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 CORNERSTONE MODERATELY AGGRESSIVE FUND]
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SEMIANNUAL REPORT
USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
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 7
FINANCIAL INFORMATION
Portfolio of Investments 11
Notes to Portfolio of Investments 34
Financial Statements 38
Notes to Financial Statements 41
EXPENSE EXAMPLE 59
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA ASSET MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2014, USAA. All rights reserved.
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FUND OBJECTIVE
The USAA CORNERSTONE MODERATELY AGGRESSIVE FUND (the Fund) seeks capital
appreciation with a secondary focus on current income.
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TYPES OF INVESTMENTS
The Fund invests in equity securities, bonds, money market instruments, and
other instruments. The Fund will have a target asset class allocation of
approximately 60% equity securities and 40% fixed-income securities. The actual
asset class allocation can deviate from time to time from these targets as
market conditions warrant. The implementation of the asset allocation may
involve the extensive use of equity and fixed-income exchange-traded funds
(ETFs). The Fund may invest in investment-grade and below-investment-grade
securities.
The Fund also may use alternative investment strategies and other instruments
from time to time, in an attempt to reduce its volatility over time and to
enhance the Fund's return and diversification.
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
USAA Asset Management Company Quantitative Management Associates LLC
JOHN P. TOOHEY, CFA JACOB POZHARNY, Ph.D.
WASIF A. LATIF JOHN VAN BELLE, Ph.D.
ARNOLD J. ESPE, CFA
DAN DENBOW, CFA
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o HOW DID THE USAA CORNERSTONE MODERATELY AGGRESSIVE FUND (THE FUND) PERFORM
DURING THE REPORTING PERIOD?
The Fund returned 4.59% during the reporting period ended November 30, 2013.
This compares to returns of 5.96% for the Lipper Global Flexible Funds Index
and 11.91% for the S&P 500(R) Index.
o WHAT SPECIFIC ELEMENTS OF YOUR POSITIONING HELPED PERFORMANCE?
Our domestic equity allocation made a positive contribution to performance.
The U.S. equity market delivered strong returns as growing optimism about the
economic outlook helped fuel investors' appetite for risk. The Fund's equity
weighting is higher than that of the Lipper peer group, which was a positive
for performance at a time of robust stock market returns.
Our equity allocation is diversified among individual large-cap U.S. stocks
and exchange-traded funds (ETFs) that provide exposure to domestic mid- and
small-cap stocks.
Refer to page 8 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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2 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
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The Fund's large-cap portfolio, which emphasizes stocks with attractive
valuations and improving fundamentals, finished with a positive return and
robust relative performance versus the broader U.S. equity market. While our
focus on high-quality stocks would typically be a headwind in a momentum-
driven market, our strong individual stock selection helped the large-cap
portfolio to outperform. In addition, our allocations to both mid- and
small-cap stocks enabled us to capitalize on the strong relative performance
of these asset classes.
The non-U.S. equity portion of the Fund also delivered positive returns. Our
developed market international allocation incorporates ETFs and a portfolio
of individual stocks managed by the subadvisor QMA Associates LLC (QMA). QMA
produced a positive absolute return and outperformed its benchmark during the
semi-annual period, a positive for Fund performance.
Our holdings in ETFs that invest in the developed overseas markets performed
well due in part to the signs of recovery in Europe's economy and the
aggressive policies of Japan's central bank. Our allocation to the emerging
markets -- which includes both broad-based and ETFs linked to individual
countries where we see the potential for outperformance -- also produced a
gain, albeit a more modest one than our positions in the developed markets.
During the reporting period, investors reacted negatively to the prospect of
the U.S. Federal Reserve (the Fed) "tapering" (or reducing) the bond-buying
program known as "quantitative easing" which caused emerging markets stocks
to lag as well as weaker-than-expected growth in key markets such as Brazil,
China, and India.
During the reporting period, the U.S. investment-grade bond market
experienced poor performance under the threat of a possible tapering by the
Fed. While the Fed kept the policy intact through the close of the reporting
period, the potential for a withdrawal of support led to a sell-off in
intermediate- and long-term investment-grade bonds. Shortly after the
reporting period ended, the Fed signaled that it will begin
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MANAGERS' COMMENTARY ON THE FUND | 3
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tapering its bond-buying program from $85 billion per month to $75 billion
per month.
Our bond portfolio delivered a positive performance in the past six months,
which helped mitigate the impact of broader bond market weakness. We
continued to construct the portfolio on a bond-by-bond basis using
fundamental credit research, with a focus on higher-yielding securities in
the investment-grade corporate bond and commercial mortgage-backed securities
sectors. Within the corporate segment, we held an overweight -- or
above-market weighting -- in bonds issued by banks and insurance companies,
which continued to work well. In addition, we maintained a below-average
duration (to reduce interest-rate sensitivity) in order to protect the
portfolio against the potential for market volatility, particularly among
longer-term bonds. This defensive approach aided performance in the difficult
market environment of the past six months.
The Fund has a modest allocation to high-yield bonds. This asset class tends
to have a lower sensitivity to interest-rate risk than the investment-grade
segment of the market, which was a positive during the reporting period.
High-yield bonds were also helped by stronger economic growth and investors'
continued preference for income-producing securities.
o WHAT ELEMENTS OF YOUR POSITIONING HURT PERFORMANCE?
Our allocation to gold and precious metals stocks was the weakest segment of
the portfolio. The price of gold weakened in an environment of low inflation
and positive investor sentiment, and gold stocks lagged even more
significantly due to their contracting profit margins and weak earnings
results.
Although our precious metals allocation lagged considerably in the past six
months, it's important to keep in mind that we construct the portfolio to
deliver strong risk-adjusted returns over a full market cycle rather than
trying to maximize short-term performance. We believe it's
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4 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
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essential to maintain this diversified approach rather than overreacting when
some elements of the portfolio aren't working.
The Fund's option hedging strategy -- which is designed to help cushion the
impact of large stock market sell-offs -- also detracted from performance, as
is typically the case during sizeable rallies. On a longer-term basis,
however, we view the hedging strategy as a way to help mitigate against sharp
declines in equity markets during the inevitable periods of elevated
volatility.
o WHAT IS YOUR OUTLOOK FOR THE FINANCIAL MARKETS AS WE MOVE INTO 2014?
As we look ahead to 2014, we foresee an environment in which financial-
market performance may be somewhat more muted. Developed-market stocks are
more richly valued, and yields on long-term bonds are likely to trend higher
over time. What's more, we anticipate a high level of market uncertainty
stemming from shifting expectations for the country's fiscal and monetary
policies.
Accordingly, we are closely monitoring economic data to assess whether the
recent uptick in economic indicators is a sign that the U.S. economy is about
to achieve "escape velocity." If growth does indeed pick up, that would
represent a strong indication that corporate sales growth can accelerate from
its current low level. This is critical for equities, since market
performance has run far ahead of earnings growth in 2013 -- indicating that
expanding valuations has been the key driver of performance. It's, therefore,
likely that investors will soon need to see an improvement in revenues for
equities to maintain their upward trajectory.
Our approach to this potentially challenging backdrop is to emphasize
fundamentals and valuations as the basis for determining the Fund's optimal
asset allocation. We seek to construct a portfolio that is truly diversified
in that it is positioned to capitalize on a wide range of potential outcomes
regarding global growth, central bank policy, and
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MANAGERS' COMMENTARY ON THE FUND | 5
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inflation. We believe this nimble approach -- and not one that simply seeks
to "ride the wave" of accommodative central bank policies -- will be critical
to generating outperformance in the year ahead.
Thank you for your investment in the Fund.
Non-investment grade securities are considered speculative and are subject to
significant credit risk. They are sometimes referred to as junk bonds since
they represent a greater risk of default than more creditworthy investment-
grade securities. o As interest rates rise, bond prices fall. o Foreign
investing is subject to additional risks, such as currency fluctuations,
market illiquidity, and political instability. Emerging market countries are
less diverse and mature than other countries and tend to be politically less
stable.
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6 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
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INVESTMENT OVERVIEW
USAA CORNERSTONE MODERATELY AGGRESSIVE FUND (THE FUND) (Ticker Symbol: USCRX)
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11/30/13 5/31/13
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Net Assets $2,369.9 Million $2,294.8 Million
Net Asset Value Per Share $25.28 $24.17
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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
4.59% 11.41% 13.46% 5.78%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
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1 Year 5 Years 10 Years
10.85% 12.82% 5.45%
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EXPENSE RATIO AS OF 5/31/13**
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1.28%
(Includes acquired fund fees and expenses of 0.06%)
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 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.
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INVESTMENT OVERVIEW | 7
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
LIPPER GLOBAL FLEXIBLE USAA CORNERSTONE MODERATELY
S&P 500 INDEX FUNDS INDEX AGGRESSIVE FUND
11/30/03 $10,000.00 $10,000.00 $10,000.00
12/31/03 10,524.45 10,334.98 10,418.86
01/31/04 10,717.62 10,568.63 10,549.76
02/29/04 10,866.59 10,717.23 10,737.93
03/31/04 10,702.65 10,765.41 10,647.94
04/30/04 10,534.64 10,454.95 10,463.86
05/31/04 10,679.21 10,503.28 10,553.86
06/30/04 10,886.86 10,649.63 10,762.48
07/31/04 10,526.54 10,378.18 10,447.50
08/31/04 10,569.12 10,418.93 10,451.59
09/30/04 10,683.59 10,669.18 10,635.67
10/31/04 10,846.80 10,864.86 10,791.11
11/30/04 11,285.68 11,367.90 11,236.99
12/31/04 11,669.72 11,691.51 11,617.88
01/31/05 11,385.27 11,483.96 11,422.00
02/28/05 11,624.87 11,753.47 11,691.88
03/31/05 11,419.01 11,534.74 11,491.64
04/30/05 11,202.45 11,413.96 11,317.53
05/31/05 11,558.89 11,632.69 11,548.23
06/30/05 11,575.30 11,759.51 11,587.41
07/31/05 12,005.76 12,039.90 11,926.93
08/31/05 11,896.22 12,109.11 12,009.64
09/30/05 11,992.57 12,331.78 12,083.64
10/31/05 11,792.65 12,095.67 11,818.11
11/30/05 12,238.67 12,393.85 12,070.58
12/31/05 12,242.87 12,721.58 12,260.23
01/31/06 12,567.10 13,237.37 12,586.98
02/28/06 12,601.20 13,227.55 12,558.57
03/31/06 12,758.05 13,411.95 12,719.58
04/30/06 12,929.36 13,694.21 12,951.62
05/31/06 12,557.24 13,355.36 12,549.10
06/30/06 12,574.26 13,252.35 12,568.04
07/31/06 12,651.83 13,264.94 12,672.22
08/31/06 12,952.85 13,547.63 12,956.35
09/30/06 13,286.65 13,708.23 13,065.27
10/31/06 13,719.61 14,016.93 13,406.23
11/30/06 13,980.50 14,351.80 13,747.18
12/31/06 14,176.61 14,504.61 13,953.89
01/31/07 14,391.01 14,636.96 14,126.49
02/28/07 14,109.54 14,565.91 14,074.19
03/31/07 14,267.35 14,682.56 14,231.09
04/30/07 14,899.33 15,040.30 14,602.43
05/31/07 15,419.24 15,347.47 14,911.00
06/30/07 15,163.08 15,319.49 14,769.79
07/31/07 14,692.95 15,246.96 14,513.51
08/31/07 14,913.20 15,193.64 14,518.74
09/30/07 15,470.93 15,731.22 15,088.82
10/31/07 15,717.03 16,093.85 15,507.23
11/30/07 15,059.95 15,637.19 14,884.85
12/31/07 14,955.47 15,481.33 14,795.23
01/31/08 14,058.42 14,935.02 14,069.56
02/29/08 13,601.72 14,885.10 13,961.61
03/31/08 13,542.99 14,806.47 13,739.71
04/30/08 14,202.57 15,275.27 14,183.51
05/31/08 14,386.53 15,432.13 14,495.37
06/30/08 13,173.70 14,604.53 13,667.74
07/31/08 13,062.96 14,310.40 13,367.88
08/31/08 13,251.91 14,183.15 13,187.96
09/30/08 12,071.07 12,859.43 11,904.55
10/31/08 10,043.76 10,831.98 9,895.47
11/30/08 9,323.07 10,230.73 9,331.73
12/31/08 9,422.27 10,469.94 9,696.01
01/31/09 8,628.10 9,886.26 9,057.46
02/28/09 7,709.40 9,179.17 8,369.32
03/31/09 8,384.71 9,705.16 8,828.08
04/30/09 9,187.20 10,432.76 9,634.01
05/31/09 9,701.07 11,247.36 10,669.33
06/30/09 9,720.31 11,309.21 10,780.92
07/31/09 10,455.53 12,044.84 11,425.67
08/31/09 10,833.02 12,449.89 11,785.24
09/30/09 11,237.26 12,875.67 12,405.19
10/31/09 11,028.50 12,685.88 12,423.79
11/30/09 11,690.03 13,120.29 12,814.36
12/31/09 11,915.83 13,299.25 13,056.22
01/31/10 11,487.17 13,041.39 12,883.75
02/28/10 11,843.01 13,230.98 13,081.77
03/31/10 12,557.68 13,821.34 13,631.10
04/30/10 12,755.93 13,978.29 13,758.85
05/31/10 11,737.36 13,153.06 13,043.44
06/30/10 11,122.93 12,934.82 12,781.55
07/31/10 11,902.24 13,537.97 13,407.53
08/31/10 11,364.92 13,283.90 13,196.74
09/30/10 12,379.18 13,996.76 14,033.52
10/31/10 12,850.20 14,464.60 14,391.22
11/30/10 12,851.85 14,285.96 14,276.25
12/31/10 13,710.75 14,884.97 14,836.70
01/31/11 14,035.72 14,925.67 14,935.13
02/28/11 14,516.57 15,284.32 15,348.53
03/31/11 14,522.34 15,380.33 15,492.90
04/30/11 14,952.43 15,882.12 15,952.24
05/31/11 14,783.17 15,672.00 15,781.63
06/30/11 14,536.75 15,403.06 15,538.83
07/31/11 14,241.15 15,342.18 15,440.40
08/31/11 13,467.54 14,639.82 14,626.71
09/30/11 12,520.79 13,633.15 13,721.16
10/31/11 13,889.23 14,400.77 14,442.98
11/30/11 13,858.53 14,293.34 14,383.92
12/31/11 14,000.29 14,186.19 14,268.44
01/31/12 14,627.72 14,780.86 14,809.42
02/29/12 15,260.25 15,259.41 15,188.11
03/31/12 15,762.46 15,363.90 15,228.68
04/30/12 15,663.52 15,250.73 15,181.35
05/31/12 14,722.13 14,450.28 14,525.41
06/30/12 15,328.71 14,853.60 14,883.81
07/31/12 15,541.61 15,029.75 15,032.58
08/31/12 15,891.65 15,297.09 15,282.78
09/30/12 16,302.32 15,596.72 15,620.90
10/31/12 16,001.31 15,536.39 15,661.47
11/30/12 16,094.13 15,681.84 15,749.38
12/31/12 16,240.83 15,928.22 15,984.34
01/31/13 17,082.02 16,388.78 16,414.66
02/28/13 17,313.91 16,369.06 16,400.78
03/31/13 17,963.24 16,619.85 16,615.94
04/30/13 18,309.33 16,931.61 16,900.51
05/31/13 18,737.62 16,838.56 16,775.58
06/30/13 18,485.99 16,385.12 16,338.31
07/31/13 19,426.64 16,933.83 16,810.28
08/31/13 18,864.01 16,688.71 16,546.53
09/30/13 19,455.57 17,221.96 16,956.03
10/31/13 20,349.90 17,690.07 17,448.82
11/30/13 20,970.04 17,841.36 17,546.00
[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 Cornerstone Moderately Aggressive Fund to the following benchmarks:
o The unmanaged S&P 500 Index represents the weighted average performance of a
group of 500 widely held, publicly traded stocks.
o The unmanaged Lipper Global Flexible Funds Index tracks the total return
performance of the 30 largest funds within the Lipper Global Flexible
Portfolio 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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8 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
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o TOP 10 HOLDINGS* o
AS OF 11/30/13
(% of Net Assets)
iShares Core S&P Mid-Cap ETF** .......................................... 4.1%
iShares MSCI EAFE ETF** ................................................. 3.7%
iShares Core MSCI Emerging Markets ETF** ................................ 3.5%
U.S. Treasury Note 1.75%, 5/15/2022 ..................................... 3.0%
iShares MSCI United Kingdom ETF** ....................................... 1.5%
Gilead Sciences, Inc. ................................................... 1.2%
SPDR Gold Shares ........................................................ 1.1%
iShares MSCI Hong Kong ETF** ............................................ 1.0%
SPDR S&P 500 ETF Trust** ................................................ 1.0%
General Electric Co. .................................................... 0.8%
* Excludes money market instruments.
** 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 11-33.
================================================================================
INVESTMENT OVERVIEW | 9
================================================================================
o ASSET ALLOCATION -- 11/30/2013* o
[PIE CHART OF ASSET ALLOCATION]
INTERNATIONAL EQUITY SECURITIES 30.1%
U.S. EQUITY SECURITIES 24.9%
CORPORATE OBLIGATIONS 16.2%
COMMERCIAL MORTGAGE SECURITIES 8.9%
MONEY MARKET INSTRUMENTS 7.0%
EURODOLLAR AND YANKEE OBLIGATIONS 5.3%
U.S. TREASURY SECURITIES 3.2%
PRECIOUS METALS AND COMMODITY-RELATED SECURITIES 2.9%
GLOBAL REAL ESTATE EQUITY SECURITIES 0.6%
ASSET-BACKED SECURITIES 0.1%
[END CHART]
* 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.
Excludes options.
Percentages are of the net assets of the Fund and may not equal 100%.
================================================================================
10 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
PORTFOLIO OF INVESTMENTS
November 30, 2013 (unaudited)
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
U.S. EQUITY SECURITIES (24.9%)
COMMON STOCKS (18.2%)
CONSUMER DISCRETIONARY (1.5%)
-----------------------------
AUTO PARTS & EQUIPMENT (0.4%)
120,100 TRW Automotive Holdings Corp.* $ 9,320
---------
CABLE & SATELLITE (0.1%)
62,190 Comcast Corp. "A" 3,101
---------
DEPARTMENT STORES (0.2%)
99,600 Kohl's Corp. 5,506
---------
HOME IMPROVEMENT RETAIL (0.1%)
53,100 Lowe's Companies, Inc. 2,521
---------
HOMEFURNISHING RETAIL (0.1%)
25,940 Bed Bath & Beyond, Inc.* 2,024
---------
MOVIES & ENTERTAINMENT (0.4%)
132,310 Walt Disney Co. 9,333
---------
SPECIALIZED CONSUMER SERVICES (0.2%)
128,100 H&R Block, Inc. 3,573
---------
Total Consumer Discretionary 35,378
---------
CONSUMER STAPLES (1.3%)
-----------------------
DRUG RETAIL (0.5%)
108,580 CVS Caremark Corp. 7,270
86,800 Walgreen Co. 5,139
---------
12,409
---------
HOUSEHOLD PRODUCTS (0.1%)
31,500 Procter & Gamble Co. 2,653
---------
HYPERMARKETS & SUPER CENTERS (0.3%)
82,300 Wal-Mart Stores, Inc. 6,667
---------
TOBACCO (0.4%)
104,050 Philip Morris International, Inc. 8,901
---------
Total Consumer Staples 30,630
---------
ENERGY (1.9%)
-------------
INTEGRATED OIL & GAS (0.9%)
31,030 Chevron Corp. 3,799
179,500 Occidental Petroleum Corp. 17,046
---------
20,845
---------
OIL & GAS EQUIPMENT & SERVICES (0.2%)
84,550 Halliburton Co. 4,454
---------
OIL & GAS EXPLORATION & PRODUCTION (0.7%)
55,000 Anadarko Petroleum Corp. 4,885
57,000 ConocoPhillips 4,150
251,000 Marathon Oil Corp. 9,046
---------
18,081
---------
OIL & GAS REFINING & MARKETING (0.1%)
60,000 Valero Energy Corp. 2,743
---------
Total Energy 46,123
---------
FINANCIALS (2.9%)
-----------------
CONSUMER FINANCE (0.4%)
129,970 Capital One Financial Corp. 9,310
---------
DIVERSIFIED BANKS (0.3%)
146,420 Wells Fargo & Co. 6,445
---------
LIFE & HEALTH INSURANCE (0.2%)
84,680 MetLife, Inc. 4,419
---------
MULTI-LINE INSURANCE (0.1%)
52,000 American International Group, Inc. 2,587
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 11
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.8%)
239,417 Citigroup, Inc. $ 12,670
92,900 JPMorgan Chase & Co. 5,316
---------
17,986
---------
REGIONAL BANKS (0.6%)
98,600 BB&T Corp. 3,425
75,800 CIT Group, Inc. 3,827
91,200 PNC Financial Services Group, Inc. 7,018
---------
14,270
---------
SPECIALIZED FINANCE (0.5%)
50,000 CME Group, Inc. 4,097
40,220 IntercontinentalExchange Group, Inc.* 8,579
---------
12,676
---------
Total Financials 67,693
---------
HEALTH CARE (4.1%)
------------------
BIOTECHNOLOGY (1.2%)
376,000 Gilead Sciences, Inc.* 28,129
---------
HEALTH CARE DISTRIBUTORS (0.5%)
177,001 Cardinal Health, Inc. 11,434
---------
HEALTH CARE EQUIPMENT (0.1%)
40,000 Medtronic, Inc. 2,293
---------
HEALTH CARE SERVICES (0.2%)
56,250 Express Scripts Holdings Co.* 3,788
---------
LIFE SCIENCES TOOLS & SERVICES (0.1%)
33,009 Thermo Fisher Scientific, Inc. 3,329
---------
MANAGED HEALTH CARE (0.1%)
43,000 UnitedHealth Group, Inc. 3,203
---------
PHARMACEUTICALS (1.9%)
246,140 AbbVie, Inc. 11,925
43,000 Allergan, Inc. 4,173
145,590 Johnson & Johnson 13,782
450,300 Pfizer, Inc. 14,288
---------
44,168
---------
Total Health Care 96,344
---------
INDUSTRIALS (2.0%)
------------------
AEROSPACE & DEFENSE (0.8%)
20,400 Boeing Co. 2,738
35,000 Raytheon Co. 3,104
300,400 Spirit AeroSystems Holdings, Inc. "A"* 9,805
36,640 United Technologies Corp. 4,062
---------
19,709
---------
AIR FREIGHT & LOGISTICS (0.3%)
74,990 United Parcel Service, Inc. "B" 7,677
---------
ENVIRONMENTAL & FACILITIES SERVICES (0.1%)
70,000 Republic Services, Inc. 2,444
---------
INDUSTRIAL CONGLOMERATES (0.8%)
694,660 General Electric Co. 18,520
---------
Total Industrials 48,350
---------
INFORMATION TECHNOLOGY (4.2%)
-----------------------------
APPLICATION SOFTWARE (0.1%)
57,700 Adobe Systems, Inc.* 3,276
---------
COMMUNICATIONS EQUIPMENT (0.3%)
311,317 Cisco Systems, Inc. 6,615
---------
COMPUTER HARDWARE (1.2%)
27,120 Apple, Inc. 15,081
493,000 Hewlett-Packard Co. 13,483
---------
28,564
---------
COMPUTER STORAGE & PERIPHERALS (0.4%)
135,000 SanDisk Corp. 9,200
---------
DATA PROCESSING & OUTSOURCED SERVICES (0.4%)
45,000 Visa, Inc. "A" 9,156
---------
INTERNET SOFTWARE & SERVICES (0.3%)
7,960 Google, Inc. "A"* 8,434
---------
SEMICONDUCTOR EQUIPMENT (0.1%)
75,000 Applied Materials, Inc. 1,298
---------
SEMICONDUCTORS (0.6%)
126,300 Broadcom Corp. "A" 3,371
324,570 Intel Corp. 7,738
================================================================================
12 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
68,000 Texas Instruments, Inc. $ 2,924
---------
14,033
---------
SYSTEMS SOFTWARE (0.8%)
423,860 Microsoft Corp. 16,162
116,550 Oracle Corp. 4,113
---------
20,275
---------
Total Information Technology 100,851
---------
MATERIALS (0.1%)
----------------
PAPER PRODUCTS (0.1%)
55,000 International Paper Co. 2,566
---------
TELECOMMUNICATION SERVICES (0.2%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.2%)
151,800 CenturyLink, Inc. 4,660
---------
Total Common Stocks
(cost: $333,229) 432,595
---------
PREFERRED STOCKS (0.9%)
CONSUMER STAPLES (0.6%)
-----------------------
AGRICULTURAL PRODUCTS (0.6%)
80,431 CHS, Inc., Series B, 7.88%, cumulative
redeemable, perpetual 2,304
120,000 Dairy Farmers of America, Inc., 7.88%,
cumulative redeemable, perpetual(a) 12,814
---------
15,118
---------
Total Consumer Staples 15,118
---------
ENERGY (0.1%)
-------------
OIL & GAS STORAGE & TRANSPORTATION (0.1%)
2,000 Kinder Morgan G.P. Inc., 4.16%,
cumulative redeemable (a) 1,849
---------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
$(000)/SHARES
--------------------------------------------------------------------------------
FINANCIALS (0.2%)
-----------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.2%)
70 International Lease Finance Corp.,
0.36%, perpetual(b) $ 4,480
---------
PROPERTY & CASUALTY INSURANCE (0.0%)
$3,000 Syncora Holdings Ltd., 6.88%, perpetual(b) -
---------
Total Financials 4,480
---------
Total Preferred Stocks (cost: $22,364) 21,447
---------
EXCHANGE-TRADED FUNDS (5.8%)
745,118 iShares Core S&P Mid-Cap ETF 97,186
83,055 iShares Core S&P Small-Cap ETF 8,970
82,600 iShares Russell 2000 ETF 9,376
125,000 SPDR S&P 500 ETF Trust 22,625
---------
Total Exchange-Traded Funds (cost: $98,934) 138,157
---------
Total U.S.Equity Securities (cost: $454,527) 592,199
---------
INTERNATIONAL EQUITY SECURITIES (30.1%)
COMMON STOCKS (15.5%)
CONSUMER DISCRETIONARY (1.9%)
-----------------------------
ADVERTISING (0.1%)
32,006 JC Decaux S.A. 1,260
---------
APPAREL RETAIL (0.1%)
600 ABC-MART, Inc. 27
32,123 Hennes & Mauritz AB "B" 1,362
---------
1,389
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
APPAREL,ACCESSORIES & LUXURY GOODS (0.1%)
7,975 Christian Dior S.A. $ 1,555
1,807 Compagnie Financiere Richemont S.A. 184
954 Swatch Group AG 107
---------
1,846
---------
AUTO PARTS & EQUIPMENT (0.3%)
12,700 Aisin Seiki Co. Ltd. 511
4,276 Continental AG 893
12,800 Denso Corp. 641
2,000 Koito Manufacturing Co. Ltd. 38
51,000 Magna International, Inc. 4,148
2,800 Stanley Electric Co. Ltd. 62
3,600 Toyota Industries Corp. 157
---------
6,450
---------
AUTOMOBILE MANUFACTURERS (0.5%)
7,274 Bayerische Motoren Werke AG 836
39,454 Daimler AG 3,270
205,585 Fiat S.p.A.* 1,631
76,400 Fuji Heavy Industries Ltd. 2,157
1,200 Honda Motor Co. Ltd. 51
59,000 Mazda Motor Corp.* 271
1,280 Renault S.A. 114
61,200 Toyota Motor Corp. 3,811
---------
12,141
---------
AUTOMOTIVE RETAIL (0.0%)
4,700 USS Co. Ltd. 64
---------
BROADCASTING (0.1%)
588,398 ITV plc 1,829
34,701 ProSieben Sat.1 Media AG 1,562
---------
3,391
---------
CASINOS & GAMING (0.1%)
245,000 Galaxy Entertainment Group Ltd.* 1,921
171,600 MGM China Holdings Ltd. 609
20,000 SJM Holdings Ltd. 64
---------
2,594
---------
CONSUMER ELECTRONICS (0.1%)
4,900 Casio Computer Co. Ltd. 56
197,000 Panasonic Corp. 2,259
22,000 Sony Corp. 401
---------
2,716
---------
DEPARTMENT STORES (0.1%)
20,763 Next plc 1,867
---------
FOOTWEAR (0.0%)
3,500 ASICS Corp. 58
---------
HOMEBUILDING (0.0%)
2,900 Iida Group Holdings Co. Ltd.* 58
44,993 Persimmon plc 854
9,000 Sekisui Chemical Co. Ltd. 105
12,000 Sekisui House Ltd. 166
---------
1,183
---------
HOTELS, RESORTS & CRUISE LINES (0.3%)
145,000 Carnival Corp. 5,236
23,378 Flight Centre Travel Group Ltd. 1,036
275,085 TUI Travel plc 1,653
---------
7,925
---------
LEISURE FACILITIES (0.0%)
3,100 Oriental Land Co. Ltd. 457
---------
LEISURE PRODUCTS (0.0%)
3,900 NAMCO BANDAI Holdings, Inc. 79
---------
SPECIALTY STORES (0.1%)
17,500 Signet Jewelers Ltd. 1,345
---------
TIRES & RUBBER (0.0%)
11,100 Bridgestone Corp. 406
---------
Total Consumer Discretionary 45,171
---------
CONSUMER STAPLES (1.6%)
-----------------------
AGRICULTURAL PRODUCTS (0.1%)
2,108,000 Golden Agri-Resources Ltd. 966
175,000 Wilmar International Ltd. 491
---------
1,457
---------
================================================================================
14 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
BREWERS (0.3%)
27,517 Anheuser-Busch InBev N.V. $ 2,810
23,500 Anheuser-Busch InBev N.V.ADR 2,399
8,500 Asahi Group Holdings Ltd. 233
23,647 Heineken Holding N.V. 1,489
39,000 Kirin Holdings Co. Ltd. 601
3,801 SABMiller plc 196
---------
7,728
---------
DISTILLERS & VINTNERS (0.0%)
18,054 Diageo plc 575
6,766 Treasury Wine Estates Ltd. 30
---------
605
---------
FOOD RETAIL (0.3%)
14,239 Casino Guichard-Perrachon S.A. 1,592
10,788 Delhaize Group 629
262,667 J Sainsbury plc 1,751
43,595 Koninklijke Ahold N.V. 794
379,723 Wm Morrison Supermarkets plc 1,649
19,525 Woolworths Ltd. 599
---------
7,014
---------
HOUSEHOLD PRODUCTS (0.1%)
33,029 Reckitt Benckiser Group plc 2,653
24,662 Svenska Cellulosa AB "B" 720
---------
3,373
---------
HYPERMARKETS & SUPER CENTERS (0.1%)
13,800 Aeon Co. Ltd. 186
22,896 Carrefour S.A. 901
---------
1,087
---------
PACKAGED FOODS & MEAT (0.5%)
9,000 Ajinomoto Co.,Inc. 128
8 Lindt & Spruengli AG 410
19 Lindt & Spruengli AG 82
51,238 Nestle S.A. 3,742
4,000 Nippon Meat Packers, Inc. 65
49,015 Suedzucker AG 1,236
90,950 Unilever N.V. 3,571
36,006 Unilever N.V. 1,419
---------
10,653
---------
SOFT DRINKS (0.0%)
2,900 Coca Cola West Co., Ltd. 64
---------
TOBACCO (0.2%)
41,749 British American Tobacco plc 2,228
71,700 Japan Tobacco, Inc. 2,421
---------
4,649
---------
Total Consumer Staples 36,630
---------
ENERGY (1.2%)
-------------
INTEGRATED OIL & GAS (0.7%)
1,574 BG Group plc 32
616,376 BP plc 4,861
18,325 ENI S.p.A. 441
32,372 OMV AG 1,586
1,215 Repsol S.A. 32
83,327 Royal Dutch Shell plc "A" 2,792
82,262 Royal Dutch Shell plc "B" 2,887
71,391 Total S.A. 4,326
---------
16,957
---------
OIL & GAS DRILLING (0.4%)
624 Seadrill Ltd. 26
8,118 Transocean Ltd. 409
146,500 Transocean Ltd. 7,381
---------
7,816
---------
OIL & GAS EXPLORATION & PRODUCTION (0.0%)
14,257 Woodside Petroleum Ltd. 485
---------
OIL & GAS REFINING & MARKETING (0.1%)
1,904 Delek Group Ltd. 721
500 Idemitsu Kosan Co. Ltd. 45
50,100 JX Holdings, Inc. 261
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
5,153 Neste Oil Oyj $ 98
137,200 Showa Shell Sekiyu K.K. 1,524
---------
2,649
---------
Total Energy 27,907
---------
FINANCIALS (2.9%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.1%)
36,303 Schroders plc 1,465
---------
DIVERSIFIED BANKS (1.7%)
10,000 Aozora Bank Ltd. 29
60,493 Australia and New Zealand Banking Group Ltd. 1,756
173,186 Banco Bilbao Vizcaya Argentaria S.A. 2,069
78,717 Banco Santander S.A. 700
293,342 Bank Hapoalim B.M. 1,636
236,000 Bank of East Asia Ltd. 1,049
157,665 Bankia S.A.* 208
1,597 BNP Paribas S.A. 120
81,000 BOC Hong Kong Holdings Ltd. 274
56,161 Commonwealth Bank of Australia 3,978
98,096 DnB NOR ASA 1,736
16,800 Hang Seng Bank Ltd. 274
538,475 HSBC Holdings plc 6,008
68,000 HSBC Holdings plc ADR 3,815
9,542 KBC Groep N.V. 544
892,321 Lloyds TSB Group plc* 1,130
510,000 Mitsubishi UFJ Financial Group, Inc. 3,281
1,151,500 Mizuho Financial Group, Inc. 2,417
7,166 National Australia Bank Ltd. 226
158,510 Skandinaviska Enskilda Banken "A" 1,924
57,800 Sumitomo Mitsui Financial Group, Inc. 2,860
17,513 Swedbank AB "A" 447
103,403 UniCredit S.p.A. 750
114,635 Westpac Banking Corp. 3,431
---------
40,662
---------
DIVERSIFIED CAPITAL MARKETS (0.0%)
3,395 UBS AG 65
---------
INVESTMENT BANKING & BROKERAGE (0.1%)
185,000 Daiwa Securities Group, Inc. 1,797
15,567 Macquarie Group Ltd. 768
---------
2,565
---------
LIFE & HEALTH INSURANCE (0.2%)
121,032 AEGON N.V. 1,075
563,302 Legal & General Group plc 1,972
72,687 Prudential plc 1,554
---------
4,601
---------
MULTI-LINE INSURANCE (0.3%)
35,812 Ageas 1,511
9,876 Allianz SE 1,716
97,176 AXA S.A. 2,546
10,161 Baloise Holdings AG 1,200
8,857 Sampo Oyj "A" 413
---------
7,386
---------
MULTI-SECTOR HOLDINGS (0.1%)
1,625 Exor S.p.A. 64
2,713 Industrivarden AB "C" 49
58,264 Investor AB "B" 1,903
---------
2,016
---------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.1%)
24,300 ORIX Corp. 442
70,237 Pohjola Bank plc "A" 1,327
---------
1,769
---------
PROPERTY & CASUALTY INSURANCE (0.0%)
157,853 Insurance Australia Group Ltd. 869
615 Tryg A/S 56
---------
925
---------
REAL ESTATE DEVELOPMENT (0.0%)
6,000 Cheung Kong Holdings Ltd. 95
64,000 Sino Land Co. 87
---------
182
---------
================================================================================
16 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
REAL ESTATE OPERATING COMPANIES (0.1%)
231,000 Hysan Development Co. Ltd. $ 1,076
120,175 Immofinanz AG 575
8,840 Swiss Prime Site AG 677
---------
2,328
---------
REGIONAL BANKS (0.0%)
17,000 Fukuoka Financial Group, Inc. 76
15,000 Joyo Bank Ltd. 77
40,400 Resona Holdings, Inc. 200
4,000 Suruga Bank Ltd. 67
5,000 Yamaguchi Financial Group, Inc. 46
---------
466
---------
REINSURANCE (0.2%)
18,701 Hannover Rueck SE 1,557
3,738 Muenchener Rueckversicherungs-Gesellschaft AG 818
23,851 Swiss Re AG 2,122
---------
4,497
---------
SPECIALIZED FINANCE (0.0%)
6,124 London Stock Exchange Group plc 163
---------
Total Financials 69,090
---------
HEALTH CARE (1.4%)
------------------
BIOTECHNOLOGY (0.1%)
20,735 Actelion Ltd. 1,727
2,290 CSL Ltd. 144
---------
1,871
---------
HEALTH CARE DISTRIBUTORS (0.0%)
900 Alfresa Holdings Corp. 47
83,100 Medipal Holdings Corp. 1,108
---------
1,155
---------
HEALTH CARE SERVICES (0.1%)
8,769 Fresenius SE & Co.KGaA 1,242
48,942 Sonic Healthcare Ltd. 739
---------
1,981
---------
HEALTH CARE SUPPLIES (0.0%)
9,557 Coloplast A/S "B" 627
---------
PHARMACEUTICALS (1.2%)
45,750 AstraZeneca plc 2,630
6,295 Bayer AG 840
147,093 GlaxoSmithKline plc 3,895
4,900 Mitsubishi Tanabe Pharma Corp. 67
33,444 Novartis AG 2,644
65,000 Novartis AG ADR 5,143
6,384 Novo Nordisk A/S "B" 1,144
59,600 Otsuka Holdings Co. Ltd. 1,741
21,162 Roche Holding AG 5,900
17,614 Sanofi 1,863
17,100 Shionogi & Co. Ltd. 376
3,379 Shire plc 153
400 Taisho Pharmaceutical Holdings Co. Ltd. 27
40,032 Teva Pharmaceutical Industries Ltd. 1,621
---------
28,044
---------
Total Health Care 33,678
---------
INDUSTRIALS (2.5%)
------------------
AEROSPACE & DEFENSE (0.2%)
242,898 BAE Systems plc 1,699
28,303 Safran S.A. 1,863
26,981 Thales S.A. 1,647
---------
5,209
---------
AIR FREIGHT & LOGISTICS (0.1%)
34,495 Deutsche Post AG 1,220
---------
AIRLINES (0.1%)
70,926 easyJet plc 1,653
19,662 International Consolidated Airlines Group S.A.* 118
1,300 Japan Airlines Co. Ltd. 66
---------
1,837
---------
AIRPORT SERVICES (0.1%)
339,773 Auckland International Airport Ltd. 973
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
BUILDING PRODUCTS (0.1%)
17,389 Assa Abloy AB "B" $ 880
5,200 Daikin Industries Ltd. 330
119,000 Toto Ltd. 1,747
---------
2,957
---------
COMMERCIAL PRINTING (0.0%)
12,000 Dai Nippon Printing Co. Ltd. 124
12,000 Toppan Printing Co. Ltd. 97
---------
221
---------
CONSTRUCTION & ENGINEERING (0.1%)
24,281 Bouygues S.A. 916
5,000 JGC Corp. 186
34,445 Vinci S.A. 2,215
---------
3,317
---------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.1%)
74,000 Hino Motors Ltd. 1,146
24,000 Kubota Corp. 410
42,000 Yangzijiang Shipbuilding Holdings Ltd. 39
---------
1,595
---------
ELECTRICAL COMPONENTS & EQUIPMENT (0.5%)
164,200 Eaton Corp.plc 11,931
104,000 Fuji Electric Co. Ltd. 471
2,200 Nidec Corp. 213
2,944 Osram Licht AG * 174
---------
12,789
---------
HEAVY ELECTRICAL EQUIPMENT (0.1%)
85,672 ABB Ltd. 2,192
---------
HIGHWAYS & RAILTRACKS (0.1%)
63,977 Abertis Infraestructuras S.A. 1,360
74,844 Atlantia S.p.A. 1,671
---------
3,031
---------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.1%)
5,089 Adecco S.A. 392
42,870 Capita plc 699
---------
1,091
---------
INDUSTRIAL CONGLOMERATES (0.1%)
164,000 Hutchison Whampoa Ltd. 2,089
1,171 Koninklijke Philips N.V. 42
6,260 Siemens AG 827
---------
2,958
---------
INDUSTRIAL MACHINERY (0.1%)
8,533 Atlas Copco AB "B" 215
3,967 GEA Group AG 185
29,000 IHI Corp. 121
12,778 Kone Oyj "B" 1,174
212,000 Mitsubishi Heavy Industries Ltd. 1,360
1,100 SMC Corp. 265
---------
3,320
---------
MARINE (0.0%)
12 A.P.Moller-Maersk A/S "A" 115
33 A.P.Moller-Maersk A/S "B" 335
35,000 Nippon Yusen Kabushiki Kaisha 108
---------
558
---------
RAILROADS (0.5%)
62,200 Canadian Pacific Railway Ltd. 9,571
3,200 Central Japan Railway Co. 385
4,800 East Japan Railway Co. 393
3,800 West Japan Railway Co. 166
---------
10,515
---------
SECURITY & ALARM SERVICES (0.0%)
4,600 Secom Co. Ltd. 284
---------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
220,000 Marubeni Corp. 1,596
38,800 Mitsubishi Corp. 763
38,500 Mitsui & Co. Ltd. 533
690,400 Sojitz Corp. 1,274
9,100 Sumitomo Corp. 112
32,724 Travis Perkins plc 962
---------
5,240
---------
================================================================================
18 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
TRUCKING (0.0%)
44,000 ComfortDelGro Corp. Ltd. $ 69
19,000 Nippon Express Co. Ltd. 98
---------
167
---------
Total Industrials 59,474
---------
INFORMATION TECHNOLOGY (1.0%)
-----------------------------
APPLICATION SOFTWARE (0.0%)
1,578 SAP AG 131
2,300 Trend Micro, Inc. 90
---------
221
---------
DATA PROCESSING & OUTSOURCED SERVICES (0.1%)
36,155 Amadeus IT Holding S.A. "A" 1,354
---------
ELECTRONIC COMPONENTS (0.1%)
700 Hirose Electric Co. Ltd. 107
9,700 HOYA Corp. 262
22,300 Murata Manufacturing Co. Ltd. 1,918
23,000 Nippon Electric Glass Co. Ltd. 124
4,500 Omron Corp. 185
5,000 Yaskawa Electric Corp. 67
---------
2,663
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
5,900 Citizen Holdings Co. Ltd. 45
71,600 FUJIFILM Holdings Corp. 1,955
107,000 Hitachi Ltd. 789
1,000 Keyence Corp. 402
---------
3,191
---------
INTERNET SOFTWARE & SERVICES (0.0%)
20,594 United Internet AG 827
---------
IT CONSULTING & OTHER SERVICES (0.1%)
29,549 Cap Gemini 1,927
2,200 Nomura Research Institute Ltd. 72
300 Otsuka Corp. 39
---------
2,038
---------
OFFICE ELECTRONICS (0.1%)
101,500 Konica Minolta, Inc. 1,024
67,000 Ricoh Co. Ltd. 768
---------
1,792
---------
SEMICONDUCTORS (0.5%)
286,500 NXP Semiconductors N.V.* 12,176
---------
Total Information Technology 24,262
---------
MATERIALS (1.4%)
----------------
COMMODITY CHEMICALS (0.2%)
223,000 Asahi Kasei Corp. 1,759
6,000 Kaneka Corp. 37
50,000 LyondellBasell Industries N.V. "A" 3,859
6,542 Orica Ltd. 138
---------
5,793
---------
CONSTRUCTION MATERIALS (0.0%)
4,844 Imerys S.A. 392
---------
DIVERSIFIED CHEMICALS (0.1%)
30,197 BASF SE 3,225
30,000 Mitsubishi Chemical Holdings Corp. 139
---------
3,364
---------
DIVERSIFIED METALS & MINING (0.7%)
93,421 Anglo American plc 2,062
71,585 BHP Billiton Ltd. 2,436
92,799 BHP Billiton plc 2,823
6,012 Boliden AB 88
25,000 Mitsubishi Materials Corp. 94
702 Rio Tinto plc 37
125,400 Rio Tinto plc ADR 6,653
99,000 Sumitomo Metal Mining Co. Ltd. 1,317
---------
15,510
---------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.1%)
38,188 Yara International ASA 1,666
---------
PAPER PRODUCTS (0.0%)
18,000 Oji Holdings Corp. 85
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
SPECIALTY CHEMICALS (0.1%)
157,000 Daicel Corp. $ 1,244
2,072 EMS-Chemie Holding AG 732
---------
1,976
---------
STEEL (0.2%)
375,457 Fortescue Metals Group Ltd. 1,941
10,800 JFE Holdings, Inc. 243
56,000 Kobe Steel Ltd.* 96
31,878 Voestalpine AG 1,586
---------
3,866
---------
Total Materials 32,652
---------
TELECOMMUNICATION SERVICES (1.2%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.4%)
144,600 Bezeq The Israeli Telecommunication Corp. Ltd. 242
377,266 BT Group plc 2,301
60,684 Deutsche Telekom AG 963
8,258 Elisa Oyj 208
38,300 Nippon Telegraph & Telephone Corp. 1,922
510 Swisscom AG 261
1,391,982 Telecom Italia S.p.A. 1,069
4,929 Telefonica S.A. 81
71,486 Telenor ASA 1,719
53,102 TeliaSonera AB 433
177,003 Telstra Corp. Ltd. 815
---------
10,014
---------
WIRELESS TELECOMMUNICATION SERVICES (0.8%)
35,200 KDDI Corp. 2,209
1,424 Millicom International Cellular
S.A. Swedish Depository Receipts 128
33,800 NTT DOCOMO, Inc. 544
92,000 Rogers Communications, Inc."B" 4,124
1,900 SoftBank Corp. 154
614,592 Vodafone Group plc 2,281
236,200 Vodafone Group plc ADR 8,761
---------
18,201
---------
Total Telecommunication Services 28,215
---------
UTILITIES (0.4%)
----------------
ELECTRIC UTILITIES (0.3%)
190,000 Cheung Kong Infrastructure Holdings Ltd. 1,249
13,700 Chubu Electric Power Co., Inc. 185
6,800 Chugoku Electric Power Co., Inc. 99
41,209 EDF S.A. 1,534
325,357 EDP-Energias de Portugal S.A. 1,231
4,200 Hokkaido Electric Power Co., Inc.* 50
3,900 Hokuriku Electric Power Co. 52
229,792 Iberdrola S.A. 1,464
15,500 Kansai Electric Power Co., Inc.* 176
9,900 Kyushu Electric Power Co., Inc.* 128
4,000 Shikoku Electric Power Co.* 63
36,740 SP AusNet 39
9,400 Tohoku Electric Power Co., Inc.* 104
33,300 Tokyo Electric Power Co., Inc.* 177
---------
6,551
---------
GAS UTILITIES (0.0%)
32,000 Tokyo Gas Co. Ltd. 159
---------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.0%)
2,600 Electric Power Development Co. Ltd. 77
---------
================================================================================
20 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
MULTI-UTILITIES (0.1%)
34,091 Centrica plc $ 189
121,457 E.ON SE 2,337
1,213 GDF Suez 28
87,300 National Grid plc 1,107
---------
3,661
---------
Total Utilities 10,448
---------
Total Common Stocks (cost: $310,943) 367,527
---------
PREFERRED STOCKS (0.0%)
CONSUMER DISCRETIONARY (0.0%)
-----------------------------
AUTOMOBILE MANUFACTURERS (0.0%)
1,180 Bayerische Motoren Werke AG 102
---------
FINANCIALS (0.0%)
-----------------
REINSURANCE (0.0%)
3,000 American Overseas Group Ltd., 7.50%, non-cumulative,
perpetual, acquired 1/23/2007 - 3/02/2007;
cost $3,065(b),(c) 750
---------
Total Preferred Stocks
(cost: $3,145) 852
---------
EXCHANGE-TRADED FUNDS (14.6%)
257,748 EGShares Emerging Markets Consumer ETF 6,915
199,150 iShares Core MSCI EAFE ETF 11,933
1,657,455 iShares Core MSCI Emerging Markets ETF 83,453
1,317,800 iShares MSCI EAFE ETF 87,291
591,274 iShares MSCI Germany ETF 18,063
1,170,922 iShares MSCI Hong Kong ETF 24,297
340,119 iShares MSCI Indonesia ETF 7,860
438,992 iShares MSCI Malaysia ETF 6,914
151,984 iShares MSCI Russia Capped ETF 3,234
486,431 iShares MSCI Singapore ETF 6,606
620,904 iShares MSCI Taiwan ETF 8,929
174,735 iShares MSCI Turkey ETF 9,789
1,678,972 iShares MSCI United Kingdom ETF 34,436
107,983 SPDR S&P Emerging Markets SmallCap ETF 5,070
126,949 Vanguard FTSE Emerging Markets ETF 5,266
170,548 WisdomTree Emerging Markets Equity Income Fund 8,829
182,288 WisdomTree Emerging Markets SmallCap Dividend Fund 8,640
430,540 WisdomTree India Earnings Fund 7,173
---------
Total Exchange-Traded Funds (cost: $321,341) 344,698
---------
Total International Equity Securities
(cost: $635,429) 713,077
---------
PRECIOUS METALS AND COMMODITY-RELATED SECURITIES (2.9%)
GOLD (1.6%)
AFRICAN GOLD COMPANIES (0.2%)
145,000 AngloGold Ashanti Ltd. ADR 1,971
340,000 Gold Fields Ltd. ADR 1,363
545,000 Harmony Gold Mining Co. Ltd. ADR 1,553
47,500 Sibanye Gold Ltd. ADR 235
---------
5,122
---------
AUSTRALIAN GOLD COMPANIES (0.1%)
238,000 Newcrest Mining Ltd. 1,666
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------
EUROPEAN GOLD COMPANIES (0.1%)
41,500 Randgold Resources Ltd. ADR $ 2,936
---------
NORTH AMERICAN GOLD COMPANIES (1.1%)
32,000 Agnico-Eagle Mines Ltd. 881
100,000 Alamos Gold, Inc. 1,283
30,000 Allied Nevada Gold Corp.* 100
295,857 AuRico Gold, Inc. 1,163
525,000 B2Gold Corp.* 1,097
57,000 Barrick Gold Corp. 940
250,000 Centerra Gold, Inc. 748
358,000 Eldorado Gold Corp. 2,187
90,000 Goldcorp, Inc. 2,021
540,000 IAMGOLD Corp. 2,354
250,000 Kinross Gold Corp. 1,178
51,000 Newmont Mining Corp. 1,266
555,000 Osisko Mining Corp.* 2,293
85,000 Primero Mining Corp.* 448
61,000 Royal Gold, Inc. 2,751
902,884 Semafo, Inc. 2,396
150,000 Yamana Gold, Inc. 1,364
---------
24,470
---------
SOUTH AMERICAN GOLD COMPANIES (0.1%)
254,000 Compania de Minas Buenaventura S.A. ADR 2,997
---------
Total Gold (cost: $57,064) 37,191
---------
SILVER (0.2%)
235,000 Pan American Silver Corp. 2,536
107,000 Tahoe Resources, Inc.* 1,905
---------
Total Silver (cost: $5,855) 4,441
---------
EXCHANGE-TRADED FUNDS (1.1%)
222,842 SPDR Gold Shares* (cost $36,841) 26,897
---------
Total Precious Metals and Commodity - Related Securities
(cost: $99,760) 68,529
---------
GLOBAL REAL ESTATE EQUITY SECURITIES (0.6%)
COMMON STOCKS (0.3%)
DIVERSIFIED REAL ESTATE ACTIVITIES (0.0%)
1,000 DAITO Trust Construction Co. Ltd. 95
12,105 Lend Lease Group 122
75,000 New World Development Co. Ltd. 101
11,700 Tokyu Fudosan Holdings Corp.* 107
20,000 Wheelock & Co. Ltd. 97
---------
522
---------
REITs - DIVERSIFIED (0.0%)
108,472 BGP Holdings plc, acquired 8/06/2009;
cost: $0*(a),(b),(c) -
177,101 Dexus Property Group 169
39,418 GPT Group 128
---------
297
---------
REITs - OFFICE (0.1%)
1,248,000 CapitaCommercial Trust 1,477
---------
REITs - RETAIL (0.2%)
138,000 CapitaMall Trust 214
46 Japan Retail Fund Investment Corp. 91
338,000 Link REIT 1,655
7,806 Unibail-Rodamco 2,041
479,130 Westfield Retail Trust 1,330
---------
5,331
---------
Total Common Stocks (cost: $7,281) 7,627
---------
RIGHTS (0.0%)
DIVERSIFIED REAL ESTATE ACTIVITIES (0.0%)
350 New World Development*(a),(b) -
---------
Total Rights (cost: $0) -
---------
================================================================================
22 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------------------------
MARKET
NUMBER OF VALUE
SHARES SECURITY (000)
--------------------------------------------------------------------------------------------------
PREFERRED STOCKS (0.3%)
REITs - OFFICE (0.3%)
268,273 CommonWealth REIT, 6.50%, perpetual $ 5,666
28,227 CommonWealth REIT, Series E, 7.25%, cumulative redeemable, perpetual 645
---------
6,311
---------
Total Preferred Stocks (cost: $7,119) 6,311
---------
Total Global Real Estate Equity Securities (cost: $14,400) 13,938
---------
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
BONDS (33.7%)
CORPORATE OBLIGATIONS (16.2%)
CONSUMER DISCRETIONARY (0.1%)
-----------------------------
CASINOS & GAMING (0.0%)
$ 200 Seneca Nation of Indians Capital
Improvements Auth.(a) 6.75% 12/01/2013 $ 200
---------
PUBLISHING (0.1%)
995 McGraw-Hill Global Education Holdings, LLC(d) 9.00 3/22/2019 1,016
1,000 McGraw-Hill Global Education Holdings, LLC(a) 9.75 4/01/2021 1,115
---------
2,131
---------
TEXTILES (0.0%)
500 SIWF Merger Sub, Inc.(a) 6.25 6/01/2021 503
---------
Total Consumer Discretionary 2,834
---------
ENERGY (3.3%)
-------------
OIL & GAS EXPLORATION & PRODUCTION (0.8%)
2,000 Alta Mesa Holdings, LP 9.63 10/15/2018 2,150
2,000 Fieldwood Energy, LLC(d) 8.38 9/30/2020 2,044
2,000 Halcon Resources Corp. 8.88 5/15/2021 2,040
2,000 Halcon Resources Corp.(a) 9.25 2/15/2022 2,060
2,000 Midstates Petroleum Co., Inc. 9.25 6/01/2021 2,098
2,000 Penn Virginia Corp. 8.50 5/01/2020 2,162
2,000 Quicksilver Resources, Inc.(d) 7.00 6/21/2019 1,961
2,150 Rex Energy Corp. 8.88 12/01/2020 2,360
1,000 Sabine Oil & Gas, LLC(d) 8.75 12/31/2018 1,009
2,000 Samson Investment Co.(d) 6.00 9/25/2018 2,011
---------
19,895
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 23
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
OIL & GAS REFINING & MARKETING (0.1%)
$ 1,750 Northern Tier Energy, LLC 7.13% 11/15/2020 $ 1,816
----------
OIL & GAS STORAGE & TRANSPORTATION (2.4%)
10,000 DCP Midstream, LLC(a) 5.85 5/21/2043 9,338
8,780 Enbridge Energy Partners, LP 8.05 10/01/2037 9,870
15,270 Energy Transfer Partners, LP(a) 3.26(e) 11/01/2066 13,972
10,980 Enterprise Products Operating, LLC 7.00 6/01/2067 11,317
2,000 Martin Midstream Partners, LP 7.25 2/15/2021 2,045
369 NuStar Logistics, LP 7.63 1/15/2043 9,553
----------
56,095
----------
Total Energy 77,806
----------
FINANCIALS (9.4%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.5%)
14,500 State Street Capital Trust IV 1.25(e) 6/15/2037 11,332
819 Walter Investment Management Corp.(d) 5.75 11/28/2017 827
----------
12,159
----------
CONSUMER FINANCE (0.4%)
8,052 American Express Co. 6.80 9/01/2066 8,585
----------
LIFE & HEALTH INSURANCE (2.2%)
385 Delphi Financial Group, Inc. 7.38 5/15/2037 9,655
12,342 Lincoln National Corp. 7.00 5/17/2066 12,712
1,000 Lincoln National Corp. 6.05 4/20/2067 1,000
5,500 Principal Financial Global Fund, LLC 0.76(e) 1/10/2031 4,836
7,800 Prudential Financial, Inc. 5.63 6/15/2043 7,693
2,135 Prudential Financial, Inc. 5.20 3/15/2044 2,055
13,935 StanCorp Financial Group, Inc. 6.90 6/01/2067 13,970
----------
51,921
----------
MULTI-LINE INSURANCE (1.8%)
15,127 Genworth Holdings, Inc. 6.15 11/15/2066 13,520
17,255 Glen Meadow Pass-Through Trust(a) 6.51 2/12/2067 16,910
12,810 Nationwide Mutual Insurance Co.(a) 5.81 12/15/2024 13,066
----------
43,496
----------
MULTI-SECTOR HOLDINGS (0.3%)
5,325 BNSF Funding Trust I 6.61 12/15/2055 5,850
----------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.6%)
3,137 ILFC E-Capital Trust I(a) 5.35(e) 12/21/2065 2,808
5,000 JPMorgan Chase Capital XIII 1.20(e) 9/30/2034 4,000
10,000 JPMorgan Chase Capital XXI 1.19(e) 2/02/2037 7,550
----------
14,358
----------
================================================================================
24 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE (2.4%)
$ 10,800 Allstate Corp. 5.75% 8/15/2053 $ 10,982
10,000 AmTrust Financial Services, Inc.(a) 6.13 8/15/2023 10,100
11,050 HSB Group, Inc. 1.15(e) 7/15/2027 8,785
12,400 Ironshore Holdings, Inc.(a) 8.50 5/15/2020 14,309
4,000 Progressive Corp. 6.70 6/15/2037 4,370
1,000 RLI Corp. 5.95 1/15/2014 1,001
6,500 Travelers Companies, Inc. 6.25 3/15/2037 6,939
----------
56,486
----------
REGIONAL BANKS (0.9%)
1,000 Allfirst Preferred Capital Trust 1.74(e) 7/15/2029 830
31 Citizens Funding Trust I 7.50 9/15/2066 793
1,000 Emigrant Bancorp, Inc.(a) 6.25 6/15/2014 1,025
4,000 First Maryland Capital Trust I 1.24(e) 1/15/2027 3,360
5,000 Fulton Capital Trust I 6.29 2/01/2036 4,864
2,000 Huntington Capital Trust II "B" 0.88(e) 6/15/2028 1,650
3,500 M&T Capital Trust I 8.23 2/01/2027 3,557
5,039 Manufacturers & Traders Trust Co. 5.63 12/01/2021 5,278
----------
21,357
----------
REINSURANCE (0.2%)
4,000 Alterra USA Holdings Ltd.(a) 7.20 4/14/2017 4,425
----------
REITs - RETAIL (0.1%)
3,000 Brixmor, LLC 5.30 1/15/2015 3,037
413 Brixmor, LLC 7.68 11/02/2026 415
----------
3,452
----------
Total Financials 222,089
----------
INDUSTRIALS (0.6%)
------------------
AEROSPACE & DEFENSE (0.5%)
13,560 Textron Financial Corp.(a) 6.00 2/15/2067 12,102
----------
AIRLINES (0.1%)
1,065 America West Airlines, Inc.
Pass-Through Trust (INS) 7.93 1/02/2019 1,140
949 Continental Airlines, Inc. "B"
Pass-Through Trust 6.25 4/11/2020 992
----------
2,132
----------
Total Industrials 14,234
----------
TELECOMMUNICATION SERVICES (0.0%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.0%)
13 Qwest Corp. 7.50 9/15/2051 318
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 25
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%)
$ 200 MetroPCS Wireless, Inc.(a) 6.25% 4/01/2021 $ 209
----------
Total Telecommunication Services 527
----------
UTILITIES (2.8%)
----------------
ELECTRIC UTILITIES (1.6%)
12,000 Enel S.p.A.(a) 8.75 9/24/2073 13,095
4,850 NextEra Energy Capital Holdings, Inc. 6.35 10/01/2066 4,877
7,000 NextEra Energy Capital Holdings, Inc. 6.65 6/15/2067 7,181
500 NextEra Energy Capital Holdings, Inc. 7.30 9/01/2067 547
7,400 PPL Capital Funding, Inc. 6.70 3/30/2067 7,470
1,000 SPI Electricity Property Ltd. (INS)(a) 7.25 12/01/2016 1,136
4,000 Texas Competitive Electric Holdings Co., LLC(d) 4.73 10/10/2017 2,777
----------
37,083
----------
MULTI-UTILITIES (1.2%)
6,350 Dominion Resources, Inc. 7.50 6/30/2066 6,834
3,500 Dominion Resources, Inc. 2.55(e) 9/30/2066 3,282
5,391 Integrys Energy Group, Inc. 6.11 12/01/2066 5,442
10,000 Puget Sound Energy, Inc. 6.97 6/01/2067 10,242
3,000 Wisconsin Energy Corp. 6.25 5/15/2067 3,074
----------
28,874
----------
Total Utilities 65,957
----------
Total Corporate Obligations (cost: $351,114) 383,447
----------
EURODOLLAR AND YANKEE OBLIGATIONS (5.3%)
CONSUMER STAPLES (0.1%)
-----------------------
PACKAGED FOODS & MEAT (0.1%)
2,020 JBS S.A. 10.50 8/04/2016 2,278
----------
ENERGY (0.4%)
-------------
OIL & GAS STORAGE & TRANSPORTATION (0.4%)
9,650 TransCanada Pipelines Ltd. 6.35 5/15/2067 10,031
----------
FINANCIALS (4.1%)
-----------------
DIVERSIFIED BANKS (1.8%)
2,000 Barclays Bank plc 0.56(e) -(f) 1,158
11,500 Barclays Bank plc 0.65(e) -(f) 6,842
5,485 Barclays Bank plc 0.69(e) -(f) 3,185
2,000 Barclays Bank plc(a) 7.70 -(f) 2,191
2,000 Compass Bank 6.40 10/01/2017 2,188
5,600 HSBC Bank plc 0.60(e) -(f) 3,514
18,000 HSBC Bank plc 0.63(e) -(f) 11,160
================================================================================
26 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
$ 2,500 LBI hf, acquired 10/12/2007;
cost $2,500(a),(b),(c),(g) 7.43% -(f) $ -
4,000 Lloyds TSB Bank plc 0.49(e) -(f) 2,390
7,889 Royal Bank of Scotland Group plc 9.50 3/16/2022 9,228
----------
41,856
----------
LIFE & HEALTH INSURANCE (0.4%)
9,800 Great-West Life & Annuity Insurance
Capital, LP(a) 7.15 5/16/2046 10,143
----------
PROPERTY & CASUALTY INSURANCE (1.3%)
19,315 Oil Insurance Ltd.(a) 3.23(e) -(f) 17,588
11,950 QBE Capital Funding III Ltd.(a) 7.25 5/24/2041 12,685
----------
30,273
----------
REGIONAL BANKS (0.0%)
3,000 Glitnir Banki hf, acquired 9/11/2006 and
10/18/2006; cost $3,051(a),(b),(c),(g) 7.45 -(f) -
----------
REINSURANCE (0.6%)
3,750 Platinum Underwriters Finance, Inc. 7.50 6/01/2017 4,247
9,650 Swiss Re Capital I, LP(a) 6.85 -(f) 10,277
----------
14,524
----------
Total Financials 96,796
----------
INDUSTRIALS (0.1%)
------------------
MARINE (0.1%)
2,000 Navios Maritime Holdings, Inc.(a) 7.38 1/15/2022 2,015
----------
MATERIALS (0.3%)
----------------
CONSTRUCTION MATERIALS (0.1%)
2,000 Cemex Espana Luxembourg(a) 9.88 4/30/2019 2,268
----------
DIVERSIFIED METALS & MINING (0.1%)
2,000 Vedanta Resources plc(a) 6.00 1/31/2019 1,930
----------
GOLD (0.1%)
3,000 St. Barbara Ltd.(a) 8.88 4/15/2018 2,535
----------
Total Materials 6,733
----------
TELECOMMUNICATION SERVICES (0.0%)
---------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%)
150 Altice Financing S.A.(a) 7.88 12/15/2019 162
----------
UTILITIES (0.3%)
----------------
ELECTRIC UTILITIES (0.3%)
7,500 Electricite De France S.A.(a) 5.25 -(f) 7,423
----------
Total Eurodollar and Yankee Obligations
(cost: $117,334) 125,438
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 27
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (0.1%)
FINANCIALS (0.1%)
-----------------
ASSET-BACKED FINANCING (0.1%)
$ 3,000 SLC Student Loan Trust 0.69%(e) 7/15/2036 $ 2,419
1,361 SLM Student Loan Trust 0.79(e) 10/25/2038 1,201
----------
3,620
----------
Total Financials 3,620
----------
Total Asset-Backed Securities (cost: $3,407) 3,620
----------
COMMERCIAL MORTGAGE SECURITIES (8.9%)
FINANCIALS (8.9%)
-----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (8.9%)
2,444 Banc of America Commercial Mortgage, Inc.(a) 5.48 12/10/2042 2,367
2,000 Banc of America Commercial Mortgage, Inc. 4.77 7/10/2043 1,989
10,000 Banc of America Commercial Mortgage, Inc. 6.06 7/10/2044 10,300
8,500 Banc of America Commercial Mortgage, Inc. 5.77 5/10/2045 8,932
2,000 Banc of America Commercial Mortgage, Inc. 5.46 9/10/2045 2,132
2,000 Banc of America Commercial Mortgage, Inc. 5.42 10/10/2045 1,993
6,000 Banc of America Commercial Mortgage, Inc. 5.18 9/10/2047 6,228
5,385 Banc of America Commercial Mortgage, Inc.(a) 6.14 9/10/2047 5,648
3,500 Banc of America Commercial Mortgage, Inc. 6.44 2/10/2051 3,645
2,000 Bear Stearns Commercial Mortgage Securities,
Inc. 5.64 12/11/2040 1,844
4,000 Bear Stearns Commercial Mortgage Securities,
Inc. 5.21 2/11/2041 4,035
2,000 Bear Stearns Commercial Mortgage Securities,
Inc.(a) 5.66 9/11/2041 1,931
2,000 Bear Stearns Commercial Mortgage Securities,
Inc. 5.60 10/12/2041 1,890
5,440 Bear Stearns Commercial Mortgage Securities,
Inc. 4.99 9/11/2042 5,666
8,000 Citigroup Commercial Mortgage Trust 5.97 3/15/2049 8,222
10,000 Commercial Mortgage Loan Trust 6.02 7/10/2038 10,311
6,000 Commercial Mortgage Loan Trust 6.21 12/10/2049 6,350
2,000 Commercial Mortgage Loan Trust(a) 5.54 12/11/2049 2,202
2,000 Credit Suisse Commercial Mortgage
Pass-Through Trust 5.99 6/15/2038 2,006
16,400 Credit Suisse Commercial Mortgage
Pass-Through Trust 0.39 2/15/2040 12,271
2,213 Credit Suisse First Boston Mortgage
Securities Corp.(a) 5.02 1/15/2037 2,206
8,000 GE Capital Commercial Mortgage Corp. 5.46 3/10/2044 7,732
5,355 GE Capital Commercial Mortgage Corp. 5.61 12/10/2049 5,473
3,500 GMAC Commercial Mortgage Securities, Inc. 4.97 12/10/2041 3,318
1,000 GMAC Commercial Mortgage Securities, Inc. 4.98 12/10/2041 684
4,000 GS Mortgage Securities Corp. II 5.82 4/10/2038 4,031
================================================================================
28 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
$ 2,200 GS Mortgage Securities Corp. II 5.93% 8/10/2038 $ 2,188
2,800 GS Mortgage Securities Corp. II 4.78 7/10/2039 2,835
625 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.00 10/15/2042 665
11,225 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.04 10/15/2042 11,500
8,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.57 4/15/2043 8,215
2,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.52 12/15/2044 2,090
2,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.52 12/15/2044 2,046
2,500 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.48 5/15/2045 2,626
5,000 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 5.41 5/15/2047 4,381
4,500 J.P. Morgan Chase Commercial Mortgage
Securities Corp. 6.19 2/15/2051 5,030
2,000 LB-UBS Commercial Mortgage Trust 5.28 2/15/2041 1,989
6,500 Merrill Lynch Mortgage Trust 5.14 7/12/2038 6,783
2,500 Merrill Lynch Mortgage Trust 5.36 7/12/2038 2,393
1,000 Merrill Lynch Mortgage Trust 5.39 7/12/2038 887
11,500 Merrill Lynch Mortgage Trust 5.87 5/12/2039 11,615
7,000 Merrill Lynch Mortgage Trust 5.01 10/12/2041 7,084
1,000 Merrill Lynch Mortgage Trust 5.60 1/12/2044 1,033
3,000 ML-CFC Commercial Mortgage Trust 5.42 8/12/2048 3,168
3,000 ML-CFC Commercial Mortgage Trust 6.09 8/12/2049 3,107
878 Morgan Stanley Capital I, Inc. 5.15 8/13/2042 903
723 Morgan Stanley Capital I, Inc. 5.17 8/13/2042 733
2,000 Morgan Stanley Capital I, Inc. 5.68 3/12/2044 2,053
3,400 Wachovia Bank Commercial Mortgage Trust 5.91 5/15/2043 3,557
1,337 Wachovia Bank Commercial Mortgage Trust(a) 4.99 5/15/2044 1,260
----------
211,547
----------
Total Financials 211,547
----------
Total Commercial Mortgage Securities (cost: $189,105) 211,547
----------
U.S. GOVERNMENT AGENCY ISSUES (0.0%)(h)
MORTGAGE-BACKED PASS-THROUGH SECURITIES (0.0%)
5 Government National Mortgage Assn. I 6.50 5/15/2023 6
20 Government National Mortgage Assn. I 6.50 4/15/2024 23
10 Government National Mortgage Assn. I 7.50 3/15/2017 10
12 Government National Mortgage Assn. I 7.50 3/15/2017 13
================================================================================
PORTFOLIO OF INVESTMENTS | 29
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
$ 2 Government National Mortgage Assn. I 8.00% 6/15/2016 $ 2
4 Government National Mortgage Assn. I 8.00 11/15/2016 4
2 Government National Mortgage Assn. I 8.50 6/15/2016 2
2 Government National Mortgage Assn. I 8.50 6/15/2016 1
3 Government National Mortgage Assn. I 8.50 7/15/2016 2
1 Government National Mortgage Assn. I 8.50 9/15/2016 1
3 Government National Mortgage Assn. I 8.50 12/15/2016 3
8 Government National Mortgage Assn. I 8.50 12/15/2016 8
1 Government National Mortgage Assn. I 8.50 1/15/2017 1
1 Government National Mortgage Assn. I 8.50 2/15/2017 1
1 Government National Mortgage Assn. I 9.00 6/15/2016 1
1 Government National Mortgage Assn. I 9.00 7/15/2016 1
1 Government National Mortgage Assn. I 9.00 9/15/2016 1
1 Government National Mortgage Assn. I 9.00 10/15/2016 1
1 Government National Mortgage Assn. I 9.50 11/15/2016 1
1 Government National Mortgage Assn. I 9.50 11/15/2016 1
----------
83
----------
Total U.S. Government Agency Issues (cost: $78) 83
----------
U.S. TREASURY SECURITIES (3.2%)
NOTES (3.2%)
1,880 1.63%, 11/15/2022 1,735
75,000 1.75%, 5/15/2022 70,890
2,328 2.00%, 2/15/2023 2,207
----------
74,832
----------
Total U.S. Treasury Securities (cost: $79,589) 74,832
----------
Total Bonds (cost: $740,627) 798,967
----------
MONEY MARKET INSTRUMENTS (7.0%)
COMMERCIAL PAPER (4.8%)
CONSUMER DISCRETIONARY (0.1%)
-----------------------------
AUTOMOTIVE RETAIL (0.1%)
2,163 Autozone, Inc.(a),(i) 0.22 12/02/2013 2,163
----------
ENERGY (2.2%)
-------------
OIL & GAS EXPLORATION & PRODUCTION (1.3%)
10,084 Canadian Natural Resources Ltd.(a),(i) 0.28 12/10/2013 10,083
18,002 Talisman Energy, Inc.(a),(i) 0.63 12/04/2013 18,001
2,863 Talisman Energy, Inc.(a),(i) 0.60 12/05/2013 2,863
----------
30,947
----------
================================================================================
30 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
--------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
--------------------------------------------------------------------------------------------------
OIL & GAS STORAGE & TRANSPORTATION (0.9%)
$ 11,427 Enterprise Products Operating, LLC(a),(i) 0.22% 12/09/2013 $ 11,427
10,000 Spectra Energy Capital, LLC(a),(i) 0.24 12/03/2013 10,000
----------
21,427
----------
Total Energy 52,374
----------
MATERIALS (0.6%)
----------------
PAPER PRODUCTS (0.6%)
13,066 Georgia-Pacific, LLC(a),(i) 0.20 12/03/2013 13,066
----------
UTILITIES (1.9%)
----------------
ELECTRIC UTILITIES (1.5%)
5,854 Northeast Utilities(a),(i) 0.20 12/05/2013 5,854
16,361 OGE Energy Corp.(a),(i) 0.20 12/06/2013 16,361
13,258 Pacific Gas & Electric Co.(a),(i) 0.19 12/09/2013 13,257
----------
35,472
----------
GAS UTILITIES (0.4%)
10,000 ONEOK, Inc.(a),(i) 0.31 12/06/2013 9,999
----------
Total Utilities 45,471
----------
Total Commercial Paper (cost: $113,074) 113,074
----------
--------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
--------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (2.2%)
52,025,923 State Street Institutional Liquid Reserve Fund, 0.07%(j) (cost: $52,026) 52,026
----------
Total Money Market Instruments (cost: $165,100) 165,100
----------
TOTAL INVESTMENTS (COST: $2,109,843) $2,351,810
==========
--------------------------------------------------------------------------------------------------
NUMBER OF
CONTRACTS
--------------------------------------------------------------------------------------------------
PURCHASED OPTIONS (0.1%)
19,550 Put - iShares MSCI EAFE ETF expiring January 18, 2014 at 61 430
4,975 Put - iShares MSCI Emerging Markets ETF expiring January 18, 2013 at 41 426
5,000 Put - iShares MSCI Emerging Markets ETF expiring January 18, 2014 at 38 130
1,037 Put - S&P 500 Index expiring January 18, 2014 at 1640 430
1,037 Put - S&P 500 Index expiring January 18, 2014 at 1730 1,208
----------
TOTAL PURCHASED OPTIONS (COST: $5,585) $ 2,624
==========
================================================================================
PORTFOLIO OF INVESTMENTS | 31
================================================================================
------------------------------------------------------------------------------------------------------
($ 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
------------------------------------------------------------------------------------------------------
U.S. Equity Securities:
Common Stocks $ 432,595 $ - $ - $ 432,595
Preferred Stocks - 16,967 4,480 21,447
Exchange-Traded Funds 138,157 - - 138,157
International Equity Securities:
Common Stocks 367,527 - - 367,527
Preferred Stocks 102 - 750 852
Exchange-Traded Funds 344,698 - - 344,698
Precious Metals and
Commodity-Related Securities:
Gold 37,191 - - 37,191
Silver 4,441 - - 4,441
Exchange-Traded Funds 26,897 - - 26,897
Global Real Estate Equity Securities:
Common Stocks 7,627 - - 7,627
Rights - - - -
Preferred Stocks 5,666 645 - 6,311
Bonds:
Corporate Obligations - 383,447 - 383,447
Eurodollar and Yankee Obligations - 125,438 - 125,438
Asset-Backed Securities - 3,620 - 3,620
Commercial Mortgage Securities - 211,547 - 211,547
U.S. Government Agency Issues - 83 - 83
U.S. Treasury Securities 74,832 - - 74,832
Money Market Instruments:
Commercial Paper - 113,074 - 113,074
Money Market Funds 52,026 - - 52,026
Purchased Options 2,624 - - 2,624
------------------------------------------------------------------------------------------------------
Total $1,494,383 $854,821 $5,230 $2,354,434
------------------------------------------------------------------------------------------------------
================================================================================
32 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
Reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining value:
--------------------------------------------------------------------------------
PREFERRED
STOCKS
--------------------------------------------------------------------------------
Balance as of May 31, 2013 $5,230
Purchases -
Sales -
Transfers into Level 3 -
Transfers out of Level 3 -
Net realized gain (loss) on investments -
Change in net unrealized appreciation/depreciation of investments -
--------------------------------------------------------------------------------
Balance as of November 30, 2013 $5,230
--------------------------------------------------------------------------------
For the period of June 1, 2013, through November 30, 2013, common stocks with a
fair value of $205,142,000 and a preferred stock with a fair value of $82,000
were transferred from Level 2 to Level 1. Due to an assessment of events at the
beginning of the reporting period, these 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 | 33
================================================================================
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%. Investments in foreign securities were 37.5% of net assets at November
30, 2013. 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
ASSET-BACKED AND COMMERCIAL MORTGAGE-BACKED SECURITIES -- Asset-backed
securities represent a participation in, or are secured by and payable from,
a stream of payments generated by particular assets. Commercial
mortgage-backed securities reflect an interest in, and are secured by,
mortgage loans on commercial real property. These securities represent
ownership in a pool of loans and are divided into pieces (tranches) with
varying maturities. The stated final maturity of such securities represents
when the final principal payment will be made for all underlying loans. The
weighted average life is the average time for principal to be repaid, which
is calculated
================================================================================
34 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
by assuming prepayment rates of the underlying loans. The weighted average
life is likely to be substantially shorter than the stated final maturity as
a result of scheduled principal payments and unscheduled principal
prepayments. Stated interest rates on commercial mortgage-backed securities
may change slightly over time as underlying mortgages pay down.
EURODOLLAR AND YANKEE OBLIGATIONS -- Eurodollar obligations are
dollar-denominated instruments that are issued outside the U.S. capital
markets by foreign corporations and financial institutions and by foreign
branches of U.S. corporations and financial institutions. Yankee
obligations are dollar-denominated instruments that are issued by foreign
issuers in the U.S. capital markets.
RIGHTS -- enable the holder to buy a specified number of shares of new
issues of a common stock before it is offered to the public.
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.
REIT Real estate investment trust
CREDIT ENHANCEMENTS -- add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
interest payments when due. The enhancement may be provided by a
high-quality bank, insurance company or other corporation, or a collateral
trust. The enhancements do not guarantee the market values of the
securities.
(INS) Principal and interest payments are insured by Ambac Assurance Corp.
Although bond insurance reduces the risk of loss due to default by an
issuer, such bonds remain subject to the risk that value may
fluctuate for other reasons, and there is no assurance that the
insurance company will meet its obligations.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 35
================================================================================
o SPECIFIC NOTES
(a) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by
Rule 144A, and as such has been deemed liquid by USAA Asset Management
Company (the Manager) under liquidity guidelines approved by the
Trust's Board of Trustees (the Board), unless otherwise noted as
illiquid.
(b) Security was fair valued at November 30, 2013, by the Manager in
accordance with valuation procedures approved by the Board. The total
value of all such securities was $5,230,000, which represented 0.22%
of net assets of the Fund.
(c) 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 $750,000, which represented 0.03%
of the Fund's net assets.
(d) Senior loan (loan) -- is not registered under the Securities Act
of 1933. The loan contains certain restrictions on resale and cannot
be sold publicly. The interest rate is adjusted periodically, and the
rate disclosed represents the current rate at November 30, 2013. The
weighted average life of the loan is likely to be shorter than the
stated final maturity date due to mandatory or optional prepayments.
The loan is deemed liquid by the Manager, under liquidity guidelines
approved by the Board, unless otherwise noted as illiquid.
(e) Variable-rate or floating-rate security -- interest rate is
adjusted periodically. The interest rate disclosed represents the
current rate at November 30, 2013.
(f) Security is perpetual and has no final maturity date but may be
subject to calls at various dates in the future.
(g) Currently the issuer is in default with respect to interest and/or
principal payments.
================================================================================
36 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
(h) U.S. government agency issues -- mortgage-backed securities issued
by Government National Mortgage Association (GNMA or Ginnie Mae) and
certain other U.S. government guaranteed securities are supported by
the full faith and credit of the U.S. government. Securities issued
by government-sponsored enterprises, such as Freddie Mac (Federal Home
Loan Mortgage Corporation or FHLMC) and Fannie Mae (Federal National
Mortgage Association or FNMA), indicated with a "+", are supported
only by the right of the government-sponsored enterprise to borrow
from the U.S. Treasury, the discretionary authority of the U.S.
government to purchase the government-sponsored enterprises'
obligations, or by the credit of the issuing agency, instrumentality,
or corporation, and are neither issued nor guaranteed by the U.S.
Treasury. In September of 2008, the U.S. Treasury placed Fannie Mae
and Freddie Mac under conservatorship and appointed the Federal
Housing Finance Agency (FHFA) to act as conservator and oversee their
daily operations. In addition, the U.S. Treasury entered into purchase
agreements with Fannie Mae and Freddie Mac to provide capital in
exchange for senior preferred stock.
(i) Commercial paper issued in reliance on the "private placement"
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Unless this commercial paper is subsequently registered,
a resale of this commercial paper in the United States must be
effected in a transaction exempt from registration under the
Securities Act of 1933. Section 4(2) commercial paper is normally
resold to other investors through or with the assistance of the issuer
or an investment dealer who makes a market in this security, and as
such has been deemed liquid by the Manager under liquidity guidelines
approved by the Board, unless otherwise noted as illiquid.
(j) Rate represents the money market fund annualized seven-day yield at
November 30, 2013.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 37
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
November 30, 2013 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $2,109,843) $2,351,810
Purchased options, at market value (cost of $5,585) 2,624
Cash 2,132
Cash denominated in foreign currencies (identified cost of $1,068) 1,058
Receivables:
Capital shares sold 2,572
Dividends and interest 10,138
Securities sold 3,803
Variation margin on futures contracts 1
----------
Total assets 2,374,138
----------
LIABILITIES
Payables:
Securities purchased 1,806
Capital shares redeemed 715
Accrued management fees 1,453
Accrued transfer agent's fees 54
Other accrued expenses and payables 171
----------
Total liabilities 4,199
----------
Net assets applicable to capital shares outstanding $2,369,939
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,228,277
Accumulated undistributed net investment income 48,359
Accumulated net realized loss on investments and options (145,685)
Net unrealized appreciation of investments and options 239,006
Net unrealized depreciation of foreign currency translations (18)
----------
Net assets applicable to capital shares outstanding $2,369,939
==========
Capital shares outstanding, unlimited number of shares authorized,
no par value 93,746
==========
Net asset value, redemption price, and offering price per share $ 25.28
==========
See accompanying notes to financial statements.
================================================================================
38 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended November 30, 2013 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $247) $ 16,042
Interest 23,837
--------
Total income 39,879
--------
EXPENSES
Management fees 8,645
Administration and servicing fees 1,729
Transfer agent's fees 2,684
Custody and accounting fees 261
Postage 100
Shareholder reporting fees 82
Trustees' fees 7
Registration fees 28
Professional fees 77
Other 19
--------
Total expenses 13,632
--------
NET INVESTMENT INCOME 26,247
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY, AND OPTIONS
Net realized gain (loss) on:
Unaffiliated transactions 63,775
Affiliated transactions (Note 7) 91
Foreign currency transactions (5)
Options (11,451)
Change in net unrealized appreciation/depreciation of:
Investments 31,060
Foreign currency translations 15
Options (5,949)
--------
Net realized and unrealized gain 77,536
--------
Increase in net assets resulting from operations $103,783
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 39
================================================================================
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 $ 26,247 $ 55,424
Net realized gain on investments 63,866 132,543
Net realized loss on foreign currency transactions (5) (148)
Net realized loss on options (11,451) (46,152)
Net realized gain on futures transactions - 2,223
Change in net unrealized appreciation/depreciation of:
Investments 31,060 165,337
Foreign currency translations 15 (117)
Options (5,949) 3,214
Futures contracts - (1,694)
----------------------------
Increase in net assets resulting from operations 103,783 310,630
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (55,999)
----------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 138,122 313,638
Reinvested dividends - 55,369
Cost of shares redeemed (166,726) (359,683)
----------------------------
Increase (decrease) in net assets from capital
share transactions (28,604) 9,324
----------------------------
Net increase in net assets 75,179 263,955
NET ASSETS
Beginning of period 2,294,760 2,030,805
----------------------------
End of period $2,369,939 $2,294,760
============================
Accumulated undistributed net investment income:
End of period $ 48,359 $ 22,112
============================
CHANGE IN SHARES OUTSTANDING
Shares sold 5,665 13,470
Shares issued for dividends reinvested - 2,414
Shares redeemed (6,843) (15,514)
----------------------------
Increase (decrease) in shares outstanding (1,178) 370
============================
See accompanying notes to financial statements.
================================================================================
40 | USAA CORNERSTONE MODERATELY AGGRESSIVE 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
Cornerstone Moderately Aggressive Fund (the Fund), which is classified as
diversified under the 1940 Act. The Fund's investment objective is to achieve
capital appreciation with a secondary focus on current income.
A. SECURITY VALUATION -- The Trust's Board of Trustees (the Board) has
established the Valuation Committee (the Committee), and subject to Board
oversight, the Committee administers and oversees the Fund's valuation
policies and procedures, which are approved by the Board. Among other
things, these policies and procedures allow the Fund to utilize independent
pricing services, quotations from securities dealers, and a wide variety of
sources and information to establish and adjust the fair value of
securities as events occur and circumstances warrant.
The Committee reports to the Board on a quarterly basis and makes
recommendations to the Board as to pricing methodologies and services used
by the Fund and presents additional information to the Board regarding
application of the pricing and fair valuation policies and procedures
during the preceding quarter.
The Committee meets as often as necessary to make pricing and fair value
determinations. In addition, the Committee holds regular monthly meetings
to review prior actions taken by the Committee and USAA Asset Management
Company (the Manager). Among other things,
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
================================================================================
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. Equity securities, including exchange-traded funds (ETFs), except
as otherwise noted, traded primarily on a domestic securities exchange
or the Nasdaq over-the-counter markets, are valued at the last sales
price or official closing price on the exchange or primary market on
which they trade. Equity securities traded primarily on foreign
securities exchanges or markets are valued at the last quoted sales
price, or the most recently determined official closing price
calculated according to local market convention, available at the time
the Fund is valued. If no last sale or official closing price is
reported or available, the average of the bid and asked prices
generally is used.
2. Equity 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, an affiliate of the Fund,
and the Fund's subadviser, if applicable, will monitor for events that
would materially affect the value of the Fund's foreign securities.
The Fund's subadviser has agreed to notify the Manager of significant
events it identifies that would materially affect the value of the
Fund's foreign securities. If the Manager determines that a
particular event would materially
================================================================================
42 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
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. Debt securities with maturities greater than 60 days are valued
each business day by a pricing service (the Service) approved by the
Board. The Service uses an evaluated mean between quoted bid and asked
prices or the last sales price to price securities when, in the
Service's judgment, these prices are readily available and are
representative of the securities' market values. For many securities,
such prices are not readily available. The Service generally prices
these securities based on methods that include consideration of yields
or prices of securities of comparable quality, coupon, maturity, and
type; indications as to values from dealers in securities; and general
market conditions.
6. Repurchase agreements are valued at cost, which approximates market
value.
7. Futures are valued based upon the last sale price at the close of
market on the principal exchange on which they are traded.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
================================================================================
8. Options are valued by a pricing service at the National Best
Bid/Offer (NBBO) composite price, which is derived from the best
available bid and ask prices in all participating options exchanges
determined to most closely reflect market value of the options at the
time of computation of the Fund's NAV.
9. Forward currency contracts are valued on a daily basis using foreign
currency exchange rates obtained from an independent pricing service.
10. 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
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
================================================================================
44 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
investments is based upon the transparency of inputs to the valuation of an
asset or liability as of the measurement date. The three levels are defined
as follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices. Level 2 securities
include certain preferred stocks which are valued based on methods discussed
in Note 1A1, and all bonds, except U.S. Treasuries, which are valued based
on methods discussed in Note 1A5, and commercial paper which is valued at
amortized cost.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
For the securities valued using significant unobservable inputs, market
quotations were not available from the pricing services. As such, the
securities were valued in good faith using methods determined by the
Manager, under valuation procedures approved by the Board.
The valuation of some securities falling in the Level 3 category are
primarily supported by tender offers and quoted prices obtained from
broker-dealers participating in the market for these securities. However,
these securities are included in the Level 3 category due to limited market
transparency and/or a lack of corroboration to support the quoted prices.
Refer to the portfolio of investments for a reconciliation of investments in
which significant unobservable inputs (Level 3) were used in determining
value.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 45
================================================================================
C. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- The Fund may buy, sell,
and enter into certain types of derivatives, including, but not limited to
futures contracts, options, options on futures contracts, and forward
currency contracts, under circumstances in which such instruments are
expected by the portfolio manager to aid in achieving the Fund's investment
objective. The Fund also may use derivatives in circumstances where the
portfolio manager believes they offer an economical means of gaining
exposure to a particular asset class or securities market or to keep cash on
hand to meet shareholder redemptions or other needs while maintaining
exposure to the market. With exchange-listed futures contracts and options,
counterparty credit risk to the Fund is limited to the exchange's
clearinghouse which, as counterparty to all exchange-traded futures
contracts and options, guarantees the transactions against default from the
actual counterparty to the trade.
OPTIONS TRANSACTIONS -- The Fund is subject to equity price risk in the
normal course of pursuing its investment objectives. The Fund may use
options on underlying instruments, namely, equity securities, ETFs, and
equity indexes, to gain exposure to, or hedge against, changes in the value
of equity securities, ETFs, or equity indexes. A call option gives the
purchaser the right to buy, and the writer the obligation to sell, the
underlying instrument at a specified price during a specified period.
Conversely, a put option gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying instrument at a specified price
during a specified period. The purchaser of the option pays a premium to the
writer of the option.
Premiums paid for purchased options are included in the Fund's statement of
assets and liabilities as an investment. If a purchased option expires
unexercised, the premium paid is recognized as a realized loss. If a
purchased call option on a security is exercised, the cost of the security
acquired includes the exercise price and the premium paid. If a purchased
put option on a security is exercised, the realized gain or loss on the
security sold is determined from the exercise price, the original cost of
the security, and the premium
================================================================================
46 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
paid. The risk associated with purchasing a call or put option is limited to
the premium paid.
Premiums received from writing options are included in the Fund's statement
of assets and liabilities as a liability. If a written option expires
unexercised, the premium received is recognized as a realized gain. If a
written call option on a security is exercised, the realized gain or loss on
the security sold is determined from the exercise price, the original cost
of the security, and the premium received. If a written put option on a
security is exercised, the cost of the security acquired is the exercise
price paid less the premium received. The Fund, as a writer of an option,
bears the market risk of an unfavorable change in the price of the security
underlying the written option.
In an attempt to reduce the Fund's volatility over time, the Fund may
implement a strategy that involves purchasing and selling options on indexes
or ETFs that represent the Fund's exposure against a highly correlated stock
portfolio. The combination of the diversified stock portfolio with index or
ETF options is designed to provide the Fund with consistent returns over a
wide range of equity market environments. This strategy may not fully
protect the Fund against declines in the portfolio's value, and the Fund
could experience a loss. Options on ETFs are similar to options on
individual securities in that the holder of the ETF call (or put) has the
right to receive (or sell) shares of the underlying ETF at the strike price
on or before exercise date. Options on securities indexes are different from
options on individual securities in that the holder of the index option has
the right to receive an amount of cash equal to the difference between the
exercise price and the settlement value of the underlying index as defined
by the exchange. If an index option is exercised, the realized gain or loss
is determined by the exercise price, the settlement value, and the premium
amount paid or received.
FORWARD CURRENCY CONTRACTS -- The Fund is subject to foreign currency
exchange rate risk in the normal course of pursuing its investment
objectives. The Fund may enter into transactions to purchase or sell
================================================================================
NOTES TO FINANCIAL STATEMENTS | 47
================================================================================
forward currency contracts in order to gain exposure to, or hedge against,
changes in foreign exchange rates on its investment in securities traded in
foreign countries. Forward currency contracts are agreements to exchange one
currency for another at a future date and at a specified price. When the
Fund believes that the currency of a specific country may deteriorate
relative to the U.S. dollar, it may enter into a forward contract to sell
that currency. The Fund bears the market risk that arises from changes in
foreign exchange rates and the credit risk that a counterparty may fail to
perform under a contract. The Fund's net equity in open forward currency
contracts is included in the statement of assets and liabilities as net
unrealized appreciation or depreciation and is generated from differences in
the forward currency exchange rates at the trade dates of the contracts and
the rates at the reporting date. When the contracts are settled, the Fund
records a realized gain or loss equal to the difference in the forward
currency exchange rates at the trade dates and at the settlement dates.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AS OF NOVEMBER 30, 2013*
(IN THOUSANDS)
ASSET DERIVATIVES LIABILITY DERIVATIVES
-----------------------------------------------------------------------------------------------
STATEMENT OF STATEMENT OF
DERIVATIVES NOT ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING LIABILITIES LIABILITIES
INSTRUMENTS LOCATION FAIR VALUE LOCATION FAIR VALUE
-----------------------------------------------------------------------------------------------
Equity contracts Purchased $2,624 - -
options; Net
unrealized
appreciation of
investments and
options
-----------------------------------------------------------------------------------------------
*For open derivative instruments as of November 30, 2013, see the portfolio of
investments, which also is indicative of activity for the six-month period
ended November 30, 2013.
================================================================================
48 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE
SIX-MONTH PERIOD ENDED NOVEMBER 30, 2013 (IN THOUSANDS)
DERIVATIVES CHANGE IN UNREALIZED
NOT ACCOUNTED STATEMENT OF APPRECIATION
FOR AS HEDGING OPERATIONS REALIZED LOSS (DEPRECIATION)
INSTRUMENTS LOCATION ON DERIVATIVES ON DERIVATIVES
--------------------------------------------------------------------------------
Equity contracts Net realized loss $(11,451) $(5,949)
on options/Change
in net unrealized
appreciation/
depreciation
of options
--------------------------------------------------------------------------------
D. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its income to its shareholders.
Therefore, no federal income tax provision is required.
E. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on
the date the securities are purchased or sold (trade date). Gains or losses
from sales of investment securities are computed on the identified cost
basis. Dividend income, 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 are amortized
over the life of the respective securities, using the effective yield method
for long-term securities and the straight-line method for short-term
securities.
F. 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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 49
================================================================================
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.
G. SECURITIES PURCHASED ON A DELAYED-DELIVERY OR WHEN-ISSUED BASIS --
Delivery and payment for securities that have been purchased by the Fund on
a delayed-delivery or when-issued basis or for delayed draws on loans can
take place a month or more after the trade date. During the period prior to
settlement, these securities do not earn interest, are subject to market
fluctuation, and may increase or decrease in value prior to their delivery.
The Fund receives a commitment fee for delayed draws on loans. The Fund
maintains segregated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a
delayed-delivery or when-issued basis and delayed-draw loan commitments may
increase the volatility of the Fund's NAV to the
================================================================================
50 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
extent that the Fund makes such purchases and commitments while remaining
substantially fully invested.
H. EXPENSES PAID INDIRECTLY -- Through arrangements with the Fund's custodian
and other banks utilized by the Fund for cash management purposes, realized
credits, if any, generated from cash balances in the Fund's bank accounts
may be used to directly reduce the Fund's expenses. For the six-month period
ended November 30, 2013, there were no custodian and other bank credits.
I. 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.
J. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at an interest rate based on
the London Interbank Offered Rate (LIBOR).
The USAA Funds that are party to the loan agreement are assessed facility fees
by CAPCO in the amount of 7.0 basis points of the amount of
================================================================================
NOTES TO FINANCIAL STATEMENTS | 51
================================================================================
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 $6,000, which represents 3.7% 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 pre-enactment capital loss carryforwards of
$178,759,000, and no post-enactment capital loss carryforwards, for federal
income tax purposes. If not offset by subsequent capital gains, the
pre-enactment capital loss carryforwards will expire in 2018. It is unlikely
that the Board will authorize a distribution of capital gains realized in the
future until the capital loss carryforwards have been used 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
================================================================================
52 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
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
$678,075,000 and $799,160,000, 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 $303,087,000 and $64,081,000, respectively, resulting in net
unrealized appreciation of $239,006,000.
For the six-month period ended November 30, 2013, transactions in written call
and put options* were as follows:
PREMIUMS
NUMBER OF RECEIVED
CONTRACTS (000'S)
------------------------
Outstanding May 31, 2013 6,200 $ 8,732
Options written 42,507 2,807
Options terminated in closing purchase transactions (33,757) (11,233)
Options expired (14,950) (306)
------------------------
Outstanding at November 30, 2013 - $ -
========================
*Refer to Note 1C for a discussion of derivative instruments and how they
are accounted for in the Fund's financial statements.
(5) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund and
for directly managing the day-to-day
================================================================================
NOTES TO FINANCIAL STATEMENTS | 53
================================================================================
investment of a portion of the Fund's assets, subject to the authority of
and supervision by the Board. The Manager is also authorized to select (with
approval of the Board and without shareholder approval) one or more
subadvisers to manage the day-to-day investment of a portion of the Fund's
assets. 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 is also 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 0.75% of the Fund's average net assets for
the fiscal year.
The performance adjustment is calculated monthly by comparing the Fund's
performance to that of the Lipper Global Flexible Funds Index over the
performance period. The Lipper Global Flexible Funds Index tracks the total
return performance of the 30 largest funds in the Lipper Global Flexible
Portfolio Funds category. The performance period for the Fund consists of
the current month plus the previous 35 months. The following table is
utilized to determine the extent of the performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
------------------------------------------------------------------------------
+/- 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.
The annual performance adjustment rate is multiplied by the average net assets
of the Fund over the entire performance period, which is
================================================================================
54 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
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, the Fund will pay a positive
performance fee adjustment for a performance period whenever the Fund
outperforms the Lipper Global Flexible Funds Index over that period, even if
the Fund 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 $8,645,000.
B. SUBADVISORY ARRANGEMENT(s) -- The Manager has entered into an investment
subadvisory agreement with Quantitative Management Associates, LLC (QMA),
under which QMA directs the investment and reinvestment of a portion of the
Fund's assets (as allocated from time to time by the Manager). The Manager
(not the Fund) pays QMA a subadvisory fee in the annual amount of 0.25% of
the portion of the Fund's average net assets that QMA manages. For the
six-month period ended November 30, 2013, the Manager incurred subadvisory
fees, paid or payable to QMA, of $341,000.
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 the Fund's average net assets. For the six-month period ended
November 30, 2013, the Fund incurred administration and servicing fees, paid
or payable to the Manager, of $1,729,000.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Board has approved the
reimbursement of a portion of these expenses incurred by the Manager. For
the six-month period ended
================================================================================
NOTES TO FINANCIAL STATEMENTS | 55
================================================================================
November 30, 2013, the Fund reimbursed the Manager $32,000 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 had agreed, through October 1, 2013, to
limit the annual expenses of the Fund to 1.28% of its average net assets,
excluding extraordinary expenses and before reductions of any expenses paid
indirectly, and would reimburse the Fund for all expenses in excess of that
amount. Effective October 1, 2013, the Manager terminated this agreement.
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 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. For the six-month period ended
November 30, 2013, the Fund incurred transfer agent's fees, paid or payable
to SAS, of $2,684,000.
F. UNDERWRITING SERVICES -- USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares on a continuing
best-efforts basis and receives no commissions or fees for this service.
(6) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(7) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
During the six-month period ended November 30, 2013, in accordance with
affiliated transaction procedures approved by the Board, purchases and sales of
security transactions were executed between the Fund and
================================================================================
56 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
the following affiliated USAA Funds at the then-current market price with no
brokerage commissions incurred.
NET REALIZED
COST TO GAIN (LOSS) TO
SELLER PURCHASER PURCHASER SELLER
---------------------------------------------------------------------------------------
USAA Cornerstone USAA Cornerstone
Moderately Aggressive Fund Aggressive Fund $ 113,000 $ (18,000)
USAA Cornerstone USAA First Start
Moderately Aggressive Fund Growth Fund 2,089,000 (67,000)
USAA Cornerstone USAA Real Return
Moderately Aggressive Fund Fund 88,000 (6,000)
USAA Real Return Fund USAA Cornerstone
Moderately Aggressive
Fund 954,000 (109,000)
USAA Cornerstone USAA Cornerstone
Aggressive Fund Moderately Aggressive
Fund 1,671,000 70,000
USAA Income Stock Fund USAA Cornerstone
Moderately Aggressive
Fund 86,000 22,000
================================================================================
NOTES TO FINANCIAL STATEMENTS | 57
================================================================================
(8) FINANCIAL HIGHLIGHTS
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 $ 24.17 $ 21.48 $ 24.05 $ 20.43 $ 17.21 $ 24.17
--------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .28 .61 .65 .57 .65 .57
Net realized and
unrealized gain (loss) .83 2.69 (2.58) 3.67(a) 3.19 (7.02)
--------------------------------------------------------------------------------
Total from investment
operations 1.11 3.30 (1.93) 4.24 3.84 (6.45)
--------------------------------------------------------------------------------
Less distributions from:
Net investment income -- (.61) (.64) (.62) (.62) (.51)
--------------------------------------------------------------------------------
Net asset value at
end of period $ 25.28 $ 24.17 $ 21.48 $ 24.05 $ 20.43 $ 17.21
================================================================================
Total return (%)* 4.59 15.49 (7.96) 20.93(a) 22.31 (26.39)
Net assets at
end of period (000) $2,369,939 $2,294,760 $2,030,805 $2,294,249 $1,924,153 $1,603,954
Ratios to average
net assets:**
Expenses (%)(b) 1.18(e) 1.22 1.27 1.25(c) 1.19 1.19
Expenses, excluding
reimbursements (%)(b) 1.18(e) 1.22 1.27 1.27 1.31 1.37
Net investment income (%) 2.28(e) 2.54 2.87 2.51 3.23 3.23
Portfolio turnover (%) 31 81 77(d) 117 151 162
* 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
$2,299,641,000.
(a) During the year ended May 31, 2011, the Manager reimbursed the Fund
$10,000 for a loss incurred from the disposal of a investment in error. The
effect of this reimbursement of the Fund's net realized loss and total
return was less than $0.01/0.01% per share.
(b) Reflects total operating expenses of the Fund before reductions of any
expenses paid indirectly. The Fund's expenses paid indirectly decreased the
expense ratios by less than 0.01%.
(c) Prior to October 13, 2013, the Manager voluntarily agreed to limit the
annual expenses of the Fund to 1.28% of the Fund's average net assets. Prior
to October 1, 2010, the voluntary expense limit was 1.19%.
(d) Trading activity due to changes in subadvisers and asset allocation
strategies.
(e) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
58 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
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, 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 first line of the table on the next page provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested at the beginning of the period, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending
================================================================================
EXPENSE EXAMPLE | 59
================================================================================
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JUNE 1, 2013 -
JUNE 1, 2013 NOVEMBER 30, 2013 NOVEMBER 30, 2013
-----------------------------------------------------
Actual $1,000.00 $1,045.90 $6.05
Hypothetical
(5% return before expenses) 1,000.00 1,019.15 5.97
* Expenses are equal to the Fund's annualized expense ratio of 1.18%, which is
net of any reimbursements and expenses paid indirectly, multiplied by the
average account value over the period, multiplied by 183 days/365 days (to
reflect the one-half-year period). The Fund's ending account value on the
first line in the table is based on its actual total return of 4.59% for the
six-month period of June 1, 2013, through November 30, 2013.
================================================================================
60 | USAA CORNERSTONE MODERATELY AGGRESSIVE FUND
================================================================================
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
Paul L. McNamara
Jefferson C. Boyce
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ADMINISTRATOR AND USAA Asset Management Company
INVESTMENT ADVISER P.O. Box 659453
San Antonio, Texas 78265-9825
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UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O. Box 659453
San Antonio, Texas 78265-9825
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TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
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CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
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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)
=============================================================================
27800-0114 (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.