UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: DANIEL J. MAVICO
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: MARCH 31
Date of reporting period: SEPTEMBER 30, 2013
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED SEPTEMBER 30, 2013
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA TAX EXEMPT MONEY MARKET FUND]
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SEMIANNUAL REPORT
USAA TAX EXEMPT MONEY MARKET FUND
SEPTEMBER 30, 2013
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PRESIDENT'S MESSAGE
"BECAUSE OF THE INVERSE RELATIONSHIP BETWEEN
BOND PRICES AND YIELDS, LOWER PRICES MEAN
INVESTORS MAY HAVE THE OPPORTUNITY TO [PHOTO OF DANIEL S. McNAMARA]
REINVEST AT HIGHER RATES AND POTENTIALLY
EARN MORE ON ANY NEW INVESTMENTS."
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SEPTEMBER 2013
Would it or wouldn't it? Would the U.S. Federal Reserve (the Fed) begin to
reduce its bond-buying programs? Or would it continue purchasing bonds at the
same pace? And if the Fed decided to taper, when would the reductions begin and
how much would they be? The guessing game, which got underway in June after
remarks by Fed Chairman Ben Bernanke, continued through the end of the reporting
period. As I've discussed in the past, the Fed is supporting the economy by
purchasing approximately $85 billion in mortgage-backed securities and long-term
U.S. Treasury securities every month. (This is commonly known as "quantitative
easing" or "QE"). In response to QE, long-term interest rates have fallen and
the stock and bond markets have rallied.
Most people acknowledge that QE can't go on forever, but the idea the Fed would
restrain a still fragile economy gave the markets pause. Interest rates rose
sharply (bond prices, which move in the opposite direction, declined). By
August, many investors had convinced themselves that the tapering announcement
would be made at the Fed's September policy meeting. Instead, the Fed backed
away from its prior guidance, saying it would continue buying the same amount of
bonds every month. In response, interest rates trended down slightly as the
markets began to price in the risks of a fiscal impasse in Washington, D.C.
During the reporting period, our USAA tax-exempt portfolios appeared to benefit
from our bench of independent credit analysts. Because of their diligence, many
of our mutual funds have avoided headline defaults and Chapter 9 bankruptcies
such as Detroit; Jefferson County, Alabama; and Stockton, San Bernardino,
Vallejo and Orange County, California. While headline events like these are
likely to occur (unfunded pensions remain a long-term concern of ours), overall
municipal credit quality appears to
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remain solid. We continue to expect the default rate among municipal issuers to
remain extremely low. Meanwhile, our USAA tax-exempt money market funds are
yielding almost zero at the present time.
For fixed-income investors, the prospect of gradually rising interest rates
remains a mixed blessing. Higher rates mean a decrease in principal value.
However, because of the inverse relationship between bond prices and yields,
lower prices mean investors may have the opportunity to reinvest at higher rates
and potentially earn more on any new investments. Furthermore, fixed-income
investing is not an all or none scenario, and bonds continue to have a place in
a diversified portfolio. Lastly, people often forget the bond market is not one
market but is actually a market of many different types of bonds. While
investors tend to focus on U.S. Treasuries, there are other segments of the bond
market and they have performed differently (some better, some worse) during the
reporting period. Investors should take a diversified approach to their
fixed-income holdings.
If you think you might be over-allocated to fixed-income securities, you want to
reassess your investment risk and if necessary, rebalance your portfolio.
Regular rebalancing can potentially help you protect your gains and prepare for
what happens next. Shareholders should always remain disciplined and follow an
investment plan based on their objectives, risk tolerance and time horizon. If
you have questions or would like assistance, USAA advisors stand ready to help
you, free of charge.
In closing, I want to acknowledge the challenges that many people faced as a
result of the federal government shutdown. We are glad the impasse has been
temporarily resolved as of the time of this message. Rest assured, we will
continue to monitor events in Washington, D.C. and any other factors that may
affect your investments.
Thank you for your confidence in us.
Sincerely,
/S/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Investment Management Company
Past performance is no guarantee of future results. o As interest rates rise,
bond prices fall o Diversification is a technique to help reduce risk and does
not guarantee a profit or prevent a loss. o Financial advice provided by USAA
Financial Planning Services Insurance Agency, Inc. (known as USAA Financial
Insurance Agency in California, License # 0E36312), and USAA Financial Advisors,
Inc., a registered broker dealer.
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TABLE OF CONTENTS
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FUND OBJECTIVE 1
MANAGER'S COMMENTARY 2
INVESTMENT OVERVIEW 5
FINANCIAL INFORMATION
Portfolio of Investments 9
Notes to Portfolio of Investments 24
Financial Statements 25
Notes to Financial Statements 28
EXPENSE EXAMPLE 36
ADVISORY AGREEMENT 38
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.
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FUND OBJECTIVE
THE USAA TAX EXEMPT MONEY MARKET FUND (THE FUND) PROVIDES INVESTORS WITH
INTEREST INCOME THAT IS EXEMPT FROM FEDERAL INCOME TAX AND A FURTHER OBJECTIVE
OF PRESERVING CAPITAL AND MAINTAINING LIQUIDITY.
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TYPES OF INVESTMENTS
The Fund invests primarily in high-quality tax-exempt securities with remaining
maturities of 397 days or less. During normal market conditions, at least 80% of
the Fund's net assets will consist of tax-exempt securities.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Asset Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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FUND OBJECTIVE | 1
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MANAGER'S COMMENTARY ON THE FUND
DALE R. HOFFMANN [PHOTO OF DALE R. HOFFMANN]
USAA Asset Management Company
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o HOW DID THE USAA TAX EXEMPT MONEY MARKET FUND (THE FUND) PERFORM DURING THE
REPORTING PERIOD?
During the six-month reporting period ended September 30, 2013, yields on
tax-exempt money market instruments remained near all-time lows. For the
reporting period, the Fund had a return of 0.01%, compared to an average
return of 0.01% for the tax-exempt money market funds category, according
to iMoneyNet, Inc.
o WHAT WERE THE MARKET CONDITIONS DURING THE REPORTING PERIOD?
Long-term interest rates increased during the reporting period on
speculation that the U.S. Federal Reserve (the Fed) might start scaling
back its quantitative easing measures sooner than expected. Bond prices,
which move in the opposite direction of interest rates, declined. By
August, it was widely believed the Fed would announce a reduction in its
asset purchases after its September policy meeting. Instead, the Fed
announced it would make no changes to its bond-buying programs and
long-term interest rates drifted down slightly.
Refer to page 6 for benchmark definition.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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2 | USAA TAX EXEMPT MONEY MARKET FUND
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Short-term interest rates were anchored near zero throughout the reporting
period. The Fed says it does not plan to raise short-term rates until
unemployment falls below 6.5% and inflation rises above 2.0%. Though the
U.S. economy has continued to grow slowly, employment gains have been
modest and inflation has remained benign.
Because of exceptionally low short-term rates, money market funds continued
to provide very low absolute yields. Nevertheless, investors continued to
favor them for the safety and liquidity they provide. As a result,
short-term tax-exempt securities, especially municipal variable rate demand
notes (VRDNs), remained in short supply. During the reporting period, the
SIFMA Municipal Swap Index, the index of seven-day VRDNs, remained in a
narrow range, starting the reporting period at 0.12%, dropping as low as
0.05% on July 3, 2013, and rising to 0.07% at the end of the reporting
period.
o WHAT WERE YOUR STRATEGIES IN THIS ENVIRONMENT?
Because of the low interest rate environment, we continued to focus our
purchases on VRDNs. The VRDNs owned by the Fund offer flexibility because
we can sell them at par value (100% of face value) upon seven days' or less
notice. In addition to providing liquidity, they offer a degree of safety.
Many of these VRDNs are guaranteed by a bank letter of credit for the
payment of both principal and interest.
To enhance the portfolio's yield, we sought to invest in securities with
longer maturities. However, with short-term rates at historic lows, there
were very few attractive opportunities. Our team of credit analysts helped
us identify potential investments for the Fund. These experienced
professionals also continued to analyze and monitor every holding in the
portfolio.
o WHAT IS THE OUTLOOK?
We expect the U.S. economy to continue its "muddle through" recovery with
slow growth and low inflation in the near term. According to consensus
estimates, the 2013 gross domestic product growth may
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MANAGER'S COMMENTARY ON THE FUND | 3
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remain below long-term averages. The Fed's decision not to taper its asset
purchase programs demonstrates that U.S. central bankers remain concerned
about the strength of economic growth and the level of unemployment.
Indeed, Fed Chairman Ben Bernanke pointed to both issues in the press
conference that followed the Fed's September meeting. At the end of the
reporting period, tax-exempt investors seemed less worried about higher
interest rates and more concerned about tight municipal supply and the U.S.
government's fiscal challenges.
Meanwhile, the Fed is likely to keep short-term rates low for the
foreseeable future. As a result, shareholders can expect to see little
change in the Fund's yield. Once the Fed does begin raising rates, we will
look for opportunities to invest at higher yields. In the interim, we will
continue to focus on safety and liquidity, while striving to maximize the
tax-exempt income you receive from the Fund. As always, we will avoid
issues subject to the alternative minimum tax for individuals.
We appreciate your continued investment in the Fund.
As interest rates rise, existing bond prices fall. o The SIFMA Municipal
Swap Index, produced by Municipal Market Data, is a seven-day high-grade
market index comprised of tax-exempt variable-rate demand obligations from
Municipal Market Data's extensive database. o Variable-rate demand notes
(VRDNs) are securities which the interest rate is reset periodically;
typically weekly, although reset intervals may vary. o Investing in
securities products involves risk, including possible loss of principal. o
Some income may be subject to state or local taxes but not the alternative
minimum tax.
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4 | USAA TAX EXEMPT MONEY MARKET FUND
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INVESTMENT OVERVIEW
USAA TAX EXEMPT MONEY MARKET FUND (Ticker Symbol: USEXX)
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9/30/13 3/31/13
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Net Assets $2,734.2 Million $2,683.4 Million
Net Asset Value Per Share $1.00 $1.00
Dollar-Weighted Average
Portfolio Maturity(+) 51 Days 37 Days
(+)Dollar-weighted average portfolio maturity is obtained by multiplying the
dollar value of each investment by the number of days left to its maturity,
adding those figures together, and dividing them by the total dollar value of
the Fund's portfolio.
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AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/13
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3/31/13-9/30/13* 1 Year 5 Years 10 Years
0.01% 0.01% 0.26% 1.25%
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7-DAY YIELD AS OF 9/30/13
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Subsidized 0.01% Unsubsidized -0.35%
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EXPENSE RATIO AS OF 3/31/13**
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0.56%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated August 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. An investment in a money market fund is not
insured or guaranteed by the FDIC or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1 per share, it is
possible to lose money by investing in the Fund.
Total return equals income return and assumes 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. Yields and
returns fluctuate. The seven-day yield quotation more closely reflects current
earnings of the Fund than the total return quotation.
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INVESTMENT OVERVIEW | 5
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o 7-DAY YIELD COMPARISON o
[CHART OF 7-DAY YIELD COMPARISON]
USAA TAX
IMONEYNET EXEMPT MONEY
AVERAGE MARKET FUND
9/24/2012 0.01% 0.01%
10/29/2012 0.01 0.01
11/26/2012 0.01 0.01
12/31/2012 0.01 0.01
1/28/2013 0.01 0.01
2/25/2013 0.01 0.01
3/25/2013 0.01 0.01
4/29/2013 0.01 0.01
5/28/2013 0.02 0.01
6/24/2013 0.01 0.01
7/29/2013 0.01 0.01
8/26/2013 0.01 0.01
9/30/2013 0.01 0.01
[END CHART]
Data represent the last Monday of each month. Ending date 9/30/13.
The graph tracks the USAA Tax Exempt Money Market Fund's seven-day yield against
iMoneyNet, Inc. tax-free national retail money funds, an average of money market
fund yields. iMoneyNet, Inc. is an organization that tracks the performance of
money market funds.
Past performance is no guarantee of future results.
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6 | USAA TAX EXEMPT MONEY MARKET FUND
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o TOP 10 INDUSTRIES o
AS OF 9/30/13
(% of Net Assets)
General Obligation ....................................................... 17.1%
Electric Utilities ....................................................... 10.5%
Hospital ................................................................. 9.8%
Education ................................................................ 9.5%
Nursing/CCRC ............................................................. 8.7%
Community Service ........................................................ 7.9%
Agricultural Products .................................................... 4.5%
Municipal Finance ........................................................ 4.2%
Multifamily Housing ...................................................... 3.9%
Special Assessment/Tax/Fee ............................................... 3.8%
o PORTFOLIO MIX -- 9/30/13 o
[PIE CHART OF PORTFOLIO MIX]
VARIABLE-RATE DEMAND NOTES 74.3%
FIXED-RATE INSTRUMENTS 18.4%
PUT BONDS 6.6%
ADJUSTABLE-RATE NOTES 0.7%
Percentages are of the net assets of the Fund and may not equal 100%.
You will find a complete list of securities that the Fund owns on
pages 12-23.
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INVESTMENT OVERVIEW | 7
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o CUMULATIVE PERFORMANCE OF $10,000 o
[CHART OF CUMULATIVE PERFORMANCE]
USAA TAX
EXEMPT MONEY
MARKET FUND
09/30/03 10,000.00
10/31/03 10,006.11
11/30/03 10,011.95
12/31/03 10,018.47
01/31/04 10,024.01
02/29/04 10,028.61
03/31/04 10,033.76
04/30/04 10,039.86
05/31/04 10,045.40
06/30/04 10,051.14
07/31/04 10,057.15
08/31/04 10,063.86
09/30/04 10,072.13
10/31/04 10,083.01
11/30/04 10,093.47
12/31/04 10,105.31
01/31/05 10,116.30
02/28/05 10,128.04
03/31/05 10,141.28
04/30/05 10,159.02
05/31/05 10,179.42
06/30/05 10,196.45
07/31/05 10,212.88
08/31/05 10,230.63
09/30/05 10,250.08
10/31/05 10,268.63
11/30/05 10,289.62
12/31/05 10,314.83
01/31/06 10,336.13
02/28/06 10,357.38
03/31/06 10,382.34
04/30/06 10,406.31
05/31/06 10,433.61
06/30/06 10,463.15
07/31/06 10,489.40
08/31/06 10,516.90
09/30/06 10,544.81
10/31/06 10,571.69
11/30/06 10,599.07
12/31/06 10,630.01
01/31/07 10,656.72
02/28/07 10,682.90
03/31/07 10,712.39
04/30/07 10,740.75
05/31/07 10,772.37
06/30/07 10,802.66
07/31/07 10,831.26
08/31/07 10,864.63
09/30/07 10,892.09
10/31/07 10,921.39
11/30/07 10,951.21
12/31/07 10,978.60
01/31/08 11,003.75
02/29/08 11,025.25
03/31/08 11,050.77
04/30/08 11,071.93
05/31/08 11,094.74
06/30/08 11,112.51
07/31/08 11,129.49
08/31/08 11,147.87
09/30/08 11,179.33
10/31/08 11,215.14
11/30/08 11,228.65
12/31/08 11,242.04
01/31/09 11,250.03
02/28/09 11,257.13
03/31/09 11,265.54
04/30/09 11,274.25
05/31/09 11,284.46
06/30/09 11,293.35
07/31/09 11,302.01
08/31/09 11,308.67
09/30/09 11,313.56
10/31/09 11,315.99
11/30/09 11,317.24
12/31/09 11,319.87
01/31/10 11,319.96
02/28/10 11,320.05
03/31/10 11,320.14
04/30/10 11,320.24
05/31/10 11,320.69
06/30/10 11,320.91
07/31/10 11,321.01
08/31/10 11,321.10
09/30/10 11,321.19
10/31/10 11,321.29
11/30/10 11,321.38
12/31/10 11,321.50
01/31/11 11,321.59
02/28/11 11,321.68
03/31/11 11,321.78
04/30/11 11,321.87
05/31/11 11,321.97
06/30/11 11,322.06
07/31/11 11,322.15
08/31/11 11,322.25
09/30/11 11,322.35
10/31/11 11,322.44
11/30/11 11,322.53
12/31/11 11,322.74
01/31/12 11,325.62
02/29/12 11,325.71
03/31/12 11,325.81
04/30/12 11,325.90
05/31/12 11,325.99
06/30/12 11,326.09
07/31/12 11,326.18
08/31/12 11,326.29
09/30/12 11,326.37
10/31/12 11,326.47
11/30/12 11,326.57
12/31/12 11,327.11
01/31/13 11,327.21
02/28/13 11,327.29
03/31/13 11,327.39
04/30/13 11,327.48
05/31/13 11,327.58
06/30/13 11,327.67
07/31/13 11,327.77
08/31/13 11,327.86
09/30/13 11,327.96
[END CHART]
Data from 9/30/03 through 9/30/13.
The graph illustrates the performance of a hypothetical $10,000 investment in
the USAA Tax Exempt Money Market Fund.
Past performance is no guarantee of future results. The cumulative performance
quoted does not reflect the deduction of taxes that a shareholder would pay on
reinvested net investment income and realized capital gain distributions or on
the redemption of shares. Some income may be subject to federal, state, or local
taxes. For seven-day yield information, please refer to the Fund's Investment
Overview.
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8 | USAA TAX EXEMPT MONEY MARKET FUND
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PORTFOLIO OF INVESTMENTS
September 30, 2013 (unaudited)
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o CATEGORIES AND DEFINITIONS
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. The effective maturity of these instruments is deemed to be
less than 397 days in accordance with detailed regulatory requirements.
PUT BONDS -- provide the right to sell the bond at face value at specific
tender dates prior to final maturity. The put feature shortens the
effective maturity of the security.
ADJUSTABLE-RATE NOTES -- similar to VRDNs in the fact that the interest
rate is adjusted periodically to reflect current market conditions. These
interest rates are adjusted at a given time, such as monthly or quarterly.
However, these securities do not offer the right to sell the security at
face value prior to maturity.
FIXED-RATE INSTRUMENTS -- consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the
market price of a fixed-rate instrument generally varies inversely to the
movement of interest rates.
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 values of the securities.
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PORTFOLIO OF INVESTMENTS | 9
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The USAA Tax Exempt Money Market Fund's (the Fund) investments consist of
securities meeting the requirements to qualify at the time of purchase as
"eligible securities" under the Securities and Exchange Commission (SEC)
rules applicable to money market funds. With respect to quality, eligible
securities generally consist of securities rated in one of the two highest
categories for short-term securities or, if not rated, of comparable
quality at the time of purchase. USAA Asset Management Company (the
Manager) also attempts to minimize credit risk in the Fund through rigorous
internal credit research.
(INS) Principal and interest payments are insured by Berkshire Hathaway
Assurance 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.
(LIQ) Liquidity enhancement that may, under certain circumstances, provide
for repayment of principal and interest upon demand from one of the
following: Citibank, N.A., Deutsche Bank A.G., Deutsche Postbank, or
JPMorgan Chase Bank, N.A.
(LOC) Principal and interest payments are guaranteed by a bank letter of
credit or other bank credit agreement.
(NBGA) Principal and interest payments or, under certain circumstances,
underlying mortgages are guaranteed by a nonbank guarantee agreement
from one of the following: California State Teacher Retirement
System, Minnesota General Obligation, Montana Board of Investments
Intercap Program, or National Rural Utility Corp.
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10 | USAA TAX EXEMPT MONEY MARKET FUND
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o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S)
ABAG Association of Bay Area Governments
CSD Central School District
EDA Economic Development Authority
EDC Economic Development Corp.
IDA Industrial Development Authority/Agency
IDB Industrial Development Board
IDC Industrial Development Corp.
ISD Independent School District
USD Unified School District
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PORTFOLIO OF INVESTMENTS | 11
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INVESTMENTS
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PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
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VARIABLE-RATE DEMAND NOTES (74.3%)
ALABAMA (3.9%)
$ 10,000 Chatom IDB (NBGA) 0.22% 8/01/2041 $ 10,000
6,050 Eutaw IDB 0.09 12/01/2020 6,050
11,030 Huntsville (LIQ)(a) 0.09 5/01/2015 11,030
1,610 Huntsville Educational Building Auth.
(LOC - Branch Banking & Trust Co.) 0.10 12/01/2022 1,610
25,000 Mobile County IDA (LOC - Swedbank AB) 0.11 7/01/2040 25,000
20,000 Tuscaloosa County IDA (LOC - Sumitomo
Mitsui Banking Corp.) 0.07 6/01/2028 20,000
32,500 Tuscaloosa County Port Auth.
(LOC - PNC Bank, N.A.) 0.11 12/01/2031 32,500
---------
106,190
---------
ARKANSAS (0.2%)
5,175 Texarkana (LOC - PNC Bank, N.A.) 0.22 3/01/2021 5,175
---------
CALIFORNIA (5.9%)
9,875 ABAG Finance Auth. for Nonprofit Corps.
(LOC - KBC Bank N.V.) 0.37 5/15/2035 9,875
15,600 Anaheim Redev. Agency (LIQ)(LOC - Deutsche
Bank A.G.)(a) 0.12 2/01/2031 15,600
12,255 Golden State Tobacco Securitization Corp. (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.15 6/01/2027 12,255
6,000 Golden State Tobacco Securitization
Corp. (INS)(LIQ)(a) 0.17 12/01/2037 6,000
28,985 Grossmont Healthcare District (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.13 7/15/2033 28,985
13,660 Infrastructure and Economic Dev. Bank
(LOC - Bank of America, N.A.) 0.09 7/01/2034 13,660
3,338 Irvine (LOC - KBC Bank N.V.) 0.11 9/02/2032 3,338
15,731 Irvine (LOC - KBC Bank N.V.) 0.11 9/02/2050 15,731
3,445 Sacramento City Financing Auth. (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.15 12/01/2033 3,445
18,845 San Jose USD (LIQ)(LOC - Deutsche Bank A.G.)(a) 0.13 6/01/2031 18,845
2,395 State (INS)(LIQ)(a) 0.09 3/01/2014 2,395
23,750 Statewide Communities Dev. Auth. (LIQ)
(LOC - Citibank, N.A.)(a) 0.57 12/14/2016 23,750
7,600 Statewide Communities Dev. Auth.
(LOC - Bank of America, N.A.) 0.08 10/01/2036 7,600
---------
161,479
---------
================================================================================
12 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
COLORADO (1.2%)
$ 6,160 Educational and Cultural Facilities Auth.
(LOC - Bank of America, N.A.) 0.09% 2/01/2037 $ 6,160
1,595 El Paso County (LOC - JPMorgan Chase Bank, N.A.) 0.17 11/01/2021 1,595
24,200 Fiddler's Business Improvement District
(LOC - Key Bank, N.A.) 0.15 12/01/2038 24,200
685 Health Facilities Auth. (LOC - JPMorgan
Chase Bank, N.A.) 0.47 1/01/2018 685
---------
32,640
---------
CONNECTICUT (0.3%)
9,585 Health and Educational Facilities Auth.
(LOC - Bank of America, N.A.) 0.14 7/01/2030 9,585
---------
DELAWARE (0.2%)
6,600 EDA IDA 0.57 12/01/2014 6,600
---------
DISTRICT OF COLUMBIA (0.2%)
2,700 District of Columbia
(LOC - Bank of America, N.A.) 0.20 7/01/2022 2,700
3,000 Metropolitan Washington Airports Auth.
(LOC - TD Bank, N.A.) 0.08 10/01/2039 3,000
---------
5,700
---------
FLORIDA (3.3%)
5,000 Escambia County 0.08 4/01/2039 5,000
1,200 Jackson County 0.09 7/01/2022 1,200
3,415 Lee County IDA (LOC - Fifth Third Bank) 0.22 6/01/2025 3,415
10,845 Miami Health Facilities Auth.
(LOC - SunTrust Bank) 0.30 8/01/2026 10,845
19,265 Peace River (LIQ)(a) 0.12 10/01/2013 19,265
9,230 Seminole County IDA (LOC - Fifth Third Bank) 0.19 12/01/2037 9,230
16,500 St. Lucie County 0.07 9/01/2028 16,500
7,265 UCF Health Facilities Corp.
(LOC - Fifth Third Bank) 0.19 7/01/2037 7,265
16,600 Univ. of North Florida Financing Corp. (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.11 11/01/2027 16,600
---------
89,320
---------
GEORGIA (2.2%)
13,000 Appling County Dev. Auth. 0.08 9/01/2041 13,000
13,000 Bartow County Dev. Auth. 0.15 12/01/2032 13,000
28,200 Burke County Dev. Auth. 0.08 7/01/2049 28,200
2,550 Cobb County Dev. Auth. (LOC - Federal Home
Loan Bank of Atlanta) 0.11 2/01/2030 2,550
2,500 Floyd County Dev. Auth.
(LOC - PNC Bank, N.A.) 0.11 4/01/2017 2,500
---------
59,250
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
ILLINOIS (7.1%)
$ 4,200 Dev. Finance Auth. 0.12% 1/01/2016 $ 4,200
20,100 Dev. Finance Auth. (LOC - JPMorgan Chase
Bank, N.A.)(LOC - Northern Trust Co.) 0.07 2/01/2029 20,100
100 Dev. Finance Auth. (LOC - JPMorgan Chase
Bank, N.A.) 0.07 10/01/2029 100
3,080 Dev. Finance Auth.
(LOC - Bank of America, N.A.) 0.30 9/01/2032 3,080
27,835 Finance Auth.
(LOC - JPMorgan Chase Bank, N.A.) 0.08 11/15/2029 27,835
2,880 Finance Auth. (LOC - Fifth Third Bank) 0.87 3/01/2031 2,880
29,300 Finance Auth.
(LOC - JPMorgan Chase Bank, N.A.) 0.07 9/01/2031 29,300
16,650 Finance Auth. (LOC - Fifth Third Bank) 0.11 6/01/2038 16,650
6,140 Finance Auth. (LOC - RBS Citizens, N.A.) 0.22 9/01/2043 6,140
7,515 Finance Auth. (LOC - Fifth Third Bank) 0.19 1/01/2048 7,515
8,105 Health Facilities Auth.
(LOC - FirstMerit Bank, N.A.) 0.12 8/15/2033 8,105
12,975 Metropolitan Pier and Exposition Auth. (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.13 6/15/2034 12,975
23,335 Metropolitan Pier and Exposition Auth. (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.13 12/15/2039 23,335
3,000 Oak Forest (LOC - Fifth Third Bank) 0.19 7/01/2024 3,000
4,350 Skokie Economic Dev.
(LOC - Bank of America, N.A.) 0.30 12/01/2014 4,350
4,249 Springfield Airport Auth. 0.60 10/15/2016 4,249
13,105 Village of Morton Grove
(LOC - Bank of America, N.A.) 0.12 12/01/2041 13,105
6,250 Will County (LOC - FirstMerit Bank, N.A.) 0.17 7/01/2034 6,250
---------
193,169
---------
INDIANA (3.4%)
6,240 Berne (LOC - Federal Home Loan Bank of
Indianapolis) 0.12 10/01/2033 6,240
20,950 Dearborn County EDA (LOC - JPMorgan
Chase Bank, N.A.) 0.08 4/01/2036 20,950
3,845 Dev. Finance Auth. (LOC - Fifth Third Bank) 0.19 2/01/2023 3,845
36,800 Dev. Finance Auth. (LOC - JPMorgan
Chase Bank, N.A.) 0.07 2/01/2039 36,800
4,855 Evansville (LOC - Fifth Third Bank) 0.19 1/01/2025 4,855
9,620 Finance Auth. (LOC - Federal Home Loan
Bank of Indianapolis) 0.11 7/01/2029 9,620
2,665 Finance Auth. (LOC - PNC Bank, N.A.) 0.12 6/01/2037 2,665
1,300 Huntington 0.14 6/26/2014 1,300
5,925 Winona Lake (LOC - Key Bank, N.A.) 0.27 7/01/2031 5,925
---------
92,200
---------
IOWA (5.7%)
6,850 Chillicothe 0.12 1/01/2023 6,850
12,750 Council Bluffs 0.12 1/01/2025 12,750
10,000 Finance Auth 0.09 6/01/2039 10,000
================================================================================
14 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 29,000 Finance Auth. 0.10% 6/01/2036 $ 29,000
32,000 Finance Auth. 0.10 9/01/2036 32,000
30,000 Finance Auth. (LOC - U.S. Bank, N.A.) 0.12 12/01/2042 30,000
2,300 Higher Educational Loan Auth.
(LOC - Fifth Third Bank) 0.11 5/01/2029 2,300
7,900 Higher Educational Loan Auth.
(LOC - Fifth Third Bank) 0.11 4/01/2035 7,900
9,500 Louisa County 0.11 9/01/2016 9,500
3,900 Louisa County 0.11 3/01/2017 3,900
4,900 Louisa County 0.11 10/01/2024 4,900
805 Sheldon 0.37 11/01/2015 805
5,500 Urbandale (LOC - Wells Fargo Bank, N.A.) 0.13 11/01/2020 5,500
---------
155,405
---------
KENTUCKY (0.6%)
925 Boone County (LOC - JPMorgan Chase Bank, N.A.) 0.47 11/01/2021 925
2,000 Frankfort 0.14 5/07/2014 2,000
9,975 Georgetown (LOC - Fifth Third Bank) 0.19 11/15/2029 9,975
595 Lexington-Fayette Urban County (LOC - JPMorgan
Chase Bank, N.A.) 0.47 7/01/2021 595
3,015 Lexington-Fayette Urban County (LOC - Federal
Home Loan Bank of Cincinnati) 0.32 12/01/2027 3,015
---------
16,510
---------
LOUISIANA (1.5%)
775 Environmental Facilities and Community Dev. Auth.
(LOC - Federal Home Loan Bank of Dallas) 0.11 4/01/2018 775
1,720 Hammond Area Economic and Industrial Dev. District
(LOC - Federal Home Loan Bank of Dallas) 0.11 3/01/2033 1,720
7,610 New Orleans (LOC - Capital One, N.A.) 0.62 8/01/2024 7,610
1,545 Public Facilities Auth. (LOC - Federal Home Loan
Bank of Dallas) 0.11 12/01/2014 1,545
13,980 Public Facilities Auth. (INS)(LIQ)(a) 0.09 2/15/2015 13,980
1,100 Public Facilities Auth. 0.09 8/01/2017 1,100
315 Public Facilities Auth. (LOC - Capital One, N.A.) 0.62 7/01/2023 315
590 Public Facilities Auth. (LOC - Capital One, N.A.) 0.62 7/01/2023 590
1,695 Public Facilities Auth. (LOC - Capital One, N.A.) 0.62 7/01/2023 1,695
555 Public Facilities Auth. (LOC - Capital One, N.A.) 0.67 7/01/2027 555
11,000 St. James Parish 0.35 11/01/2040 11,000
---------
40,885
---------
MARYLAND (1.3%)
1,000 Baltimore County IDA 0.14 3/01/2014 1,000
25,240 Health and Higher Educational Facilities Auth.
(LOC - JPMorgan Chase Bank, N.A.) 0.09 4/01/2035 25,240
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
$ 10,500 Williamsport (LOC - Manufacturers & Traders Trust Co.) 0.12% 11/01/2037 $ 10,500
----------
36,740
----------
MASSACHUSETTS (0.5%)
7,390 Dev. Finance Agency (LOC - Manufacturers &
Traders Trust Co.) 0.12 4/01/2041 7,390
7,390 Dev. Finance Agency (LOC - RBS Citizens, N.A.) 0.19 4/01/2041 7,390
----------
14,780
----------
MICHIGAN (2.2%)
3,540 Fremont Hospital Finance Auth.
(LOC - Fifth Third Bank) 0.19 11/01/2027 3,540
330 Higher Education Facilities Auth.
(LOC - Comerica Bank, N.A.) 0.20 10/01/2027 330
6,960 Hospital Finance Auth. (LOC - Fifth Third Bank) 0.19 6/01/2035 6,960
3,345 Kalamazoo County EDA (LOC - Fifth Third Bank) 0.24 9/01/2015 3,345
28,405 Marquette County (LOC - RBS Citizens, N.A.) 0.22 3/01/2033 28,405
7,900 Northville EDC (LOC - Fifth Third Bank) 0.19 5/01/2014 7,900
10,000 Oakland County EDC (LOC - Fifth Third Bank) 0.19 3/01/2029 10,000
----------
60,480
----------
MINNESOTA (0.3%)
2,530 Canby Community Hospital District No.1 0.37 11/01/2026 2,530
4,675 Rochester (LOC - Royal Bank of Scotland N.V.) 0.18 4/01/2022 4,675
----------
7,205
----------
MISSISSIPPI (0.3%)
9,045 Business Finance Corp. (LOC - Hancock Bank) 1.50 12/01/2036 9,045
----------
MISSOURI (1.5%)
6,800 Health and Educational Facilities Auth.
(LOC - Commerce Bank, N.A.) 0.13 7/01/2026 6,800
7,185 Health and Educational Facilities Auth.
(LOC - Fifth Third Bank) 0.19 11/01/2027 7,185
8,500 Health and Educational Facilities Auth.
(LOC - Commerce Bank, N.A.) 0.12 10/01/2032 8,500
8,400 Jackson County IDA (LOC - Commerce Bank, N.A.) 0.13 7/01/2025 8,400
3,690 St. Louis County IDA (LOC - U.S. Bank, N.A.) 0.11 6/15/2024 3,690
6,000 State Health (LOC - Commerce Bank, N.A.) 0.14 11/01/2032 6,000
----------
40,575
----------
NEBRASKA (0.4%)
10,000 Washington County 0.10 12/01/2040 10,000
----------
NEW HAMPSHIRE (0.4%)
10,000 Business Finance (LOC - Landesbank
Hessen-Thuringen) 0.34 9/01/2030 10,000
----------
================================================================================
16 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
NEW JERSEY (0.2%)
$ 4,190 EDA (LOC - Bank of America, N.A.) 0.25% 11/01/2027 $ 4,190
----------
NEW MEXICO (0.2%)
5,000 Hospital Equipment Loan Council
(LOC - Fifth Third Bank) 0.22 7/01/2025 5,000
----------
NEW YORK (7.0%)
5,050 Albany IDA (LOC - RBS Citizens, N.A.) 0.14 7/01/2016 5,050
9,615 Albany IDA (LOC - Key Bank, N.A.) 0.15 7/01/2035 9,615
12,490 Broome County IDA (LOC - Manufacturers &
Traders Trust Co.) 0.12 7/01/2040 12,490
2,675 Chautauqua County IDA (LOC - RBS Citizens, N.A.) 0.15 8/01/2027 2,675
2,750 Chautauqua County IDA (LOC - Manufacturers &
Traders Trust Co.) 0.11 8/01/2030 2,750
5,375 Clinton County IDA (LOC - Key Bank, N.A.) 0.15 7/01/2017 5,375
2,635 Clinton County IDA (LOC - Key Bank, N.A.) 0.15 7/01/2042 2,635
150 Dormitory Auth. (LOC - Key Bank, N.A.) 0.15 11/01/2036 150
5,530 East Rochester Housing Auth.
(LOC - RBS Citizens, N.A.) 0.14 12/01/2036 5,530
1,850 Erie County IDA (LOC - Key Bank, N.A.) 0.20 9/01/2017 1,850
2,220 Erie County IDA (LOC - Key Bank, N.A.) 0.20 6/01/2022 2,220
3,900 Erie County IDA (LOC - Key Bank, N.A.) 0.20 3/01/2024 3,900
2,520 Guilderland IDA (LOC - Key Bank, N.A.) 0.20 7/01/2032 2,520
5,500 Housing Finance Agency (LOC - Landesbank
Hessen-Thuringen) 0.11 11/01/2037 5,500
10,000 Housing Finance Agency (LOC - Landesbank
Hessen-Thuringen) 0.09 5/01/2042 10,000
5,200 Housing Finance Agency (LOC - Landesbank
Hessen-Thuringen) 0.10 5/01/2042 5,200
4,600 Housing Finance Agency (LOC - Landesbank
Hessen-Thuringen) 0.10 5/01/2042 4,600
6,300 Long Island Power Auth. (LOC - JPMorgan
Chase Bank, N.A.) 0.08 5/01/2033 6,300
1,775 Monroe County IDA (LOC - Key Bank, N.A.) 0.20 8/01/2018 1,775
7,525 Monroe County IDA (LOC - RBS Citizens, N.A.) 0.14 7/01/2027 7,525
4,500 New York City (LIQ)(a) 0.07 8/01/2020 4,500
4,900 New York City (LOC - Bayerische Landesbank) 0.10 8/01/2022 4,900
4,900 New York City (LOC - Manufacturers &
Traders Trust Co.) 0.13 12/01/2040 4,900
10,315 New York City Housing Dev.Corp.
(LOC - Landesbank Hessen-Thuringen) 0.09 6/01/2039 10,315
6,280 New York City IDA (LOC - Key Bank, N.A.) 0.15 7/01/2037 6,280
6,380 New York City IDA (LOC - Key Bank, N.A.) 0.15 7/01/2038 6,380
1,845 Niagara County IDA (LOC - Key Bank, N.A.) 0.20 9/01/2021 1,845
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
$ 8,925 Oneida County IDA (LOC - Manufacturers &
Traders Trust Co.) 0.12% 6/01/2030 $ 8,925
3,385 Onondaga County IDA (LOC - Key Bank, N.A.) 0.15 7/01/2025 3,385
8,200 Onondaga County IDA (LOC - Manufacturers &
Traders Trust Co.) 0.12 12/01/2031 8,200
1,000 Ontario County IDA (LOC - Royal Bank of
Scotland N.V.) 0.18 3/01/2028 1,000
6,825 Ontario County IDA (LOC - Key Bank, N.A.) 0.15 7/01/2030 6,825
12,280 Ramapo Housing Auth. (LOC - Manufacturers &
Traders Trust Co.) 0.17 12/01/2029 12,280
2,265 St.Lawrence County (LOC - RBS Citizens, N.A.) 0.18 7/01/2037 2,265
2,905 Syracuse IDA (LOC - Key Bank, N.A.) 0.20 1/01/2033 2,905
4,880 Tompkins County IDA (LOC - Bank of America, N.A.) 0.17 2/01/2037 4,880
3,705 Utica IDA (LOC - RBS Citizens, N.A.) 0.15 10/01/2025 3,705
----------
191,150
----------
OHIO (5.4%)
7,850 Air Quality Dev. Auth. (LOC - Key Bank, N.A.) 0.16 6/01/2033 7,850
30,000 Buckeye Tobacco Settlement Finance Auth. (LIQ)
(LOC - Deutsche Bank A.G.)(a) 0.32 6/01/2024 30,000
13,145 Butler County (LOC - Fifth Third Bank) 0.19 5/15/2036 13,145
1,415 Cadiz Health Care Facilities Auth.
(LOC - PNC Bank, N.A.) 0.57 1/01/2033 1,415
3,200 Cincinnati and Hamilton County
(LOC - Fifth Third Bank) 0.20 9/01/2025 3,200
1,190 Clermont County (LOC - Fifth Third Bank) 0.19 8/01/2022 1,190
8,080 Delaware County (LOC - Fifth Third Bank) 0.19 10/01/2033 8,080
4,905 Hamilton County (LOC - Fifth Third Bank) 0.22 12/01/2024 4,905
8,000 Hamilton County (LOC - Fifth Third Bank) 0.19 12/01/2026 8,000
6,065 Higher Educational Facilities (LOC - Fifth Third Bank) 0.19 9/01/2036 6,065
20,950 Lima Hospital (LOC - JPMorgan Chase Bank, N.A.) 0.08 4/01/2037 20,950
21,865 Northeast Regional Sewer District (LIQ)(a) 0.09 5/15/2015 21,865
11,475 Pike County Health Care Facilities
(LOC - Bank of America, N.A.) 0.11 11/01/2033 11,475
2,465 Pike County Health Care Facilities
(LOC - Bank of America, N.A.) 0.11 11/01/2033 2,465
2,185 Portage County (LOC - JPMorgan Chase Bank, N.A.) 0.14 12/01/2022 2,185
2,560 Summit County (LOC - Fifth Third Bank) 0.19 12/01/2029 2,560
2,435 Wayne County (LOC - Fifth Third Bank) 0.25 9/01/2021 2,435
----------
147,785
----------
OKLAHOMA (3.9%)
11,900 Dev. Finance Auth. (LOC - JPMorgan Chase Bank, N.A.) 0.08 12/01/2038 11,900
7,305 Edmond EDA (LOC - Bank of Oklahoma, N.A.) 0.20 6/01/2031 7,305
================================================================================
18 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
$ 8,700 Garfield County Industrial Auth. 0.20% 1/01/2025 $ 8,700
32,400 Muskogee Industrial Trust 0.13 1/01/2025 32,400
36,000 Muskogee Industrial Trust 0.13 6/01/2027 36,000
10,100 Tulsa Industrial Auth. (LOC - Bank of Oklahoma, N.A.) 0.27 11/01/2026 10,100
----------
106,405
----------
OREGON (1.6%)
6,730 Facilities Auth. (LOC - Bank of the West) 0.28 10/01/2037 6,730
38,100 Port of Portland (LOC - Bank of
Tokyo-Mitsubishi UFJ, Ltd.) 0.31 12/01/2014 38,100
----------
44,830
----------
PENNSYLVANIA (2.2%)
5,250 Chartiers Valley Industrial and
Commercial Dev. Auth. 1.11 11/15/2017 5,250
1,885 Delaware County Auth. (LOC - Citizens Bank of
Pennsylvania) 0.09 4/01/2030 1,885
14,300 Delaware Valley Regional Finance Auth.
(LOC - Bayerische Landesbank) 0.31 12/01/2020 14,300
7,800 Delaware Valley Regional Finance Auth.
(LOC - Bayerische Landesbank) 0.31 12/01/2020 7,800
3,400 Delaware Valley Regional Finance Auth.
(LOC - Bayerische Landesbank) 0.31 12/01/2020 3,400
8,990 Delaware Valley Regional Finance Auth.
(LOC - Bayerische Landesbank) 0.29 6/01/2042 8,990
18,685 Derry Township Industrial and Commercial
Dev. Auth. (LOC - PNC Bank, N.A.) 0.08 11/01/2030 18,685
----------
60,310
----------
RHODE ISLAND (1.0%)
6,455 EDC (LOC - RBS Citizens, N.A.) 0.19 10/01/2034 6,455
15,395 Health and Educational Building Corp.
(LOC - RBS Citizens, N.A.) 0.11 4/01/2036 15,395
6,930 Health and Educational Building Corp.
(LOC - RBS Citizens, N.A.) 0.18 12/01/2036 6,930
----------
28,780
----------
SOUTH CAROLINA (0.1%)
3,400 EDA (LOC - Fifth Third Bank) 0.19 2/01/2028 3,400
----------
SOUTH DAKOTA (0.6%)
5,975 Health and Educational Facilities Auth. 0.37 11/01/2020 5,975
3,275 Health and Educational Facilities Auth. 0.37 11/01/2025 3,275
6,865 Health and Educational Facilities Auth. 0.37 11/01/2027 6,865
----------
16,115
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
TENNESSEE (0.7%)
$ 7,100 Hendersonville IDB (LOC - Fifth Third Bank) 0.22% 5/01/2036 $ 7,100
4,860 Metropolitan Government of Nashville and Davidson
County (LOC - Fifth Third Bank) 0.19 12/01/2024 4,860
6,110 Sullivan County Health, Educational & Housing
Facilities Board (LOC - JPMorgan Chase Bank, N.A.) 0.07 9/01/2032 6,110
2,445 Williamson County IDB (LOC - Fifth Third Bank) 0.22 12/01/2027 2,445
----------
20,515
----------
TEXAS (2.3%)
13,300 Atascosa County IDC (NBGA) 0.13 6/30/2020 13,300
9,100 Metropolitan Higher Education Auth.
(LOC - JPMorgan Chase Bank, N.A.) 0.12 5/01/2019 9,100
1,800 North Central IDA 0.14 10/01/2013 1,800
15,000 Port Arthur 0.09 12/01/2040 15,000
25,000 Port Arthur 0.09 6/01/2041 25,000
----------
64,200
----------
UTAH (0.5%)
15,000 Emery County (LOC - JPMorgan Chase Bank, N.A.) 0.07 7/01/2015 15,000
----------
VIRGINIA (1.7%)
5,900 Fairfax County EDA (LOC - SunTrust Bank) 0.30 6/01/2037 5,900
2,500 Hampton Roads Sanitation District 0.05 11/01/2041 2,500
3,000 Hanover County EDA (LOC - U.S. Bank, N.A.) 0.07 11/01/2025 3,000
4,525 Lexington IDA 0.07 1/01/2035 4,525
4,300 Loudoun County IDA 0.06 2/15/2038 4,300
900 Peninsula Ports Auth. (LOC - U.S. Bank, N.A.) 0.05 7/01/2016 900
20,245 Stafford County IDA (LOC - Bank of America, N.A.) 0.09 8/01/2028 20,245
3,915 Univ. of Virginia (LIQ)(a) 0.07 6/01/2032 3,915
----------
45,285
----------
WASHINGTON (0.5%)
8,960 Housing Finance Commission (LOC - Key Bank, N.A.) 0.15 7/01/2043 8,960
5,025 Snohomish County Housing Auth.
(LOC - Bank of America, N.A.) 0.11 7/01/2036 5,025
----------
13,985
----------
WEST VIRGINIA (1.8%)
9,630 Marshall County 0.09 3/01/2026 9,630
39,540 State Hospital Finance Auth. (LOC - Fifth Third Bank) 0.19 10/01/2033 39,540
----------
49,170
----------
WISCONSIN (1.6%)
5,535 Health and Educational Facilities Auth.
(LOC - KBC Bank N.V.) 0.13 5/01/2025 5,535
550 Health and Educational Facilities Auth.
(LOC - JPMorgan Chase Bank, N.A.) 0.17 5/01/2026 550
================================================================================
20 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
$ 11,440 Health and Educational Facilities Auth.
(LOC - KBC Bank N.V.) 0.30% 3/01/2038 $ 11,440
19,900 Public Finance Auth. (LOC - Bank of Scotland) 0.10 6/01/2041 19,900
6,465 Wind Point (LOC - U.S. Bank, N.A.) 0.19 9/01/2035 6,465
----------
43,890
----------
WYOMING (0.4%)
10,000 Platte County (NBGA) 0.11 7/01/2014 10,000
----------
Total Variable-Rate Demand Notes (cost: $2,032,943) 2,032,943
----------
PUT BONDS (6.6%)
ALABAMA (1.8%)
25,000 Mobile IDB 0.40 6/01/2034 25,000
25,000 Mobile IDB 0.45 7/15/2034 25,000
----------
50,000
----------
CALIFORNIA (1.0%)
26,000 Statewide Communities Dev. Auth. 0.20 4/01/2037 26,000
----------
GEORGIA (0.5%)
3,100 Atlanta Finance Auth. 0.40 5/01/2015 3,100
10,150 Burke County Dev. Auth. 2.30 10/01/2032 10,246
----------
13,346
----------
MASSACHUSETTS (0.7%)
18,000 State Dev. Finance 0.40 5/01/2015 18,000
----------
MONTANA (1.9%)
9,125 Board of Investments (NBGA) 0.22 3/01/2017 9,125
11,775 Board of Investments (NBGA) 0.22 3/01/2018 11,775
11,335 Board of Investments (NBGA) 0.22 3/01/2025 11,335
12,450 Board of Investments (NBGA) 0.22 3/01/2028 12,450
2,450 Board of Investments (NBGA) 0.22 3/01/2029 2,450
5,975 Board of Investments (NBGA) 0.22 3/01/2035 5,975
----------
53,110
----------
NEW YORK (0.7%)
20,000 Liberty Dev. Corp. 0.23 12/01/2049 20,000
----------
Total Put Bonds (cost: $180,456) 180,456
----------
ADJUSTABLE-RATE NOTES (0.7%)
CALIFORNIA (0.7%)
19,000 Golden Empire Schools Financing Auth. 0.37 5/01/2014 19,000
----------
Total Adjustable-Rate Notes (cost: $19,000) 19,000
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (18.4%)
CALIFORNIA (1.6%)
$ 7,000 San Diego County Water Auth. 0.12% 10/03/2013 $ 7,000
30,735 San Diego County Water Auth. 0.12 11/06/2013 30,735
5,000 State (NBGA)(LOC - Wells Fargo Bank, N.A.) 0.09 11/05/2013 5,000
----------
42,735
----------
MARYLAND (0.4%)
9,800 John Hopkins Univ. 0.12 10/08/2013 9,800
----------
MINNESOTA (1.6%)
1,250 Aurora ISD (NBGA) 1.00 8/21/2014 1,256
1,460 Clearbrook Gonvick ISD (NBGA) 1.00 9/30/2014 1,470
22,000 Duluth ISD (NBGA) 1.00 9/16/2014 22,137
11,300 Farmington ISD (NBGA) 1.00 9/26/2014 11,380
3,000 Little Falls ISD (NBGA) 1.25 9/23/2014 3,026
1,500 Onamia ISD (NBGA) 1.00 8/30/2014 1,508
2,050 St. Cloud ISD (NBGA) 0.65 8/08/2014 2,054
2,100 St. Francis ISD (NBGA) 1.25 9/04/2014 2,118
----------
44,949
----------
NEW YORK (9.8%)
10,000 AuSable Valley CSD 1.00 10/04/2013 10,000
2,419 Clinton County 1.00 6/13/2014 2,428
16,730 Cortland Enlarged CSD 1.00 6/27/2014 16,811
10,562 Depew Union Free School District 0.75 6/18/2014 10,592
12,812 Dundee CSD 0.75 6/19/2014 12,849
4,750 Dunkirk School District 1.00 7/23/2014 4,765
23,970 Enlarged Troy School District 1.00 11/20/2013 23,987
12,190 Evans Brant CSD 1.00 6/27/2014 12,247
6,000 Geneva School Districrt 1.00 8/15/2014 6,029
5,301 Kenmore Tonawanda 1.00 6/27/2014 5,328
4,870 Livonia CSD 0.60 6/27/2014 4,875
9,219 Lockport School District 1.00 8/07/2014 9,265
8,780 Longwood CSD 1.00 6/20/2014 8,824
9,100 Maine Endwell CSD 1.00 6/26/2014 9,143
8,900 Moravia CSD 1.00 6/20/2014 8,937
2,040 New Rochelle School District 1.00 1/24/2014 2,044
20,315 Newburgh School District 1.00 6/30/2014 20,394
10,000 Ogdensburg City 0.75 6/24/2014 10,025
6,854 Oswego School District 1.00 6/25/2014 6,881
14,557 Rome School District 1.00 8/07/2014 14,629
4,270 Royalton Hartland CSD 1.00 6/27/2014 4,289
11,000 Schoharie County 1.50 11/15/2013 11,008
18,860 Sherburne Earleville CSD 1.00 6/27/2014 18,951
================================================================================
22 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
---------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON FINAL VALUE
(000) SECURITY RATE MATURITY (000)
---------------------------------------------------------------------------------------------------------
$ 3,500 Sullivan County 1.00% 3/07/2014 $ 3,508
5,730 Sullivan County 1.00 3/07/2014 5,745
4,694 Susquehanna Valley CSD 1.00 6/27/2014 4,713
4,758 Tonawanda School District 1.00 3/12/2014 4,767
11,635 Union Endicott CSD 1.00 6/25/2014 11,694
4,000 Waverly CSD 1.00 6/27/2014 4,015
----------
268,743
----------
TEXAS (4.0%)
10,000 Dallas Area Rapid Transit 0.15 11/19/2013 10,000
15,000 Houston 0.13 12/04/2013 15,000
10,000 Houston 0.13 12/10/2013 10,000
10,000 Houston 0.13 12/18/2013 10,000
13,000 San Antonio 0.12 12/05/2013 13,000
25,000 San Antonio 0.14 1/14/2014 25,000
25,000 Univ. of Texas 0.12 12/10/2013 25,000
----------
108,000
----------
VIRGINIA (1.0%)
20,000 Rector and Visitors of the Univ. of Virginia 0.10 12/05/2013 20,000
6,800 Univ. of Virginia 0.09 10/03/2013 6,800
----------
26,800
----------
WISCONSIN (0.0%)
1,220 Racine USD 1.00 4/01/2014 1,224
----------
Total Fixed-Rate Instruments (cost: $502,251) 502,251
----------
TOTAL INVESTMENTS (COST: $2,734,650) $2,734,650
==========
------------------------------------------------------------------------------------------------------
($ 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
------------------------------------------------------------------------------------------------------
Variable-Rate Demand Notes $- $2,032,943 $- $2,032,943
Put Bonds - 180,456 - 180,456
Adjustable-Rate Notes - 19,000 - 19,000
Fixed-Rate Instruments - 502,251 - 502,251
------------------------------------------------------------------------------------------------------
Total $- $2,734,650 $- $2,734,650
------------------------------------------------------------------------------------------------------
================================================================================
PORTFOLIO OF INVESTMENTS | 23
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
September 30, 2013 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Values of securities are determined by procedures and practices discussed in
Note 1 to the financial statements.
The cost of securities at September 30, 2013, for federal income tax
purposes, was approximately the same as that reported in the financial
statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
o SPECIFIC NOTES
(a) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by
Rule 144A, and as such has been deemed liquid by the Manager under
liquidity guidelines approved by the Trust's Board of Trustees (the
Board), unless otherwise noted as illiquid.
See accompanying notes to financial statements.
================================================================================
24 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
September 30, 2013 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities (amortized cost approximates market value) $2,734,650
Cash 109
Receivables:
Capital shares sold 2,657
USAA Asset Management Company (Note 4D) 108
Interest 1,567
----------
Total assets 2,739,091
----------
LIABILITIES
Payables:
Capital shares redeemed 3,880
Dividends on capital shares 18
Accrued management fees 630
Accrued transfer agent's fees 300
Other accrued expenses and payables 82
----------
Total liabilities 4,910
----------
Net assets applicable to capital shares outstanding $2,734,181
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,733,971
Accumulated net realized gain on investments 210
----------
Net assets applicable to capital shares outstanding $2,734,181
==========
Capital shares outstanding, unlimited number of shares
authorized, no par value 2,733,963
==========
Net asset value, redemption price, and offering price per share $ 1.00
==========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 25
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended September 30, 2013 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 3,220
-------
EXPENSES
Management fees 3,779
Administration and servicing fees 1,349
Transfer agent's fees 2,052
Custody and accounting fees 150
Postage 27
Shareholder reporting fees 26
Trustees' fees 6
Registration fees 32
Professional fees 78
Other 21
-------
Total expenses 7,520
Expenses reimbursed (4,435)
-------
Net expenses 3,085
-------
NET INVESTMENT INCOME 135
-------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain 32
-------
Increase in net assets resulting from operations $ 167
=======
See accompanying notes to financial statements.
================================================================================
26 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended September 30, 2013 (unaudited), and year ended
March 31, 2013
--------------------------------------------------------------------------------
9/30/2013 3/31/2013
---------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 135 $ 261
Net realized gain on investments 32 262
-----------------------------
Increase in net assets resulting from operations 167 523
-----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (135) (261)
Net realized gains - (106)
-----------------------------
Distributions to shareholders (135) (367)
-----------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 625,120 1,358,194
Reinvested dividends 134 363
Cost of shares redeemed (574,463) (1,315,730)
-----------------------------
Increase in net assets from capital
share transactions 50,791 42,827
-----------------------------
Net increase in net assets 50,823 42,983
NET ASSETS
Beginning of period 2,683,358 2,640,375
-----------------------------
End of period $2,734,181 $ 2,683,358
=============================
CHANGE IN SHARES OUTSTANDING
Shares sold 625,120 1,358,194
Shares issued for dividends reinvested 134 363
Shares redeemed (574,463) (1,315,730)
-----------------------------
Increase in shares outstanding 50,791 42,827
=============================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 27
================================================================================
NOTES TO FINANCIAL STATEMENTS
September 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 52 separate funds. The
information presented in this semiannual report pertains only to the USAA Tax
Exempt Money Market Fund (the Fund), which is classified as diversified under
the 1940 Act. The Fund's investment objective is to provide investors with
interest income that is exempt from federal income tax, with a further objective
of preserving capital and maintaining liquidity.
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.
================================================================================
28 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
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. Pursuant to Rule 2a-7 under the 1940 Act, securities in the Fund are
valued at amortized cost, which approximates market value. This method
values a security at its cost on the date of purchase and, thereafter,
assumes a constant amortization to maturity of any premiums or discounts.
2. Securities for which amortized cost valuations are considered unreliable
or whose values have been materially affected by a significant event are
valued in good faith at fair value, using methods determined by the
Manager, an affiliate of the Fund, under procedures to stabilize net
asset value (NAV) and valuation procedures approved by the Board.
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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
================================================================================
securities, inputs that are observable for the securities, either directly
or indirectly, and market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
For example, money market securities are valued using amortized cost, in
accordance with rules under the 1940 Act. Generally, amortized cost
approximates the current fair value of a security, but since the value is
not obtained from a quoted price in an active market, such securities are
reflected as Level 2.
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 basis. Premiums and
discounts are amortized over the life of the respective securities using the
straight-line method.
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.
================================================================================
30 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
F. EXPENSES PAID INDIRECTLY -- Through arrangements with the Fund's custodian
and other banks utilized by the Fund for cash management purposes, realized
credits, if any, generated from cash balances in the Fund's bank accounts
may be used to directly reduce the Fund's expenses. For the six-month period
ended September 30, 2013, there were no custodian and other bank credits.
G. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business, the Trust enters into contracts that contain a variety of
representations and warranties that provide general indemnifications. The
Trust's maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Trust that have not yet
occurred. However, the Trust expects the risk of loss to be remote.
H. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at an interest rate based on
the London Interbank Offered Rate (LIBOR).
The USAA Funds that are party to the loan agreement are assessed facility fees
by CAPCO in the amount of 7.0 basis points of the amount of the committed loan
agreement. The facility fee rate remains unchanged from September 30, 2012, to
September 30, 2013. The facility fees are
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
================================================================================
allocated among the Funds based on their respective average net assets
for the period.
For the six-month period ended September 30, 2013, the Fund paid CAPCO facility
fees of $8,000, which represents 4.4% of the total fees paid to CAPCO by the
USAA Funds. The Fund had no borrowings under this agreement during the six-month
period ended September 30, 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 March 31, 2014,
in accordance with applicable tax law. Net investment income is accrued daily
as dividends and distributed to shareholders monthly. Distributions of realized
gains from security transactions not offset by capital losses are made annually
in the succeeding fiscal year or as otherwise required to avoid the payment of
federal taxes.
Under the Regulated Investment Company Modernization Act of 2010 (the Act) a
fund is permitted to carry forward net capital losses indefinitely.
Additionally, such capital losses that are carried forward will retain their
character as short-term and or long-term capital losses. Post-enactment capital
loss carryforwards must be used before pre-enactment capital loss carryforwards.
As a result, pre-enactment capital loss carryforwards may be more likely to
expire unused. At March 31, 2013, the Fund had no capital loss carryforwards,
for federal income tax purposes.
For the six-month period ended September 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
adjustments to this conclusion are necessary. The statute of limitations on the
Fund's tax return filings generally remain open for the three preceding fiscal
reporting year ends and remain subject to examination by the Internal Revenue
Service and state taxing authorities.
================================================================================
32 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
(4) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager carries out the Fund's investment policies
and manages the Fund's portfolio pursuant to an Advisory Agreement. The
Fund's management fees are accrued daily and paid monthly at an annualized
rate of 0.28% of the Fund's average net assets for the fiscal year. For the
six-month period ended September 30, 2013, the Fund incurred total
management fees, paid or payable to the Manager, of $3,779,000.
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 0.10% of the Fund's average net assets. For the six-month period ended
September 30, 2013, the Fund incurred administration and servicing fees,
paid or payable to the Manager, of $1,349,000.
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 September 30, 2013, the Fund reimbursed the
Manager $38,000 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 September
30, 2013, the Fund incurred transfer agent's fees, paid or payable to SAS,
of $2,052,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
================================================================================
D. EXPENSE LIMITATION -- The Manager has voluntarily agreed, on a temporary
basis, to reimburse management, administrative, or other fees to limit the
Fund's expenses and attempt to prevent a negative yield. The Manager can
modify or terminate this arrangement at any time. For the six-month period
ended September 30, 2013, the Fund incurred reimbursable expenses of
$4,435,000, of which $108,000 was receivable from the Manager.
E. 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.
(5) 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.
================================================================================
34 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
(6) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------------------
2013 2013 2012 2011 2010 2009
--------------------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .00(a) .00(a) .00(a) .00(a) .00(a) .02
Net realized and
unrealized gain .00(a) .00(a) .00(a) .00(a) .00(a) .00(a)
--------------------------------------------------------------------------------------------------
Total from investment
operations .00(a) .00(a) .00(a) .00(a) .00(a) .02
Less distributions from:
Net investment income (.00)(a) (.00)(a) (.00)(a) (.00)(a) (.00)(a) (.02)
Realized capital gains - (.00)(a) (.00)(a) - (.00)(a) (.00)(a)
--------------------------------------------------------------------------------------------------
Total distributions (.00)(a) (.00)(a) (.00)(a) (.00)(a) (.00)(a) (.02)
--------------------------------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==================================================================================================
Total return (%)* .01(d) .01(d) .04(c),(d) .01(d) .48(b),(d) 1.94
Net assets at end of
period (000) $2,734,181 $2,683,358 $2,640,375 $2,842,986 $3,331,284 $3,498,914
Ratios to average
net assets:**
Expenses (%)(e) .23(d),(f) .34(d) .42(c),(d) .49(d) .52(b),(d) .51
Expenses, excluding
reimbursements (%)(e) .56(f) .56 .57(c) .55 .53(b) -
Net investment income (%) .01(f) .01 .03 .01 .47 1.90
* 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
iMoneyNet reported return. Total returns for periods of less than one year
are not annualized.
** For the six-month period ended September 30, 2013, average net assets were
$2,691,508,000.
(a) Represents less than $0.01 per share.
(b) During the year ended March 31, 2010, SAS reimbursed the Fund $87,000 for
corrections in fees paid for the administration and servicing of certain
accounts. The effect of this reimbursement on the Fund's total return was
less than 0.01%. The reimbursement decreased the Fund's expense ratios by
0.01%. This decrease is excluded from the expense ratios in the Financial
Highlights table.
(c) During the year ended March 31, 2012, SAS reimbursed the Fund $654,000 for
corrections in fees paid for the administration and servicing of certain
accounts. The effect of this reimbursement on the Fund's total return was
less than 0.01%. The reimbursement decreased the Fund's expense ratios by
0.02%. This decrease is excluded from the expense ratios in the Financial
Highlights table.
(d) Effective January 7, 2010, the Manager voluntarily agreed, on a temporary
basis, to reimburse management, administrative, or other fees to limit the
Fund's expenses and attempt to prevent a negative yield.
(e) 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%.
(f) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
================================================================================
EXPENSE EXAMPLE
September 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 April 1, 2013, through
September 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
================================================================================
36 | USAA TAX EXEMPT MONEY MARKET 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 APRIL 1, 2013 -
APRIL 1, 2013 SEPTEMBER 30, 2013 SEPTEMBER 30, 2013
--------------------------------------------------------
Actual $1,000.00 $1,000.10 $1.15
Hypothetical
(5% return before expenses) 1,000.00 1,023.92 1.17
* Expenses are equal to the Fund' sualized expense ratio of 0.23%, which is
net of any reimbursements and expenses paid indirectly, multiplied by the
average account value over the period, multiplied by 183 days/365 days (to
reflect the one-half-year period). The Fund's ending account value on the
first line in the table is based on its actual total return of 0.01% for the
six-month period of April 1, 2013, through September 30, 2013.
================================================================================
EXPENSE EXAMPLE | 37
================================================================================
ADVISORY AGREEMENT
September 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
continuation of the Advisory Agreement with management and with experienced
independent counsel and received materials from such counsel discussing the
legal standards for their consideration of the proposed continuation of the
Advisory Agreement with respect to the Fund. The Independent Trustees also
reviewed the proposed continuation of the Advisory Agreement with respect to the
Fund in private sessions with their counsel at which no representatives of
management were present.
At each regularly scheduled meeting of the Board and its committees, the Board
receives and reviews, among other things, information concerning the Fund's
performance and related services provided by the Manager. At the meeting at
which the renewal of the Advisory Agreement is
================================================================================
38 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
considered, particular focus is given to information concerning 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's and its committees' consideration
of the Advisory Agreement included information previously received at such
meetings.
ADVISORY AGREEMENT
After full consideration of a variety of factors, the Board, including the
Independent Trustees, voted to approve the Advisory Agreement. In approving the
Advisory Agreement, the Trustees did not identify any single factor as
controlling, and each Trustee may have attributed different weights to various
factors. Throughout their deliberations, the Independent Trustees were
represented and assisted by independent counsel.
NATURE, EXTENT, AND QUALITY OF SERVICES -- In considering the nature, extent,
and quality of the services provided by the Manager under the Advisory
Agreement, the Board reviewed information provided by the Manager relating to
its operations and personnel. The Board also took into account its knowledge of
the Manager's management and the quality of the performance of its 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 | 39
================================================================================
brokerage, including the Manager's process for monitoring "best execution," also
was 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 and its affiliates, including the Manager's oversight of
the Fund's day-to-day operations and oversight of Fund accounting. The Trustees,
guided also by information obtained from their experiences as trustees of the
Trust, also focused on the quality of the Manager's compliance and
administrative staff.
EXPENSES AND PERFORMANCE -- In connection with its consideration of the Advisory
Agreement, the Board evaluated the Fund's advisory fees and total expense ratio
as compared to other open-end investment companies deemed to be comparable to
the Fund as determined by the independent third party in its report. The Fund's
expenses were compared to (i) a group of investment companies chosen by the
independent third party to be comparable to the Fund based upon certain factors,
including fund type, comparability of investment objective and classification,
sales load type (in this case, investment companies with no sales loads and
frontend loads), asset size, and expense components (the "expense group") and
(ii) a larger group of investment companies that includes the Fund and all other
no-load and front-end 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 fee waivers or reimbursements --
was above the median of its expense group and its expense universe. The data
indicated that the Fund's total expense ratio, after reimbursements, was above
the median of its expense group and its expense universe. The Board took into
account the various services
================================================================================
40 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
provided to the Fund by the Manager and its affiliates, including the nature and
high quality of the services provided by the Manager. The Board also noted the
level and method of computing the management fee. The Board took into account
management's discussion of the Fund's expenses, noting that the Manager had
reimbursed Fund expenses for the period covered by the third-party report.
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 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- and five-year periods ended December 31, 2012, and was above
the average of its performance universe and lower than its Lipper index for the
three-year period ended December 31, 2012. The Board also noted that the Fund's
percentile performance ranking was in the top 10% of its performance universe
for the one-year period ended December 31, 2012, was in the top 20% of its
performance universe for the three-year period ended December 31, 2012, and was
in the top 5% of its performance universe for the five-year period ended
December 31, 2012. The Board also took into account Management's discussion of
the Fund's performance.
COMPENSATION AND PROFITABILITY -- The Board took into consideration the level
and method of computing the management fee. The information considered by the
Board included operating profit margin information for the Manager's business as
a whole. The Board also received and considered profitability information
related to the management revenues from the Fund. This information included a
review of the methodology used in the allocation of certain costs to the Fund.
The Trustees reviewed the profitability of the Manager's relationship with the
Fund before tax
================================================================================
ADVISORY AGREEMENT | 41
================================================================================
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 Board also took into account the high quality of the services received
by the Fund from the Manager as well as the type of fund. The Trustees
recognized that the Manager should be entitled to earn a reasonable level of
profits in exchange for the level of services it provides to the Fund and the
entrepreneurial risk that it assumes as Manager.
ECONOMIES OF SCALE -- The Board considered whether there should be changes in
the management fee rate or structure in order to enable the Fund to participate
in any economies of scale. The Board took into account management's discussion
of the current advisory fee structure. The Board also considered the effect of
the Fund's growth and size on its performance and fees, noting that if the
Fund's assets increase over time, the Fund may realize other economies of scale
if assets increase proportionally more than some expenses. The Board determined
that the current investment management fee structure was reasonable.
CONCLUSIONS -- The Board reached the following conclusions regarding the Fund's
Advisory Agreement with the Manager, among others: (i) the Manager has
demonstrated that it possesses the capability and resources to perform the
duties required of it under the Advisory Agreement; (ii) the Manager maintains
an appropriate compliance program; (iii) the overall performance of the Fund is
reasonable in relation to the performance of funds with similar investment
objectives and to relevant indices; (iv) the Fund's advisory expenses are
reasonable in relation to those of similar funds and to the services to be
provided by the Manager; and (v) the Manager's level of profitability from its
relationship with the Fund is reasonable in light of the nature and high quality
of services provided by the Manager and the type of fund. Based on its
conclusions, the Board determined that continuation of the Advisory Agreement
would be in the best interests of the Fund and its shareholders.
================================================================================
42 | USAA TAX EXEMPT MONEY MARKET FUND
================================================================================
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Paul L. McNamara
Jefferson C. Boyce
--------------------------------------------------------------------------------
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) in summary within the Statement of Additional Information on the SEC's
website at HTTP://WWW.SEC.GOV. Information regarding how the Fund voted proxies
relating to portfolio securities during the most recent 12-month period ended
June 30 is available without charge (i) at USAA.COM; and (ii) on the SEC's
website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
USAA
9800 Fredericksburg Road --------------
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)
=============================================================================
39598-1113 (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 September 30, 2013
By:* /S/ DANIEL J. MAVICO
-----------------------------------------------------------
Signature and Title: DANIEL J. MAVICO, Assistant Secretary
Date: 11/22/2013
------------------------------
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: 12/02/2013
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 12/02/2013
------------------------------
*Print the name and title of each signing officer under his or her signature.