGH INCOME FUND ================================================================================ indirectly, and market-corroborated inputs such as market indices. Level 2 securities include certain preferred stocks, which are valued based on methods discussed in Note 1A2, certain bonds, which are valued based on methods discussed in Note 1A1 and commercial paper and variable-rate demand notes, which are valued at amortized cost. Level 3 -- inputs to the valuation methodology are unobservable and significant to the fair value measurement, including the Manager's own assumptions in determining the fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For the securities valued using significant unobservable inputs, market quotations were not available from the pricing services. As such, the securities were valued in good faith using methods determined by the Manager, under valuation procedures approved by the Board. The valuation of some securities falling in the Level 3 category are primarily supported by discounted prior tender offers and quoted prices obtained from broker-dealers participating in the market for these securities, as well as, other relevant information related to the security. However, these securities are included in the Level 3 category due to limited market transparency and or a lack of corroboration to support the quoted prices. The methods used may include valuation models that rely on significant assumptions and or unobservable inputs to determine the fair value measurement for the securities. A market-based approach may be employed using related or comparable securities, recent transactions, market multiples, book values and other relevant information or an income-based approach may be employed whereby estimated future cash flows are discounted to determine the fair value. In some cases discounts may be applied due to market liquidity limitations. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 49 ================================================================================ Refer to the portfolio of investments for a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value. QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS
FAIR VALUE AT SIGNIFICANT JANUARY 31, 2014 VALUATION UNOBSERVABLE ASSETS ($ IN 000's) TECHNIQUE(S) INPUT(S) RANGE ------------------------------------------------------------------------------------------ EQUITY SECURITIES: Common Stocks $5,832 Market Revenue Multiple(a) 0.5x - 1.2x Comparables EBITDA Multiple(a) 2.5x - 16.4x Earnings per Share Multiple(a) 14.2x Discount for lack of marketability(b) 0.4x - 2.2x ------------------------------------------------------------------------------------------
(a) Represents amounts used when the reporting entity has determined that market participants would use such multiples when pricing the security. (b) Represents amounts used when the reporting entity has determined that market participants would take into account these discounts when pricing the security. Increases in the earnings before interest depreciation and amortization (EBITDA), revenue multiples, or earnings per share will increase the value of the security while an increase in the discount for lack of marketability will decrease the value of the security. C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its income to its shareholders. Therefore, no federal income tax provision is required. D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the date the securities are purchased or sold (trade date). Gains or losses from sales of investment securities are computed on the identified cost basis. Dividend income, less foreign taxes, if any, is recorded on the ex-dividend date. If the ex-dividend date has passed, certain dividends from foreign securities are recorded upon notification. Interest income is recorded daily on the accrual basis. Discounts and premiums 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. ================================================================================ 50 | USAA HIGH INCOME FUND ================================================================================ E. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the securities of foreign issuers and may be traded in foreign currency. Since the Fund's accounting records are maintained in U.S. dollars, foreign currency amounts are translated into U.S. dollars on the following bases: 1. Purchases and sales of securities, income, and expenses at the exchange rate obtained from an independent pricing service on the respective dates of such transactions. 2. Market value of securities, other assets, and liabilities at the exchange rate obtained from an independent pricing service on a daily basis. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Separately, net realized foreign currency gains/losses may arise from sales of foreign currency, currency gains/losses realized between the trade and settlement dates on security transactions, and from the difference between amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts received. At the end of the Fund's fiscal year, these net realized foreign currency gains/losses are reclassified from accumulated net realized gain/loss to accumulated undistributed net investment income on the statement of assets and liabilities as such amounts are treated as ordinary income/loss for tax purposes. Net unrealized foreign currency exchange gains/losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rate. F. 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 or for delayed ================================================================================ NOTES TO FINANCIAL STATEMENTS | 51 ================================================================================ draws on loans 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 receives a commitment fee for delayed draws on loans. 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 and delayed-draw loan commitments may increase the volatility of the Fund's NAV to the extent that the Fund makes such purchases and commitments while remaining substantially fully invested. As of January 31, 2014, the Fund's outstanding delayed-delivery commitments, including interest purchased, were $18,550,000; which included when-issued securities of $15,925,000. Also, included in these amounts is $1,950,000, for securities which were sold prior to January 31, 2014. G. EXPENSES PAID INDIRECTLY -- Through arrangements with the Fund's custodian and other banks utilized by the Fund for cash management purposes, realized credits, if any, generated from cash balances in the Fund's bank accounts may be used to directly reduce the Fund's expenses. For the six-month period ended January 31, 2014, there were no custodian and other bank credits. H. REDEMPTION FEES -- All share classes held in the Fund less than 180 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed or exchanged shares. All redemption fees paid will be accounted for by the Fund as an addition to paid in capital. For the six-month period ended January 31, 2014, the Fund Shares and Adviser Shares incurred redemption fees of $23,000 and $4,000, respectively. I. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Trust's maximum ================================================================================ 52 | USAA HIGH INCOME FUND ================================================================================ exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust expects the risk of loss to be remote. J. USE OF ESTIMATES -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts in the financial statements. (2) LINE OF CREDIT The Fund participates in a joint, short-term, revolving, committed loan agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of the Manager. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. Subject to availability, the Fund may borrow from CAPCO an amount up to 5% of the Fund's total assets at an interest rate based on the London Interbank Offered Rate (LIBOR). The USAA Funds that are party to the loan agreement are assessed facility fees by CAPCO in the amount of 7.0 basis points of the amount of the committed loan agreement. The facility fees are allocated among the Funds based on their respective average net assets for the period. For the six-month period ended January 31, 2014, the Fund paid CAPCO facility fees of $6,000, which represents 3.3% 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 January 31, 2014. (3) DISTRIBUTIONS The tax basis of distributions and accumulated undistributed net investment income will be determined based upon the Fund's tax year end of July 31, 2014, in accordance with applicable tax law. Distributions of net investment income are made monthly. Distributions of realized gains from security transactions not offset by capital losses ================================================================================ NOTES TO FINANCIAL STATEMENTS | 53 ================================================================================ are made annually in the succeeding fiscal year or as otherwise required to avoid the payment of federal taxes. Under the Regulated Investment Company Modernization Act of 2010 (the Act), a fund is permitted to carry forward net capital losses indefinitely. Additionally, such capital losses that are carried forward will retain their character as short-term and/or long-term capital losses. Post-enactment capital loss carryforwards must be used before pre-enactment capital loss carryforwards. As a result, pre-enactment capital loss carryforwards may be more likely to expire unused. At July 31, 2013, the Fund had no pre-enactment or post-enactment capital loss carryforwards, for federal income tax purposes. For the six-month period ended January 31, 2014, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions. On an ongoing basis the Manager will monitor its tax positions to determine if adjustments to this conclusion are necessary. The statute of limitations on the Fund's tax return filings generally remain open for the three preceding fiscal reporting year ends and remain subject to examination by the Internal Revenue Service and state taxing authorities. (4) INVESTMENT TRANSACTIONS Cost of purchases and proceeds from sales/maturities of securities, excluding short-term securities, for the six-month period ended January 31, 2014, were $362,607,000 and $225,183,000, respectively. As of January 31, 2014, the cost of securities, including short-term securities, for federal income tax purposes, was approximately the same as that reported in the financial statements. Gross unrealized appreciation and depreciation of investments as of January 31, 2014, were $171,912,000 and $40,789,000, respectively, resulting in net unrealized appreciation of $131,123,000. ================================================================================ 54 | USAA HIGH INCOME FUND ================================================================================ (5) CAPITAL SHARE TRANSACTIONS At January 31, 2014, there were an unlimited number of shares of capital stock at no par value authorized for the Fund. Capital share transactions for the Institutional Shares resulted from purchases and sales by the affiliated USAA fund-of-funds. Capital share transactions for all classes were as follows, in thousands:
SIX-MONTH PERIOD ENDED YEAR ENDED JANUARY 31, 2014 JULY 31, 2013 -------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT --------------------------------------------- FUND SHARES: Shares sold 26,217 $ 229,793 58,445 $ 513,780 Shares issued from reinvested dividends 6,780 59,139 9,721 84,713 Shares redeemed* (19,367) (169,519) (99,767) (874,001) --------------------------------------------- Net increase (decrease) from capital share transactions 13,630 $ 119,413 (31,601) $(275,508) ============================================= INSTITUTIONAL SHARES: Shares sold 10,475 $ 91,744 89,777 $ 786,599 Shares issued from reinvested dividends 4,307 37,556 6,479 56,611 Shares redeemed (10,430) (91,225) (40,658) (356,852) --------------------------------------------- Net increase from capital share transactions 4,352 $ 38,075 55,598 $ 486,358 ============================================= ADVISER SHARES: Shares sold 160 $ 1,409 163 $ 1,439 Shares issued from reinvested dividends 10 85 6 57 Shares redeemed* (85) (741) (39) (348) --------------------------------------------- Net increase from capital share transactions 85 $ 753 130 $ 1,148 =============================================
*Net of redemption fees. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 55 ================================================================================ (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 Board. The Manager also is authorized to select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a portion of the Fund's assets. For the six-month period ended January 31, 2014, the Fund had no subadviser(s). The investment management fee for the Fund is comprised of a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.50% of the Fund's average net assets for the fiscal year. The performance adjustment is calculated separately for each share class on a monthly basis by comparing each class's performance to that of the Lipper High Current Yield Bond Funds Index over the performance period. The Lipper High Current Yield Bond Funds Index tracks the total return performance of the 30 largest funds in the Lipper High Current Yield Funds category. The performance period for each class 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) -------------------------------------------------------------------------------- +/- 0.20% to 0.50% +/- 0.04% +/- 0.51% to 1.00% +/- 0.05% +/- 1.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the relevant share class of the Fund and its relevant index, rounded to the nearest basis point (0.01%). Average net assets of the share class are calculated over a rolling 36-month period. ================================================================================ 56 | USAA HIGH INCOME FUND ================================================================================ Each class's annual performance adjustment rate is multiplied by the average net assets of each respective class over the entire performance period, which is then multiplied by a fraction, the numerator of which is the number of days in the month and the denominator of which is 365 (366 in leap years). The resulting amount is then added to (in the case of overperformance) or subtracted from (in the case of underperformance) the base fee. Under the performance fee arrangement, each class will pay a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper High Current Yield Bond Funds Index over that period, even if the class had overall negative returns during the performance period. For the six-month period ended January 31, 2014, the Fund incurred total management fees, paid or payable to the Manager, of $5,688,000, which included a performance adjustment for the Fund Shares, Institutional Shares, and Adviser Shares of $333,000, $105,000, and $1,000, respectively. For the Fund Shares, Institutional Shares, and Adviser Shares the performance adjustments were 0.05%, 0.03%, and 0.03%, respectively. B. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain administration and servicing functions for the Fund. For such services, the Manager receives a fee accrued daily and paid monthly at an annualized rate of 0.15% of average net assets of the Fund Shares and Adviser Shares, and 0.10% of average net assets of the Institutional Shares. For the six-month period ended January 31, 2014, the Fund Shares, Institutional Shares, and Adviser Shares incurred administration and servicing fees, paid or payable to the Manager, of $983,000, $391,000, and $6,000, respectively. In addition to the services provided under its Administration and Servicing Agreement with the Fund, the Manager also provides certain compliance and legal services for the benefit of the Fund. The Board has approved the reimbursement of a portion of these expenses incurred by the Manager. For the six-month period ended ================================================================================ NOTES TO FINANCIAL STATEMENTS | 57 ================================================================================ January 31, 2014, the Fund reimbursed the Manager $29,000 for these compliance and legal services. These expenses are included in the professional fees on the Fund's statement of operations. C. EXPENSE LIMITATION -- The Manager has agreed, through December 1, 2014, to limit the annual expenses of the Adviser Shares to 1.20% of its average net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and will reimburse the Adviser Shares for all expenses in excess of that amount. This expense limitation arrangement may not be changed or terminated through December 1, 2014, without approval of the Board, and may be changed or terminated by the Manager at any time after that date. For the six-month period ended January 31, 2014, there were no reimbursable expenses incurred by the Adviser Shares. D. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services (SAS), an affiliate of the Manager, provides transfer agent services to the Fund. Transfer agent's fees for both the Fund Shares and Adviser Shares are paid monthly based on an annual charge of $25.50 per shareholder account plus out-of-pocket expenses. SAS pays a portion of these fees to certain intermediaries for administration and servicing of accounts that are held with such intermediaries. Transfer agent's fees for Institutional Shares are paid monthly based on a fee accrued daily at an annualized rate of 0.10% of the Institutional Shares' average net assets, plus out-of-pocket expenses. For the six-month period ended January 31, 2014, the Fund Shares, Institutional Shares and Adviser Shares incurred transfer agent's fees, paid or payable to SAS, of $1,062,000, $391,000, and $1,000, respectively. E. DISTRIBUTION AND SERVICE (12B-1) FEES -- The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares pay fees to USAA Investment Management Company, the distributor, for distribution and shareholder services. USAA Investment Management Company pays all or a portion of such fees to intermediaries that make the Adviser Shares available for investment by their customers. The fee ================================================================================ 58 | USAA HIGH INCOME FUND ================================================================================ is accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average net assets. Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge. For the six-month period ended January 31, 2014, the Adviser Shares incurred distribution and service (12b-1) fees of $9,000. F. UNDERWRITING SERVICES -- USAA Investment Management Company provides exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis and receives no commissions or fees for this service. (7) TRANSACTIONS WITH AFFILIATES The Fund offers its Institutional Shares for investment by other USAA Funds and is one of 17 USAA mutual funds in which the affiliated USAA fund-of-funds may invest. The USAA fund-of-funds do not invest in the underlying funds for the purpose of exercising management or control. As of January 31, 2014, the USAA fund-of-funds owned the following percentages of the total outstanding shares of the Fund:
AFFILIATED USAA FUND OWNERSHIP % ------------------------------------------------------------------------------ USAA Cornerstone Conservative Fund 0.2 USAA Target Retirement Income Fund 0.9 USAA Target Retirement 2020 Fund 1.7 USAA Target Retirement 2030 Fund 2.3 USAA Target Retirement 2040 Fund 1.2 USAA Target Retirement 2050 Fund 0.2
The Manager is indirectly wholly owned by United Services Automobile Association (USAA), a large, diversified financial services institution. At January 31, 2014, USAA and its affiliates owned 617,000 shares which represents 69.1% of the Adviser Shares and 0.2% of the Fund. Certain trustees and officers of the Fund are also directors, officers, and/or employees of the Manager. None of the affiliated trustees or Fund officers received any compensation from the Fund. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 59 ================================================================================ (8) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS During the six-month period ended January 31, 2014, in accordance with affiliated transaction procedures approved by the Board, 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) SELLER PURCHASER PURCHASER TO SELLER ------------------------------------------------------------------------------ USAA High Income Fund USAA Income Fund $11,614,000 $ 922,000 USAA High Income Fund USAA Intermediate-Term Bond Fund 18,128,000 1,718,000 USAA High Income Fund USAA Short-Term Bond Fund 2,297,000 339,000
================================================================================ 60 | USAA HIGH INCOME FUND ================================================================================ (9) FINANCIAL HIGHLIGHTS -- FUND SHARES Per share operating performance for a share outstanding throughout each period is as follows:
SIX-MONTH PERIOD ENDED JANUARY 31, YEAR ENDED JULY 31, ----------------------------------------------------------------------------------- 2014 2013 2012 2011 2010 2009 ----------------------------------------------------------------------------------- Net asset value at beginning of period $ 8.79 $ 8.42 $ 8.60 $ 8.08 $ 6.96 $ 7.68 ----------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .26 .55 .57 .60 .66 .62 Net realized and unrealized gain (loss) .11 .46 (.18) .52 1.11 (.72) ----------------------------------------------------------------------------------- Total from investment operations .37 1.01 .39 1.12 1.77 (.10) ----------------------------------------------------------------------------------- Less distributions from: Net investment income (.26) (.53) (.57) (.60) (.65) (.62) Realized capital gains (.16) (.11) - - - - Redemption fees .00(e) - - - - - ----------------------------------------------------------------------------------- Total distributions (.42) (.64) (.57) (.60) (.65) (.62) ----------------------------------------------------------------------------------- Net asset value at end of period $ 8.74 $ 8.79 $ 8.42 $ 8.60 $ 8.08 $ 6.96 =================================================================================== Total return (%)* 4.38 12.39 4.99 14.28 26.15(a) .29 Net assets at end of period (000) $1,363,348 $1,250,728 $1,464,070 $1,482,706 $1,139,425 $836,042 Ratios to average net assets:** Expenses (%)(d) .90(f) .94 .95 .90 .92(a) .99(b) Expenses, excluding reimbursements (%)(d) .90(f) .94 .95 - .92(a) 1.02 Net investment income (%) 5.98(f) 6.15 6.96 7.06 8.43 9.98 Portfolio turnover (%) 11 47 52 54(c) 62(c) 46(c)
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper reported return. Total returns for periods of less than one year are not annualized. ** For the six-month period ended January 31, 2014, average net assets were $1,300,497,000. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 61 ================================================================================ (a) During the year ended July 31, 2010, SAS reimbursed the Fund Shares $124,000 for corrections in fees paid for the administration and servicing of certain accounts. The effect of this reimbursement on the Fund Shares' total return was less than 0.01%. The reimbursement decreased the Fund Shares' expense ratios by 0.01%. This decrease is excluded from the expense ratios in the Financial Highlights table. (b) Effective April 13, 2007, through November 30, 2008, the Manager voluntarily agreed to limit the annual expenses of the Fund Shares to 0.90% of the Fund Shares' average net assets. Prior to April 13, 2007, the voluntary expense limit was 1.00%. (c) Reflects increased trading activity due to market volatility. (d) Reflects total operating expenses of the Fund Shares before reductions of any expenses paid indirectly. The Fund Shares' expenses paid indirectly decreased the expense ratios by less than 0.01%. (e) Represents less than $0.01 per share. (f) Annualized. The ratio is not necessarily indicative of 12 months of operations. ================================================================================ 62 | USAA HIGH INCOME FUND ================================================================================ (9) FINANCIAL HIGHLIGHTS (CONTINUED) --INSTITUTIONAL SHARES Per share operating performance for a share outstanding throughout each period is as follows:
SIX-MONTH PERIOD ENDED PERIOD ENDED JANUARY 31, YEAR ENDED JULY 31, JULY 31, ----------------------------------------------------------------------------- 2014 2013 2012 2011 2010 2009*** ----------------------------------------------------------------------------- Net asset value at beginning of period $ 8.78 $ 8.41 $ 8.60 $ 8.08 $ 6.95 $ 7.68 ---------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .27 .54 .58 .62 .68 .65(a) Net realized and unrealized gain (loss) .12 .49 (.18) .52 1.12 (.74)(a) ---------------------------------------------------------------------------- Total from investment operations .39 1.03 .40 1.14 1.80 (.09)(a) ---------------------------------------------------------------------------- Less distributions from: Net investment income (.27) (.55) (.59) (.62) (.67) (.64) Realized capital gains (.16) (.11) - - - - ---------------------------------------------------------------------------- Total distributions (.43) (.66) (.59) (.62) (.67) (.64) ---------------------------------------------------------------------------- Net asset value at end of period $ 8.74 $ 8.78 $ 8.41 $ 8.60 $ 8.08 $ 6.95 ============================================================================ Total return (%)* 4.57 12.63 5.09 14.57 26.68 .51 Net assets at end of period (000) $798,583 $764,558 $264,540 $146,535 $95,618 $48,528 Ratios to average net assets:** Expenses (%)(d) .76(c) .76 .76 .65(b) .63(b) .64(b),(c) Net investment income (%) 6.12(c) 6.22 7.09 7.30 8.65 10.55(c) Portfolio turnover (%) 11 47 52 54(e) 62(e) 46(e)
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper reported return. Total returns for periods of less than one year are not annualized. ** For the six-month period ended January 31, 2014, average net assets were $775,837,000. *** Institutional Shares were initiated on August 1, 2008. (a) Calculated using average shares. (b) Prior to December 1, 2010, the Manager had voluntarily agreed to limit the annual expenses of the Institutional Shares to 0.65% of the Institutional Shares' average net assets. (c) Annualized. The ratio is not necessarily indicative of 12 months of operations. (d) Reflects total operating expenses of the Institutional Shares before reductions of any expenses paid indirectly. The Institutional Shares' expenses paid indirectly decreased the expense ratios by less than 0.01%. (e) Reflects increased trading activity due to market volatility. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 63 ================================================================================ (9) FINANCIAL HIGHLIGHTS (CONTINUED) -- ADVISER SHARES Per share operating performance for a share outstanding throughout each period is as follows:
SIX-MONTH PERIOD ENDED PERIOD ENDED JANUARY 31, YEAR ENDED JULY 31 JULY 31, -------------------------------------------------- 2014 2013 2012 2011*** -------------------------------------------------- Net asset value at beginning of period $ 8.79 $ 8.42 $ 8.60 $ 8.09 ------------------------------------------- Income (loss) from investment operations: Net investment income .25 .52 .55 .55 Net realized and unrealized gain (loss) .12 .47 (.19) .54 ------------------------------------------- Total from investment operations .37 .99 .36 1.09 ------------------------------------------- Less distributions from: Net investment income (.25) (.51) (.55) (.58) Realized capital gains (.16) (.11) - - Redemption fees .00(d) .00(d) .01 - ------------------------------------------- Total distributions (.41) (.62) (.54) (.58) ------------------------------------------- Net asset value at end of period $ 8.75 $ 8.79 $ 8.42 $ 8.60 =========================================== Total return (%)* 4.35 12.13 4.76 13.90 Net assets at end of period (000) $7,819 $7,108 $5,711 $5,533 Ratios to average net assets:** Expenses (%)(b) 1.19(a) 1.20 1.20 1.20(a) Expenses, excluding reimbursements (%)(b) 1.19(a) 1.34 1.45 1.86(a) Net investment income (%) 5.69(a) 5.85 6.71 6.77(a) Portfolio turnover (%) 11 47 52 54(c)
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper reported return. Total returns for periods of less than one year are not annualized. ** For the six-month period ended January 31, 2014, average net assets were $7,462,000. *** Adviser Shares were initiated on August 1, 2010. (a) Annualized. The ratio is not necessarily indicative of 12 months of operations. (b) Reflects total operating expenses of the Adviser Shares before reductions of any expenses paid indirectly. The Adviser Shares' expenses paid indirectly decreased the expense ratios by less than 0.01%. (c) Reflects increased trading activity due to market volatility. (d) Represents less than $0.01 per share. ================================================================================ 64 | USAA HIGH INCOME FUND ================================================================================ EXPENSE EXAMPLE January 31, 2014 (unaudited) -------------------------------------------------------------------------------- EXAMPLE As a shareholder of the Fund, you incur two types of costs: direct costs, such as wire fees, redemption fees, and low balance fees; and indirect costs, including management fees, transfer agency fees, distribution and service (12b-1) fees, and other Fund operating expenses. This example is intended to help you understand your indirect costs, also referred to as "ongoing costs" (in dollars), of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period of August 1, 2013, through January 31, 2014. ACTUAL EXPENSES The line labeled "actual" under each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested at the beginning of the period, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number for your share class in the "actual" line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The line labeled "hypothetical" under each share class in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios for each class and an assumed rate of return of 5% per year before ================================================================================ EXPENSE EXAMPLE | 65 ================================================================================ expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any direct costs, such as wire fees, redemption fees, or low balance fees. Therefore, the line labeled "hypothetical" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these direct costs were included, your costs would have been higher.
EXPENSES PAID BEGINNING ENDING DURING PERIOD* ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2013 - AUGUST 1, 2013 JANUARY 31, 2014 JANUARY 31, 2014 ------------------------------------------------------------------ FUND SHARES Actual $1,000.00 $1,043.80 $4.64 Hypothetical (5% return before expenses) 1,000.00 1,020.67 4.58 INSTITUTIONAL SHARES Actual 1,000.00 1,045.70 3.92 Hypothetical (5% return before expenses) 1,000.00 1,021.37 3.87 ADVISER SHARES Actual 1,000.00 1,043.50 6.17 Hypothetical (5% return before expenses) 1,000.00 1,019.16 6.11
* Expenses are equal to the annualized expense ratio of 0.90% for Fund Shares, 0.76% for Institutional Shares, and 1.19% for Adviser Shares, which are net of any reimbursements and expenses paid indirectly, multiplied by the average account value over the period, multiplied by 184 days/365 days (to reflect the one-half-year period). The Fund's actual ending account values are based on its actual total returns of 4.38% for Fund Shares, 4.57% for Institutional Shares, and 4.35% for Adviser Shares for the six-month period of August 1, 2013, through January 31, 2014. ================================================================================ 66 | USAA HIGH INCOME FUND ================================================================================ TRUSTEES Daniel S. McNamara Robert L. Mason, Ph.D. Jefferson C. Boyce Paul L. McNamara Barbara B. Ostdiek, Ph.D. Michael F. Reimherr -------------------------------------------------------------------------------- ADMINISTRATOR AND USAA Asset Management Company INVESTMENT ADVISER P.O.Box 659453 San Antonio, Texas 78265-9825 -------------------------------------------------------------------------------- UNDERWRITER AND USAA Investment Management Company DISTRIBUTOR P.O.Box 659453 San Antonio, Texas 78265-9825 -------------------------------------------------------------------------------- TRANSFER AGENT USAA Shareholder Account Services 9800 Fredericksburg Road San Antonio, Texas 78288 -------------------------------------------------------------------------------- CUSTODIAN AND State Street Bank and Trust Company ACCOUNTING AGENT P.O.Box 1713 Boston, Massachusetts 02105 -------------------------------------------------------------------------------- INDEPENDENT Ernst & Young LLP REGISTERED PUBLIC 100 West Houston St., Suite 1800 ACCOUNTING FIRM San Antonio, Texas 78205 -------------------------------------------------------------------------------- MUTUAL FUND Under "My Accounts" on SELF-SERVICE 24/7 usaa.com select your mutual fund AT USAA.COM account and either click the link or select 'I want to...' and select OR CALL the desired action. (800) 531-USAA (8722) -------------------------------------------------------------------------------- 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) in summary within the Statement of Additional Information on the SEC's website at HTTP://WWW.SEC.GOV. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) at USAA.COM; and (ii) on the SEC's website at HTTP://WWW.SEC.GOV. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM; and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) 732-0330. ================================================================================ USAA -------------- 9800 Fredericksburg Road PRSRT STD San Antonio, TX 78288 U.S. Postage PAID USAA -------------- >> SAVE PAPER AND FUND COSTS Under MY PROFILE on USAA.COM select MANAGE PREFERENCES Set your DOCUMENT PREFERENCES to USAA DOCUMENTS ONLINE. [LOGO OF USAA] USAA WE KNOW WHAT IT MEANS TO SERVE.(R) ============================================================================ 40051-0314 (C)2014, USAA. All rights reserved. ITEM 2. CODE OF ETHICS. NOT APPLICABLE. This item must be disclosed only in annual reports. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. NOT APPLICABLE. This item must be disclosed only in annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. NOT APPLICABLE. This item must be disclosed only in annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not Applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Filed as part of the report to shareholders. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not Applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Corporate Governance Committee selects and nominates candidates for membership on the Board as independent directors. Currently, there is no procedure for shareholders to recommend candidates to serve on the Board. ITEM 11. CONTROLS AND PROCEDURES The principal executive officer and principal financial officer of USAA Mutual Funds Trust (Trust) have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR/S was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. The only change to the procedures was to document the annual disclosure controls and procedures established for the new section of the shareholder reports detailing the factors considered by the Funds' Board in approving the Funds' advisory agreements. ITEM 12. EXHIBITS. (a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports. (a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. (a)(3). Not Applicable. (b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: USAA MUTUAL FUNDS TRUST, Period Ended January 31, 2014 By:* /S/ DANIEL J. MAVICO ----------------------------------------------------------- Signature and Title: Daniel J. Mavico, Assistant Secretary Date: 03/31/2014 ------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By:* /S/ DANIEL S. MCNAMARA ----------------------------------------------------- Signature and Title: Daniel S. McNamara, President Date: 03/31/2014 ------------------------------ By:* /S/ ROBERTO GALINDO, JR. ----------------------------------------------------- Signature and Title: Roberto Galindo, Jr., Treasurer Date: 03/31/2014 ------------------------------ *Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 ncsrscert13114.txt USAA MUTUAL FUNDS TRUST, CERTIFICATIONS, 1/31/14 Certifications I, DANIEL S. MCNAMARA, certify that: ------------------ 1. I have reviewed the reports on Form N-CSR/S for the period ending January 31, 2014 for the following funds of USAA MUTUAL FUNDS TRUST: Aggressive Growth Fund Shares Aggressive Growth Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Growth & Income Fund Shares Growth & Income Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares Money Market Fund Science & Technology Fund Shares Science & Technology Fund Adviser Shares Short-Term Bond Fund Shares Short-Term Bond Fund Institutional Shares Short-Term Bond Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Value Fund Shares Value Fund Institutional Shares Value Fund Adviser Shares 2. Based on my knowledge, these reports do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by these reports; 3. Based on my knowledge, the financial statements, and other financial information included in these reports, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in these reports; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which these reports are being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in these reports our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in these reports any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal half-year (the Registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: 3/31/2014 /S/ DANIEL S. MCNAMARA ------------------- ---------------------------------------- Daniel S. McNamara President I, ROBERTO GALINDO, JR., certify that: --------------- 1. I have reviewed the reports on Form N-CSR/S for the period ending January 31, 2014 for the following funds of USAA MUTUAL FUNDS TRUST: Aggressive Growth Fund Shares Aggressive Growth Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Growth & Income Fund Shares Growth & Income Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares Money Market Fund Science & Technology Fund Shares Science & Technology Fund Adviser Shares Short-Term Bond Fund Shares Short-Term Bond Fund Institutional Shares Short-Term Bond Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Value Fund Shares Value Fund Institutional Shares Value Fund Adviser Shares 2. Based on my knowledge, these reports do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by these reports; 3. Based on my knowledge, the financial statements, and other financial information included in these reports, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in these reports; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which these reports are being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in these reports our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in these reports any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal half-year (the Registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: 3/31/2014 /S/ ROBERTO GALINDO, JR. ------------------- ---------------------------------------- Roberto Galindo, Jr. Treasurer EX-99.906 CERT 3 ncsrs906cert13114.txt USAA MUTUAL FUNDS TRUST, 906 CERTIFICATIONS, 1/31/14 SECTION 906 CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Name of Issuer: USAA MUTUAL FUNDS TRUST Aggressive Growth Fund Shares Aggressive Growth Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Growth & Income Fund Shares Growth & Income Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares Money Market Fund Science & Technology Fund Shares Science & Technology Fund Adviser Shares Short-Term Bond Fund Shares Short-Term Bond Fund Institutional Shares Short-Term Bond Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Value Fund Shares Value Fund Institutional Shares Value Fund Adviser Shares In connection with the Annual Reports on Form N-CSR/S (Reports) of the above- named issuer for the Funds listed above for the period ended January 31, 2014, the undersigned hereby certifies, that: 1. The Reports fully comply with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Reports fairly present, in all material respects, the financial condition and results of operations of the issuer. Date: 3/31/2014 /S/ DANIEL S. MCNAMARA ------------------- --------------------------- Daniel S. McNamara President SECTION 906 CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Name of Issuer: USAA MUTUAL FUNDS TRUST Aggressive Growth Fund Shares Aggressive Growth Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Growth & Income Fund Shares Growth & Income Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares Money Market Fund Science & Technology Fund Shares Science & Technology Fund Adviser Shares Short-Term Bond Fund Shares Short-Term Bond Fund Institutional Shares Short-Term Bond Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Value Fund Shares Value Fund Institutional Shares Value Fund Adviser Shares In connection with the Annual Reports on Form N-CSR/S (Reports) of the above- named issuer for the Funds listed above for the period ended January 31, 2014, the undersigned hereby certifies, that: 1. The Reports fully comply with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Reports fairly present, in all material respects, the financial condition and results of operations of the issuer. Date: 3/31/2014 /S/ ROBERTO GALINDO, JR. ------------------- --------------------------- Roberto Galindo, Jr. Treasurer