0000908695-14-000435.txt : 20141201 0000908695-14-000435.hdr.sgml : 20141201 20141201135340 ACCESSION NUMBER: 0000908695-14-000435 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20140930 FILED AS OF DATE: 20141201 DATE AS OF CHANGE: 20141201 EFFECTIVENESS DATE: 20141201 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: 141257312 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 S000012901 Tax Exempt Intermediate-Term Fund C000034870 Tax Exempt Intermediate-Term Fund Shares USATX C000091153 Tax Exempt Intermediate-Term Fund Adviser Shares UTEIX N-CSRS 1 ncrsteit093014.txt USAA TAX EXEMPT INTERMEDIATE-TERM FUND, 09.30.2014 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: MARCH 31 Date of reporting period: SEPTEMBER 30, 2014 ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS. USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED SEPTEMBER 30, 2014 [LOGO OF USAA] USAA(R) [GRAPHIC OF USAA TAX EXEMPT INTERMEDIATE-TERM FUND] ======================================================== SEMIANNUAL REPORT USAA TAX EXEMPT INTERMEDIATE-TERM FUND FUND SHARES o ADVISER SHARES SEPTEMBER 30, 2014 ======================================================== ================================================================================ ================================================================================ PRESIDENT'S MESSAGE "SMALL DECISIONS TODAY, AS YOU WORK TO GROW YOUR SAVINGS AND BUILD YOUR PORTFOLIO, [PHOTO OF BROOKS ENGLEHARDT] CAN HAVE A BIG IMPACT IN THE FUTURE." -------------------------------------------------------------------------------- NOVEMBER 2014 In the financial markets, nothing should be taken for granted. During the reporting period, a number of so-called "experts" predicted that longer-term interest rates would rise after the Federal Reserve (the Fed) began reducing (or tapering) its quantitative easing (QE) asset purchases. (Through QE, the Fed had been buying $85 billion of U.S. Treasury securities and mortgage-backed securities every month in an effort to push down long-term interest rates and stimulate economic growth.) However, instead of longer-term interest rates rising, they fell. They continued to trend down through much of the reporting period as the Fed continued tapering its asset purchases. Although interest rates spiked during September of this year, the increase was temporary and seemed to be a reaction to improved U.S. economic data, speculation about the timing of Fed short-term interest rate cuts, and growing geopolitical concerns, including extremist threats in the Middle East. At the end of the reporting period, longer-term interest rates were lower than they were at the beginning of the period. The investment environment is multi-faceted, and short-term market moves can be influenced by many different things. It is therefore vital, I believe, to have an investment plan - one that is based on your financial objectives, time horizon, and risk tolerance. Small decisions today, as you work to grow your savings and build your portfolio, can have a big impact in the future. At USAA Investments, we have believed for some time that longer-term interest rates were likely to remain lower for longer than many market participants expected. The U.S. economic recovery remains fragile. Growth contracted during the first quarter, with U.S. gross domestic product (GDP) declining 2.1%. Although GDP reportedly grew 4.6% in the second quarter, economic growth in the first half of 2014 was lower than many expected at the beginning of the calendar year. In addition, the global economy has slowed. Growth has stagnated in a number of euro zone countries, and Europe could potentially experience a new recession. China's economy has unexpectedly softened amid a slump in that country's real estate sector, while Japan's second-quarter change in GDP was weaker than anticipated. Meanwhile, geopolitical tensions sparked dramatic ================================================================================ ================================================================================ headlines during the reporting period and are likely to persist. Shareholders must try to look through the media noise and focus on information relevant to their investment plan. Eventually, longer-term interest rates may start to rise, and we expect the increase to be more gradual than the markets seem to believe. Once interest rates do rise, bond prices will fall (bond prices move in the opposite direction of interest rates). However, this will be offset, we believe, in part by the income generated by those bonds. We also expect that our USAA fixed-income portfolio managers will have the opportunity to reinvest and achieve higher yields. It is our view that, in the coming months, you should expect the majority of your potential total return to come from the income generated by your bond funds. Meanwhile, we believe that tax-exempt bonds are likely to remain attractive, perhaps more so given that marginal income tax rates are higher today than they were a few years ago. We expect many investors to continue favoring them for the tax-free income they provide. At the same time, most money market funds are yielding almost zero percent. Some shareholders may find that other investments, such as short duration bond funds - which generally offer higher yields than money markets - could be attractive alternatives. If you would like to review your investment plan to ensure it still matches your time horizon, investment goals, and risk tolerance, please do not hesitate to call one of our financial advisors. They can also help you determine if it might be appropriate to rebalance your portfolio. Regular rebalancing potentially can help you protect your gains and prepare for what happens next. From all of us here at USAA Investments, thank you for your continued investment in our family of tax-exempt mutual funds. We will continue working hard on your behalf. Sincerely, /s/ BROOKS ENGLEHARDT Brooks Englehardt President USAA Investments 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 Investments provided by USAA Investment Management Company and USAA Financial Advisors Inc., both registered broker dealers. 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 5 FINANCIAL INFORMATION Portfolio of Investments 16 Notes to Portfolio of Investments 39 Financial Statements 41 Notes to Financial Statements 44 EXPENSE EXAMPLE 57 ADVISORY AGREEMENT(S) 59
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 TAX EXEMPT INTERMEDIATE-TERM FUND (THE FUND) PROVIDES INVESTORS WITH INTEREST INCOME THAT IS EXEMPT FROM FEDERAL INCOME TAX. -------------------------------------------------------------------------------- TYPES OF INVESTMENTS The Fund invests primarily in investment-grade securities, the interest from which is exempt from federal income tax. During normal market conditions, at least 80% of the Fund's net assets will consist of tax-exempt securities. The Fund's dollar-weighted average portfolio maturity is between three and 10 years. IRA DISTRIBUTION WITHHOLDING DISCLOSURE We generally must withhold federal income tax at a rate of 10% of the taxable portion of your distribution and, if you live in a state that requires state income tax withholding, at your state's set rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. If you wish to make such an election, please call USAA Asset Management Company at (800) 531-USAA (8722). If you must pay estimated taxes, you may be subject to estimated tax penalties if your estimated tax payments are not sufficient and sufficient tax is not withheld from your distribution. For more specific information, please consult your tax adviser. ================================================================================ FUND OBJECTIVE | 1 ================================================================================ MANAGERS' COMMENTARY ON THE FUND -------------------------------------------------------------------------------- [PHOTO OF REGINA G. SHAFER] [PHOTO OF DIEDERIK OLIJSLAGER] REGINA G. SHAFER, CFA DIEDERIK OLIJSLAGER USAA Asset Management Company USAA Asset Management Company -------------------------------------------------------------------------------- o WHAT WERE THE MARKET CONDITIONS DURING THE REPORTING PERIOD? The tax-exempt bond market advanced during the reporting period, supported by an imbalance in supply and demand. New issuances of tax-exempt bonds remained extremely light - well below historical norms - throughout the period as state and local governments hesitated to take on new debt. Meanwhile, demand was strong as investors sought higher-yielding securities and continued to favor municipal securities for their tax advantage. At the same time, geopolitical worries drove a flight to quality assets. Municipal bond prices also benefited from strength in the U.S. Treasury market; the municipal bond market tends to follow the U.S. Treasury market over time. Intermediate-term U.S. Treasury yields trended down for much of the reporting period before spiking in late August through mid-September. Stronger U.S. economic data and speculation about the timing of short-term interest rate hikes by the Federal Reserve were the prime catalysts. In late September, intermediate-term U.S. Treasury yields fell back to end the reporting period lower than they began. Municipal bonds outperformed U.S. Treasuries during the reporting period. As a result, the difference in yields between AAA-rated tax-exempt bonds and U.S. Treasuries returned to historic averages. At the same time, municipal credit spreads narrowed as investors sought higher yields in riskier assets. (Municipal credit spreads are the difference in yields between municipal bonds with similar maturities but different credit ratings.) ================================================================================ 2 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ Overall, during the reporting period, municipal credit quality remained solid, as state and local governments continued working to maintain fiscal balance. We expect credit quality to continue to improve further as the U.S. economy strengthens. That said, the size and diversity of the tax-exempt market makes it likely that we will see occasional problems. o HOW DID THE USAA TAX EXEMPT INTERMEDIATE-TERM FUND (THE FUND) PERFORM DURING THE REPORTING PERIOD? The Fund has two share classes: Fund Shares and Adviser Shares. For the six-month period ended September 30, 2014, the Fund Shares and Adviser Shares had a total return of 3.22% and 3.10%, respectively, versus an average return of 2.99% amongst the funds in the Lipper Intermediate Municipal Debt Funds category. This compares to returns of 3.12% for the Lipper Intermediate Municipal Debt Funds Index and 4.12% for the Barclays Municipal Bond Index. The Fund Shares' and Adviser Shares' tax-exempt distributions over the prior 12 months produced a dividend yield of 3.53% and 3.32%, respectively, compared to the Lipper category average of 2.35%. USAA Asset Management Company is the Fund's investment adviser. The investment adviser provides day-to-day discretionary management for the Fund's assets. o WHAT STRATEGIES DID YOU EMPLOY DURING THE REPORTING PERIOD? We maintained our focus on income generation. The Fund's long-term income distribution, not its price appreciation, contributes the majority of its total returns (see page 6). Because of our income focus, the Fund is generally tilted toward bonds in the BBB and A rated categories. Refer to page 8 for benchmark definitions. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. o As interest rates rise, bond prices generally fall; given the historically low interest rate environment, risks associated with rising interest rates may be heightened. ================================================================================ MANAGERS' COMMENTARY ON THE FUND | 3 ================================================================================ To help us identify attractive opportunities for the portfolio, we continued to work with our in-house team of credit analysts. We conduct independent credit research on every security we consider for purchase. Issues are selected one at a time based on fundamental analysis, rather than thematic or sector trends, with a focus on the issuer's ability and willingness to repay its debt. We attempt to use credit research both to find value and to avoid potential pitfalls. During the reporting period, we continued to maintain a diversified portfolio of more than 500 municipal bonds, primarily of investment-grade quality. Our credit analysts continuously monitored the portfolio's holdings. The Fund continues to be diversified by sector, issuer, and geography, potentially limiting its exposure to an unexpected event. We also seek to avoid bonds subject to the federal alternative minimum tax for individuals. Thank you for allowing us to help you with your investment needs. Diversification is a technique intended to help reduce risk and does not guarantee a profit or prevent a loss. o Some income may be subject to state or local taxes but not the federal alternative minimum tax. ================================================================================ 4 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ INVESTMENT OVERVIEW USAA TAX EXEMPT INTERMEDIATE-TERM FUND SHARES (FUND SHARES) (Ticker Symbol: USATX) -------------------------------------------------------------------------------- 9/30/14 3/31/14 -------------------------------------------------------------------------------- Net Assets $3.6 Billion $3.4 Billion Net Asset Value Per Share $13.56 $13.36 LAST 12 MONTHS Tax-Exempt Dividends Per Share $0.479 $0.496 Dollar-Weighted Average Portfolio Maturity(+) 8.7 Years 8.6 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 9/30/14 -------------------------------------------------------------------------------- 3/31/14-9/30/14* 1 YEAR 5 YEARS 10 YEARS 3.22% 6.63% 4.92% 4.48% -------------------------------------------------------------------------------- 30-DAY SEC YIELD AS OF 9/30/14** EXPENSE RATIO AS OF 3/31/14*** -------------------------------------------------------------------------------- 1.78% 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. **Calculated as prescribed by the Securities and Exchange Commission. ***The expense ratio represents the total annual operating expenses, before reductions of any expenses paid indirectly and including any acquired fund fees and expenses, as reported in the Fund's prospectus dated August 1, 2014, 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. No adjustment has been made for taxes payable by shareholders on their reinvested net investment income and realized capital gain distributions. ================================================================================ INVESTMENT OVERVIEW | 5 ================================================================================ AVERAGE ANNUAL COMPOUNDED RETURNS WITH REINVESTMENT OF DIVIDENDS - PERIODS ENDED SEPTEMBER 30, 2014
-------------------------------------------------------------------------------- TOTAL RETURN = DIVIDEND RETURN + PRICE CHANGE -------------------------------------------------------------------------------- 10 YEARS 4.48% = 4.26% + 0.22% 5 YEARS 4.92% = 4.05% + 0.87% 1 YEAR 6.63% = 3.75% + 2.88%
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 THE ONE-YEAR PERIODS ENDED SEPTEMBER 30, 2005-SEPTEMBER 30, 2014 [CHART OF ANNUAL TOTAL RETURNS AND COMPOUNDED DIVIDEND RETURNS]
TOTAL RETURN DIVIDEND RETURN CHANGE IN SHARE PRICE 9/30/05 3.33% 4.22% -0.89% 9/30/06 4.37% 4.28% 0.09% 9/30/07 2.43% 4.21% -1.78% 9/30/08 -2.92% 4.29% -7.21% 9/30/09 13.72% 5.44% 8.28% 9/30/10 6.35% 4.52% 1.83% 9/30/11 3.93% 4.41% -0.48% 9/30/12 8.34% 4.07% 4.27% 9/30/13 -0.43% 3.51% -3.94% 9/30/14 6.63% 3.75% 2.88%
[END CHART] 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. ================================================================================ 6 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ TAXABLE EQUIVALENT ILLUSTRATION To match the Fund Shares' Dividend Return for the period ended 9/30/14, and assuming marginal federal tax rates of: 28.00% 36.80%* 38.80%* 43.40%* A FULLY TAXABLE INVESTMENT MUST PAY THE FOLLOWING:
PERIOD DIVIDEND RETURN -------------------------------------------------------------------------------- 10 Years 4.26% 5.92% 6.74% 6.96% 7.53% 5 Years 4.05% 5.63% 6.41% 6.62% 7.16% 1 Year 3.75% 5.21% 5.93% 6.13% 6.63%
To match the Fund Shares' closing 30-day SEC Yield of 1.78% on 9/30/2014, A FULLY TAXABLE INVESTMENT MUST PAY: 2.47% 2.82% 2.91% 3.14% This table is based on a hypothetical investment calculated for illustrative purposes only. It is not an indication of performance for any of the USAA family of funds. Taxable equivalent returns or yields will vary depending on applicable tax rates. -------------------------------------------------------------------------------- Some income may be subject to federal, state, or local taxes, but not the federal alternative minimum tax. Based on 2013 tax rates or rates in effect as of the issuance of this report. The above marginal rates assume married, filing jointly. * The above marginal rates assume income exceeds $250,000 and investment income is subject to the 3.80% medicare tax, which is applied for income over a specific level, depending on the federal income tax filing status. ================================================================================ INVESTMENT OVERVIEW | 7 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
BARCLAYS USAA TAX EXEMPT LIPPER INTERMEDIATE MUNICIPAL INTERMEDIATE-TERM MUNICIPAL DEBT BOND INDEX FUND SHARES FUNDS INDEX 09/30/04 10,000.00 10,000.00 10,000.00 10/31/04 10,086.05 10,072.62 10,054.00 11/30/04 10,002.86 9,980.29 9,973.10 12/31/04 10,125.01 10,101.21 10,070.63 01/31/05 10,219.64 10,187.49 10,114.26 02/28/05 10,185.64 10,155.00 10,070.95 03/31/05 10,121.40 10,068.36 9,996.53 04/30/05 10,281.02 10,227.35 10,127.78 05/31/05 10,353.68 10,300.02 10,185.49 06/30/05 10,417.92 10,351.04 10,235.74 07/31/05 10,370.83 10,293.60 10,181.17 08/31/05 10,475.54 10,398.69 10,268.40 09/30/05 10,404.98 10,335.35 10,215.68 10/31/05 10,341.80 10,274.91 10,162.44 11/30/05 10,391.44 10,326.28 10,203.14 12/31/05 10,480.80 10,413.41 10,273.31 01/31/06 10,509.09 10,439.08 10,299.79 02/28/06 10,579.64 10,515.27 10,344.36 03/31/06 10,506.68 10,442.70 10,283.49 04/30/06 10,503.07 10,421.09 10,280.09 05/31/06 10,549.85 10,473.89 10,328.45 06/30/06 10,510.14 10,432.78 10,287.95 07/31/06 10,635.15 10,556.20 10,395.04 08/31/06 10,792.96 10,706.83 10,530.23 09/30/06 10,868.03 10,786.11 10,592.49 10/31/06 10,936.18 10,838.72 10,642.01 11/30/06 11,027.35 10,925.57 10,707.74 12/31/06 10,988.38 10,886.97 10,670.65 01/31/07 10,960.25 10,872.72 10,647.98 02/28/07 11,104.67 11,010.01 10,761.56 03/31/07 11,077.29 10,974.40 10,750.97 04/30/07 11,110.09 11,011.30 10,778.45 05/31/07 11,060.90 10,957.55 10,736.55 06/30/07 11,003.58 10,896.60 10,696.05 07/31/07 11,088.88 10,959.23 10,764.58 08/31/07 11,041.04 10,875.57 10,757.02 09/30/07 11,204.42 11,047.03 10,887.07 10/31/07 11,254.36 11,086.74 10,917.87 11/30/07 11,326.12 11,120.77 10,991.90 12/31/07 11,357.56 11,095.05 11,012.74 01/31/08 11,500.78 11,247.16 11,192.48 02/29/08 10,974.24 10,712.12 10,791.57 03/31/08 11,287.91 11,021.89 11,022.41 04/30/08 11,420.00 11,133.82 11,084.49 05/31/08 11,489.05 11,221.22 11,150.53 06/30/08 11,359.37 11,112.59 11,040.02 07/31/08 11,402.54 11,110.65 11,089.70 08/31/08 11,535.98 11,234.07 11,209.67 09/30/08 10,995.00 10,724.09 10,789.65 10/31/08 10,882.78 10,449.45 10,667.44 11/30/08 10,917.38 10,410.06 10,686.67 12/31/08 11,076.54 10,281.94 10,762.24 01/31/09 11,481.98 10,825.39 11,198.83 02/28/09 11,542.30 10,870.51 11,153.25 03/31/09 11,544.41 10,887.10 11,146.07 04/30/09 11,775.03 11,152.19 11,335.31 05/31/09 11,899.59 11,408.45 11,463.82 06/30/09 11,788.12 11,314.47 11,372.77 07/31/09 11,985.34 11,529.42 11,561.25 08/31/09 12,190.24 11,711.18 11,682.90 09/30/09 12,627.72 12,195.45 12,017.99 10/31/09 12,362.65 11,997.01 11,781.03 11/30/09 12,464.79 12,114.23 11,960.98 12/31/09 12,506.92 12,161.39 11,984.55 01/31/10 12,572.06 12,240.36 12,049.95 02/28/10 12,693.91 12,361.54 12,168.38 03/31/10 12,663.53 12,310.54 12,102.86 04/30/10 12,817.42 12,464.22 12,219.01 05/31/10 12,913.56 12,554.69 12,302.12 06/30/10 12,921.23 12,552.15 12,304.75 07/31/10 13,082.35 12,705.90 12,464.30 08/31/10 13,381.87 12,973.40 12,716.28 09/30/10 13,360.96 12,969.35 12,674.73 10/31/10 13,323.95 12,926.53 12,644.29 11/30/10 13,057.53 12,696.91 12,454.58 12/31/10 12,804.49 12,505.89 12,274.20 01/31/11 12,710.16 12,400.69 12,208.45 02/28/11 12,912.50 12,616.86 12,382.67 03/31/11 12,869.48 12,592.67 12,346.97 04/30/11 13,099.95 12,791.80 12,534.23 05/31/11 13,323.80 12,988.18 12,710.53 06/30/11 13,370.29 13,065.07 12,740.72 07/31/11 13,506.74 13,192.86 12,855.01 08/31/11 13,737.81 13,361.70 13,027.22 09/30/11 13,879.83 13,481.52 13,082.37 10/31/11 13,828.23 13,443.18 13,030.20 11/30/11 13,909.91 13,541.09 13,127.73 12/31/11 14,174.54 13,777.29 13,360.76 01/31/12 14,502.34 14,088.42 13,614.93 02/29/12 14,516.64 14,091.13 13,618.86 03/31/12 14,422.31 14,011.20 13,506.09 04/30/12 14,588.70 14,180.03 13,657.46 05/31/12 14,709.80 14,298.75 13,742.45 06/30/12 14,694.00 14,302.59 13,719.35 07/31/12 14,926.88 14,482.79 13,898.08 08/31/12 14,943.88 14,520.65 13,911.67 09/30/12 15,034.15 14,603.17 13,991.97 10/31/12 15,076.57 14,657.86 14,021.83 11/30/12 15,324.95 14,909.09 14,219.36 12/31/12 15,135.54 14,767.62 14,060.19 01/31/13 15,198.58 14,830.43 14,102.48 02/28/13 15,244.61 14,916.50 14,157.51 03/31/13 15,178.87 14,894.26 14,113.55 04/30/13 15,345.25 15,024.02 14,238.63 05/31/13 15,157.81 14,882.47 14,066.83 06/30/13 14,728.60 14,511.68 13,733.24 07/31/13 14,599.83 14,458.41 13,689.61 08/31/13 14,391.47 14,296.29 13,543.36 09/30/13 14,701.22 14,540.49 13,778.59 10/31/13 14,817.36 14,653.10 13,881.61 11/30/13 14,786.82 14,623.70 13,842.25 12/31/13 14,749.06 14,614.80 13,817.23 01/31/14 15,036.40 14,860.79 14,028.40 02/28/14 15,212.72 14,997.21 14,160.28 03/31/14 15,238.29 15,020.20 14,132.84 04/30/14 15,421.38 15,164.95 14,276.67 05/31/14 15,619.96 15,320.70 14,418.85 06/30/14 15,633.50 15,318.59 14,411.72 07/31/14 15,661.03 15,350.56 14,435.01 08/31/14 15,850.73 15,484.39 14,567.97 09/30/14 15,866.83 15,503.87 14,574.41
[END CHART] Data from 9/30/04 through 9/30/14. The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA Tax Exempt Intermediate-Term Fund Shares to the following benchmarks: o The unmanaged, broad-based Barclays Municipal Bond Index tracks total return performance for the long-term, investment-grade, tax-exempt bond market. All tax-exempt bond funds will find it difficult to outperform the index because the index does not reflect any deduction for fees, expenses, or taxes. o The unmanaged Lipper Intermediate Municipal Debt Funds Index tracks the total return performance of the 30 largest funds within the Lipper Intermediate Municipal Debt Funds category. Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indexes does not reflect the deduction of any fees, expenses, or taxes. ================================================================================ 8 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ o 12-MONTH DIVIDEND YIELD COMPARISON o [CHART OF 12-MONTH DIVIDEND YIELD COMPARISON]
USAA TAX EXEMPT LIPPER INTERMEDIATE INTERMEDIATE-TERM FUND SHARES MUNICIPAL DEBT FUNDS AVERAGE 09/30/05 4.21 3.33 09/30/06 4.16 3.40 09/30/07 4.25 3.48 09/30/08 4.78 3.62 09/30/09 4.53 3.77 09/30/10 4.26 3.11 09/30/11 4.23 2.89 09/30/12 3.77 2.53 09/30/13 3.70 2.40 09/30/14 3.53 2.35
[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 9/30/05 to 9/30/14. The Lipper Intermediate Municipal Debt Funds Average is an average performance level of all intermediate-term municipal debt funds, reported by Lipper Inc., an independent organization that monitors the performance of mutual funds. ================================================================================ INVESTMENT OVERVIEW | 9 ================================================================================ USAA TAX EXEMPT INTERMEDIATE-TERM FUND ADVISER SHARES (ADVISER SHARES) (Ticker Symbol: UTEIX)
-------------------------------------------------------------------------------- 9/30/14 3/31/14 -------------------------------------------------------------------------------- Net Assets $30.3 Million $20.2 Million Net Asset Value Per Share $13.56 $13.36 LAST 12 MONTHS Tax-Exempt Dividends Per Share $0.450 $0.468 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 -------------------------------------------------------------------------------- 3/31/14-9/30/14* 1 YEAR SINCE INCEPTION 8/01/10 3.10% 6.40% 4.68% -------------------------------------------------------------------------------- 30-DAY SEC YIELD AS OF 9/30/14** -------------------------------------------------------------------------------- UNSUBSIDIZED 1.37% SUBSIDIZED 1.53% -------------------------------------------------------------------------------- EXPENSE RATIOS AS OF 3/31/14*** -------------------------------------------------------------------------------- BEFORE REIMBURSEMENT 0.96% AFTER REIMBURSEMENT 0.80%
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 August 1, 2014, and is calculated as a percentage of average net assets. USAA Asset Management Company (the Manager) has agreed, through August 1, 2015, 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 0.80% 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 August 1, 2015. These expense ratios may differ from the expense ratios disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. No adjustment has been made for taxes payable by shareholders on their reinvested net investment income and realized capital gain distributions. ================================================================================ 10 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ TAXABLE EQUIVALENT ILLUSTRATION To match the Adviser Shares' closing 30-day Subsidized SEC Yield of 1.53% on 9/30/2014, and assuming marginal federal tax rates of: 28.00% 36.80%* 38.80%* 43.40%* A FULLY TAXABLE INVESTMENT MUST PAY: 2.13% 2.42% 2.50% 2.70% This table is based on a hypothetical investment calculated for illustrative purposes only. It is not an indication of performance for any of the USAA family of funds. Taxable equivalent returns or yields will vary depending on applicable tax rates. -------------------------------------------------------------------------------- Some income may be subject to federal, state, or local taxes, but not the federal alternative minimum tax. Based on 2013 tax rates or rates in effect as of the issuance of this report. The above marginal rates assume married, filing jointly. * The above marginal rates assume income exceeds $250,000 and investment income is subject to the 3.80% medicare tax, which is applied for income over a specific level, depending on the federal income tax filing status. ================================================================================ INVESTMENT OVERVIEW | 11 ================================================================================ o CUMULATIVE PERFORMANCE COMPARISON o [CHART OF CUMULATIVE PERFORMANCE COMPARISON]
BARCLAYS USAA TAX EXEMPT LIPPER INTERMEDIATE MUNICIPAL INTERMEDIATE-TERM FUND MUNICIPAL DEBT BOND INDEX ADVISER SHARES FUNDS INDEX 07/31/10 10,000.00 10,000.00 10,000.00 08/31/10 10,228.95 10,207.68 10,202.16 09/30/10 10,212.97 10,202.67 10,168.82 10/31/10 10,184.68 10,167.09 10,144.40 11/30/10 9,981.03 9,984.70 9,992.20 12/31/10 9,787.61 9,832.59 9,847.48 01/31/11 9,715.50 9,748.28 9,794.73 02/28/11 9,870.17 9,916.64 9,934.51 03/31/11 9,837.28 9,895.97 9,905.86 04/30/11 10,013.45 10,050.71 10,056.10 05/31/11 10,184.57 10,203.26 10,197.55 06/30/11 10,220.10 10,261.88 10,221.77 07/31/11 10,324.40 10,360.40 10,313.46 08/31/11 10,501.03 10,491.11 10,451.62 09/30/11 10,609.58 10,583.24 10,495.87 10/31/11 10,570.14 10,551.47 10,454.01 11/30/11 10,632.58 10,626.58 10,532.26 12/31/11 10,834.86 10,810.00 10,719.21 01/31/12 11,085.43 11,052.37 10,923.13 02/29/12 11,096.35 11,052.74 10,926.29 03/31/12 11,024.25 10,988.14 10,835.82 04/30/12 11,151.44 11,118.74 10,957.26 05/31/12 11,244.01 11,209.88 11,025.45 06/30/12 11,231.93 11,210.95 11,006.91 07/31/12 11,409.94 11,350.27 11,150.31 08/31/12 11,422.94 11,377.82 11,161.20 09/30/12 11,491.93 11,440.78 11,225.64 10/31/12 11,524.36 11,481.61 11,249.59 11/30/12 11,714.22 11,676.37 11,408.07 12/31/12 11,569.44 11,563.63 11,280.36 01/31/13 11,617.62 11,610.80 11,314.29 02/28/13 11,652.81 11,676.34 11,358.44 03/31/13 11,602.56 11,656.81 11,323.17 04/30/13 11,729.74 11,764.81 11,423.53 05/31/13 11,586.46 11,643.43 11,285.69 06/30/13 11,258.38 11,351.37 11,018.05 07/31/13 11,159.95 11,307.72 10,983.05 08/31/13 11,000.68 11,178.99 10,865.72 09/30/13 11,237.45 11,368.12 11,054.44 10/31/13 11,326.23 11,454.22 11,137.09 11/30/13 11,302.88 11,429.28 11,105.51 12/31/13 11,274.02 11,420.42 11,085.44 01/31/14 11,493.66 11,610.77 11,254.86 02/28/14 11,628.43 11,715.55 11,360.66 03/31/14 11,647.98 11,731.40 11,338.65 04/30/14 11,787.93 11,842.39 11,454.04 05/31/14 11,939.72 11,961.83 11,568.11 06/30/14 11,950.07 11,958.08 11,562.39 07/31/14 11,971.12 11,980.86 11,581.08 08/31/14 12,116.12 12,082.67 11,687.75 09/30/14 12,128.43 12,095.44 11,692.91
[END CHART] Data from 7/31/10 through 9/30/14.* The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA Tax Exempt Intermediate-Term Fund Adviser Shares to the benchmarks listed above (see page 8 for benchmark definitions). *The performance of the Barclays Municipal Bond Index and the Lipper Intermediate Municipal Debt Funds Index is calculated from the end of the month, July 31, 2010, while the inception date of the Adviser Shares 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 indexes does not reflect the deduction of any fees, expenses, or taxes. ================================================================================ 12 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ o 12-MONTH DIVIDEND YIELD COMPARISON* o [CHART OF 12-MONTH DIVIDEND YIELD COMPARISON*]
USAA TAX EXEMPT LIPPER INTERMEDIATE INTERMEDIATE-TERM FUND MUNICIPAL DEBT FUNDS ADVISER SHARES AVERAGE 09/30/11 4.02 2.89 09/30/12 3.57 2.53 09/30/13 3.48 2.40 09/30/14 3.32 2.35
[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 9/30/11 to 9/30/14. The Lipper Intermediate Municipal Debt Funds Average is an average performance level of all intermediate-term municipal debt funds, reported by Lipper Inc., an independent organization that monitors the performance of mutual funds. *Adviser Shares were initiated on August 1, 2010. ================================================================================ INVESTMENT OVERVIEW | 13 ================================================================================ o TOP 10 INDUSTRIES - 9/30/14 o (% of Net Assets) Hospital ................................................................ 20.8% Appropriated Debt ....................................................... 10.0% General Obligation ...................................................... 9.7% Electric Utilities ...................................................... 9.5% Special Assessment/Tax/Fee .............................................. 9.0% Education ............................................................... 7.9% Airport/Port ............................................................ 5.4% Toll Roads .............................................................. 4.5% Electric/Gas Utilities .................................................. 4.0% Oil & Gas Refining & Marketing .......................................... 3.4%
You will find a complete list of securities that the Fund owns on pages 18-38. ================================================================================ 14 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ o PORTFOLIO RATINGS MIX - 9/30/14 o [PIE CHART OF PORTFOLIO RATINGS MIX] AAA 5.2% AA 34.1% A 36.2% BBB 20.9% Below Investment-Grade 1.0% Unrated 2.6%
[END CHART] This chart reflects the highest long-term rating from a Nationally Recognized Statistical Rating Organization (NRSRO), with the four highest long-term credit ratings labeled, in descending order of credit quality, AAA, AA, A, and BBB. These categories represent investment-grade quality. NRSRO ratings are shown because they provide a third-party analysis of the credit quality of the Fund's investments. USAA Asset Management Company (the Manager) also performs its own fundamental credit analysis of each security. As part of its fundamental credit analysis, the Manager considers various criteria, including industry specific actions, peer comparisons, payment ranking, and structure specific characteristics. Any of the Fund's securities that are not rated by an NRSRO appear in the chart above as "Unrated," but these securities are analyzed and monitored by the Manager 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. 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 18-38. ================================================================================ INVESTMENT OVERVIEW | 15 ================================================================================ PORTFOLIO OF INVESTMENTS September 30, 2014 (unaudited) -------------------------------------------------------------------------------- o CATEGORIES AND DEFINITIONS FIXED-RATE INSTRUMENTS - consist of municipal bonds, notes, and commercial paper. The interest rate is constant to maturity. Prior to maturity, the market price of a fixed-rate instrument generally varies inversely to the movement of interest rates. PUT BONDS - provide the right to sell the bond at face value at specific tender dates prior to final maturity. The put feature shortens the effective maturity of the security. ADJUSTABLE-RATE NOTES - similar to variable-rate demand notes in the fact that the interest rate is adjusted periodically to reflect current market conditions. These interest rates are adjusted at a given time, such as monthly or quarterly. However, these securities do not offer the right to sell the security at face value prior to maturity. 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. 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: ACA Financial Guaranty Corp., AMBAC Assurance Corp., Assured Guaranty Corp., Assured Guaranty ================================================================================ 16 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ Municipal Corp., Build America Mutual Assurance Co., Financial Guaranty Insurance Co., 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. (LIQ) Liquidity enhancement that may, under certain circumstances, provide for repayment of principal and interest upon demand from one of the following: Bank of America, N.A., Bank of New York Mellon, Citibank, N.A., Dexia Credit Local, JPMorgan Chase Bank, N.A., Key Bank, N.A., Landesbank Hessen-Thuringen, or Wells Fargo Bank, N.A. (LOC) Principal and interest payments are guaranteed by a bank letter of credit or other bank credit agreement. (NBGA) Principal and interest payments or, under certain circumstances, underlying mortgages are guaranteed by a nonbank guarantee agreement from one of the following: Federal Home Loan Mortgage Corp., Federal Housing Administration, Federal Housing Association Insured Mortgage Nursing Home, or Texas Permanent School Fund. o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S) EDA Economic Development Authority EDC Economic Development Corp. ETM Escrowed to final maturity IDA Industrial Development Authority/Agency IDC Industrial Development Corp. ISD Independent School District MTA Metropolitan Transportation Authority PRE Prerefunded to a date prior to maturity USD Unified School District ================================================================================ PORTFOLIO OF INVESTMENTS | 17 ================================================================================ INVESTMENTS
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- FIXED-RATE INSTRUMENTS (82.8%) ALABAMA (0.6%) $16,340 Montgomery Medical Clinic Board 4.75% 3/01/2026 $ 16,686 5,000 Private Colleges and Universities Facilities Auth. (INS) 4.75 9/01/2026 5,080 ---------- 21,766 ---------- ARIZONA (2.3%) 20,310 Apache County IDA(a) 4.50 3/01/2030 21,328 6,000 Health Facilities Auth. 5.00 2/01/2027 6,660 2,500 Maricopa County Union High School District No. 210 (INS) (PRE) 4.50 7/01/2024 2,582 15,000 Mohave County IDA 7.50 5/01/2019 17,092 3,270 Phoenix Civic Improvement Corp. (INS) 5.50 7/01/2024 4,061 2,115 Phoenix Civic Improvement Corp. (INS) 5.50 7/01/2025 2,630 2,680 Pima County IDA 4.50 6/01/2030 2,818 2,000 Pinal County IDA (INS) 5.25 10/01/2020 2,082 1,250 Pinal County IDA (INS) 5.25 10/01/2022 1,289 2,000 Pinal County IDA (INS) 4.50 10/01/2025 2,017 3,540 State (INS) 5.00 10/01/2019 4,151 7,275 State (INS) 5.25 10/01/2020 8,481 1,535 State Univ. (INS) (PRE) 5.00 9/01/2024 1,566 7,180 Univ. Medical Center Corp. 5.00 7/01/2022 7,341 ---------- 84,098 ---------- ARKANSAS (0.2%) 3,125 Baxter County 5.00 9/01/2026 3,203 4,000 Independence County (INS) 4.90 7/01/2022 4,071 ---------- 7,274 ---------- CALIFORNIA (11.1%) 1,510 Cerritos Community College District 5.02(b) 8/01/2025 1,074 1,000 Cerritos Community College District 5.24(b) 8/01/2027 639 1,000 Cerritos Community College District 5.41(b) 8/01/2028 607 10,000 Chabot-Las Positas Community College District (INS) 4.85(b) 8/01/2022 7,346 5,000 Chabot-Las Positas Community College District (INS) 4.88(b) 8/01/2023 3,494 5,000 City and County of San Francisco Airport Commission 5.25 5/01/2022 5,881 7,000 City and County of San Francisco Airport Commission 5.25 5/01/2023 8,201 5,000 City and County of San Francisco Airport Commission 4.90 5/01/2029 5,751 2,000 Coronado Community Dev. Agency (INS) 5.00 9/01/2024 2,082 6,810 El Camino Community College District 4.25(b) 8/01/2026 4,687 7,665 El Camino Community College District 4.42(b) 8/01/2027 4,995 5,500 El Camino Community College District 4.58(b) 8/01/2028 3,412
================================================================================ 18 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $46,605 Golden State Tobacco Securitization Corp. (INS) 4.17%(b) 6/01/2025 $ 33,754 2,475 Health Facilities Financing Auth. 5.13 7/01/2022 2,558 2,000 Health Facilities Financing Auth. 5.00 8/15/2027 2,292 5,000 Health Facilities Financing Auth. 5.25 8/15/2031 5,712 1,000 Irvine City 5.00 9/02/2029 1,101 5,000 Irvine USD Special Tax District (INS) 5.25 9/01/2019 5,843 2,500 Irvine USD Special Tax District (INS) 4.50 9/01/2020 2,796 6,745 Kern County Board of Education (INS) 5.00 6/01/2026 6,933 1,300 Los Angeles County 5.00 3/01/2023 1,546 20,000 Los Angeles Department of Water and Power (INS) (PRE)(a) 4.75 7/01/2025 20,699 6,400 Public Works Board 5.50 4/01/2021 7,622 6,755 Public Works Board 5.60 4/01/2022 8,005 3,000 Public Works Board 5.13 3/01/2023 3,461 3,130 Public Works Board 5.75 4/01/2023 3,696 1,185 Public Works Board 5.00 11/01/2023 1,413 2,500 Public Works Board 5.25 3/01/2024 2,891 2,000 Public Works Board 5.00 11/01/2024 2,367 1,250 Public Works Board 5.00 3/01/2025 1,481 2,000 Public Works Board 5.38 3/01/2025 2,321 1,365 Public Works Board 5.00 3/01/2026 1,608 10,000 Public Works Board 5.00 4/01/2028 11,445 7,000 Public Works Board 5.00 11/01/2028 8,078 5,000 Public Works Board 5.00 4/01/2029 5,687 11,465 Public Works Board 5.00 10/01/2031 13,332 1,430 Sacramento Financing Auth. (INS) 5.00 12/01/2024 1,501 15,265 Sacramento Municipal Utility District Financing Auth. (INS) 4.75 7/01/2024 16,226 10,000 Sacramento Municipal Utility District Financing Auth. 5.13 7/01/2029 10,614 4,720 Salinas Union High School District (INS) 4.37(b) 6/01/2016 4,655 2,000 Salinas Union High School District (INS) 4.37(b) 10/01/2016 1,963 3,525 San Bernardino County Redevelopment Agency (INS) 5.00 9/01/2025 3,565 2,395 San Diego USD (INS) 4.50 7/01/2025 2,574 3,000 San Jose USD (INS) (PRE) 4.50 6/01/2024 3,268 7,065 Santa Clara County Financing Auth. (INS) 4.75 5/15/2023 7,538 7,400 Santa Clara County Financing Auth. (INS) 4.75 5/15/2024 7,889 7,750 Santa Clara County Financing Auth. (INS) 4.75 5/15/2025 8,256 2,175 Semitropic Improvement District (INS) (PRE) 5.25 12/01/2018 2,194 2,500 Solano Community College District (INS) 4.85(b) 8/01/2023 1,686 4,735 Solano Community College District (INS) 4.88(b) 8/01/2024 3,021 4,035 South Orange County Public Financing Auth. (INS) 5.00 8/15/2022 4,132 4,920 South Orange County Public Financing Auth. (INS) 5.00 8/15/2025 5,020 20,000 State 5.25 10/01/2022 23,992
================================================================================ PORTFOLIO OF INVESTMENTS | 19 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $27,445 State 5.75% 4/01/2027 $ 32,963 10,000 State University 5.00 11/01/2029 11,994 3,120 Statewide Communities Dev. Auth. 5.00 5/15/2021 3,257 3,275 Statewide Communities Dev. Auth. 5.00 5/15/2022 3,400 3,440 Statewide Communities Dev. Auth. 5.00 5/15/2023 3,583 3,610 Statewide Communities Dev. Auth. 5.00 5/15/2024 3,751 3,795 Statewide Communities Dev. Auth. 5.00 5/15/2025 3,935 1,000 Statewide Communities Dev. Auth. 5.13 5/15/2031 1,115 10,085 Tobacco Securitization Auth. 4.75 6/01/2025 9,963 3,470 Tuolumne Wind Project Auth. 5.00 1/01/2022 3,932 10,000 Upland City 6.00 1/01/2026 11,544 2,000 Washington Township Health Care District 5.75 7/01/2024 2,212 3,500 Washington Township Health Care District 5.00 7/01/2025 3,781 ---------- 408,334 ---------- COLORADO (2.9%) 5,000 Adams and Arapahoe Counties Joint School District No. 28J 3.20(b) 12/01/2022 4,204 4,500 Adams County (INS) 4.38 9/01/2017 4,661 30,955 Denver Health and Hospital Auth. 4.75 12/01/2027 31,684 1,000 Health Facilities Auth. 5.25 6/01/2023 1,040 2,750 Health Facilities Auth. 5.00 6/01/2028 2,981 10,000 Regional Transportation District 5.00 6/01/2025 11,140 7,585 Regional Transportation District 5.00 6/01/2029 8,639 14,175 Regional Transportation District 5.00 6/01/2030 16,087 15,005 Regional Transportation District 5.00 6/01/2031 16,932 9,045 State (INS) (PRE) 5.00 11/01/2023 9,520 ---------- 106,888 ---------- CONNECTICUT (0.3%) 10,000 Health and Educational Facilities Auth. 5.00 7/01/2034 11,082 6,378 Mashantucket (Western) Pequot Tribe, acquired 7/01/2013; cost $3,750(c),(d) 7.06(e) 7/01/2031 1,470 ---------- 12,552 ---------- DISTRICT OF COLUMBIA (0.9%) 375 District of Columbia 5.00 7/01/2023 431 7,000 District of Columbia (INS) (PRE) 5.00 1/01/2025 7,414 3,870 District of Columbia 5.63 10/01/2025 4,321 5,000 District of Columbia 5.75 10/01/2026 5,588 7,930 District of Columbia (INS) 4.75 5/01/2027 6,333 6,000 District of Columbia 5.75 10/01/2027 6,731 1,280 District of Columbia 6.00 7/01/2033 1,495 ---------- 32,313 ----------
================================================================================ 20 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- FLORIDA (9.3%) $ 5,165 Brevard County School Board (INS) (PRE) 5.00% 7/01/2025 $ 5,471 2,500 Broward County Airport System 5.00 10/01/2024 2,851 6,500 Broward County School Board (INS) 5.00 7/01/2023 6,969 4,000 Broward County School Board (INS) 5.00 7/01/2024 4,283 3,710 Broward County School Board (INS) 5.00 7/01/2025 3,832 3,270 Flagler County School Board (INS) (PRE) 5.00 8/01/2025 3,401 8,000 Hillsborough County IDA 5.65 5/15/2018 9,183 4,250 Indian River County School Board (INS) 5.00 7/01/2024 4,387 3,500 Jacksonville 5.00 10/01/2028 3,999 5,000 JEA St. Johns River Power Park (INS) 5.00 10/01/2020 5,121 1,250 Lake County School Board (INS) 5.00 6/01/2029 1,434 2,225 Lake County School Board (INS) 5.00 6/01/2030 2,543 2,500 Lee County 5.00 10/01/2023 2,957 2,700 Lee County 5.00 10/01/2024 3,220 7,245 Lee County IDA 5.00 10/01/2028 7,600 10,535 Lee County School Board (INS) (PRE) 5.00 8/01/2027 10,959 3,750 Lee County School Board 5.00 8/01/2028 4,383 6,465 Lee County School Board (INS) (PRE) 5.00 8/01/2028 6,725 6,560 Miami Beach City Health Facilities Auth. 5.00 11/15/2029 7,163 7,500 Miami-Dade County 3.75 12/01/2018 8,086 1,670 Miami-Dade County (INS) (PRE) 5.00 4/01/2022 1,711 2,805 Miami-Dade County (INS) (PRE) 5.00 4/01/2023 2,874 8,375 Miami-Dade County (INS) 4.75 11/01/2023 9,018 2,345 Miami-Dade County (INS) 5.00 10/01/2024 2,572 9,830 Miami-Dade County (INS) 4.75 11/01/2024 10,551 2,000 Miami-Dade County 5.00 10/01/2025 2,344 3,670 Miami-Dade County (INS) 5.00 10/01/2025 4,026 6,440 Miami-Dade County 5.00 10/01/2026 7,294 2,500 Miami-Dade County (INS) 5.00 10/01/2026 2,742 7,000 Miami-Dade County 5.00 10/01/2027 7,895 10,000 Miami-Dade County Expressway Auth. 5.00 7/01/2028 11,289 7,000 Miami-Dade County Expressway Auth. 5.00 7/01/2029 7,866 1,000 Miami-Dade County Expressway Auth. 5.00 7/01/2029 1,148 2,000 Miami-Dade County Expressway Auth.(f) 5.00 7/01/2030 2,309 1,610 Miami-Dade County Expressway Auth. 5.00 7/01/2030 1,842 2,000 Miami-Dade County Expressway Auth.(f) 5.00 7/01/2031 2,299 1,255 Miami-Dade County Expressway Auth. 5.00 7/01/2031 1,427 2,000 Miami-Dade County Expressway Auth. 5.00 7/01/2032 2,263 2,000 Miami-Dade County Expressway Auth. 5.00 7/01/2033 2,256 2,000 Miami-Dade County Expressway Auth. 5.00 7/01/2034 2,247 4,750 Miami-Dade County Health Facilities Auth. 5.00 8/01/2027 5,318 4,950 Miami-Dade County Health Facilities Auth. 5.00 8/01/2028 5,514
================================================================================ PORTFOLIO OF INVESTMENTS | 21 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 5,250 Miami-Dade County Health Facilities Auth. 5.00% 8/01/2029 $ 5,768 3,500 Miami-Dade County Health Facilities Auth. 5.00 8/01/2030 3,835 5,780 Miami-Dade County Health Facilities Auth. 5.00 8/01/2031 6,323 10,000 Miami-Dade County School Board (INS) 5.00 2/01/2024 10,892 12,000 Miami-Dade County School Board (INS) 5.25 5/01/2025 13,447 12,000 Orange County Health Facility Auth. 5.25 10/01/2022 13,722 5,000 Orange County Health Facility Auth. 5.38 10/01/2023 5,716 3,055 Osceola County School Board 5.00 6/01/2028 3,420 6,235 Palm Beach County Health Facilities Auth. (INS) 5.00 12/01/2021 6,243 7,595 Palm Beach County Health Facilities Auth. 5.00 11/15/2023 8,347 650 Palm Beach County School Board (INS) 5.00 8/01/2022 676 1,995 Pinellas County Educational Facilities Auth. 5.00 10/01/2021 2,292 1,080 Pinellas County Educational Facilities Auth. 4.00 10/01/2022 1,152 1,415 Pinellas County Educational Facilities Auth. 4.00 10/01/2023 1,488 2,045 Pinellas County Educational Facilities Auth. 5.38 10/01/2026 2,289 1,895 Pinellas County Educational Facilities Auth. 5.00 10/01/2027 2,078 2,615 Pinellas County Educational Facilities Auth. 6.50 10/01/2031 3,083 7,370 Saint Lucie County (INS) 5.00 10/01/2028 8,281 2,045 Saint Lucie County School Board 5.00 7/01/2025 2,353 1,500 Saint Lucie County School Board 5.00 7/01/2026 1,713 3,195 Southeast Overtown/Park West Community Redevelopment Agency(g) 5.00 3/01/2030 3,493 8,970 Sunshine State Governmental Financing Commission 5.00 9/01/2019 10,360 5,525 Sunshine State Governmental Financing Commission 5.00 9/01/2020 6,404 1,055 Sunshine State Governmental Financing Commission (INS) 5.00 9/01/2021 1,227 4,585 Volusia County School Board (INS) (PRE) 5.00 8/01/2022 4,771 4,920 Volusia County School Board (INS) (PRE) 5.00 8/01/2023 5,120 5,165 Volusia County School Board (INS) (PRE) 5.00 8/01/2024 5,374 ---------- 341,239 ---------- GEORGIA (0.6%) 10,000 Burke County Dev. Auth. 7.00 1/01/2023 11,596 4,000 Glynn-Brunswick Memorial Hospital Auth. 5.25 8/01/2023 4,350 2,000 Private Colleges and Universities Auth. 5.25 10/01/2027 2,246 3,000 Private Colleges and Universities Auth. 5.25 10/01/2027 3,328 ---------- 21,520 ---------- GUAM (0.4%) 1,000 Power Auth. 5.00 10/01/2027 1,158 1,000 Power Auth. 5.00 10/01/2029 1,115 1,000 Power Auth. 5.00 10/01/2030 1,115 1,000 Power Auth. 5.00 10/01/2030 1,144 695 Power Auth. 5.00 10/01/2031 772
================================================================================ 22 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 1,000 Power Auth. (INS) 5.00% 10/01/2032 $ 1,134 750 Waterworks Auth. 5.00 7/01/2023 856 600 Waterworks Auth. 5.00 7/01/2024 685 750 Waterworks Auth. 5.00 7/01/2025 848 1,000 Waterworks Auth. 5.00 7/01/2028 1,113 1,000 Waterworks Auth. 5.00 7/01/2029 1,103 3,000 Waterworks Auth. 5.25 7/01/2033 3,351 ---------- 14,394 ---------- ILLINOIS (9.5%) 1,000 Bedford Park Village 4.60 12/01/2017 1,025 3,240 Bedford Park Village 4.80 12/01/2020 3,320 3,085 Bedford Park Village 4.90 12/01/2023 3,142 3,861 Chicago 6.63 12/01/2022 3,898 30,000 Chicago (INS) 4.45(b) 1/01/2023 21,548 1,000 Chicago 5.00 1/01/2031 1,119 2,000 Chicago 5.00 11/01/2031 2,265 1,000 Chicago 5.00 1/01/2032 1,115 2,000 Chicago 5.00 11/01/2033 2,249 6,525 Chicago Midway Airport 5.00 1/01/2027 7,439 11,750 Chicago Midway Airport 5.00 1/01/2029 13,316 5,175 Chicago Midway Airport 5.00 1/01/2030 5,843 8,910 Chicago Midway Airport 5.00 1/01/2031 10,007 6,000 Chicago Midway Airport 5.00 1/01/2032 6,708 1,635 Chicago Midway Airport 5.25 1/01/2033 1,837 7,000 Chicago-O'Hare International Airport (INS) 5.00 1/01/2021 7,387 10,000 Chicago-O'Hare International Airport (INS) 5.00 1/01/2022 10,551 9,000 Chicago-O'Hare International Airport 5.25 1/01/2024 10,175 3,620 Chicago-O'Hare International Airport (INS) 5.00 1/01/2028 4,107 1,500 Chicago-O'Hare International Airport (INS) 5.00 1/01/2029 1,690 13,480 Chicago-O'Hare International Airport 5.25 1/01/2029 15,464 2,150 Chicago-O'Hare International Airport (INS) 5.13 1/01/2030 2,434 2,370 Finance Auth. 5.50 5/01/2017 2,587 4,340 Finance Auth. 5.75 5/01/2018 4,875 2,080 Finance Auth. 5.00 2/15/2020 2,377 1,710 Finance Auth. 5.00 2/15/2022 1,878 750 Finance Auth. 5.25 4/01/2022 779 2,000 Finance Auth. 5.00 4/01/2023 2,021 3,400 Finance Auth. (INS) 5.00 11/01/2023 3,743 14,935 Finance Auth. (INS) 5.00 11/15/2023 14,983 7,140 Finance Auth. 5.13 2/15/2025 7,737 4,165 Finance Auth. 5.00 4/01/2025 4,196 8,210 Finance Auth. 4.50 5/15/2025 8,720
================================================================================ PORTFOLIO OF INVESTMENTS | 23 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 7,665 Finance Auth. 5.38% 8/15/2026 $ 8,649 8,000 Finance Auth. 4.50 11/15/2026 8,180 1,750 Finance Auth. 5.40 4/01/2027 1,820 8,250 Finance Auth. 5.50 7/01/2028 9,397 20,000 Finance Auth. 3.90 3/01/2030 20,557 3,385 Finance Auth. 5.00 9/01/2034 3,569 315 Housing Dev. Auth. 4.55 7/01/2021 322 365 Housing Dev. Auth. 4.60 7/01/2023 370 3,495 Lake County Community Unit School District (INS) (ETM) 5.13(b) 12/01/2016 3,464 4,555 Lake County Community Unit School District (INS) 5.13(b) 12/01/2016 4,425 2,500 Metropolitan Pier and Exposition Auth. (INS) 5.20 6/15/2017 2,793 2,500 Metropolitan Pier and Exposition Auth. (INS) 5.30 6/15/2018 2,795 4,000 Metropolitan Pier and Exposition Auth. (INS) 5.40 6/15/2019 4,448 5,000 Metropolitan Pier and Exposition Auth. (INS) 5.70(b) 6/15/2026 3,172 2,000 Northeastern Illinois Univ. 4.75 10/01/2025 2,036 7,095 Railsplitter Tobacco Settlement Auth. 5.00 6/01/2018 8,009 10,000 Railsplitter Tobacco Settlement Auth. 5.50 6/01/2023 11,707 3,000 Sports Facilities Auth. (INS) 5.25 6/15/2030 3,370 5,000 Sports Facilities Auth. (INS) 5.25 6/15/2031 5,595 5,000 Sports Facilities Auth. (INS) 5.25 6/15/2032 5,577 3,700 Springfield School District No. 186 (INS) 5.00 2/01/2024 4,276 7,200 Springfield School District No. 186 (INS) 5.00 2/01/2025 8,238 4,215 Springfield School District No. 186 (INS) 5.00 2/01/2026 4,786 5,000 State (INS) 5.00 1/01/2021 5,553 10,000 State (INS) 5.00 4/01/2029 10,808 14,070 Will County Forest Preserve District (INS) 5.40(b) 12/01/2017 13,672 ---------- 348,123 ---------- INDIANA (1.7%) 1,470 Finance Auth. 5.00 5/01/2024 1,719 20,000 Finance Auth. (INS)(a) 4.55 12/01/2024 20,608 1,200 Finance Auth. 5.00 5/01/2027 1,357 1,900 Finance Auth. 5.00 10/01/2027 2,084 10,500 Finance Auth. 5.00 6/01/2032 11,067 4,000 Health and Educational Facility Financing Auth. 5.00 2/15/2021 4,233 8,375 Health and Educational Facility Financing Auth. 5.00 2/15/2022 8,857 3,000 Jasper County (INS) 5.85 4/01/2019 3,431 6,000 Rockport (INS) 4.63 6/01/2025 6,404 6,181 St. Joseph County, acquired 12/17/1998; cost $6,119(d),(h) 5.75 2/15/2019 509 1,500 Vanderburgh County Redevelopment District (PRE) 5.00 2/01/2026 1,627 ---------- 61,896 ----------
================================================================================ 24 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- IOWA (0.7%) $ 1,325 Finance Auth. (INS) 5.00% 12/01/2021 $ 1,354 1,390 Finance Auth. (INS) 5.00 12/01/2022 1,414 5,000 Finance Auth. 5.50 12/01/2022 5,291 1,460 Finance Auth. (INS) 5.00 12/01/2023 1,482 1,535 Finance Auth. (INS) 5.00 12/01/2024 1,555 1,610 Finance Auth. (INS) 5.00 12/01/2025 1,631 1,690 Finance Auth. (INS) 5.00 12/01/2026 1,709 2,475 Waterloo Community School District 5.00 7/01/2024 2,682 2,775 Waterloo Community School District 5.00 7/01/2025 2,994 4,510 Waterloo Community School District 5.00 7/01/2027 4,908 ---------- 25,020 ---------- KANSAS (0.1%) 7,585 Wyandotte County 6.07(b) 6/01/2021 5,320 ---------- KENTUCKY (0.9%) 6,130 Economic Dev. Finance Auth. 4.05(b) 10/01/2024 4,336 7,500 Economic Dev. Finance Auth. (INS) 5.75 12/01/2028 8,093 3,830 Louisville/Jefferson County Metro Government 5.00 12/01/2022 4,477 2,760 Louisville/Jefferson County Metro Government 5.00 12/01/2023 3,190 7,160 Louisville/Jefferson County Metro Government 5.00 12/01/2024 8,233 3,725 Pikeville City Hospital Improvement 5.75 3/01/2026 4,214 ---------- 32,543 ---------- LOUISIANA (1.6%) 2,750 Jefferson Parish Hospital District No. 1 (INS) 5.50 1/01/2026 3,076 3,000 Jefferson Parish Hospital District No. 1 (INS) 5.38 1/01/2031 3,278 3,750 Local Government Environmental Facilities and Community Dev. Auth. 6.50 8/01/2029 4,393 20,000 Public Facilities Auth. 5.00 9/01/2028 20,649 2,440 Terrebonne Parish Hospital Service District No. 1 5.00 4/01/2022 2,717 2,570 Terrebonne Parish Hospital Service District No. 1 5.00 4/01/2023 2,832 2,000 Terrebonne Parish Hospital Service District No. 1 4.65 4/01/2024 2,144 4,250 Terrebonne Parish Hospital Service District No. 1 5.00 4/01/2028 4,587 5,000 Tobacco Settlement Financing Corp. 5.00 5/15/2023 5,720 10,000 Tobacco Settlement Financing Corp. 5.25 5/15/2031 10,788 ---------- 60,184 ---------- MAINE (0.5%) 1,635 Health and Higher Educational Facilities Auth. 5.00 7/01/2024 1,871 1,000 Health and Higher Educational Facilities Auth. 5.00 7/01/2026 1,124 11,500 Health and Higher Educational Facilities Auth. 6.00 7/01/2026 12,677 1,000 Health and Higher Educational Facilities Auth. 5.00 7/01/2027 1,109 1,500 Jay 4.85 5/01/2019 1,506 ---------- 18,287 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 25 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- MARYLAND (0.2%) $ 510 Community Dev. Administration 5.88% 7/01/2016 $ 512 2,500 EDC 6.20 9/01/2022 2,981 5,000 Health and Higher Educational Facilities Auth. 6.00 1/01/2028 5,324 ---------- 8,817 ---------- MASSACHUSETTS (1.0%) 640 Dev. Finance Agency 5.00 7/01/2020 711 1,480 Dev. Finance Agency 5.00 7/01/2022 1,645 4,500 Dev. Finance Agency 6.25 1/01/2027 5,255 1,720 Dev. Finance Agency 5.00 7/01/2027 1,826 2,000 Dev. Finance Agency 5.00 7/01/2030 2,142 3,110 Health and Educational Facilities Auth. 5.00 7/01/2019 3,382 9,000 Health and Educational Facilities Auth. 6.00 7/01/2024 10,548 4,000 Health and Educational Facilities Auth. 5.00 7/15/2027 4,110 5,545 Massachusetts Bay Transportation Auth. 4.60(b) 7/01/2022 4,195 5,000 Massachusetts Bay Transportation Auth. 4.70(b) 7/01/2024 3,404 1,600 Massachusetts Bay Transportation Auth. 4.73(b) 7/01/2025 1,025 110 Water Pollution Abatement Trust 4.75 8/01/2025 114 ---------- 38,357 ---------- MICHIGAN (1.4%) 18,000 Building Auth. (INS) 4.81(b) 10/15/2022 12,816 3,000 Building Auth. 5.00 10/15/2029 3,437 10,000 Grand Traverse County Hospital Finance Auth. 5.00 7/01/2029 10,907 2,675 Hospital Finance Auth. 5.00 11/15/2019 2,875 3,400 Hospital Finance Auth. 5.00 11/15/2022 3,583 12,000 Kent Hospital Finance Auth. 5.00 11/15/2029 13,411 3,000 State Trunk Line Fund 5.00 11/01/2019 3,541 2,000 State Trunk Line Fund 5.00 11/01/2020 2,340 ---------- 52,910 ---------- MINNESOTA (0.6%) 1,080 Chippewa County 5.38 3/01/2022 1,141 5,120 Chippewa County 5.50 3/01/2027 5,375 2,500 Higher Education Facilities Auth. 4.50 10/01/2027 2,641 3,000 Municipal Power Agency 4.38 10/01/2025 3,115 7,680 St. Paul Housing and Redevelopment Auth. 5.15 11/15/2020 7,925 3,500 St. Paul Housing and Redevelopment Auth. 5.25 5/15/2026 3,700 ---------- 23,897 ---------- MISSISSIPPI (0.4%) 2,000 Dev. Bank 5.00 4/01/2028 2,245 7,000 Dev. Bank (INS) 5.00 9/01/2030 7,967 1,650 Hospital Equipment and Facilities Auth. 5.00 12/01/2016 1,759
================================================================================ 26 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 1,000 Hospital Equipment and Facilities Auth. 5.25% 12/01/2021 $ 1,040 ---------- 13,011 ---------- MISSOURI (1.2%) 1,780 Cape Girardeau County Health Care Facilities IDA 5.00 6/01/2025 2,055 17,545 Cape Girardeau County Health Care Facilities IDA 5.00 6/01/2027 17,895 2,555 Cape Girardeau County Health Care Facilities IDA 5.00 6/01/2027 2,899 1,000 Cass County 5.00 5/01/2022 1,021 3,315 Cass County 5.38 5/01/2022 3,409 2,000 Cass County 5.50 5/01/2027 2,043 2,000 Dev. Finance Board 4.75 6/01/2025 2,048 2,310 Health and Educational Facilities Auth. 5.00 5/01/2030 2,502 2,350 Health and Educational Facilities Auth. 5.25 5/01/2033 2,566 1,760 Riverside IDA (INS) 5.00 5/01/2020 1,882 1,380 Saint Louis County IDA 5.00 9/01/2023 1,479 2,750 Saint Louis County IDA 5.50 9/01/2033 3,011 1,330 St. Joseph IDA 5.00 4/01/2027 1,431 ---------- 44,241 ---------- MONTANA (0.4%) 6,500 Forsyth (INS) 4.65 8/01/2023 6,931 8,500 Forsyth 3.90 3/01/2031 8,852 ---------- 15,783 ---------- NEVADA (1.6%) 2,865 Clark County 5.00 5/15/2020 3,045 20,470 Clark County 5.00 7/01/2032 23,378 10,845 Clark County 5.00 7/01/2033 12,309 18,000 Humboldt County 5.15 12/01/2024 20,221 ---------- 58,953 ---------- NEW JERSEY (3.5%) 10,000 EDA 5.25 9/01/2019 11,494 5,000 EDA (INS) 5.00 7/01/2022 5,083 10,000 EDA 5.25 9/01/2022 11,444 3,500 EDA 4.45 6/01/2023 3,825 8,830 EDA (PRE) 5.25 9/01/2023 9,246 10,000 EDA 5.00 6/15/2025 11,667 2,500 EDA 5.00 6/15/2026 2,802 4,535 Essex County Improvement Auth. (INS) 6.00 11/01/2025 5,234 20,000 State Turnpike Auth. 5.00 1/01/2021 22,824 10,000 State Turnpike Auth. 5.00 1/01/2034 11,376 5,000 Tobacco Settlement Financing Corp. 5.00 6/01/2017 5,476 2,000 Transportation Trust Fund Auth. (PRE) 5.25 12/15/2017 2,123 5,000 Transportation Trust Fund Auth. (INS) 5.25 12/15/2022 5,814 5,580 Transportation Trust Fund Auth. 5.00 12/15/2023 6,423
================================================================================ PORTFOLIO OF INVESTMENTS | 27 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $20,000 Transportation Trust Fund Auth. 4.47%(b) 12/15/2025 $ 12,739 ---------- 127,570 ---------- NEW MEXICO (0.9%) 20,000 Farmington Pollution Control 4.70 5/01/2024 21,424 4,005 Jicarilla Apache Nation(g) 5.00 9/01/2018 4,005 3,250 Jicarilla Apache Nation(g) 5.50 9/01/2023 3,233 4,000 Sandoval County (PRE) 4.38 6/01/2020 4,113 ---------- 32,775 ---------- NEW YORK (6.4%) 2,500 Albany IDA 5.75 11/15/2022 2,828 4,000 Dormitory Auth. 5.20 2/15/2016 4,017 4,760 Dormitory Auth. 5.30 2/15/2017 4,780 12,560 Dormitory Auth. (ETM) 5.30 2/15/2019 14,219 5,000 Dormitory Auth. 5.00 7/01/2020 5,450 24,935 Dormitory Auth. 5.00 7/01/2022 26,734 750 Dormitory Auth. 5.00 5/01/2023 845 750 Dormitory Auth. 5.00 5/01/2024 840 1,200 Dormitory Auth. 5.00 5/01/2025 1,334 1,000 Dormitory Auth. 5.00 5/01/2026 1,104 1,000 Dormitory Auth. (INS) 5.00 10/01/2027 1,197 1,000 Dormitory Auth. (INS) 5.00 10/01/2028 1,182 1,300 Dormitory Auth. (INS) 5.00 10/01/2029 1,525 2,500 Dutchess County IDA 4.50 8/01/2026 2,508 960 East Rochester Housing Auth. (NBGA) 4.63 2/15/2017 963 2,000 Erie County IDA 5.00 5/01/2028 2,321 17,075 Long Island Power Auth. 5.00 4/01/2023 18,884 5,000 Monroe County IDC (NBGA) 5.75 8/15/2030 6,006 10,000 MTA 6.25 11/15/2023 12,000 6,800 MTA 5.00 11/15/2024 7,620 16,565 MTA 5.00 11/15/2024 18,088 2,500 MTA (INS) 5.00 11/15/2024 2,780 45 New York City 5.63 8/01/2015 45 70 New York City 5.75 8/01/2016 70 5,000 New York City 5.13 11/15/2022 5,814 4,330 New York City 5.13 12/01/2022 4,884 6,000 New York City 5.13 12/01/2023 6,757 10,000 New York City (PRE) 5.00 4/01/2024 10,711 815 New York City (PRE) 5.00 8/01/2024 916 4,425 New York City 5.00 8/01/2024 4,914 5,000 New York City 5.25 11/15/2024 5,826 2,995 New York City (PRE) 5.00 2/01/2025 3,414 2,005 New York City 5.00 2/01/2025 2,261 3,500 New York City Transitional Finance Auth. 5.00 1/15/2022 4,048 25,000 New York City Transitional Finance Auth. 5.00 5/01/2026 28,832
================================================================================ 28 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 575 Newburgh City 5.00% 6/15/2023 $ 623 2,250 Niagara Area Dev. Corp. 4.00 11/01/2024 2,282 1,585 Rockland County 3.50 10/01/2021 1,619 1,190 Rockland County 3.63 10/01/2022 1,210 1,560 Rockland County 3.63 10/01/2023 1,579 1,665 Rockland County 3.63 10/01/2024 1,678 790 Saratoga County Capital Resource Corp. 5.00 12/01/2028 905 1,500 Suffolk County EDC 5.00 7/01/2028 1,644 1,880 Suffolk County IDA 5.00 11/01/2014 1,886 1,000 Suffolk County IDA 5.00 11/01/2015 1,041 1,350 Westchester County Local Dev. Corp. 5.00 1/01/2028 1,454 2,600 Yonkers (INS) 5.00 10/01/2023 2,950 ---------- 234,588 ---------- NORTH CAROLINA (0.8%) 3,000 Eastern Municipal Power Agency 5.00 1/01/2024 3,372 5,000 Eastern Municipal Power Agency 5.00 1/01/2026 5,686 4,805 Medical Care Commission 6.38 7/01/2026 5,579 5,500 Medical Care Commission 5.00 7/01/2027 5,770 2,000 Municipal Power Agency No. 1 5.25 1/01/2020 2,235 3,600 Turnpike Auth. (INS) 5.00 1/01/2022 3,982 3,330 Turnpike Auth. (INS) 5.13 1/01/2024 3,677 ---------- 30,301 ---------- NORTH DAKOTA (0.4%) 1,000 Grand Forks (INS) 5.00 12/15/2022 1,054 11,085 Grand Forks City Health Care System 5.00 12/01/2029 11,884 2,055 Williams County 5.00 11/01/2021 2,059 ---------- 14,997 ---------- OHIO (1.6%) 9,000 Air Quality Dev. Auth. 5.70 8/01/2020 10,464 3,000 American Municipal Power, Inc. 5.00 2/15/2021 3,435 2,760 American Municipal Power, Inc. 5.00 2/15/2022 3,123 7,165 Buckeye Tobacco Settlement Financing Auth. 5.13 6/01/2024 6,032 2,000 Cleveland Airport System 5.00 1/01/2030 2,163 1,000 Cleveland Airport System 5.00 1/01/2031 1,076 1,845 Fairview Park City (INS) (PRE) 4.13 12/01/2020 1,931 555 Fairview Park City (INS) 4.13 12/01/2020 579 10,000 Hamilton City (INS) 4.65 10/15/2022 10,534 4,365 Hamilton County 4.30(b) 12/01/2025 3,026 9,000 Hancock County Hospital Facilities 6.50 12/01/2030 10,806 1,750 Miami County 5.25 5/15/2021 1,861 2,000 Miami County 5.25 5/15/2026 2,113 2,000 Turnpike and Infrastructure Commission 5.25 2/15/2029 2,311 ---------- 59,454 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 29 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- OKLAHOMA (1.1%) $ 5,360 Cherokee Nation (INS)(g) 4.60% 12/01/2021 $ 5,542 5,650 Chickasaw Nation(g) 5.38 12/01/2017 5,975 5,000 Chickasaw Nation(g) 6.00 12/01/2025 5,660 2,020 Comanche County Hospital Auth. 5.00 7/01/2021 2,147 3,895 Comanche County Hospital Auth. (INS) 5.25 7/01/2022 3,961 3,000 Comanche County Hospital Auth. (INS) 5.25 7/01/2023 3,046 1,400 Norman Regional Hospital Auth. 5.50 9/01/2024 1,457 13,100 Norman Regional Hospital Auth. 5.00 9/01/2027 13,494 ---------- 41,282 ---------- OREGON (0.1%) 1,000 Washington, Yamhill and Multnomah Counties Hillsboro School District No. 1J (INS) (PRE) 4.58(b) 6/15/2025 684 5,900 Washington, Yamhill and Multnomah Counties Hillsboro School District No. 1J (INS) (PRE) 4.59(b) 6/15/2026 3,854 ---------- 4,538 ---------- PENNSYLVANIA (1.8%) 1,410 Allegheny County Higher Education Building Auth. 5.13 3/01/2025 1,598 1,000 Allegheny County IDA 5.00 9/01/2021 1,022 1,220 Allegheny County IDA 5.10 9/01/2026 1,233 5,000 Beaver County IDA 2.15 3/01/2017 5,020 3,000 Bethlehem Auth. (INS) 5.00 11/15/2030 3,371 6,500 Cumberland County Municipal Auth. 4.00 12/01/2026 6,532 1,000 Delaware County Auth. 5.00 10/01/2025 1,068 2,720 Delaware River Port Auth. 5.00 1/01/2025 3,100 13,000 Economic Dev. Financing Auth. 4.00 10/01/2023 13,801 1,730 Higher Educational Facilities Auth. 5.25 7/15/2025 1,980 2,020 Higher Educational Facilities Auth. 5.25 7/15/2026 2,295 2,125 Higher Educational Facilities Auth. 5.25 7/15/2027 2,391 2,245 Higher Educational Facilities Auth. 5.25 7/15/2028 2,509 2,415 Higher Educational Facilities Auth. 5.00 7/15/2030 2,622 1,625 Higher Educational Facilities Auth. 5.00 7/01/2032 1,739 1,965 Higher Educational Facilities Auth. 5.25 7/15/2033 2,150 1,615 Lancaster County Hospital Auth. 5.00 11/01/2026 1,704 1,200 Montgomery County IDA 5.00 11/15/2023 1,327 2,750 Montgomery County IDA 5.00 11/15/2024 3,018 1,250 Public School Building Auth. 5.00 4/01/2023 1,445 1,500 State Turnpike Commission 5.00 12/01/2032 1,675 4,345 State Turnpike Commission 5.00 12/01/2033 4,841 ---------- 66,441 ---------- PUERTO RICO (0.4%) 14,000 Government Dev. Bank (INS) 4.75 12/01/2015 14,017
================================================================================ 30 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 2,600 Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Auth. 5.00% 4/01/2027 $ 2,308 ---------- 16,325 ---------- RHODE ISLAND (0.4%) 400 Health and Educational Building Corp. (INS) 5.50 5/15/2016 402 5,500 Health and Educational Building Corp. (INS) 5.00 5/15/2026 5,708 2,000 Health and Educational Building Corp. 6.00 9/01/2033 2,212 4,550 Housing and Mortgage Finance Corp. 4.65 10/01/2026 4,582 ---------- 12,904 ---------- SOUTH CAROLINA (1.0%) 5,870 Association of Governmental Organizations Educational Facilities Corp. (INS) 4.75 12/01/2026 6,058 6,325 Association of Governmental Organizations Educational Facilities Corp. (INS) 4.75 12/01/2026 6,485 5,000 Lexington County Health Services District, Inc. 5.00 11/01/2024 5,523 7,335 Lexington County Health Services District, Inc. 5.00 11/01/2026 8,088 7,200 Piedmont Municipal Power Agency (INS) 5.00 1/01/2028 8,002 2,700 Piedmont Municipal Power Agency (INS) 5.00 1/01/2028 3,001 ---------- 37,157 ---------- SOUTH DAKOTA (0.1%) 1,700 Health and Educational Facilities Auth. 5.00 11/01/2024 1,904 ---------- TENNESSEE (0.7%) 7,000 Jackson 5.25 4/01/2023 7,688 2,125 Johnson City Health and Educational Facilities Board 5.25 7/01/2026 2,207 1,000 Nashville and Davidson County Health and Educational Facilities Board (INS) 5.10 8/01/2019 1,001 14,750 Sullivan County Health, Educational and Housing Facilities Board 5.25 9/01/2026 15,531 ---------- 26,427 ---------- TEXAS (10.7%) 2,300 Austin (INS) 5.00 11/15/2024 2,422 5,610 Austin Utility Systems (INS) 5.15(b) 5/15/2017 5,473 3,030 Bastrop ISD (NBGA) 5.55(b) 2/15/2015 3,028 3,055 Bastrop ISD (NBGA) 5.60(b) 2/15/2016 3,040 3,155 Bastrop ISD (NBGA) 5.60(b) 2/15/2017 3,105 3,935 Bexar County Health Facilities Dev. Corp. 5.00 7/01/2027 4,042 4,240 Boerne ISD (NBGA) 3.66(b) 2/01/2026 2,924 2,680 Central Regional Mobility Auth. (INS) (PRE) 4.55 1/01/2020 2,923 3,445 Central Regional Mobility Auth. (INS) (PRE) 4.60 1/01/2021 3,761 700 Central Regional Mobility Auth. 5.00 1/01/2021 779 500 Central Regional Mobility Auth. 5.00 1/01/2022 556
================================================================================ PORTFOLIO OF INVESTMENTS | 31 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 885 Central Regional Mobility Auth. 5.90%(b) 1/01/2022 $ 679 500 Central Regional Mobility Auth. 5.00 1/01/2023 555 7,000 Central Regional Mobility Auth. 6.25(b) 1/01/2024 4,852 2,500 Central Regional Mobility Auth. 5.75 1/01/2025 2,794 2,535 Central Regional Mobility Auth. 6.50(b) 1/01/2026 1,585 3,500 Central Regional Mobility Auth. 5.00 1/01/2033 3,707 2,600 Conroe ISD (NBGA) (PRE)(a) 5.00 2/15/2023 2,648 3,100 Conroe ISD (NBGA) (PRE)(a) 5.00 2/15/2024 3,157 2,000 Dallas/Fort Worth International Airport 5.25 11/01/2028 2,355 7,500 Dallas/Fort Worth International Airport 5.25 11/01/2029 8,784 1,000 Decatur Hospital Auth. 5.25 9/01/2029 1,072 1,000 Decatur Hospital Auth. 5.00 9/01/2034 1,038 13,745 Denton ISD (NBGA)(a) 5.03(b) 8/15/2023 9,502 16,500 Denton ISD (NBGA)(a) 5.06(b) 8/15/2024 10,820 3,715 Ennis ISD (NBGA) 4.58(b) 8/15/2025 2,365 3,720 Ennis ISD (NBGA) 4.60(b) 8/15/2026 2,253 4,710 Harris County Cultural Education Facilities Finance Corp. 5.00 12/01/2027 5,403 1,400 Harris County Cultural Education Facilities Finance Corp. 5.00 6/01/2028 1,535 40,000 Harris County IDC 5.00 2/01/2023 43,480 1,895 Hidalgo County Health Services Corp. 4.75 8/15/2017 1,897 350 Hidalgo County Health Services Corp. 5.00 8/15/2019 351 3,805 Hidalgo County Health Services Corp. 5.00 8/15/2022 3,927 1,785 Hidalgo County Health Services Corp. 5.00 8/15/2026 1,853 4,000 Houston Airport System 5.00 7/01/2024 4,489 7,000 Houston Airport System 5.00 7/01/2025 7,831 2,300 Houston Convention & Entertainment Facilities Department 5.00 9/01/2029 2,648 1,000 Houston Convention & Entertainment Facilities Department 5.00 9/01/2030 1,151 3,850 Houston Higher Education Finance Corp. 5.25 9/01/2031 4,280 4,075 Houston Higher Education Finance Corp. 5.25 9/01/2032 4,501 4,955 Houston ISD Public Facility Corp. (INS) 5.35(b) 9/15/2015 4,933 3,635 Houston ISD Public Facility Corp. (INS) 5.35(b) 9/15/2015 3,619 6,955 Houston ISD Public Facility Corp. (INS) 5.38(b) 9/15/2016 6,844 2,635 Houston ISD Public Facility Corp. (INS) 5.38(b) 9/15/2016 2,593 3,885 Houston ISD Public Facility Corp. (INS) 5.40(b) 9/15/2017 3,749 105 La Porte ISD (INS) 5.00 2/15/2022 107 1,490 La Porte ISD (INS) (PRE) 5.00 2/15/2022 1,517 225 La Porte ISD (INS) 5.00 2/15/2024 229 3,310 La Porte ISD (INS) (PRE) 5.00 2/15/2024 3,371 1,655 Lewisville (INS) 5.38 9/01/2015 1,659 4,555 Lower Colorado River Auth. (INS) 4.38 5/15/2025 4,813
================================================================================ 32 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 2,000 Lower Colorado River Auth. (INS) 4.38% 5/15/2026 $ 2,113 1,245 Marlin ISD Public Facility Corp., acquired 7/22/1998; cost $1,265(d) 5.85 2/15/2018 1,271 3,425 Mesquite Health Facilities Dev. Corp. 5.50 2/15/2025 3,486 2,040 Midlothian Dev. Auth. (INS) 5.00 11/15/2018 2,112 2,235 Midlothian Dev. Auth. (INS) 5.00 11/15/2021 2,283 1,695 Midlothian Dev. Auth. (INS) 5.00 11/15/2026 1,722 2,295 Midlothian Dev. Auth. 5.13 11/15/2026 2,328 2,155 New Braunfels ISD (NBGA) 3.04(b) 2/01/2023 1,748 2,500 North Texas Tollway Auth. 6.00 1/01/2023 2,840 15,000 North Texas Tollway Auth. 6.00 1/01/2025 17,377 1,220 Nueces River Auth. (INS) 5.00 7/15/2023 1,264 1,530 Nueces River Auth. (INS) 5.00 7/15/2024 1,585 2,965 Plano ISD (NBGA) 4.50 2/15/2023 3,117 2,000 Red River Education Finance Corp. 4.38 3/15/2025 2,106 3,000 Red River Education Finance Corp. 4.38 3/15/2026 3,154 8,395 Rockwall ISD (NBGA) 5.14(b) 2/15/2022 6,123 9,205 Sabine River Auth. (INS) 4.95 3/01/2018 10,020 2,000 San Leanna Education Facilities Corp. 5.00 6/01/2018 2,167 1,965 San Leanna Education Facilities Corp. 5.13 6/01/2023 2,071 1,000 San Leanna Education Facilities Corp. 5.13 6/01/2024 1,050 1,545 San Leanna Education Facilities Corp. 5.13 6/01/2025 1,617 5,200 Schertz-Cibolo-Universal City ISD (NBGA) (PRE) 4.86(b) 2/01/2023 3,527 3,320 State 5.00 8/01/2016 3,345 3,750 Tarrant County Cultural Education Facilities Finance Corp. 5.25 11/15/2022 4,088 1,100 Tarrant County Cultural Education Facilities Finance Corp. 6.00 11/15/2026 1,146 8,300 Tarrant County Cultural Education Facilities Finance Corp. 5.13 5/15/2027 8,421 5,000 Tarrant Regional Water District (INS) 4.38 3/01/2021 5,257 4,510 Transportation Commission (PRE) 4.38 4/01/2025 4,789 2,490 Transportation Commission 4.38 4/01/2025 2,628 13,000 Transportation Commission 4.50 4/01/2026 14,094 7,170 Tyler Health Facilities Dev. Corp. 5.25 11/01/2019 7,884 7,945 Tyler Health Facilities Dev. Corp. 5.25 11/01/2021 8,641 3,360 Tyler Health Facilities Dev. Corp. 5.25 11/01/2022 3,640 3,800 Tyler Health Facilities Dev. Corp. 5.25 11/01/2023 4,088 8,745 Tyler Health Facilities Dev. Corp. 5.25 7/01/2026 9,159 10,000 Tyler Health Facilities Dev. Corp. 5.50 7/01/2027 11,161 10,000 Univ. of Texas Board of Regents 4.25 8/15/2025 10,762 1,795 Weatherford ISD (NBGA) 4.73(b) 2/15/2023 1,275 1,795 Weatherford ISD (NBGA) 4.77(b) 2/15/2024 1,212
================================================================================ PORTFOLIO OF INVESTMENTS | 33 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- $ 5,970 Williamson County (INS) 5.13% 2/15/2022 $ 6,556 1,690 Wylie ISD (NBGA) 5.10(b) 8/15/2015 1,686 ---------- 391,912 ---------- UTAH (0.3%) 18,337 Jordanelle Special Service District, acquired 6/18/2009; cost $18,337(d),(g),(h),(i) 4.44 8/01/2030 10,269 ---------- VERMONT (0.3%) 9,000 EDA 5.00 12/15/2020 10,465 ---------- VIRGINIA (1.0%) 1,750 Albemarle County IDA 5.00 1/01/2024 1,786 2,290 College Building Auth. 5.00 6/01/2021 2,379 11,280 College Building Auth. 5.00 6/01/2026 11,565 14,924 Farms of New Kent Community Dev. Auth., acquired 9/08/2006-10/04/2007; cost $14,395(d),(h),(i) 5.13 3/01/2036 7,462 10,000 Roanoke County EDA 5.00 7/01/2025 11,269 1,000 Small Business Financing Auth. 5.13 9/01/2022 1,068 ---------- 35,529 ---------- WASHINGTON (0.2%) 400 Higher Education Facilities Auth. 5.20 10/01/2017 400 5,000 Tobacco Settlement Auth. 5.25 6/01/2031 5,469 ---------- 5,869 ---------- WISCONSIN (0.7%) 8,300 Health and Educational Facilities Auth. 5.13 2/15/2026 8,700 1,500 Health and Educational Facilities Auth. 5.00 8/15/2026 1,719 2,000 Health and Educational Facilities Auth. 5.00 7/15/2028 2,176 1,935 Health and Educational Facilities Auth. 5.00 8/15/2029 2,180 5,000 Health and Educational Facilities Auth. 5.13 4/15/2031 5,518 3,920 Sheboygan (INS) 5.00 9/01/2015 4,085 ---------- 24,378 ---------- Total Fixed-Rate Instruments (cost: $2,862,336) 3,042,805 ---------- PUT BONDS (7.9%) ARIZONA (1.3%) 16,000 Health Facilities Auth. 1.89(j) 2/01/2048 16,262 30,000 Health Facilities Auth. 1.89(j) 2/01/2048 30,338 ---------- 46,600 ---------- CALIFORNIA (0.7%) 10,000 Bay Area Toll Auth. 0.94(j) 4/01/2045 9,927 17,000 Bay Area Toll Auth. 1.14(j) 4/01/2045 17,115 ---------- 27,042 ----------
================================================================================ 34 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- FLORIDA (0.7%) $ 7,375 Miami-Dade County IDA 4.00% 10/01/2018 $ 7,507 16,000 Putnam County Dev. Auth. (INS) 5.35 3/15/2042 18,291 ---------- 25,798 ---------- ILLINOIS (0.4%) 5,000 Chicago Board of Education 0.87(j) 3/01/2036 4,869 7,500 Educational Facilities Auth. 4.75 11/01/2036 8,099 ---------- 12,968 ---------- INDIANA (0.1%) 4,000 Rockport Pollution Control 1.75 6/01/2025 4,014 ---------- LOUISIANA (0.5%) 16,750 St. Charles Parish 4.00 12/01/2040 17,925 ---------- MASSACHUSETTS (0.2%) 6,000 Dev. Finance Agency (PRE) 5.75 12/01/2042 7,258 ---------- MICHIGAN (0.5%) 15,000 Hospital Finance Auth. 6.00 12/01/2034 17,428 ---------- NEW MEXICO (0.9%) 10,000 Farmington 4.75 6/01/2040 10,744 20,000 Farmington 5.20 6/01/2040 22,399 ---------- 33,143 ---------- NORTH CAROLINA (0.3%) 10,000 Capital Facilities Finance Agency 0.30 7/01/2034 10,000 ---------- OHIO (1.1%) 8,000 Air Quality Dev. Auth. 5.75 6/01/2033 8,557 30,000 Water Dev. Auth.(a) 4.00 12/01/2033 31,823 ---------- 40,380 ---------- PENNSYLVANIA (0.8%) 8,800 Beaver County IDA 2.70 4/01/2035 8,916 11,000 Berks County Municipal Auth. 1.54(j) 11/01/2039 11,288 1,750 Economic Dev. Financing Auth. 1.75 12/01/2033 1,780 8,750 Economic Dev. Financing Auth. 2.55 11/01/2041 8,843 ---------- 30,827 ---------- TEXAS (0.4%) 14,935 San Antonio Housing Trust Finance Corp. (NBGA) 3.50(j) 4/01/2043 15,016 ---------- Total Put Bonds (cost: $273,678) 288,399 ----------
================================================================================ PORTFOLIO OF INVESTMENTS | 35 ================================================================================
----------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COUPON FINAL VALUE (000) SECURITY RATE MATURITY (000) ----------------------------------------------------------------------------------------------------- ADJUSTABLE-RATE NOTES (0.5%) NEW JERSEY (0.5%) $10,000 EDA 1.59% 9/01/2027 $ 9,999 10,000 EDA 1.64 3/01/2028 9,999 ---------- 19,998 ---------- Total Adjustable-Rate Notes (cost: $20,000) 19,998 ---------- VARIABLE-RATE DEMAND NOTES (8.2%) CALIFORNIA (0.8%) 10,200 Golden State Tobacco Securitization Corp. (INS) (LIQ)(g) 0.44 6/01/2045 10,200 15,230 State (LIQ) (LOC - Dexia Credit Local)(g) 0.29 8/01/2027 15,230 4,815 Victorville Joint Powers Financing Auth. (LOC - BNP Paribas) 1.04 5/01/2040 4,815 ---------- 30,245 ---------- CONNECTICUT (0.2%) 5,000 State(k) 0.34 7/01/2017 5,000 ---------- IDAHO (0.9%) 19,885 American Falls Reservoir District 0.18 2/01/2025 19,885 13,550 Housing and Finance Association(k) 0.29 1/01/2038 13,550 ---------- 33,435 ---------- ILLINOIS (0.4%) 14,100 State Toll Highway Auth. (INS) (LIQ) 0.25 1/01/2016 14,100 ---------- KENTUCKY (0.1%) 5,000 Economic Dev. Finance Auth. (INS) (LIQ)(g) 0.29 6/01/2016 5,000 ---------- LOUISIANA (0.4%) 15,100 St. James Parish 0.20 11/01/2040 15,100 ---------- NEW JERSEY (0.6%) 22,160 EDA (LIQ) (LOC - Dexia Credit Local)(g) 0.29 9/01/2022 22,160 ---------- NEW YORK (0.2%) 3,410 Oneida County IDA (LOC - RBS Citizens, N.A.) 0.07 7/01/2037 3,410 4,760 Urban Dev. Corp. (LIQ) (LOC - Dexia Credit Local)(g) 0.19 3/15/2024 4,760 ---------- 8,170 ---------- PENNSYLVANIA (1.6%) 14,305 Butler County General Auth. (INS) (LIQ) 0.06 9/01/2027 14,305 43,265 Emmaus General Auth. (INS) (LIQ) 0.05 12/01/2028 43,265 ---------- 57,570 ----------
================================================================================ 36 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================
----------------------------------------------------------------------------------------------------- Principal Market Amount Coupon Final Value (000) Security Rate Maturity (000) ----------------------------------------------------------------------------------------------------- RHODE ISLAND (0.3%) $11,130 Health and Educational Building Corp. (LOC - RBS Citizens, N.A.) 0.28% 4/01/2036 $ 11,130 ---------- TEXAS (1.7%) 10,590 Port of Port Arthur Navigation District 0.17 12/01/2039 10,590 19,300 Port of Port Arthur Navigation District 0.17 12/01/2039 19,300 30,800 Port of Port Arthur Navigation District 0.17 12/01/2039 30,800 2,800 Port of Port Arthur Navigation District 0.17 11/01/2040 2,800 ---------- 63,490 ---------- WASHINGTON (0.6%) 10,000 Health Care Facilities Auth. (LIQ)(g) 0.24 2/01/2019 10,000 11,910 Health Care Facilities Auth. (INS) (LIQ) 0.23 12/01/2036 11,910 ---------- 21,910 ---------- WYOMING (0.4%) 14,200 Gillette 0.22 1/01/2018 14,200 ---------- Total Variable-Rate Demand Notes (cost: $301,510) 301,510 ---------- TOTAL INVESTMENTS (COST: $3,457,524) $3,652,712 ========== -------------------------------------------------------------------------------------------------------- ($ 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 ------------------------------------------------------------------------------------------------------ Fixed-Rate Instruments $- $3,032,536 $10,269 $3,042,805 Put Bonds - 288,399 - 288,399 Adjustable-Rate Notes - 19,998 - 19,998 Variable-Rate Demand Notes - 301,510 - 301,510 Total $- $3,642,443 $10,269 $3,652,712
================================================================================ PORTFOLIO OF INVESTMENTS | 37 ================================================================================ Reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value: FIXED-RATE INSTRUMENTS ----------------------------------------------------------------------------------------- Balance as of March 31, 2014 $11,515 Purchases - Sales - Transfers into Level 3 - Transfers out of Level 3 - Net realized gain (loss) on investments - Change in net unrealized appreciation/depreciation on investments (1,246) ----------------------------------------------------------------------------------------- Balance as of September 30, 2014 $10,269 -----------------------------------------------------------------------------------------
For the period of April 1, 2014, through September 30, 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. ================================================================================ 38 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS September 30, 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. o SPECIFIC NOTES (a) At September 30, 2014, portions of these securities were segregated to cover delayed-delivery and/or when-issued purchases. (b) Zero-coupon security. Rate represents the effective yield at the date of purchase. (c) 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. (d) Security deemed illiquid by USAA Asset Management Company (the Manager), under liquidity guidelines approved by the USAA Mutual Funds Trust's Board of Trustees (the Board). The aggregate market value of these securities at September 30, 2014, was $20,981,000, which represented 0.6% of the Fund's net assets. (e) Up to 6.05% of the 7.06% coupon may be payable in PIK. (f) At September 30, 2014, the aggregate market value of securities purchased on a when-issued basis was $4,608,000. ================================================================================ NOTES TO PORTFOLIO OF INVESTMENTS | 39 ================================================================================ (g) Restricted security that is not registered under the Securities Act of 1933. A resale of this security in the United States may occur in an exempt transaction to a qualified institutional buyer as defined by Rule 144A, and as such has been deemed liquid by the Manager under liquidity guidelines approved by the Board, unless otherwise noted as illiquid. (h) At September 30, 2014, the issuer was in default with respect to interest and/or principal payments. (i) Security was fair valued at September 30, 2014, by the Manager in accordance with valuation procedures approved by the Board. The total value of all such securities was $17,731,000, which represented 0.5% of the Fund's net assets. (j) Variable-rate or floating-rate security - interest rate is adjusted periodically. The interest rate disclosed represents the rate at September 30, 2014. (k) Variable-rate remarketed obligation - Structured similarly to variable-rate demand notes and has a tender option that is supported by a best efforts remarketing agent. See accompanying notes to financial statements. ================================================================================ 40 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) September 30, 2014 (unaudited) ------------------------------------------------------------------------------- ASSETS Investments in securities, at market value (cost of $3,457,524) $3,652,712 Receivables: Capital shares sold 2,418 USAA Asset Management Company (Note 6C) 5 Interest 42,333 Securities sold 294 ---------- Total assets 3,697,762 ---------- LIABILITIES Payables: Securities purchased 19,489 Capital shares redeemed 1,758 Dividends on capital shares 1,566 Bank overdraft 62 Accrued management fees 1,000 Accrued transfer agent's fees 34 Other accrued expenses and payables 35 ---------- Total liabilities 23,944 ---------- Net assets applicable to capital shares outstanding $3,673,818 ========== NET ASSETS CONSIST OF: Paid-in capital $3,507,234 Overdistribution of net investment income (28) Accumulated net realized loss on investments (28,576) Net unrealized appreciation of investments 195,188 ---------- Net assets applicable to capital shares outstanding $3,673,818 ========== Net asset value, redemption price, and offering price per share: Fund Shares (net assets of $3,643,476/268,635 shares outstanding) $ 13.56 ========== Adviser Shares (net assets of $30,342/2,237 shares outstanding) $ 13.56 ==========
See accompanying notes to financial statements. ================================================================================ FINANCIAL STATEMENTS | 41 ================================================================================ STATEMENT OF OPERATIONS (IN THOUSANDS) Six-month period ended September 30, 2014 (unaudited) ------------------------------------------------------------------------------- INVESTMENT INCOME Interest income $ 69,658 ---------- EXPENSES Management fees 5,953 Administration and servicing fees: Fund Shares 2,651 Adviser Shares 19 Transfer agent's fees: Fund Shares 553 Adviser Shares 6 Distribution and service fees (Note 6E): Adviser Shares 31 Custody and accounting fees: Fund Shares 200 Adviser Shares 1 Postage: Fund Shares 23 Shareholder reporting fees: Fund Shares 16 Adviser Shares 1 Trustees' fees 12 Registration fees: Fund Shares 23 Adviser Shares 16 Professional fees 143 Other 25 ---------- Total expenses 9,673 Expenses reimbursed: Adviser Shares (18) ---------- Net expenses 9,655 ---------- NET INVESTMENT INCOME 60,003 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss (2,229) Change in net unrealized appreciation/depreciation 54,943 ---------- Net realized and unrealized gain 52,714 ---------- Increase in net assets resulting from operations $ 112,717 ==========
See accompanying notes to financial statements. ================================================================================ 42 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) Six-month period ended September 30, 2014 (unaudited), and year ended March 31, 2014 -------------------------------------------------------------------------------
9/30/2014 3/31/2014 -------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income $ 60,003 $ 117,675 Net realized loss on investments (2,229) (16,134) Change in net unrealized appreciation/depreciation of investments 54,943 (84,412) -------------------------------- Increase in net assets resulting from operations 112,717 17,129 -------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Fund Shares (59,545) (117,287) Adviser Shares (395) (328) -------------------------------- Total distributions of net investment income (59,940) (117,615) -------------------------------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Fund Shares 209,488 94,585 Adviser Shares 9,816 12,815 -------------------------------- Total net increase in net assets from capital share transactions 219,304 107,400 -------------------------------- Capital contribution from USAA Transfer Agency Company: Fund Shares - 6 -------------------------------- Net increase in net assets 272,081 6,920 NET ASSETS Beginning of period 3,401,737 3,394,817 -------------------------------- End of period $ 3,673,818 $ 3,401,737 ================================ Overdistribution of net investment income: End of period $ (28) $ (91) ================================ See accompanying notes to financial statements. ================================================================================ FINANCIAL STATEMENTS | 43 ================================================================================ NOTES TO FINANCIAL STATEMENTS September 30, 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 Tax Exempt Intermediate- Term Fund (the Fund), which is classified as diversified under the 1940 Act. The Fund's investment objective is to provide investors with interest income that is exempt from federal income tax. The Fund consists of two classes of shares: Tax Exempt Intermediate-Term Fund Shares (Fund Shares) and Tax Exempt Intermediate-Term Fund Adviser Shares (Adviser Shares). Each class of shares has equal rights to assets and earnings, except that each class bears certain class-related expenses specific to the particular class. These expenses include administration and servicing fees, transfer agent fees, postage, shareholder reporting fees, distribution and service (12b-1) fees, and certain registration and custodian fees. Expenses not attributable to a specific class, income, and realized gains or losses on investments are allocated to each class of shares based on each class's relative net assets. Each class has exclusive voting rights on matters related solely to that class and separate voting rights on matters that relate to both classes. The Adviser Shares permit investors to purchase shares through financial intermediaries, 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 ================================================================================ 44 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ 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 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 tax-exempt securities of comparable quality, coupon, maturity, and type; indications as to values from dealers in securities; and general market conditions. 2. Debt securities purchased with original or remaining maturities of 60 days or less may be valued at amortized cost, which approximates market value. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 45 ================================================================================ 3. 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, an affiliate of the Fund, under valuation procedures approved by the Board. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's net asset value (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 fixed-rate instruments, put bonds, and adjustable-rate ================================================================================ 46 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ notes which are valued based on methods discussed in Note 1A1 and variable-rate demand notes which are valued at amortized cost. Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement, including the Manager's own assumptions in determining the fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For the securities valued using significant unobservable inputs, market quotations were not available from the pricing services. As such, the securities were valued in good faith using methods determined by the Manager, under valuation procedures approved by the Board. The valuation of securities falling in the Level 3 category are primarily supported by quoted prices discounted for liquidity and other relevant information related to the security. However, these securities are included in the Level 3 category due to limited market transparency and or a lack of corroboration to support the quoted prices. Refer to the portfolio of investments for a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value. C. FEDERAL TAXES - The Fund's policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of its income to its shareholders. Therefore, no federal income tax provision is required. D. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the date the securities are purchased or sold (trade date). Gains or losses from sales of investment securities are computed on the identified cost basis. Interest income is recorded daily on the accrual basis. Premiums and discounts are amortized over the life of the respective securities, using the effective yield method for long-term securities and the straight-line method for short-term securities. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 47 ================================================================================ E. SECURITIES PURCHASED ON A DELAYED-DELIVERY OR WHEN-ISSUED BASIS - Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis can take place a month or more after the trade date. During the period prior to settlement, these securities do not earn interest, are subject to market fluctuation, and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a delayed-delivery or when-issued basis may increase the volatility of the Fund's NAV to the extent that the Fund makes such purchases while remaining substantially fully invested. As of September 30, 2014, the Fund's outstanding delayed-delivery commitments, including interest purchased, were $4,554,000; all of which were when-issued securities. F. 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 September 30, 2014, custodian and other bank credits reduced the Fund's expenses by less than $500. G. 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. H. 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. ================================================================================ 48 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ (2) LINE OF CREDIT The Fund participates in a joint, short-term, revolving, committed loan agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of the Manager. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. Subject to availability, the Fund may borrow from CAPCO an amount up to 5% of the Fund's total assets at an interest rate based on the London Interbank Offered Rate (LIBOR). The USAA Funds that are party to the loan agreement are assessed facility fees by CAPCO in the amount of 7.0 basis points of the amount of the committed loan agreement. The facility fees are allocated among the Funds based on their respective average net assets for the period. For the six-month period ended September 30, 2014, the Fund paid CAPCO facility fees of $9,000, which represents 5.3% of the total fees paid to CAPCO by the USAA Funds. The Fund had no borrowings under this agreement during the six-month period ended September 30, 2014. (3) DISTRIBUTIONS The tax basis of distributions and any accumulated undistributed net investment income will be determined based upon the Fund's tax year-end of March 31, 2015, 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. The Fund is permitted to carry forward post-enactment 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. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 49 ================================================================================ At March 31, 2014, the Fund had no pre-enactment capital loss carryforwards and post-enactment long-term capital loss carryfowards of $26,347,000, for federal income tax purposes. It is unlikely that the Board will authorize a distribution of capital gains realized in the future until the capital loss carryforwards have been used. POST-ENACTMENT CAPITAL LOSS CARRYFORWARDS -------------------------------------------------------- TAX CHARACTER -------------------------------------------------------- (NO EXPIRATION) BALANCE --------------- ----------- Short-Term $ 7,034,000 Long-Term 19,313,000 ----------- Total $26,347,000 ===========
For the six-month period ended September 30, 2014, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions. On an ongoing basis the Manager will monitor its tax positions to determine if adjustments to this conclusion are necessary. The statute of limitations on the Fund's tax return filings generally remain open for the three preceding fiscal reporting year ends and remain subject to examination by the Internal Revenue Service and state taxing authorities. (4) INVESTMENT TRANSACTIONS Cost of purchases and proceeds from sales/maturities of securities, excluding short-term securities, for the six-month period ended September 30, 2014, were $255,822,000 and $69,688,000, respectively. As of September 30, 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 September 30, 2014, were $221,400,000 and $26,212,000, respectively, resulting in net unrealized appreciation of $195,188,000. (5) CAPITAL SHARE TRANSACTIONS At September 30, 2014, there were an unlimited number of shares of capital stock at no par value authorized for the Fund. ================================================================================ 50 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ Capital share transactions for all classes were as follows, in thousands:
SIX-MONTH PERIOD ENDED YEAR ENDED SEPTEMBER 30, 2014 MARCH 31, 2014 ---------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------- FUND SHARES: Shares sold 26,052 $ 351,618 50,004 $ 669,158 Shares issued from reinvested dividends 3,627 49,048 7,124 94,802 Shares redeemed (14,164) (191,178) (50,411) (669,375) ----------------------------------------------------- Net increase from capital share transactions 15,515 $ 209,488 6,717 $ 94,585 ===================================================== ADVISER SHARES: Shares sold 912 $ 12,303 1,209 $ 16,030 Shares issued from reinvested dividends 21 290 10 129 Shares redeemed (205) (2,777) (251) (3,344) ----------------------------------------------------- Net increase from capital share transactions 728 $ 9,816 968 $ 12,815 =====================================================
(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 the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund is comprised of a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.28% of the Fund's average net assets for the fiscal year. The performance adjustment is calculated separately for each share class on a monthly basis by comparing each class's performance to that of the Lipper Intermediate Municipal Debt Funds Index over the performance period. The Lipper Intermediate Municipal Debt Funds Index tracks the total return performance of the 30 largest funds in the Lipper ================================================================================ NOTES TO FINANCIAL STATEMENTS | 51 ================================================================================ Intermediate Municipal Debt Funds category. The performance period for each class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE RELATIVE TO INDEX (IN BASIS POINTS AS A PERCENTAGE (IN BASIS POINTS)(1) OF AVERAGE NET ASSETS)(1) --------------------------------------------------------------------------- +/- 20 to 50 +/- 4 +/- 51 to 100 +/- 5 +/- 101 and greater +/- 6
(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 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 Intermediate Municipal Debt Funds Index over that period, even if the class had overall negative returns during the performance period. For the six-month period ended September 30, 2014, the Fund incurred total management fees, paid or payable to the Manager, of $5,953,000, which included a performance adjustment for the Fund Shares and Adviser Shares of $965,000 and $3,000, respectively. For the Fund Shares and Adviser Shares, the performance adjustments were 0.05% and 0.02%, respectively. B. ADMINISTRATION AND SERVICING FEES - The Manager provides certain administration and servicing functions for the Fund. For such services, ================================================================================ 52 | USAA TAX EXEMPT INTERMEDIATE-TERM FUNDS ================================================================================ the Manager receives a fee accrued daily and paid monthly at an annualized rate of 0.15% of average net assets for both the Fund Shares and Adviser Shares. For the six-month period ended September 30, 2014, the Fund Shares and Adviser Shares incurred administration and servicing fees, paid or payable to the Manager, of $2,651,000 and $19,000, 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 September 30, 2014, the Fund reimbursed the Manager $45,000 for these compliance and legal services. These expenses are included in the professional fees on the Fund's statement of operations. C. EXPENSE LIMITATION - The Manager agreed, through August 1, 2015, to limit the total annual operating expenses of the Adviser Shares to 0.80% of its average net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and will reimburse the Adviser Shares for all expenses in excess of that amount. This expense limitation arrangement may not be changed or terminated through August 1, 2015, without approval of the Board, and may be changed or terminated by the Manager at any time after that date. Prior to August 1, 2014, the Adviser Shares' expense limitation was 0.75% of average net assets. For the six-month period ended September 30, 2014, the Adviser Shares incurred reimbursable expenses of $18,000, of which $5,000 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 the administration and servicing of accounts that are held with such intermediaries. For the six-month period ended September 30, 2014, the ================================================================================ NOTES TO FINANCIAL STATEMENTS | 53 ================================================================================ Fund Shares and Adviser Shares incurred transfer agent's fees, paid or payable to SAS, of $553,000 and $6,000, respectively. E. DISTRIBUTION AND SERVICE (12B-1) FEES - The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares pay fees to USAA Investment Management Company, the distributor, for distribution and shareholder services. USAA Investment Management Company pays all or a portion of such fees to intermediaries that make the Adviser Shares available for investment by their customers. The fee 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 September 30, 2014, the Adviser Shares incurred distribution and service (12b-1) fees of $31,000. 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 Manager is indirectly wholly owned by United Services Automobile Association (USAA), a large, diversified financial services institution. At September 30, 2014, USAA and its affiliates owned 378,000 shares, which represent 16.9% of the Adviser Shares and 0.1% 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. ================================================================================ 54 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ (8) FINANCIAL HIGHLIGHTS - FUND SHARES Per share operating performance for a share outstanding throughout each period is as follows:
SIX-MONTH PERIOD ENDED SEPTEMBER 30, YEAR ENDED MARCH 31, -------------------------------------------------------------------------------------- 2014 2014 2013 2012 2011 2010 -------------------------------------------------------------------------------------- Net asset value at beginning of period $ 13.36 $ 13.75 $ 13.41 $ 12.56 $ 12.83 $ 11.88 -------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .23 .50 .50 .54 .56 .57 Net realized and unrealized gain (loss) .20 (.39) .34 .85 (.26) .96 -------------------------------------------------------------------------------------- Total from investment operations .43 .11 .84 1.39 .30 1.53 -------------------------------------------------------------------------------------- Less distributions from: Net investment income (.23) (.50) (.50) (.54) (.56) (.57) Realized capital gains - - - (.00)(a) (.01) (.01) -------------------------------------------------------------------------------------- Total distributions (.23) (.50) (.50) (.54) (.57) (.58) -------------------------------------------------------------------------------------- Net asset value at end of period $ 13.56 $ 13.36 $ 13.75 $ 13.41 $ 12.56 $ 12.83 ====================================================================================== Total return (%)* 3.22 .85 6.31 11.25 2.29 13.07(b) Net assets at end of period (000) $3,643,476 $3,381,571 $3,387,366 $3,231,474 $2,794,641 $2,859,691 Ratios to average net assets:** Expenses (%) .54(c),(d) .55(c) .54(c) .54(c) .52(c) .47(b),(c) Net investment income (%) 3.37(d) 3.72 3.63 4.11 4.35 4.55 Portfolio turnover (%) 2 10 11 13 14 7
* 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 September 30, 2014, average net assets were $3,527,571,000. (a) Represents less than $0.01 per share. (b) During the year ended March 31, 2010, SAS reimbursed the Fund Shares $66,000 for corrections in fees paid for the administration and servicing of certain accounts. The effect of this reimbursement on the Fund Shares' total return was less than 0.01%. The reimbursement decreased the Fund Shares' expense ratio by less than 0.01%. This decrease is excluded from the expense ratio in the Financial Highlights table. (c) Reflects total annual operating expenses of the Fund Shares before reductions of any expenses paid indirectly. The Fund Shares' expenses paid indirectly decreased the expense ratios by less than 0.01%. (d) Annualized. The ratio is not necessarily indicative of 12 months of operations. ================================================================================ NOTES TO FINANCIAL STATEMENTS | 55 ================================================================================ (8) 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 SEPTEMBER 30, YEAR ENDED MARCH 31, MARCH 31, --------------------------------------------------------------------- 2014 2014 2013 2012 2011*** --------------------------------------------------------------------- Net asset value at beginning of period $ 13.36 $ 13.75 $13.41 $12.56 $13.05 --------------------------------------------------------------- Income (loss) from investment operations: Net investment income .21 .47 .47 .51 .35 Net realized and unrealized gain (loss) .20 (.39) .34 .85 (.48) --------------------------------------------------------------- Total from investment operations .41 .08 .81 1.36 (.13) --------------------------------------------------------------- Less distributions from: Net investment income (.21) (.47) (.47) (.51) (.35) Realized capital gains - - - (.00)(a) (.01) --------------------------------------------------------------- Total distributions (.21) (.47) (.47) (.51) (.36) --------------------------------------------------------------- Net asset value at end of period $ 13.56 $ 13.36 $13.75 $13.41 $12.56 =============================================================== Total return (%)* 3.10 .64 6.10 11.03 (1.04) Net assets at end of period (000) $30,342 $20,166 $7,451 $5,843 $4,756 Ratios to average net assets:** Expenses (%)(d) .77(b),(c) .75(b) .75(b) .75(b) .75(b),(c) Expenses, excluding reimbursements (%) .91(b),(c) .96(b) 1.14(b) 1.38(b) 1.56(b),(c) Net investment income (%) 3.13(c) 3.51 3.41 3.90 4.15(c) Portfolio turnover (%) 2 10 11 13 14
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper reported return. Total returns for periods of less than one year are not annualized. ** For the six-month period ended September 30, 2014, average net assets were $25,203,000. *** Adviser Shares were initiated on August 1, 2010. (a) Represents less than $0.01 per share. (b) Reflects total annual 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) Effective August 1, 2014, the Manager voluntarily agreed to limit the annual expenses of the Adviser Shares to 0.80% of the Adviser Shares' average net assets. Prior to this date, the voluntary expense limit was 0.75%. ================================================================================ 56 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ EXPENSE EXAMPLE September 30, 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 April 1, 2014, through September 30, 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 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 ================================================================================ EXPENSE EXAMPLE | 57 ================================================================================ 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 APRIL 1, 2014 - APRIL 1, 2014 SEPTEMBER 30, 2014 SEPTEMBER 30, 2014 ---------------------------------------------------------------- FUND SHARES Actual $1,000.00 $1,032.20 $2.75 Hypothetical (5% return before expenses) 1,000.00 1,022.36 2.74 ADVISER SHARES Actual 1,000.00 1,031.00** 3.92** Hypothetical (5% return before expenses) 1,000.00 1,021.21** 3.90**
* Expenses are equal to the annualized expense ratio of 0.54% for Fund Shares and 0.77% for Adviser Shares, which are net of any reimbursements and expenses paid indirectly, multiplied by the average account value over the period, multiplied by 183 days/365 days (to reflect the one-half-year period). The Fund's actual ending account values are based on its actual total returns of 3.22% for Fund Shares and 3.10% for Adviser Shares for the six-month period of April 1, 2014, through September 30, 2014. ** The annualized expense ratio of 0.77% for the Adviser Shares above reflects a change effective August 1, 2014, in the rate of the Manager's voluntary expense limitation for the Adviser Shares from 0.75% to 0.80% of the Adviser Share's average annual net assets. Had the expense limitation of 0.80% been in effect for the entire six-month period of April 1, 2014, through September 30, 2014, the values in the table above would be as shown below.
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE ACCOUNT VALUE APRIL 1, 2014 - APRIL 1, 2014 SEPTEMBER 30, 2014 SEPTEMBER 30, 2014 ---------------------------------------------------------------- ADVISER SHARES Actual 1,000.00 1,031.00 4.07 Hypothetical (5% return before expenses) 1,000.00 1,021.06 4.05 ================================================================================ 58 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ ADVISORY AGREEMENT(S) September 30, 2014 (unaudited) -------------------------------------------------------------------------------- At an in-person meeting of the Board of Trustees (the Board) held on April 30, 2014, the Board, including the Trustees who are not "interested persons" of the Trust (the Independent Trustees), approved for an annual period the continuance of the Advisory Agreement between the Trust and the Manager with respect to the Fund. In advance of the meeting, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Manager and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Manager's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Manager; and (iii) information about the Manager's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuation of the Advisory Agreement with management and with experienced independent counsel and received materials from such counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with their counsel at which no representatives of management were present. At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Manager. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, ================================================================================ ADVISORY AGREEMENT(S) | 59 ================================================================================ comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the Manager is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. ADVISORY AGREEMENT After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by independent counsel. NATURE, EXTENT, AND QUALITY OF SERVICES - In considering the nature, extent, and quality of the services provided by the Manager under the Advisory Agreement, the Board reviewed information provided by the Manager relating to its operations and personnel. The Board also took into account its knowledge of the Manager's management and the quality of the performance of the Manager's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Manager and the services provided to the Fund by the Manager under the Advisory Agreement, as well as other services provided by the Manager and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Manager and its affiliates provide administrative services, stockholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust. The Board considered the Manager's management style and the performance of its duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Manager, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Manager's process for monitoring "best execution," also was considered. The Manager's ================================================================================ 60 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ role in coordinating the activities of the Fund's other service providers also was considered. The Board also considered the Manager's risk management processes. The Board considered the Manager's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Manager and its affiliates in managing the Fund, as well as the other funds in the Trust. The Board also reviewed the compliance and administrative services provided to the Fund by the Manager, including the Manager's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as trustees of the Trust, also focused on the quality of the Manager's compliance and administrative staff. EXPENSES AND PERFORMANCE - In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type (in this case, investment companies with front-end loads or with no sales loads), asset size, and expense components (the "expense group") and (ii) a larger group of investment companies that includes all no-load and front-end load retail open-end investment companies in similar investment classifications/objectives as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's management fee rate - which includes advisory and administrative services and the effects of any performance adjustment - was below the median of its expense group and above the median of its expense universe. The data indicated that the Fund's total expense ratio was below the median of its expense group and its expense universe. The Board took into account the various services provided to the Fund by the Manager and its affiliates, including the high quality of services ================================================================================ ADVISORY AGREEMENT(S) | 61 ================================================================================ provided by the Manager. The Board also took into account management's discussion of the Fund's expenses. The Board also noted the level and method of computing the management fee, including any performance adjustment to such fee. In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total return with its Lipper index and with that of other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe and its Lipper index for the one-, three-, and five-year periods ended December 31, 2013. The Board also noted that the Fund's percentile performance ranking was in the top 15% of its performance universe for the one-year period ended December 31, 2013, and was in the top 5% of its performance universe for the three- and five-year periods ended December 31, 2013. COMPENSATION AND PROFITABILITY - The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Manager's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. The Trustees reviewed the profitability of the Manager's relationship with the Fund before tax expenses. In reviewing the overall profitability of the management fee to the Manager, the Board also considered the fact that affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Manager ================================================================================ 62 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ from its relationship with the Trust, including that the Manager may derive reputational and other benefits from its association with the Fund. The Board also took into account the high quality of services received by the Fund from the Manager. The Trustees recognized that the Manager should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial risk that it assumes as Manager. ECONOMIES OF SCALE - The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board took into account management's discussion of the current advisory fee structure. The Board also considered the effect of the Fund's growth and size on its performance and fees, noting that if the Fund's assets increase over time, the Fund may realize other economies of scale if assets increase proportionally more than some expenses. The Board determined that the current investment management fee structure was reasonable. CONCLUSIONS - The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Manager, among others: (i) the Manager has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Manager maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Manager; and (v) the Manager's and its affiliates' level of profitability from its relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Manager and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders. ================================================================================ ADVISORY AGREEMENT(S) | 63 ================================================================================ TRUSTEES Daniel S. McNamara Robert L. Mason, Ph.D. Jefferson C. Boyce Dawn M. Hawley 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. 211745-1114 ================================================================================ USAA 9800 Fredericksburg Road -------------- San Antonio, TX 78288 PRSRT STD U.S. Postage PAID USAA -------------- >> SAVE PAPER AND FUND COSTS Under MY PROFILE on usaa.com select MANAGE PREFERENCES Set your DOCUMENT PREFERENCES to USAA DOCUMENTS ONLINE. [LOGO OF USAA] [LOGO OF RECYCLE PAPER] USAA WE KNOW WHAT IT MEANS TO SERVE.(R) 10% ============================================================================= 39594-1114 (C)2014, USAA. All rights reserved. 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 APRIL 1, 2014 - APRIL 1, 2014 SEPTEMBER 30, 2014 SEPTEMBER 30, 2014 ---------------------------------------------------------------- FUND SHARES Actual $1,000.00 $1,032.20 $2.75 Hypothetical (5% return before expenses) 1,000.00 1,022.36 2.74 ADVISER SHARES Actual 1,000.00 1,031.00** 3.92** Hypothetical (5% return before expenses) 1,000.00 1,021.21** 3.90**
* Expenses are equal to the annualized expense ratio of 0.54% for Fund Shares and 0.77% for Adviser Shares, which are net of any reimbursements and expenses paid indirectly, multiplied by the average account value over the period, multiplied by 183 days/365 days (to reflect the one-half-year period). The Fund's actual ending account values are based on its actual total returns of 3.22% for Fund Shares and 3.10% for Adviser Shares for the six-month period of April 1, 2014, through September 30, 2014. ** The annualized expense ratio of 0.77% for the Adviser Shares above reflects a change effective August 1, 2014, in the rate of the Manager's voluntary expense limitation for the Adviser Shares from 0.75% to 0.80% of the Adviser Share's average annual net assets. Had the expense limitation of 0.80% been in effect for the entire six-month period of April 1, 2014, through September 30, 2014, the values in the table above would be as shown below.
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE ACCOUNT VALUE APRIL 1, 2014 - APRIL 1, 2014 SEPTEMBER 30, 2014 SEPTEMBER 30, 2014 ---------------------------------------------------------------- ADVISER SHARES Actual 1,000.00 1,031.00 4.07 Hypothetical (5% return before expenses) 1,000.00 1,021.06 4.05
================================================================================ 58 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ ADVISORY AGREEMENT(S) September 30, 2014 (unaudited) -------------------------------------------------------------------------------- At an in-person meeting of the Board of Trustees (the Board) held on April 30, 2014, the Board, including the Trustees who are not "interested persons" of the Trust (the Independent Trustees), approved for an annual period the continuance of the Advisory Agreement between the Trust and the Manager with respect to the Fund. In advance of the meeting, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Manager and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Manager's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Manager; and (iii) information about the Manager's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuation of the Advisory Agreement with management and with experienced independent counsel and received materials from such counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with their counsel at which no representatives of management were present. At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Manager. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, ================================================================================ ADVISORY AGREEMENT(S) | 59 ================================================================================ comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the Manager is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. ADVISORY AGREEMENT After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by independent counsel. NATURE, EXTENT, AND QUALITY OF SERVICES - In considering the nature, extent, and quality of the services provided by the Manager under the Advisory Agreement, the Board reviewed information provided by the Manager relating to its operations and personnel. The Board also took into account its knowledge of the Manager's management and the quality of the performance of the Manager's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Manager and the services provided to the Fund by the Manager under the Advisory Agreement, as well as other services provided by the Manager and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Manager and its affiliates provide administrative services, stockholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust. The Board considered the Manager's management style and the performance of its duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Manager, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Manager's process for monitoring "best execution," also was considered. The Manager's ================================================================================ 60 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ role in coordinating the activities of the Fund's other service providers also was considered. The Board also considered the Manager's risk management processes. The Board considered the Manager's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Manager and its affiliates in managing the Fund, as well as the other funds in the Trust. The Board also reviewed the compliance and administrative services provided to the Fund by the Manager, including the Manager's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as trustees of the Trust, also focused on the quality of the Manager's compliance and administrative staff. EXPENSES AND PERFORMANCE - In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type (in this case, investment companies with front-end loads or with no sales loads), asset size, and expense components (the "expense group") and (ii) a larger group of investment companies that includes all no-load and front-end load retail open-end investment companies in similar investment classifications/objectives as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's management fee rate - which includes advisory and administrative services and the effects of any performance adjustment - was below the median of its expense group and above the median of its expense universe. The data indicated that the Fund's total expense ratio was below the median of its expense group and its expense universe. The Board took into account the various services provided to the Fund by the Manager and its affiliates, including the high quality of services ================================================================================ ADVISORY AGREEMENT(S) | 61 ================================================================================ provided by the Manager. The Board also took into account management's discussion of the Fund's expenses. The Board also noted the level and method of computing the management fee, including any performance adjustment to such fee. In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total return with its Lipper index and with that of other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe and its Lipper index for the one-, three-, and five-year periods ended December 31, 2013. The Board also noted that the Fund's percentile performance ranking was in the top 15% of its performance universe for the one-year period ended December 31, 2013, and was in the top 5% of its performance universe for the three- and five-year periods ended December 31, 2013. COMPENSATION AND PROFITABILITY - The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Manager's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. The Trustees reviewed the profitability of the Manager's relationship with the Fund before tax expenses. In reviewing the overall profitability of the management fee to the Manager, the Board also considered the fact that affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Manager ================================================================================ 62 | USAA TAX EXEMPT INTERMEDIATE-TERM FUND ================================================================================ from its relationship with the Trust, including that the Manager may derive reputational and other benefits from its association with the Fund. The Board also took into account the high quality of services received by the Fund from the Manager. The Trustees recognized that the Manager should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial risk that it assumes as Manager. ECONOMIES OF SCALE - The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board took into account management's discussion of the current advisory fee structure. The Board also considered the effect of the Fund's growth and size on its performance and fees, noting that if the Fund's assets increase over time, the Fund may realize other economies of scale if assets increase proportionally more than some expenses. The Board determined that the current investment management fee structure was reasonable. CONCLUSIONS - The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Manager, among others: (i) the Manager has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Manager maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Manager; and (v) the Manager's and its affiliates' level of profitability from its relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Manager and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders. ================================================================================ ADVISORY AGREEMENT(S) | 63 ================================================================================ TRUSTEES Daniel S. McNamara Robert L. Mason, Ph.D. Jefferson C. Boyce Dawn M. Hawley 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. 211745-1114 ================================================================================ USAA 9800 Fredericksburg Road -------------- San Antonio, TX 78288 PRSRT STD U.S. Postage PAID USAA -------------- >> SAVE PAPER AND FUND COSTS Under MY PROFILE on usaa.com select MANAGE PREFERENCES Set your DOCUMENT PREFERENCES to USAA DOCUMENTS ONLINE. [LOGO OF USAA] USAA WE KNOW WHAT IT MEANS TO SERVE.(R) ============================================================================= 39594-1114 (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 September 30, 2014 By:* /S/ DANIEL J. MAVICO ----------------------------------------------------------- Signature and Title: Daniel J. Mavico, Assistant Secretary Date: 11/20/2014 ------------------------------ 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: 11/21/2014 ------------------------------ By:* /S/ ROBERTO GALINDO, JR. ----------------------------------------------------- Signature and Title: Roberto Galindo, Jr., Treasurer Date: 11/20/2014 ------------------------------ *Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 ncrscert093014.txt USAA MUTUAL FUNDS TRUST, N-CSR, CERTIFICATION, 09.30.2014 Certifications I, DANIEL S. MCNAMARA, certify that: ------------------ 1. I have reviewed the reports on Form N-CSR/S for the period ending September 30, 2014 for the following funds of USAA MUTUAL FUNDS TRUST: TAX EXEMPT LONG-TERM FUND SHARES CALIFORNIA BOND FUND SHARES TAX EXEMPT LONG-TERM FUND ADVISER SHARES CALIFORNIA BOND FUND ADVISER SHARES TAX EXEMPT SHORT-TERM FUND SHARES CALIFORNIA MONEY MARKET FUND TAX EXEMPT SHORT-TERM FUND ADVISER SHARES NEW YORK BOND FUND SHARES TAX EXEMPT INTERMEDIATE-TERM FUND SHARES NEW YORK BOND FUND ADVISER SHARES TAX EXEMPT INTERMEDIATE-TERM FUND NEW YORK MONEY MARKET FUND ADVISER SHARES VIRGINIA BOND FUND SHARES TAX EXEMPT MONEY MARKET FUND VIRGINIA BOND FUND ADVISER SHARES VIRGINIA MONEY MARKET FUND 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: 11/21/2014 /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 September 30, 2014 for the following funds of USAA MUTUAL FUNDS TRUST: TAX EXEMPT LONG-TERM FUND SHARES CALIFORNIA BOND FUND SHARES TAX EXEMPT LONG-TERM FUND ADVISER SHARES CALIFORNIA BOND FUND ADVISER SHARES TAX EXEMPT SHORT-TERM FUND SHARES CALIFORNIA MONEY MARKET FUND TAX EXEMPT SHORT-TERM FUND ADVISER SHARES NEW YORK BOND FUND SHARES TAX EXEMPT INTERMEDIATE-TERM FUND SHARES NEW YORK BOND FUND ADVISER SHARES TAX EXEMPT INTERMEDIATE-TERM FUND NEW YORK MONEY MARKET FUND ADVISER SHARES VIRGINIA BOND FUND SHARES TAX EXEMPT MONEY MARKET FUND VIRGINIA BOND FUND ADVISER SHARES VIRGINIA MONEY MARKET FUND 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: 11/20/2014 /s/ ROBERTO GALINDO, JR. ----------------- ___________________________________ Roberto Galindo, Jr. Treasurer EX-99.906 CERT 3 ncrs906cert093014.txt USAA MUTUAL FUNDS TRUST, N-CSR, 906 CERTIFICATION, 09.30.2014 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 TAX EXEMPT LONG-TERM FUND SHARES CALIFORNIA BOND FUND SHARES TAX EXEMPT LONG-TERM FUND ADVISER SHARES CALIFORNIA BOND FUND ADVISER SHARES TAX EXEMPT SHORT-TERM FUND SHARES CALIFORNIA MONEY MARKET FUND TAX EXEMPT SHORT-TERM FUND ADVISER SHARES NEW YORK BOND FUND SHARES TAX EXEMPT INTERMEDIATE-TERM FUND SHARES NEW YORK BOND FUND ADVISER SHARES TAX EXEMPT INTERMEDIATE-TERM FUND NEW YORK MONEY MARKET FUND ADVISER SHARES VIRGINIA BOND FUND SHARES TAX EXEMPT MONEY MARKET FUND VIRGINIA BOND FUND ADVISER SHARES VIRGINIA MONEY MARKET FUND 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 September 30, 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: 11/21/2014 /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 TAX EXEMPT LONG-TERM FUND SHARES CALIFORNIA BOND FUND SHARES TAX EXEMPT LONG-TERM FUND ADVISER SHARES CALIFORNIA BOND FUND ADVISER SHARES TAX EXEMPT SHORT-TERM FUND SHARES CALIFORNIA MONEY MARKET FUND TAX EXEMPT SHORT-TERM FUND ADVISER SHARES NEW YORK BOND FUND SHARES TAX EXEMPT INTERMEDIATE-TERM FUND SHARES NEW YORK BOND FUND ADVISER SHARES TAX EXEMPT INTERMEDIATE-TERM FUND NEW YORK MONEY MARKET FUND ADVISER SHARES VIRGINIA BOND FUND SHARES TAX EXEMPT MONEY MARKET FUND VIRGINIA BOND FUND ADVISER SHARES VIRGINIA MONEY MARKET FUND 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 September 30, 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: 11/20/2014 /s/ ROBERTO GALINDO, JR. ________________ __________________________________ Roberto Galindo, Jr. Treasurer