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: JULY 31
Date of reporting period: JANUARY 31, 2014
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2014
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA GROWTH FUND]
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SEMIANNUAL REPORT
USAA GROWTH FUND
FUND SHARES o INSTITUTIONAL SHARES
JANUARY 31, 2014
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PRESIDENT'S MESSAGE
"IN MY OPINION, THE CONTINUATION OF
THE TAPER IS AN INDICATION THAT FED [PHOTO OF DANIEL S. McNAMARA]
POLICYMAKERS BELIEVE THE U.S. ECONOMIC
RECOVERY IS STRENGTHENING."
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FEBRUARY 2014
For much of the reporting period, market sentiment was driven by the potential
for -- and then the reality of -- Federal Reserve (the Fed) "tapering." The Fed
had hinted during the spring of 2013 that it might start reducing its asset
purchase program (also known as quantitative easing, or QE) if U.S. economic
conditions improved. (In September 2012, the U.S. central bank began purchasing
$85 billion of U.S. Treasury securities and mortgage-backed securities every
month to push down long-term interest rates and stimulate economic growth.) The
Fed also continued to reiterate its "forward guidance" -- the promise to hold
short-term interest rates near zero until unemployment falls below 6.5% and
inflation rises above 2.5%.
In general, equity investors seemed to like the Fed's promise of "low rates for
longer" more than they disliked the prospect of the taper. Though stocks had
briefly declined in response to the Fed's springtime "taper talk," they moved
higher overall during the reporting period, reaching new all-time highs in
mid-January 2014. In the bond market, longer-term yields -- especially in
five-year, 10-year, and 30-year maturities -- rose on expectations that the Fed
would begin tapering sooner rather than later. Bond prices, which move in the
opposite direction of yields, declined. However, not all bonds performed the
same way during the reporting period. The fixed-income market is, after all, a
market of bonds and not a single bond market. It comprises different types of
bonds with different maturities and risk characteristics, including U.S.
Treasuries, mortgage-backed securities, investment-grade bonds, high-yield
bonds, municipal securities and more. While U.S. Treasury securities
underperformed during the reporting period, bonds with more exposure to the U.S.
economy's health (I.E., those with credit risk) outperformed.
In December, the Fed announced it would taper its QE asset purchases by $10
billion beginning in January 2014. It subsequently announced additional tapering
of $10 billion in February and suggested it would continue reducing its asset
purchases in $10 billion increments through the end of 2014. In my opinion, the
continuation of the taper is an indication that Fed policymakers believe the
U.S. economic recovery is strengthening. Indeed, near the end of the reporting
period, the U.S. Department of Commerce estimated that fourth-quarter gross
domestic product growth was 3.2%, which was later revised downward to 2.4% on
February 28, 2014. Combined with a third-quarter
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growth rate of 4.1%, the U.S. economy experienced one of its strongest six-month
periods in a decade during the second half of 2013.
In mid-January, stocks underwent a sell-off. According to some observers, the
decline was a response to slowing global economic growth, especially in China
and Brazil, as well as currency weakness in Turkey and South Africa. However, in
my opinion, the predominant driver of market behavior is how investors interpret
macroeconomic data and future earnings trends. Some companies that met or beat
earnings expectations in the fourth-quarter 2013 have guided down forecasts for
coming quarters. Downward earnings guidance feeds into the belief held by many,
including USAA Asset Management Company, that it may be harder than the markets
expect for U.S. companies to find the earnings growth needed to support current
valuations.
Meanwhile, as stocks declined in late January, investors sought safety in U.S.
Treasuries and other conservative fixed-income securities. Though yields trended
down, they generally remained higher at the end of the reporting period than
they were at the beginning. Higher yields mean that investors have the
opportunity to reinvest at higher rates and can potentially earn more on new
investments.
Nevertheless, the shift in market sentiment during January underlines the
importance of diversification. Different asset classes, such as stocks and
bonds, move up and down at different rates and often at different times. I urge
all investors to hold diversified portfolios directly tied to their goals, risk
tolerance and time horizon. It is also a good idea to regularly reassess your
investment risk and rebalance your portfolio. Regular rebalancing can
potentially help you protect your gains and prepare for what happens next.
Looking ahead, I expect U.S. economic growth to continue getting stronger,
albeit slowly. While some investors may believe the economy is already on a
clear path to normalization, I believe the ride will be bumpier than many of us
would like. Rest assured we will continue to monitor economic trends, Fed
policy, geopolitical events, and other factors that could potentially affect
your investments. From all of us at USAA Asset Management Company, thank you for
allowing us to help you with your investment needs.
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 generally fall; given the historically low interest rate
environment, risks associated with rising interest rates may be heightened.
o Diversification is a technique intended to help reduce risk and does not
guarantee a profit or prevent a loss. o Financial advice provided by USAA
Financial Planning Services Insurance Agency, Inc. (known as USAA Financial
Insurance Agency in California, License # 0E36312), and USAA Financial Advisors,
Inc., a registered broker-dealer.
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TABLE OF CONTENTS
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FUND OBJECTIVE 1
MANAGERS' COMMENTARY 2
INVESTMENT OVERVIEW 7
FINANCIAL INFORMATION
Portfolio of Investments 12
Notes to Portfolio of Investments 17
Financial Statements 18
Notes to Financial Statements 21
EXPENSE EXAMPLE 36
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 GROWTH FUND (THE FUND) SEEKS LONG-TERM GROWTH OF CAPITAL.
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TYPES OF INVESTMENTS
The Fund invests its assets primarily in a diversified portfolio of equity
securities selected for their growth potential. Although the Fund will invest
primarily in U.S. securities, it may invest up to 20% of its total assets in
foreign securities including securities issued in emerging markets.
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
Loomis, Sayles & Company, L.P. The Renaissance Group LLC
AZIZ V. HAMZAOGULLARI, CFA MICHAEL E. SCHROER, CFA
PAUL A. RADOMSKI, CFA
ERIC J. STRANGE, CPA, CFA
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o HOW DID THE USAA GROWTH FUND (THE FUND) PERFORM DURING THE REPORTING PERIOD?
The Fund has two share classes: Fund Shares and Institutional Shares. For
the six-month reporting period ended January 31, 2014, the Fund Shares and
Institutional Shares had a total return of 11.22% and 11.21%, respectively.
This compares to returns of 12.90% for the Lipper Large-Cap Growth Funds
Index and 10.15% for the Russell 1000(R) Growth Index (the Index).
USAA Asset Management Company is the Fund's investment adviser. As the
investment adviser, USAA Asset Management Company employs dedicated
resources to support the research, selection, and monitoring of the Fund's
subadvisers. Loomis, Sayles & Company, L.P. (Loomis) and The Renaissance
Group LLC (Renaissance) are subadvisers to the Fund. The investment adviser
and each subadviser provides day-to-day discretionary management for a
portion of the Fund's assets.
o PLEASE DISCUSS THE MARKET BACKDROP DURING THE REPORTING PERIOD.
After regaining their footing in July 2013, markets experienced considerable
volatility and declines in most regions during August, as
Refer to page 8 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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2 | USAA GROWTH FUND
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investors reacted to the possibility of changes in U.S. monetary policy. At
that time, market watchers worried that the U.S. Federal Reserve (the Fed)
might begin to taper (or reduce) its quantitative easing (QE) program later
in the year. Also, a congressional showdown regarding the U.S. budget and
debt ceiling loomed. However, an end to the federal government shutdown in
early October, additional clarity regarding the Fed's plans to taper QE, and
a favorable jobs report helped to ignite a sustained market rally into
year-end 2013, with stocks closing the year at all-time highs. In January,
the market dipped slightly as December payroll data undermined previous
confidence in U.S. growth. Investors also displayed renewed concern over
lagging growth in China and budgetary problems for several emerging market
countries.
o HOW DID THE PORTION OF THE FUND MANAGED BY LOOMIS SAYLES PERFORM DURING THE
REPORTING PERIOD?
Through our proprietary, bottom-up research framework, we look to invest in
high-quality businesses with sustainable competitive advantages and
profitable growth that trade at a significant discount to intrinsic value.
During the period, positive performance was due primarily to stock selection
in the information technology, consumer discretionary, and financials
sectors. Selection in the health care, consumer staples, and industrials
sectors detracted from relative performance.
On an individual stock level, the largest contributors to performance
included Facebook, Inc. "A" (Facebook) and Google, Inc. "A" (Google). We
first purchased Facebook's stock in 2012 at the initial public offering, and
subsequently added to our position on price weakness. Over the period,
Facebook reported strong results, with key measurements above consensus
expectations. The company's mobile platform was the primary driver of
performance. Facebook also continued to show strong user growth, positive
engagement trends, product innovation, and solid
You will find a complete list of securities that the Fund owns on pages
12-16.
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MANAGERS' COMMENTARY ON THE FUND | 3
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financials. We believe that the assumptions embedded in its current price
show a lack of appreciation for Facebook's growth opportunities and the
sustainability of its business model. Google, the global leader in online
search and advertising, continues to offer a disruptive business model in
the advertising and technology industries, and it has persistently gained
market share. Google saw strong revenue growth driven by increased
advertising in mobile, video, and online channels. We believe that the
company is selling at a meaningful discount to its intrinsic value because
market expectations continue to discount Google's ability to deliver
long-term sustainable growth.
During the period, we sold the Fund's positions in Legg Mason, Inc. and
Clorox Co. because we believe they had reached intrinsic value. With the
proceeds, we added to positions in Expeditors International of Washington,
Inc., Cisco Systems, Inc., Monster Beverage Corp., Varian Medical Systems,
Inc., and Danone S.A. ADR. We believe that these stocks offer attractive
risk/reward opportunities.
On an individual stock level, the largest detractors from performance
included Cisco Systems, Inc. (Cisco) and Danone S.A. ADR (Danone). Cisco
reported mixed results for third quarter 2013. Revenues were slightly below
consensus expectations but stable gross margins and operating expense
discipline allowed the company to deliver strong operating margins with net
income slightly above consensus. Lower information technology spending
exacerbated to some extent by the U.S. government shut down, declining sales
growth in emerging markets, and NSA revelations hampering the reputations
of U.S. networking firms all took a toll. However, Cisco's end-to-end
architecture solution makes the company well-positioned to benefit from
the expected substantial growth in Internet traffic which will require a
corresponding increase in bandwidth capacity. Because of Cisco's
architecture, coupled with its new product offering, a transformational
data center and cloud-computing solution called Application Centric
Infrastructure (known as ACI), we believe Cisco shares are selling at a
meaningful discount to our estimate of intrinsic value, offering a long-term
reward-to-risk opportunity. Danone was hurt by short-term setbacks due to an
erroneous warning of tainted
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4 | USAA GROWTH FUND
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ingredients from a New Zealand supplier. Within four weeks a follow-up
investigation found that all ingredients were in full compliance of the
highest-quality standards. Danone followed up by putting in place a solid
communications campaign to rebuild brand trust. Because market expectations
for key variables such as revenue and profit growth are well below our
estimates, the company's shares are trading at a significant discount to our
estimate of intrinsic value and offer, what we believe, is an attractive
reward-to-risk profile.
o HOW IS LOOMIS SAYLES POSITIONED?
Our investment process is characterized by bottom-up, fundamental research
and a long-term investment time horizon. The nature of our process leads to
lower portfolio turnover, where sector positioning is the result of stock
selection. The Fund ended the period with overweight positions in the
information technology, financials, consumer staples, and health care
sectors, and underweight positions in the consumer discretionary,
industrials, materials, telecommunications, energy, and utilities sectors.
o HOW DID THE PORTION OF THE FUND MANAGED BY RENAISSANCE PERFORM DURING THE
REPORTING PERIOD?
Our positioning in the consumer staples sector, where we are significantly
underweight, added the most to relative return. We also were able to add
significant value within the health care sector, where we continue to be
overweight relative to the Index. Top individual contributors in this
category were McKesson Corp. (McKesson) and Gilead Sciences, Inc. (Gilead).
We believe that the outlook for pharmaceutical distributors such as McKesson
is favorable as the population continues to age. Additionally, there are a
number of branded pharmaceuticals that are slated to lose patent protection
over the next several years. As generics offer better economics for
distributors such as McKesson, we believe that the trend of replacing
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MANAGERS' COMMENTARY ON THE FUND | 5
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branded drugs with generics should boost the company's earnings growth.
Gilead is one of the world's leading biotechnology firms. The company
focuses its efforts on the large and growing health care markets for HIV
and, more recently, hepatitis C. The HIV drug market has shown steady growth
as advanced medications allow patients to go on treatment regimens earlier
in their disease progression and benefit from the increased effectiveness of
treatment. Gilead seems particularly well suited to benefit from these
trends as the firm is in the process of launching new drugs for HIV and for
hepatitis C. We believe that Gilead's growth prospects will continue to
improve.
o WHAT IS RENAISSANCE'S OUTLOOK?
Although there are some risks facing the market, we believe that equities
are attractively valued given current interest rate levels. We also are
encouraged by the return of more typical volatility levels in the market.
Short of a major recession, we do not anticipate a substantive decline in
corporate profitability, and thus we believe that stocks offer attractive
opportunities as we enter 2014.
Thank you for your investment in the Fund.
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6 | USAA GROWTH FUND
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INVESTMENT OVERVIEW
USAA GROWTH FUND SHARES (FUND SHARES) (Ticker Symbol: USAAX)
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1/31/14 7/31/13
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Net Assets $1,009.1 Million $796.0 Million
Net Asset Value Per Share $22.13 $20.05
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AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14
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8/1/13-1/31/14* 1 Year 5 Years 10 Years
11.22% 24.37% 18.66% 6.11%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
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1 Year 5 Years 10 Years
35.63% 18.43% 6.51%
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EXPENSE RATIOS AS OF 7/31/13**
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Before Reimbursement 1.19% After Reimbursement 1.00%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratios represent the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2013, and
are calculated as a percentage of average net assets. USAA Asset Management
Company (the Manager) has agreed, through December 1, 2014, to make payments or
waive management, administration, and other fees so that the total annual
operating expenses of the Fund Shares (exclusive of commission recapture,
expense offset arrangements, acquired fund fees and expenses, and extraordinary
expenses) do not exceed an annual rate of 1.00% of the Fund Shares' average net
assets. This reimbursement arrangement may not be changed or terminated during
this time period without approval of the Fund's Board of Trustees and may be
changed or terminated by the Manager at any time after December 1, 2014. These
expense ratios may differ from the expense ratios disclosed in the Financial
Highlights, which excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
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INVESTMENT OVERVIEW | 7
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
RUSSELL 1000 LIPPER LARGE-CAP USAA GROWTH
GROWTH INDEX GROWTH FUNDS INDEX FUND SHARES
1/31/2004 $10,000.00 $10,000.00 $10,000.00
2/29/2004 10,063.53 10,043.29 10,048.15
3/31/2004 9,876.85 9,931.27 9,967.90
4/30/2004 9,762.03 9,708.32 9,799.36
5/31/2004 9,943.98 9,884.20 9,927.77
6/30/2004 10,068.24 10,025.63 10,080.26
7/31/2004 9,499.06 9,432.75 9,454.25
8/31/2004 9,452.15 9,366.21 9,414.13
9/30/2004 9,542.05 9,585.69 9,823.43
10/31/2004 9,690.87 9,701.22 10,024.08
11/30/2004 10,024.22 10,134.01 10,642.05
12/31/2004 10,417.26 10,543.17 11,139.65
1/31/2005 10,069.86 10,180.30 10,706.26
2/28/2005 10,177.03 10,246.93 10,834.67
3/31/2005 9,991.61 10,060.26 10,569.82
4/30/2005 9,801.33 9,841.57 10,329.05
5/31/2005 10,275.55 10,387.83 10,930.98
6/30/2005 10,237.67 10,408.55 11,163.72
7/31/2005 10,738.03 10,931.93 11,661.32
8/31/2005 10,599.74 10,815.27 11,460.67
9/30/2005 10,648.55 10,944.75 11,709.47
10/31/2005 10,545.05 10,873.87 11,605.14
11/30/2005 11,000.01 11,371.57 12,174.96
12/31/2005 10,965.53 11,342.45 12,215.09
1/31/2006 11,158.04 11,651.72 12,608.35
2/28/2006 11,140.31 11,494.55 12,439.81
3/31/2006 11,304.80 11,605.38 12,463.88
4/30/2006 11,289.43 11,587.16 12,295.35
5/31/2006 10,906.77 11,046.60 11,476.73
6/30/2006 10,863.73 11,010.30 11,428.57
7/31/2006 10,656.82 10,728.40 11,075.44
8/31/2006 10,989.31 10,976.81 11,195.83
9/30/2006 11,291.27 11,213.49 11,540.93
10/31/2006 11,688.20 11,550.85 11,894.06
11/30/2006 11,920.15 11,814.75 12,094.70
12/31/2006 11,960.51 11,877.26 12,158.91
1/31/2007 12,267.97 12,183.81 12,640.45
2/28/2007 12,037.37 11,908.79 12,191.01
3/31/2007 12,102.66 11,998.40 12,359.55
4/30/2007 12,672.45 12,485.52 12,712.68
5/31/2007 13,128.34 12,908.33 13,202.25
6/30/2007 12,932.37 12,786.59 13,036.85
7/31/2007 12,731.88 12,624.34 12,868.27
8/31/2007 12,934.76 12,832.38 13,101.07
9/30/2007 13,476.60 13,615.17 14,000.17
10/31/2007 13,935.26 14,223.58 14,851.09
11/30/2007 13,421.93 13,643.70 14,192.83
12/31/2007 13,373.40 13,655.62 14,554.07
1/31/2008 12,330.58 12,487.09 12,747.86
2/29/2008 12,085.68 12,226.95 12,466.89
3/31/2008 12,012.10 12,122.91 12,474.92
4/30/2008 12,642.73 12,869.97 13,237.54
5/31/2008 13,106.14 13,221.36 13,606.81
6/30/2008 12,162.21 12,248.67 12,731.80
7/31/2008 11,930.97 12,006.98 12,322.39
8/31/2008 12,059.44 12,039.04 12,201.98
9/30/2008 10,662.90 10,495.87 10,524.21
10/31/2008 8,785.60 8,662.80 8,701.94
11/30/2008 8,086.89 7,793.79 7,883.12
12/31/2008 8,233.04 8,003.14 7,973.97
1/31/2009 7,836.99 7,589.43 7,692.34
2/28/2009 7,247.43 7,094.39 7,153.24
3/31/2009 7,893.87 7,704.05 7,660.16
4/30/2009 8,651.73 8,520.32 8,159.03
5/31/2009 9,080.61 8,986.78 8,488.94
6/30/2009 9,182.20 8,990.31 8,480.89
7/31/2009 9,834.38 9,667.76 8,947.58
8/31/2009 10,038.33 9,858.48 9,100.46
9/30/2009 10,465.32 10,331.92 9,526.92
10/31/2009 10,323.57 10,127.50 9,301.62
11/30/2009 10,957.77 10,738.37 9,840.73
12/31/2009 11,296.46 11,084.28 10,196.26
1/31/2010 10,803.52 10,503.56 9,576.10
2/28/2010 11,174.80 10,876.17 10,035.18
3/31/2010 11,821.18 11,559.30 10,671.44
4/30/2010 11,953.27 11,678.20 10,768.08
5/31/2010 11,040.74 10,740.04 9,962.69
6/30/2010 10,432.77 10,121.92 9,406.97
7/31/2010 11,176.96 10,808.45 10,083.50
8/31/2010 10,655.12 10,277.84 9,447.24
9/30/2010 11,789.36 11,379.55 10,623.11
10/31/2010 12,352.41 11,977.17 11,162.73
11/30/2010 12,495.87 12,097.03 11,291.59
12/31/2010 13,184.16 12,760.79 11,853.69
1/31/2011 13,519.68 13,012.59 11,966.51
2/28/2011 13,962.14 13,364.68 12,208.26
3/31/2011 13,979.19 13,371.41 12,304.96
4/30/2011 14,447.34 13,776.86 12,772.34
5/31/2011 14,290.05 13,609.19 12,651.46
6/30/2011 14,085.10 13,429.04 12,441.95
7/31/2011 13,943.91 13,357.18 12,167.97
8/31/2011 13,208.03 12,459.13 11,378.26
9/30/2011 12,234.80 11,371.84 10,564.37
10/31/2011 13,577.44 12,736.71 11,869.81
11/30/2011 13,576.13 12,579.96 11,724.76
12/31/2011 13,532.48 12,390.16 11,616.53
1/31/2012 14,340.26 13,239.47 12,352.17
2/29/2012 15,026.08 14,019.20 12,829.12
3/31/2012 15,520.31 14,514.59 13,241.39
4/30/2012 15,496.34 14,407.89 13,136.30
5/31/2012 14,502.30 13,303.24 12,182.41
6/30/2012 14,896.09 13,597.89 12,562.35
7/31/2012 15,095.77 13,618.91 12,699.77
8/31/2012 15,501.91 14,130.39 13,144.39
9/30/2012 15,805.92 14,477.35 13,459.66
10/31/2012 15,344.60 13,974.03 13,128.22
11/30/2012 15,601.55 14,284.96 13,580.92
12/31/2012 15,597.24 14,362.43 13,699.11
1/31/2013 16,265.72 14,982.37 14,551.25
2/28/2013 16,468.13 15,062.42 14,689.21
3/31/2013 17,085.90 15,536.04 15,030.07
4/30/2013 17,448.58 15,737.41 15,224.84
5/31/2013 17,772.72 16,152.14 15,719.89
6/30/2013 17,438.28 15,824.88 15,468.31
7/31/2013 18,362.88 16,814.32 16,271.75
8/31/2013 18,048.17 16,612.20 15,906.55
9/30/2013 18,852.46 17,561.96 16,669.42
10/31/2013 19,686.41 18,298.51 17,375.47
11/30/2013 20,241.75 18,845.43 17,894.87
12/31/2013 20,819.95 19,448.23 18,580.08
1/31/2014 20,226.41 18,983.98 18,097.59
[END CHART]
Data from 1/31/04 to 1/31/14.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Growth Fund Shares to the following benchmarks:
o The unmanaged Russell 1000 Growth Index measures the performance of those
Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values.
o The unmanaged Lipper Large-Cap Growth Funds Index tracks the total return
performance of the 30 largest funds in the Lipper Large-Cap Growth Funds
category.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index. The return information for the
indices does not reflect the deduction of any fees or expenses.
================================================================================
8 | USAA GROWTH FUND
================================================================================
USAA GROWTH FUND INSTITUTIONAL SHARES (INSTITUTIONAL SHARES)
(Ticker Symbol: UIGRX)
--------------------------------------------------------------------------------
1/31/14 7/31/13
--------------------------------------------------------------------------------
Net Assets $716.7 Million $664.5 Million
Net Asset Value Per Share $22.09 $20.02
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14
--------------------------------------------------------------------------------
8/1/13-1/31/14* 1 Year 5 Years Since Inception 8/01/08
11.21% 24.38% 18.77% 7.47%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception 8/01/08
35.60% 18.53% 8.10%
--------------------------------------------------------------------------------
EXPENSE RATIO AS OF 7/31/13**
--------------------------------------------------------------------------------
0.99%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2013, and
is calculated as a percentage of average net assets. The expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
The Institutional Shares are available for investment through a USAA
discretionary managed account program, and certain advisory programs sponsored
by financial intermediaries, such as brokerage firms, investment advisors,
financial planners, third-party administrators, and insurance companies.
Institutional Shares also are available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA Fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds) and not to the general public.
================================================================================
INVESTMENT OVERVIEW | 9
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA GROWTH
RUSSELL 1000 LIPPER LARGE-CAP FUND
GROWTH INDEX GROWTH FUNDS INDEX INSTITUTIONAL SHARES
7/31/2008 $10,000.00 $10,000.00 $10,000.00
8/31/2008 10,107.67 10,026.70 9,980.30
9/30/2008 8,937.16 8,741.47 8,608.01
10/31/2008 7,363.69 7,214.80 7,117.53
11/30/2008 6,778.06 6,491.05 6,447.80
12/31/2008 6,900.56 6,665.41 6,520.15
1/31/2009 6,568.61 6,320.85 6,289.64
2/28/2009 6,074.46 5,908.55 5,854.96
3/31/2009 6,616.28 6,416.31 6,269.88
4/30/2009 7,251.48 7,096.14 6,671.63
5/31/2009 7,610.95 7,484.63 6,941.65
6/30/2009 7,696.10 7,487.57 6,941.65
7/31/2009 8,242.73 8,051.78 7,323.64
8/31/2009 8,413.67 8,210.62 7,448.78
9/30/2009 8,771.55 8,604.93 7,797.83
10/31/2009 8,652.74 8,434.67 7,613.43
11/30/2009 9,184.30 8,943.43 8,054.69
12/31/2009 9,468.18 9,231.53 8,348.25
1/31/2010 9,055.02 8,747.88 7,840.09
2/28/2010 9,366.21 9,058.20 8,216.26
3/31/2010 9,907.97 9,627.15 8,744.21
4/30/2010 10,018.69 9,726.17 8,823.41
5/31/2010 9,253.84 8,944.83 8,163.47
6/30/2010 8,744.28 8,430.03 7,701.51
7/31/2010 9,368.02 9,001.80 8,262.46
8/31/2010 8,930.63 8,559.89 7,741.10
9/30/2010 9,881.30 9,477.45 8,704.62
10/31/2010 10,353.23 9,975.17 9,153.38
11/30/2010 10,473.47 10,075.00 9,258.97
12/31/2010 11,050.36 10,627.81 9,716.04
1/31/2011 11,331.58 10,837.52 9,815.11
2/28/2011 11,702.43 11,130.76 10,013.27
3/31/2011 11,716.72 11,136.36 10,092.53
4/30/2011 12,109.10 11,474.04 10,475.62
5/31/2011 11,977.27 11,334.40 10,376.54
6/30/2011 11,805.49 11,184.35 10,204.81
7/31/2011 11,687.16 11,124.51 9,980.24
8/31/2011 11,070.37 10,376.57 9,339.55
9/30/2011 10,254.66 9,471.02 8,672.44
10/31/2011 11,380.00 10,607.76 9,742.46
11/30/2011 11,378.90 10,477.21 9,623.57
12/31/2011 11,342.31 10,319.13 9,534.56
1/31/2012 12,019.35 11,026.47 10,138.35
2/29/2012 12,594.17 11,675.87 10,529.81
3/31/2012 13,008.42 12,088.46 10,868.20
4/30/2012 12,988.33 11,999.59 10,781.94
5/31/2012 12,155.17 11,079.58 10,005.64
6/30/2012 12,485.22 11,324.98 10,310.86
7/31/2012 12,652.59 11,342.50 10,423.65
8/31/2012 12,992.99 11,768.47 10,788.58
9/30/2012 13,247.80 12,057.45 11,053.98
10/31/2012 12,861.15 11,638.25 10,775.31
11/30/2012 13,076.51 11,897.21 11,153.51
12/31/2012 13,072.90 11,961.73 11,249.13
1/31/2013 13,633.19 12,478.05 11,950.11
2/28/2013 13,802.84 12,544.72 12,063.60
3/31/2013 14,320.63 12,939.17 12,337.32
4/30/2013 14,624.61 13,106.88 12,504.22
5/31/2013 14,896.29 13,452.29 12,904.79
6/30/2013 14,615.98 13,179.73 12,697.83
7/31/2013 15,390.94 14,003.78 13,365.43
8/31/2013 15,127.16 13,835.45 13,065.01
9/30/2013 15,801.28 14,626.46 13,685.88
10/31/2013 16,500.26 15,239.89 14,266.70
11/30/2013 16,965.71 15,695.40 14,693.96
12/31/2013 17,450.34 16,197.44 15,253.33
1/31/2014 16,952.86 15,810.78 14,863.08
[END CHART]
Data from 7/31/08 to 1/31/14*.
The graph illustrates the comparison of a $10,000 hypothetical investment in
the USAA Growth Fund Institutional Shares to the Fund's benchmarks listed above
(see page 8 for benchmark definitions).
*The performance of the Russell 1000 Growth Index and the Lipper Large-Cap
Growth Funds Index is calculated from the end of the month, July 31, 2008, while
the Institutional Shares' inception date is August 1, 2008. There may be a
slight variation of performance numbers because of this difference.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index. The return information for the
indices does not reflect the deduction of any fees or expenses.
================================================================================
10 | USAA GROWTH FUND
================================================================================
o TOP 10 HOLDINGS o
AS OF 1/31/2014
(% of Net Assets)
Google, Inc. "A" ........................................................ 5.1%
Cisco Systems, Inc. ..................................................... 3.6%
Visa, Inc. "A" .......................................................... 3.6%
Amazon.com, Inc. ........................................................ 3.4%
Oracle Corp. ............................................................ 3.2%
Facebook, Inc. "A" ...................................................... 3.2%
QUALCOMM, Inc. .......................................................... 3.1%
Lowe's Companies, Inc. .................................................. 2.6%
American Express Co. .................................................... 2.5%
Zimmer Holdings, Inc. ................................................... 2.3%
o ASSET ALLOCATION -- 1/31/2014 o
[PIE CHART OF ASSET ALLOCATION]
INFORMATION TECHNOLOGY 39.4%
CONSUMER DISCRETIONARY 17.0%
HEALTH CARE 14.7%
INDUSTRIALS 8.4%
CONSUMER STAPLES 8.1%
FINANCIALS 7.6%
ENERGY 1.7%
MATERIALS 0.9%
MONEY MARKET INSTRUMENTS 1.4%
[END CHART]
Percentages are of the net assets of the Fund and may not equal 100%.
You will find a complete list of securities that the Fund owns on pages 12-16.
================================================================================
INVESTMENT OVERVIEW | 11
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
COMMON STOCKS (97.8%)
CONSUMER DISCRETIONARY (17.0%)
------------------------------
APPAREL RETAIL (1.4%)
288,315 Gap, Inc. $ 10,979
229,218 TJX Companies, Inc. 13,148
----------
24,127
----------
APPAREL, ACCESSORIES & LUXURY GOODS (1.5%)
104,691 Fossil Group, Inc.* 11,708
200,497 Hanesbrands, Inc. 14,263
----------
25,971
----------
AUTO PARTS & EQUIPMENT (0.8%)
262,052 BorgWarner, Inc. 14,072
----------
AUTOMOTIVE RETAIL (1.7%)
30,110 AutoZone, Inc.* 14,906
107,375 O'Reilly Automotive, Inc.* 14,064
----------
28,970
----------
BROADCASTING (0.8%)
177,410 Scripps Networks Interactive "A" 12,866
----------
DEPARTMENT STORES (0.8%)
265,331 Macy's, Inc. 14,116
----------
HOME IMPROVEMENT RETAIL (3.4%)
166,395 Home Depot, Inc. 12,787
983,663 Lowe's Companies, Inc. 45,534
----------
58,321
----------
HOMEBUILDING (0.9%)
769,125 PulteGroup, Inc. 15,629
----------
HOTELS, RESORTS & CRUISE LINES (0.8%)
191,351 Starwood Hotels & Resorts Worldwide, Inc. 14,296
----------
INTERNET RETAIL (4.3%)
165,190 Amazon.com, Inc.* 59,252
13,014 priceline.com, Inc.* 14,899
----------
74,151
----------
================================================================================
12 | USAA GROWTH FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
SPECIALTY STORES (0.6%)
166,375 PetSmart, Inc. $ 10,482
----------
Total Consumer Discretionary 293,001
----------
CONSUMER STAPLES (8.1%)
-----------------------
BREWERS (1.0%)
395,565 SABMiller plc ADR 17,868
----------
DISTILLERS & VINTNERS (0.2%)
25,874 Diageo plc ADR 3,106
----------
DRUG RETAIL (0.9%)
216,523 CVS Caremark Corp. 14,663
----------
HOUSEHOLD PRODUCTS (1.4%)
315,188 Procter & Gamble Co. 24,150
----------
PACKAGED FOODS & MEAT (2.0%)
2,607,120 Danone S.A. ADR 34,622
----------
SOFT DRINKS (2.6%)
448,109 Coca-Cola Co. 16,948
404,024 Monster Beverage Corp.* 27,433
----------
44,381
----------
Total Consumer Staples 138,790
----------
ENERGY (1.7%)
-------------
OIL & GAS EQUIPMENT & SERVICES (1.7%)
329,260 Schlumberger Ltd. 28,833
----------
FINANCIALS (7.6%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (3.9%)
46,132 BlackRock, Inc. 13,861
497,134 Franklin Resources, Inc. 25,856
813,906 SEI Investments Co. 27,722
----------
67,439
----------
CONSUMER FINANCE (2.5%)
507,685 American Express Co. 43,163
----------
INVESTMENT BANKING & BROKERAGE (0.5%)
158,596 Greenhill & Co., Inc. 8,239
----------
SPECIALIZED FINANCE (0.7%)
62,164 IntercontinentalExchange Group, Inc. 12,979
----------
Total Financials 131,820
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
HEALTH CARE (14.7%)
-------------------
BIOTECHNOLOGY (3.9%)
197,275 Amgen, Inc. $ 23,466
52,778 Biogen Idec, Inc.* 16,500
87,783 Celgene Corp.* 13,337
184,186 Gilead Sciences, Inc.* 14,855
----------
68,158
----------
HEALTH CARE DISTRIBUTORS (0.9%)
84,913 McKesson Corp. 14,810
----------
HEALTH CARE EQUIPMENT (5.5%)
124,041 Becton, Dickinson & Co. 13,411
243,349 Medtronic, Inc. 13,764
342,072 Varian Medical Systems, Inc.* 27,814
419,677 Zimmer Holdings, Inc. 39,437
----------
94,426
----------
LIFE SCIENCES TOOLS & SERVICES (0.9%)
271,309 Agilent Technologies, Inc. 15,777
----------
PHARMACEUTICALS (3.5%)
141,599 Allergan, Inc. 16,227
297,511 Merck & Co., Inc. 15,759
369,016 Novartis AG ADR 29,178
----------
61,164
----------
Total Health Care 254,335
----------
INDUSTRIALS (8.4%)
-------------------
AEROSPACE & DEFENSE (0.8%)
109,109 Boeing Co. 13,667
----------
AIR FREIGHT & LOGISTICS (3.6%)
755,910 Expeditors International of Washington, Inc. 30,887
322,970 United Parcel Service, Inc. "B" 30,756
----------
61,643
----------
AIRLINES (0.8%)
180,506 Alaska Air Group, Inc. 14,273
----------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.8%)
103,811 Cummins, Inc. 13,182
----------
ELECTRICAL COMPONENTS & EQUIPMENT (0.8%)
124,851 Rockwell Automation, Inc. 14,338
----------
INDUSTRIAL CONGLOMERATES (0.8%)
187,169 Danaher Corp. 13,923
----------
================================================================================
14 | USAA GROWTH FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
RAILROADS (0.8%)
81,846 Union Pacific Corp. $ 14,261
----------
Total Industrials 145,287
----------
INFORMATION TECHNOLOGY (39.4%)
------------------------------
APPLICATION SOFTWARE (3.5%)
552,303 Autodesk, Inc.* 28,306
175,620 FactSet Research Systems, Inc. 18,575
353,798 Synopsys, Inc.* 14,102
----------
60,983
----------
COMMUNICATIONS EQUIPMENT (7.6%)
2,828,454 Cisco Systems, Inc. 61,972
144,477 F5 Networks, Inc.* 15,459
724,149 QUALCOMM, Inc. 53,746
----------
131,177
----------
COMPUTER HARDWARE (0.7%)
25,493 Apple, Inc. 12,762
----------
COMPUTER STORAGE & PERIPHERALS (3.1%)
475,797 EMC Corp. 11,533
295,942 NetApp, Inc. 12,530
206,481 SanDisk Corp. 14,361
183,655 Western Digital Corp. 15,826
----------
54,250
----------
DATA PROCESSING & OUTSOURCED SERVICES (6.0%)
177,611 Automatic Data Processing, Inc. 13,605
270,627 Fidelity National Information Services, Inc. 13,721
189,230 MasterCard, Inc. "A" 14,321
283,559 Visa, Inc. "A" 61,087
----------
102,734
----------
INTERNET SOFTWARE & SERVICES (8.3%)
866,001 Facebook, Inc. "A"* 54,186
74,776 Google, Inc. "A"* 88,308
----------
142,494
----------
IT CONSULTING & OTHER SERVICES (0.6%)
63,581 International Business Machines Corp. 11,233
----------
SEMICONDUCTOR EQUIPMENT (1.5%)
215,594 KLA-Tencor Corp. 13,253
243,673 Lam Research Corp.* 12,332
----------
25,585
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
SEMICONDUCTORS (2.8%)
71,084 Altera Corp. $ 2,376
85,008 Analog Devices, Inc. 4,103
554,159 ARM Holdings plc ADR 25,530
533,673 Skyworks Solutions, Inc.* 16,144
----------
48,153
----------
SYSTEMS SOFTWARE (5.3%)
940,448 Microsoft Corp. 35,596
1,495,781 Oracle Corp. 55,194
----------
90,790
----------
Total Information Technology 680,161
----------
MATERIALS (0.9%)
----------------
SPECIALTY CHEMICALS (0.9%)
84,022 PPG Industries, Inc. 15,322
----------
Total Common Stocks (cost: $1,191,119) 1,687,549
----------
MONEY MARKET INSTRUMENTS (1.4%)
MONEY MARKET FUNDS (1.4%)
24,369,196 State Street Institutional Liquid Reserve Fund, 0.06%(a)
(cost: $24,369) 24,369
----------
TOTAL INVESTMENTS (COST: $1,215,488) $1,711,918
==========
-----------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-----------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $1,687,549 $- $- $1,687,549
Money Market Instruments:
Money Market Funds 24,369 - - 24,369
-----------------------------------------------------------------------------------------------------
Total $1,711,918 $- $- $1,711,918
-----------------------------------------------------------------------------------------------------
For the period of August 1, 2013, through January 31, 2014, there were no
transfers of securities between levels. The Fund's policy is to recognize any
transfers into and out of the levels as of the beginning of the period in which
the event or circumstance that caused the transfer occurred.
================================================================================
16 | USAA GROWTH FUND
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
Investments in foreign securities were 8.1% of net assets at January 31,
2014.
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.
o SPECIFIC NOTES
(a) Rate represents the money market fund annualized seven-day yield at
January 31, 2014.
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 17
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $1,215,488) $1,711,918
Receivables:
Capital shares sold:
Affiliated transactions (Note 7) 23
Nonaffiliated transactions 1,529
USAA Asset Management Company (Note 6D) 111
Dividends and interest 1,032
Securities sold 13,165
----------
Total assets 1,727,778
----------
LIABILITIES
Payables:
Capital shares redeemed 783
Accrued management fees 1,122
Accrued transfer agent's fees 27
Other accrued expenses and payables 94
----------
Total liabilities 2,026
----------
Net assets applicable to capital shares outstanding $1,725,752
==========
NET ASSETS CONSIST OF:
Paid-in capital $1,223,163
Overdistribution of net investment income (6,003)
Accumulated net realized gain on investments 12,162
Net unrealized appreciation of investments 496,430
----------
Net assets applicable to capital shares outstanding $1,725,752
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $1,009,051/45,585 shares outstanding) $ 22.14
==========
Institutional Shares (net assets of $716,701/32,445
shares outstanding) $ 22.09
==========
See accompanying notes to financial statements.
================================================================================
18 | USAA GROWTH FUND
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $20) $ 9,959
Interest 7
--------
Total income 9,966
--------
EXPENSES
Management fees 5,963
Administration and servicing fees:
Fund Shares 651
Institutional Shares 345
Transfer agent's fees:
Fund Shares 707
Institutional Shares 345
Custody and accounting fees:
Fund Shares 51
Institutional Shares 36
Postage:
Fund Shares 35
Institutional Shares 5
Shareholder reporting fees:
Fund Shares 21
Institutional Shares 5
Trustees' fees 7
Registration fees:
Fund Shares 19
Institutional Shares 14
Professional fees 59
Other 12
--------
Total expenses 8,275
Expenses paid indirectly:
Fund Shares (6)
Expenses reimbursed:
Fund Shares (525)
--------
Net expenses 7,744
--------
NET INVESTMENT INCOME 2,222
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 55,133
Change in net unrealized appreciation/depreciation 101,441
--------
Net realized and unrealized gain 156,574
--------
Increase in net assets resulting from operations $158,796
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 19
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended January 31, 2014 (unaudited), and year ended
July 31, 2013
-----------------------------------------------------------------------------------------------
1/31/2014 7/31/2013
-----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 2,222 $ 7,424
Net realized gain on investments 55,133 97,566
Change in net unrealized appreciation/depreciation
of investments 101,441 245,505
--------------------------
Increase in net assets resulting from operations 158,796 350,495
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares (6,689) (2,585)
Institutional Shares (5,486) (4,415)
--------------------------
Total distributions of net investment income (12,175) (7,000)
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 5)
Fund Shares 133,028 (422,900)
Institutional Shares (14,434) 270,094
--------------------------
Total net increase (decrease) in net assets from
capital share transactions 118,594 (152,806)
--------------------------
Net increase in net assets 265,215 190,689
NET ASSETS
Beginning of period 1,460,537 1,269,848
--------------------------
End of period $1,725,752 $1,460,537
==========================
Accumulated undistributed (Overdistribution of)
net investment income:
End of period $ (6,003) $ 3,950
==========================
See accompanying notes to financial statements.
================================================================================
20 | USAA GROWTH FUND
================================================================================
NOTES TO FINANCIAL STATEMENTS
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940, as amended (the 1940 Act), is an open-end management investment company
organized as a Delaware statutory trust consisting of 52 separate funds. The
information presented in this semiannual report pertains only to the USAA Growth
Fund (the Fund), which is classified as diversified under the 1940 Act. The
Fund's investment objective is to seek long-term growth of capital.
The Fund consists of two classes of shares: Growth Fund Shares (Fund Shares) and
Growth Fund Institutional Shares (Institutional Shares). Each class of shares
has equal rights to assets and earnings, except that each class bears certain
class-related expenses specific to the particular class. These expenses include
administration and servicing fees, transfer agent fees, postage, shareholder
reporting fees, and certain registration and custodian fees. Expenses not
attributable to a specific class, income, and realized gains or losses on
investments are allocated to each class of shares based on each class's relative
net assets. Each class has exclusive voting rights on matters related solely to
that class and separate voting rights on matters that relate to both classes.
The Institutional Shares are available for investment through a USAA
discretionary managed account program, and certain advisory programs sponsored
by financial intermediaries, such as brokerage firms, investment advisors,
financial planners, third-party administrators, and insurance companies.
Institutional Shares also are available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA Fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds) and not to the general public.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 21
================================================================================
A. SECURITY VALUATION -- The Trust's Board of Trustees (the Board) has
established the Valuation Committee (the Committee), and subject to Board
oversight, the Committee administers and oversees the Fund's valuation
policies and procedures which are approved by the Board. Among other things,
these policies and procedures allow the Fund to utilize independent pricing
services, quotations from securities dealers, and a wide variety of sources
and information to establish and adjust the fair value of securities as
events occur and circumstances warrant.
The Committee reports to the Board on a quarterly basis and makes
recommendations to the Board as to pricing methodologies and services used
by the Fund and presents additional information to the Board regarding
application of the pricing and fair valuation policies and procedures during
the preceding quarter.
The Committee meets as often as necessary to make pricing and fair value
determinations. In addition, the Committee holds regular monthly meetings to
review prior actions taken by the Committee and USAA Asset Management
Company (the Manager). Among other things, these monthly meetings include a
review and analysis of back testing reports, pricing service quotation
comparisons, illiquid securities and fair value determinations, pricing
movements, and daily stale price monitoring.
The value of each security is determined (as of the close of trading on the
New York Stock Exchange (NYSE) on each business day the NYSE is open) as set
forth below:
1. 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
================================================================================
22 | USAA GROWTH FUND
================================================================================
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 and the Fund's subadviser(s), if applicable, will monitor for
events that would materially affect the value of the Fund's foreign
securities. The Fund's subadviser(s) have agreed to notify the Manager of
significant events they identify that would materially affect the value
of the Fund's foreign securities. If the Manager determines that a
particular event would materially affect the value of the Fund's foreign
securities, then the Manager, under valuation procedures approved by the
Board, will consider such available information that it deems relevant to
determine a fair value for the affected foreign securities. In addition,
the Fund may use information from an external vendor or other sources to
adjust the foreign market closing prices of foreign equity securities to
reflect what the Fund believes to be the fair value of the securities as
of the close of the NYSE. Fair valuation of affected foreign equity
securities may occur frequently based on an assessment that events that
occur on a fairly regular basis (such as U.S. market movements) are
significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 23
================================================================================
5. Repurchase agreements are valued at cost, which approximates market value.
6. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before the
pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadviser(s), 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 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,
================================================================================
24 | USAA GROWTH FUND
================================================================================
inputs that are observable for the securities, either directly or indirectly,
and market-corroborated inputs such as market indices.
Level 3 -- inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon notification. Interest income is recorded daily
on the accrual basis. Discounts and premiums on short-term securities are
amortized on a straight-line basis over the life of the respective
securities.
E. FOREIGN CURRENCY TRANSLATIONS -- The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective dates
of such transactions.
2. Market value of securities, other assets, and liabilities at the exchange
rate obtained from an independent pricing service on a daily basis.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 25
================================================================================
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts received. At
the end of the Fund's fiscal year, these net realized foreign currency
gains/losses are reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rate.
F. EXPENSES PAID INDIRECTLY -- A portion of the brokerage commissions that the
Fund pays may be recaptured as a credit that is tracked and used by the
custodian to directly reduce expenses paid by the Fund. In addition, through
arrangements with the Fund's custodian and other banks utilized by the Fund
for cash management purposes, realized credits, if any, generated from cash
balances in the Fund's bank accounts may be used to directly reduce the
Fund's expenses. For the six-month period ended January 31, 2014, brokerage
commission recapture credits reduced the expenses of the Fund Shares and
Institutional Shares by $6,000 and less than $500, respectively. For the
six-month period ended January 31, 2014, there were no custodian and other
bank credits.
G. INDEMNIFICATIONS -- Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In
================================================================================
26 | USAA GROWTH FUND
================================================================================
addition, in the normal course of business, the Trust enters into contracts
that contain a variety of representations and warranties that provide
general indemnifications. The Trust's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be
made against the Trust that have not yet occurred. However, the Trust
expects the risk of loss to be remote.
H. USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at an interest rate based on
the London Interbank Offered Rate (LIBOR).
The USAA Funds that are party to the loan agreement are assessed facility fees
by CAPCO in the amount of 7.0 basis points of the amount of the committed loan
agreement. The facility fees are allocated among the Funds based on their
respective average net assets for the period.
For the six-month period ended January 31, 2014, the Fund paid CAPCO facility
fees of $4,000, which represents 2.4% of the total fees paid to CAPCO by the
USAA Funds. The Fund had no borrowings under this agreement during the six-month
period ended January 31, 2014.
(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 July 31, 2014,
in accordance with applicable tax law.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
================================================================================
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 July 31, 2013, the Fund had pre-enactment capital loss carryforwards of
$40,961,000 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 January 31, 2014, the Fund did not incur any
income tax, interest, or penalties, and has recorded no liability for net
unrecognized tax benefits relating to uncertain income tax positions. On an
ongoing basis the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary. The statute of limitations on the
Fund's tax return filings generally remain open for the three preceding fiscal
reporting year ends and remain subject to examination by the Internal Revenue
Service and state taxing authorities.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2014, were
$312,603,000 and $219,006,000, respectively.
As of January 31, 2014, the cost of securities, including short-term securities,
for federal income tax purposes, was approximately the same as that reported in
the financial statements.
================================================================================
28 | USAA GROWTH FUND
================================================================================
Gross unrealized appreciation and depreciation of investments as of January 31,
2014, were $503,535,000 and $7,105,000, respectively, resulting in net
unrealized appreciation of $496,430,000.
(5) CAPITAL SHARE TRANSACTIONS
At January 31, 2014, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated USAA fund-of-funds. Capital share transactions for
all classes were as follows, in thousands:
SIX-MONTH
PERIOD ENDED YEAR ENDED
JANUARY 31, 2014 JULY 31, 2013
--------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------
FUND SHARES:
Shares sold 8,296 $184,066 6,913 $ 124,217
Shares issued from reinvested
dividends 302 6,588 149 2,544
Shares redeemed (2,705) (57,626) (33,332) (549,661)
---------------------------------------------
Net increase (decrease) from
capital share transactions 5,893 $133,028 (26,270) $(422,900)
=============================================
INSTITUTIONAL SHARES:
Shares sold 2,324 $ 49,270 33,353 $ 550,941
Shares issued from reinvested
dividends 252 5,486 258 4,414
Shares redeemed (3,330) (69,190) (15,300) (285,261)
---------------------------------------------
Net increase (decrease) from
capital share transactions (754) $(14,434) 18,311 $ 270,094
=============================================
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund,
and for directly managing the day-to-day investment of a portion of the
Fund's assets, subject to the authority of and supervision by the Board. The
Manager is authorized to select
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
================================================================================
(with approval of the Board and without shareholder approval) one or more
subadvisers to manage the actual 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 reports to the Board as to whether
each subadviser's agreement should be renewed, terminated, or modified. The
Manager also is responsible for allocating assets to the subadviser(s). The
allocation for each subadviser could range from 0% to 100% of the Fund's
assets, and the Manager could 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 separately for each share class on
a monthly basis by comparing each class's performance to that of the Lipper
Large-Cap Growth Funds Index over the performance period. The Lipper
Large-Cap Growth Funds Index tracks the total return performance of the 30
largest funds in the Lipper Large-Cap Growth Funds category. The performance
period for each class consists of the current month plus the previous 35
months. The following table is utilized to determine the extent of the
performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(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
relevant share class of the Fund and its relevant index, rounded to the
nearest basis point (0.01%). Average net assets of the share class are
calculated over a rolling 36-month period.
Each class's annual performance adjustment rate is multiplied by the average
net assets of each respective class over the entire
================================================================================
30 | USAA GROWTH FUND
================================================================================
performance period, which is then multiplied by a fraction, the numerator of
which is the number of days in the month and the denominator of which is 365
(366 in leap years). The resulting amount is then added to (in the case of
overperformance) or subtracted from (in the case of underperformance) the
base fee.
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper Large-Cap Growth Funds Index over that period, even
if the class had overall negative returns during the performance period.
For the six-month period ended January 31, 2014, the Fund incurred total
management fees, paid or payable to the Manager, of $5,963,000, which
included a performance adjustment for the Fund Shares and Institutional
Shares of $83,000 and $38,000, respectively. For the Fund Shares and
Institutional Shares, the performance adjustments were 0.02% and 0.01%,
respectively.
B. SUBADVISORY ARRANGEMENT(S) -- The Manager has entered into investment
subadvisory agreements with Loomis, Sayles & Company, L.P. (Loomis Sayles)
and The Renaissance Group LLC (Renaissance), under which Loomis Sayles and
Renaissance direct the investment and reinvestment of portions of the Fund's
assets (as allocated from time to time by the Manager).
The Manager (not the Fund) pays Loomis Sayles a subadvisory fee in the
annual amount of 0.20% of the portion of the Fund's average net assets that
Loomis Sayles manages. For the six-month period ended January 31, 2014, the
Manager incurred subadvisory fees, paid or payable to Loomis Sayles, of
$817,000.
The Manager (not the Fund) pays Renaissance a subadvisory fee in the annual
amount of 0.20% of the portion of the Fund's average net assets that
Renaissance manages. For the six-month period ended January 31, 2014, the
Manager incurred subadvisory fees, paid or payable to Renaissance, of
$744,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
================================================================================
C. ADMINISTRATION AND SERVICING FEES -- The Manager provides certain
administration and servicing functions for the Fund. For such services, the
Manager receives a fee accrued daily and paid monthly at an annualized rate
of 0.15% of average net assets of the Fund Shares, and 0.10% of average net
assets of the Institutional Shares. For the six-month period ended January
31, 2014, the Fund Shares and Institutional Shares incurred administration
and servicing fees, paid or payable to the Manager, of $651,000 and
$345,000, respectively.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Board has approved the
reimbursement of a portion of these expenses incurred by the Manager. For
the six-month period ended January 31, 2014, the Fund reimbursed the Manager
$21,000 for these compliance and legal services. These expenses are included
in the professional fees on the Fund's statement of operations.
D. EXPENSE LIMITATION -- The Manager has agreed, through December 1, 2014, to
limit the total annual operating expenses of the Fund Shares to 1.00% of its
average net assets, excluding extraordinary expenses and before reductions of
any expenses paid indirectly, and will reimburse the Fund Shares for all
expenses in excess of that amount. This expense limitation arrangement may
not be changed or terminated through December 1, 2014, without approval of
the Board, and may be changed or terminated by the Manager at any time after
that date. For the six-month period ended January 31, 2014, the Fund incurred
reimbursable expenses from the Manager for the Fund Shares of $525,000, of
which $111,000 was receivable from the Manager.
E. TRANSFER AGENT'S FEES -- USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services (SAS), an affiliate of the Manager, provides
transfer agent services to the Fund. Transfer agent's fees for Fund Shares
are paid monthly based on an annual charge of $23 per shareholder account
plus out-of-pocket expenses. SAS pays a portion of these fees to certain
intermediaries for the administration and servicing of accounts held with
such intermediaries.
================================================================================
32 | USAA GROWTH FUND
================================================================================
Transfer agent's fees for Institutional Shares are paid monthly based on a
fee accrued daily at an annualized rate of 0.10% of the Institutional
Shares' average net assets, plus out-of-pocket expenses. For the six-month
period ended January 31, 2014, the Fund Shares and Institutional Shares
incurred transfer agent's fees, paid or payable to SAS, of $707,000 and
$345,000, respectively.
F. UNDERWRITING SERVICES -- USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares on a continuing
best-efforts basis and receives no commissions or fees for this service.
(7) TRANSACTIONS WITH AFFILIATES
The Fund offers its Institutional Shares for investment by other USAA Funds and
is one of 17 USAA mutual funds in which the affiliated USAA fund-of-funds may
invest. The USAA fund-of-funds do not invest in the underlying funds for the
purpose of exercising management or control. As of January 31, 2014, the Fund
recorded a receivable for capital shares sold of $23,000 for the USAA
fund-of-funds' purchases of Institutional Shares. As of January 31, 2014, the
USAA fund-of-funds owned the following percentages of the total outstanding
shares of the Fund:
AFFILIATED USAA FUND OWNERSHIP %
------------------------------------------------------------------------------
USAA Cornerstone Conservative Fund 0.1
USAA Cornerstone Equity Fund 0.2
USAA Target Retirement Income Fund 0.4
USAA Target Retirement 2020 Fund 1.0
USAA Target Retirement 2030 Fund 2.6
USAA Target Retirement 2040 Fund 3.1
USAA Target Retirement 2050 Fund 1.8
USAA Target Retirement 2060 Fund 0.0*
*Represents less than 0.1%
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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
================================================================================
(8) FINANCIAL HIGHLIGHTS -- FUND SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31,
-----------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009
-----------------------------------------------------------------------------
Net asset value at
beginning of period $ 20.05 $ 15.71 $ 15.10 $ 12.52 $ 11.12 $ 15.35
-----------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .03 .13 .06 .04 .00(a) .03
Net realized and
unrealized gain (loss) 2.23 4.28 .59 2.55 1.41 (4.24)
-----------------------------------------------------------------------------
Total from investment
operations 2.26 4.41 .65 2.59 1.41 (4.21)
-----------------------------------------------------------------------------
Less distributions from:
Net investment income (.17) (.07) (.04) (.01) (.01) (.02)
-----------------------------------------------------------------------------
Net asset value at end
of period $ 22.14 $ 20.05 $ 15.71 $ 15.10 $ 12.52 $ 11.12
=============================================================================
Total return (%)* 11.27 28.13 4.37 20.67 12.70 (27.39)
Net assets at end
of period (000) $1,009,051 $796,024 $1,035,999 $794,896 $629,961 $593,140
Ratios to average
net assets:**
Expenses (%)(b) 1.00(d) 1.00 1.00 1.00 1.00 1.00
Expenses, excluding
reimbursements (%)(b) 1.12(d) 1.19 1.17 1.17 1.22 1.25
Net investment
income (loss) (%) .28(d) .51 .42 .30 (.01) .31
Portfolio turnover (%) 14 28 43 39(c) 148 136
* 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 January 31, 2014, average net assets were $862,947,000.
(a) Represents less than $0.01 per share.
(b) Reflects total operating expenses of the Fund Shares before reductions of any expenses paid
indirectly. The Fund Shares' expenses paid indirectly decreased the expense ratios as follows:
(.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+) (.01%) (.03%)
(+) Represents less than 0.01% of average net assets.
(c) Reflects decreased trading activity due to market volatility.
(d) Annualized. The ratio is not necessarily indicative of 12 months of operations.
================================================================================
34 | USAA GROWTH FUND
================================================================================
(8) FINANCIAL HIGHLIGHTS (CONTINUED) -- INSTITUTIONAL SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH PERIOD
PERIOD ENDED ENDED
JANUARY 31, YEAR ENDED JULY 31, JULY 31,
---------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009***
---------------------------------------------------------------------------
Net asset value at
beginning of period $ 20.02 $ 15.71 $ 15.11 $ 12.52 $ 11.12 $ 15.23
--------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .03 .10(a) .06 .06 .02(a) .03(a)
Net realized and
unrealized gain (loss) 2.21 4.32(a) .60 2.54 1.41(a) (4.11)(a)
--------------------------------------------------------------------------
Total from investment operations 2.24 4.42(a) .66 2.60 1.43(a) (4.08)(a)
--------------------------------------------------------------------------
Less distributions from:
Net investment income (.17) (.11) (.06) (.01) (.03) (.03)
--------------------------------------------------------------------------
Net asset value at end
of period $ 22.09 $ 20.02 $ 15.71 $ 15.11 $ 12.52 $ 11.12
==========================================================================
Total return (%)* 11.21 28.22 4.44 20.79 12.82 (26.76)
Net assets at end
of period (000) $716,701 $664,513 $233,849 $157,225 $96,849 $39,929
Ratios to average net assets:**
Expenses (%)(b) .99(c) .99 .95 .86(d) .87(d) .87(c),(d)
Expenses, excluding
reimbursements (%)(b) .99(c) .99 .95 .86 .88 .89(c)
Net investment income (%) .29(c) .53 .46 .43 .11 .32(c)
Portfolio turnover (%) 14 28 43 39(e) 148 136
* 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 January 31, 2014, average net assets were $684,864,000.
*** Institutional shares were initiated on August 1, 2008.
(a) Calculated using average shares.
(b) Reflects total operating expenses of the Institutional Shares before reductions of any expenses paid
indirectly. The Institutional Shares' expenses paid indirectly decreased the expense ratios as follows:
(.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+) (.01%) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
(c) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(d) Prior to December 1, 2010, the Manager agreed to limit the annual expenses of the Institutional
Shares to 0.87% of the Institutional Shares average net assets.
(e) Reflects decreased trading activity due to market volatility.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
================================================================================
EXPENSE EXAMPLE
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, 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 August 1, 2013, through
January 31, 2014.
ACTUAL EXPENSES
The line labeled "actual" under each share class in the table on the next page
provides information about actual account values and actual expenses. You may
use the information in this line, together with the amount you invested at the
beginning of the period, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number for your share
class in the "actual" line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class and an assumed rate of return of
5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses
================================================================================
36 | USAA GROWTH FUND
================================================================================
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the line labeled "hypothetical"
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2013 -
AUGUST 1, 2013 JANUARY 31, 2014 JANUARY 31, 2014
------------------------------------------------------------------
FUND SHARES
Actual $1,000.00 $1,112.20 $5.32
Hypothetical
(5% return before expenses) 1,000.00 1,020.16 5.09
INSTITUTIONAL SHARES
Actual 1,000.00 1,112.10 5.27
Hypothetical
(5% return before expenses) 1,000.00 1,020.21 5.04
* Expenses are equal to the annualized expense ratio of 1.00% for Fund Shares
and 0.99% for Institutional Shares, which are net of any reimbursements and
expenses paid indirectly, multiplied by the average account value over the
period, multiplied by 184 days/365 days (to reflect the one-half-year period).
The Fund's actual ending account values are based on its actual total returns
of 11.27% for Fund Shares and 11.21% for Institutional Shares for the
six-month period of August 1, 2013, through January 31, 2014.
================================================================================
EXPENSE EXAMPLE | 37
================================================================================
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Jefferson C. Boyce
Paul L. McNamara
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
--------------------------------------------------------------------------------
ADMINISTRATOR AND USAA Asset Management Company
INVESTMENT ADVISER P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O. Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "My Accounts" on
SELF-SERVICE 24/7 usaa.com select your mutual fund
AT USAA.COM account and either click the link or
select 'I want to...' and select
OR CALL the desired action.
(800) 531-USAA
(8722)
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) in summary within the Statement of Additional Information on the SEC's
website at HTTP://WWW.SEC.GOV. Information regarding how the Fund voted proxies
relating to portfolio securities during the most recent 12-month period ended
June 30 is available without charge (i) at USAA.COM; and (ii) on the SEC's
website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
USAA --------------
9800 Fredericksburg Road PRSRT STD
San Antonio, TX 78288 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)
============================================================================
23420-0314 (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 January 31, 2014
By:* /S/ DANIEL J. MAVICO
-----------------------------------------------------------
Signature and Title: Daniel J. Mavico, Assistant Secretary
Date: 03/31/2014
------------------------------
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: 03/31/2014
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 03/31/2014
------------------------------
*Print the name and title of each signing officer under his or her signature.