0000908695-14-000072.txt : 20140407 0000908695-14-000072.hdr.sgml : 20140407 20140407152357 ACCESSION NUMBER: 0000908695-14-000072 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: 14748534 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 S000012902 Intermediate-Term Bond Fund C000034871 Intermediate-Term Bond Fund Shares USIBX C000066840 Intermediate-Term Bond Fund Institutional Shares UIITX C000091154 Intermediate-Term Bond Fund Adviser Shares UITBX N-CSRS 1 ncsrsitbf013114.txt USAA INTERMEDIATE-TERM BOND FUND - N-CSR/S 01-31-2014 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 INTERMEDIATE-TERM BOND FUND] ============================================================= SEMIANNUAL REPORT USAA INTERMEDIATE-TERM BOND 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 POLICYMAKERS BELIEVE [PHOTO OF DANIEL S. McNAMARA] 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 6 FINANCIAL INFORMATION Portfolio of Investments 17 Notes to Portfolio of Investments 43 Financial Statements 48 Notes to Financial Statements 52 EXPENSE EXAMPLE 71
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 INTERMEDIATE-TERM BOND FUND (THE FUND) SEEKS HIGH CURRENT INCOME WITHOUT UNDUE RISK TO PRINCIPAL. -------------------------------------------------------------------------------- TYPES OF INVESTMENTS The Fund normally invests at least 80% of its assets in a broad range of debt securities that have a dollar-weighted average portfolio maturity between three to 10 years. This 80% policy may be changed upon at least 60 days' written notice to shareholders. 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 USAA Asset Management Company R. MATTHEW FREUND, CFA JULIANNE BASS, CFA BRIAN W. SMITH*, CFA, CPA -------------------------------------------------------------------------------- o HOW DID THE USAA INTERMEDIATE-TERM BOND 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 period ended January 31, 2014, the Fund Shares, Institutional Shares, and Adviser Shares had a total return of 2.70%, 2.75%, and 2.55%, respectively. During the same period, the Barclays U.S. Aggregate Bond Index returned 1.78% and the Lipper Index** returned 2.10%. At the same time, the Fund Shares, Institutional Shares, and Adviser Shares provided a one-year dividend yield of 4.31%, 4.41%, and 4.02%, respectively, compared to 2.83% for the Lipper Core Plus 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. *Effective December 1, 2013, Brian W. Smith co-manages the Fund. **The Lipper Index tracks the performance of funds that invest primarily in investment-grade debt issues (rated in top four grades) with dollar-weighted average maturities of five to ten years. SOURCE: LIPPER, A THOMSON REUTERS COMPANY. Refer to page 9 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. ================================================================================ 2 | USAA INTERMEDIATE-TERM BOND 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. 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. 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. The 10-year yield drifted down after the Fed surprised the markets during September with the announcement that it would continue the pace of its bond purchases. In October and November, the 10-year yield edged up as investors sought to divine the Fed's intentions and in response to the partial government ================================================================================ MANAGERS' COMMENTARY ON THE FUND | 3 ================================================================================ shutdown and debt ceiling debate. After the Fed said in December it would taper its January 2014 bond purchases by $10 billion, the yield on a 10-year U.S. Treasury reached a high for the reporting period of 3.03% on December 31, 2013. The Fed subsequently announced an additional $10 billion reduction in its February bond purchases. In January, the 10-year yield trended down as a decline in stock prices sent many investors into the perceived safe haven of U.S. Treasury securities. On January 31, 2014, the yield on a 10-year U.S. Treasury stood at 2.65%. o WHAT WERE YOUR STRATEGIES IN THIS ENVIRONMENT? We sought attractive relative values across the fixed-income market, seeking 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. We continued to rely on our team of skilled credit analysts to help us identify investment opportunities. During the reporting period, we found value in spread (non-U.S. Treasury) sectors, including select junior subordinated debt, airline enhanced equipment trust certificates, and select high-yield bonds. During the reporting period, the portfolio benefited from its underweight in U.S. Treasuries, its overweight in lower-rated investment-grade corporate bonds, and its allocation to high-yield bonds. Also contributing positively were the portfolio's holdings of deep-discount floating rate notes that were bought in anticipation of higher rates, as well as the Fund's previous investments in out-of-favor sectors. The Fund was hampered by its holdings of certain commercial mortgage-backed securities and junior subordinated debt in certain financial and energy companies. Our credit analysts continued to analyze and monitor every holding in the portfolio. We remain committed to building a portfolio diversified among multiple asset classes and across a large number of issuers. ================================================================================ 4 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ To minimize the Fund's exposure to potential surprises, we limit the positions we take in any one issuer. 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. We will continue to look for attractive values, while also focusing on the impact of rising long-term rates. We also will do our utmost to maintain the Fund's income advantage over its Lipper peer group; over time, income generally makes up the majority of the Fund's total long-term return. We appreciate the opportunity to help you with your investment needs. ================================================================================ MANAGERS' COMMENTARY ON THE FUND | 5 ================================================================================ INVESTMENT OVERVIEW USAA INTERMEDIATE-TERM BOND FUND SHARES (FUND SHARES) (Ticker Symbol: USIBX)
-------------------------------------------------------------------------------- 1/31/14 7/31/13 -------------------------------------------------------------------------------- Net Assets $1,770.7 Million $1,775.2 Million Net Asset Value Per Share $10.80 $10.75 Dollar-Weighted Average Portfolio Maturity(+) 6.2 Years 6.6 Years
(+)Obtained by multiplying the dollar value of each investment by the number of days left to its maturity, adding those figures together, and dividing them by the total dollar value of the Fund's portfolio.
-------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14 -------------------------------------------------------------------------------- 8/1/13-1/31/14* 1 Year 5 Years 10 Years 2.70% 2.43% 12.46% 5.80% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years 1.30% 12.21% 5.72% -------------------------------------------------------------------------------- SEC YIELD AS OF 1/31/14** EXPENSE RATIO AS OF 7/31/13*** -------------------------------------------------------------------------------- 3.48% 0.71%
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. ================================================================================ 6 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ ***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 are 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 ================================================================================ AVERAGE ANNUAL COMPOUNDED RETURNS WITH REINVESTMENT OF DIVIDENDS -- PERIODS ENDED JANUARY 31, 2014
-------------------------------------------------------------------------------- TOTAL RETURN = DIVIDEND RETURN + PRICE CHANGE -------------------------------------------------------------------------------- 10 Years 5.80% = 5.35% + 0.45% 5 Years 12.46% = 5.79% + 6.67% 1 Year 2.43% = 4.30% + -1.87%
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. ANNUAL TOTAL RETURNS AND COMPOUNDED DIVIDEND RETURNS FOR ONE-YEAR PERIODS ENDED JANUARY 31, 2005 -- JANUARY 31, 2014
-------------------------------------------------------------------------------- TOTAL RETURN DIVIDEND RETURN CHANGE IN SHARE PRICE -------------------------------------------------------------------------------- 1/31/2005 3.65% 4.62% -0.97% 1/31/2006 2.09% 4.62% -2.53% 1/31/2007 4.92% 5.02% -0.10% 1/31/2008 4.20% 5.30% -1.10% 1/31/2009 -15.58% 5.07% -20.65% 1/31/2010 34.12% 8.61% 25.51% 1/31/2011 11.73% 6.04% 5.69% 1/31/2012 7.27% 3.33% 3.94% 1/31/2013 9.59% 7.54% 2.05% 1/31/2014 2.43% 4.30% -1.87%
NOTE THE ROLE THAT DIVIDEND RETURNS PLAY IN THE FUND SHARES' TOTAL RETURN OVER TIME. WHILE SHARE PRICES TEND TO VARY, DIVIDEND RETURNS GENERALLY ARE A RELATIVELY STABLE COMPONENT OF TOTAL RETURNS. Total return equals dividend return plus share price change and assumes reinvestment of all net investment income and realized capital gain distributions. Dividend return is the net investment income dividends received over the period, assuming reinvestment of all dividends. Share price change is the change in net asset value over the period adjusted for 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. ================================================================================ 8 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA INTERMEDIATE-TERM BARCLAYS U.S. BOND FUND SHARES LIPPER INDEX AGGREGATE BOND INDEX 1/31/2004 $10,000.00 $10,000.00 $10,000.00 2/29/2004 10,095.00 10,097.13 10,108.24 3/31/2004 10,161.36 10,169.88 10,183.94 4/30/2004 9,958.02 9,925.52 9,918.99 5/31/2004 9,895.22 9,876.84 9,879.25 6/30/2004 9,932.57 9,922.87 9,935.09 7/31/2004 10,012.00 10,016.01 10,033.57 8/31/2004 10,176.79 10,196.38 10,224.96 9/30/2004 10,215.34 10,223.06 10,252.70 10/31/2004 10,293.27 10,303.64 10,338.68 11/30/2004 10,213.87 10,239.23 10,256.21 12/31/2004 10,316.41 10,345.73 10,350.58 1/31/2005 10,363.79 10,401.61 10,415.58 2/28/2005 10,322.56 10,357.51 10,354.09 3/31/2005 10,270.36 10,296.22 10,300.92 4/30/2005 10,405.41 10,422.90 10,440.33 5/31/2005 10,494.54 10,532.34 10,553.28 6/30/2005 10,565.44 10,594.12 10,610.83 7/31/2005 10,471.64 10,511.37 10,514.23 8/31/2005 10,605.04 10,642.91 10,649.02 9/30/2005 10,513.08 10,534.97 10,539.32 10/31/2005 10,446.56 10,448.21 10,455.91 11/30/2005 10,498.32 10,486.46 10,502.16 12/31/2005 10,594.48 10,581.92 10,602.01 1/31/2006 10,580.35 10,595.39 10,602.61 2/28/2006 10,612.32 10,626.65 10,637.80 3/31/2006 10,541.73 10,523.94 10,533.41 4/30/2006 10,508.97 10,509.34 10,514.32 5/31/2006 10,510.45 10,497.90 10,503.10 6/30/2006 10,524.63 10,509.13 10,525.36 7/31/2006 10,651.95 10,654.93 10,667.69 8/31/2006 10,815.26 10,815.11 10,830.99 9/30/2006 10,937.55 10,905.62 10,926.13 10/31/2006 11,013.12 10,979.28 10,998.41 11/30/2006 11,147.11 11,106.44 11,126.00 12/31/2006 11,091.91 11,054.42 11,061.43 1/31/2007 11,101.32 11,043.19 11,056.89 2/28/2007 11,281.83 11,222.00 11,227.39 3/31/2007 11,274.15 11,218.13 11,227.73 4/30/2007 11,342.68 11,274.59 11,288.28 5/31/2007 11,243.70 11,178.97 11,202.73 6/30/2007 11,217.73 11,133.40 11,169.59 7/31/2007 11,233.11 11,194.81 11,262.76 8/31/2007 11,320.37 11,295.81 11,400.80 9/30/2007 11,399.93 11,416.74 11,487.29 10/31/2007 11,471.15 11,491.65 11,590.48 11/30/2007 11,536.58 11,640.27 11,798.91 12/31/2007 11,517.53 11,654.38 11,832.05 1/31/2008 11,568.07 11,848.81 12,030.81 2/29/2008 11,481.76 11,789.56 12,047.51 3/31/2008 11,413.21 11,667.50 12,088.61 4/30/2008 11,393.87 11,728.36 12,063.35 5/31/2008 11,425.97 11,636.45 11,974.89 6/30/2008 11,336.67 11,539.75 11,965.21 7/31/2008 11,223.98 11,429.01 11,955.45 8/31/2008 11,222.39 11,497.44 12,068.92 9/30/2008 10,780.54 11,139.53 11,906.81 10/31/2008 10,035.37 10,724.97 11,625.76 11/30/2008 9,843.20 10,707.31 12,004.18 12/31/2008 9,732.20 11,105.63 12,452.04 1/31/2009 9,767.52 11,088.80 12,342.17 2/28/2009 9,702.64 10,964.66 12,295.59 3/31/2009 9,900.39 11,171.95 12,466.52 4/30/2009 10,137.59 11,364.80 12,526.12 5/31/2009 10,822.06 11,637.14 12,616.97 6/30/2009 11,130.41 11,777.07 12,688.74 7/31/2009 11,532.46 12,118.52 12,893.40 8/31/2009 11,900.60 12,291.59 13,026.91 9/30/2009 12,290.28 12,516.61 13,163.75 10/31/2009 12,513.07 12,630.56 13,228.74 11/30/2009 12,690.56 12,786.75 13,400.01 12/31/2009 12,735.34 12,693.86 13,190.55 1/31/2010 13,097.73 12,923.18 13,392.05 2/28/2010 13,187.92 12,988.30 13,442.06 3/31/2010 13,389.14 13,060.77 13,425.53 4/30/2010 13,646.12 13,242.01 13,565.29 5/31/2010 13,491.05 13,247.66 13,679.44 6/30/2010 13,613.30 13,461.38 13,893.95 7/31/2010 13,870.20 13,647.49 14,042.18 8/31/2010 14,108.03 13,852.93 14,222.87 9/30/2010 14,311.20 13,934.93 14,238.03 10/31/2010 14,525.45 14,019.08 14,288.72 11/30/2010 14,489.14 13,908.85 14,206.60 12/31/2010 14,448.51 13,787.71 14,053.40 1/31/2011 14,634.34 13,860.53 14,069.76 2/28/2011 14,755.82 13,917.17 14,104.95 3/31/2011 14,824.86 13,933.66 14,112.75 4/30/2011 15,064.98 14,139.86 14,291.89 5/31/2011 15,243.00 14,289.33 14,478.40 6/30/2011 15,122.62 14,219.82 14,436.01 7/31/2011 15,316.54 14,418.95 14,665.09 8/31/2011 15,166.67 14,478.82 14,879.34 9/30/2011 15,035.08 14,445.20 14,987.58 10/31/2011 15,245.04 14,565.32 15,003.68 11/30/2011 15,178.74 14,471.78 14,990.67 12/31/2011 15,365.14 14,653.80 15,155.42 1/31/2012 15,646.82 14,904.11 15,288.50 2/29/2012 15,786.92 14,960.47 15,284.99 3/31/2012 15,823.79 14,924.47 15,201.24 4/30/2012 15,976.07 15,100.77 15,369.77 5/31/2012 16,013.33 15,203.23 15,508.84 6/30/2012 16,096.16 15,259.68 15,514.92 7/31/2012 16,430.72 15,524.63 15,728.92 8/31/2012 16,564.10 15,578.98 15,739.19 9/30/2012 16,727.15 15,676.00 15,760.86 10/31/2012 16,955.22 15,743.91 15,791.86 11/30/2012 17,041.14 15,794.25 15,816.78 12/31/2012 17,085.67 15,799.58 15,794.25 1/31/2013 17,146.99 15,740.21 15,683.79 2/28/2013 17,288.28 15,825.59 15,762.40 3/31/2013 17,382.71 15,854.39 15,774.99 4/30/2013 17,615.36 16,027.07 15,934.61 5/31/2013 17,423.27 15,745.68 15,650.30 6/30/2013 16,993.70 15,405.22 15,408.22 7/31/2013 17,101.80 15,461.32 15,429.28 8/31/2013 17,005.57 15,349.06 15,350.41 9/30/2013 17,098.56 15,536.89 15,495.74 10/31/2013 17,320.43 15,683.39 15,621.02 11/30/2013 17,336.67 15,654.51 15,562.53 12/31/2013 17,309.94 15,563.05 15,474.58 1/31/2014 17,567.49 15,786.46 15,703.23
[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 Intermediate-Term Bond Fund Shares to the following benchmarks: o The Lipper Index tracks the performance of funds that invest primarily in investment-grade debt issues (rated in top four grades) with dollar- weighted average maturities of five to ten years. Source: Lipper, a THOMSON REUTERS COMPANY. o The unmanaged Barclays U.S. Aggregate Bond Index covers the U.S. investment-grade rated bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities, and commercial mortgage-backed securities that have remaining maturities of more than one year. 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. ================================================================================ INVESTMENT OVERVIEW | 9 ================================================================================ o 12-MONTH DIVIDEND YIELD COMPARISON o [CHART OF 12-MONTH DIVIDEND YIELD COMPARISON]
USAA INTERMEDIATE-TERM LIPPER CORE PLUS BOND FUND SHARES BOND FUNDS AVERAGE 1/31/2005 4.42% 3.69% 1/31/2006 4.79 4.19 1/31/2007 4.79 4.48 1/31/2008 4.98 4.60 1/31/2009 5.80 5.63 1/31/2010 5.16 4.60 1/31/2011 4.37 3.71 1/31/2012 3.83 3.62 1/31/2013 4.60 3.06 1/31/2014 4.31 2.83
[END CHART] The 12-month dividend yield is computed by dividing net investment income dividends paid during the previous 12 months by the latest adjusted month-end net asset value. The net asset value is adjusted for a portion of the capital gains distributed during the previous nine months. The graph represents data for periods ending 1/31/05 to 1/31/14. The Lipper Core Plus Bond Funds Average is the average performance level of all investment-grade debt funds, as reported by Lipper Inc., an independent organization that monitors the performance of mutual funds. ================================================================================ 10 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ USAA INTERMEDIATE-TERM BOND FUND INSTITUTIONAL SHARES (INSTITUTIONAL SHARES) (Ticker Symbol: UIITX) -------------------------------------------------------------------------------- 1/31/14 7/31/13 -------------------------------------------------------------------------------- Net Assets $1,175.3 Million $1,132.6 Million Net Asset Value Per Share $10.80 $10.75 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14 -------------------------------------------------------------------------------- 8/1/13-1/31/14* 1 Year 5 Years Since Inception 8/01/08 2.75% 2.53% 12.62% 8.63% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13 -------------------------------------------------------------------------------- 1 Year 5 Years Since Inception 8/01/08 1.41% 12.37% 8.47% -------------------------------------------------------------------------------- EXPENSE RATIO AS OF 7/31/13** -------------------------------------------------------------------------------- 0.55% 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 | 11 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA INTERMEDIATE-TERM BARCLAYS U.S. BOND FUND INSTITUTIONAL SHARES LIPPER INDEX AGGREGATE BOND INDEX 7/31/2008 $10,000.00 $10,000.00 $10,000.00 8/31/2008 9,995.51 10,059.87 10,094.91 9/30/2008 9,603.48 9,746.71 9,959.32 10/31/2008 8,941.32 9,383.98 9,724.23 11/30/2008 8,771.29 9,368.53 10,040.76 12/31/2008 8,673.92 9,717.05 10,415.37 1/31/2009 8,706.83 9,702.33 10,323.47 2/28/2009 8,650.28 9,593.70 10,284.50 3/31/2009 8,827.96 9,775.08 10,427.47 4/30/2009 9,040.93 9,943.81 10,477.33 5/31/2009 9,652.88 10,182.10 10,553.32 6/30/2009 9,929.45 10,304.54 10,613.35 7/31/2009 10,289.85 10,603.29 10,784.54 8/31/2009 10,619.91 10,754.73 10,896.20 9/30/2009 10,969.35 10,951.61 11,010.66 10/31/2009 11,170.03 11,051.31 11,065.03 11/30/2009 11,330.16 11,187.97 11,208.28 12/31/2009 11,372.15 11,106.69 11,033.08 1/31/2010 11,697.42 11,307.34 11,201.62 2/28/2010 11,779.67 11,364.32 11,243.45 3/31/2010 11,949.41 11,427.73 11,229.63 4/30/2010 12,193.02 11,586.31 11,346.52 5/31/2010 12,056.28 11,591.25 11,442.00 6/30/2010 12,167.42 11,778.25 11,621.43 7/31/2010 12,399.30 11,941.09 11,745.42 8/31/2010 12,613.97 12,120.85 11,896.55 9/30/2010 12,797.72 12,192.59 11,909.23 10/31/2010 12,991.55 12,266.22 11,951.63 11/30/2010 12,961.29 12,169.77 11,882.94 12/31/2010 12,927.36 12,063.78 11,754.80 1/31/2011 13,095.79 12,127.49 11,768.48 2/28/2011 13,206.51 12,177.05 11,797.92 3/31/2011 13,270.59 12,191.48 11,804.44 4/30/2011 13,474.88 12,371.90 11,954.28 5/31/2011 13,649.10 12,502.68 12,110.29 6/30/2011 13,543.39 12,441.86 12,074.83 7/31/2011 13,719.21 12,616.09 12,266.44 8/31/2011 13,587.04 12,668.48 12,445.65 9/30/2011 13,470.13 12,639.06 12,536.18 10/31/2011 13,659.13 12,744.16 12,549.65 11/30/2011 13,600.79 12,662.31 12,538.76 12/31/2011 13,768.99 12,821.58 12,676.57 1/31/2012 14,022.38 13,040.59 12,787.88 2/29/2012 14,148.83 13,089.91 12,784.95 3/31/2012 14,182.91 13,058.41 12,714.90 4/30/2012 14,320.11 13,212.66 12,855.86 5/31/2012 14,354.33 13,302.31 12,972.18 6/30/2012 14,429.43 13,351.70 12,977.27 7/31/2012 14,730.70 13,583.53 13,156.26 8/31/2012 14,851.51 13,631.08 13,164.86 9/30/2012 14,998.77 13,715.97 13,182.98 10/31/2012 15,204.39 13,775.39 13,208.91 11/30/2012 15,283.23 13,819.44 13,229.75 12/31/2012 15,324.47 13,824.10 13,210.92 1/31/2013 15,380.41 13,772.15 13,118.52 2/28/2013 15,508.42 13,846.86 13,184.27 3/31/2013 15,594.54 13,872.06 13,194.80 4/30/2013 15,804.67 14,023.14 13,328.31 5/31/2013 15,633.59 13,776.93 13,090.51 6/30/2013 15,263.30 13,479.04 12,888.02 7/31/2013 15,346.95 13,528.13 12,905.64 8/31/2013 15,261.84 13,429.91 12,839.67 9/30/2013 15,360.79 13,594.26 12,961.22 10/31/2013 15,546.78 13,722.43 13,066.01 11/30/2013 15,562.59 13,697.17 13,017.09 12/31/2013 15,539.84 13,617.14 12,943.53 1/31/2014 15,773.04 13,812.61 13,134.78
[END CHART] Data from 7/31/08 through 1/31/14.* The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA Intermediate-Term Bond Fund Institutional Shares to the Fund's benchmarks listed above (see page 9 for benchmark definitions). *The performance of the Lipper Index and the Barclays U.S. Aggregate Bond 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. ================================================================================ 12 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ USAA INTERMEDIATE-TERM BOND FUND ADVISER SHARES (ADVISER SHARES) (Ticker Symbol: UITBX)
-------------------------------------------------------------------------------- 1/31/14 7/31/13 -------------------------------------------------------------------------------- Net Assets $10.7 Million $8.9 Million Net Asset Value Per Share $10.79 $10.74 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14 -------------------------------------------------------------------------------- 8/1/13-1/31/14* 1 Year Since Inception 8/01/10 2.55% 2.13% 6.66% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13 -------------------------------------------------------------------------------- 1 Year Since Inception 8/01/10 0.90% 6.38% -------------------------------------------------------------------------------- 30-DAY SEC YIELD AS OF 1/31/14** -------------------------------------------------------------------------------- Unsubsidized 3.14% Subsidized 3.25% -------------------------------------------------------------------------------- EXPENSE RATIOS AS OF 7/31/13*** -------------------------------------------------------------------------------- Before Reimbursement 1.06% After Reimbursement 0.95%
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 0.95% 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 | 13 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA INTERMEDIATE-TERM BARCLAYS U.S. BOND FUND ADVISER SHARES LIPPER INDEX AGGREGATE BOND INDEX 7/31/2010 $10,000.00 $10,000.00 $10,000.00 8/31/2010 10,167.97 10,150.54 10,128.67 9/30/2010 10,321.93 10,210.61 10,139.47 10/31/2010 10,473.75 10,272.28 10,175.57 11/30/2010 10,444.97 10,191.51 10,117.09 12/31/2010 10,402.80 10,102.74 10,007.99 1/31/2011 10,534.01 10,156.10 10,019.64 2/28/2011 10,629.23 10,197.61 10,044.70 3/31/2011 10,666.05 10,209.68 10,050.25 4/30/2011 10,836.23 10,360.78 10,177.83 5/31/2011 10,961.69 10,470.30 10,310.65 6/30/2011 10,882.66 10,419.36 10,280.46 7/31/2011 11,019.42 10,565.27 10,443.59 8/31/2011 10,898.39 10,609.15 10,596.17 9/30/2011 10,800.87 10,584.51 10,673.26 10/31/2011 10,949.26 10,672.52 10,684.72 11/30/2011 10,909.42 10,603.98 10,675.45 12/31/2011 11,040.42 10,737.36 10,792.78 1/31/2012 11,240.16 10,920.77 10,887.55 2/29/2012 11,327.45 10,962.07 10,885.05 3/31/2012 11,350.95 10,935.69 10,825.41 4/30/2012 11,468.29 11,064.87 10,945.43 5/31/2012 11,492.11 11,139.94 11,044.46 6/30/2012 11,537.81 11,181.31 11,048.79 7/31/2012 11,774.97 11,375.45 11,201.19 8/31/2012 11,867.33 11,415.27 11,208.51 9/30/2012 11,981.60 11,486.36 11,223.94 10/31/2012 12,142.42 11,536.12 11,246.01 11/30/2012 12,211.85 11,573.01 11,263.76 12/31/2012 12,240.84 11,576.91 11,247.72 1/31/2013 12,270.24 11,533.41 11,169.05 2/28/2013 12,379.76 11,595.97 11,225.04 3/31/2013 12,444.20 11,617.08 11,234.00 4/30/2013 12,596.42 11,743.60 11,347.67 5/31/2013 12,455.72 11,537.42 11,145.21 6/30/2013 12,156.60 11,287.95 10,972.81 7/31/2013 12,219.48 11,329.06 10,987.81 8/31/2013 12,147.56 11,246.80 10,931.64 9/30/2013 12,222.46 11,384.43 11,035.13 10/31/2013 12,377.93 11,491.77 11,124.35 11/30/2013 12,386.38 11,470.61 11,082.70 12/31/2013 12,352.59 11,403.60 11,020.07 1/31/2014 12,533.99 11,567.29 11,182.90
[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 Intermediate-Term Bond Fund Adviser Shares to the Fund's benchmarks listed above (see page 9 for benchmark definitions). *The performance of the Lipper Index and the Barclays U.S. Aggregate Bond 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. ================================================================================ 14 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ o PORTFOLIO RATINGS MIX -- 1/31/2014 o [PIE CHART OF PORTFOLIO RATINGS MIX] AAA 13.2% AA 7.9% A 21.5% BBB 46.0% BELOW INVESTMENT-GRADE 10.4% UNRATED 0.6% SHORT-TERM INVESTMENT-GRADE 0.4%
[END CHART] The four highest long-term credit ratings, in descending order of credit quality, are AAA, AA, A, and BBB. These categories represent investment-grade quality. This chart reflects the highest rating of a Nationally Recognized Statistical Rating Organization (NRSRO). Any of the Fund's securities that are not rated by these agencies appear in the chart above as "Unrated", but are monitored and evaluated by USAA Asset Management Company on an ongoing basis. Government securities that are issued or guaranteed as to principal and interest by the U.S. government are not rated but are treated as AAA for credit quality purposes. Securities within the Short-Term Investment-Grade ratings category are those that are ranked in the top two short-term credit ratings for the respective rating agency (which are A-1 and A-2 for S&P and P-1 and P-2 for Moody's, F1 and F2 for Fitch, and R-1 and R-2 for Dominion). Short-term ratings are generally assigned to those obligations considered short-term; such obligations generally have an original maturity not exceeding 13 months, unless explicitly noted. The Below Investment-Grade category includes both long-term and short-term securities. Percentages are of the total market value of the Fund's investments. You will find a complete list of securities that the Fund owns on pages 17-42. ================================================================================ INVESTMENT OVERVIEW | 15 ================================================================================ o ASSET ALLOCATION -- 1/31/2014 o [PIE CHART OF ASSET ALLOCATION] CORPORATE OBLIGATIONS 52.6% EURODOLLAR AND YANKEE OBLIGATIONS 16.8% COMMERCIAL MORTGAGE SECURITIES 16.7% MUNICIPAL BONDS 5.0% U.S. TREASURY SECURITIES 2.6% ASSET-BACKED SECURITIES 1.7% PREFERRED STOCKS 1.7% U.S. GOVERNMENT AGENCY ISSUES 1.4% FOREIGN GOVERNMENT OBLIGATIONS 0.4% MONEY MARKET INSTRUMENTS 0.4%
[END CHART] Percentages are of the net assets of the Fund and may not equal 100%. ================================================================================ 16 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ PORTFOLIO OF INVESTMENTS January 31, 2014 (unaudited)
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- CORPORATE OBLIGATIONS (52.6%) CONSUMER DISCRETIONARY (1.2%) ----------------------------- AUTOMOTIVE RETAIL (0.2%) $ 5,500 CST Brands, Inc. 5.00% 5/01/2023 $ 5,307 ---------- CABLE & SATELLITE (0.3%) 1,000 Comcast Corp. 6.50 1/15/2017 1,152 5,000 NBCUniversal Enterprise, Inc.(a) 1.97 4/15/2019 4,930 1,000 Time Warner Cable, Inc. 8.25 2/14/2014 1,002 ---------- 7,084 ---------- CATALOG RETAIL (0.0%) 1,000 QVC, Inc.(a) 7.38 10/15/2020 1,085 ---------- DEPARTMENT STORES (0.1%) 851 Macy's Retail Holdings, Inc. 5.90 12/01/2016 954 2,000 Macy's Retail Holdings, Inc. 7.45 7/15/2017 2,340 ---------- 3,294 ---------- HOME FURNISHINGS (0.2%) 4,848 Serta Simmons Holdings, LLC(b) 4.25 10/01/2019 4,900 ---------- HOUSEHOLD APPLIANCES (0.0%) 1,000 Whirlpool Corp. 7.75 7/15/2016 1,151 ---------- LEISURE PRODUCTS (0.1%) 2,000 Hasbro, Inc. 6.13 5/15/2014 2,030 ---------- SPECIALIZED CONSUMER SERVICES (0.1%) 1,000 Service Corp. International 7.63 10/01/2018 1,158 2,000 Service Corp. International 7.00 5/15/2019 2,140 ---------- 3,298 ---------- SPECIALTY STORES (0.2%) 4,938 Harbor Freight Tools USA, Inc.(b) 4.75 7/26/2019 5,021 2,000 Sally Holdings, LLC / Sally Capital Inc. 5.75 6/01/2022 2,040 ---------- 7,061 ---------- Total Consumer Discretionary 35,210 ---------- CONSUMER STAPLES (0.9%) ----------------------- AGRICULTURAL PRODUCTS (0.1%) 2,000 Cargill, Inc.(a) 6.00 11/27/2017 2,316 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 17 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- DRUG RETAIL (0.3%) $ 9,530 CVS Pass-Through Trust(a) 5.93% 1/10/2034 $ 10,556 ---------- PACKAGED FOODS & MEAT (0.5%) 15,000 Kraft Foods Group, Inc. 3.50 6/06/2022 15,042 ---------- Total Consumer Staples 27,914 ---------- ENERGY (8.0%) ------------- COAL & CONSUMABLE FUELS (0.1%) 2,500 Peabody Energy Corp. 6.00 11/15/2018 2,675 ---------- INTEGRATED OIL & GAS (0.1%) 2,000 Hess Corp. 8.13 2/15/2019 2,511 ---------- OIL & GAS EQUIPMENT & SERVICES (0.2%) 2,000 Exterran Holdings, Inc. 7.25 12/01/2018 2,123 3,079 SEACOR Holdings, Inc. 7.38 10/01/2019 3,402 ---------- 5,525 ---------- OIL & GAS EXPLORATION & PRODUCTION (2.2%) 8,000 Anadarko Petroleum Corp. 6.38 9/15/2017 9,197 3,000 Chesapeake Energy Corp. 6.63 8/15/2020 3,360 4,000 Denbury Resources, Inc. 6.38 8/15/2021 4,270 2,000 Devon Energy Corp. 6.30 1/15/2019 2,376 2,000 EQT Corp. 6.50 4/01/2018 2,277 1,000 EQT Corp. 8.13 6/01/2019 1,230 3,000 EQT Corp. 4.88 11/15/2021 3,172 3,000 Linn Energy, LLC(a) 6.25 11/01/2019 3,060 3,000 Newfield Exploration Co. 6.88 2/01/2020 3,225 2,000 Newfield Exploration Co. 5.75 1/30/2022 2,075 2,000 Noble Energy, Inc. 8.25 3/01/2019 2,524 5,000 Pioneer Natural Resource 3.95 7/15/2022 5,091 1,000 Polar Tankers, Inc.(a) 5.95 5/10/2037 1,122 900 QEP Resources, Inc. 6.80 3/01/2020 958 5,000 QEP Resources, Inc. 6.88 3/01/2021 5,412 5,000 Samson Investment Co.(b) 5.00 9/25/2018 5,053 10,000 Southwestern Energy Co. 4.10 3/15/2022 10,214 ---------- 64,616 ---------- OIL & GAS REFINING & MARKETING (0.1%) 1,000 Citgo Petroleum Corp.(a) 11.50 7/01/2017 1,094 2,000 Motiva Enterprises, LLC(a) 5.75 1/15/2020 2,298 ---------- 3,392 ---------- OIL & GAS STORAGE & TRANSPORTATION (5.3%) 250 Buckeye Partners, LP 5.13 7/01/2017 268 10,000 Buckeye Partners, LP 2.65 11/15/2018 9,972
================================================================================ 18 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 3,000 DCP Midstream Operating, LP 4.95% 4/01/2022 $ 3,124 4,000 DCP Midstream Operating, LP 3.88 3/15/2023 3,823 18,000 DCP Midstream, LLC(a) 5.85 5/21/2043 16,740 2,000 El Paso Pipeline Partners Operating, LLC 6.50 4/01/2020 2,323 5,000 El Paso Pipeline Partners Operating, LLC 5.00 10/01/2021 5,338 1,000 El Paso, LLC 6.50 9/15/2020 1,079 19,000 Enbridge Energy Partners, LP 8.05 10/01/2037 21,415 1,000 Energy Transfer Partners, LP 9.70 3/15/2019 1,304 16,000 Energy Transfer Partners, LP 3.29(c) 11/01/2066 14,640 1,000 Enterprise Products Operating, LLC 8.38 8/01/2066 1,113 5,000 Enterprise Products Operating, LLC 7.00 6/01/2067 5,191 7,550 Enterprise Products Operating, LLC 7.03 1/15/2068 8,388 6,000 Kinder Morgan, Inc.(a) 5.00 2/15/2021 5,981 12,000 NGPL PipeCo, LLC(a) 7.12 12/15/2017 11,400 2,000 NuStar Logistics, LP 8.15 4/15/2018 2,265 5,000 NuStar Logistics, LP(d) 4.80 9/01/2020 4,775 3,000 NuStar Logistics, LP(d) 4.75 2/01/2022 2,715 2,000 Oneok Partners, LP 8.63 3/01/2019 2,542 1,000 Plains All American Pipeline, LP 8.75 5/01/2019 1,293 1,000 Questar Pipeline Co. 5.83 2/01/2018 1,150 5,000 Rockies Express Pipeline, LLC(a) 3.90 4/15/2015 5,006 3,000 Southeast Supply Header(a) 4.85 8/15/2014 3,060 2,000 Southern Natural Gas Co., LLC (a),(d) 5.90 4/01/2017 2,275 2,000 Southern Union Co. 3.26(c) 11/01/2066 1,630 1,000 Spectra Energy Capital, LLC 5.50 3/01/2014 1,004 1,000 Spectra Energy Capital, LLC 8.00 10/01/2019 1,216 2,000 Sunoco Logistics Partners Operations, LP 8.75 2/15/2014 2,004 1,000 Sunoco, Inc. 9.63 4/15/2015 1,099 3,000 Targa Resources Partners, LP 6.88 2/01/2021 3,218 1,000 Tennessee Gas Pipeline Co. 8.00 2/01/2016 1,134 2,000 Tennessee Gas Pipeline Co. 7.00 10/15/2028 2,454 5,000 Western Gas Partners, LP(e) 5.38 6/01/2021 5,472 ---------- 156,411 ---------- Total Energy 235,130 ---------- FINANCIALS (24.5%) ------------------ ASSET MANAGEMENT & CUSTODY BANKS (0.8%) 10,000 Ares Capital Corp. 4.88 11/30/2018 10,299 18,725 State Street Capital Trust IV 1.24(c) 6/01/2077 14,437 ---------- 24,736 ---------- CONSUMER FINANCE (0.5%) 5,000 Ally Financial, Inc. 4.63 6/26/2015 5,194 8,000 American Express Co.(e) 6.80 9/01/2066 8,640 ---------- 13,834 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 19 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- DIVERSIFIED BANKS (0.7%) $ 1,000 Comerica Bank 5.20% 8/22/2017 $ 1,108 6,035 Compass Bank 6.40 10/01/2017 6,733 7,500 USB Realty Corp.(a) 1.39(c) -(f) 6,825 5,000 Wells Fargo & Co. 3.50 3/08/2022 5,067 ---------- 19,733 ---------- INVESTMENT BANKING & BROKERAGE (0.3%) 10,000 Morgan Stanley 4.88 11/01/2022 10,407 ---------- LIFE & HEALTH INSURANCE (3.2%) 3,000 American Equity Investment Life Holding Co. 6.63 7/15/2021 3,143 370 Delphi Financial Group, Inc. 7.38 5/15/2037 8,914 2,000 Forethought Financial Group(a) 8.63 4/15/2021 2,251 13,018 Lincoln National Corp. 7.00 5/17/2066 13,343 5,000 MetLife Capital Trust X(a) 9.25 4/08/2038 6,450 8,000 MetLife, Inc. 6.40 12/15/2036 8,320 1,000 Ohio National Financial Services, Inc.(a) 6.38 4/30/2020 1,123 2,000 Ohio National Financial Services, Inc.(a) 6.63 5/01/2031 2,373 5,000 Primerica, Inc. 4.75 7/15/2022 5,281 3,000 Principal Financial Global Fund, LLC 0.76(c) 1/10/2031 2,641 2,000 Prudential Financial, Inc. 6.00 12/01/2017 2,321 10,000 Prudential Financial, Inc. 5.88 9/15/2042 10,300 5,000 Prudential Holdings, LLC(a) 7.25 12/18/2023 6,008 20,471 StanCorp Financial Group, Inc. 6.90 6/01/2067 20,522 2,000 Travelers Life & Annuity(a) 5.13 8/15/2014 2,049 ---------- 95,039 ---------- MULTI-LINE INSURANCE (1.8%) 2,000 American International Group, Inc. 8.18 5/15/2058 2,495 10,000 Genworth Holdings, Inc. 6.15 11/15/2066 8,975 15,000 Glen Meadow Pass-Through Trust(a) 6.51 2/12/2067 15,000 2,000 HCC Insurance Holdings, Inc. 6.30 11/15/2019 2,335 3,000 Kemper Corp. 6.00 11/30/2015 3,204 20,235 Nationwide Mutual Insurance Co.(a),(d) 5.81 12/15/2024 20,564 ---------- 52,573 ---------- MULTI-SECTOR HOLDINGS (1.1%) 5,000 Berkshire Hathaway Finance Corp. 1.30 5/15/2018 4,934 10,000 BNSF Funding Trust I 6.61 12/15/2055 11,011 14,513 Leucadia National Corp. 8.13 9/15/2015 16,037 ---------- 31,982 ---------- OTHER DIVERSIFIED FINANCIAL SERVICES (2.6%) 1,000 Bank of America Corp. 8.00 -(f) 1,112 1,000 Bank of America Corp. 8.13 -(f) 1,118
================================================================================ 20 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 2,000 Bank of America Corp. 5.63% 10/14/2016 $ 2,227 2,000 Bank of America Corp. 5.75 12/01/2017 2,280 10,000 Bank of America Corp. 1.32(c) 3/22/2018 10,140 2,000 Bank of America, N.A. 6.10 6/15/2017 2,282 175 Citigroup Capital XIII 7.88 10/30/2040 4,757 2,000 Citigroup, Inc. 6.38 8/12/2014 2,061 2,000 Countrywide Financial Corp. 6.25 5/15/2016 2,212 6,440 GE Capital Trust I 6.38 11/15/2067 7,068 5,000 General Electric Capital Corp. 6.25 -(f) 5,234 9,000 General Electric Capital Corp. 6.38 11/15/2067 9,799 5,000 Icahn Enterprises, LP(a) 3.50 3/15/2017 5,019 7,000 ILFC E-Capital Trust I(a) 5.46(c) 12/21/2065 6,466 2,000 ILFC E-Capital Trust II(a) 6.25 12/21/2065 1,890 3,000 International Lease Finance Corp.(a) 6.50 9/01/2014 3,101 2,000 JPMorgan Chase Capital XIII 1.20(c) 9/30/2034 1,600 12,000 JPMorgan Chase Capital XXI 1.19(c) 2/02/2037 9,030 ---------- 77,396 ---------- PROPERTY & CASUALTY INSURANCE (4.6%) 2,000 Allied World Assurance 5.50 11/15/2020 2,254 15,000 Allstate Corp. 5.75 8/15/2053 15,223 10,000 Allstate Corp. 6.13 5/15/2067 10,463 7,500 AmTrust Financial Services, Inc.(a) 6.13 8/15/2023 7,575 3,000 Assured Guaranty Municipal Holdings, Inc.(a) 6.40 12/15/2066 2,370 1,535 Assured Guaranty U.S. Holdings, Inc. 7.00 6/01/2034 1,580 2,425 Assured Guaranty U.S. Holdings, Inc. 6.40 12/15/2066 2,169 25,000 Chubb Corp. 6.38 3/29/2067 27,687 9,760 Ironshore Holdings, Inc.(a),(d) 8.50 5/15/2020 11,437 3,000 Liberty Mutual Group, Inc.(a) 7.00 3/15/2037 3,135 4,000 Markel Corp. 3.63 3/30/2023 3,868 5,000 Navigators Group, Inc. 5.75 10/15/2023 5,429 10,000 ProAssurance Corp. 5.30 11/15/2023 10,561 20,010 Progressive Corp. 6.70 6/15/2037 21,761 5,000 RLI Corp. 4.88 9/15/2023 5,074 5,000 Travelers Companies, Inc. 6.25 3/15/2037 5,375 ---------- 135,961 ---------- REGIONAL BANKS (2.9%) 1,750 BOKF, N.A. 0.93(c) 5/15/2017 1,750 2,000 Chittenden Corp. 0.92(c) 2/14/2017 1,972 2,000 Cullen/Frost Bankers, Inc. 0.77(c) 2/15/2017 1,985 2,000 Cullen/Frost Capital Trust II 1.79(c) 3/01/2034 1,731 1,000 Emigrant Bancorp, Inc.(a) 6.25 6/15/2014 1,021 1,000 First Maryland Capital Trust I 1.24(c) 1/15/2027 850 10,000 First Niagara Financial Group, Inc. 7.25 12/15/2021 11,886
================================================================================ PORTFOLIO OF INVESTMENTS | 21 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 3,000 First Tennessee Bank, N.A. 5.65% 4/01/2016 $ 3,238 10,000 FirstMerit Corp. 4.35 2/04/2023 10,066 2,000 Fulton Capital Trust I 6.29 2/01/2036 1,795 2,000 Key Bank, N.A. 5.45 3/03/2016 2,179 750 KeyCorp Capital II 6.88 3/17/2029 823 2,395 M&T Capital Trust I 8.23 2/01/2027 2,429 16,000 Manufacturers & Traders Trust Co.(e) 5.63 12/01/2021 16,720 2,000 Regions Financial Corp. 7.75 11/10/2014 2,110 1,000 Regions Financial Corp. 5.75 6/15/2015 1,061 12,000 Suntrust Capital I 0.91(c) 5/15/2027 9,840 2,000 Susquehanna Bancshares, Inc. 2.06(c) 5/01/2014 1,999 2,000 TCF National Bank 5.50 2/01/2016 2,050 5,000 UnionBanCal Corp. 3.50 6/18/2022 5,043 1,000 Webster Financial Corp. 5.13 4/15/2014 1,005 1,000 Whitney National Bank 5.88 4/01/2017 1,058 1,000 Wilmington Trust Corp. 8.50 4/02/2018 1,191 1,000 Zions Bancorp. 6.00 9/15/2015 1,061 ---------- 84,863 ---------- REINSURANCE (0.4%) 5,000 Alleghany Corp.(d) 5.63 9/15/2020 5,572 6,259 Alterra USA Holdings Ltd.(a) 7.20 4/14/2017 7,082 ---------- 12,654 ---------- REITs - DIVERSIFIED (0.4%) 1,000 Liberty Property, LP 5.13 3/02/2015 1,043 1,000 Liberty Property, LP 6.63 10/01/2017 1,145 4,000 Washington REIT 5.35 5/01/2015 4,193 5,000 Washington REIT 3.95 10/15/2022 4,849 ---------- 11,230 ---------- REITs - INDUSTRIAL (0.2%) 5,000 ProLogis, LP 6.88 3/15/2020 5,969 ---------- REITs - OFFICE (1.5%) 7,000 Alexandria Real Estate Equities, Inc. 4.60 4/01/2022 7,205 2,000 BioMed Realty, LP 6.13 4/15/2020 2,217 3,000 BioMed Realty, LP 4.25 7/15/2022 2,977 2,000 Boston Properties, LP 5.88 10/15/2019 2,322 8,000 Boston Properties, LP 3.85 2/01/2023 7,993 2,000 Brandywine Operating Partnership, LP 7.50 5/15/2015 2,163 1,000 Brandywine Operating Partnership, LP 6.00 4/01/2016 1,091 5,000 Columbia Property Trust Operating Partnership, LP 5.88 4/01/2018 5,314 1,000 CommonWealth REIT 5.75 11/01/2015 1,042 2,000 CommonWealth REIT 6.25 8/15/2016 2,129 1,700 CommonWealth REIT 6.25 6/15/2017 1,828
================================================================================ 22 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 1,000 CommonWealth REIT 6.65% 1/15/2018 $ 1,097 1,000 Duke Realty, LP 5.50 3/01/2016 1,083 1,000 Duke Realty, LP 5.95 2/15/2017 1,117 1,000 Duke Realty, LP 6.50 1/15/2018 1,150 1,500 Mack-Cali Realty, LP 5.80 1/15/2016 1,623 1,000 Mack-Cali Realty, LP 7.75 8/15/2019 1,210 1,000 Reckson Operating Partnership, LP 6.00 3/31/2016 1,086 ---------- 44,647 ---------- REITs - RESIDENTIAL (0.7%) 5,550 AvalonBay Communities, Inc. 2.85 3/15/2023 5,122 1,330 BRE Properties, Inc. 5.50 3/15/2017 1,466 1,965 ERP Operating, LP 6.58 4/13/2015 2,103 2,000 UDR, Inc. 5.25 1/15/2015 2,079 10,000 UDR, Inc. 4.63 1/10/2022 10,552 ---------- 21,322 ---------- REITs - RETAIL (1.1%) 5,000 CBL & Associates, LP 5.25 12/01/2023 5,159 2,000 DDR Corp. 5.50 5/01/2015 2,107 1,000 Federal Realty Investment Trust 6.20 1/15/2017 1,130 3,000 Federal Realty Investment Trust 3.00 8/01/2022 2,886 10,000 Federal Realty Investment Trust 2.75 6/01/2023 9,226 1,000 National Retail Properties, Inc. 6.88 10/15/2017 1,166 1,000 Pan Pacific Retail Properties, Inc. 5.25 9/01/2015 1,067 2,000 Realty Income Corp. 5.95 9/15/2016 2,229 2,000 Realty Income Corp. 5.75 1/15/2021 2,256 2,100 Realty Income Corp. 3.25 10/15/2022 1,976 2,000 Regency Centers, LP 5.88 6/15/2017 2,236 ---------- 31,438 ---------- REITs - SPECIALIZED (1.4%) 5,000 American Tower Corp. 5.90 11/01/2021 5,630 6,000 EPR Properties 7.75 7/15/2020 7,013 2,000 HCP, Inc. 6.30 9/15/2016 2,260 2,000 Health Care REIT, Inc. 4.70 9/15/2017 2,196 3,000 Health Care REIT, Inc. 6.13 4/15/2020 3,444 2,000 Health Care REIT, Inc. 4.95 1/15/2021 2,159 5,000 Healthcare Realty Trust 6.50 1/17/2017 5,621 1,000 Hospitality Properties Trust 5.13 2/15/2015 1,020 1,000 Host Hotels & Resorts, LP 5.88 6/15/2019 1,085 2,000 Nationwide Health Properties, Inc. 6.90 10/01/2037 2,347 6,000 Senior Housing Properties Trust 6.75 4/15/2020 6,820 2,000 Senior Housing Properties Trust 6.75 12/15/2021 2,260 ---------- 41,855 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 23 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.3%) $ 10,000 People's United Financial, Inc. 3.65% 12/06/2022 $ 9,719 ---------- Total Financials 725,358 ---------- HEALTH CARE (0.8%) ------------------ HEALTH CARE EQUIPMENT (0.1%) 1,000 Baxter International, Inc. 4.00 3/01/2014 1,003 1,600 Hologic, Inc.(b) 3.75 8/01/2019 1,613 ---------- 2,616 ---------- HEALTH CARE FACILITIES (0.1%) 3,000 HCA, Inc. 7.25 9/15/2020 3,266 ---------- HEALTH CARE SERVICES (0.1%) 1,000 Laboratory Corp. of America 5.63 12/15/2015 1,084 ---------- PHARMACEUTICALS (0.5%) 1,000 Hospira, Inc. 6.05 3/30/2017 1,112 15,000 Zoetis, Inc. 3.25 2/01/2023 14,432 ---------- 15,544 ---------- Total Health Care 22,510 ---------- INDUSTRIALS (4.2%) ------------------ AEROSPACE & DEFENSE (0.5%) 10,000 L-3 Communications Corp.(e) 5.20 10/15/2019 11,011 5,000 United Technologies Corp. 3.10 6/01/2022 5,003 ---------- 16,014 ---------- AIRLINES (2.1%) 180 America West Airlines, Inc. Pass-Through Trust 6.87 1/02/2017 189 1,199 America West Airlines, Inc. Pass-Through Trust 7.93 1/02/2019 1,286 9,729 American Airlines, Inc. Pass-Through Trust(a) 4.00 7/15/2025 9,510 3,875 Continental Airlines, Inc. Pass-Through Trust(d) 9.00 7/08/2016 4,432 766 Continental Airlines, Inc. Pass-Through Trust 6.55 2/02/2019 839 943 Continental Airlines, Inc. Pass-Through Trust 6.24 3/15/2020 1,040 10,729 Continental Airlines, Inc. Pass-Through Trust(e) 4.15 4/11/2024 10,984 10,000 Hawaiian Airlines, Inc. Pass-Through Trust 3.90 1/15/2026 9,500 5,000 United Airlines, Inc. Pass-Through Trust 4.30 8/15/2025 5,100 1,679 US Airways Group, Inc. Pass-Through Trust (INS) 7.08 3/20/2021 1,813 4,193 US Airways Group, Inc. Pass-Through Trust 6.25 4/22/2023 4,665 2,634 US Airways Group, Inc. Pass-Through Trust 7.13 10/22/2023 3,023 10,000 US Airways Group, Inc. Pass-Through Trust 3.95 11/15/2025 9,950 ---------- 62,331 ---------- BUILDING PRODUCTS (0.1%) 1,000 Building Materials Corp.(a) 7.00 2/15/2020 1,073 1,000 USG Corp. 6.30 11/15/2016 1,077
================================================================================ 24 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 1,000 USG Corp. 9.75% 1/15/2018 $ 1,195 ---------- 3,345 ---------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.1%) 1,000 Paccar, Inc. 6.88 2/15/2014 1,002 1,870 Terex Corp.(b) 3.50 4/28/2017 1,892 ---------- 2,894 ---------- INDUSTRIAL CONGLOMERATES (0.1%) 1,351 Tomkins, LLC(b) 3.75 9/29/2016 1,364 ---------- INDUSTRIAL MACHINERY (0.3%) 1,500 SPX Corp. 6.88 9/01/2017 1,703 6,000 Stanley Black & Decker, Inc. 5.75 12/15/2053 6,405 ---------- 8,108 ---------- RAILROADS (0.1%) 2,609 Southern Capital Pass-Through Trust(a) 5.70 6/30/2022 2,893 ---------- TRUCKING (0.9%) 1,000 ERAC USA Finance, LLC(a) 6.20 11/01/2016 1,131 5,000 ERAC USA Finance, LLC(a) 3.30 10/15/2022 4,809 20,000 Penske Truck Leasing Co., LP(a),(d) 4.25 1/17/2023 20,087 ---------- 26,027 ---------- Total Industrials 122,976 ---------- MATERIALS (1.9%) ---------------- ALUMINUM (0.4%) 10,000 Alcoa, Inc. 5.40 4/15/2021 10,459 ---------- COMMODITY CHEMICALS (0.0%) 144 Sweetwater Investors, LLC(a) 5.88 5/15/2014 144 ---------- CONSTRUCTION MATERIALS (0.1%) 3,450 Vulcan Materials Co. 6.40 11/30/2017 3,950 ---------- DIVERSIFIED CHEMICALS (0.0%) 1,000 E.I. du Pont de Nemours & Co. 6.00 7/15/2018 1,169 ---------- METAL & GLASS CONTAINERS (0.0%) 1,000 Ball Corp. 5.00 3/15/2022 999 ---------- PAPER PACKAGING (0.4%) 5,000 Rock Tenn Co. 4.45 3/01/2019 5,375 5,153 Sealed Air Corp.(a) 6.88 7/15/2033 5,075 ---------- 10,450 ---------- PAPER PRODUCTS (0.5%) 1,000 Clearwater Paper Corp. 7.13 11/01/2018 1,075 3,000 Georgia Pacific, LLC 7.25 6/01/2028 3,776
================================================================================ PORTFOLIO OF INVESTMENTS | 25 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 3,000 International Paper Co. 7.50% 8/15/2021 $ 3,774 5,000 International Paper Co. 4.75 2/15/2022 5,384 ---------- 14,009 ---------- STEEL (0.5%) 2,000 Allegheny Technologies, Inc. 9.38 6/01/2019 2,460 10,000 Allegheny Technologies, Inc. 5.95 1/15/2021 10,557 2,000 Carpenter Technology Corp. 5.20 7/15/2021 2,099 ---------- 15,116 ---------- Total Materials 56,296 ---------- TELECOMMUNICATION SERVICES (1.6%) --------------------------------- INTEGRATED TELECOMMUNICATION SERVICES (0.9%) 2,000 CenturyLink, Inc. 6.45 6/15/2021 2,093 5,000 CenturyLink, Inc. 5.80 3/15/2022 4,950 2,000 CenturyLink, Inc. 6.75 12/01/2023 2,035 3,301 Frontier Communications Corp. 8.25 4/15/2017 3,833 6,000 Qwest Corp. 6.75 12/01/2021 6,709 200 Qwest Corp. 7.38 6/01/2051 5,002 2,000 Windstream Corp. 7.88 11/01/2017 2,295 ---------- 26,917 ---------- WIRELESS TELECOMMUNICATION SERVICES (0.7%) 15,000 CC Holdings GS V, LLC / Crown Castle III Corp. 3.85 4/15/2023 14,467 4,175 iPCS, Inc. 3.49(c) 5/01/2014 4,180 1,500 SBA Telecommunications, Inc. 5.75 7/15/2020 1,567 ---------- 20,214 ---------- Total Telecommunication Services 47,131 ---------- UTILITIES (9.5%) ---------------- ELECTRIC UTILITIES (4.2%) 1,000 Baltimore Gas and Electric Co. 5.90 10/01/2016 1,121 9,135 Bruce Mansfield Unit 1 & 2 2007 Pass-Through Trust 6.85 6/01/2034 9,799 2,000 Cleveland Electric Illuminating Co. 8.88 11/15/2018 2,549 2,000 Commonwealth Edison Co. 5.80 3/15/2018 2,310 1,000 Duke Energy Indiana, Inc. 6.05 6/15/2016 1,120 1,045 Duke Energy Progress, Inc. 6.13 9/15/2033 1,220 13,000 Duquesne Light Holdings, Inc.(a) 6.40 9/15/2020 15,114 3,500 Duquesne Light Holdings, Inc.(a) 5.90 12/01/2021 3,970 2,225 Entergy Texas, Inc. 3.60 6/01/2015 2,297 431 FPL Energy National Wind, LLC(a) 5.61 3/10/2024 428 3,000 Great Plains Energy, Inc. 6.88 9/15/2017 3,408 2,000 Indiana Michigan Power Co. 7.00 3/15/2019 2,423 2,680 IPALCO Enterprises, Inc.(a) 7.25 4/01/2016 2,955
================================================================================ 26 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 12,500 IPALCO Enterprises, Inc. 5.00% 5/01/2018 $ 13,250 2,000 Metropolitan Edison Co. 7.70 1/15/2019 2,443 1,000 Nevada Power Co. 6.50 5/15/2018 1,188 14,000 NextEra Energy Capital Holdings, Inc. 6.35 10/01/2066 13,868 1,000 NextEra Energy Capital Holdings, Inc. 7.30 9/01/2067 1,101 3,000 NV Energy, Inc. 6.25 11/15/2020 3,561 2,000 Oglethorpe Power Corp. 6.10 3/15/2019 2,347 20,500 PPL Capital Funding, Inc. 6.70 3/30/2067 20,720 3,000 Public Service Co. of New Mexico 7.95 5/15/2018 3,592 1,000 Public Service Co. of Oklahoma 6.15 8/01/2016 1,102 6,900 Southern California Edison Co. 6.25 -(f) 7,190 4,000 Texas - New Mexico Power Co.(a) 9.50 4/01/2019 5,175 387 Tri-State Pass-Through Trust(a) 6.04 1/31/2018 409 ---------- 124,660 ---------- GAS UTILITIES (1.8%) 2,000 AGL Capital Corp. 6.38 7/15/2016 2,229 2,000 Atmos Energy Corp. 6.35 6/15/2017 2,262 1,000 Atmos Energy Corp. 8.50 3/15/2019 1,292 2,000 Florida Gas Transmission Co.(a) 7.90 5/15/2019 2,479 3,000 Florida Gas Transmission Co.(a) 5.45 7/15/2020 3,291 3,000 Gulfstream Natural Gas(a) 6.95 6/01/2016 3,358 4,000 National Fuel Gas Co. 4.90 12/01/2021 4,257 10,000 National Fuel Gas Co. 3.75 3/01/2023 9,744 1,000 National Fuel Gas Co. 7.38 6/13/2025 1,215 8,000 ONEOK, Inc. 4.25 2/01/2022 7,793 13,110 SourceGas, LLC(a) 5.90 4/01/2017 14,003 1,000 Southern Star Central Gas Pipeline, Inc.(a) 6.00 6/01/2016 1,094 ---------- 53,017 ---------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) 2,000 DPL, Inc. 6.50 10/15/2016 2,160 ---------- MULTI-UTILITIES (3.4%) 1,000 Ameren Corp. 8.88 5/15/2014 1,022 1,000 Ameren Illinois Co. 6.13 11/15/2017 1,164 2,000 Ameren Illinois Co. 9.75 11/15/2018 2,669 3,000 Black Hills Corp. 5.88 7/15/2020 3,481 2,000 CMS Energy Corp. 6.25 2/01/2020 2,347 3,000 CMS Energy Corp. 5.05 3/15/2022 3,328 5,000 Consumers Energy Co. 2.85 5/15/2022 4,920 1,000 Dominion Resources, Inc. 8.88 1/15/2019 1,286 6,050 Dominion Resources, Inc. 7.50 6/30/2066 6,598 10,000 Dominion Resources, Inc. 2.55(c) 9/30/2066 9,302
================================================================================ PORTFOLIO OF INVESTMENTS | 27 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 19,663 Integrys Energy Group, Inc. 6.11% 12/01/2066 $ 19,848 1,000 Puget Sound Energy, Inc. 6.75 1/15/2016 1,106 20,500 Puget Sound Energy, Inc. 6.97 6/01/2067 21,602 2,000 Sempra Energy 9.80 2/15/2019 2,664 19,500 Wisconsin Energy Corp. 6.25 5/15/2067 20,002 ---------- 101,339 ---------- Total Utilities 281,176 ---------- Total Corporate Obligations (cost: $1,456,212) 1,553,701 ---------- EURODOLLAR AND YANKEE OBLIGATIONS (16.8%) CONSUMER DISCRETIONARY (0.3%) ----------------------------- AUTOMOBILE MANUFACTURERS (0.2%) 5,000 Daimler Finance N.A., LLC(a) 2.25 7/31/2019 4,984 ---------- CABLE & SATELLITE (0.1%) 1,000 Virgin Media Finance plc 8.38 10/15/2019 1,084 2,000 Virgin Media Secured Finance plc 6.50 1/15/2018 2,075 ---------- 3,159 ---------- Total Consumer Discretionary 8,143 ---------- CONSUMER STAPLES (1.0%) ----------------------- AGRICULTURAL PRODUCTS (0.3%) 8,000 Viterra, Inc.(a) 5.95 8/01/2020 8,760 ---------- BREWERS (0.2%) 5,000 SABMiller Holdings, Inc.(a) 3.75 1/15/2022 5,128 ---------- DISTILLERS & VINTNERS (0.2%) 5,000 Pernod Ricard S.A.(a) 2.95 1/15/2017 5,208 ---------- FOOD RETAIL (0.0%) 950 Ahold Lease USA, Inc. Pass-Through Trust 7.82 1/02/2020 1,068 ---------- TOBACCO (0.3%) 10,000 BAT International Finance plc(a) 3.25 6/07/2022 9,834 ---------- Total Consumer Staples 29,998 ---------- ENERGY (1.7%) ------------- INTEGRATED OIL & GAS (0.0%) 1,000 Husky Energy, Inc. 7.25 12/15/2019 1,229 ---------- OIL & GAS DRILLING (0.7%) 10,000 Nabors Industries, Inc. 4.63 9/15/2021 10,267 3,000 Noble Holding International Ltd. 3.95 3/15/2022 2,969 2,044 QGOG Atlantic/Alaskan Rigs Ltd.(a) 5.25 7/30/2018 2,115
================================================================================ 28 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 5,000 Transocean, Inc. 5.05% 12/15/2016 $ 5,512 ---------- 20,863 ---------- OIL & GAS EQUIPMENT & SERVICES (0.2%) 2,000 SESI, LLC 7.13 12/15/2021 2,215 2,000 Weatherford Bermuda 9.63 3/01/2019 2,599 ---------- 4,814 ---------- OIL & GAS EXPLORATION & PRODUCTION (0.1%) 1,500 Talisman Energy, Inc. 7.75 6/01/2019 1,818 2,000 Woodside Finance Ltd.(a) 4.60 5/10/2021 2,143 ---------- 3,961 ---------- OIL & GAS STORAGE & TRANSPORTATION (0.7%) 1,275 Nakilat, Inc.(a) 6.07 12/31/2033 1,364 2,000 TransCanada Pipelines Ltd. 7.13 1/15/2019 2,448 14,860 TransCanada Pipelines Ltd. 6.35 5/15/2067 15,346 ---------- 19,158 ---------- Total Energy 50,025 ---------- FINANCIALS (8.1%) ----------------- DIVERSIFIED BANKS (3.9%) 10,000 Abbey National Treasury Services plc 3.05 8/23/2018 10,343 2,450 Barclays Bank plc 0.69(c) -(f) 1,642 3,000 BayernLB Capital Trust l 6.20 -(f) 2,550 20,000 HSBC Bank plc 0.63(c) -(f) 14,443 2,000 LBG Capital No.1 plc 8.00 -(f) 2,144 3,000 LBG Capital No.1 plc(a) 7.88 11/01/2020 3,247 1,000 Lloyds TSB Bank plc(a) 4.38 1/12/2015 1,035 5,000 Lloyds TSB Bank plc 4.20 3/28/2017 5,440 2,000 National Capital Trust II(a) 5.49 -(f) 2,051 2,000 Nordea Bank AB(a) 5.42 -(f) 2,068 10,000 Nordea Bank AB(a) 4.25 9/21/2022 10,097 15,000 Rabobank Nederland 1.70 3/19/2018 14,962 10,000 Rabobank Nederland 3.88 2/08/2022 10,203 5,000 Rabobank Nederland 3.95 11/09/2022 4,909 4,000 Royal Bank of Scotland Group plc 7.64 -(f) 3,960 10,000 Royal Bank of Scotland Group plc 9.50 3/16/2022 11,716 5,000 Santander UK plc(a) 5.00 11/07/2023 5,060 6,560 Sovereign Bank 8.75 5/30/2018 8,007 1,000 Standard Chartered Bank(a) 6.40 9/26/2017 1,138 1,000 Westpac Capital Trust IV(a) 5.26 -(f) 1,047 ---------- 116,062 ---------- DIVERSIFIED REAL ESTATE ACTIVITIES (0.2%) 4,500 Brookfield Asset Management, Inc. 5.80 4/25/2017 4,999 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 29 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- LIFE & HEALTH INSURANCE (0.4%) $ 11,500 Great-West Life & Annuity Insurance Capital, LP(a) 7.15% 5/16/2046 $ 11,902 ---------- MULTI-LINE INSURANCE (0.6%) 2,000 AXA S.A.(a) 6.46 -(f) 2,060 15,000 ZFS Finance USA Trust II(a) 6.45 12/15/2065 16,162 ---------- 18,222 ---------- OTHER DIVERSIFIED FINANCIAL SERVICES (0.4%) 7,000 ING Bank N.V.(a) 3.75 3/07/2017 7,444 36 ING Groep N.V. 7.20 -(f) 914 27 ING Groep N.V. 7.38 -(f) 673 4,000 ING Groep N.V. 5.78 -(f) 4,130 ---------- 13,161 ---------- PROPERTY & CASUALTY INSURANCE (1.6%) 2,000 Allied World Assurance Holdings Ltd. 7.50 8/01/2016 2,296 15,000 Oil Insurance Ltd.(a) 3.23(c) -(f) 13,702 20,056 QBE Capital Funding III Ltd.(a) 7.25 5/24/2041 20,737 5,000 White Mountains Re Group Ltd.(a) 6.38 3/20/2017 5,650 5,000 XL Group plc 6.50 -(f) 4,925 ---------- 47,310 ---------- REGIONAL BANKS (0.5%) 15,000 RBS Citizens Financial Group, Inc.(a) 4.15 9/28/2022 15,006 ---------- REINSURANCE (0.4%) 5,000 Platinum Underwriters Finance, Inc. 7.50 6/01/2017 5,715 5,000 Swiss Re Capital I, LP(a) 6.85 -(f) 5,375 ---------- 11,090 ---------- REITs - RETAIL (0.1%) 2,000 WEA Finance(a) 5.75 9/02/2015 2,151 ---------- Total Financials 239,903 ---------- HEALTH CARE (0.1%) ------------------ PHARMACEUTICALS (0.1%) 2,000 Valeant Pharmaceuticals(a) 6.88 12/01/2018 2,145 ---------- INDUSTRIALS (2.3%) ------------------ AIR FREIGHT & LOGISTICS (0.3%) 10,000 Sydney Airport Finance Co. Pty. Ltd.(a) 3.90 3/22/2023 9,774 ---------- AIRLINES (1.0%) 10,000 Air Canada Pass-Through Trust(a) 4.13 5/15/2025 9,750 15,000 British Airways Pass-Though Trust(a) 4.63 6/20/2024 15,694 5,000 Virgin Australia Trust(a) 6.00 4/23/2022 5,212 ---------- 30,656 ----------
================================================================================ 30 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- AIRPORT SERVICES (0.4%) $ 10,000 Heathrow Funding Ltd.(a) 4.88% 7/15/2021 $ 10,736 ---------- INDUSTRIAL CONGLOMERATES (0.4%) 8,000 Hutchison Whampoa International Ltd.(a) 6.00 -(f) 8,480 2,000 Hutchison Whampoa International Ltd.(a) 4.63 1/13/2022 2,091 1,000 Siemens Financieringsmat(a) 6.13 8/17/2026 1,210 ---------- 11,781 ---------- RAILROADS (0.2%) 4,261 Asciano Finance Ltd.(a) 4.63 9/23/2020 4,369 ---------- Total Industrials 67,316 ---------- INFORMATION TECHNOLOGY (0.2%) ----------------------------- ELECTRONIC MANUFACTURING SERVICES (0.2%) 5,000 Tyco Electronics Group S.A. 3.50 2/03/2022 4,883 ---------- MATERIALS (2.7%) ---------------- COMMODITY CHEMICALS (0.2%) 5,000 Braskem Finance Ltd.(g) 6.45 2/03/2024 4,922 ---------- CONSTRUCTION MATERIALS (0.2%) 2,000 CRH America, Inc. 6.00 9/30/2016 2,235 3,000 CRH America, Inc. 5.75 1/15/2021 3,413 ---------- 5,648 ---------- DIVERSIFIED CHEMICALS (0.1%) 3,000 Incitec Pivot Finance, LLC(a) 6.00 12/10/2019 3,333 ---------- DIVERSIFIED METALS & MINING (0.8%) 5,000 Anglo American Capital plc(a) 2.63 9/27/2017 5,052 3,000 Glencore Canada Corp. 6.00 10/15/2015 3,238 2,000 Glencore Funding, LLC(a) 6.00 4/15/2014 2,020 10,000 Glencore Funding, LLC(a) 2.50 1/15/2019 9,677 3,000 Rio Tinto Finance (USA) Ltd. 8.95 5/01/2014 3,060 ---------- 23,047 ---------- GOLD (0.7%) 2,000 Barrick Gold Corp. 6.95 4/01/2019 2,337 20,000 Goldcorp, Inc. 3.70 3/15/2023 18,474 ---------- 20,811 ---------- METAL & GLASS CONTAINERS (0.0%) 1,000 Ardagh Packaging Finance plc(a) 7.38 10/15/2017 1,075 ---------- PAPER PACKAGING (0.1%) 3,000 Smurfit Kappa Acquisitions(a) 4.88 9/15/2018 3,143 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 31 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- PRECIOUS METALS & MINERALS (0.3%) $ 10,000 Fresnillo plc(a) 5.50% 11/13/2023 $ 9,750 ---------- STEEL (0.3%) 3,000 ArcelorMittal 6.13 6/01/2018 3,274 2,000 ArcelorMittal 6.00 3/01/2021 2,100 4,000 ArcelorMittal 6.75 2/25/2022 4,335 ---------- 9,709 ---------- Total Materials 81,438 ---------- UTILITIES (0.4%) ---------------- ELECTRIC UTILITIES (0.3%) 10,000 Electricite De France S.A.(a) 5.25 -(f) 9,680 ---------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) 2,000 Transalta Corp. 4.75 1/15/2015 2,071 ---------- Total Utilities 11,751 ---------- Total Eurodollar and Yankee Obligations (cost: $471,194) 495,602 ---------- FOREIGN GOVERNMENT OBLIGATIONS (0.4%) GOVERNMENT (0.4%) CAD15,000 Province of Alberta (cost: $14,535) 2.55 12/15/2022 13,129 ---------- ASSET-BACKED SECURITIES (1.7%) FINANCIALS (1.7%) ----------------- ASSET-BACKED FINANCING (1.7%) 3,000 American Express Credit Account Master Trust(a) 0.51(c) 9/15/2016 3,000 5,000 Avis Budget Rental Car Funding, LLC(a) 6.74 5/20/2016 5,277 2,000 Bank One Issuance Trust 0.96(c) 2/15/2017 2,002 1,748 Centre Point Funding, LLC(a) 5.43 7/20/2016 1,806 5,000 CIT Equipment Collateral(a) 2.55 9/20/2016 5,010 1,000 Citibank Credit Card Issuance Trust 5.50 3/24/2017 1,054 1,000 Citibank Credit Card Issuance Trust 5.65 9/20/2019 1,150 5,000 GE Capital Credit Card Master Note Trust 4.47 3/15/2020 5,459 5,000 Hertz Vehicle Financing, LLC(a) 5.93 3/25/2016 5,197 2,000 Hertz Vehicle Financing, LLC(a) 6.44 2/25/2019 2,250 5,289 SLM Student Loan Trust 0.60(c) 4/25/2025 4,743 6,045 SLM Student Loan Trust 0.62(c) 4/25/2025 5,442 1,479 SLM Student Loan Trust 0.44(c) 10/27/2025 1,352 1,334 SLM Student Loan Trust 0.79(c) 10/25/2038 1,177 1,607 Trinity Rail Leasing, LP(a) 5.27 8/14/2027 1,724
================================================================================ 32 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 3,776 Trinity Rail Leasing, LP(a),(h) 5.90% 5/14/2036 $ 3,791 ---------- 50,434 ---------- Total Financials 50,434 ---------- Total Asset-Backed Securities (cost: $47,801) 50,434 ---------- COMMERCIAL MORTGAGE SECURITIES (16.7%) FINANCIALS (16.4%) ------------------ COMMERCIAL MORTGAGE-BACKED SECURITIES (15.7%) 3,342 Banc of America Commercial Mortgage, Inc. 5.29 11/10/2042 3,489 1,000 Banc of America Commercial Mortgage, Inc. 5.29 11/10/2042 1,022 40 Banc of America Commercial Mortgage, Inc. 4.51 12/10/2042 40 2,400 Banc of America Commercial Mortgage, Inc. 4.95 7/10/2043 2,507 1,584 Banc of America Commercial Mortgage, Inc. 5.72 5/10/2045 1,627 4,920 Banc of America Commercial Mortgage, Inc. 5.77 5/10/2045 5,207 2,000 Banc of America Commercial Mortgage, Inc. 5.77 5/10/2045 2,203 5,211 Banc of America Commercial Mortgage, Inc. 5.00 7/10/2045 5,499 3,000 Banc of America Commercial Mortgage, Inc. 5.15 10/10/2045 3,172 7,523 Banc of America Commercial Mortgage, Inc. 5.18 10/10/2045 8,042 4,200 Banc of America Commercial Mortgage, Inc. 5.42 10/10/2045 4,201 4,787 Banc of America Commercial Mortgage, Inc. 5.18 9/10/2047 5,142 895 Banc of America Commercial Mortgage, Inc.(a) 5.50 9/10/2047 938 304 Banc of America Commercial Mortgage, Inc.(a) 5.64 9/10/2047 319 7,605 Banc of America Commercial Mortgage, Inc.(a) 6.14 9/10/2047 7,932 5,980 Banc of America Commercial Mortgage, Inc. 6.25 2/10/2051 6,815 3,000 BCRR Trust(a) 5.86 7/17/2040 3,357 4,480 Bear Stearns Commercial Mortgage Securities, Inc. 5.00 2/11/2041 4,477 4,000 Bear Stearns Commercial Mortgage Securities, Inc. 5.21 2/11/2041 4,055 3,000 Bear Stearns Commercial Mortgage Securities, Inc. 4.99 9/11/2042 3,137 5,989 Bear Stearns Commercial Mortgage Securities, Inc. 5.33 2/11/2044 6,522 7,000 CFCRE Commercial Mortgage Trust(a) 5.56 12/15/2047 7,895 4,705 Citigroup Commercial Mortgage Securities, Inc. 5.78 3/15/2049 5,115 1,620 Citigroup Commercial Mortgage Trust 4.83 5/15/2043 1,686 5,000 Citigroup Commercial Mortgage Trust 6.13 12/10/2049 5,596 5,000 Citigroup Deutsche Bank Commercial Mortgage Trust 5.22 7/15/2044 5,289 2,300 Citigroup/Deutsche Bank Commercial Mortgage Trust 5.22 7/15/2044 2,437 5,000 Citigroup/Deutsche Bank Commercial Mortgage Trust 5.35 1/15/2046 5,382 386 Commercial Mortgage Asset Trust 7.33 11/17/2032 387 3,000 Commercial Mortgage Loan Trust(a) 5.54 12/11/2049 3,249 366 Commercial Mortgage Trust 4.58 10/15/2037 366 5,000 Commercial Mortgage Trust 5.12 6/10/2044 5,258 5,000 Commercial Mortgage Trust(a) 5.54 12/11/2049 5,499 4,956 Credit Suisse Commercial Mortgage Trust 5.47 2/15/2039 5,359
================================================================================ PORTFOLIO OF INVESTMENTS | 33 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 3,000 Credit Suisse Commercial Mortgage Trust 5.47% 2/15/2039 $ 3,209 4,872 Credit Suisse Commercial Mortgage Trust 5.38 2/15/2040 5,274 2,386 Credit Suisse First Boston Mortgage Securities Corp. 5.11 7/15/2036 2,409 4,824 Credit Suisse First Boston Mortgage Securities Corp.(a) 4.96 1/15/2037 4,820 5,750 Credit Suisse First Boston Mortgage Securities Corp. 0.41 4/15/2037 5,305 6,000 Credit Suisse First Boston Mortgage Securities Corp. 4.73 7/15/2037 6,267 4,555 Credit Suisse First Boston Mortgage Securities Corp. 5.10 8/15/2038 4,842 1,000 Credit Suisse First Boston Mortgage Securities Corp. 4.82 10/15/2039 1,016 1,950 DB-UBS Mortgage Trust(a) 5.42 8/10/2044 2,161 5,000 GE Capital Commercial Mortgage Corp. 5.28 3/10/2044 4,840 5,000 GE Capital Commercial Mortgage Corp. 5.07 7/10/2045 5,296 691 GE Capital Commercial Mortgage Corp. 5.31 11/10/2045 693 2,745 GE Capital Commercial Mortgage Corp. 5.31 11/10/2045 2,926 2,000 GMAC Commercial Mortgage Securities, Inc. 4.75 5/10/2043 2,088 2,829 GMAC Commercial Mortgage Securities, Inc. 4.81 5/10/2043 2,758 5,000 Greenwich Capital Commercial Funding Corp. 5.82 7/10/2038 5,476 2,000 Greenwich Capital Commercial Funding Corp. 5.44 3/10/2039 2,210 4,225 GS Mortgage Securities Corp. II 5.59 4/10/2038 4,271 7,195 GS Mortgage Securities Corp. II 5.62 4/10/2038 7,795 2,000 GS Mortgage Securities Corp. II 5.53 8/10/2038 2,031 9,500 GS Mortgage Securities Corp. II 4.78 7/10/2039 9,730 3,000 GS Mortgage Securities Corp. II(a) 4.95 1/10/2045 3,294 4,000 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.99 9/12/2037 4,163 5,540 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.84 7/15/2042 5,767 3,200 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.00 10/15/2042 3,388 8,800 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.04 10/15/2042 9,081 1,429 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.29 1/12/2043 1,524 713 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.49 4/15/2043 731 810 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.79 6/12/2043 842 2,734 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.42 12/12/2043 2,860 5,000 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.46 12/12/2043 5,234 3,000 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.24 12/15/2044 3,196
================================================================================ 34 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 3,650 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.36% 12/15/2044 $ 3,913 3,465 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.86 4/15/2045 3,831 1,504 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.86 4/15/2045 1,559 10,000 J.P. Morgan Chase Commercial Mortgage Securities Corp. 3.51 5/15/2045 10,130 453 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.37 5/15/2045 468 4,000 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.48 5/15/2045 4,206 221 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.63 3/15/2046 221 5,000 J.P. Morgan Chase Commercial Mortgage Securities Corp.(a) 5.31 8/15/2046 5,658 2,000 J.P. Morgan Chase Commercial Mortgage Securities Corp. 6.00 2/15/2051 2,219 5,000 J.P. Morgan Chase Commercial Mortgage Securities Trust 5.37 5/15/2047 5,297 2,459 LB-UBS Commercial Mortgage Trust 5.02 8/15/2029 2,483 3,000 LB-UBS Commercial Mortgage Trust 5.21 4/15/2030 3,105 5,493 LB-UBS Commercial Mortgage Trust 5.62 11/15/2030 5,682 3,000 LB-UBS Commercial Mortgage Trust 5.22 2/15/2031 3,232 1,144 LB-UBS Commercial Mortgage Trust 5.64 3/15/2032 1,172 2,000 LB-UBS Commercial Mortgage Trust 5.35 11/15/2038 2,199 7,750 LB-UBS Commercial Mortgage Trust 5.38 11/15/2038 8,406 6,000 LB-UBS Commercial Mortgage Trust 5.41 9/15/2039 6,593 2,000 LB-UBS Commercial Mortgage Trust 5.43 4/15/2040 1,594 5,000 LB-UBS Commercial Mortgage Trust 5.28 2/15/2041 5,047 2,000 Merrill Lynch Mortgage Trust 5.28 11/12/2037 2,116 626 Merrill Lynch Mortgage Trust 4.96 7/12/2038 626 5,000 Merrill Lynch Mortgage Trust 5.14 7/12/2038 5,204 2,000 Merrill Lynch Mortgage Trust 5.18 7/12/2038 1,951 3,000 Merrill Lynch Mortgage Trust 5.69 5/12/2039 3,049 1,443 Merrill Lynch Mortgage Trust 4.86 10/12/2041 1,462 4,285 Merrill Lynch Mortgage Trust 4.92 10/12/2041 4,384 2,000 Merrill Lynch Mortgage Trust 5.42 1/12/2044 2,059 2,900 Merrill Lynch Mortgage Trust 5.38 8/12/2048 3,169 2,000 Merrill Lynch Mortgage Trust 6.26 2/12/2051 2,184 2,000 Merrill Lynch Mortgage Trust(a) 6.45 2/12/2051 2,128 2,000 Merrill Lynch-Countrywide Commercial Mortgage Trust 5.89 6/12/2046 2,038
================================================================================ PORTFOLIO OF INVESTMENTS | 35 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 1,775 Morgan Stanley Capital I, Inc. 5.80% 8/12/2041 $ 1,822 5,000 Morgan Stanley Capital I, Inc. 5.37 12/15/2043 5,450 6,000 Morgan Stanley Capital I, Inc. 5.79 7/12/2044 6,453 3,445 Morgan Stanley Capital I, Inc. 4.89 6/12/2047 3,604 3,000 Morgan Stanley Capital I, Inc. 4.77 7/15/2056 3,114 5,000 Royal Bank of Scotland Trust(a) 5.91 6/16/2049 5,526 3,398 Structured Asset Mortgage Investments, Inc. 0.66(c) 7/19/2035 3,032 3,000 Timberstar Trust(a) 5.75 10/15/2036 3,261 10,000 UBS Commercial Mortgage Trust 3.40 5/10/2045 10,044 4,756 UBS-Citigroup Commercial Mortgage Trust(a) 5.15 1/10/2045 5,257 1,993 Wachovia Bank Commercial Mortgage Trust 5.08 3/15/2042 2,051 424 Wachovia Bank Commercial Mortgage Trust 4.81 4/15/2042 432 4,860 Wachovia Bank Commercial Mortgage Trust 5.18 7/15/2042 5,155 5,000 Wachovia Bank Commercial Mortgage Trust 5.72 5/15/2043 5,257 5,592 Wachovia Bank Commercial Mortgage Trust 5.61 3/15/2045 6,020 531 Wachovia Bank Commercial Mortgage Trust 5.94 6/15/2045 539 5,000 Wachovia Bank Commercial Mortgage Trust 5.80 7/15/2045 5,472 802 Wachovia Bank Commercial Mortgage Trust 5.50 10/15/2048 808 1,000 Wachovia Bank Commercial Mortgage Trust 5.57 10/15/2048 1,095 3,000 Wachovia Bank Commercial Mortgage Trust 5.60 10/15/2048 3,254 5,000 Wachovia Bank Commercial Mortgage Trust 5.34 11/15/2048 5,472 5,000 Wachovia Bank Commercial Mortgage Trust 5.75 6/15/2049 5,580 3,000 WF Commercial Mortgage Trust(a) 5.28 11/15/2043 3,306 6,000 WF-RBS Commercial Mortgage Trust(a) 5.17 2/15/2044 6,569 ---------- 464,676 ---------- INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (0.7%) 35,182 J.P. Morgan Chase Commercial Mortgage Securities Corp., acquired 9/28/2012; cost $4,803(i) 2.15 10/15/2045 4,026 37,861 Morgan Stanley-BAML Trust, acquired 10/05/2012; cost $4,919(a),(i) 2.17 11/15/2045 4,116 32,338 UBS Commercial Mortgage Trust, acquired 5/01/2012; cost $4,896(a),(i) 2.33 5/10/2045 4,205 78,844 WF-RBS Commercial Mortgage Trust, acquired 12/04/2012; cost $9,837(a),(i) 1.83 12/15/2045 8,471 ---------- 20,818 ---------- Total Financials 485,494 ---------- GOVERNMENT (0.3%) ----------------- COMMERCIAL MORTGAGE-BACKED SECURITIES (0.3%) 8,500 Freddie Mac(+) 2.22 12/25/2018 8,633 ---------- Total Commercial Mortgage Securities (cost: $467,783) 494,127 ----------
================================================================================ 36 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY ISSUES (1.4%)(j) INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (0.9%) $ 202,027 Fannie Mae(+) 0.68% 4/25/2022 $ 8,568 44,141 Freddie Mac(+) 1.45 12/25/2021 3,873 24,010 Freddie Mac(+) 1.74 3/25/2022 2,614 74,139 Freddie Mac(+) 1.31 8/25/2022 6,442 72,259 Freddie Mac(+) 0.90 10/25/2022 4,430 ---------- 25,927 ---------- MORTGAGE-BACKED PASS-THROUGH SECURITIES (0.5%) 15,099 Fannie Mae(+) 2.50 7/01/2027 15,227 561 Freddie Mac(+),(k) 5.00 9/01/2020 605 220 Freddie Mac(+) 5.50 4/01/2036 241 ---------- 16,073 ---------- Total U.S. Government Agency Issues (cost: $41,715) 42,000 ---------- U.S. TREASURY SECURITIES (2.6%) BONDS (1.3%) 20,000 2.75%, 8/15/2042 16,861 5,000 2.75%, 11/15/2042 4,206 20,000 3.00%, 5/15/2042 17,814 ---------- 38,881 ---------- NOTES (1.3%) 5,000 1.75%, 5/15/2023 4,640 15,000 2.00%, 2/15/2022 14,567 10,000 2.00%, 2/15/2023 9,535 10,000 2.13%, 8/15/2021 9,900 ---------- 38,642 ---------- Total U.S. Treasury Securities (cost: $85,733) 77,523 ---------- MUNICIPAL BONDS (5.0%) AIRPORT/PORT (0.5%) 10,000 Chicago Midway Airport 3.53 1/01/2041(l) 10,436 2,000 College Park (INS) 5.76 1/01/2015 2,063 860 Riverside (INS) 5.19 8/01/2017 858 ---------- 13,357 ---------- APPROPRIATED DEBT (0.7%) 3,000 Baltimore City Board of School Commissioners 5.69 12/15/2025 3,471 1,125 Escondido Joint Powers Financing Auth. (INS) 5.53 9/01/2018 1,161 3,000 Kannapolis Ltd. 7.28 3/01/2027 3,134
================================================================================ PORTFOLIO OF INVESTMENTS | 37 ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- $ 1,500 Kentucky State Property and Buildings Commission 4.08% 11/01/2015 $ 1,593 5,000 Miami-Dade County School Board 5.38 5/01/2031 5,439 4,000 Palm Beach County School Board 5.40 8/01/2025 4,289 ---------- 19,087 ---------- CASINOS & GAMING (0.0%) 1,273 Mashantucket (Western) Pequot Tribe(m) 6.35 7/01/2026 772 ---------- DIVERSIFIED REAL ESTATE ACTIVITIES (0.0%) 680 American Eagle Northwest, LLC(a) 4.97 12/15/2018 688 ---------- EDUCATION (1.0%) 1,780 Austin CCD 5.20 2/01/2020 1,822 3,430 Austin CCD 6.76 8/01/2030 4,096 925 California State Univ. (INS) 5.27 11/01/2017 951 1,000 Colorado State Board of Governors Univ. Enterprise System 4.90 3/01/2021 1,098 3,000 Los Alamitos USD No. 1 6.19 2/01/2026 3,309 3,000 Miami Univ. (A State Univ. of Ohio) 6.67 9/01/2028 3,396 10,000 New Jersey EDA 5.25 9/01/2026 11,121 3,000 Rensselaer Polytechnic Institute 5.60 9/01/2020 3,387 1,000 Univ. of Oklahoma (PRE) 5.25 11/01/2019 1,038 ---------- 30,218 ---------- ELECTRIC/GAS UTILITIES (0.1%) 2,000 American Municipal Power, Inc. 3.82 2/15/2014 2,003 1,815 Piedmont Municipal Power Agency 4.34 1/01/2017 1,841 ---------- 3,844 ---------- ENVIRONMENTAL & FACILITIES SERVICES (0.5%) 4,000 Maricopa County IDA 2.63(c) 12/01/2031(l) 4,022 2,375 Miami-Dade County IDA 2.63 8/01/2023(l) 2,394 8,500 Mission EDC 3.75 12/01/2018(l) 8,787 ---------- Total Environmental & Facilities Services 15,203 ---------- GENERAL OBLIGATION (0.8%) 1,250 Las Virgenes USD 5.54 8/01/2025 1,359 3,000 Long Beach USD 5.91 8/01/2025 3,560 5,000 New York City 6.27 12/01/2037 6,098 5,000 State of Washington 5.25 2/01/2036 5,473 4,045 Will County, Illinois 3.83 11/15/2016 4,339 1,520 Will County, Illinois 4.08 11/15/2017 1,649 1,405 Will County, Illinois 4.28 11/15/2018 1,538 ---------- 24,016 ----------
================================================================================ 38 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- HOSPITAL (0.2%) $ 1,000 Medical Univ. (INS)(PRE) 5.01% 2/15/2015 $ 1,026 3,000 Novant Health, Inc. 5.35 11/01/2016 3,272 ---------- 4,298 ---------- MISCELLANEOUS (0.0%) 612 Keenan Dev. Association of Tennessee, LLC (INS)(a) 5.02 7/15/2028 634 ---------- MULTIFAMILY HOUSING (0.2%) 5,000 New York State Mortgage Agency 4.20 10/01/2027 4,996 ---------- NURSING/CCRC (0.0%) 630 California Statewide Communities Dev. Auth. (INS) 5.59 2/01/2015 632 ---------- SALES TAX (0.1%) 3,300 Miami-Dade County Transit System 4.59 7/01/2021 3,504 ---------- SPECIAL ASSESSMENT/TAX/FEE (0.7%) 2,000 Florida State Department of Environmental Protection 5.76 7/01/2020 2,222 1,745 Metropolitan Nashville Airport Auth. (INS) 5.14 7/01/2018 1,907 3,000 MTA 5.20 11/15/2018 3,383 5,000 MTA 6.73 11/15/2030 5,632 3,000 New Jersey Transportation Trust Fund Auth. 5.75 12/15/2028 3,389 2,500 New York City Transitional Finance Auth. 5.00 2/01/2035 2,673 ---------- 19,206 ---------- WATER UTILITIES (0.1%) 3,000 Connecticut Dev. Auth. 5.50 4/01/2021 3,382 ---------- WATER/SEWER UTILITY (0.1%) 2,500 Tohopekaliga Water Auth. 5.25 10/01/2036 2,703 ---------- Total Municipal Bonds (cost: $135,504) 146,540 ---------- ------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES ------------------------------------------------------------------------------------------------------------- PREFERRED STOCKS (1.7%) CONSUMER STAPLES (0.6%) ----------------------- AGRICULTURAL PRODUCTS (0.6%) 150,000 Dairy Farmers of America, Inc., 7.88%, cumulative redeemable, perpetual(a) 16,322 ---------- ENERGY (0.1%) ------------- OIL & GAS EXPLORATION & PRODUCTION (0.1%) 3,000 Chesapeake Energy Corp., 5.75%, perpetual(a) 3,456 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 39 ================================================================================
--------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT MARKET $(000)/ VALUE SHARES SECURITY (000) --------------------------------------------------------------------------------------------- FINANCIALS (0.5%) ----------------- DIVERSIFIED BANKS (0.2%) 50,000 HSBC Holdings plc, 6.20%, perpetual $ 1,249 5,000 US Bancorp, 7.19%, perpetual 3,913 ---------- 5,162 ---------- PROPERTY & CASUALTY INSURANCE (0.1%) $3,000 Catlin Insurance Co. Ltd., 7.25%, perpetual(a) 3,120 $3,000 Syncora Holdings Ltd., 6.88%, perpetual(h) - ---------- 3,120 ---------- REGIONAL BANKS (0.1%) 2,000 CoBank ACB, 1.46%, perpetual(a) 1,321 ---------- REINSURANCE (0.0%) 2,000 American Overseas Group Ltd., 7.50%, non-cumulative, perpetual, acquired 1/23/2007 - 3/02/2007; cost $2,058*(h),(i) 500 ---------- REITs - OFFICE (0.1%) 160,000 CommonWealth REIT, Series E, 7.25%, cumulative redeemable, perpetual 3,648 ---------- Total Financials 13,751 ---------- INDUSTRIALS (0.1%) ------------------ OFFICE SERVICES & SUPPLIES (0.1%) 4,000 Pitney Bowes International Holdings, Series F, 6.13%, cumulative redeemable, perpetual(a) 4,241 ---------- TELECOMMUNICATION SERVICES (0.1%) --------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.1%) 2,000 Centaur Funding Corp., 9.08%(a) 2,461 ---------- UTILITIES (0.3%) ---------------- ELECTRIC UTILITIES (0.3%) 99,000 Southern California Edison, Series D, 6.50%, cumulative redeemable, perpetual 9,751 ---------- Total Preferred Stocks (cost: $51,044) 49,982 ----------
================================================================================ 40 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================
------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON VALUE (000) SECURITY RATE MATURITY (000) ------------------------------------------------------------------------------------------------------------- MONEY MARKET INSTRUMENTS (0.4%) COMMERCIAL PAPER (0.3%) ENERGY (0.2%) ------------- OIL & GAS EXPLORATION & PRODUCTION (0.2%) $ 5,161 Talisman Energy, Inc.(a),(n) 0.67% 2/03/2014 $ 5,161 ---------- UTILITIES (0.1%) ---------------- ELECTRIC UTILITIES (0.1%) 2,976 Northeast Utilities(a),(n) 0.15 2/04/2014 2,976 ---------- Total Commercial Paper 8,137 ---------- VARIABLE-RATE DEMAND NOTES (0.1%) ENERGY (0.1%) ------------- OIL & GAS REFINING & MARKETING (0.1%) 5,000 Port of Port Arthur Navigation District 0.42 12/01/2039 5,000 ---------- Total Money Market Instruments (cost: $13,137) 13,137 ---------- TOTAL INVESTMENTS (COST: $2,784,658) $2,936,175 ========== ------------------------------------------------------------------------------------------------------------- UNREALIZED NUMBER OF CONTRACT APPRECIATION/ CONTRACTS EXPIRATION VALUE (DEPRECIATION) LONG/(SHORT) SECURITY DATE (000) (000) ------------------------------------------------------------------------------------------------------------- FUTURES (0.7%) 100 10YR U.S. Treasury Note Futures 3/20/2014 $12,575 $ 138 50 30YR U.S. Treasury Bond Futures 3/20/2014 6,680 236 ------- ------ TOTAL FUTURES $19,255 $ 374 ======= ======
================================================================================ PORTFOLIO OF INVESTMENTS | 41 ================================================================================
--------------------------------------------------------------------------------------------------- ($ 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 $ 5,002 $1,548,699 $ - $1,553,701 Eurodollar and Yankee Obligations - 495,602 - 495,602 Foreign Government Obligations - 13,129 - 13,129 Asset-Backed Securities - 46,643 3,791 50,434 Commercial Mortgage Securities - 494,127 - 494,127 U.S. Government Agency Issues - 42,000 - 42,000 U.S. Treasury Securities 77,523 - - 77,523 Municipal Bonds - 146,540 - 146,540 Equity Securities: Preferred Stocks 1,249 48,233 500 49,982 Money Market Instruments: Commercial Paper - 8,137 - 8,137 Variable-Rate Demand Notes - 5,000 - 5,000 Futures* 374 - - 374 --------------------------------------------------------------------------------------------------- Total $84,148 $2,848,110 $4,291 $2,936,549 ---------------------------------------------------------------------------------------------------
*Futures are valued at the unrealized appreciation/depreciation on the investment Reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
--------------------------------------------------------------------------------------- ASSET-BACKED PREFERRED SECURITIES STOCKS --------------------------------------------------------------------------------------- Balance as of July 31, 2013 $4,320 $500 Purchases - - Sales (124) - Transfers into Level 3 - - Transfers out of Level 3 - - Net realized gain (loss) on investments 4 - Change in net unrealized appreciation/depreciation on investments (409) - --------------------------------------------------------------------------------------- Balance as of January 31, 2014 $3,791 $500 ---------------------------------------------------------------------------------------
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. ================================================================================ 42 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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 17.3% of net assets at January 31, 2014. o CATEGORIES AND DEFINITIONS ASSET-BACKED AND COMMERCIAL MORTGAGE-BACKED SECURITIES -- Asset-backed securities represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets. Commercial mortgage-backed securities reflect an interest in, and are secured by, mortgage loans on commercial real property. These securities represent ownership in a pool of loans and are divided into pieces (tranches) with varying maturities. The stated final maturity of such securities represents when the final principal payment will be made for all underlying loans. The weighted average life is the average time for principal to be repaid, which is calculated by assuming prepayment rates of the underlying loans. The weighted average life is likely to be substantially shorter than the stated final maturity as a result of scheduled principal payments and unscheduled principal prepayments. Stated interest rates on commercial mortgage-backed securities may change slightly over time as underlying mortgages pay down. ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS | 43 ================================================================================ 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 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. o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S) CAD Canadian dollars CCD Community College District EDA Economic Development Authority EDC Economic Development Corp. IDA Industrial Development Authority/Agency MTA Metropolitan Transportation Authority PRE Prerefunded to a date prior to maturity ================================================================================ 44 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ REIT Real estate investment trust USD Unified School District CREDIT ENHANCEMENTS -- add the financial strength of the provider of the enhancement to support the issuer's ability to repay the principal and interest payments when due. The enhancement may be provided by a high-quality bank, insurance company or other corporation, or a collateral trust. The enhancements do not guarantee the market values of the securities. (INS) Principal and interest payments are insured by one of the following: AMBAC Assurance Corp., Assured Guaranty Municipal Corp., MBIA Insurance Corp., National Public Finance Guarantee Corp., Radian Asset Assurance, Inc., or XL Capital Assurance. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that value may fluctuate for other reasons, and there is no assurance that the insurance company will meet its obligations. o SPECIFIC NOTES (a) Restricted security that is not registered under the Securities Act of 1933. A resale of this security in the United States may occur in an exempt transaction to a qualified institutional buyer as defined by Rule 144A, and as such has been deemed liquid by USAA Asset Management Company (the Manager) under liquidity guidelines approved by the Trust's Board of Trustees (the Board), unless otherwise noted as illiquid. (b) 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 the Manager, under ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS | 45 ================================================================================ 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, portions of these securities were segregated to cover delayed-delivery and/or when-issued purchases. (e) The security, or a portion thereof, is segregated to cover the value of open futures contracts at January 31, 2014. (f) Security is perpetual and has no final maturity date but may be subject to calls at various dates in the future. (g) At January 31, 2014, the aggregate market value of securities purchased on a when-issued basis was $4,922,000. (h) 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 $4,291,000, which represented 0.01% of net assets of the Fund. (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 $21,318,000, which represented 0.7% of the Fund's net assets. (j) U.S. government agency issues -- Mortgage-backed securities issued by certain U.S. Government Sponsored Enterprises (GSEs) such as the Government National Mortgage Association (GNMA or Ginnie Mae) and certain other U.S. government guaranteed securities are supported by the full faith and credit of the U.S. government. Securities issued by other GSEs, such as Freddie Mac (Federal Home Loan Mortgage Corporation or FHLMC) and Fannie Mae (Federal National Mortgage Association or FNMA), indicated with a "+", are supported only by the right of the GSE to borrow from the U.S. Treasury, the discretionary authority of the U.S. government to purchase the GSEs' obligations, or only by the credit of the issuing agency, instrumentality, or corporation, ================================================================================ 46 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ and are neither issued nor guaranteed by the U.S. Treasury. In September of 2008, the U.S. Treasury placed Fannie Mae and Freddie Mac under conservatorship and appointed the Federal Housing Finance Agency (FHFA) to act as conservator and oversee their daily operations. In addition, the U.S. Treasury entered into purchase agreements with Fannie Mae and Freddie Mac to provide them with capital in exchange for senior preferred stock. While these arrangements are intended to ensure that Fannie Mae and Freddie Mac can continue to meet their obligations, it is possible that actions by the U.S. Treasury, FHFA, or others could adversely impact the value of the Fund's investments in securities issued by Fannie Mae and Freddie Mac. (k) Securities with a value of $598,000 are segregated as collateral for initial margin requirements on open futures contracts. (l) Put bond -- provides the right to sell the bond at face value at specific tender dates prior to final maturity. The put feature shortens the effective maturity of the security. (m) 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. (n) 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. (o) In U.S. dollars unless otherwise noted. * Non-income-producing security. See accompanying notes to financial statements. ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS | 47 ================================================================================ STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) January 31, 2014 (unaudited) -------------------------------------------------------------------------------- ASSETS Investments in securities, at market value (cost of $2,784,658) $2,936,175 Cash 496 Receivables: Capital shares sold Affiliated transactions (Note 7) 17 Nonaffiliated transactions 2,514 USAA Asset Management Company (Note 6C) 12 Dividends and interest 31,157 Variation margin on futures contracts 375 ---------- Total assets 2,970,746 ---------- LIABILITIES Payables: Securities purchased 10,349 Capital shares redeemed 1,781 Dividends on capital shares 746 Accrued management fees 882 Accrued transfer agent's fees 96 Other accrued expenses and payables 111 ---------- Total liabilities 13,965 ---------- Net assets applicable to capital shares outstanding $2,956,781 ========== NET ASSETS CONSIST OF: Paid-in capital $2,803,304 Accumulated undistributed net investment income 9 Accumulated net realized gain on investments and futures transactions 1,578 Net unrealized appreciation of investments and futures contracts 151,891 Net unrealized depreciation of foreign currency translations (1) ---------- Net assets applicable to capital shares outstanding $2,956,781 ========== Net asset value, redemption price, and offering price per share: Fund Shares (net assets of $1,770,694/164,025 shares outstanding) $ 10.80 ========== Institutional Shares (net assets of $1,175,340/108,871 shares outstanding) $ 10.80 ========== Adviser Shares (net assets of $10,747/996 shares outstanding) $ 10.79 ==========
See accompanying notes to financial statements. ================================================================================ 48 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ STATEMENT OF OPERATIONS (IN THOUSANDS) Six-month period ended January 31, 2014 (unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME Dividends $ 2,194 Interest 70,327 ------- Total income 72,521 ------- EXPENSES Management fees 5,168 Administration and servicing fees: Fund Shares 1,321 Institutional Shares 576 Adviser Shares 8 Transfer agent's fees: Fund Shares 1,403 Institutional Shares 576 Adviser Shares 1 Distribution and service fees (Note 6E): Adviser Shares 13 Custody and accounting fees: Fund Shares 122 Institutional Shares 79 Adviser Shares 1 Postage: Fund Shares 33 Institutional Shares 5 Shareholder reporting fees: Fund Shares 23 Institutional Shares 5 Trustees' fees 7 Registration fees: Fund Shares 9 Institutional Shares 13 Adviser Shares 8 Professional fees 86 Other 22 -------- Total expenses 9,479 --------
================================================================================ FINANCIAL STATEMENTS | 49 ================================================================================ Expenses reimbursed: Fund Shares (394) -------- Net expenses 9,085 -------- NET INVESTMENT INCOME 63,436 -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS Net realized gain (loss) on: Unaffiliated transactions 1,738 Affiliated transactions (Note 8) 649 Foreign currency transactions (5) Futures transactions (1,974) Change in net unrealized appreciation/depreciation of: Investments 12,209 Foreign currency translations (2) Futures contracts 1,815 -------- Net realized and unrealized gain 14,430 -------- Increase in net assets resulting from operations $ 77,866 ========
See accompanying notes to financial statements. ================================================================================ 50 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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 $ 63,436 $ 122,622 Net realized gain on investments 2,387 6,967 Net realized loss on foreign currency transactions (5) (2) Net realized loss on futures transactions (1,974) (3,410) Change in net unrealized appreciation/depreciation of: Investments 12,209 (22,722) Foreign currency translations (2) 1 Futures contracts 1,815 (2,045) -------------------------- Increase in net assets resulting from operations 77,866 101,411 -------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Fund Shares (37,860) (83,521) Institutional Shares (25,363) (38,761) Adviser Shares (202) (340) -------------------------- Total distributions of net investment income (63,425) (122,622) -------------------------- Net realized gains: Fund Shares (681) (3,550) Institutional Shares (448) (1,846) Adviser Shares (4) (16) -------------------------- Total distributions of net realized gains (1,133) (5,412) -------------------------- Distributions to shareholders (64,558) (128,034) -------------------------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Fund Shares (12,226) (335,997) Institutional Shares 37,273 816,023 Adviser Shares 1,795 1,031 -------------------------- Total net increase in net assets from capital share transactions 26,842 481,057 -------------------------- Net increase in net assets 40,150 454,434 NET ASSETS Beginning of period 2,916,631 2,462,197 -------------------------- End of period $2,956,781 $2,916,631 ========================== Accumulated undistributed (overdistribution of) net investment income: End of period $ 9 $ (2) ==========================
See accompanying notes to financial statements. ================================================================================ FINANCIAL STATEMENTS | 51 ================================================================================ 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 Intermediate-Term Bond Fund (the Fund), which is classified as diversified under the 1940 Act. The Fund's investment objective is to seek high current income without undue risk to principal. The Fund consists of three classes of shares: Intermediate-Term Bond Fund Shares (Fund Shares), Intermediate-Term Bond Fund Institutional Shares (Institutional Shares), and Intermediate-Term Bond 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, 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 ================================================================================ 52 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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. 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 ================================================================================ NOTES TO FINANCIAL STATEMENTS | 53 ================================================================================ 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. Futures are valued based upon the last sale price at the close of market on the principal exchange on which they are traded. 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 ================================================================================ 54 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be. Fair value methods used by the Manager include, but are not limited to, obtaining market quotations from secondary pricing services, broker-dealers, or widely used quotation systems. General factors considered in determining the fair value of securities include fundamental analytical data, the nature and duration of any restrictions on disposition of the securities, and an evaluation of the forces that influenced the market in which the securities are purchased and sold. B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-level valuation hierarchy disclosed in the portfolio of investments is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 -- inputs to the valuation methodology are quoted prices (unadjusted) in active markets for identical securities. Level 2 -- inputs to the valuation methodology are other significant observable inputs, including quoted prices for similar securities, inputs that are observable for the securities, either directly or indirectly, and market-corroborated inputs such as market indices. Level 2 securities include certain preferred stocks, which are valued based on methods discussed in 1A2, certain bonds, 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. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 55 ================================================================================ 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 or quoted prices obtained from broker-dealers participating in the market for these securities. 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. Refer to the portfolio of investments for a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value. C. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- The Fund may buy, sell, and enter into certain types of derivatives, including, but not limited to futures contracts, options, and options on futures contracts, under circumstances in which such instruments are expected by the portfolio manager to aid in achieving the Fund's investment objective. The Fund also may use derivatives in circumstances where the portfolio manager believes they offer an economical means of gaining exposure to a particular asset class or securities market or to keep cash on hand to meet shareholder redemptions or other needs while maintaining exposure to the market. With exchange-listed futures contracts and options, counterparty credit risk to the Fund is limited to the exchange's clearinghouse which, as counterparty to all exchange-traded futures contracts and options, guarantees the transactions against default from the actual counterparty to the trade. The Fund's derivative agreements held during the six-month period ended January 31, 2014, did not include master netting provisions. FUTURES CONTRACTS -- The Fund is subject to equity price risk, interest rate risk, and foreign currency exchange rate risk in the normal ================================================================================ 56 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ course of pursuing its investment objectives. The Fund may use futures contracts to gain exposure to, or hedge against, changes in the value of equities, interest rates, or foreign currencies. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Upon entering into such contracts, the Fund is required to deposit with the broker in either cash or securities an initial margin in an amount equal to a certain percentage of the contract amount. Subsequent payments (variation margin) are made or received by the Fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Upon entering into such contracts, the Fund bears the risk of interest or exchange rates or securities prices moving unexpectedly in an unfavorable direction, in which case, the Fund may not achieve the anticipated benefits of the futures contracts. FAIR VALUES OF DERIVATIVE INSTRUMENTS AS OF JANUARY 31, 2014* (IN THOUSANDS)
ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------------------------------------------------------------- STATEMENT OF STATEMENT OF DERIVATIVES NOT ASSETS AND ASSETS AND ACCOUNTED FOR AS LIABILITIES LIABILITIES HEDGING INSTRUMENTS LOCATION FAIR VALUE LOCATION FAIR VALUE ---------------------------------------------------------------------------------------------- Interest rate contracts Net Unrealized $374** - $- appreciation of investments and futures contracts ----------------------------------------------------------------------------------------------
* For open derivative instruments as of January 31, 2014, see the portfolio of investments, which also is indicative of activity for the six-month period ended January 31, 2014. ** Includes cumulative appreciation (depreciation) of futures as reported on the portfolio of investments. Only current day's variation margin is reported within the statement of assets and liabilities. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 57 ================================================================================ THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 2014 (IN THOUSANDS)
CHANGE IN DERIVATIVES NOT UNREALIZED ACCOUNTED FOR STATEMENT OF REALIZED APPRECIATION AS HEDGING OPERATIONS LOSS ON (DEPRECIATION) INSTRUMENTS LOCATION DERIVATIVES ON DERIVATIVES ---------------------------------------------------------------------------------------- Interest rate contracts Net realized and $(1,974) $1,815 unrealized gain (loss) on futures transactions/ Change in net unrealized appreciation (depreciation) of futures ----------------------------------------------------------------------------------------
D. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its income to its shareholders. Therefore, no federal income tax provision is required. E. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the date the securities are purchased or sold (trade date). Gains or losses from sales of investment securities are computed on the identified cost basis. Dividend income is recorded on the ex-dividend date; interest income is recorded daily on the accrual basis. Discounts and premiums on securities 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. 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 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 ================================================================================ 58 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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 while remaining substantially fully invested. As of January 31, 2014, the Fund's outstanding delayed-delivery commitments, including interest purchased, were $4,975,000; all of which were when-issued securities. 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. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Trust's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust expects the risk of loss to be remote. I. USE OF ESTIMATES -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts in the financial statements. (2) LINE OF CREDIT The Fund participates in a joint, short-term, revolving, committed loan agreement of $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 ================================================================================ NOTES TO FINANCIAL STATEMENTS | 59 ================================================================================ 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 $8,000, which represents 4.6% 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. Net investment income is accrued daily as dividends and distributed to shareholders monthly. Distributions of realized gains from security transactions not offset by capital losses are made annually in the succeeding fiscal year or as otherwise required to avoid the payment of federal taxes. 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. ================================================================================ 60 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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 $230,549,000 and $133,016,000, 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 $180,539,000 and $28,648,000, respectively, resulting in net unrealized appreciation of $151,891,000. (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. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 61 ================================================================================ 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 18,888 $ 202,160 60,077 $ 659,979 Shares issued from reinvested dividends 3,380 36,219 7,467 81,947 Shares redeemed (23,437) (250,605) (98,316) (1,077,923) -------------------------------------------------------- Net decrease from capital share transactions (1,169) $ (12,226) (30,772) $ (335,997) ======================================================== INSTITUTIONAL SHARES: Shares sold 10,783 $ 115,387 89,502 $ 982,910 Shares issued from reinvested dividends 2,338 25,060 3,657 40,168 Shares redeemed (9,643) (103,174) (18,905) (207,055) -------------------------------------------------------- Net increase from capital share transactions 3,478 $ 37,273 74,254 $ 816,023 ======================================================== ADVISER SHARES: Shares sold 267 $ 2,851 164 $ 1,794 Shares issued from reinvested dividends 8 93 12 126 Shares redeemed (107) (1,149) (82) (889) -------------------------------------------------------- Net increase from capital share transactions 168 $ 1,795 94 $ 1,031 ========================================================
(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 ================================================================================ 62 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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, accrued daily and paid monthly, is computed as a percentage of the Fund's average net assets at annualized rates of 0.50% of the first $50 million of average net assets, 0.40% of that portion of average net assets over $50 million but not over $100 million, and 0.30% of that portion of average net assets over $100 million. For the six-month period ended January 31, 2014, the Fund's effective annualized base fee was 0.31% of the Fund's average net assets for the same period. 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 Index over the performance period. The Index tracks the performance of funds in that invest primarily in investment grade debt issues (rated in top four grades) with dollar-weighted average maturities of five to ten years. The share 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. 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 ================================================================================ NOTES TO FINANCIAL STATEMENTS | 63 ================================================================================ 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 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 $5,168,000, which included a performance adjustment for the Fund Shares, Institutional Shares, and Adviser Shares of $545,000, $159,000, and $2,000, respectively. For the Fund Shares, Institutional Shares, and Adviser Shares, the performance adjustments were 0.06%, 0.03%, and 0.04%, 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 $1,321,000, $576,000, and $8,000, respectively. In addition to the services provided under its Administration and Servicing Agreement with the Fund, the Manager also provides certain compliance and legal services for the benefit of the Fund. The Board has approved the reimbursement of a portion of these expenses incurred by the Manager. For the six-month period ended January 31, 2014, the Fund reimbursed the Manager $40,000 for these compliance and legal services. These expenses are included in the professional fees on the Fund's statement of operations. ================================================================================ 64 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ C. EXPENSE LIMITATION -- The Manager has agreed, through December 1, 2014, to limit the total annual operating expenses of the Adviser Shares to 0.95% 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 those amounts. 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. The Manager had agreed, through December 1, 2013, to limit the total annual operating expenses of the Fund Shares to 0.65% of its average net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse the Fund Shares for all expenses in excess of that amount. Effective December 1, 2013, the Manager terminated this agreement for the Fund Shares. For the six-month period ended January 31, 2014, the Fund incurred reimbursable expenses from the Manager for the Fund Shares of $394,000, of which $12,000 was receivable from the Manager. 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 $1,403,000, $576,000, 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 ================================================================================ NOTES TO FINANCIAL STATEMENTS | 65 ================================================================================ Investment Management Company, the distributor, for distribution and shareholder services. USAA Investment Management Company pays all or a portion of such fees to intermediaries that make the Adviser Shares available for investment by their customers. The fee is accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average net assets. Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge. For the six-month period ended January 31, 2014, the Adviser Shares incurred distribution and service (12b-1) fees of $13,000. 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 Fund recorded a receivable for capital shares sold of $17,000 for the USAA fund-of-funds' redemptions of Institutional Shares. 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 0.7 USAA Target Retirement Income Fund 2.0 USAA Target Retirement 2020 Fund 3.4 USAA Target Retirement 2030 Fund 4.1 USAA Target Retirement 2040 Fund 2.3 USAA Target Retirement 2050 Fund 0.2 USAA Target Retirement 2060 Fund 0.0*
*Represents less than 0.1% ================================================================================ 66 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ 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 490,000 shares which represents 49.2% 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. (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 Fund at the then-current market price with no brokerage commissions incurred.
COST TO NET REALIZED SELLER PURCHASER PURCHASER GAIN TO SELLER ------------------------------------------------------------------------------- USAA Intermediate-Term USAA Short-Term Bond Fund Bond Fund $ 6,315,000 $ 649,000 USAA High Income Fund USAA Intermediate-Term Bond Fund 18,128,000 1,718,000
================================================================================ NOTES TO FINANCIAL STATEMENTS | 67 ================================================================================ (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 $ 10.75 $ 10.81 $ 10.60 $ 10.12 $ 8.93 $ 9.32 ----------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .23 .48 .53 .56 .58 .58 Net realized and unrealized gain (loss) .05 (.04) .21 .47 1.19 (.39) ----------------------------------------------------------------------------- Total from investment operations .28 .44 .74 1.03 1.77 .19 ----------------------------------------------------------------------------- Less distributions from: Net investment income (.23) (.48) (.53) (.55) (.58) (.58) Realized capital gains (.00)(a) (.02) - - - - ----------------------------------------------------------------------------- Total distributions (.23) (.50) (.53) (.55) (.58) (.58) ----------------------------------------------------------------------------- Net asset value at end of period $ 10.80 $ 10.75 $ 10.81 $ 10.60 $ 10.12 $ 8.93 ============================================================================= Total return (%)* 2.70 4.08 7.27 10.44 20.30 2.71 Net assets at end of period (000) $1,770,694 $1,775,162 $2,117,767 $1,731,646 $1,248,509 $951,548 Ratios to average net assets:** Expenses (%)(b) .66(c) .65 .65 .65 .65 .65 Expenses, excluding reimbursements (%)(b) .71(c) .71 .72 .72 .69 .70 Net investment income (%) 4.30(c) 4.38 5.07 5.33 6.00 6.93 Portfolio turnover (%) 5 10 17 16(e) 37 49(d)
* 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 $1,747,390,000. (a) Represents less than $0.01 per share. (b) 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%. (c) Annualized. The ratio is not necessarily indicative of 12 months of operations. (d) Reflects increased trading activity due to market volatility. (e) Reflects decreased trading activity due to market volatility. ================================================================================ 68 | USAA INTERMEDIATE-TERM BOND FUND ================================================================================ (9) FINANCIAL HIGHLIGHTS (CONTINUED) -- INSTITUTIONAL SHARES Per share operating performance for a share outstanding throughout each period is as follows:
SIX-MONTH PERIOD PERIOD ENDED ENDED JANUARY 31, YEAR ENDED JULY 31, JULY 31, ----------------------------------------------------------------------------- 2014 2013 2012 2011 2010 2009*** ----------------------------------------------------------------------------- Net asset value at beginning of period $ 10.75 $ 10.81 $ 10.60 $ 10.12 $ 8.93 $ 9.32 --------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .24 .49 .54 .58 .60 .59 Net realized and unrealized gain (loss) .05 (.04) .21 .48 1.19 (.39) --------------------------------------------------------------------------- Total from investment operations .29 .45 .75 1.06 1.79 .20 --------------------------------------------------------------------------- Less distributions from: Net investment income (.24) (.49) (.54) (.58) (.60) (.59) Realized capital gains (.00)(a) (.02) - - - - --------------------------------------------------------------------------- Total distributions (.24) (.51) (.54) (.58) (.60) (.59) --------------------------------------------------------------------------- Net asset value at end of period $ 10.80 $ 10.75 $ 10.81 $ 10.60 $ 10.12 $ 8.93 =========================================================================== Total return (%)* 2.75 4.18 7.37 10.66 20.53 2.86 Net assets at end of period (000) $1,175,340 $1,132,579 $336,501 $194,889 $116,451 $46,888 Ratios to average net assets:** Expenses (%)(b) .56(c) .55 .56 .45(e) .46(e) .46(c),(e) Net investment income (%) 4.40(c) 4.41 5.13 5.53 6.15 7.28(c) Portfolio turnover (%) 5 10 17 16(f) 37 49(d)
* 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 $1,143,402,000. *** Institutional shares were initiated on August 1, 2008. (a) Represents less than $0.01 per share. (b) 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%. (c) Annualized. The ratio is not necessarily indicative of 12 months of operations. (d) Reflects increased trading activity due to market volatility. (e) Prior to December 1, 2010, the Manager had voluntarily agreed to limit the annual expenses of the institutional Shares to 0.46% of the Institutional Shares' average net assets. (f) Reflects decreased trading activity due to market volatility. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 69 ================================================================================ (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 $ 10.74 $10.80 $10.60 $10.11 ----------------------------------------------------- Income (loss) from investment operations: Net investment income .22 .45 .50 .52 Net realized and unrealized gain (loss) .05 (.04) .20 .49 ----------------------------------------------------- Total from investment operations .27 .41 .70 1.01 ----------------------------------------------------- Less distributions from: Net investment income (.22) (.45) (.50) (.52) Realized capital gains (.00)(a) (.02) - - ----------------------------------------------------- Total distributions (.22) (.47) (.50) (.52) ----------------------------------------------------- Net asset value at end of period $ 10.79 $10.74 $10.80 $10.60 ===================================================== Total return (%)* 2.55 3.77 6.86 10.19 Net assets at end of period (000) $10,747 $8,890 $7,929 $6,109 Ratios to average net assets:** Expenses (%)(b) .96(c) .95 .95 .95(c) Expenses, excluding reimbursements (%)(b) .96(c) 1.06 1.14 1.70(c) Net investment income (%) 4.00(c) 4.07 4.76 5.02(c) Portfolio turnover (%) 5 10 17 16(d)
* 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 $10,032,000. *** Adviser Shares were initiated on August 1, 2010. (a) Represents less than $0.01 per share. (b) Reflects total operating expenses of the Adviser Shares before reductions of any expenses paid indirectly. The Adviser Shares' expenses paid indirectly decreased the expense ratios by less than 0.01%. (c) Annualized. The ratio is not necessarily indicative of 12 months of operations. (d) Reflects decreased trading activity due to market volatility. ================================================================================ 70 | USAA INTERMEDIATE-TERM BOND 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 expenses, which is not the Fund's ================================================================================ EXPENSE EXAMPLE | 71 ================================================================================ 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 $1,027.00 $3.37 Hypothetical (5% return before expenses) 1,000.00 1,021.88 3.36 INSTITUTIONAL SHARES Actual 1,000.00 1,027.50 2.86 Hypothetical (5% return before expenses) 1,000.00 1,022.38 2.85 ADVISER SHARES Actual 1,000.00 1,025.50 4.90 Hypothetical (5% return before expenses) 1,000.00 1,020.37 4.89
* Expenses are equal to the annualized expense ratio of 0.66% for Fund Shares, 0.56% for Institutional Shares, and 0.96% 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 2.70% for Fund Shares, 2.75% for Institutional Shares, and 2.55% for Adviser Shares for the six-month period of August 1, 2013, through January 31, 2014. ================================================================================ 72 | USAA INTERMEDIATE-TERM BOND 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) ============================================================================ 40049-0314 (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 ncsrscert013114.txt USAA MUTUAL FUNDS TRUST - CERTIFICATION 01-31-2014 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 Growth & Income Fund Shares Growth & Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares 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 Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Money Market Fund 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: 03/31/2014 /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 Growth & Income Fund Shares Growth & Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares 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 Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Money Market Fund 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 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: 03/31/2014 /S/ ROBERTO GALINDO, JR. ----------------- --------------------------------- Roberto Galindo, Jr. Treasurer EX-99.906 CERT 3 ncsrs906cert013114.txt USAA MUTUAL FUNDS TRUST - 906 CERTIFICATION 01-31-2014 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 Growth & Income Fund Shares Growth & Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares 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 Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Money Market Fund 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: 03/31/2014 /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 Growth & Income Fund Shares Growth & Income Fund Adviser Shares Income Stock Fund Shares Income Stock Fund Institutional Shares Income Fund Shares Income Fund Institutional Shares Income Fund Adviser Shares 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 Intermediate-Term Bond Fund Shares Intermediate-Term Bond Fund Institutional Shares Intermediate-Term Bond Fund Adviser Shares High Income Fund Shares High Income Fund Institutional Shares High Income Fund Adviser Shares Small Cap Stock Fund Shares Small Cap Stock Fund Institutional Shares Capital Growth Fund First Start Growth Fund Growth Fund Shares Growth Fund Institutional Shares Money Market Fund 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: 03/31/2014 /S/ ROBERTO GALINDO, JR. ________________ __________________________________ Roberto Galindo, Jr. Treasurer