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: MAY 31
Date of reporting period: NOVEMBER 30, 2013
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED NOVEMBER 30, 2013
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA EMERGING MARKETS FUND]
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SEMIANNUAL REPORT
USAA EMERGING MARKETS FUND
FUND SHARES o INSTITUTIONAL SHARES o ADVISER SHARES
NOVEMBER 30, 2013
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PRESIDENT'S MESSAGE
"IT IS IMPORTANT TO OWN A VARIETY OF
INVESTMENTS THAT TEND TO PERFORM [PHOTO OF DANIEL S. McNAMARA]
DIFFERENTLY IN DIFFERENT ENVIRONMENTS."
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DECEMBER 2013
As experienced investors know, major moves in an asset class can happen quickly.
This was the case during the reporting period for both stocks and bonds. For
stocks, it was essentially a tale of two markets. In the first half of the
period, global stocks retreated on hints from Federal Reserve (the Fed) Chairman
Ben Bernanke that the Fed might begin tapering (or reducing) its quantitative
easing (QE) asset purchases. (Through QE, the Fed was buying $85 billion in U.S.
Treasury securities and mortgage-backed securities every month in order to push
down long-term interest rates and stimulate economic growth and it recently
signaled that it will reduce this amount to $75 billion every month.) Overall,
for the period between May 31, 2013, and September 5, 2013, international stocks
(which exclude the United States and Europe) and European stocks gained about
3%, while U.S. stocks returned approximately 2%. Emerging market stocks
declined.
Global stocks reversed direction in the second half of the reporting period,
rallying strongly after the Fed delayed the inevitable taper. Between September
6, 2013, and November 29, 2013, European stocks gained more than 10%,
outperforming U.S. and international stocks -- both of which advanced nearly a
still-respectable 10% -- and emerging markets stocks, which recorded a return of
about 8%. Varied performance, such as this, is an important reminder of the
benefits of diversification: it is important to own a variety of investments
that tend to perform differently in different environments.
In the bond market, longer-term interest rates rose on expectations of a
reduction in the Fed's asset purchases. Bond prices, which move in the opposite
direction of interest rates, declined. The increase in rates was most pronounced
in the longer end of the yield curve -- in five-year, 10-year and 30-year
maturities. For fixed-income investors, it was a mixed blessing. Higher rates
meant a decrease in principal value. On the other hand, lower prices mean
investors have the opportunity to reinvest at higher rates and earn more on any
new investments. Meanwhile, short-term interest rates remained anchored near
zero. The Fed has said it will keep the targeted federal funds rate between 0%
and 0.25% as long as unemployment is above 6.5% and inflation remains below
2.5%.
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Looking ahead, I expect the Fed to continue its asset purchases for the
foreseeable future. Janet Yellen, who has been nominated to succeed Bernanke,
said this past November that she supports the continuation of the Fed's
accommodative monetary policies. Yellen also told the Senate Banking Committee
that the Fed would eventually have to begin tapering (which it subsequently
stated it will do). However, I believe that the Fed will continue asset
purchases, as the U.S. economy remains fragile.
As the Fed starts to taper its asset purchases, longer-term interest rates will
probably increase. Though gradually rising rates can be a headwind for
investors, fixed-income investing is not an all-or-none scenario. I believe that
bonds continue to have a place in a diversified portfolio, in part because of
the income they provide. Furthermore, the bond market is not one market but is
actually a market of many different types of bonds, including U.S. Treasuries,
mortgage-backed securities, investment-grade bonds, high-yield bonds, municipal
securities, and more. Many of these fixed-income asset classes performed
differently (some better and some worse than U.S. Treasuries) during the
reporting period.
Meanwhile, equity valuations have risen faster than fundamentals. I believe
valuations will continue to rise if economic growth accelerates and profit
margins can maintain their current levels. If growth stalls or decelerates and
profit margins decrease, earnings may disappoint and stocks may trim their
gains.
Precious metals, like fixed-income securities, underperformed during the
reporting period. The underperformance, in my view, was driven by concern that
Fed tapering would be stronger than expected, which could lead to a rally in the
U.S. dollar and reduce the need for inflation protection. Precious metals are
typically used as a long-term inflation hedge. Exposure to gold and other
precious metals and minerals may enhance overall portfolio diversification.
In the months ahead, rest assured that we will continue to monitor the financial
markets as well as Congressional budget negotiations, Fed policy, economic
trends, corporate earnings, and other factors that potentially could affect the
performance of your investments. On behalf of everyone at USAA Asset Management
Company, thank for your continued investment in our family of no-load mutual
funds.
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 Emerging market countries are less
diverse and mature than other countries and tend to be politically less stable.
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
MANAGERS' COMMENTARY 2
INVESTMENT OVERVIEW 6
FINANCIAL INFORMATION
Portfolio of Investments 14
Notes to Portfolio of Investments 26
Financial Statements 28
Notes to Financial Statements 31
EXPENSE EXAMPLE 50
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA ASSET MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2014, USAA. All rights reserved.
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FUND OBJECTIVE
THE USAA EMERGING MARKETS FUND (THE FUND) SEEKS CAPITAL APPRECIATION.
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TYPES OF INVESTMENTS
The Fund invests at least 80% of its assets in equity securities of emerging
market companies. The "equity securities" in which the Fund principally invests
are common stocks, preferred stocks, securities convertible into common stocks,
and securities that carry the right to buy common stocks. This 80% policy may be
changed upon at least 60 days' written notice to shareholders.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Asset Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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FUND OBJECTIVE | 1
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MANAGERS' COMMENTARY ON THE FUND
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Lazard Asset Management (Lazard) Brandes Investment Partners,
JAI JACOB L.P. (Brandes)
JAMES M. MCDONALD, CFA AL CHAN, CFA**
KEVIN O'HARE, CFA DOUG EDMAN, CFA
STEPHEN MARRA* CHRIS GARRETT, CFA
LOUIS LAU, CFA
Victory Capital Management, Inc. (Victory) GREG RIPPEL, CFA
MARGARET LINDSAY GERARDO ZAMORANO, CFA
TIFFANY KUO, CFA
JOSHUA LINDLAND, CFA
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o HOW DID THE USAA EMERGING MARKETS FUND (THE FUND SHARES) PERFORM DURING THE
REPORTING PERIOD?
For the six-month period ended November 30, 2013, the Fund Shares had a
total return of 1.72%. This compares to a return of 1.26% for the Lipper
Emerging Markets Funds Index and 2.53% for the MSCI Emerging Markets Index
(the Index).
The Fund is managed by Brandes Investment Partners, L.P. (Brandes), Lazard
Asset Management (Lazard), and Victory Capital Management, Inc. (Victory).
Refer to page 7 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. o Emerging market
countries are less diverse and mature than other countries and tend to be
politically less stable.
*Effective October 2013, Stephen Marra is a co-manager of the Fund.
**Effective June 1, 2013, Al Chan no longer is a co-manager of the Fund.
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2 | USAA EMERGING MARKETS FUND
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o HOW DID THE BRANDES PORTION OF THE FUND PERFORM?
The Brandes portion outperformed the Index for the six-month period.
Brandes benefited most from holdings in materials, telecommunication
services, and industrials -- with notable outperformers such as Greece's
Titan Cement Co. S.A.; Brazil's TIM Participacoes S.A. ADR; and China's
Sinotrans Limited "H". Conversely, Brandes' positioning in the consumer
discretionary sector detracted most from performance, mainly due to
holdings in Mexican homebuilders Desarrolladora Homex S.A. de C.V. and Urbi
Desarrollos Urbanos S.A. de C.V. On a country basis, stock selection in
South Korea, India, and Indonesia aided returns the most, while select
holdings in China, Mexico, and Turkey were subtractive.
During the period, Brandes sold out of positions in South Africa's MTN
Group Ltd. and U.A.E.-based Air Arabia PJSC. New positions included
China's Weiqiao Textile Co. Ltd. "H"; India's Reliance Infrastructure Ltd.
GDR; Indonesia's PT XL Axiata TbK; and Russia's Surgutneftegas.
o WHAT IS BRANDES' INVESTMENT APPROACH AND STRATEGY?
Brandes is a bottom-up, Graham-and-Dodd value manager with a long-term
focus on pursuing value. Their process relies on fundamental analysis by
their team of experienced equity analysts coupled with bottom-up portfolio
construction by a dedicated emerging market investment committee. While
they monitor short-term events in the emerging markets, their investment
philosophy focuses on company-by-company analysis. They take a long-term
perspective and believe that very little short-term "market news" provides
useful information to investors.
You will find a complete list of securities that the Fund owns on pages
14-25.
Titan Cement Co. S.A. was sold out of the Fund prior to November 30, 2013.
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MANAGERS' COMMENTARY ON THE FUND | 3
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In all market environments, they search for and hold what they believe to
be fundamentally sound companies trading at discounts to Brandes' estimates
of fair value. Brandes believes that this strategy will provide patient
investors with favorable results.
o PLEASE DESCRIBE THE PERFORMANCE OF THE LAZARD PORTION OF THE FUND.
The Lazard portion outperformed the Index for the semiannual period. On a
sector basis, stock selection in the information technology, energy, and
health care sectors added to relative performance, as did a
higher-than-index exposure to the information technology sector.
Conversely, stock selection in the financials, industrials, and telecom
services areas detracted from relative return. On a country basis, an
overweight to and stock selection within Russia, stock selection in Mexico,
and a lack of exposure to Thailand contributed to relative return. In
contrast, underweights and stock selection in Taiwan and South Africa, and
an overweight to Turkey, detracted from performance.
o WHAT IS LAZARD'S OUTLOOK?
While most market participants appear to recognize that the eventual
normalization of Federal Reserve (the Fed) policy will likely be less
supportive of U.S. economic growth and asset price appreciation, the
postponement of tapering (or reducing) the Fed's U.S. Treasury bond-buying
program in September 2013, and the ensuing political standoff over the U.S.
budget and debt ceiling seem to have gone too far in pushing back
expectations regarding the timing of the Fed's reduction of bond purchases.
In Lazard's view, there is a real possibility that the U.S. central bank
may taper its U.S. Treasury bond-buying program sooner than the market is
anticipating, and that interest rate increases could conceivably begin
before mid-2015. Economic reports continue to show an anemic recovery
within developed markets, with a slower, more drawn-out cycle of corporate
capital expenditures.
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4 | USAA EMERGING MARKETS FUND
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Over the next six to 12 months, Lazard expects investor risk appetite to
diminish somewhat.
o HOW DID VICTORY'S PORTION OF THE PORTFOLIO PERFORM?
Victory's portion of the Fund outperformed the index for the semiannual
period. Victory's holdings in consumer durables, consumer non-durables,
finance, and commercial services were among the top contributors, while
positions in producer manufacturing, retail trade, industrial services, and
consumer services detracted from performance. On a country basis, stock
selection was strong within South Korea, Malaysia, and Taiwan, more than
offsetting negative performance in South Africa, Indonesia, the
Philippines, and Thailand.
At the stock level, top contributors included Eclat Textile Co. Ltd., a
Taiwanese functional fabrics manufacturer; My EG Services Berhad, a
Malaysian online car registration service provider; and Suheung Capsule Co.
Ltd., a South Korean manufacturer of gelatin capsules for the
pharmaceutical industry. PT Bank Pembangunan Daerah Jawa Barat dan Banten
Tbk, from Indonesia; EEI Corp., a Phillippine engineering service company;
and Somboon Advance Technology, a Thai automotive components manufacturer;
were among the detractors.
o WHAT IS VICTORY'S OUTLOOK?
According to Victory, emerging market valuations remain attractive compared
to developed markets, and emerging countries' long-term economic and
capital market growth potential remains superior. Victory believes that
this asset class offers a unique opportunity to invest directly in the
beneficiaries of secular trends in the emerging world.
Thank you for your investment in the Fund.
Somboon Advance Technology was sold out of the Fund prior to
November 30, 2013.
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MANAGERS' COMMENTARY ON THE FUND | 5
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INVESTMENT OVERVIEW
USAA EMERGING MARKETS FUND SHARES (FUND SHARES) (Ticker Symbol: USEMX)
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11/30/13 5/31/13
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Net Assets $482.7 Million $476.7 Million
Net Asset Value Per Share $17.74 $17.44
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AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/13
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5/31/13-11/30/13* 1 Year 5 Years 10 Years
1.72% 6.37% 13.94% 9.62%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
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1 Year 5 Years 10 Years
-0.38% 11.87% 8.78%
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EXPENSE RATIO AS OF 5/31/13**
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1.62%
(includes acquired fund fees and expenses of 0.04%)
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 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 October 1, 2013, and is
calculated as a percentage of average net assets. This expense ratio may differ
from the expense ratio disclosed in the Financial Highlights, which excludes
acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
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6 | USAA EMERGING MARKETS FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
MSCI EMERGING MARKETS LIPPER EMERGING USAA EMERGING MARKETS -
FUNDS INDEX MARKET FUNDS INDEX FUND SHARES
11/30/03 $10,000.00 $10,000.00 $10,000.00
12/31/03 10,724.96 10,849.67 10,690.02
01/31/04 11,105.86 11,159.89 11,019.11
02/29/04 11,618.17 11,660.82 11,496.82
03/31/04 11,767.46 11,817.22 11,571.13
04/30/04 10,805.38 10,885.84 10,859.87
05/31/04 10,662.14 10,673.41 10,679.41
06/30/04 10,640.95 10,728.22 10,817.41
07/31/04 10,452.80 10,570.77 10,658.17
08/31/04 10,890.35 10,981.53 10,976.65
09/30/04 11,519.35 11,625.47 11,496.82
10/31/04 11,795.31 11,980.24 11,783.44
11/30/04 12,887.86 12,965.47 12,855.63
12/31/04 13,508.30 13,637.35 13,490.18
01/31/05 13,551.05 13,685.83 13,362.11
02/28/05 14,740.96 14,826.97 14,376.01
03/31/05 13,769.81 13,818.84 13,372.78
04/30/05 13,402.80 13,480.67 13,105.97
05/31/05 13,874.69 13,897.75 13,436.82
06/30/05 14,353.63 14,359.08 13,938.43
07/31/05 15,369.26 15,350.29 14,813.58
08/31/05 15,507.61 15,588.97 14,877.62
09/30/05 16,953.64 16,952.35 16,062.28
10/31/05 15,845.97 15,930.13 14,941.66
11/30/05 17,157.97 17,124.12 15,987.57
12/31/05 18,174.37 18,090.31 16,935.96
01/31/06 20,215.34 20,172.50 18,472.66
02/28/06 20,196.09 20,054.45 18,483.41
03/31/06 20,377.13 20,326.57 18,859.52
04/30/06 21,831.15 21,766.48 20,116.83
05/31/06 19,548.80 19,373.27 18,075.05
06/30/06 19,507.38 19,277.31 17,967.59
07/31/06 19,799.13 19,691.66 18,075.05
08/31/06 20,313.48 20,227.93 18,451.17
09/30/06 20,484.23 20,378.46 18,773.56
10/31/06 21,457.97 21,442.78 19,622.50
11/30/06 23,056.43 22,851.79 21,019.50
12/31/06 24,096.75 23,891.79 21,908.52
01/31/07 23,847.13 23,777.34 21,789.04
02/28/07 23,708.99 23,554.26 21,517.49
03/31/07 24,662.22 24,452.14 22,266.97
04/30/07 25,807.49 25,610.53 23,146.78
05/31/07 27,092.43 26,988.76 24,624.01
06/30/07 28,373.90 27,928.68 25,525.55
07/31/07 29,885.69 28,941.16 26,579.15
08/31/07 29,260.37 28,313.81 26,122.95
09/30/07 32,493.97 31,060.55 28,306.20
10/31/07 36,120.25 34,374.70 31,130.31
11/30/07 33,562.05 32,262.52 29,066.54
12/31/07 33,681.95 32,553.27 29,271.34
01/31/08 29,488.51 28,958.11 26,653.77
02/29/08 31,675.85 30,222.03 27,741.44
03/31/08 30,002.45 28,814.01 26,629.87
04/30/08 32,442.09 30,993.52 28,745.44
05/31/08 33,053.35 31,564.43 29,247.43
06/30/08 29,762.11 28,317.20 26,426.68
07/31/08 28,663.02 27,327.17 25,697.58
08/31/08 26,382.92 25,250.87 23,773.25
09/30/08 21,768.67 21,110.15 19,912.64
10/31/08 15,814.23 14,979.65 14,306.98
11/30/08 14,624.90 13,697.80 13,040.03
12/31/08 15,769.58 14,727.45 14,153.34
01/31/09 14,757.62 13,456.43 12,987.15
02/28/09 13,927.58 12,698.53 12,351.04
03/31/09 15,931.00 14,335.40 13,888.29
04/30/09 18,584.52 16,704.07 16,167.67
05/31/09 21,770.84 19,730.13 19,096.40
06/30/09 21,481.89 19,496.84 18,765.10
07/31/09 23,912.84 21,752.04 20,911.95
08/31/09 23,833.66 21,840.01 20,978.22
09/30/09 26,000.95 23,790.11 22,979.30
10/31/09 26,035.51 23,501.16 22,727.50
11/30/09 27,155.19 24,789.28 23,906.95
12/31/09 28,230.93 25,662.10 24,742.90
01/31/10 26,661.01 24,226.79 23,396.43
02/28/10 26,760.44 24,431.70 23,556.41
03/31/10 28,923.01 26,453.56 25,436.12
04/30/10 29,279.88 26,642.33 25,529.44
05/31/10 26,440.87 24,129.69 22,916.51
06/30/10 26,525.51 24,139.21 22,863.18
07/31/10 28,753.22 26,391.35 25,022.85
08/31/10 28,204.49 25,877.91 24,396.28
09/30/10 31,342.66 28,810.46 27,075.87
10/31/10 32,255.47 29,702.33 27,715.78
11/30/10 31,405.29 28,949.84 27,115.87
12/31/10 33,650.05 30,831.24 29,002.93
01/31/11 32,743.50 29,835.36 28,063.89
02/28/11 32,442.99 29,557.61 27,715.10
03/31/11 34,355.57 31,089.04 29,110.24
04/30/11 35,428.74 32,206.15 29,848.06
05/31/11 34,513.55 31,358.44 28,935.85
06/30/11 33,997.12 30,950.99 28,426.09
07/31/11 33,869.26 30,893.95 28,090.71
08/31/11 30,854.98 28,356.29 25,421.16
09/30/11 26,361.70 23,948.04 21,235.72
10/31/11 29,856.11 26,884.93 23,865.03
11/30/11 27,867.93 26,003.35 23,060.14
12/31/11 27,534.71 25,166.19 22,103.45
01/31/12 30,663.21 27,804.81 24,750.82
02/29/12 32,505.60 29,460.73 26,039.49
03/31/12 31,427.56 28,829.08 24,862.88
04/30/12 31,057.35 28,475.65 24,414.64
05/31/12 27,590.55 25,392.42 21,641.21
06/30/12 28,668.38 26,568.85 22,551.68
07/31/12 29,248.25 26,823.46 22,733.77
08/31/12 29,163.72 27,012.45 22,705.76
09/30/12 30,929.29 28,432.89 24,092.48
10/31/12 30,744.83 28,353.46 23,602.22
11/30/12 31,137.43 28,668.96 23,546.19
12/31/12 32,663.65 30,226.06 24,891.06
01/31/13 33,119.07 30,663.37 25,328.73
02/28/13 32,707.74 30,375.03 25,427.56
03/31/13 32,080.38 30,054.83 24,919.29
04/30/13 32,406.42 30,483.46 25,046.36
05/31/13 31,590.26 29,699.88 24,622.80
06/30/13 29,594.20 27,805.70 22,843.86
07/31/13 29,919.41 28,247.24 23,168.59
08/31/13 29,417.32 27,333.74 22,547.37
09/30/13 31,339.67 29,305.79 24,227.48
10/31/13 32,866.90 30,581.95 25,286.38
11/30/13 32,388.87 30,073.02 25,046.36
[END CHART]
Data from 11/30/03 to 11/30/13.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Emerging Markets Fund Shares to the following benchmarks:
o The unmanaged MSCI Emerging Markets Index is a free-float-adjusted market
capitalization index that is designed to measure equity market performance
in the global emerging markets.
o The unmanaged Lipper Emerging Markets Funds Index tracks the total return
performance of the 30 largest funds within the Lipper Emerging Markets
Funds category.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index.
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INVESTMENT OVERVIEW | 7
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USAA EMERGING MARKETS INSTITUTIONAL SHARES (INSTITUTIONAL SHARES)
(Ticker Symbol: UIEMX)
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11/30/13 5/31/13
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Net Assets $677.0 Million $540.6 Million
Net Asset Value Per Share $17.73 $17.41
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AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/13
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5/31/13-11/30/13* 1 Year 5 Years Since Inception 8/01/08
1.84% 6.68% 14.41% 0.11%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception 8/01/08
-0.15% 12.31% -0.08%
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EXPENSE RATIO AS OF 5/31/13**
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1.34%
(includes acquired fund fees and expenses of 0.04%)
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 October 1, 2013, and is
calculated as a percentage of average net assets. The expense ratio may differ
from the expense ratio disclosed in the Financial Highlights, which excludes
acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
The Institutional Shares are available for investment through a USAA
discretionary managed account program, and certain advisory programs sponsored
by financial intermediaries, such as brokerage firms, investment advisors,
financial planners, third-party administrators, and insurance companies.
Institutional Shares also are available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA Fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds) and not to the general public.
================================================================================
8 | USAA EMERGING MARKETS FUND
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
MSCI EMERGING MARKETS LIPPER EMERGING MARKETS USAA EMERGING MARKETS -
INDEX FUNDS INDEX FUNDS INSTITUTIONAL SHARES
07/31/08 $10,000.00 $10,000.00 $10,000.00
08/31/08 9,204.52 9,240.21 9,355.60
09/30/08 7,594.69 7,724.97 7,836.31
10/31/08 5,517.29 5,481.60 5,630.29
11/30/08 5,102.36 5,012.52 5,131.70
12/31/08 5,501.72 5,389.31 5,573.05
01/31/09 5,148.66 4,924.20 5,117.78
02/28/09 4,859.08 4,646.85 4,871.84
03/31/09 5,558.04 5,245.84 5,484.09
04/30/09 6,483.80 6,112.62 6,384.15
05/31/09 7,595.45 7,219.97 7,545.85
06/30/09 7,494.64 7,134.60 7,415.03
07/31/09 8,342.75 7,959.86 8,273.23
08/31/09 8,315.13 7,992.05 8,299.39
09/30/09 9,071.25 8,705.66 9,094.79
10/31/09 9,083.31 8,599.92 9,000.60
11/30/09 9,473.95 9,071.29 9,471.56
12/31/09 9,849.25 9,390.69 9,807.63
01/31/10 9,301.54 8,865.46 9,273.63
02/28/10 9,336.23 8,940.44 9,342.36
03/31/10 10,090.71 9,680.31 10,093.13
04/30/10 10,215.22 9,749.39 10,130.14
05/31/10 9,224.74 8,829.92 9,104.44
06/30/10 9,254.27 8,833.41 9,083.29
07/31/10 10,031.48 9,657.55 9,945.09
08/31/10 9,840.03 9,469.67 9,701.89
09/30/10 10,934.88 10,542.79 10,769.89
10/31/10 11,253.34 10,869.16 11,028.96
11/30/10 10,956.73 10,593.79 10,732.88
12/31/10 11,739.89 11,282.27 11,541.35
01/31/11 11,423.61 10,917.84 11,178.18
02/28/11 11,318.77 10,816.20 11,044.66
03/31/11 11,986.03 11,376.60 11,600.10
04/30/11 12,360.44 11,785.40 11,899.18
05/31/11 12,041.15 11,475.19 11,536.01
06/30/11 11,860.98 11,326.09 11,338.40
07/31/11 11,816.37 11,305.21 11,204.89
08/31/11 10,764.74 10,376.59 10,142.08
09/30/11 9,197.12 8,763.46 8,475.76
10/31/11 10,416.25 9,838.17 9,527.89
11/30/11 9,722.61 9,515.57 9,207.45
12/31/11 9,606.36 9,209.22 8,829.95
01/31/12 10,697.83 10,174.79 9,888.20
02/29/12 11,340.61 10,780.75 10,408.93
03/31/12 10,964.50 10,549.60 9,938.60
04/30/12 10,835.34 10,420.27 9,759.42
05/31/12 9,625.84 9,292.01 8,656.38
06/30/12 10,001.88 9,722.50 9,025.93
07/31/12 10,204.18 9,815.67 9,098.72
08/31/12 10,174.69 9,884.83 9,087.52
09/30/12 10,790.66 10,404.62 9,641.84
10/31/12 10,726.31 10,375.56 9,451.47
11/30/12 10,863.28 10,491.01 9,429.07
12/31/12 11,395.75 11,060.81 9,973.87
01/31/13 11,554.64 11,220.84 10,149.75
02/28/13 11,411.13 11,115.32 10,195.14
03/31/13 11,192.26 10,998.15 9,990.89
04/30/13 11,306.01 11,155.00 10,047.63
05/31/13 11,021.27 10,868.26 9,877.42
06/30/13 10,324.88 10,175.11 9,162.57
07/31/13 10,438.34 10,336.69 9,293.06
08/31/13 10,263.17 10,002.41 9,049.10
09/30/13 10,933.84 10,724.05 9,724.24
10/31/13 11,466.66 11,191.04 10,149.75
11/30/13 11,299.89 11,004.81 10,058.97
[END CHART]
Data from 7/31/08 to 11/30/13.*
See page 7 for benchmark definitions.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index.
*The performance of the MSCI Emerging Markets Index and the Lipper Emerging
Markets Funds Index is calculated from the end of the month, July 31, 2008,
while the Institutional Shares' inception date is August 1, 2008. There may be a
slight variation of performance numbers because of this difference.
================================================================================
INVESTMENT OVERVIEW | 9
================================================================================
USAA EMERGING MARKETS ADVISER SHARES (ADVISER SHARES) (Ticker Symbol: UAEMX)
--------------------------------------------------------------------------------
11/30/13 5/31/13
--------------------------------------------------------------------------------
Net Assets $4.9 Million $4.8 Million
Net Asset Value Per Share $17.61 $17.35
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/13
--------------------------------------------------------------------------------
5/31/13-11/30/13* 1 Year Since Inception 8/01/10
1.50% 5.93% -1.12%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
--------------------------------------------------------------------------------
1 Year Since Inception 8/01/10
-0.84% -1.38%
--------------------------------------------------------------------------------
EXPENSE RATIOS AS OF 5/31/13**
--------------------------------------------------------------------------------
Before Reimbursement 2.08% After Reimbursement 2.04%
(includes acquired fund fees and expenses of 0.04%)
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 ratios represent the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated October 1, 2013, and
are calculated as a percentage of average net assets. USAA Asset Management
Company (the Manager) has agreed, through October 1, 2014, to make payments or
waive management, administration, and other fees so that the total expenses of
the Adviser Shares (exclusive of commission recapture, expense offset
arrangements, acquired fund fees and expenses, and extraordinary expenses) do
not exceed an annual rate of 2.00% of the Adviser Shares' average net assets.
This reimbursement arrangement may not be changed or terminated during this time
period without approval of the Trust's Board of Trustees and may be changed or
terminated by the Manager at any time after October 1, 2014. These expense
ratios may differ from the expense ratios disclosed in the Financial Highlights,
which excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
================================================================================
10 | USAA EMERGING MARKETS FUND
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LIPPER EMERGING MARKETS MSCI EMERGING USAA EMERGING MARKETS
FUNDS INDEX MARKETS INDEX FUND ADVISER SHARES
07/31/10 $10,000.00 $10,000.00 $10,000.00
08/31/10 9,805.45 9,809.16 9,516.13
09/30/10 10,916.63 10,900.57 10,556.71
10/31/10 11,254.57 11,218.03 10,801.25
11/30/10 10,969.44 10,922.35 10,567.12
12/31/10 11,682.33 11,703.05 11,294.94
01/31/11 11,304.98 11,387.76 10,923.50
02/28/11 11,199.74 11,283.25 10,787.48
03/31/11 11,780.01 11,948.42 11,326.33
04/30/11 12,203.30 12,321.66 11,608.83
05/31/11 11,882.09 12,003.37 11,247.85
06/30/11 11,727.70 11,823.76 11,049.05
07/31/11 11,706.09 11,779.29 10,913.03
08/31/11 10,744.54 10,730.96 9,871.95
09/30/11 9,074.20 9,168.26 8,244.94
10/31/11 10,187.02 10,383.57 9,265.09
11/30/11 9,852.98 9,692.10 8,945.97
12/31/11 9,535.77 9,576.22 8,571.56
01/31/12 10,535.58 10,664.27 9,594.06
02/29/12 11,163.03 11,305.03 10,094.43
03/31/12 10,923.68 10,930.10 9,632.13
04/30/12 10,789.77 10,801.35 9,458.09
05/31/12 9,621.49 9,595.64 8,381.21
06/30/12 10,067.25 9,970.49 8,729.29
07/31/12 10,163.73 10,172.16 8,799.99
08/31/12 10,235.34 10,142.77 8,783.68
09/30/12 10,773.56 10,756.81 9,316.68
10/31/12 10,743.46 10,692.66 9,120.88
11/30/12 10,863.01 10,829.20 9,093.70
12/31/12 11,453.02 11,359.99 9,616.54
01/31/13 11,618.72 11,518.38 9,775.18
02/28/13 11,509.46 11,375.33 9,813.47
03/31/13 11,388.13 11,157.14 9,611.07
04/30/13 11,550.55 11,270.53 9,660.30
05/31/13 11,253.64 10,986.68 9,490.72
06/30/13 10,535.91 10,292.48 8,801.49
07/31/13 10,703.22 10,405.59 8,921.83
08/31/13 10,357.08 10,230.96 8,681.14
09/30/13 11,104.31 10,899.53 9,326.62
10/31/13 11,587.87 11,430.68 9,725.94
11/30/13 11,395.03 11,264.43 9,632.95
[END CHART]
Data from 7/31/10 to 11/30/13.*
See page 7 for benchmark definitions.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index.
*The performance of the MSCI Emerging Markets Index and the Lipper Emerging
Markets Index is calculated from the end of the month, July 31, 2010, while the
Adviser Shares' inception date is August 1, 2010. There may be a slight
variation of performance numbers because of this difference.
================================================================================
INVESTMENT OVERVIEW | 11
================================================================================
o TOP 10 INDUSTRIES* o
AS OF 11/30/13
(% of Net Assets)
Diversified Banks ........................................................ 20.5%
Wireless Telecommunication Services ...................................... 5.9%
Semiconductors ........................................................... 5.5%
Integrated Oil & Gas ..................................................... 5.1%
Oil & Gas Exploration & Production ....................................... 4.3%
Internet Software & Services ............................................. 3.2%
Casinos & Gaming ......................................................... 2.7%
Construction & Engineering ............................................... 2.2%
Auto Parts & Equipment ................................................... 2.1%
Life & Health Insurance .................................................. 2.0%
o TOP 10 EQUITY HOLDINGS o
AS OF 11/30/13
(% of Net Assets)
Samsung Electronics Co. Ltd. ............................................. 3.1%
Sberbank of Russia ....................................................... 2.4%
Baidu, Inc. ADR .......................................................... 2.3%
Pacific Rubiales Energy Corp. ............................................ 2.1%
Hyundai Mobis Co. Ltd. ................................................... 1.9%
Cielo S.A. ADR ........................................................... 1.6%
China Construction Bank Corp. "H" ........................................ 1.6%
Shinhan Financial Group Co. Ltd. ......................................... 1.5%
Banco do Brasil S.A. ..................................................... 1.5%
WisdomTree India Earnings Fund ........................................... 1.4%
* Excludes exchange-traded funds.
** The Fund may rely on certain Securities and Exchange Commission (SEC)
exemptive orders or rules that permit funds meeting various conditions to
invest in an exchange-traded fund (ETF) in amounts exceeding limits set forth
in the Investment Company Act of 1940, as amended, that would otherwise be
applicable.
You will find a complete list of securities that the Fund owns on pages 14-25.
================================================================================
12 | USAA EMERGING MARKETS FUND
================================================================================
o COUNTRY ALLOCATION -- 11/30/2013 o
[PIE CHART OF COUNTRY ALLOCATION]
OTHER* 18.6%
RUSSIA 12.6%
BRAZIL 11.7%
SOUTH KOREA 11.6%
CHINA 10.6%
TAIWAN 6.7%
HONG KONG 6.1%
MEXICO 5.4%
TURKEY 5.2%
INDIA 4.5%
INDONESIA 3.8%
SOUTH AFRICA 3.6%
[END CHART]
* Includes countries with less than 3% of portfolio and money market
instruments.
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
INVESTMENT OVERVIEW | 13
================================================================================
PORTFOLIO OF INVESTMENTS
November 30, 2013 (unaudited)
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
EQUITY SECURITIES (96.9%)
COMMON STOCKS (91.9%)
CONSUMER DISCRETIONARY (14.3%)
------------------------------
ADVERTISING (0.2%)
92,100 Cheil Worldwide, Inc.* $ 2,250
----------
APPAREL RETAIL (0.5%)
121,245 Mr. Price Group Ltd. 1,845
513,542 Truworths International Ltd. 4,083
----------
5,928
----------
APPAREL, ACCESSORIES & LUXURY GOODS (0.5%)
16,146,000 Bosideng International Holdings Ltd. 3,395
397,000 Makalot Industrial Co. Ltd. 2,227
----------
5,622
----------
AUTO PARTS & EQUIPMENT (2.1%)
74,835 Hyundai Mobis Co. Ltd. 21,709
1,252,000 Minth Group Ltd. 2,616
----------
24,325
----------
AUTOMOBILE MANUFACTURERS (1.0%)
43,300 KIA Motors Corp. 2,471
271,100 Tata Motors Ltd. ADR 8,803
----------
11,274
----------
BROADCASTING (0.9%)
337,800 Grupo Televisa S.A. de C.V. ADR 10,306
----------
CASINOS & GAMING (2.7%)
1,913,200 Genting Malaysia Berhad 2,517
95,507 Paradise Co. Ltd. 2,468
1,995,500 Sands China Ltd. 15,110
2,886,000 Wynn Macau Ltd. 11,056
----------
31,151
----------
CATALOG RETAIL (0.2%)
12,145 Hyundai Home Shopping Network Corp. 2,037
----------
================================================================================
14 | USAA EMERGING MARKETS FUND
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
DEPARTMENT STORES (0.5%)
2,095,000 PT Matahari Department Store Tbk* $ 2,023
1,016,200 Robinson Department Store PCL(a) 1,725
1,428,250 Robinsons Retail Holdings, Inc. 1,832
----------
5,580
----------
DISTRIBUTORS (0.0%)
598,000 Xinhua Winshare Publishing and Media Co. Ltd. "H" 342
----------
EDUCATION SERVICES (1.2%)
1,481,600 Estacio Participacoes S.A. 12,803
2,344,400 Prestariang Berhad 1,891
----------
14,694
----------
FOOTWEAR (0.4%)
94,000 Arezzo Industria e Comercio S.A. 1,164
2,764,000 Daphne International Holdings Ltd. 1,273
1,041,000 Feng Tay Enterprise Co. Ltd. 2,666
----------
5,103
----------
HOME FURNISHINGS (0.3%)
80,120 Hanssem Co. Ltd. 3,293
----------
HOME IMPROVEMENT RETAIL (0.1%)
28,217,500 ACE Hardware Indonesia 1,628
----------
HOMEBUILDING (0.7%)
1,083,600 Cyrela Brazil Realty S.A. Empreendimentos e Participacoes 7,256
2,071,586 Desarrolladora Homex S.A. de C.V.* 403
6,312,677 URBI, Desarrollos Urbanos, S.A. de C.V., acquired
2/10/2010 - 3/25/2013; cost $2,879*(a),(b) 501
371,300 Viver Incorporadora e Construtora S.A.* 43
----------
8,203
----------
HOUSEHOLD APPLIANCES (1.0%)
1,196,000 Haier Electronics Group Co. Ltd. 2,823
3,158,000 Techtronic Industries Co. 8,453
----------
11,276
----------
LEISURE PRODUCTS (0.6%)
3,700,000 Goodbaby International Holdings Ltd. 1,962
380,000 Merida Industry Co. Ltd. 2,825
145,113 Samchuly Bicycle Co. Ltd. 2,735
----------
7,522
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
MOVIES & ENTERTAINMENT (0.2%)
42,250 CJ CGV Co. Ltd. $ 1,922
----------
RESTAURANTS (0.2%)
656,600 Alsea S.A.B. de C.V. 1,972
----------
SPECIALTY STORES (0.1%)
2,782,900 Singer Thailand PCL NVDR 1,759
----------
TEXTILES (0.9%)
314,160 Eclat Textile Co. Ltd. 4,002
740,000 Shenzhou International Group 2,806
450,000 Toung Loong Textile Manufacturing Co. Ltd. 1,931
3,006,500 Weiqiao Textile Co. Ltd. "H" 1,924
----------
10,663
----------
Total Consumer Discretionary 166,850
----------
CONSUMER STAPLES (6.0%)
-----------------------
FOOD RETAIL (0.1%)
55,440 GS Retail Co. Ltd. 1,483
----------
HOUSEHOLD PRODUCTS (1.0%)
4,008,400 Kimberly-Clark de Mexico S.A. de C.V. "A" 11,825
----------
PACKAGED FOODS & MEAT (1.9%)
252,590 Adecoagro S.A.* 2,112
271,000 Biostime International Holdings Ltd. 2,262
627,999 Illovo Sugar Ltd. 1,710
1,527 Lotte Confectionery Co. Ltd. 2,531
749,836 Marfrig Alimentos S.A.* 1,381
729,750 PT Mayora Indah Tbk 1,711
1,018,600 Thai Union Frozen Products PCL(a) 2,094
302,094 Tiger Brands Ltd. 8,429
----------
22,230
----------
PERSONAL PRODUCTS (1.2%)
738,800 Karex Berhad* 736
329,200 Natura Cosmeticos S.A. 6,086
212,363 Oriflame Cosmetics S.A. Swedish Depository Receipts 6,624
----------
13,446
----------
SOFT DRINKS (0.1%)
1,152 Lotte Chilsung Beverage Co. Ltd. 1,672
----------
TOBACCO (1.7%)
121,960 Eastern Tobacco 1,747
148,541 KT&G Corp. 11,018
================================================================================
16 | USAA EMERGING MARKETS FUND
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
634,400 Souza Cruz S.A. $ 6,392
----------
19,157
----------
Total Consumer Staples 69,813
----------
ENERGY (9.7%)
-------------
INTEGRATED OIL & GAS (3.7%)
1,282,399 Gazprom OAO ADR 11,067
581,450 Gazprom OAO ADR 5,041
210,170 Lukoil OAO ADR 13,077
474,500 YPF S.A. ADR 14,102
----------
43,287
----------
OIL & GAS DRILLING (0.8%)
219,923 Eurasia Drilling Co. Ltd. GDR 9,589
----------
OIL & GAS EQUIPMENT & SERVICES (0.9%)
2,542,000 Anton Oilfield Services Group 1,666
1,262,600 Dayang Enterprise Holdings Berhad 2,103
524,799 TMK OAO GDR 5,983
----------
9,752
----------
OIL & GAS EXPLORATION & PRODUCTION (4.3%)
5,548,000 CNOOC Ltd. 11,378
111,884 NovaTek OAO GDR 14,713
1,280,900 Pacific Rubiales Energy Corp. 24,062
----------
50,153
----------
Total Energy 112,781
----------
FINANCIALS (24.1%)
------------------
DIVERSIFIED BANKS (20.5%)
25,363,000 Agricultural Bank of China Ltd. "H" 13,021
572,160 Axis Bank Ltd. GDR 10,860
124,630 Banco Bradesco S.A. 1,837
485,080 Banco Bradesco S.A. ADR 6,437
1,622,300 Banco do Brasil S.A. 17,743
138,070 Banco Latinoamericano de Exportaciones S.A. "E" 3,720
418,720 Banco Santander Brasil S.A. ADR 2,705
117,400 Bancolombia S.A. ADR 5,956
1,334,800 BIMB Holdings Berhad 1,860
22,571,000 China Construction Bank Corp. "H" 18,284
1,838,040 Commercial Bank of Ceylon plc 1,624
1,259,140 Commercial International Bank GDR 6,925
32,100 Credicorp Ltd. 4,125
3,019,600 East West Banking Corp.* 1,724
171,300 Erste Group Bank AG 6,031
1,039,300 Grupo Financiero Banorte S.A. "O" 7,127
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
82,490 Hana Financial Group, Inc. $ 3,094
332,300 ICICI Bank Ltd. ADR 11,916
85,500 KB Financial Group, Inc. 3,207
486,063 OTP Bank plc 9,834
18,254,500 PT Bank Mandiri (Persero) Tbk 11,674
23,952,000 PT Bank Pembangunan Daerah Jawa Barat Dan Banten Tbk 1,682
13,040,500 PT Bank Rakyat Indonesia (Persero) Tbk 8,121
8,646,636 Sberbank of Russia(a) 27,367
233,390 Sberbank of Russia ADR 2,908
423,530 Shinhan Financial Group Co. Ltd. 17,809
1,309,684 Standard Bank Group Ltd. 15,509
751,810 Turkiye Garanti Bankasi A.S. 2,835
3,802,191 Turkiye Is Bankasi "C" 9,783
1,251,200 Turkiye Vakiflar Bankasi T.A.O. "D" 2,835
----------
238,553
----------
LIFE & HEALTH INSURANCE (2.0%)
1,234,260 Hanwha Life Insurance Co. Ltd. 8,455
1,595,000 Ping An Insurance (Group) Co. of China Ltd. "H" 14,865
----------
23,320
----------
MULTI-SECTOR HOLDINGS (0.4%)
4,192,000 First Pacific Co. Ltd. 4,796
----------
REITs - DIVERSIFIED (0.4%)
592,100 Fibra Uno Administracion S.A. 1,863
1,575,202 Macquarie Mexico Real Estate Management S.A. de C.V. 2,772
----------
4,635
----------
REITs - RESIDENTIAL (0.6%)
5,326,549 Emlak Konut Gayrimenkul Yatirim Ortakligi A.S. 6,958
----------
SPECIALIZED FINANCE (0.2%)
903,100 Chailease Holding Co. Ltd. 2,402
----------
Total Financials 280,664
----------
HEALTH CARE (2.7%)
------------------
HEALTH CARE DISTRIBUTORS (0.1%)
1,283,700 Selcuk Ecza Deposu Ticaret ve Sanayi A.S. 1,207
----------
HEALTH CARE EQUIPMENT (0.2%)
52,039 I-Sens, Inc. 2,112
----------
HEALTH CARE FACILITIES (0.5%)
6,298,300 Chularat Hospital PCL NVDR 1,981
879,800 KPJ Healthcare Berhad 1,665
357,717 NMC Health plc 2,384
----------
6,030
----------
================================================================================
18 | USAA EMERGING MARKETS FUND
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
HEALTH CARE SUPPLIES (0.6%)
156,000 Ginko International Co. Ltd. $ 3,331
81,670 Suheung Capsule Co. Ltd. 3,222
----------
6,553
----------
PHARMACEUTICALS (1.3%)
4,907,400 Genomma Lab Internacional S.A. "B"* 14,261
149,600 Haw Par Corp. Ltd. 920
----------
15,181
----------
Total Health Care 31,083
----------
INDUSTRIALS (8.7%)
------------------
AEROSPACE & DEFENSE (0.9%)
1,197,798 Aselsan Elektronik Sanayi Ve Ticaret A.S. 5,299
177,920 Embraer S.A. ADR 5,517
----------
10,816
----------
AIR FREIGHT & LOGISTICS (0.1%)
5,214,000 Sinotrans Ltd. "H", acquired 8/18/2008 - 4/23/2012; cost $965(b) 1,661
----------
BUILDING PRODUCTS (0.7%)
4,727 KCC Corp. 2,086
25,029,500 PT Arwana Citramulia Tbk 1,820
937,000 Sunspring Metal Corp. 2,473
1,621,518 Trakya Cam Sanayii A.S. 2,014
----------
8,393
----------
COMMERCIAL PRINTING (0.1%)
117,000 Valid Solucoes e Servicos de Seguranca em Meios de
Pagamento e Identificacao S.A. 1,831
----------
CONSTRUCTION & ENGINEERING (2.2%)
7,207,000 China State Construction International Holdings Ltd. 12,662
2,137,900 Dialog Group Berhad 1,977
8,447,200 EEI Corp. 1,906
133,965 OCI N.V. 5,406
130,446 Wilson Bayly Holmes-Ovcon Ltd. 1,983
3,047,000 Yoma Strategic Holdings Ltd. 1,797
----------
25,731
----------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (1.2%)
64,700 China Yuchai International Ltd. 1,501
3,844,500 PT United Tractors Tbk 5,865
6,104,000 Zoomlion Heavy Industry Science and Technology Co. Ltd. "H" 6,204
----------
13,570
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
DIVERSIFIED SUPPORT SERVICES (0.2%)
41,256 Kepco Plant Service & Engineering Co. Ltd. $ 1,992
----------
ELECTRICAL COMPONENTS & EQUIPMENT (0.7%)
2,684,000 Teco Electric & Machinery Co. Ltd. 2,948
1,281,000 Zhuzhou CSR Times Electric Co. Ltd. "H" 4,940
----------
7,888
----------
INDUSTRIAL CONGLOMERATES (1.4%)
657,729 Alarko Holding A.S. 2,109
620,000 Koc Holding A.S. ADR 14,688
----------
16,797
----------
RAILROADS (1.0%)
741,600 Globaltrans Investment plc GDR 11,235
----------
TRUCKING (0.2%)
14,849,500 PT Express Transindo Utama Tbk* 1,949
----------
Total Industrials 101,863
----------
INFORMATION TECHNOLOGY (13.3%)
------------------------------
APPLICATION SOFTWARE (0.4%)
219,700 AsiaInfo-Linkage, Inc.* 2,564
97,600 Linx S.A. 1,938
----------
4,502
----------
COMMUNICATIONS EQUIPMENT (0.4%)
996,500 AAC Technologies Holdings, Inc. 4,525
----------
COMPUTER HARDWARE (0.2%)
3,914,000 Compal Electronics, Inc. 2,956
----------
COMPUTER STORAGE & PERIPHERALS (0.7%)
1,314,000 Catcher Technology Co. Ltd. 7,992
----------
DATA PROCESSING & OUTSOURCED SERVICES (1.7%)
621,880 Cielo S.A. ADR 18,364
2,484,000 My E.G. Services Berhad 1,942
----------
20,306
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%)
943,000 Chroma Ate, Inc. 1,912
----------
ELECTRONIC MANUFACTURING SERVICES (0.9%)
361,921 Flextronics International Ltd.* 2,743
1,478,212 Hon Hai Precision Industry Co. Ltd. GDR "S" 7,731
----------
10,474
----------
================================================================================
20 | USAA EMERGING MARKETS FUND
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (3.2%)
157,759 Baidu, Inc. ADR* $ 26,278
270,420 Yandex N.V. "A"* 10,749
----------
37,027
----------
IT CONSULTING & OTHER SERVICES (0.1%)
559,482 Sonda S.A. 1,339
----------
SEMICONDUCTORS (5.5%)
758,000 Media Tek, Inc. 11,168
25,964 Samsung Electronics Co. Ltd. 36,653
916,400 Taiwan Semiconductor Manufacturing Co. Ltd. ADR 16,248
----------
64,069
----------
Total Information Technology 155,102
----------
MATERIALS (5.2%)
----------------
COMMODITY CHEMICALS (0.4%)
99,600 Saudi Basic Ind HSBC(a),(c) 2,888
1,132,200 Scientex Berhad 1,971
----------
4,859
----------
CONSTRUCTION MATERIALS (0.5%)
341,878 Akcansa Cimento A.S. 1,945
360,315 Cemex S.A. de C.V. ADR* 3,938
----------
5,883
----------
DIVERSIFIED METALS & MINING (1.7%)
493,749 Exxaro Resources Ltd. 6,800
264,700 Freeport-McMoRan Copper & Gold, Inc. 9,182
1,487,600 Grupo Mexico S.A.B. de C.V. "B" 4,371
----------
20,353
----------
FOREST PRODUCTS (0.1%)
276,280 Duratex S.A. 1,597
----------
INDUSTRIAL GASES (0.4%)
4,635,800 Yingde Gases Group Co. 4,969
----------
METAL & GLASS CONTAINERS (0.6%)
2,735,000 CPMC Holdings Ltd. 2,184
534,740 Nampak Ltd. 2,060
1,061,000 Taiwan Hon Chuan Enterprise Co. Ltd. 2,187
----------
6,431
----------
PAPER PACKAGING (0.2%)
2,897,000 Greatview Aseptic Packaging Co. Ltd. 1,831
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
STEEL (1.3%)
1,264,858 Eregli Demir ve Celik Fabrikalari TAS $ 1,677
18,854 POSCO 5,834
3,154,000 STP & I PCL(a) 1,788
101,040 Ternium S.A. ADR 2,699
2,460,000 Ton Yi Industrial Corp. 2,585
----------
14,583
----------
Total Materials 60,506
----------
TELECOMMUNICATION SERVICES (6.8%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (1.2%)
1,398,620 Magyar Telekom Telecommunications plc 1,834
172,600 PT Telekomunikasi Indonesia (Persero) Tbk ADR 6,307
4,912,370 PT XL Axiata Tbk 2,053
235,530 Telefonica Czech Republic A.S. 3,471
----------
13,665
----------
WIRELESS TELECOMMUNICATION SERVICES (5.6%)
187,340 America Movil S.A.B. de C.V. ADR "L" 4,354
534,100 China Mobile Ltd. 5,753
201,770 China Mobile Ltd. ADR 10,944
63,619 MegaFon OAO GDR(a),(d) 2,052
199,616 MegaFon OAO GDR(a),(d) 6,440
709,200 Mobile TeleSystems ADR 14,950
109,180 Philippine Long Distance Telephone Co. ADR 6,827
218,080 TIM Participacoes S.A. ADR 5,404
575,100 Turkcell Iletisim Hizmetleri A.S. ADR* 8,810
----------
65,534
----------
Total Telecommunication Services 79,199
----------
UTILITIES (1.1%)
----------------
ELECTRIC UTILITIES (0.9%)
604,160 Centrais Eletricas Brasileiras S.A. Eletrobras ADR 1,547
184,400 Companhia Paranaense de Energia ADR 2,489
217,960 Reliance Infrastructure Ltd. GDR(a) 4,504
1,055,420 RusHydro Management Co. ADR 1,752
----------
10,292
----------
GAS UTILITIES (0.2%)
646,695 Aygaz A.S. 2,764
----------
Total Utilities 13,056
----------
Total Common Stocks (cost: $984,254) 1,070,917
----------
================================================================================
22 | USAA EMERGING MARKETS FUND
================================================================================
-------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (3.3%)
CONSUMER DISCRETIONARY (0.3%)
-----------------------------
AUTOMOBILE MANUFACTURERS (0.3%)
34,620 Hyundai Motor Co. Ltd. $ 4,024
----------
Total Consumer Discretionary 4,024
----------
ENERGY (1.4%)
-------------
INTEGRATED OIL & GAS (1.4%)
846,720 Petroleo Brasileiro S.A. ADR 14,005
2,536,500 Surgutneftegas(a) 1,804
----------
15,809
----------
Total Energy 15,809
----------
INDUSTRIALS (0.6%)
------------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.6%)
2,897,900 Marcopolo S.A. 7,201
----------
Total Industrials 7,201
----------
MATERIALS (0.7%)
----------------
STEEL (0.7%)
565,515 Vale S.A. ADR 7,934
----------
Total Materials 7,934
----------
TELECOMMUNICATION SERVICES (0.3%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.3%)
186,140 Telefonica Brasil S.A. ADR 3,622
----------
Total Telecommunication Services 3,622
----------
Total Preferred Stocks (cost: $42,966) 38,590
----------
EXCHANGE-TRADED FUNDS (1.4%)
981,937 WisdomTree India Earnings Fund 16,359
----------
Total Exchange-Traded Funds (cost: $17,089) 16,359
----------
WARRANTS (0.3%)
TELECOMMUNICATION SERVICES (0.3%)
---------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
149,230 Etihad Etisalat HSBC(a),(c) 3,382
----------
Total Telecommunication Services 3,382
----------
Total Warrants (cost: $2,725) 3,382
----------
Total Equity Securities (cost: $1,047,034) 1,129,248
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 23
================================================================================
-------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
$(000)/ VALUE
SHARES(f) SECURITY (000)
-------------------------------------------------------------------------------------------------------
CONVERTIBLE SECURITIES (0.1%)
CONSUMER DISCRETIONARY (0.1%)
-----------------------------
HOMEBUILDING (0.1%)
BRL 1,548 Viver Incorporadora e Construtora S.A., 5.04% due 8/06/2016(a) $ 716
----------
Total Consumer Discretionary 716
----------
Total Convertible Securities (cost: $699) 716
----------
MONEY MARKET INSTRUMENTS (3.4%)
MONEY MARKET FUNDS (3.4%)
39,553,456 State Street Institutional Liquid Reserve Fund, 0.07%(e) 39,553
----------
Total Money Market Instruments (cost: $39,553) 39,553
----------
TOTAL INVESTMENTS (COST: $1,087,286) $1,169,517
==========
------------------------------------------------------------------------------------------------------
($ 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
------------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $1,021,558 $49,359 $ - $1,070,917
Preferred Stocks 36,786 1,804 - 38,590
Exchange-Traded Funds 16,359 - - 16,359
Warrants - 3,382 - 3,382
Bonds:
Convertible Securities - - 716 716
Money Market Instruments:
Money Market Funds 39,553 - - 39,553
------------------------------------------------------------------------------------------------------
Total $1,114,256 $54,545 $716 $1,169,517
------------------------------------------------------------------------------------------------------
================================================================================
24 | USAA EMERGING MARKETS FUND
================================================================================
Reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining value:
--------------------------------------------------------------------------------
CONVERTIBLE SECURITIES
--------------------------------------------------------------------------------
Balance as of May 31, 2013 $ -
Purchases 699
Sales -
Transfers into Level 3 -
Transfers out of Level 3 -
Net realized gain (loss) on investments -
Change in net unrealized appreciation/depreciation on investments 17
--------------------------------------------------------------------------------
Balance as of November 30, 2013 $716
--------------------------------------------------------------------------------
For the period of June 1, 2013, through November 30, 2013, common stock with a
fair value of $1,196,000 was transferred from Level 1 to Level 2. Due to an
assessment of events at the end of the reporting period, the securities had
adjustments to their foreign market closing prices to reflect changes in value
that occurred after the close of foreign markets and prior to the close of the
U.S. securities markets. Common stocks with a fair value of $461,468,000 and a
preferred stock with a fair value of $5,294,000 were transferred from Level 2 to
Level 1. Due to an assessment of events at the end of the reporting period, the
securities had adjustments to their foreign market closing prices to reflect
changes in value that occurred after the close of foreign markets and prior to
the close of the U.S. securities markets. The Fund's policy is to recognize any
transfers into and out of the levels as of the beginning of the period in which
the event or circumstance that caused the transfer occurred.
================================================================================
PORTFOLIO OF INVESTMENTS | 25
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
November 30, 2013 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
The Fund may rely on certain Securities and Exchange Commission (SEC)
exemptive orders or rules that permit funds meeting various conditions to
invest in an exchange-traded fund (ETF) in amounts exceeding limits set
forth in the Investment Company Act of 1940, as amended, that would
otherwise be applicable.
o CATEGORIES AND DEFINITIONS
WARRANTS -- entitle the holder to buy a proportionate amount of common
stock at a specified price for a stated period.
o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S)
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
BRL Brazilian Real
GDR Global depositary receipts are receipts issued by a U.S. or foreign
bank evidencing ownership of foreign shares. Dividends are paid in
U.S. dollars.
================================================================================
26 | USAA EMERGING MARKETS FUND
================================================================================
NVDR Non-voting depositary receipts are receipts issued by Thai NVDR
Company Limited.
REIT Real estate investment trust
o SPECIFIC NOTES
(a) Security was fair valued at November 30, 2013, by USAA Asset
Management Company (the Manager) in accordance with valuation
procedures approved by the Trust's Board of Trustees (the Board). The
total value of all such securities was $55,261,000, which represented
4.7% of net assets of the Fund.
(b) Security deemed illiquid by the Manager, under liquidity guidelines
approved by the Board. The aggregate market value of these securities
at November 30, 2013, was $2,162,000, which represented 0.2% of the
Fund's net assets.
(c) Represents the underlying security of a participatory note with HSBC
Bank plc.
(d) 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 the Board, unless otherwise noted as
illiquid.
(e) Rate represents the money market fund annualized seven-day yield at
November 30, 2013.
(f) In U.S. dollars unless otherwise noted.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 27
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
November 30, 2013 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $1,087,286) $1,169,517
Cash denominated in foreign currencies (identified cost of $1,158) 1,146
Receivables:
Capital shares sold 685
Dividends and interest 403
Securities sold 270
----------
Total assets 1,172,021
----------
LIABILITIES
Payables:
Securities purchased 5,398
Capital shares redeemed 337
Unrealized depreciation on foreign currency contracts held, at value 7
Accrued management fees 911
Accrued transfer agent's fees 25
Other accrued expenses and payables 797
----------
Total liabilities 7,475
----------
Net assets applicable to capital shares outstanding $1,164,546
==========
NET ASSETS CONSIST OF:
Paid-in capital $1,167,821
Accumulated undistributed net investment income 11,847
Accumulated net realized loss on investments (97,424)
Net unrealized appreciation of investments 82,231
Net unrealized appreciation of foreign currency translations 71
----------
Net assets applicable to capital shares outstanding $1,164,546
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $482,723/27,217 shares outstanding) $ 17.74
==========
Institutional Shares (net assets of $676,970/38,191
shares outstanding) $ 17.73
==========
Adviser Shares (net assets of $4,853/276 shares outstanding) $ 17.61
==========
See accompanying notes to financial statements.
================================================================================
28 | USAA EMERGING MARKETS FUND
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended November 30, 2013 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $1,437) $12,095
Interest 20
-------
Total income 12,115
-------
EXPENSES
Management fees 5,225
Administration and servicing fees:
Fund Shares 344
Institutional Shares 313
Adviser Shares 3
Transfer agent's fees:
Fund Shares 675
Institutional Shares 313
Distribution and service fees (Note 6F):
Adviser Shares 6
Custody and accounting fees:
Fund Shares 178
Institutional Shares 239
Adviser Shares 2
Postage:
Fund Shares 35
Institutional Shares 10
Shareholder reporting fees:
Fund Shares 39
Institutional Shares 13
Trustees' fees 7
Registration fees:
Fund Shares 16
Institutional Shares 12
Adviser Shares 12
Professional fees 70
Other 11
-------
Total expenses 7,523
Expenses paid indirectly:
Fund Shares (2)
-------
Net expenses 7,521
-------
NET INVESTMENT INCOME 4,594
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized loss on:
Investments (9,160)
Foreign currency transactions (278)
Change in net unrealized appreciation/depreciation of:
Investments 33,878
Foreign currency translations 136
-------
Net realized and unrealized gain 24,576
-------
Increase in net assets resulting from operations $29,170
=======
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 29
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended November 30, 2013 (unaudited), and year ended
May 31, 2013
--------------------------------------------------------------------------------
11/30/2013 5/31/2013
--------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 4,594 $ 10,646
Net realized loss on investments (9,160) (49,302)
Net realized loss on foreign currency transactions (278) (509)
Change in net unrealized appreciation/depreciation of:
Investments 33,878 160,927
Foreign currency translations 136 565
-----------------------------
Increase in net assets resulting from operations 29,170 122,327
-----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares - (3,996)
Institutional Shares - (6,476)
Adviser Shares - (28)
-----------------------------
Distributions to shareholders - (10,500)
-----------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (NOTE 5)
Fund Shares (1,745) (274,362)
Institutional Shares 115,023 307,509
Adviser Shares (1) 10
-----------------------------
Total net increase in net assets from
capital share transactions 113,277 33,157
-----------------------------
Capital contribution from USAA Transfer
Agency Company:
Fund Shares - 3
Institutional Shares - 4
-----------------------------
Net increase in net assets 142,447 144,991
NET ASSETS
Beginning of period 1,022,099 877,108
-----------------------------
End of period $1,164,546 $1,022,099
=============================
Accumulated undistributed net investment income:
End of period $ 11,847 $ 7,253
=============================
See accompanying notes to financial statements.
================================================================================
30 | USAA EMERGING MARKETS FUND
================================================================================
NOTES TO FINANCIAL STATEMENTS
November 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
Emerging Markets Fund (the Fund), which is classified as diversified under the
1940 Act. The Fund's investment objective is capital appreciation. The Fund
concentrates its investments in securities of companies in emerging market
countries, which may have limited or developing capital markets. Such
investments may involve greater risks than investments in developed markets, and
political, social, or economic changes in these markets may cause the prices of
such investments to be volatile.
The Fund consists of three classes of shares: Emerging Markets Fund Shares (Fund
Shares), Emerging Markets Fund Institutional Shares (Institutional Shares), and
Emerging Markets Fund Adviser Shares (Adviser Shares). Each class of shares has
equal rights to assets and earnings, except that each class bears certain
class-related expenses specific to the particular class. These expenses include
administration and servicing fees, transfer agent fees, postage, shareholder
reporting fees, distribution and service (12b-1) fees, and certain registration
and custodian fees. Expenses not attributable to a specific class, income, and
realized gains or losses on investments are allocated to each class of shares
based on each class's relative net assets. Each class has exclusive voting
rights on matters related solely to that class and separate voting
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
================================================================================
rights on matters that relate to all classes. The Institutional Shares are
available for investment through a USAA discretionary managed account program,
and certain advisory programs sponsored by financial intermediaries, such as
brokerage firms, investment advisors, financial planners, third-party
administrators, and insurance companies. Institutional Shares also are available
to institutional investors, which include retirement plans, endowments,
foundations, and bank trusts, as well as other persons or legal entities that
the Fund may approve from time to time, or for purchase by a USAA Fund
participating in a fund-of-funds investment strategy (USAA fund-of-funds) and
not to the general public. The Adviser Shares permit investors to purchase
shares through financial intermediaries, banks, broker-dealers, insurance
companies, investment advisers, plan sponsors, and financial professionals that
provide various administrative and distribution services.
A. SECURITY VALUATION -- The Trust's Board of Trustees (the Board) has
established the Valuation Committee (the Committee), and subject to Board
oversight, the Committee administers and oversees the Fund's valuation
policies and procedures, which are approved by the Board. Among other
things, these policies and procedures allow the Fund to utilize independent
pricing services, quotations from securities dealers, and a wide variety of
sources and information to establish and adjust the fair value of
securities as events occur and circumstances warrant.
The Committee reports to the Board on a quarterly basis and makes
recommendations to the Board as to pricing methodologies and services used
by the Fund and presents additional information to the Board regarding
application of the pricing and fair valuation policies and procedures
during the preceding quarter.
The Committee meets as often as necessary to make pricing and fair value
determinations. In addition, the Committee holds regular monthly meetings
to review prior actions taken by the Committee and USAA Asset Management
Company (the Manager). Among other
================================================================================
32 | USAA EMERGING MARKETS FUND
================================================================================
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. Securities, including exchange-traded funds (ETFs), exchange-traded
notes (ETNs), and equity-linked structured notes, except as otherwise
noted, traded primarily on a domestic securities exchange or the Nasdaq
over-the-counter markets, are valued at the last sales price or
official closing price on the exchange or primary market on which they
trade. Securities traded primarily on foreign securities exchanges or
markets are valued at the last quoted sales price, or the most recently
determined official closing price calculated according to local market
convention, available at the time the Fund is valued. If no last sale
or official closing price is reported or available, the average of the
bid and asked prices generally is used.
2. Securities trading in various foreign markets may take place on days
when the NYSE is closed. Further, when the NYSE is open, the foreign
markets may be closed. Therefore, the calculation of the Fund's net
asset value (NAV) may not take place at the same time the prices of
certain foreign securities held by the Fund are determined. In most
cases, events affecting the values of foreign securities that occur
between the time of their last quoted sales or official closing prices
and the close of normal trading on the NYSE on a day the Fund's NAV is
calculated will not be reflected in the value of the Fund's foreign
securities. However, the Manager and the Fund's subadvisers, if
applicable, will monitor for events that would materially affect the
value of the Fund's foreign securities. The Fund's subadvisers have
agreed to notify the Manager of significant events they identify that
would materially
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
================================================================================
affect the value of the Fund's foreign securities. If the Manager
determines that a particular event would materially affect the value of
the Fund's foreign securities, then the Manager, under valuation
procedures approved by the Board, will consider such available
information that it deems relevant to determine a fair value for the
affected foreign securities. In addition, the Fund may use information
from an external vendor or other sources to adjust the foreign market
closing prices of foreign equity securities to reflect what the Fund
believes to be the fair value of the securities as of the close of the
NYSE. Fair valuation of affected foreign equity securities may occur
frequently based on an assessment that events that occur on a fairly
regular basis (such as U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
6. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before
the pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadviser, if applicable, under valuation procedures approved by the
Board. The effect of fair value pricing is that securities may not be
priced on the basis of quotations from the primary market in which they
are traded and the actual price realized from the sale of a security
may differ materially from the fair value price. Valuing these
================================================================================
34 | USAA EMERGING MARKETS FUND
================================================================================
securities at fair value is intended to cause the Fund's NAV to be more
reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any
restrictions on disposition of the securities, and an evaluation of the
forces that influenced the market in which the securities are purchased
and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments
is based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices. Level 2 securities
include certain common stock and certain preferred stocks traded on foreign
exchanges, whose fair values at the beginning of the reporting date included
an adjustment to reflect changes occurring subsequent to the close of
trading in the foreign markets but prior to the close of trading in
comparable U.S. securities market. Level 2 securities also include certain
common stocks and warrants valued using market inputs and other factors
deemed by the Manager to appropriately reflect fair value.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
================================================================================
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
For the securities valued using significant unobservable inputs, market
quotations were not available from the pricing services. As such, the
securities were valued in good faith using methods determined by the
Manager, under valuation procedures approved by the Board. The valuation of
some securities falling in the Level 3 category are primarily supported by
valuation methods including using inputs such as the underlying security's
conversion ratio. However, these securities are included in the Level 3
category due to limited market transparency and/or a lack of corroboration
to support the quoted prices.
Refer to the portfolio of investments for a reconciliation of investments
in which significant unobservable inputs (Level 3) were used in determining
value.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its income to its shareholders.
Therefore, no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses
from sales of investment securities are computed on the identified cost
basis. Dividend income, less foreign taxes, if any, is recorded on the
ex-dividend date. If the ex-dividend date has passed, certain dividends
from foreign securities are recorded upon notification. Interest income is
recorded daily on the accrual basis. Discounts and premiums on short-term
securities are amortized on a straight-line basis over the life of the
respective securities.
================================================================================
36 | USAA EMERGING MARKETS FUND
================================================================================
E. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective
dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts received. At
the end of the Fund's fiscal year, these net realized foreign currency
gains/losses are reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rate.
F. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
================================================================================
In addition, 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
November 30, 2013, brokerage commission recapture credits reduced the
Fund's expenses by $2,000. For the six-month period ended November 30,
2013, there were no custodian and other bank credits.
G. REDEMPTION FEES -- Adviser Shares held in the Fund less than 60 days are
subject to a redemption fee equal to 1.00% of the proceeds of the redeemed
or exchanged shares. All redemption fees paid will be accounted for by the
Fund as an addition to paid in capital. For the six-month period ended
November 30, 2013, the Adviser Shares did not receive redemption fees.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, its
officers and trustees are indemnified against certain liabilities arising
out of the performance of their duties to the Trust. In addition, in the
normal course of business, the Trust enters into contracts that contain a
variety of representations and warranties that provide general
indemnifications. The Trust's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the
Trust that have not yet occurred. However, the Trust expects the risk of
loss to be remote.
I. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests
================================================================================
38 | USAA EMERGING MARKETS FUND
================================================================================
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 allocated among the Funds based on
their respective average net assets for the period.
For the six-month period ended November 30, 2013, the Fund paid CAPCO facility
fees of $3,000, which represents 1.7% 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 November 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 May 31, 2014, in
accordance with applicable tax law.
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually in the succeeding
fiscal year or as otherwise required to avoid the payment of federal taxes.
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 May 31, 2013, the Fund had post-enactment short-term capital loss
carryforwards of $21,648,000, and long-term capital loss carryforwards of
$57,882,000, for federal income tax purposes. It is unlikely that the
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
================================================================================
Board will authorize a distribution of capital gains realized in the future
until the capital loss carryforwards have been used or expire.
For the six-month period ended November 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.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended November 30, 2013, were
$358,998,000 and $227,320,000, respectively.
As of November 30, 2013, the cost of securities, including short-term
securities, for federal income tax purposes, was approximately the same as that
reported in the financial statements.
Gross unrealized appreciation and depreciation of investments as of November 30,
2013, were $150,246,000 and $68,015,000, respectively, resulting in net
unrealized appreciation of $82,231,000.
(5) CAPITAL SHARE TRANSACTIONS
At November 30, 2013, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
================================================================================
40 | USAA EMERGING MARKETS FUND
================================================================================
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated USAA fund-of-funds. Capital share transactions for
all classes were as follows, in thousands:
SIX-MONTH PERIOD ENDED YEAR ENDED
11/30/2013 5/31/2013
----------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------
FUND SHARES:
Shares sold 2,954 $ 50,287 6,462 $ 110,285
Shares issued from reinvested
dividends -* -* 221 3,838
Shares redeemed (3,077) (52,032) (22,764) (388,485)
-----------------------------------------------
Net decrease from
capital share transactions (123) $ (1,745) (16,081) $(274,362)
===============================================
INSTITUTIONAL SHARES:
Shares sold 9,564 $156,178 21,520 $ 368,623
Shares issued from
reinvested dividends - - 373 6,476
Shares redeemed (2,426) (41,155) (3,922) (67,590)
-----------------------------------------------
Net increase from capital
share transactions 7,138 $115,023 17,971 $ 307,509
===============================================
ADVISER SHARES:
Shares sold 1 $ 15 2 $ 26
Shares issued from reinvested
dividends - - -* -*
Shares redeemed (1) (16) (1) (16)
-----------------------------------------------
Net increase (decrease) from
capital share transactions - $ (1) 1 $ 10
===============================================
*Represents less than 500 shares or $500.
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund,
subject to the authority of and supervision
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
================================================================================
by the Board. The Manager is authorized to select (with approval of the
Board and without shareholder approval) one or more subadvisers to manage
the actual day-to-day investment of the Fund's assets. The Manager
monitors each subadviser's performance through quantitative and qualitative
analysis, and periodically recommends to the Board as to whether each
subadviser's agreement should be renewed, terminated, or modified. The
Manager also is responsible for allocating assets to the subadvisers. The
allocation for each subadviser can range from 0% to 100% of the Fund's
assets, and the Manager can change the allocations without shareholder
approval.
The investment management fee for the Fund is comprised of a base fee and a
performance adjustment. The Fund's base fee is accrued daily and paid
monthly at an annualized rate of 1.00% of the Fund's average net assets for
the fiscal year.
The performance adjustment is calculated separately for each share class on
a monthly basis by comparing each class's performance to that of the Lipper
Emerging Markets Funds Index over the performance period. The Lipper
Emerging Markets Funds Index tracks the total return performance of the 30
largest funds in the Lipper Emerging Markets Funds category. The
performance period for each class consists of the current month plus the
previous 35 months. The performance adjustment for the Adviser Shares
includes the performance of the Fund Shares for periods prior to August 1,
2010. The following table is utilized to determine the extent of the
performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
--------------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the Fund
and its relevant index, rounded to the nearest 0.01%. Average net assets
are calculated over a rolling 36-month period.
Each class's annual performance adjustment rate is multiplied by the
average net assets of each respective class over the entire
================================================================================
42 | USAA EMERGING MARKETS FUND
================================================================================
performance period, which is then multiplied by a fraction, the numerator
of which is the number of days in the month and the denominator of which is
365 (366 in leap years). The resulting amount is the performance
adjustment; a positive adjustment in the case of overperformance, or a
negative adjustment in the case of underperformance.
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper Emerging Markets Funds Index over that period, even
if the class had overall negative returns during the performance period.
For the six-month period ended November 30, 2013, the Fund incurred total
management fees, paid or payable to the Manager, of $5,225,000, which
included a performance adjustment for the Fund Shares, Institutional
Shares, and Adviser Shares of $(154,000), $(64,000), and $(1,000),
respectively. For the Fund Shares, Institutional Shares, and Adviser
Shares, the performance adjustments were (0.07)%, (0.02)%, and (0.05)%,
respectively.
B. SUBADVISORY ARRANGEMENT(S) -- The Manager has entered into investment
subadvisory agreements with Brandes Investment Partners, L.P. (Brandes),
Lazard Asset Management (Lazard), and Victory Capital Management Inc.
(Victory), under which Brandes, Lazard, and Victory direct the investment
and reinvestment of portions of the Fund's assets (as allocated from time
to time by the Manager).
The Manager (not the Fund) pays Brandes a subadvisory fee in the annual
amount of 0.75% for assets up to $300 million; 0.70% for assets over $300
million up to $600 million; and 0.60% for assets over $600 million on the
portion of the Fund's average net assets that Brandes manages. For the
six-month period ended November 30, 2013, the Manager incurred subadvisory
fees, paid or payable to Brandes, of $655,000.
The Manager (not the Fund) pays Lazard a subadvisory fee in the annual
amount of 0.75% for assets up to $200 million; 0.70% for
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
================================================================================
assets over $200 million up to $400 million; 0.65% for assets over $400
million up to $600 million; and 0.60% for assets over $600 million on the
portion of the Fund's average net assets that Lazard manages. For the
six-month period ended November 30, 2013, the Manager incurred subadvisory
fees, paid or payable to Lazard, of $2,578,000.
The Manager (not the Fund) pays Victory a subadvisory fee in the annual
amount of 0.85% for assets up to $50 million; 0.75% for assets over $50
million up to $150 million; and 0.70% for assets over $150 million on the
portion of the Fund's average net assets that Victory manages. For the
six-month period ended November 30, 2013, the Manager incurred subadvisory
fees, paid or payable to Victory, of $610,000.
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and servicing functions for the Fund. For such services, the
Manager receives a fee accrued daily and paid monthly at an annualized rate
of 0.15% of average net assets of the Fund Shares and Adviser Shares, and
0.10% of average net assets of the Institutional Shares. For the six-month
period ended November 30, 2013, the Fund Shares, Institutional Shares, and
Adviser Shares incurred administration and servicing fees, paid or payable
to the Manager, of $344,000, $313,000, and $3,000, respectively.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Board has approved the
reimbursement of a portion of these expenses incurred by the Manager. For
the six-month period ended November 30, 2013, the Fund reimbursed the
Manager $15,000 for these compliance and legal services. These expenses are
included in the professional fees on the Fund's statement of operations.
D. EXPENSE LIMITATION -- The Manager has agreed, through October 1, 2014, to
limit the annual expenses of the Adviser Shares to 2.00% of its average net
assets, excluding extraordinary expenses and before reductions of any
expenses paid indirectly, and will reimburse the
================================================================================
44 | USAA EMERGING MARKETS FUND
================================================================================
Adviser Shares for all expenses in excess of that amount. This expense
limitation arrangement may not be changed or terminated through October 1,
2014, without approval of the Board, and may be changed or terminated by
the Manager at any time after that date. For the six-month period ended
November 30, 2013, the Adviser Shares did not incur reimbursable expenses.
E. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund. Transfer agent's fees for both the
Fund Shares and Adviser Shares are paid monthly based on an annual charge
of $23 per shareholder account plus out-of-pocket expenses. SAS pays a
portion of these fees to certain intermediaries for administration and
servicing of accounts held with such intermediaries. Transfer agent's fees
for Institutional Shares are paid monthly based on a fee accrued daily at
an annualized rate of 0.10% of the Institutional Shares' average net
assets, plus out-of-pocket expenses. For the Institutional Shares, and
Adviser Shares incurred transfer agent's fees, paid or payable to SAS, of
$675,000, $313,000, and less than $500, respectively.
F. DISTRIBUTION AND SERVICE (12b-1) FEES -- The Fund has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser
Shares. Under the plan, the Adviser Shares pay fees to USAA Investment
Management Company, the distributor, for distribution and shareholder
services. USAA Investment Management Company pays all or a portion of such
fees to intermediaries that make the Adviser Shares available for
investment by their customers. The fee is accrued daily and paid monthly at
an annual rate of 0.25% of the Adviser Shares' average net assets. Adviser
Shares are offered and sold without imposition of an initial sales charge
or a contingent deferred sales charge. For the six-month period ended
November 30, 2013, the Adviser Shares incurred distribution and service
(12b-1) fees of $6,000.
G. UNDERWRITING SERVICES -- USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares
================================================================================
NOTES TO FINANCIAL STATEMENTS | 45
================================================================================
on a continuing best-efforts basis and receives no commissions or fees for
this service.
(7) TRANSACTIONS WITH AFFILIATES
The Fund's Institutional Shares is one of 17 USAA mutual funds in which the
affiliated USAA fund-of-funds may invest. The USAA fund-of-funds do not invest
in the underlying funds for the purpose of exercising management or control. As
of November 30, 2013, the USAA fund-of-funds owned the following percentages of
the total outstanding shares of the Fund:
AFFILIATED USAA FUND OWNERSHIP %
--------------------------------------------------------------------------------
USAA Cornerstone Conservative Fund 0.1
USAA Cornerstone Equity Fund 0.5
USAA Target Retirement Income Fund 1.0
USAA Target Retirement 2020 Fund 2.6
USAA Target Retirement 2030 Fund 6.7
USAA Target Retirement 2040 Fund 8.2
USAA Target Retirement 2050 Fund 4.5
USAA Target Retirement 2060 Fund 0.1
The Manager is indirectly wholly owned by United Services Automobile Association
(USAA), a large, diversified financial services institution. At November 30,
2013, USAA and its affiliates owned 271,000 shares which represents 98.4% of the
Adviser Shares and 0.4% of the Fund.
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
================================================================================
46 | USAA EMERGING MARKETS FUND
================================================================================
(8) FINANCIAL HIGHLIGHTS -- FUND SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
----------------------------------------------------------------------------------
2013 2013 2012 2011 2010 2009
----------------------------------------------------------------------------------
Net asset value at
beginning of period $ 17.44 $ 15.45 $ 21.57 $ 17.20 $ 14.41 $ 24.47
----------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .06 .17(e) .15 .13 .11 .23
Net realized and
unrealized gain (loss) .24 1.96(e) (5.57) 4.37 2.79 (9.15)
----------------------------------------------------------------------------------
Total from investment
operations .30 2.13(e) (5.42) 4.50 2.90 (8.92)
----------------------------------------------------------------------------------
Less distributions from:
Net investment income - (.14) (.14) (.13) (.11) (.20)
Realized capital gains - - (.56) - - (.94)
----------------------------------------------------------------------------------
Total distributions - (.14) (.70) (.13) (.11) (1.14)
----------------------------------------------------------------------------------
Net asset value at end
of period $ 17.74 $ 17.44 $ 15.45 $ 21.57 $ 17.20 $ 14.41
==================================================================================
Total return (%)* 1.72 13.78 (25.21) 26.19 20.07(a) (34.71)
Net assets at end of
period (000) $482,723 $476,735 $670,698 $821,004 $557,639 $425,934
Ratios to average
net assets:**
Expenses (%)(b),(c) 1.51(f) 1.58 1.58 1.59 1.66(a) 1.79
Net investment income (%) .74(f) 1.00 1.06 .68 .61 1.98
Portfolio turnover (%) 22 148(d) 72 66 66 76
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in
accordance with U.S. generally accepted accounting principles and could
differ from the Lipper reported return. Total returns for periods of less
than one year are not annualized.
** For the six-month period ended November 30, 2013, average net assets were
$457,641,000.
(a) During the year ended May 31, 2010, SAS reimbursed the Fund Shares $102,000
for corrections in fees paid for the administration and servicing of
certain accounts. The effect of this reimbursement on the Fund Shares'
total return was less than 0.01%. The reimbursement decreased the Fund
Shares' expense ratios by 0.02%. This decrease is excluded from the expense
ratios in the the expense ratios in the Financial Highlights table.
(b) Reflects total operating expenses of the Fund Shares before reductions of
any expenses paid indirectly. The Fund Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
(c) Effective March 1, 2004, through September 30, 2008, the Manager
voluntarily agreed to limit the annual expenses of the Fund Shares to 1.80%
of the Fund Shares' average net assets.
(d) Reflects increased trading activity due to changes in subadvisers and asset
allocation strategies.
(e) Calculated using average shares.
(f) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 47
================================================================================
(8) FINANCIAL HIGHLIGHTS (CONTINUED) -- INSTITUTIONAL SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH PERIOD
PERIOD ENDED ENDED
NOVEMBER 30, YEAR ENDED MAY 31, MAY 31,
----------------------------------------------------------------------------------
2013 2013 2012 2011 2010 2009***
----------------------------------------------------------------------------------
Net asset value at
beginning of period $ 17.41 $ 15.45 $ 21.60 $ 17.22 $ 14.41 $ 21.26
---------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .08 .20(a) .20 .22 .21(a) .31(a)
Net realized and
unrealized gain (loss) .24 1.99(a) (5.58) 4.37 2.78(a) (5.98)(a)
---------------------------------------------------------------------------------
Total from investment
operations .32 2.19(a) (5.38) 4.59 2.99(a) (5.67)(a)
---------------------------------------------------------------------------------
Less distributions from:
Net investment income - (.23) (.21) (.21) (.18) (.24)
Realized capital gains - - (.56) - - (.94)
---------------------------------------------------------------------------------
Total distributions - (.23) (.77) (.21) (.18) (1.18)
---------------------------------------------------------------------------------
Net asset value at end
of period $ 17.73 $ 17.41 $ 15.45 $ 21.60 $ 17.22 $ 14.41
=================================================================================
Total return (%)* 1.84 14.18 (25.01) 26.71 20.74 (24.59)
Net assets at end of
period (000) $676,970 $540,580 $202,173 $185,493 $77,410 $23,255
Ratios to average
net assets:**
Expenses (%)(b) 1.28(c) 1.30 1.27 1.20(d) 1.13(d) 1.13(c),(d)
Expenses, excluding
reimbursements (%)(b) 1.28(c) 1.30 1.27 1.22 1.24 1.28(c)
Net investment income (%) .92(c) 1.19 1.40 1.13 1.17 3.30(c)
Portfolio turnover (%) 22 148(e) 72 66 66 76
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in
accordance with U.S. generally accepted accounting principles and could
differ from the Lipper reported return. Total returns for periods of less
than one year are not annualized.
** For the six-month period ended November 30, 2013, average net assets were
$625,139,000.
*** Institutional Shares were initiated on August 1, 2008.
(a) Calculated using average shares.
(b) Reflects total operating expenses of the Institutional Shares before
reductions of any expenses paid indirectly. The Institutional Shares'
expenses paid indirectly decreased the expense ratios by less than 0.01%.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(d) Prior to October 1, 2010, the Manager had voluntarily agreed to limit the
annual expenses of the Institutional Shares to 1.13% of the Institutional
Shares' average net assets.
(e) Reflects increased trading activity due to changes in subadvisers and asset
allocation strategies.
================================================================================
48 | USAA EMERGING MARKETS FUND
================================================================================
(8) FINANCIAL HIGHLIGHTS (CONTINUED) -- ADVISER SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED PERIOD ENDED
NOVEMBER 30, YEAR ENDED MAY 31, MAY 31,
------------------------------------------------------------------
2013 2013 2012 2011***
------------------------------------------------------------------
Net asset value at beginning of period $17.35 $15.40 $ 21.50 $19.22
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .02 .11 .10 .03(a)
Net realized and unrealized gain (loss) .24 1.94 (5.57) 2.36(a)
-------------------------------------------------------------
Total from investment operations .26 2.05 (5.47) 2.39(a)
-------------------------------------------------------------
Less distributions from:
Net investment income - (.10) (.07) (.11)
Realized capital gains - - (.56) -
-------------------------------------------------------------
Total distributions - (.10) (.63) (.11)
-------------------------------------------------------------
Net asset value at end of period $17.61 $17.35 $ 15.40 $21.50
=============================================================
Total return (%)* 1.50 13.31 (25.53) 12.48
Net assets at end of period (000) $4,853 $4,784 $ 4,237 $5,919
Ratios to average net assets:**
Expenses (%)(b) 1.97(c) 2.00 2.00 2.00(c)
Expenses, excluding reimbursements (%)(b) 1.97(c) 2.04 2.16 2.26(c)
Net investment income (%) .28(c) .55 .63 .16(c)
Portfolio turnover (%) 22 148(d) 72 66
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in
accordance with U.S. generally accepted accounting principles and could
differ from the Lipper reported return. Total returns for periods of less
than one year are not annualized.
** For the six-month period ended November 30, 2013, average net assets were
$4,644,000.
*** Adviser Shares were initiated on August 1, 2010.
(a) Calculated using average shares.
(b) Reflects total operating expenses of the Adviser Shares before reductions
of any expenses paid indirectly. The Adviser Shares' expenses paid
indirectly decreased the expense ratios by less than 0.01%.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(d) Reflects increased trading activity due to changes in subadvisers and asset
allocation strategies.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 49
================================================================================
EXPENSE EXAMPLE
November 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, distribution and service
(12b-1) fees, and other Fund operating expenses. This example is intended to
help you understand your indirect costs, also referred to as "ongoing costs" (in
dollars), of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire six-month period of June 1, 2013, through
November 30, 2013.
ACTUAL EXPENSES
The line labeled "actual" under each share class in the table on the next page
provides information about actual account values and actual expenses. You may
use the information in this line, together with the amount you invested at the
beginning of the period, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number for your share
class in the "actual" line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class and an assumed rate of return of
5% per year before expenses, which is not
================================================================================
50 | USAA EMERGING MARKETS FUND
================================================================================
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the line labeled "hypothetical"
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JUNE 1, 2013 -
JUNE 1, 2013 NOVEMBER 30, 2013 NOVEMBER 30, 2013
-----------------------------------------------------------
FUND SHARES
Actual $1,000.00 $1,017.20 $7.64
Hypothetical
(5% return before expenses) 1,000.00 1,017.50 7.64
INSTITUTIONAL SHARES
Actual 1,000.00 1,018.40 6.48
Hypothetical
(5% return before expenses) 1,000.00 1,018.65 6.48
ADVISER SHARES
Actual 1,000.00 1,015.00 9.95
Hypothetical
(5% return before expenses) 1,000.00 1,015.19 9.95
* Expenses are equal to the annualized expense ratio of 1.51% for Fund Shares,
1.28% for Institutional Shares, and 1.97% for Adviser Shares, which are net
of any reimbursements and expenses paid indirectly, multiplied by the average
account value over the period, multiplied by 183 days/365 days (to reflect
the one-half-year period). The Fund's actual ending account values are based
on its actual total returns of 1.72% for Fund Shares, 1.84% for Institutional
Shares, and 1.50% for Adviser Shares for the six-month period of June 1,
2013, through November 30, 2013.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 51
================================================================================
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)
=============================================================================
25559-0114 (C)2014, USAA. All rights reserved.
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE. This item must be disclosed only in annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Filed as part of the report to shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Corporate Governance Committee selects and nominates candidates for
membership on the Board as independent directors. Currently, there is no
procedure for shareholders to recommend candidates to serve on the Board.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended November 30, 2013
By:* /S/ DANIEL J. MAVICO
-----------------------------------------------------------
Signature and Title: DANIEL J. MAVICO, Assistant Secretary
Date: 1/27/2014
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /S/ DANIEL S. MCNAMARA
-----------------------------------------------------
Signature and Title: Daniel S. McNamara, President
Date: 1/27/2014
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 1/27/2014
------------------------------
*Print the name and title of each signing officer under his or her signature.