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: JAMES G. WHETZEL
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: DECEMBER 31
Date of reporting period: JUNE 30, 2013
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JUNE 30, 2013
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA ULTRA SHORT-TERM BOND FUND]
=======================================================
SEMIANNUAL REPORT
USAA ULTRA SHORT-TERM BOND FUND
JUNE 30, 2013
=======================================================
================================================================================
================================================================================
PRESIDENT'S MESSAGE
"...[W]E BELIEVE THE MARKETS WILL FIND
A WAY TO MANAGE WITHOUT THE FED'S [PHOTO OF DANIEL S. McNAMARA]
QUANTITATIVE EASING PROGRAMS, AS THEY
HAVE FOR MOST OF THE LAST 100 YEARS."
--------------------------------------------------------------------------------
JULY 2013
The power of market psychology was on display during the reporting period as
investors interpreted and then reinterpreted previously misinterpreted comments
by Federal Reserve (the Fed) Chairman Ben Bernanke. At first, stocks and bonds
sold off on the realization that the Fed had an optimistic view of future U.S.
economic growth and expected it to accelerate during the second half of 2013. In
other words, good news was bad news. Meanwhile, inflation pressures, which are
very modest at the time of this writing, were expected to increase, setting the
stage for the Fed to reduce -- or "taper" -- its quantitative easing measures.
From this point of view, higher inflation, usually bad news for central bankers,
was considered good news. (The term "quantitative easing" is generally used to
reference programs in which the Fed uses newly created money to purchase
financial assets.)
The markets generally reacted as though tapering was imminent. Bond yields rose
(and prices, which move in the opposite direction, dropped) in anticipation of
reduced Fed buying. The increase in yields sparked a sell-off across the global
financial markets, including stocks, corporate bonds, emerging markets assets
and precious metals. With more sellers than buyers, liquidity grew tight and
smaller markets, such as emerging markets equities and emerging markets debt,
suffered steeper declines than larger markets, such as U.S. equities.
The sell-off was remarkable because the Fed has always said it would not start
unwinding its stimulus programs until it became clear that economic growth was
self-sustaining. In addition, Bernanke said that the Fed could increase
quantitative easing if the economy stalled or grew more slowly. Indeed,
first-quarter gross domestic product growth was revised downward during the last
week of the reporting period from 2.4% to 1.8%, suggesting that the Fed might
not be tapering any time soon.
Although interest rates did increase during the reporting period, they remain
exceptionally low by historical measures. In the years since the
================================================================================
================================================================================
financial crisis, the 10-year U.S. Treasury yield has been near 2.5% more than
once. At those times, if I recall, many observers considered that a low yield.
When it reached the same level on June 21, 2013, it was perceived as high. In my
opinion, investors have less to fear from rising interest rates than they do
from an extended period of low rates, which some believe could result in a
Japan-like deflationary economy. That said, higher interest rates do mean that
bond investors are likely to see a decrease in their principal value, but they
will also -- for the first time in a long time -- see an increase in the income
they receive from their fixed-income investments.
Meanwhile, the June sell-off should serve as a reminder about the importance of
an investment plan and the need to keep emotion out of the investment process.
At USAA Asset Management Company, we believe every investor should hold a
diversified portfolio that is directly tied to their goals, risk tolerance and
time horizon. Diversification is important because different asset classes, such
as stocks and bonds, move up and down at different rates and often at different
times. If you think you may be over-allocated to fixed-income securities or
equities, you may want to reassess your investment risk and rebalance your
portfolio. Regular rebalancing can potentially help you protect your gains and
prepare for what happens next. I encourage you to contact a USAA advisor with
any questions or for assistance in updating your investment plan.
Whatever happens in the months ahead, you can be assured that our portfolio
management team will continue working on your behalf. "Taper talk" is
distracting and market reaction can be extreme but at USAA Asset Management
Company, we recognize that the Fed's extraordinary monetary stimulus cannot go
on forever. Also, we believe the markets will find a way to manage without the
Fed's quantitative easing programs, as they have for most of the last 100 years.
From all of us here, thank you for your investment.
Sincerely,
/S/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Investment Management Company
Past performance is no guarantee of future results. o Diversification is a
technique to help reduce risk and does not guarantee a profit or prevent a loss.
o 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
MANAGER'S COMMENTARY 2
INVESTMENT OVERVIEW 4
FINANCIAL INFORMATION
Portfolio of Investments 8
Notes to Portfolio of Investments 22
Financial Statements 26
Notes to Financial Statements 29
EXPENSE EXAMPLE 40
ADVISORY AGREEMENT 42
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA 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)2013, USAA. All rights reserved.
================================================================================
================================================================================
FUND OBJECTIVE
THE USAA ULTRA SHORT-TERM BOND FUND (THE FUND) SEEKS TO PROVIDE HIGH CURRENT
INCOME CONSISTENT WITH PRESERVATION OF PRINCIPAL.
--------------------------------------------------------------------------------
TYPES OF INVESTMENTS
The Fund's principal investment strategy is to normally invest at least 80% of
the Fund's assets in investment-grade debt securities that have a
dollar-weighted average portfolio maturity of 18 months (one and a half years)
or less. These securities will consist primarily of U.S. dollar-denominated debt
securities that may include, but are not limited to, obligations of U.S., state,
and local governments, their agencies and instrumentalities; mortgage- and
asset-backed securities; corporate debt securities; repurchase agreements; and
other securities believed to have debt-like characteristics, including synthetic
securities. This 80% policy may be changed upon at least 60 days' written notice
to shareholders.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Asset Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
================================================================================
FUND OBJECTIVE | 1
================================================================================
MANAGER'S COMMENTARY ON THE FUND
TONY ERA
USAA Asset Management Company [PHOTO OF TONY ERA]
--------------------------------------------------------------------------------
o HOW DID THE USAA ULTRA SHORT-TERM BOND FUND (THE FUND) PERFORM DURING THE
REPORTING PERIOD?
For the reporting period, the Fund provided a total return of 0.37%. This
compares to the 0.07% return of the Lipper Ultra Short Funds Index and 0.03%
return of the Citigroup 3-Month T-Bill Index.
o WHAT WERE THE MARKET CONDITIONS DURING THE REPORTING PERIOD?
Federal Reserve (the Fed) monetary policy continued to drive the performance
of the financial markets during the reporting period. The Fed held short-term
interest rates near zero and continued to expand its balance sheet through
open-ended monthly purchases of U.S. Treasuries and agency mortgage-backed
securities. The Fed has been trying to stimulate economic growth by increasing
the prices of financial assets, such as stocks, and by fueling a housing
recovery. In the final weeks of the reporting period, the bond market grew
volatile after Fed Chairman Ben Bernanke told Congress that the Fed might
begin scaling back its stimulus measures if economic conditions continued to
improve. As a result, yields on longer-term bonds rose (and their prices fell)
in
Refer to page 5 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
================================================================================
2 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
anticipation of higher interest rates. Subsequently, the Fed sought to calm
jittery markets and first-quarter U.S. gross domestic product growth
indicated that the economy remained on a slow-growth trajectory. These both
acted to slightly dampen upward pressure on yields.
o WHAT WERE YOUR STRATEGIES FOR THE FUND?
In our view, the Fund's performance during the reporting period reflected
relative value opportunities found primarily within the corporate credit
sector. We also maintained a disciplined approach to liquidity management,
which gave us the ability to invest opportunistically during periods of market
volatility.
At the end of the reporting period, the fund had a weighted average maturity
(WAM) of close to one year at 1.2. The portfolio's duration, which is a
measure of its sensitivity to changes in interest rates, was one year.
o WHAT IS YOUR OUTLOOK?
In the months ahead, we expect the U.S. economy to continue growing slowly
toward recovery. In our opinion, the Fed is likely to continue to keep
short-term interest rates near zero until it sees a sustainable recovery in
employment. As a result, the yields on short-term bonds are likely to remain
low and given the ongoing low interest rate environment, we believe the
Fund's SEC yield may continue to trend downward. We will continue to seek
attractive investment opportunities, relying on our research analysts as we
strive to provide you with a high-quality diversified bond fund of short
duration.
We appreciate your continued confidence.
As interest rates rise, existing bond prices fall.
You will find a complete list of securities that the Fund owns on pages 8-21.
================================================================================
MANAGER'S COMMENTARY ON THE FUND | 3
================================================================================
INVESTMENT OVERVIEW
USAA ULTRA SHORT-TERM BOND FUND (THE FUND)(Ticker Symbol: UUSTX)
--------------------------------------------------------------------------------
6/30/13 12/31/12
--------------------------------------------------------------------------------
Net Assets $516.1 Million $417.6 Million
Net Asset Value Per Share $10.08 $10.12
Dollar-Weighted Average
Portfolio Maturity 1.2 Year 1.0 Year
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/13
--------------------------------------------------------------------------------
12/31/2012-6/30/2013* 1 Year Since Inception 10/18/10
0.37% 1.83% 1.84%
--------------------------------------------------------------------------------
30-DAY SEC YIELD** AS OF 6/30/13 EXPENSE RATIO AS OF 12/31/12***
--------------------------------------------------------------------------------
1.22% 0.59%
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 May 1, 2013, and is
calculated as a percentage of average net assets. This expense ratio may differ
from the expense ratio disclosed in the Financial Highlights, which excludes
acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
================================================================================
4 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA ULTRA SHORT-TERM LIPPER ULTRA-SHORT CITIGROUP 3-MONTH
BOND FUND FUNDS INDEX U.S. TREASURY BILL INDEX
10/31/2010 $10,000.00 $10,000.00 $10,000.00
11/30/2010 9,990.51 9,999.63 10,001.18
12/31/2010 9,990.55 10,001.43 10,002.47
1/31/2011 10,010.25 10,010.36 10,003.67
2/28/2011 10,032.31 10,022.47 10,004.80
3/31/2011 10,043.36 10,028.04 10,006.00
4/30/2011 10,075.82 10,046.48 10,007.05
5/31/2011 10,117.41 10,055.32 10,007.83
6/30/2011 10,119.72 10,057.04 10,008.33
7/31/2011 10,141.41 10,063.96 10,008.65
8/31/2011 10,133.47 10,054.67 10,009.13
9/30/2011 10,117.83 10,041.28 10,009.51
10/31/2011 10,149.84 10,055.48 10,009.88
11/30/2011 10,142.00 10,053.10 10,009.99
12/31/2011 10,150.41 10,058.88 10,010.08
1/31/2012 10,203.58 10,092.30 10,010.18
2/29/2012 10,238.65 10,111.50 10,010.40
3/31/2012 10,253.20 10,127.40 10,010.84
4/30/2012 10,287.80 10,141.92 10,011.41
5/31/2012 10,291.26 10,147.98 10,012.11
6/30/2012 10,316.42 10,158.77 10,012.73
7/31/2012 10,350.23 10,185.09 10,013.42
8/31/2012 10,385.83 10,204.92 10,014.13
9/30/2012 10,418.79 10,224.24 10,014.91
10/31/2012 10,443.70 10,232.20 10,015.75
11/30/2012 10,457.57 10,234.96 10,016.52
12/31/2012 10,468.36 10,238.23 10,017.27
1/31/2013 10,491.97 10,248.67 10,017.85
2/28/2013 10,516.22 10,255.22 10,018.30
3/31/2013 10,530.56 10,260.54 10,018.91
4/30/2013 10,544.03 10,271.15 10,019.57
5/31/2013 10,535.72 10,266.32 10,020.21
6/30/2013 10,506.12 10,245.46 10,020.62
[END CHART]
*Data from 10/31/10 to 6/30/13.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Ultra Short-Term Bond Fund to the following benchmarks:
o The unmanaged Lipper Ultra Short Funds Index tracks the total return
performance of the 10 largest funds within the Lipper Ultra Short Obligations
Funds category.
o The unmanaged Citigroup 3-Month U.S. Treasury Bill Index represents the total
return received by investors of 3-month U.S. Treasury securities.
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 performance of the Lipper Ultra Short Funds Index and Citigroup 3-Month
U.S. Treasury Bill Index is calculated from the end of the month, October 31,
2010, while the Fund's inception date is October 18, 2010. There may be a slight
variation of performance numbers because of this difference.
================================================================================
INVESTMENT OVERVIEW | 5
================================================================================
o PORTFOLIO MIX -- 6/30/2013 o
[PIE CHART OF PORTFOLIO MIX]
CORPORATE OBLIGATIONS 48.0%
EURODOLLAR AND YANKEE OBLIGATIONS 19.9%
COMMERCIAL MORTGAGE SECURITIES 10.9%
VARIABLE-RATE DEMAND NOTES 9.9%
MUNICIPAL BONDS 6.4%
ASSET-BACKED SECURITIES 4.6%
U.S. GOVERNMENT AGENCY ISSUES 0.7%
MONEY MARKET FUNDS 0.1%
[END CHART]
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
6 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
o PORTFOLIO RATINGS MIX -- 6/30/2013 o
[PIE CHART OF PORTFOLIO RATINGS MIX]
A 29.3%
AA 17.8%
AAA 13.1%
BBB 34.0%
BELOW INVESTMENT-GRADE 5.2%
UNRATED 0.6%
[END CHART]
The four highest long-term credit ratings, in descending order of credit
quality, are AAA, AA, A, and BBB. These categories represent investment-grade
quality. This chart reflects the highest rating of a Nationally Recognized
Statistical Rating Organization and includes any related credit enhancements
(for a definition of "Credit Enhancements," see the Categories and Definitions
section within the Portfolio of Investments). Any of the Fund's securities that
are not rated by these agencies appear in the chart above as "Unrated," but are
monitored and evaluated by USAA Asset Management Company on an ongoing basis.
Government securities that are issued or guaranteed as to principal and interest
by the U.S. government are not rated but are treated as AAA for credit quality
purposes. Securities within the Short-Term Investment-Grade ratings category
are those that are ranked in the top two short-term credit ratings for the
respective rating agency (which are A-1 and A-2 for S&P and P-1 and P-2 for
Moody's, F1 and F2 for Fitch, and R-1 and R-2 for Dominion). Short-term ratings
are generally assigned to those obligations considered short-term; such
obligations generally have an original maturity not exceeding 13 months, unless
explicitly noted. The Below Investment-Grade category includes both long-term
and short-term securities.
Percentages are of the total market value of the Fund's investments.
You will find a complete list of securities that the Fund owns on pages 8-21.
================================================================================
INVESTMENT OVERVIEW | 7
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 2013 (unaudited)
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (48.0%)
CONSUMER DISCRETIONARY (3.4%)
-----------------------------
AUTOMOBILE MANUFACTURERS (0.7%)
$ 1,000 Ford Motor Credit Co., LLC 1.53%(a) 5/09/2016 $ 1,008
1,000 Ford Motor Credit Co., LLC 1.70 5/09/2016 984
1,375 Nissan Motor Acceptance Corp.(b) 4.50 1/30/2015 1,450
--------
3,442
--------
CABLE & SATELLITE (0.2%)
1,000 NBC Universal Enterprise(b) 0.82(a) 4/15/2016 1,004
--------
CASINOS & GAMING (1.3%)
2,464 Las Vegas Sands, LLC(c) 1.70 5/23/2014 2,467
506 Las Vegas Sands, LLC(c) 1.70 5/23/2014 506
1,990 MGM Resorts International(c) 3.20 12/20/2017 1,991
2,000 VML US Finance, LLC(c),(d) 2.67 11/15/2016 1,985
--------
6,949
--------
HOTELS, RESORTS & CRUISE LINES (0.6%)
1,865 Hyatt Hotels Corp. 3.88 8/15/2016 1,967
1,000 Royal Caribbean Cruises Ltd. 6.88 12/01/2013 1,022
--------
2,989
--------
HOUSEWARES & SPECIALTIES (0.2%)
1,000 Newell Rubbermaid, Inc. 2.00 6/15/2015 1,013
--------
SPECIALTY STORES (0.4%)
2,000 Staples, Inc. 2.75 1/12/2018 2,003
--------
Total Consumer Discretionary 17,400
--------
CONSUMER STAPLES (0.4%)
-----------------------
FOOD RETAIL (0.4%)
2,000 Safeway, Inc. 5.63 8/15/2014 2,099
--------
ENERGY (2.0%)
-------------
OIL & GAS EXPLORATION & PRODUCTION (0.3%)
1,650 EQT Corp. 5.15 3/01/2018 1,778
--------
OIL & GAS REFINING & MARKETING (0.2%)
1,000 Tesoro Corp.(c) 2.52 1/29/2016 1,002
--------
================================================================================
8 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
OIL & GAS STORAGE & TRANSPORTATION (1.5%)
$ 3,000 Boardwalk Pipelines, LLC 5.50% 2/01/2017 $ 3,313
900 Energy Transfer Equity, LP(c) 3.75 3/24/2017 904
1,205 Spectra Energy Capital, LLC 5.50 3/01/2014 1,240
2,000 Spectra Energy Partners, LP 2.95 6/15/2016 2,052
--------
7,509
--------
Total Energy 10,289
--------
FINANCIALS (33.5%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (0.2%)
1,000 State Street Bank & Trust Co. 0.47(a) 12/08/2015 997
--------
CONSUMER FINANCE (4.0%)
6,000 American Express Bank, FSB 0.49(a) 6/12/2017 5,917
4,000 American Honda Finance Corp.(b) 0.65(a) 5/26/2016 3,997
1,000 Capital One Bank USA, N.A. 5.13 2/15/2014 1,027
2,000 Capital One Financial Corp. 1.43(a) 7/15/2014 2,017
3,530 Capital One, N.A. 0.72(a) 3/22/2016 3,509
1,000 Caterpillar Financial Services Corp. 0.51(a) 2/26/2016 1,000
1,000 Ford Motor Credit Co., LLC 3.88 1/15/2015 1,031
2,000 Ford Motor Credit Co., LLC 2.75 5/15/2015 2,029
--------
20,527
--------
DIVERSIFIED BANKS (4.2%)
1,400 Abbey National Treasury Services 1.86(a) 4/25/2014 1,411
2,000 Barclays Bank plc 5.20 7/10/2014 2,087
975 HSBC USA, Inc. 4.63 4/01/2014 1,002
2,000 Lloyds TSB Bank plc 2.63(a) 1/24/2014 2,023
3,000 Societe Generale(b) 2.50 1/15/2014 3,037
1,400 SSIF Nevada, LP(b) 0.98(a) 4/14/2014 1,407
1,300 U.S. Bancorp 3.44 2/01/2016 1,364
2,000 Wachovia Corp. 0.62(a) 10/28/2015 1,978
3,000 Wachovia Corp. 0.65(a) 10/15/2016 2,948
2,500 Wells Fargo & Co. 0.48(a) 10/28/2015 2,490
2,000 Wells Fargo Bank N.A. 0.48(a) 5/16/2016 1,967
--------
21,714
--------
DIVERSIFIED CAPITAL MARKETS (0.4%)
1,000 Credit Suisse New York 3.50 3/23/2015 1,044
814 UBS AG 2.25 8/12/2013 815
--------
1,859
--------
INVESTMENT BANKING & BROKERAGE (1.0%)
5,000 Morgan Stanley 1.88(a) 1/24/2014 5,030
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 9
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE (3.0%)
$ 2,067 Lincoln National Corp. 4.30% 6/15/2015 $ 2,193
1,000 MetLife Global Funding I(b) 1.03(a) 1/10/2014 1,004
725 MetLife Global Funding I(b) 5.13 6/10/2014 756
2,000 MetLife Global Funding I(b) 1.88 6/22/2018 1,968
1,500 MetLife Institutional Fund(b) 1.18(a) 4/04/2014 1,510
1,000 New York Life Global Funding(b) 1.30 1/12/2015 1,010
1,000 New York Life Global Funding(b) 0.80 2/12/2016 994
365 Pricoa Global Funding I(b) 5.30 9/27/2013 369
1,000 Principal Life Global Funding II(b) 1.00 12/11/2015 1,001
2,000 Principal Life Income Funding Trust 5.55 4/27/2015 2,171
2,700 Prudential Covered Trust(b) 3.00 9/30/2015 2,788
--------
15,764
--------
MULTI-SECTOR HOLDINGS (1.1%)
5,000 Leucadia National Corp. 8.13 9/15/2015 5,631
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (6.2%)
2,000 Bank of America Corp. 1.83(a) 7/11/2014 2,022
1,000 Bank of America Corp. 1.09(a) 3/22/2016 998
2,500 Bank of America Corp. 0.61(a) 8/15/2016 2,413
2,000 Bank of America Corp. 0.54(a) 10/14/2016 1,959
1,500 Citigroup, Inc. 5.13 5/05/2014 1,549
1,000 Citigroup, Inc. 5.00 9/15/2014 1,040
1,000 Citigroup, Inc. 2.25 8/07/2015 1,017
1,000 Citigroup, Inc. 1.25 1/15/2016 989
4,000 Citigroup, Inc. 0.54(a) 6/09/2016 3,863
900 General Electric Capital Corp. 1.27(a) 9/23/2013 902
1,000 General Electric Capital Corp. 0.53(a) 9/15/2014 1,001
2,000 General Electric Capital Corp. 1.31(a) 7/02/2015 2,032
1,000 General Electric Capital Corp. 0.88(a) 12/11/2015 1,007
1,500 General Electric Capital Corp. 0.48(a) 1/08/2016 1,492
2,565 JPMorgan Chase & Co.(e) 5.13 9/15/2014 2,692
2,168 JPMorgan Chase & Co. 5.25 5/01/2015 2,315
2,841 JPMorgan Chase & Co. 1.49(a) 9/01/2015 2,842
2,000 Merrill Lynch & Co., Inc. 0.74(a) 1/15/2015 1,978
--------
32,111
--------
PROPERTY & CASUALTY INSURANCE (0.3%)
1,374 CNA Financial Corp. 5.85 12/15/2014 1,462
--------
REGIONAL BANKS (5.5%)
2,000 Associated Banc Corp. 1.88 3/12/2014 2,004
6,000 Branch Banking & Trust Co.(e) 0.59(a) 9/13/2016 5,941
2,200 Fifth Third Bancorp 0.69(a) 12/20/2016 2,161
================================================================================
10 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
$ 3,000 Fifth Third Bank 0.68%(a) 2/26/2016 $ 3,005
1,968 Key Bank, N.A. 4.95 9/15/2015 2,121
661 National City Bank 0.62(a) 12/15/2016 657
500 PNC Funding Corp. 0.48(a) 1/31/2014 500
1,500 Regions Financial Corp. 7.75 11/10/2014 1,621
1,000 Suntrust Bank 0.58(a) 4/01/2015 993
3,900 Suntrust Bank 0.56(a) 8/24/2015 3,871
772 Suntrust Bank 5.00 9/01/2015 828
1,000 Zions Bancorp. 3.50 9/15/2015 1,001
3,500 Zions Bancorp. 6.00 9/15/2015 3,622
--------
28,325
--------
REITs - DIVERSIFIED (1.2%)
850 Colonial Realty, LP 5.50 10/01/2015 918
1,275 Liberty Property, LP 5.65 8/15/2014 1,338
2,000 Washington REIT 5.25 1/15/2014 2,041
2,000 Washington REIT 5.35 5/01/2015 2,130
--------
6,427
--------
REITs - INDUSTRIAL (0.1%)
600 ProLogis, LP 4.00 1/15/2018 623
--------
REITs - OFFICE (1.9%)
530 CommonWealth REIT 5.75 2/15/2014 533
1,942 CommonWealth REIT 5.75 11/01/2015 2,055
1,595 Digital Realty Trust, LP 4.50 7/15/2015 1,674
640 Mack-Cali Realty, LP 5.13 1/15/2015 673
2,552 Mack-Cali Realty, LP 2.50 12/15/2017 2,511
2,240 Reckson Operating Partnership, LP 5.88 8/15/2014 2,339
--------
9,785
--------
REITs - RESIDENTIAL (0.2%)
1,000 UDR, Inc. 5.50 4/01/2014 1,032
--------
REITs - RETAIL (3.1%)
1,120 DDR Corp. 5.50 5/01/2015 1,199
820 Equity One, Inc. 6.00 9/15/2017 913
500 Federal Realty Investment Trust 5.95 8/15/2014 527
1,450 Kimco Realty Corp. 4.82 6/01/2014 1,501
905 Kimco Realty Corp. 5.58 11/23/2015 991
4,050 National Retail Properties, Inc. 6.25 6/15/2014 4,239
500 Pan Pacific Retail Properties, Inc. 5.25 9/01/2015 540
2,000 Regency Centers, LP 5.25 8/01/2015 2,152
2,596 Simon Property Group, LP 4.20 2/01/2015 2,705
1,000 Weingarten Realty Investors 4.99 9/03/2013 1,006
--------
15,773
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 11
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
REITs - SPECIALIZED (1.1%)
$ 1,680 Health Care Property Investors, Inc. 5.65% 12/15/2013 $ 1,718
1,000 Health Care Property Investors, Inc. 5.63 5/01/2017 1,115
755 Hospitality Properties Trust 5.13 2/15/2015 782
2,130 Hospitality Properties Trust 6.30 6/15/2016 2,317
--------
5,932
--------
Total Financials 172,992
--------
HEALTH CARE (1.2%)
------------------
HEALTH CARE FACILITIES (0.5%)
1,700 HCA, Inc.(c) 2.69 2/02/2016 1,696
1,000 HCA, Inc.(c) 3.03 3/31/2017 996
--------
2,692
--------
HEALTH CARE SERVICES (0.1%)
768 Laboratory Corp. of America Holdings 2.20 8/23/2017 763
--------
HEALTH CARE SUPPLIES (0.2%)
1,000 DENTSPLY International, Inc. 1.78(a) 8/15/2013 1,002
--------
PHARMACEUTICALS (0.4%)
2,000 AbbVie, Inc.(b) 1.03(a) 11/06/2015 2,020
--------
Total Health Care 6,477
--------
INDUSTRIALS (1.6%)
------------------
TRADING COMPANIES & DISTRIBUTORS (0.4%)
2,000 International Lease Finance Corp. 2.22(a) 6/15/2016 1,995
--------
TRUCKING (1.2%)
1,000 Penske Truck Leasing Co., LP / PTL Finance Corp.(b) 2.50 7/11/2014 1,015
3,000 Penske Truck Leasing Co., LP / PTL Finance Corp.(b) 3.13 5/11/2015 3,101
1,000 Penske Truck Leasing Co., LP / PTL Finance Corp.(b) 2.50 3/15/2016 1,018
1,000 Penske Truck Leasing Co., LP / PTL Finance Corp.(b) 2.88 7/17/2018 1,011
--------
6,145
--------
Total Industrials 8,140
--------
INFORMATION TECHNOLOGY (1.3%)
-----------------------------
COMPUTER HARDWARE (0.9%)
1,000 Hewlett Packard Co. 1.25 9/13/2013 1,001
1,500 Hewlett Packard Co. 6.13 3/01/2014 1,551
2,000 HP Enterprise Services, LLC 6.00 8/01/2013 2,008
--------
4,560
--------
OFFICE ELECTRONICS (0.4%)
2,000 Xerox Corp. 1.67(a) 9/13/2013 2,003
--------
Total Information Technology 6,563
--------
================================================================================
12 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
MATERIALS (1.2%)
---------------
ALUMINUM (0.2%)
$ 1,000 Alcoa, Inc. 5.55% 2/01/2017 $ 1,063
--------
CONSTRUCTION MATERIALS (0.6%)
3,000 Lafarge North America, Inc. 6.88 7/15/2013 3,013
--------
GOLD (0.2%)
1,000 Barrick Gold Finance Co. 4.88 11/15/2014 1,028
--------
SPECIALTY CHEMICALS (0.2%)
1,000 Ashland, Inc.(b) 3.00 3/15/2016 1,010
--------
Total Materials 6,114
--------
UTILITIES (3.4%)
----------------
ELECTRIC UTILITIES (1.9%)
2,000 Duke Energy Corp. 2.10 6/15/2018 1,990
1,000 Entergy New Orleans, Inc. 5.25 8/01/2013 1,003
2,500 ITC Holdings Corp.(b) 5.25 7/15/2013 2,503
532 NextEra Energy Capital Holdings, Inc. 2.55 11/15/2013 536
710 PPL Energy Supply, LLC 5.70 10/15/2015 763
3,186 Trans-Allegheny Interstate Line Co.(b) 4.00 1/15/2015 3,310
--------
10,105
--------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.8%)
711 AES Corp. 7.75 3/01/2014 735
1,500 AES Corp. 7.75 10/15/2015 1,661
1,750 Curtis Palmer, Inc.(b) 5.90 7/15/2014 1,749
--------
4,145
--------
MULTI-UTILITIES (0.7%)
2,000 Alliant Energy Corp. 4.00 10/15/2014 2,076
1,500 CMS Energy Corp. 2.75 5/15/2014 1,521
--------
3,597
--------
Total Utilities 17,847
--------
Total Corporate Obligations (cost: $246,658) 247,921
--------
EURODOLLAR AND YANKEE OBLIGATIONS (19.9%)
CONSUMER DISCRETIONARY (1.0%)
-----------------------------
AUTOMOBILE MANUFACTURERS (1.0%)
2,000 Daimler Finance N.A., LLC(b) 1.61(a) 7/11/2013 2,000
2,000 Daimler Finance N.A., LLC(b) 0.88(a) 1/09/2015 2,007
1,000 Daimler Finance N.A., LLC(b) 1.65 4/10/2015 1,009
--------
5,016
--------
Total Consumer Discretionary 5,016
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
ENERGY (2.6%)
-------------
INTEGRATED OIL & GAS (2.2%)
$ 2,500 BP Capital Markets plc 1.63% 8/17/2017 $ 2,445
2,000 Petrobras Global Finance B.V. 1.89(a) 5/20/2016 1,993
2,000 Petrobras International Finance Co. 3.88 1/27/2016 2,068
2,000 Petrobras International Finance Co. 3.50 2/06/2017 1,996
3,000 TransCanada PipeLines Ltd. 0.95(a) 6/30/2016 3,000
--------
11,502
--------
OIL & GAS EXPLORATION & PRODUCTION (0.4%)
2,000 Woodside Finance Ltd.(b) 4.50 11/10/2014 2,088
--------
Total Energy 13,590
--------
FINANCIALS (7.8%)
-----------------
DIVERSIFIED BANKS (5.9%)
2,000 ABN AMRO Bank N.V.(b) 1.38 1/22/2016 1,987
1,000 ANZ National International Ltd.(b) 3.13 8/10/2015 1,040
1,000 ANZ National International Ltd.(b) 1.85 10/15/2015 1,015
1,500 BPCE S.A.(b) 2.02(a) 2/07/2014 1,512
970 Commonwealth Bank of Australia(b) 3.75 10/15/2014 1,008
1,500 Commonwealth Bank of Australia 1.95 3/16/2015 1,528
2,000 HSBC USA, Inc. 2.38 2/13/2015 2,045
1,500 National Australia Bank Ltd.(b) 1.00(a) 4/11/2014 1,508
1,000 National Australia Bank Ltd.(b) 1.23(a) 7/25/2014 1,010
1,000 Norddeutsche Landesbank Girozentrale(b) 0.88 10/16/2015 999
1,000 Nordea Bank AB(b) 1.18(a) 1/14/2014 1,005
1,950 Rabobank Nederland(b) 3.20 3/11/2015 2,023
3,500 Santander Holdings USA, Inc. 3.00 9/24/2015 3,591
2,250 Standard Chartered plc(b) 1.23(a) 5/12/2014 2,266
2,000 Standard Chartered plc(b) 3.20 5/12/2016 2,094
1,000 Sumitomo Mitsui Banking Corp.(b) 1.23(a) 7/22/2014 1,008
1,500 Westpac Banking Corp. 2.10 8/02/2013 1,502
1,000 Westpac Banking Corp.(b) 1.53(a) 1/30/2014 1,007
2,000 Westpac Banking Corp.(b) 1.01(a) 3/31/2014 2,010
--------
30,158
--------
OTHER DIVERSIFIED FINANCIAL SERVICES (1.6%)
300 ING Bank N.V.(b) 1.60(a) 10/18/2013 301
2,000 ING Bank N.V.(b) 1.91(a) 9/25/2015 2,039
2,000 ING Bank N.V.(b) 2.00 9/25/2015 2,018
2,000 ING Bank N.V.(b) 1.22(a) 3/07/2016 2,004
2,000 JPMorgan Chase & Co. 0.99(a) 3/31/2016 1,977
--------
8,339
--------
================================================================================
14 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
REITs - RETAIL (0.3%)
$ 1,660 WEA Finance(b) 7.50% 6/02/2014 $ 1,764
--------
Total Financials 40,261
--------
HEALTH CARE (0.4%)
------------------
PHARMACEUTICALS (0.4%)
1,990 Valeant Pharmaceuticals International, Inc.(c) 3.50 2/13/2019 1,980
--------
INDUSTRIALS (3.4%)
------------------
AIRPORT SERVICES (0.6%)
3,000 Heathrow Funding Ltd.(b) 2.50 6/25/2015 3,049
--------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.3%)
1,500 CNH Capital, LLC 3.88 11/01/2015 1,515
--------
DIVERSIFIED SUPPORT SERVICES (1.0%)
5,000 Brambles USA, Inc.(b) 3.95 4/01/2015 5,223
--------
INDUSTRIAL CONGLOMERATES (1.2%)
2,525 Hutchison Whampoa Ltd.(b) 4.63 9/11/2015 2,698
4,000 Hutchison Whampoa Ltd.(b) 2.00 11/08/2017 3,894
--------
6,592
--------
RAILROADS (0.3%)
1,500 Asciano Finance Ltd.(b) 3.13 9/23/2015 1,534
--------
Total Industrials 17,913
--------
INFORMATION TECHNOLOGY (0.2%)
-----------------------------
SEMICONDUCTOR EQUIPMENT (0.2%)
1,000 TSMC Global Ltd.(b) 0.95 4/03/2016 986
--------
MATERIALS (4.1%)
----------------
DIVERSIFIED METALS & MINING (2.7%)
1,250 Anglo American Capital(b) 2.15 9/27/2013 1,254
2,000 Glencore Funding, LLC(b) 6.00 4/15/2014 2,070
2,000 Glencore Funding, LLC(b) 1.70 5/27/2016 1,941
3,000 Rio Tinto Finance USA plc 1.11(a) 6/17/2016 3,001
1,000 Rio Tinto Finance USA plc 1.63 8/21/2017 982
1,000 Vedanta Resources plc(b) 6.75 6/07/2016 1,017
1,750 Xstrata Finance Canada Ltd.(b) 2.85 11/10/2014 1,782
2,000 Xstrata Finance Canada Ltd.(b) 2.05 10/23/2015 2,002
--------
14,049
--------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.6%)
3,000 Yara International ASA(b) 5.25 12/15/2014 3,160
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
STEEL (0.8%)
$ 2,000 ArcelorMittal 4.25% 2/25/2015 $ 2,018
2,000 ArcelorMittal 4.25 3/01/2016 2,015
--------
4,033
--------
Total Materials 21,242
--------
TELECOMMUNICATION SERVICES (0.1%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.1%)
300 Telecom Italia Capital 5.25 11/15/2013 304
--------
UTILITIES (0.3%)
----------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.3%)
1,500 Transalta Corp. 4.75 1/15/2015 1,569
--------
Total Eurodollar and Yankee Obligations
(cost: $102,653) 102,861
--------
ASSET-BACKED SECURITIES (4.6%)
FINANCIALS (4.6%)
-----------------
ASSET-BACKED FINANCING (4.6%)
2,000 AmeriCredit Automobile Receivables Trust 4.26 2/08/2017 2,093
2,000 AmeriCredit Automobile Receivables Trust 4.00 5/08/2017 2,078
1,005 AmeriCredit Automobile Receivables Trust 2.42 5/08/2018 1,018
3,500 Arran Residential Mortgages Funding plc(b) 1.72(a) 11/19/2047 3,550
1,000 Credit Acceptance Auto Loan Trust(b) 1.21 10/15/2020 993
1,000 Credit Acceptance Auto Loan Trust(b) 1.83 4/15/2021 988
1,057 Enterprise Fleet Financing, LLC(b) 1.62 5/20/2017 1,062
1,000 GE Dealer Floorplan Master Note Trust 0.60(a) 4/20/2018 996
1,812 Gracechurch Mortgage Financing plc(b) 1.82(a) 11/20/2056 1,843
615 Holmes Master Issuer plc(b) 1.68(a) 10/15/2054 619
1,500 Holmes Master Issuer plc(b) 1.83(a) 10/21/2054 1,521
2,000 Permanent Master Issuer plc(b) 1.68(a) 7/15/2042 2,013
1,059 Santander Consumer Acquired Receivable(b) 2.01 8/15/2016 1,065
1,330 Santander Drive Auto Receivables Trust 2.35 11/16/2015 1,341
1,855 Santander Drive Auto Receivables Trust 4.01 2/15/2017 1,921
222 Santander Drive Auto Receivables Trust(b) 1.48 5/15/2017 222
311 SLC Student Loan Trust 0.40(a) 1/15/2019 311
--------
23,634
--------
Total Financials 23,634
--------
Total Asset-Backed Securities (cost: $23,512) 23,634
--------
================================================================================
16 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE SECURITIES (10.9%)
FINANCIALS (10.9%)
------------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (10.9%)
$ 162 Banc of America Commercial Mortgage, Inc. 4.50% 7/10/2043 $ 162
1,500 Banc of America Commercial Mortgage, Inc. 4.73 7/10/2043 1,568
1,975 Banc of America Commercial Mortgage, Inc. 5.60 7/10/2046 1,976
2,405 Banc of America Commercial Mortgage, Inc. 5.68 7/10/2046 2,672
3,275 Banc of America Commercial Mortgage, Inc. 5.62 2/10/2051 3,332
2,393 Banc of America Commercial Mortgage, Inc. 6.02 2/10/2051 2,392
709 Bear Stearns Commercial Mortgage Securities, Inc. 5.62 3/11/2039 721
1,445 Bear Stearns Commercial Mortgage Securities, Inc. 4.67 6/11/2041 1,522
1,000 Chase Commercial Mortgage Securities Corp.(b) 6.56 5/18/2030 1,021
5 Citigroup Deutsche Bank Commercial
Mortgage Trust 5.27 7/15/2044 5
2,218 Citigroup Deutsche Bank Commercial
Mortgage Trust 5.28 12/11/2049 2,299
1,478 Credit Suisse First Boston Mortgage
Securities Corp. 4.83 4/15/2037 1,554
1,627 Credit Suisse First Boston Mortgage
Securities Corp. 5.10 8/15/2038 1,637
1,690 GE Capital Commercial Mortgage Corp. 5.47 11/10/2045 1,687
2,000 Greenwich Capital Commercial Funding Corp. 6.06 7/10/2038 2,191
3,000 GS Mortgage Securities Corp. II 5.62 4/10/2038 3,216
2,000 GS Mortgage Securities Corp. II 4.75 7/10/2039 2,103
1,622 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 4.65 1/12/2037 1,628
3,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.12 7/15/2041 3,112
1,155 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.51 1/12/2043 1,230
1,226 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.45 12/12/2043 1,225
1,500 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.40 12/15/2044 1,529
633 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 6.06 4/15/2045 661
3,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.82 2/12/2051 3,089
867 LB-UBS Commercial Mortgage Trust 5.17 11/15/2030 888
948 LB-UBS Commercial Mortgage Trust 4.57 1/15/2031 964
30 LB-UBS Commercial Mortgage Trust 5.08 2/15/2031 30
1,201 LB-UBS Commercial Mortgage Trust 5.35 2/15/2040 1,234
1,550 LB-UBS Commercial Mortgage Trust 5.40 2/15/2040 1,578
835 Merrill Lynch Mortgage Trust 5.83 5/12/2039 837
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
$ 997 Merrill Lynch-Countrywide Commercial
Mortgage Trust 6.06% 8/12/2049 $ 1,023
1,085 Morgan Stanley Capital I, Inc. 4.97 8/13/2042 1,111
2,030 Morgan Stanley Capital I, Inc. 5.33 3/15/2044 2,106
219 Morgan Stanley Capital I, Inc. 4.51 7/15/2056 221
500 Timberstar Trust(b) 6.21 10/15/2036 526
133 Wachovia Bank Commercial Mortgage Trust 5.49 12/15/2044 133
555 Wachovia Bank Commercial Mortgage Trust 5.58 3/15/2045 561
348 Wachovia Bank Commercial Mortgage Trust 5.94 6/15/2045 352
1,997 Wachovia Bank Commercial Mortgage Trust 5.31 11/15/2048 2,029
--------
56,125
--------
Total Financials 56,125
--------
Total Commercial Mortgage Securities
(cost: $56,307) 56,125
--------
U.S. GOVERNMENT AGENCY ISSUES (0.7%)(g)
COMMERCIAL MORTGAGE-BACKED SECURITIES (0.7%)
14,819 Fannie Mae(+) 2.25 12/25/2019 1,401
22,676 Freddie Mac(+) 1.74 4/25/2017 1,185
5,298 Freddie Mac(+) 3.09 1/25/2019 735
6,194 Freddie Mac(+) 1.40 11/25/2019 441
--------
3,762
--------
Total U.S. Government Agency Issues (cost: $3,767) 3,762
--------
MUNICIPAL BONDS (6.4%)
AGRICULTURAL PRODUCTS (0.4%)
2,000 Washington County 1.38 9/01/2030(f) 2,001
--------
AIRPORT/PORT (0.8%)
1,000 Chicago Midway Airport 3.53 1/01/2041(f) 1,040
1,500 Greater Orlando Aviation Auth. 4.50 10/01/2013 1,515
1,500 Houston Airport System 5.00 7/01/2013 1,501
--------
4,056
--------
EDUCATION (0.4%)
1,000 New Jersey EDA 3.10 9/01/2013 1,005
855 Pinellas County Educational Facilities Auth. 5.00 10/01/2014 898
--------
1,903
--------
ELECTRIC UTILITIES (0.8%)
3,000 Beaver County IDA 2.20 1/01/2035(f) 2,993
500 West Virginia EDA 4.85 5/01/2019(f) 504
500 West Virginia EDA 2.25 1/01/2041(f) 504
--------
4,001
--------
================================================================================
18 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
ELECTRIC/GAS UTILITIES (0.5%)
$ 1,000 Jackson Energy Auth. 1.50% 4/01/2017 $ 976
1,500 South Carolina Public Service Auth. 0.89(a) 6/02/2014 1,498
--------
2,474
--------
ENVIRONMENTAL & FACILITIES SERVICES (1.2%)
1,000 California Pollution Control Financing Auth. 2.63 12/01/2027(f) 1,007
2,000 Maricopa County IDA 2.63 12/01/2031(f) 2,014
1,500 New Jersey EDA 2.20 11/01/2013 1,502
2,000 South Carolina Jobs EDA 2.25 11/01/2016(f) 2,004
--------
6,527
--------
GENERAL OBLIGATION (0.5%)
1,760 Illinois State 4.42 4/01/2015 1,843
1,000 Rockland County 2.25 3/14/2014 1,006
--------
2,849
--------
INTEGRATED OIL & GAS (0.3%)
1,500 Whiting Environmental Facilities 2.80 6/01/2044(f) 1,534
--------
MULTI-LINE INSURANCE (0.4%)
1,890 Irvine Ranch Water District Joint Power Agency 2.39 3/15/2014 1,889
--------
PAPER PRODUCTS (0.1%)
660 Savannah EDA 5.10 8/01/2014 680
--------
TOLL ROADS (1.0%)
2,500 North Texas Tollway Auth. 2.31 9/01/2013 2,506
2,000 North Texas Tollway Auth. 2.44 9/01/2013 2,007
500 Tampa-Hillsborough County Expressway Auth. 1.79 7/01/2017 485
--------
4,998
--------
Total Municipal Bonds (cost: $32,788) 32,912
--------
MONEY MARKET INSTRUMENTS (10.0%)
VARIABLE-RATE DEMAND NOTES (9.9%)
CONSUMER DISCRETIONARY (0.5%)
-----------------------------
EDUCATION SERVICES (0.5%)
2,520 Frisch School (LOC - Sovereign Bank) 0.84 5/01/2036 2,520
--------
FINANCIALS (0.9%)
-----------------
REAL ESTATE OPERATING COMPANIES (0.9%)
4,400 MOBR 04, LLC (LOC - Compass Bank) 1.78 9/01/2024 4,400
--------
INDUSTRIALS (1.0%)
------------------
AIRPORT SERVICES (1.0%)
4,950 Metropolitan Nashville Airport Auth.
(LOC - Regions Bank)(e) 2.13 4/01/2030 4,950
--------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
MATERIALS (2.1%)
----------------
STEEL (2.1%)
$ 2,500 Berkeley County 0.38% 9/01/2028 $ 2,500
3,500 Blytheville 0.38 6/01/2028 3,500
1,000 Decatur IDB 0.38 8/01/2036 1,000
3,500 Indiana Finance Auth. (LOC - Banco Bilbao
Vizcaya Argentaria S.A.) 0.60 8/01/2030 3,500
500 St. James Parish 0.30 11/01/2040 500
--------
11,000
--------
Total Materials 11,000
--------
MUNICIPAL BONDS (4.3%)
----------------------
AIRPORT/PORT (0.0%)
10 Clark County (LOC - Landesbank Baden
Wurttemberg) 0.30 7/01/2029 10
--------
APPROPRIATED DEBT (1.5%)
7,750 Emmaus General Auth. (INS)(LIQ) 0.35 12/01/2028 7,750
--------
GENERAL OBLIGATION (1.4%)
4,500 Illinois State (LIQ) 2.00 10/01/2033 4,500
3,000 Lancaster County (INS)(LIQ) 0.40 3/01/2030 3,000
--------
7,500
--------
MULTIFAMILY HOUSING (0.7%)
1,600 Dallas Housing Finance Corp. (LIQ)(NBGA)(b) 1.00 9/01/2019 1,600
1,975 Southeast Texas Housing Finance Corp.
(LIQ)(NBGA)(b) 1.00 6/01/2019 1,975
--------
3,575
--------
MUNICIPAL FINANCE (0.1%)
700 Delaware Valley Regional Finance Auth.
(LOC - Bayerische Landesbank) 0.32 12/01/2020 700
--------
NURSING/CCRC (0.4%)
1,900 New Jersey EDA
(LOC - Valley National Bank) 0.28 11/01/2040 1,900
--------
SOLID WASTE DISPOSAL (0.2%)
820 Marion County IDA (LOC - SunTrust Bank) 0.23 10/01/2026 820
--------
Total Municipal Bonds 22,255
--------
UTILITIES (1.1%)
----------------
ELECTRIC UTILITIES (0.9%)
5,000 Indiana Dev. Finance Auth. 0.32 12/01/2038 5,000
--------
================================================================================
20 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------
WATER UTILITIES (0.2%)
$ 930 Iowa Finance Auth. (LOC - Societe Generale) 0.48% 11/01/2017 $ 930
--------
Total Utilities 5,930
--------
Total Variable-Rate Demand Notes 51,055
--------
----------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
----------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (0.1%)
322,152 State Street Institutional Liquid Reserve Fund, 0.09%(h) 322
--------
Total Money Market Instruments (cost: $51,377) 51,377
--------
TOTAL INVESTMENTS (COST: $517,062) $518,592
========
---------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
---------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
---------------------------------------------------------------------------------------------------
Bonds:
Corporate Obligations $ - $247,921 $- $247,921
Eurodollar and Yankee Obligations - 102,861 - 102,861
Asset-Backed Securities - 23,634 - 23,634
Commercial Mortgage Securities - 56,125 - 56,125
U.S. Government Agency Issues - 3,762 - 3,762
Municipal Bonds - 32,912 - 32,912
Money Market Instruments:
Variable-Rate Demand Notes - 51,055 - 51,055
Money Market Funds 322 - - 322
---------------------------------------------------------------------------------------------------
Total $322 $518,270 $- $518,592
---------------------------------------------------------------------------------------------------
For the period of January 1, 2013, through June 30, 2013, there were no
transfers of securities between levels. The Fund's policy is to recognize any
transfers into and out of the levels as of the beginning of the period in which
the event or circumstance that caused the transfer occurred.
================================================================================
PORTFOLIO OF INVESTMENTS | 21
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
June 30, 2013 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net
assets. Investments in foreign securities were 19.9% of net assets at June
30, 2013.
o CATEGORIES AND DEFINITIONS
EURODOLLAR AND YANKEE OBLIGATIONS -- Eurodollar obligations are dollar-
denominated instruments that are issued outside the U.S. capital markets by
foreign corporations and financial institutions and by foreign branches of
U.S. corporations and financial institutions. Yankee obligations are
dollar-denominated instruments that are issued by foreign issuers in the
U.S. capital markets.
ASSET-BACKED AND COMMERCIAL MORTGAGE-BACKED SECURITIES -- Asset-backed
securities represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets. Commercial
mortgage-backed securities reflect an interest in, and are secured by,
mortgage loans on commercial real property. These securities represent
ownership in a pool of loans and are divided into pieces (tranches) with
varying maturities. The stated final maturity of such securities represents
when the final principal payment will be made for all underlying loans. The
weighted average life is the
================================================================================
22 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
average time for principal to be repaid, which is calculated by assuming
prepayment rates of the underlying loans. The weighted average life is
likely to be substantially shorter than the stated final maturity as a
result of scheduled principal payments and unscheduled principal
prepayments. Stated interest rates on commercial mortgage-backed securities
may change slightly over time as underlying mortgages pay down.
VARIABLE-RATE DEMAND NOTES (VRDNs) -- provide the right to sell the
security at face value on either that day or within the rate-reset period.
The interest rate is adjusted at a stipulated daily, weekly, monthly,
quarterly, or other specified time interval to reflect current market
conditions. VRDNs will normally trade as if the maturity is the earlier put
date, even though stated maturity is longer.
o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S)
EDA Economic Development Authority
IDA Industrial Development Authority/Agency
IDB Industrial Development Board
REIT Real estate investment trust
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 Assured Guaranty
Corp. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that
value may fluctuate for other reasons, and there is no assurance
that the insurance company will meet its obligations.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 23
================================================================================
(LIQ) Liquidity enhancement that may, under certain circumstances,
provide for repayment of principal and interest upon demand from
one of the following: DEPFA Bank plc, PNC Bank, N.A, 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 Citigroup, Inc.
o SPECIFIC NOTES
(a) Variable-rate or floating-rate security -- interest rate is adjusted
periodically. The interest rate disclosed represents the current rate
at June 30, 2013.
(b) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by
Rule 144A, and as such has been deemed liquid by USAA Asset Management
Company (the Manager) under liquidity guidelines approved by the Board
of Trustees (the Board), unless otherwise noted as illiquid.
(c) Senior loan (loan) -- is not registered under the Securities Act of
1933. The loan contains certain restrictions on resale and cannot be
sold publicly. The interest rate is adjusted periodically, and the
rate disclosed represents the current rate at June 30, 2013. The
weighted average life of the loan is likely to be shorter than the
stated final maturity date due to mandatory or optional prepayments.
Security deemed liquid by the Manager, under liquidity guidelines
approved by the Board, unless otherwise noted as illiquid.
(d) At June 30, 2013, the aggregate market value of securities purchased
on a delayed-delivery basis was $1,985,000.
================================================================================
24 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
(e) At June 30, 2013, portions of these securities were segregated to
cover delayed-delivery and/or when-issued purchases.
(f) Put bond -- provides the right to sell the bond at face value at
specific tender dates prior to final maturity. The put feature
shortens the effective maturity of the security.
(g) U.S. government agency issues -- mortgage-backed securities issued by
Government National Mortgage Association (GNMA or Ginnie Mae) and
certain other U.S. government guaranteed securities are supported by
the full faith and credit of the U.S. government. Securities issued
by government-sponsored enterprises, such as Freddie Mac (Federal Home
Loan Mortgage Corporation or FHLMC) and Fannie Mae (Federal National
Mortgage Association or FNMA), indicated with a "+", are supported
only by the right of the government-sponsored enterprise to borrow
from the U.S. Treasury, the discretionary authority of the U.S.
government to purchase the government-sponsored enterprises'
obligations, or by the credit of the issuing agency, instrumentality,
or corporation, and are neither issued nor guaranteed by the U.S.
Treasury. In September of 2008, the U.S. Treasury placed Fannie Mae
and Freddie Mac under conservatorship and appointed the Federal
Housing Finance Agency (FHFA) to act as conservator and oversee their
daily operations. In addition, the U.S. Treasury entered into purchase
agreements with Fannie Mae and Freddie Mac to provide capital in
exchange for senior preferred stock.
(h) Rate represents the money market fund annualized seven-day yield at
June 30, 2013.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 25
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
June 30, 2013 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $517,062) $518,592
Cash 45
Receivables:
Capital shares sold 624
Interest 3,185
Securities sold 1,047
--------
Total assets 523,493
--------
LIABILITIES
Payables:
Securities purchased 6,028
Capital shares redeemed 1,176
Dividends on capital shares 56
Accrued management fees 114
Accrued transfer agent's fees 8
Other accrued expenses and payables 18
--------
Total liabilities 7,400
--------
Net assets applicable to capital shares outstanding $516,093
========
NET ASSETS CONSIST OF:
Paid-in capital $514,281
Overdistribution of net investment income (1)
Accumulated net realized gain on investments 283
Net unrealized appreciation of investments 1,530
--------
Net assets applicable to capital shares outstanding $516,093
========
Capital shares outstanding, unlimited number of shares
authorized, no par value 51,210
========
Net asset value, redemption price, and offering price per share $ 10.08
========
See accompanying notes to financial statements.
================================================================================
26 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended June 30, 2013 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 4,715
-------
EXPENSES
Management fees 615
Administration and servicing fees 337
Transfer agent's fees 176
Custody and accounting fees 61
Postage 5
Shareholder reporting fees 8
Trustees' fees 6
Registration fees 22
Professional fees 36
Other 7
-------
Total expenses 1,273
-------
NET INVESTMENT INCOME 3,442
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain 276
Change in net unrealized appreciation/depreciation (2,714)
-------
Net realized and unrealized loss (2,438)
-------
Increase in net assets resulting from operations $ 1,004
=======
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 27
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended June 30, 2013 (unaudited), and year ended
December 31, 2012
--------------------------------------------------------------------------------
6/30/2013 12/31/2012
------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 3,442 $ 5,527
Net realized gain on investments 276 261
Change in net unrealized appreciation/depreciation
of investments (2,714) 4,461
-----------------------
Increase in net assets resulting from operations 1,004 10,249
-----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,443) (5,527)
Net realized gains - (267)
-----------------------
Distributions to shareholders (3,443) (5,794)
-----------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 237,953 369,612
Reinvested dividends 3,336 5,567
Cost of shares redeemed (140,380) (207,830)
-----------------------
Increase in net assets from capital share transactions 100,909 167,349
-----------------------
Net increase in net assets 98,470 171,804
NET ASSETS
Beginning of period 417,623 245,819
-----------------------
End of period $ 516,093 $ 417,623
=======================
Overdistribution of net investment income:
End of period $ (1) $ -
=======================
CHANGE IN SHARES OUTSTANDING
Shares sold 23,494 36,706
Shares issued for dividends reinvested 330 552
Shares redeemed (13,866) (20,629)
-----------------------
Increase in shares outstanding 9,958 16,629
=======================
See accompanying notes to financial statements.
================================================================================
28 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
NOTES TO FINANCIAL STATEMENTS
June 30, 2013 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940, as amended (the 1940 Act), is an open-end management investment company
organized as a Delaware statutory trust consisting of 50 separate funds. The
information presented in this semiannual report pertains only to the USAA Ultra
Short-Term Bond Fund (the Fund), which is classified as diversified under the
1940 Act. The Fund's investment objective is high current income consistent with
preservation of principal.
Effective July 12, 2013, the Fund will consist of two classes of shares. The
existing share class will be designated "Ultra Short-Term Bond Fund Shares (Fund
Shares)" and a new share class designated "Ultra Short-Term Bond Fund
Institutional Shares (Institutional Shares)" will commence operations. Each
class of shares will have equal rights to assets and earnings, except that each
class will bear certain class-related expenses specific to the particular
class. These expenses include administration and servicing fees, transfer agent
fees, postage, shareholder reporting fees, and certain registration and
custodian fees. Expenses not attributable to a specific class, income, and
realized gains or losses on investments will be allocated to each class of
shares based on each class's relative net assets. Each class will have exclusive
voting rights on matters related solely to that class and separate voting rights
on matters that relate to both classes. The Institutional Shares will be
available for investment only through a USAA discretionary managed account
program, and certain advisory programs sponsored by financial intermediaries,
such as brokerage firms, investment advisors, financial planners, third-party
administrators, and insurance companies.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
================================================================================
Institutional Shares also will be available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA Fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds) and not to the general public.
A. SECURITY VALUATION -- The Trust's Board of Trustees (the Board) has
established the Valuation Committee (the Committee), and subject to Board
oversight, the Committee administers and oversees the Fund's valuation
policies and procedures which are approved by the Board. Among other
things, these policies and procedures allow the Fund to utilize independent
pricing services, quotations from securities dealers, and a wide variety of
sources and information to establish and adjust the fair value of
securities as events occur and circumstances warrant.
The Committee reports to the Board on a quarterly basis and makes
recommendations to the Board as to pricing methodologies and services used
by the Fund and presents additional information to the Board regarding
application of the pricing and fair valuation policies and procedures
during the preceding quarter.
The Committee meets as often as necessary to make pricing and fair value
determinations. In addition, the Committee holds regular monthly meetings
to review prior actions taken by the Committee and USAA Asset Management
Company (the Manager). Among other things, these monthly meetings include a
review and analysis of back testing reports, pricing service quotation
comparisons, illiquid securities and fair value determinations, pricing
movements, and daily stale price monitoring.
The value of each security is determined (as of the close of trading on the
New York Stock Exchange (NYSE) on each business day the NYSE is open) as
set forth below:
1. Debt securities with maturities greater than 60 days are valued each
business day by a pricing service (the Service) approved by
================================================================================
30 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
the Board. The Service uses an evaluated mean between quoted bid and
asked prices or the last sales price to price securities when, in the
Service's judgment, these prices are readily available and are
representative of the securities' market values. For many securities,
such prices are not readily available. The Service generally prices
these securities based on methods that include consideration of yields
or prices of securities of comparable quality, coupon, maturity, and
type; indications as to values from dealers in securities; and general
market conditions.
2. Investments in open-end investment companies, hedge, or other funds,
other than exchange-traded funds, are valued at their net asset value
(NAV) at the end of each business day.
3. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates
market value.
4. Securities for which market quotations are not readily available or
are considered unreliable, or whose values have been materially
affected by events occurring after the close of their primary markets
but before the pricing of the Fund, are valued in good faith at fair
value, using methods determined by the Manager under valuation
procedures approved by the Board. The effect of fair value pricing is
that securities may not be priced on the basis of quotations from the
primary market in which they are traded and the actual price realized
from the sale of a security may differ materially from the fair value
price. Valuing these securities at fair value is intended to cause the
Fund's NAV to be more reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited
to, obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any
restrictions on disposition of the securities, and
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
================================================================================
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 all bonds, valued based on methods discussed in Note 1A1, and all
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.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its income to its shareholders.
Therefore, no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses
from sales of investment securities are computed on the identified cost
basis. Interest income is recorded daily on the accrual
================================================================================
32 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
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.
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 June 30, 2013, the Fund's outstanding
delayed-delivery commitments, including interest purchased, were $1,990,000.
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. Effective January 1,
2013, the Fund's custodian suspended the bank credit arrangement. For the
six-month period ended June 30, 2013, 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
================================================================================
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.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at a rate per annum equal to
the rate at which CAPCO obtains funding in the capital markets, with no markup.
The USAA Funds that are party to the loan agreement are assessed facility fees
by CAPCO in the amount of 7.0 basis points of the amount of the committed loan
agreement. Prior to September 30, 2012, the Funds were assessed facility fees by
CAPCO in the amount of 7.5 basis points of the amount of the committed loan
agreement. The facility fees are allocated among the Funds based on their
respective average net assets for the period.
For the six-month period ended June 30, 2013, the Fund paid CAPCO facility fees
of $1,000, which represents 0.8% 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 June 30, 2013.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year-end of December 31,
2013, in accordance with applicable tax law.
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually in the succeeding
fiscal year or as otherwise required to avoid the payment of federal taxes.
================================================================================
34 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
Under the Regulated Investment Company Modernization Act of 2010 (the Act) a
fund is permitted to carry forward net capital losses indefinitely.
Additionally, such capital losses that are carried forward will retain their
character as short-term and or long-term capital losses. Post-enactment capital
loss carryforwards must be used before pre-enactment capital loss carryforwards.
As a result, pre-enactment capital loss carryforwards may be more likely to
expire unused.
At December 31, 2012, the Fund had no capital loss carryforwards for federal
income tax purposes.
For the six-month period ended June 30, 2013, the Fund did not incur any income
tax, interest, or penalties, and has recorded no liability for net unrecognized
tax benefits relating to uncertain income tax positions. On an ongoing basis the
Manager will monitor its tax positions to determine if adustments to this
conclusion are necessary. The statute of limitations on the Fund's tax return
filings generally remain open for the three preceeding fiscal reporting year
ends and remain subject to examination by the Internal Revenue Service and state
taxing authorities.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended June 30, 2013, were
$167,050,000 and $66,932,000, respectively.
As of June 30, 2013, the cost of securities, including short-term securities,
for federal income tax purposes, was approximately the same as that reported in
the financial statements.
Gross unrealized appreciation and depreciation of investments as of June 30,
2013, were $3,014,000 and $1,484,000, respectively, resulting in net unrealized
appreciation of $1,530,000.
(5) 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
================================================================================
and affairs of the Fund, subject to the authority of and supervision by the
Board. The Fund's base is accrued daily and paid monthly at an annualized
rate of 0.24% of the Fund's average net assets for the fiscal year.
Effective October 31, 2011, the investment management fee for the Fund is
composed of a base fee and a performance adjustment that increases or
decreases the base fee depending upon the performance of the Fund relative
to the performance of the Lipper Ultra Short Funds Index, which tracks the
total return performance of the 30 largest funds in the Lipper Ultra Short
Obligation Funds category. The base fee is computed as referenced above.
The performance adjustment is calculated monthly by comparing the Fund's
performance to that of the Lipper Index over the performance period. For
the month ended October 31, 2011, the performance period will consist of
the previous 12-month period. A new month will be added to the performance
period each month thereafter until the performance period consists of the
previous 36 months. Thereafter, the performance period for the Fund will
consist of the current month plus the previous 35 months. The following
table is utilized to determine the extent of the performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
--------------------------------------------------------------------------------
+/- 0.20% to 0.50% +/- 0.04%
+/- 0.51% to 1.00% +/- 0.05%
+/- 1.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
The annual performance adjustment rate is multiplied by the average net
assets of the Fund over the entire performance period, which is then
multiplied by a fraction, the numerator of which is the number of days in
the month and the denominator of which is 365 (366 in leap years). The
resulting amount is the performance adjustment;
================================================================================
36 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
a positive adjustment in the case of overperformance, or a negative
adjustment in the case of underperformance.
Under the performance fee arrangement, the Fund will pay a positive
performance fee adjustment for a performance period whenever the Fund
outperforms the Lipper Ultra Short Funds Index over that period, even if
the Fund had overall negative returns during the performance period.
For the six-month period ended June 30, 2013, the Fund incurred total
management fees, paid or payable to the Manager, of $615,000, which
included a 0.03% performance adjustment of $76,000.
B. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and servicing functions for the Fund. For such services, the
Manager receives a fee accrued daily and paid monthly at an annualized rate
of 0.15% of the Fund's average net assets. For the six-month period ended
June 30, 2013, the Fund incurred administration and servicing fees, paid or
payable to the Manager, of $337,000.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Board has approved the
reimbursement of a portion of these expenses incurred by the Manager. For
the six-month period ended June 30, 2013, the Fund reimbursed the Manager
$7,000 for these compliance and legal services. These expenses are included
in the professional fees on the Fund's statement of operations.
C. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund based on an annual charge of $25.50 per
shareholder account plus out-of-pocket expenses. The Fund also pays SAS
fees that are related to the administration and servicing of accounts that
are traded on an omnibus basis. For the six-month period ended June 30,
2013, the Fund incurred transfer agent's fees, paid or payable to SAS, of
$176,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
================================================================================
D. 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.
(6) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(7) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
During the six-month period ended June 30, 2013, in accordance with affiliated
transaction procedures approved by the Board, purchases and sales of security
transactions were executed between the Fund and the following affiliated USAA
Funds at the then-current market price with no brokerage commissions incurred.
COST TO NET REALIZED
SELLER PURCHASER PURCHASER GAIN TO SELLER
--------------------------------------------------------------------------------
USAA First Start Growth Fund USAA Ultra Short-
Term Bond Fund $ 230,000 $ 57,000
USAA Cornerstone Moderately USAA Ultra Short-
Aggressive Fund Term Bond Fund 1,175,000 282,000
USAA Cornerstone USAA Ultra Short-
Moderate Fund Term Bond Fund 1,000,000 240,000
================================================================================
38 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
(8) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
----------------------------------------------------------
2013 2012 2011 2010***
----------------------------------------------------------
Net asset value at
beginning of period $ 10.12 $ 9.98 $ 9.97 $ 10.00
------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .08 .16 .14 .03(a)
Net realized and
unrealized gain (loss) (.04) .15 .01 (.04)(a)
------------------------------------------------------
Total from investment
operations .04 .31 .15 (.01)(a)
------------------------------------------------------
Less distributions from:
Net investment income (.08) (.16) (.14) (.02)
Realized capital gains -- (.01) (.00)(b) --
------------------------------------------------------
Total distributions (.08) (.17) (.14) (.02)
------------------------------------------------------
Net asset value at
end of period $ 10.08 $ 10.12 $ 9.98 $ 9.97
======================================================
Total return (%)* .37 3.13 1.60 (.10)
Net assets at
end of period (000) $516,093 $417,623 $245,819 $82,712
Ratios to average net assets:**
Expenses (%)(c) .57(d) .58(e) .60 .60(d)
Expenses, excluding
reimbursements (%)(c) .57(d) .59 .67 1.13(d)
Net investment income (%) 1.53(d) 1.62 1.46 1.06(d)
Portfolio turnover (%) 17 28 26 1
* 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 June 30, 2013, average net assets were
$453,927,000.
*** Fund commenced operations on October 18, 2010.
(a) Calculated using average shares.
(b) Represents less than $0.01 per share.
(c) Reflects total operating expenses of the Fund before reductions of any
expenses paid indirectly. The Fund's expenses paid indirectly decreased
the expense ratios by less than 0.01%.
(d) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(e) Prior to May 1, 2012, the Manager had voluntarily agreed to limit the
annual expenses of the Fund to 0.60% of the Fund's average net assets.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
================================================================================
EXPENSE EXAMPLE
June 30, 2013 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, 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 January 1, 2013, through June
30, 2013.
ACTUAL EXPENSES
The first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested at the beginning of the period, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual
================================================================================
40 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JANUARY 1, 2013 -
JANUARY 1, 2013 JUNE 30, 2013 JUNE 30, 2013
---------------------------------------------------------
Actual $1,000.00 $1,003.70 $2.83
Hypothetical 1,000.00 1,021.97 2.86
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.57%, which is
net of any reimbursements and expenses paid indirectly, multiplied by the
average account value over the period, multiplied by 181 days/365 days (to
reflect the one-half-year period). The Fund's ending account value on the
first line in the table is based on its actual total return of 0.37% for the
six-month period of January 1, 2013, through June 30, 2013.
================================================================================
EXPENSE EXAMPLE | 41
================================================================================
ADVISORY AGREEMENT
June 30, 2013 (unaudited)
--------------------------------------------------------------------------------
At a meeting of the Board of Trustees (the Board) held on April 30, 2013, 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
continuance 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 continuance of the
Advisory Agreement with respect to the Fund. The Independent Trustees also
reviewed the proposed continuance 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
================================================================================
42 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
performance, 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 and its committees' consideration
of the Advisory Agreement included certain 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
================================================================================
ADVISORY AGREEMENT | 43
================================================================================
brokerage, including the Manager's process for monitoring "best execution," was
also considered. The Manager's 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 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, retail investment companies with front-end loads
and no sales loads), asset size, and expense components (the "expense group")
and (ii) a larger group of investment companies that includes all front-end load
and no-load retail open-end investment companies in the same investment
classification/objective 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 was equal to the median of its expense universe. The
data indicated that the Fund's total expenses were equal to the median of its
expense group and were
================================================================================
44 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
below the median of its expense universe. The Board took into account the
various services provided to the Fund by the Manager and its affiliates. 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-year period ending December 31, 2012. 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 ending December 31, 2012.
COMPENSATION AND PROFITABILITY -- The Board took into consideration the level
and method of computing the Fund's management fee. The information considered by
the Board included operating profit margin for the Manager's business as a
whole. The Board also 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 from its relationship with the Trust, including
that the Manager may derive reputational and other benefits from its association
with the Fund. The Trustees recognized that the Manager should be entitled to
earn
================================================================================
ADVISORY AGREEMENT | 45
================================================================================
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 discussions
of the Fund's 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
current 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 a similar investment
strategy and to relevant indices; (iv) the Fund's advisory expenses are
reasonable in relation to the services to be provided by the Manager; and (v)
the Manager and its affiliates' level of profitability from their relationship
with the Fund is reasonable. Based on its conclusions, the Board determined that
the continuation of the Advisory Agreement would be in the best interests of the
Fund and its shareholders.
================================================================================
46 | USAA ULTRA SHORT-TERM BOND FUND
================================================================================
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Paul L. McNamara
--------------------------------------------------------------------------------
ADMINISTRATOR AND USAA Asset Management Company
INVESTMENT ADVISER P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "My Accounts" on
SELF-SERVICE 24/7 usaa.com select "Investments,"
AT USAA.COM then "Mutual Funds"
OR CALL Under "Investments" view
(800) 531-USAA account balances, or click
(8722) "I want to...," and select
the desired action.
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge (i) at USAA.COM; and
(ii) on the SEC's website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
USAA
9800 Fredericksburg Road --------------
San Antonio, TX 78288 PRSRT STD
U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
Under MY PROFILE on USAA.COM select MANAGE PREFERENCES
Set your DOCUMENT PREFERENCES to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
=============================================================================
94422-0813 (C)2013, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended June 30, 2013
By:* /S/ JAMES G. WHETZEL
-----------------------------------------------------------
Signature and Title: JAMES G. WHETZEL, Secretary
Date: 08/22/2013
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /S/ DANIEL S. MCNAMARA
-----------------------------------------------------
Signature and Title: Daniel S. McNamara, President
Date: 08/26/2013
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 08/23/2013
------------------------------
*Print the name and title of each signing officer under his or her signature.