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 AGGRESSIVE GROWTH FUND]
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SEMIANNUAL REPORT
USAA AGGRESSIVE 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 6
FINANCIAL INFORMATION
Portfolio of Investments 11
Notes to Portfolio of Investments 19
Financial Statements 20
Notes to Financial Statements 23
EXPENSE EXAMPLE 38
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA ASSET MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2014, USAA. All rights reserved.
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FUND OBJECTIVE
THE USAA AGGRESSIVE GROWTH FUND (THE FUND) SEEKS CAPITAL APPRECIATION.
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TYPES OF INVESTMENTS
The Fund invests primarily in equity securities of large companies that are
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
Wellington Management Company, LLP Winslow Capital Management, LLC
PAUL E. MARRKAND, CFA CLARK J. WINSLOW
JUSTIN H. KELLY, CFA
PATRICK M. BURTON, CFA
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o HOW DID THE USAA AGGRESSIVE GROWTH FUND (THE FUND) PERFORM DURING THE
REPORTING PERIOD?
The Fund has two share classes: Fund Shares and Institutional Shares. For
the six-month period ended January 31, 2014, the Fund Shares and
Institutional Shares had a total return of 11.70% and 11.81%, 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
subadviser(s). Wellington Management Company, LLP (Wellington) and Winslow
Capital Management, LLC (Winslow) 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.
Refer to page 7 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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2 | USAA AGGRESSIVE GROWTH FUND
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o HOW DID THE OVERALL MARKET PERFORM DURING THE REPORTING PERIOD?
The period was strong for U.S. equities. Equity markets were boosted by news
in December of the modest level of the U.S. Federal Reserve's (the Fed)
tapering of its bond-buying program, coupled with improving macroeconomic
data. In January however, the market dipped as December payroll data
undermined previous confidence in U.S. economic growth. In addition, the
Argentine peso dropped in value and unnerved holders of other emerging
currencies, most notably those of Turkey, South Africa, and Russia. The
Fed's tapering program will likely result in reduced liquidity within
emerging markets countries. Further data suggests that economic growth in
emerging markets is also slowing. The largest emerging market, China, may
grow slower in 2014. China is the chief purchaser of exports from other
emerging markets.
o HOW DID THE WELLINGTON MANAGEMENT PORTION PERFORM DURING THE REPORTING
PERIOD?
Positive stock selection in the financials sector was offset by weaker
selection in the information technology and health care sectors. Sector
allocation, a result of bottom-up stock selection, contributed to relative
return, primarily due to an underweight position in the lagging consumer
staples sector and an overweight exposure to the solidly performing
information technology sector.
Top contributors relative to performance included the online media and
e-commerce company IAC/InterActiveCorp, as well as underweight positions in
Philip Morris and IBM Corp. The largest detractors from returns included
positions in Cisco Systems, Inc. and the semiconductor company Altera
Corp., as well as an underweight position in Apple, Inc.
You will find a complete list of securities that the Fund owns on pages
11-18.
Phillip Morris and IBM Corp. were sold out of the Fund prior to January 31,
2014.
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MANAGERS' COMMENTARY ON THE FUND | 3
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o HOW IS WELLINGTON MANAGEMENT POSITIONED?
Our portfolio continues to be balanced based on our growth, quality, and
valuation measurements. We remain disciplined in executing our process, and
we believe that we have an attractive portfolio of companies with strong
balance sheets, solid growth opportunities, and high return on capital. At
the end of the period, our largest overweights were to the information
technology, health care, and industrials sectors, while we remained
underweight in the consumer staples, materials, and telecommunication
services sectors.
o HOW DID WINSLOW CAPITAL'S PORTION OF THE PORTFOLIO PERFORM DURING THE
REPORTING PERIOD?
The top-performing sectors were information technology and consumer staples
sectors. Within the information technology sector, stock selection drove
positive relative performance, while a modest underweight exposure to the
sector itself detracted slightly. A longstanding underweight exposure to
the consumer staples sector contributed to relative return, as did stock
selection. Top performers in the technology sector included the
cloud-computing provider Salesforce.com, Inc. and Facebook, Inc. "A".
The bottom-performing sectors for the period were the industrials and
energy sectors, with stock selection the main driver of underperformance.
Within the industrials sector, the maintenance, repair and operations
supplier W.W. Grainger, Inc. represented the largest detractor. In the
energy sector, positions in the oil and gas firms EOG Resources and Noble
Energy, Inc. subtracted from performance.
W.W. Grainger, Inc. and EOG Resources were sold out of the Fund prior to
January 31, 2014.
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4 | USAA AGGRESSIVE GROWTH FUND
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o HOW IS THE WINSLOW CAPITAL PORTFOLIO POSITIONED?
We have maintained largely the same portfolio positioning as we have held
for the last several months. Consumer discretionary stocks remain our
largest overweight position. Within the sector, we believe that Amazon.com,
Inc. will likely see strong growth from its Web services business, and the
potential reduction of capital expenditures by the company in 2014 could add
to earnings. We believe that economic recovery in Europe, mobile traffic
growth, and increasing economies of scale, particularly in customer
acquisition costs, should, in our view, add upside to earnings for
priceline.com, Inc.
In health care, we believe that companies with exceptional drug "pipelines"
and those poised to benefit from the Affordable Care Act will be favored.
We plan to remain selective in the information technology sector and we are
skeptical of slower-growth "legacy" technology companies such as IBM Corp.
We also believe that a rising interest rate environment, in our opinion,
should benefit banks and brokers such as Charles Schwab Corp. and JPMorgan
Chase & Co.; both companies were added to our portion of the portfolio
during the period.
Going forward, we expect challenges in the industrials, energy, and
materials companies markets. Thus, we will continue to seek companies with
growth opportunities. Our portion of the Fund holds companies within the
aerospace and automobile end-markets, and we are avoiding firms that are
over-leveraged to emerging markets. Similarly, we think that emerging market
exposure combined with other headwinds will limit growth opportunities
within the consumer staples area. Valuations have improved there given
recent underperformance, but they remain elevated on a historical basis.
Thank you for your investment in the Fund.
Foreign investing is subject to additional risks, such as currency
fluctuations, market illiquidity, and political instability. Emerging
market countries are most volatile. Emerging market countries are less
diverse and mature than other countries and tend to be politically less
stable.
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MANAGERS' COMMENTARY ON THE FUND | 5
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INVESTMENT OVERVIEW
USAA AGGRESSIVE GROWTH FUND SHARES (FUND SHARES) (Ticker Symbol: USAUX)
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1/31/14 7/31/13
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Net Assets $1,057.5 Million $1,010.0 Million
Net Asset Value Per Share $39.11 $38.44
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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
11.70% 25.59% 18.77% 6.41%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
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1 Year 5 Years 10 Years
34.43% 17.37% 6.69%
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EXPENSE RATIO AS OF 7/31/13**
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1.08%
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. This expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
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6 | USAA AGGRESSIVE GROWTH FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
RUSSELL 1000 LIPPER LARGE-CAP USAA AGGRESSIVE
GROWTH INDEX GROWTH FUNDS INDEX GROWTH FUND SHARES
1/31/2004 $10,000.00 $10,000.00 $10,000.00
2/29/2004 10,063.53 10,043.29 10,154.20
3/31/2004 9,876.85 9,931.27 10,177.33
4/30/2004 9,762.03 9,708.32 9,907.48
5/31/2004 9,943.98 9,884.20 9,984.58
6/30/2004 10,068.24 10,025.63 10,123.36
7/31/2004 9,499.06 9,432.75 9,610.64
8/31/2004 9,452.15 9,366.21 9,714.73
9/30/2004 9,542.05 9,585.69 10,138.78
10/31/2004 9,690.87 9,701.22 10,084.81
11/30/2004 10,024.22 10,134.01 10,636.08
12/31/2004 10,417.26 10,543.17 11,272.17
1/31/2005 10,069.86 10,180.30 10,851.97
2/28/2005 10,177.03 10,246.93 10,913.65
3/31/2005 9,991.61 10,060.26 10,751.73
4/30/2005 9,801.33 9,841.57 10,659.21
5/31/2005 10,275.55 10,387.83 11,129.53
6/30/2005 10,237.67 10,408.55 11,256.75
7/31/2005 10,738.03 10,931.93 11,665.38
8/31/2005 10,599.74 10,815.27 11,464.92
9/30/2005 10,648.55 10,944.75 11,626.83
10/31/2005 10,545.05 10,873.87 11,495.76
11/30/2005 11,000.01 11,371.57 12,016.19
12/31/2005 10,965.53 11,342.45 12,086.64
1/31/2006 11,158.04 11,651.72 12,402.88
2/28/2006 11,140.31 11,494.55 12,341.18
3/31/2006 11,304.80 11,605.38 12,445.31
4/30/2006 11,289.43 11,587.16 12,441.45
5/31/2006 10,906.77 11,046.60 11,909.24
6/30/2006 10,863.73 11,010.30 11,897.67
7/31/2006 10,656.82 10,728.40 11,523.57
8/31/2006 10,989.31 10,976.81 11,600.71
9/30/2006 11,291.27 11,213.49 11,859.10
10/31/2006 11,688.20 11,550.85 12,217.77
11/30/2006 11,920.15 11,814.75 12,510.87
12/31/2006 11,960.51 11,877.26 12,730.70
1/31/2007 12,267.97 12,183.81 13,324.62
2/28/2007 12,037.37 11,908.79 12,850.25
3/31/2007 12,102.66 11,998.40 12,803.97
4/30/2007 12,672.45 12,485.52 13,174.21
5/31/2007 13,128.34 12,908.33 13,683.28
6/30/2007 12,932.37 12,786.59 13,548.30
7/31/2007 12,731.88 12,624.34 13,390.18
8/31/2007 12,934.76 12,832.38 13,667.85
9/30/2007 13,476.60 13,615.17 14,624.30
10/31/2007 13,935.26 14,223.58 15,492.03
11/30/2007 13,421.93 13,643.70 14,705.28
12/31/2007 13,373.40 13,655.62 14,625.28
1/31/2008 12,330.58 12,487.09 13,376.55
2/29/2008 12,085.68 12,226.95 12,908.75
3/31/2008 12,012.10 12,122.91 12,645.86
4/30/2008 12,642.73 12,869.97 13,446.13
5/31/2008 13,106.14 13,221.36 13,662.63
6/30/2008 12,162.21 12,248.67 12,645.86
7/31/2008 11,930.97 12,006.98 12,518.28
8/31/2008 12,059.44 12,039.04 12,410.03
9/30/2008 10,662.90 10,495.87 11,049.18
10/31/2008 8,785.60 8,662.80 9,413.84
11/30/2008 8,086.89 7,793.79 8,416.40
12/31/2008 8,233.04 8,003.14 8,556.59
1/31/2009 7,836.99 7,589.43 7,875.02
2/28/2009 7,247.43 7,094.39 7,349.24
3/31/2009 7,893.87 7,704.05 7,843.86
4/30/2009 8,651.73 8,520.32 8,626.69
5/31/2009 9,080.61 8,986.78 9,218.68
6/30/2009 9,182.20 8,990.31 9,004.48
7/31/2009 9,834.38 9,667.76 9,670.46
8/31/2009 10,038.33 9,858.48 9,943.09
9/30/2009 10,465.32 10,331.92 10,375.40
10/31/2009 10,323.57 10,127.50 10,188.46
11/30/2009 10,957.77 10,738.37 10,944.02
12/31/2009 11,296.46 11,084.28 11,003.97
1/31/2010 10,803.52 10,503.56 10,522.81
2/28/2010 11,174.80 10,876.17 10,824.02
3/31/2010 11,821.18 11,559.30 11,586.83
4/30/2010 11,953.27 11,678.20 11,758.95
5/31/2010 11,040.74 10,740.04 10,906.17
6/30/2010 10,432.77 10,121.92 10,162.92
7/31/2010 11,176.96 10,808.45 10,780.99
8/31/2010 10,655.12 10,277.84 10,225.51
9/30/2010 11,789.36 11,379.55 11,465.56
10/31/2010 12,352.41 11,977.17 12,009.31
11/30/2010 12,495.87 12,097.03 12,154.04
12/31/2010 13,184.16 12,760.79 12,908.87
1/31/2011 13,519.68 13,012.59 13,198.43
2/28/2011 13,962.14 13,364.68 13,628.86
3/31/2011 13,979.19 13,371.41 13,718.85
4/30/2011 14,447.34 13,776.86 14,157.11
5/31/2011 14,290.05 13,609.19 13,922.33
6/30/2011 14,085.10 13,429.04 13,711.03
7/31/2011 13,943.91 13,357.18 13,527.12
8/31/2011 13,208.03 12,459.13 12,599.75
9/30/2011 12,234.80 11,371.84 11,504.12
10/31/2011 13,577.44 12,736.71 13,006.69
11/30/2011 13,576.13 12,579.96 12,826.70
12/31/2011 13,532.48 12,390.16 12,588.01
1/31/2012 14,340.26 13,239.47 13,523.21
2/29/2012 15,026.08 14,019.20 14,219.71
3/31/2012 15,520.31 14,514.59 14,763.62
4/30/2012 15,496.34 14,407.89 14,560.14
5/31/2012 14,502.30 13,303.24 13,347.12
6/30/2012 14,896.09 13,597.89 13,711.03
7/31/2012 15,095.77 13,618.91 13,730.59
8/31/2012 15,501.91 14,130.39 14,219.71
9/30/2012 15,805.92 14,477.35 14,509.27
10/31/2012 15,344.60 13,974.03 13,863.63
11/30/2012 15,601.55 14,284.96 14,207.97
12/31/2012 15,597.24 14,362.43 14,177.05
1/31/2013 16,265.72 14,982.37 14,818.51
2/28/2013 16,468.13 15,062.42 14,918.19
3/31/2013 17,085.90 15,536.04 15,438.29
4/30/2013 17,448.58 15,737.41 15,624.66
5/31/2013 17,772.72 16,152.14 16,110.09
6/30/2013 17,438.28 15,824.88 15,828.37
7/31/2013 18,362.88 16,814.32 16,660.53
8/31/2013 18,048.17 16,612.20 16,352.80
9/30/2013 18,852.46 17,561.96 17,228.30
10/31/2013 19,686.41 18,298.51 17,943.44
11/30/2013 20,241.75 18,845.43 18,506.88
12/31/2013 20,819.95 19,448.23 19,057.63
1/31/2014 20,226.41 18,983.98 18,610.33
[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 Aggressive 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 within 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.
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INVESTMENT OVERVIEW | 7
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USAA AGGRESSIVE GROWTH FUND INSTITUTIONAL SHARES (INSTITUTIONAL SHARES)
(Ticker Symbol: UIAGX)
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1/31/14 7/31/13
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Net Assets $110.7 Million $165.1 Million
Net Asset Value Per Share $39.36 $38.67
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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 Since Inception 8/01/08
11.81% 25.91% 19.25% 8.08%
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AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
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1 Year 5 Years Since Inception 8/01/08
34.84% 17.85% 8.69%
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EXPENSE RATIO AS OF 7/31/13**
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0.71%
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. This expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
The Institutional Shares are available for investment through a USAA
discretionary managed account program, and certain advisory programs sponsored
by financial intermediaries, such as brokerage firms, investment advisors,
financial planners, third-party administrators, and insurance companies.
Institutional Shares also are available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA Fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds) and not to the general public.
================================================================================
8 | USAA AGGRESSIVE GROWTH FUND
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA AGGRESSIVE
RUSSELL 1000 LIPPER LARGE-CAP GROWTH 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 10,012.48
9/30/2008 8,937.16 8,741.47 8,914.54
10/31/2008 7,363.69 7,214.80 7,595.13
11/30/2008 6,778.06 6,491.05 6,790.39
12/31/2008 6,900.56 6,665.41 6,909.17
1/31/2009 6,568.61 6,320.85 6,357.57
2/28/2009 6,074.46 5,908.55 5,938.36
3/31/2009 6,616.28 6,416.31 6,341.81
4/30/2009 7,251.48 7,096.14 6,978.52
5/31/2009 7,610.95 7,484.63 7,460.77
6/30/2009 7,696.10 7,487.57 7,290.56
7/31/2009 8,242.73 8,051.78 7,832.71
8/31/2009 8,413.67 8,210.62 8,056.50
9/30/2009 8,771.55 8,604.93 8,409.52
10/31/2009 8,652.74 8,434.67 8,261.38
11/30/2009 9,184.30 8,943.43 8,879.17
12/31/2009 9,468.18 9,231.53 8,926.20
1/31/2010 9,055.02 8,747.88 8,538.24
2/28/2010 9,366.21 9,058.20 8,789.46
3/31/2010 9,907.97 9,627.15 9,412.73
4/30/2010 10,018.69 9,726.17 9,552.65
5/31/2010 9,253.84 8,944.83 8,865.78
6/30/2010 8,744.28 8,430.03 8,264.76
7/31/2010 9,368.02 9,001.80 8,770.38
8/31/2010 8,930.63 8,559.89 8,318.82
9/30/2010 9,881.30 9,477.45 9,330.05
10/31/2010 10,353.23 9,975.17 9,778.43
11/30/2010 10,473.47 10,075.00 9,899.27
12/31/2010 11,050.36 10,627.81 10,517.15
1/31/2011 11,331.58 10,837.52 10,759.87
2/28/2011 11,702.43 11,130.76 11,114.38
3/31/2011 11,716.72 11,136.36 11,191.03
4/30/2011 12,109.10 11,474.04 11,548.74
5/31/2011 11,977.27 11,334.40 11,363.50
6/30/2011 11,805.49 11,184.35 11,194.23
7/31/2011 11,687.16 11,124.51 11,050.51
8/31/2011 11,070.37 10,376.57 10,296.77
9/30/2011 10,254.66 9,471.02 9,405.71
10/31/2011 11,380.00 10,607.76 10,635.32
11/30/2011 11,378.90 10,477.21 10,491.60
12/31/2011 11,342.31 10,319.13 10,299.97
1/31/2012 12,019.35 11,026.47 11,066.48
2/29/2012 12,594.17 11,675.87 11,641.36
3/31/2012 13,008.42 12,088.46 12,091.68
4/30/2012 12,988.33 11,999.59 11,928.80
5/31/2012 12,155.17 11,079.58 10,938.73
6/30/2012 12,485.22 11,324.98 11,238.94
7/31/2012 12,652.59 11,342.50 11,261.30
8/31/2012 12,992.99 11,768.47 11,666.91
9/30/2012 13,247.80 12,057.45 11,909.64
10/31/2012 12,861.15 11,638.25 11,382.66
11/30/2012 13,076.51 11,897.21 11,670.10
12/31/2012 13,072.90 11,961.73 11,647.13
1/31/2013 13,633.19 12,478.05 12,179.13
2/28/2013 13,802.84 12,544.72 12,264.25
3/31/2013 14,320.63 12,939.17 12,696.94
4/30/2013 14,624.61 13,106.88 12,852.99
5/31/2013 14,896.29 13,452.29 13,257.30
6/30/2013 14,615.98 13,179.73 13,026.77
7/31/2013 15,390.94 14,003.78 13,714.82
8/31/2013 15,127.16 13,835.45 13,466.56
9/30/2013 15,801.28 14,626.46 14,190.07
10/31/2013 16,500.26 15,239.89 14,782.36
11/30/2013 16,965.71 15,695.40 15,246.97
12/31/2013 17,450.34 16,197.44 15,704.57
1/31/2014 16,952.86 15,810.78 15,334.46
[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 Aggressive Growth Fund Institutional Shares to the Fund's benchmarks listed
above (see page 7 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.
================================================================================
INVESTMENT OVERVIEW | 9
================================================================================
o TOP 10 HOLDINGS o
AS OF 1/31/2014
(% of Net Assets)
Google, Inc. "A" ........................................................ 4.5%
Visa, Inc. "A" .......................................................... 2.8%
Apple, Inc. ............................................................. 2.5%
Celgene Corp. ........................................................... 2.4%
Microsoft Corp. ......................................................... 2.3%
priceline.com, Inc. ..................................................... 2.3%
Amgen, Inc. ............................................................. 2.1%
Union Pacific Corp. ..................................................... 2.1%
Gilead Sciences, Inc. ................................................... 2.1%
Danaher Corp. ........................................................... 2.1%
o ASSET ALLOCATION -- 1/31/2014 o
[PIE CHART OF ASSET ALLOCATION]
INFORMATION TECHNOLOGY 32.1%
CONSUMER DISCRETIONARY 22.4%
HEALTH CARE 17.0%
INDUSTRIALS 12.1%
FINANCIALS 6.0%
ENERGY 3.4%
CONSUMER STAPLES 2.8%
MATERIALS 2.3%
TELECOMMUNICATION SERVICES 0.7%
MONEY MARKET INSTRUMENTS 0.9%
[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 11-18.
================================================================================
10 | USAA AGGRESSIVE GROWTH FUND
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
COMMON STOCKS (98.8%)
CONSUMER DISCRETIONARY (22.4%)
------------------------------
ADVERTISING (0.5%)
75,431 Omnicom Group, Inc. $ 5,475
----------
APPAREL RETAIL (1.0%)
21,210 Buckle, Inc. 940
84,800 Ross Stores, Inc. 5,759
73,804 TJX Companies, Inc. 4,233
----------
10,932
----------
APPAREL, ACCESSORIES & LUXURY GOODS (0.9%)
2,578 Lululemon Athletica, Inc.* 118
54,300 Michael Kors Holdings Ltd.* 4,340
38,500 Ralph Lauren Corp. 6,040
----------
10,498
----------
AUTO PARTS & EQUIPMENT (0.6%)
136,000 BorgWarner, Inc. 7,303
----------
AUTOMOBILE MANUFACTURERS (0.3%)
158,973 Ford Motor Co. 2,378
3,900 Tesla Motors, Inc.* 708
----------
3,086
----------
AUTOMOTIVE RETAIL (0.4%)
36,122 O'Reilly Automotive, Inc.* 4,731
----------
BROADCASTING (1.2%)
132,300 CBS Corp. "B" 7,769
42,053 Discovery Communications, Inc. "A"* 3,355
44,235 Scripps Networks Interactive "A" 3,208
----------
14,332
----------
CABLE & SATELLITE (1.7%)
200,444 Comcast Corp. "A" 10,914
19,984 DIRECTV* 1,388
65,500 Liberty Global plc "A"* 5,235
30,900 Liberty Global plc "C"* 2,451
----------
19,988
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 11
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
CASINOS & GAMING (0.9%)
48,441 Wynn Resorts Ltd. $ 10,532
----------
FOOTWEAR (0.9%)
138,756 NIKE, Inc. "B" 10,108
----------
GENERAL MERCHANDISE STORES (0.7%)
142,800 Dollar General Corp.* 8,043
10,711 Dollar Tree, Inc.* 541
----------
8,584
----------
HOME IMPROVEMENT RETAIL (2.2%)
123,765 Home Depot, Inc. 9,511
353,410 Lowe's Companies, Inc. 16,360
----------
25,871
----------
HOMEBUILDING (0.4%)
235,135 PulteGroup, Inc. 4,778
----------
HOTELS, RESORTS & CRUISE LINES (1.5%)
258,100 Hilton Worldwide Holdings Inc.* 5,588
79,663 Starwood Hotels & Resorts Worldwide, Inc. 5,952
88,909 Wyndham Worldwide Corp. 6,307
----------
17,847
----------
INTERNET RETAIL (4.7%)
62,425 Amazon.com, Inc.* 22,391
23,382 Expedia, Inc. 1,519
64,512 Homeaway, Inc.* 2,636
23,755 priceline.com, Inc.* 27,197
16,400 TripAdvisor, Inc.* 1,266
----------
55,009
----------
MOVIES & ENTERTAINMENT (2.1%)
540,584 Twenty-First Century Fox, Inc. "A" 17,201
96,800 Walt Disney Co. 7,029
----------
24,230
----------
RESTAURANTS (1.9%)
12,358 Chipotle Mexican Grill, Inc.* 6,821
217,400 Starbucks Corp. 15,462
----------
22,283
----------
SPECIALTY STORES (0.5%)
13,849 PetSmart, Inc. 872
59,300 Ulta Salon, Cosmetics & Fragrance, Inc.* 5,083
----------
5,955
----------
Total Consumer Discretionary 261,542
----------
================================================================================
12 | USAA AGGRESSIVE GROWTH FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
CONSUMER STAPLES (2.8%)
-----------------------
BREWERS (0.2%)
21,897 Anheuser-Busch InBev N.V. ADR $ 2,099
----------
DRUG RETAIL (1.0%)
172,399 CVS Caremark Corp. 11,675
----------
HYPERMARKETS & SUPER CENTERS (0.8%)
79,448 Costco Wholesale Corp. 8,927
----------
PACKAGED FOODS & MEAT (0.3%)
45,496 Green Mountain Coffee Roasters, Inc. 3,685
----------
PERSONAL PRODUCTS (0.5%)
88,300 Estee Lauder Companies, Inc. "A" 6,070
----------
Total Consumer Staples 32,456
----------
ENERGY (3.4%)
-------------
OIL & GAS EQUIPMENT & SERVICES (1.6%)
56,974 National-Oilwell Varco, Inc. 4,274
44,704 Oceaneering International, Inc. 3,047
122,100 Schlumberger Ltd. 10,692
----------
18,013
----------
OIL & GAS EXPLORATION & PRODUCTION (1.5%)
37,993 Apache Corp. 3,049
25,065 Cabot Oil & Gas Corp. 1,002
109,200 Noble Energy, Inc. 6,806
77,000 Range Resources Corp. 6,637
----------
17,494
----------
OIL & GAS REFINING & MARKETING (0.3%)
74,234 Valero Energy Corp. 3,793
----------
Total Energy 39,300
----------
FINANCIALS (6.0%)
-----------------
ASSET MANAGEMENT & CUSTODY BANKS (1.1%)
36,460 BlackRock, Inc. 10,955
32,205 Waddell & Reed Financial, Inc. "A" 2,088
----------
13,043
----------
CONSUMER FINANCE (1.3%)
181,930 American Express Co. 15,468
----------
INVESTMENT BANKING & BROKERAGE (1.1%)
228,500 Charles Schwab Corp. 5,672
246,400 Morgan Stanley 7,271
----------
12,943
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES (1.3%)
346,684 Bank of America Corp. $ 5,807
159,387 JPMorgan Chase & Co. 8,823
----------
14,630
----------
REITs - SPECIALIZED (0.7%)
103,000 American Tower Corp. 8,331
----------
SPECIALIZED FINANCE (0.5%)
25,042 IntercontinentalExchange Group, Inc. 5,228
----------
Total Financials 69,643
----------
HEALTH CARE (17.0%)
-------------------
BIOTECHNOLOGY (10.0%)
63,400 Alexion Pharmaceuticals, Inc.* 10,063
210,941 Amgen, Inc. 25,091
76,921 Biogen Idec, Inc.* 24,049
183,464 Celgene Corp.* 27,874
305,524 Gilead Sciences, Inc.* 24,640
78,000 Incyte Corp.* 5,111
----------
116,828
----------
HEALTH CARE DISTRIBUTORS (1.0%)
69,987 McKesson Corp. 12,207
----------
HEALTH CARE EQUIPMENT (1.9%)
47,186 Becton, Dickinson & Co. 5,102
39,275 C.R. Bard, Inc. 5,090
113,570 Medtronic, Inc. 6,423
59,332 Zimmer Holdings, Inc. 5,575
----------
22,190
----------
HEALTH CARE FACILITIES (0.2%)
38,894 HCA Holdings, Inc.* 1,955
----------
HEALTH CARE SERVICES (1.0%)
114,500 Catamaran Corp.* 5,567
90,619 Express Scripts Holdings Co.* 6,768
----------
12,335
----------
HEALTH CARE TECHNOLOGY (0.6%)
131,700 Cerner Corp.* 7,493
----------
MANAGED HEALTH CARE (0.4%)
62,164 Aetna, Inc. 4,248
----------
PHARMACEUTICALS (1.9%)
29,746 Bristol-Myers Squibb Co. 1,486
74,277 Eli Lilly and Co. 4,012
================================================================================
14 | USAA AGGRESSIVE GROWTH FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
49,735 Johnson & Johnson $ 4,400
89,688 Merck & Co., Inc. 4,751
241,900 Zoetis, Inc. 7,344
----------
21,993
----------
Total Health Care 199,249
----------
INDUSTRIALS (12.1%)
-------------------
AEROSPACE & DEFENSE (4.0%)
83,782 Boeing Co. 10,494
77,657 Honeywell International, Inc. 7,085
42,600 Precision Castparts Corp. 10,852
165,555 United Technologies Corp. 18,877
----------
47,308
----------
AIR FREIGHT & LOGISTICS (0.6%)
68,315 United Parcel Service, Inc. "B" 6,506
----------
AIRLINES (0.4%)
158,300 Delta Air Lines, Inc. 4,845
----------
ELECTRICAL COMPONENTS & EQUIPMENT (0.5%)
46,891 Rockwell Automation, Inc. 5,385
----------
INDUSTRIAL CONGLOMERATES (2.8%)
61,211 3M Co. 7,847
330,007 Danaher Corp. 24,549
----------
32,396
----------
INDUSTRIAL MACHINERY (1.3%)
54,371 Dover Corp. 4,706
54,409 Illinois Tool Works, Inc. 4,291
58,617 Parker-Hannifin Corp. 6,646
----------
15,643
----------
RAILROADS (2.1%)
142,400 Union Pacific Corp. 24,812
----------
SECURITY & ALARM SERVICES (0.4%)
42,118 ADT Corp. 1,265
89,194 Tyco International Ltd. 3,612
----------
4,877
----------
Total Industrials 141,772
----------
INFORMATION TECHNOLOGY (32.1%)
------------------------------
APPLICATION SOFTWARE (3.2%)
63,313 Informatica Corp.* 2,555
60,493 Intuit, Inc. 4,431
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
375,327 Salesforce.com, Inc.* $ 22,719
46,493 Splunk, Inc.* 3,582
46,005 Workday, Inc. "A"* 4,119
----------
37,406
----------
COMMUNICATIONS EQUIPMENT (2.4%)
285,533 Cisco Systems, Inc. 6,256
28,879 F5 Networks, Inc.* 3,090
251,254 QUALCOMM, Inc. 18,648
----------
27,994
----------
COMPUTER HARDWARE (2.5%)
58,088 Apple, Inc. 29,079
----------
COMPUTER STORAGE & PERIPHERALS (1.7%)
225,385 NetApp, Inc. 9,543
77,275 SanDisk Corp. 5,374
63,389 Western Digital Corp. 5,462
----------
20,379
----------
DATA PROCESSING & OUTSOURCED SERVICES (4.5%)
20,325 Alliance Data Systems Corp.* 4,871
134,050 MasterCard, Inc. "A" 10,145
76,083 Paychex, Inc. 3,182
51,143 Vantiv, Inc. "A"* 1,552
153,480 Visa, Inc. "A" 33,064
----------
52,814
----------
INTERNET SOFTWARE & SERVICES (9.1%)
49,100 Baidu, Inc. ADR* 7,684
67,200 eBay, Inc.* 3,575
361,527 Facebook, Inc. "A"* 22,621
44,160 Google, Inc. "A"* 52,152
107,269 IAC/InterActiveCorp. 7,513
42,908 LinkedIn Corp. "A"* 9,234
6,783 Twitter, Inc.* 438
82,653 Yahoo! Inc.* 2,977
----------
106,194
----------
IT CONSULTING & OTHER SERVICES (0.6%)
79,400 Cognizant Technology Solutions Corp. "A"* 7,695
----------
SEMICONDUCTOR EQUIPMENT (0.5%)
321,900 Applied Materials, Inc. 5,414
----------
SEMICONDUCTORS (2.4%)
245,735 Altera Corp. 8,215
164,800 ARM Holdings plc ADR 7,593
================================================================================
16 | USAA AGGRESSIVE GROWTH FUND
================================================================================
--------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
84,976 Microchip Technology, Inc. $ 3,812
92,572 Skyworks Solutions, Inc.* 2,800
119,262 Xilinx, Inc. 5,536
----------
27,956
----------
SYSTEMS SOFTWARE (5.2%)
119,668 Check Point Software Technologies Ltd.* 7,830
723,140 Microsoft Corp. 27,371
26,038 NetSuite, Inc.* 2,738
441,873 Oracle Corp. 16,305
33,753 Red Hat, Inc.* 1,907
66,100 Servicenow, Inc.* 4,193
----------
60,344
----------
Total Information Technology 375,275
----------
MATERIALS (2.3%)
----------------
FERTILIZERS & AGRICULTURAL CHEMICALS (1.5%)
169,391 Monsanto Co. 18,048
----------
SPECIALTY CHEMICALS (0.8%)
64,300 Ecolab, Inc. 6,465
13,369 Sherwin-Williams Co. 2,450
----------
8,915
----------
Total Materials 26,963
----------
TELECOMMUNICATION SERVICES (0.7%)
---------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.7%)
93,400 SBA Communications Corp. "A"* 8,663
----------
Total Common Stocks (cost: $773,788) 1,154,863
----------
MONEY MARKET INSTRUMENTS (0.9%)
MONEY MARKET FUNDS (0.9%)
10,350,989 State Street Institutional Liquid Reserve
Fund, 0.06%(a) (cost: $10,351) 10,351
----------
Total Money Market Instruments (cost: $10,351) 10,351
----------
TOTAL INVESTMENTS (COST: $784,139) $1,165,214
==========
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
-----------------------------------------------------------------------------------------------------
($ 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 $1,154,863 $- $- $1,154,863
Money Market Instruments:
Money Market Funds 10,351 - - 10,351
-----------------------------------------------------------------------------------------------------
Total $1,165,214 $- $- $1,165,214
-----------------------------------------------------------------------------------------------------
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.
================================================================================
18 | USAA AGGRESSIVE 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.
o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S)
ADR American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
REIT Real estate investment trust
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 | 19
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $784,139) $1,165,214
Receivables:
Capital shares sold
Affiliated transactions (Note 7) 22
Unaffiliated transactions 1,113
Dividends and interest 388
Securities sold 11,523
----------
Total assets 1,178,260
----------
LIABILITIES
Payables:
Securities purchased 8,944
Capital shares redeemed 573
Accrued management fees 444
Accrued transfer agent's fees 33
Other accrued expenses and payables 88
----------
Total liabilities 10,082
----------
Net assets applicable to capital shares outstanding $1,168,178
==========
NET ASSETS CONSIST OF:
Paid-in capital $ 773,241
Overdistribution of net investment income (23,944)
Accumulated net realized gain on investments 37,806
Net unrealized appreciation of investments 381,075
----------
Net assets applicable to capital shares outstanding $1,168,178
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $1,057,508/27,039 shares outstanding) $ 39.11
==========
Institutional Shares (net assets of $110,670/2,811 shares
outstanding) $ 39.37
==========
See accompanying notes to financial statements.
================================================================================
20 | USAA AGGRESSIVE GROWTH FUND
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended January 31, 2014 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $2) $ 6,568
Interest 3
--------
Total income 6,571
--------
EXPENSES
Management fees 2,663
Administration and servicing fees:
Fund Shares 1,347
Institutional Shares 59
Transfer agent's fees:
Fund Shares 1,127
Institutional Shares 59
Custody and accounting fees:
Fund Shares 109
Institutional Shares 11
Postage:
Fund Shares 49
Shareholder reporting fees:
Fund Shares 29
Trustees' fees 7
Registration fees:
Fund Shares 20
Institutional Shares 14
Professional fees 54
Other 12
--------
Total expenses 5,560
Expenses paid indirectly:
Fund Shares (21)
--------
Net expenses 5,539
--------
NET INVESTMENT INCOME 1,032
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 76,686
Change in net unrealized appreciation/depreciation 53,984
--------
Net realized and unrealized gain 130,670
--------
Increase in net assets resulting from operations $131,702
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 21
================================================================================
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 $ 1,032 $ 5,196
Net realized gain on investments 76,686 99,417
Change in net unrealized appreciation/depreciation
of investments 53,984 114,520
-------------------------
Increase in net assets resulting from operations 131,702 219,133
-------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares (24,842) (2,172)
Institutional Shares (2,596) (1,028)
-------------------------
Total distributions of net investment income (27,438) (3,200)
-------------------------
Net realized gains:
Fund Shares (75,792) (84,034)
Institutional Shares (7,525) (16,929)
-------------------------
Total distributions of net realized gains (83,317) (100,963)
-------------------------
Distributions to shareholders (110,755) (104,163)
-------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 5)
Fund Shares 29,024 36,726
Institutional Shares (56,814) (32,241)
-------------------------
Total net increase (decrease) in net assets from
capital share transactions (27,790) 4,485
-------------------------
Net increase (decrease) in net assets (6,843) 119,455
NET ASSETS
Beginning of period 1,175,021 1,055,566
-------------------------
End of period $1,168,178 $1,175,021
=========================
Accumulated undistributed (overdistribution of)
net investment income:
End of period $ (23,944) $ 2,462
=========================
See accompanying notes to financial statements.
================================================================================
22 | USAA AGGRESSIVE 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
Aggressive Growth Fund (the Fund), which is classified as diversified under the
1940 Act. The Fund's investment objective is to seek capital appreciation.
The Fund consists of two classes of shares: Aggressive Growth Fund Shares (Fund
Shares) and Aggressive 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 | 23
================================================================================
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 sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
================================================================================
24 | USAA AGGRESSIVE GROWTH FUND
================================================================================
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) has
agreed to notify the Manager of significant events it identifies that
would materially affect the value of the Fund's foreign securities. If
the Manager determines that a particular event would materially affect
the value of the Fund's foreign securities, then the Manager, under
valuation procedures approved by the Board, will consider such
available information that it deems relevant to determine a fair value
for the affected foreign securities. In addition, the Fund may use
information from an external vendor or other sources to adjust the
foreign market closing prices of foreign equity securities to reflect
what the Fund believes to be the fair value of the securities as of the
close of the NYSE. Fair valuation of affected foreign equity securities
may occur frequently based on an assessment that events that occur on a
fairly regular basis (such as U.S. market movements) are significant.
3. Investments in open-end investment companies, hedge, or other funds,
other than ETFs, are valued at their NAV at the end of each business
day.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market
value.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 25
================================================================================
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, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
================================================================================
26 | USAA AGGRESSIVE GROWTH FUND
================================================================================
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.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments
================================================================================
NOTES TO FINANCIAL STATEMENTS | 27
================================================================================
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 -- 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 $21,000
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 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
================================================================================
28 | USAA AGGRESSIVE GROWTH FUND
================================================================================
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 $3,000, which represents 1.9% 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.
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.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 29
================================================================================
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 no pre-enactment or post-enactment capital loss
carryforwards, for federal income tax purposes.
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
$355,150,000 and $500,669,000, 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.
Gross unrealized appreciation and depreciation of investments as of January 31,
2014, were $384,407,000 and $3,332,000, respectively, resulting in net
unrealized appreciation of $381,075,000.
(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.
================================================================================
30 | USAA AGGRESSIVE GROWTH 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 1,698 $ 67,940 2,981 $ 106,316
Shares issued from
reinvested dividends 2,522 99,432 2,607 85,112
Shares redeemed (3,455) (138,348) (4,338) (154,702)
-----------------------------------------------
Net increase from
capital share transactions 765 $ 29,024 1,250 $ 36,726
===============================================
INSTITUTIONAL SHARES:
Shares sold 139 $ 5,600 778 $ 27,988
Shares issued from
reinvested dividends 255 10,121 546 17,957
Shares redeemed (1,852) (72,535) (2,084) (78,186)
-----------------------------------------------
Net decrease from
capital share transactions (1,458) $ (56,814) (760) $ (32,241)
===============================================
(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 (with approval of the Board and without
shareholder approval) one or more subadviser(s) 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 31
================================================================================
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, which is accrued daily and
paid monthly, is computed as a percentage of the Fund's average net assets
at annualized rates of 0.50% of the first $750 million of average net
assets, 0.40% of that portion of average net assets over $750 million but
not over $1.5 billion, and 0.33% of that portion of average net assets over
$1.5 billion. For the six-month period ended January 31, 2014, the Fund's
effective annualized base fee was 0.46% of the Fund's average net assets
for the same period.
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 the Fund consists of the current month plus the
previous 35 months. The following table is utilized to determine the extent
of the performance adjustment:
OVER/UNDER PERFORMANCE ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
--------------------------------------------------------------------------------
+/- 1.00% to 4.00% +/- 0.04%
+/- 4.01% to 7.00% +/- 0.05%
+/- 7.01% and greater +/- 0.06%
(1)Based on the difference between average annual performance of the
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 performance
period, which is then multiplied by a fraction, the numerator of which is
the number of days in the month and the
================================================================================
32 | USAA AGGRESSIVE GROWTH FUND
================================================================================
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 $2,663,000, which
included a performance adjustment for the Fund Shares of $(106,000). For
the Fund Shares, the performance adjustment was (0.02)%. There was no
performance adjustment for the Institutional Shares.
B. SUBADVISORY AGREEMENT(S) -- The Manager has entered into investment
subadvisory agreements with Wellington Management Company, LLP (Wellington
Management) and Winslow Capital Management, LLC (Winslow Capital), under
which Wellington Management and Winslow Capital direct the investment and
reinvestment of the Fund's assets (as allocated from time to time by the
Manager).
The Manager (not the Fund) pays Wellington Management a subadvisory fee in
the annual amount of 0.325% on the first $300 million, 0.30% on the next
$700 million, and 0.28% on assets over $1 billion of the portion of the
Fund's average net assets that Wellington Management manages. For the
six-month period ended January 31, 2014, the Manager incurred subadvisory
fees, paid or payable to Wellington Management, of $883,000.
The Manager (not the Fund) pays Winslow Capital a subadvisory fee in the
annual amount of 0.40% on the first $100 million, 0.35% on the next $250
million, 0.30% on the next $250 million, and 0.25% on the next $400 million
of the portion of the Fund's average net assets that Winslow Capital
manages. For the six-month period ended January 31, 2014, the Manager
incurred subadvisory fees, paid or payable to Winslow Capital, of
$1,054,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 33
================================================================================
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 0.25% and 0.10% of average net assets of the Fund Shares and
Institutional Shares, respectively. 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 $1,347,000 and
$59,000, 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 $16,000 for these compliance and legal services. These expenses are
included in the professional fees on the Fund's statement of operations.
D. 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. 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 $1,127,000 and $59,000, respectively.
E. UNDERWRITING SERVICES -- USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares on a
continuing best-efforts basis and receives no commissions or fees for this
service.
================================================================================
34 | USAA AGGRESSIVE GROWTH FUND
================================================================================
(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 $22,000 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 0.3
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 3.3
USAA Target Retirement 2050 Fund 1.7
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 | 35
================================================================================
(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 $ 38.44 $ 35.09 $ 34.57 $ 27.56 $ 24.83 $ 32.38
------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income (loss) (.00)(a) .13 (.00)(a) (.01) .08 .15
Net realized and
unrealized gain (loss) 4.47 6.73 .52 7.03 2.77 (7.54)
------------------------------------------------------------------------------------
Total from investment
operations 4.47 6.86 .52 7.02 2.85 (7.39)
------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.89) (.08) - (.01) (.12) (.16)
Realized capital gains (2.91) (3.43) - - - -
------------------------------------------------------------------------------------
Total distributions (3.80) (3.51) - (.01) (.12) (.16)
------------------------------------------------------------------------------------
Net asset value at end
of period $ 39.11 $ 38.44 $ 35.09 $ 34.57 $ 27.56 $ 24.83
====================================================================================
Total return (%)* 11.70 21.34 1.50 25.47 11.48(b) (22.75)
Net assets at end of
period (000) $1,057,508 $1,009,963 $878,246 $1,207,205 $997,867 $863,162
Ratios to average
net assets:**
Expenses (%)(c) .95(d) 1.08 1.08 1.02 1.06(b) 1.18
Net investment income (loss) (%) .15(d) .40 (.01) (.12) .27 .62
Portfolio turnover (%) 30 67 55 63 156(e) 79
* 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 $1,068,938,000.
(a) Represents less than $0.01 per share.
(b) During the year ended July 30, 2010, SAS reimbursed the Fund Shares $327,000 for corrections in fees
paid for the administration and servicing of certain accounts. The effect of this reimbursement on the
Fund Shares' total return was less than 0.01%. The reimbursement decreased the Fund Shares' expense
ratios by 0.03%. This decrease is excluded from the expense ratios in the Financial Highlights table.
(c) 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%)(+) (.01%) (.01%) (.00%)(+) (.01%) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
(d) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(e) Reflects increased trading activity due to changes in subadviser(s) and asset allocation strategies.
================================================================================
36 | USAA AGGRESSIVE 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 ENDED PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31, JULY 31,
-------------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009***
-------------------------------------------------------------------------------
Net asset value at
beginning of period $ 38.67 $ 35.26 $ 34.60 $ 27.58 $ 24.85 $ 32.06
----------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .23 .30 .13 .14 .23 .24(a)
Net realized and
unrealized gain (loss) 4.31 6.73 .53 7.02 2.75 (7.22)(a)
----------------------------------------------------------------------------
Total from investment
operations 4.54 7.03 .66 7.16 2.98 (6.98)(a)
----------------------------------------------------------------------------
Less distributions from:
Net investment income (.93) (.19) - (.14) (.25) (.23)
Realized capital gains (2.91) (3.43) - - - -
----------------------------------------------------------------------------
Total distributions (3.84) (3.62) - (.14) (.25) (.23)
----------------------------------------------------------------------------
Net asset value at end
of period $ 39.37 $ 38.67 $ 35.26 $ 34.60 $ 27.58 $ 24.85
============================================================================
Total return (%)* 11.84 21.79 1.91 26.00 11.97 (21.67)
Net assets at end of
period (000) $110,670 $165,058 $177,320 $136,837 $70,397 $21,565
Ratios to average
net assets:**
Expenses (%)(c) .72(b) .71 .68 .58(d) .60(d) .61(b),(d)
Expenses, excluding
reimbursements (%) .72(b) .71 .68 .58 .60 .63
Net investment income (%) .41(b) .78 .37 .31 .62 1.11(b)
Portfolio turnover (%) 30 67 55 63 156(e) 79
* 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 $115,926,000.
*** Institutional Shares were initiated on August 1, 2008.
(a) Calculated using average shares.
(b) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(c) 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%)(+) (.01%) (.00%)(+) (.01%) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
(d) Prior to December 1, 2010, the Manager had voluntarily agreed to limit the annual expenses of the
Institutional Shares to .61% of the Institutional Shares' average net assets.
(e) Reflects increased trading activity due to changes in subadviser(s) and asset allocation strategies.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
================================================================================
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 may not be
================================================================================
38 | USAA AGGRESSIVE GROWTH FUND
================================================================================
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 $1,117.00 $5.07
Hypothetical
(5% return before expenses) 1,000.00 1,020.42 4.84
INSTITUTIONAL SHARES
Actual 1,000.00 1,118.40 3.84
Hypothetical
(5% return before expenses) 1,000.00 1,021.58 3.67
* Expenses are equal to the annualized expense ratio of 0.95% for Fund Shares
and 0.72% 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 11.70% for Fund Shares and 11.84% for Institutional Shares
for the six-month period of August 1, 2013, through January 31, 2014.
================================================================================
EXPENSE EXAMPLE | 39
================================================================================
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)
============================================================================
23418-0314 (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: 3/31/2014
------------------------------
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: 3/31/2014
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 3/31/2014
------------------------------
*Print the name and title of each signing officer under his or her signature.