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: DECEMBER 31
Date of reporting period: JUNE 30, 2014
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JUNE 30, 2014
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA S&P 500 INDEX FUND]
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SEMIANNUAL REPORT
USAA S&P 500 INDEX FUND
MEMBER SHARES o REWARD SHARES
JUNE 30, 2014
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PRESIDENT'S MESSAGE
"...[W]E HAVE BELIEVED FOR SOME TIME THE
ECONOMIC RECOVERY WILL BE MORE GRADUAL [PHOTO OF BROOKS ENGLEHARDT]
THAN THE MARKET'S INITIAL EXPECTATIONS."
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AUGUST 2014
The six-month reporting period was a reminder that nothing should be taken for
granted, especially when it comes to the economy and financial markets. In
January 2014, when the six-month period began, many observers anticipated U.S.
economic growth of more than 3% in 2014. Interest rates were expected to rise
once the U.S. Federal Reserve (the Fed) began tapering (or reducing) its
quantitative easing (QE) asset purchases. The equity market was expected to
become more volatile, as Fed tapering continued. Instead, stock market
volatility remained low, interest rates fell, and U.S. economic growth slowed.
At USAA Asset Management Company, we have believed for some time the economic
recovery will be more gradual than the market's initial expectations. Indeed,
economic growth disappointed many during the reporting period, contracting by
2.9% in the first quarter of 2014. Some attributed the deceleration to the
extreme winter weather, but we are not entirely convinced. For example, in
Canada, where the winter weather was equally harsh, economic growth remained
positive. In the second quarter, economic growth appeared to pick up -
manufacturing data and construction spending improved, for example - suggesting
the economy was getting healthier. Nevertheless, we believe that gross domestic
product growth for 2014 is likely to fall short of the market's expectations at
the beginning of the year.
At the same time, inflationary pressures are increasing. The Fed has a
long-stated inflation target of 2%. By many measures, inflation is at or near
that range. If inflation continues to rise, the Fed may taper its QE asset
purchases more aggressively.
Meanwhile, the U.S. stock market generated positive returns during the reporting
period, with little to no increase in market volatility. International stocks
also generated positive returns. We remain concerned, and are also
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uncertain, if the improving economy can generate the revenue and earnings growth
needed to justify current valuations and serve as a foundation for future price
gains. Valuations will continue to rise, in our opinion, if economic growth
accelerates and profit margins can maintain their current levels. If growth
stalls and profit margins decrease, earnings may disappoint and stocks may trim
their gains. Based on fundamental valuation at the time of this writing, we are
more optimistic about the near-term prospects for international stocks than for
U.S. stocks.
As for interest rates, they declined after the Fed started tapering its QE asset
purchases. By the end of the reporting period, the Fed - which had bought $85
billion of U.S. Treasury securities and mortgage-backed securities every month
during 2013 - had cut its asset purchases by more than half, with $35 billion
slated for purchase in July 2014. Longer-term interest rates, which had been
expected to increase, dropped and bond prices (which tend to move inversely with
rates) increased. We have long believed that, while interest rates would rise
over the longer term, it would be at a much more gradual pace than the market
was expecting.
In the months ahead, we will continue to monitor the direction of interest rates
and central bank policy, as well as the financial markets, corporate earnings,
economic trends, and other factors that could potentially affect your
investments. Assuming the U.S. economy regains its footing and continues to
strengthen, we expect the Fed to end its QE asset purchases by the end of 2014.
We believe that other global central banks are likely to maintain their easy
monetary policies, using rate cuts and/or asset purchases, to boost economic
growth in their countries and to support their financial markets.
On behalf of everyone at USAA Asset Management Company, thank you for allowing
us to help you manage your investments. We appreciate your continued investment
in our family of mutual funds.
Sincerely,
/S/ BROOKS ENGLEHARDT
Brooks Englehardt
President
USAA Asset 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.
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TABLE OF CONTENTS
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FUND OBJECTIVE 1
MANAGER COMMENTARY 2
INVESTMENT OVERVIEW 4
FINANCIAL INFORMATION
Portfolio of Investments 9
Notes to Portfolio of Investments 30
Financial Statements 32
Notes to Financial Statements 35
EXPENSE EXAMPLE 49
ADVISORY AGREEMENT(S) 51
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 S&P 500 INDEX FUND (THE FUND) SEEKS TO MATCH, BEFORE FEES AND EXPENSES,
THE PERFORMANCE OF THE STOCKS COMPOSING THE S&P 500(R) INDEX. THE S&P 500 INDEX
EMPHASIZES STOCKS OF LARGE U.S. COMPANIES.
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TYPES OF INVESTMENTS
The Fund's principal investment strategy is, under normal market conditions, to
invest at least 80% of the Fund's assets in the common stocks of companies
composing the S&P 500 Index. This strategy may be changed upon 60 days' written
notice to shareholders.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable
portion of your distribution and, if you live in a state that requires state
income tax withholding, at your state's set rate. However, you may elect not to
have withholding apply or to have income tax withheld at a higher rate. If you
wish to make such an election, please call USAA Asset Management Company at
(800) 531-USAA (8722).
If you must pay estimated taxes, you may be subject to estimated tax penalties
if your estimated tax payments are not sufficient and sufficient tax is not
withheld from your distribution.
For more specific information, please consult your tax adviser.
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FUND OBJECTIVE | 1
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MANAGER COMMENTARY ON THE FUND
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o HOW DID THE USAA S&P 500 INDEX FUND (THE FUND) PERFORM DURING THE REPORTING
PERIOD?
The Fund closely tracked its benchmark, the broad-based S&P 500(R) Index
(the Index), for the period ended June 30, 2014. The Fund's Member Shares
and Reward Shares returned 6.98% and 7.07%, respectively, during the
reporting period, versus the Index which returned 7.14%. The Index is a
group of large-company U.S. stocks that is not available for direct
investment.
o WHAT WERE THE MARKET CONDITIONS DURING THE PERIOD?
Global stocks showed positive returns during the first half of 2014 and
U.S. large cap stocks tended to outperform non-U.S. markets. The S&P 500 is
constructed to reflect the performance of the broad U.S. large cap market
segment. Small caps lagged large caps in the U.S., as the S&P 500
outperformed the S&P 600, an index of U.S. small cap stocks, which returned
3.22% in the first 6 months of 2014, and within the large cap universe,
growth stocks tended to outperform value stocks.
At the beginning of 2014, markets battled several negative headlines and had
slightly positive returns. U.S. economic data for the first quarter was
disappointing, as an exceptionally cold winter hindered economic growth
substantially. The U.S. Federal Reserve continued to taper its asset purchase
program, though it appeared that an actual increase in short-term interest
rates was not imminent. Several geopolitical risks also emerged during the
period. Investors worried about the potential for Russian involvement
following a period of unrest and a change in government. The conflict in the
Ukraine escalated quickly, and several western governments, including the
United States, began to introduce a range of economic sanctions against
Russia. Volatility remained somewhat
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2 | USAA S&P 500 INDEX FUND
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muted despite the unrest, and there was little evidence of increased investor
worry even as tensions rose in the Middle East. The equity markets generally
shrugged off these geopolitical worries, apparently focusing instead on
positive corporate earnings results. Additionally, an increase in corporate
activity, including mergers and acquisitions, boosted equity returns.
o PLEASE DESCRIBE SECTOR PERFORMANCE DURING THE PERIOD.
All sectors showed positive performance in the first half of the year.
The top performing sector in the Index was Utilities, returning 18.65%. The
next best performing sector was Energy, which returned 12.98%. The worst
performing sectors in the Index were Consumer Discretionary, which returned
0.60%, and Industrials, which returned 4.00%.
o WHAT INVESTMENT STRATEGIES WILL YOU PURSUE FOR THE FUND IN 2014?
We don't manage the Fund according to a given outlook for the stock
markets or the economy in general, because we're managing an index fund that
seeks to replicate as closely as possible (before deduction of expenses) the
broad diversification and returns of the Index. Nevertheless, we will
monitor economic conditions and their effect on the financial markets as we
seek to track the Index's performance closely.
Thank you for your investment in the Fund.
INVESTING IN SECURITIES PRODUCTS INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
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MANAGER COMMENTARY ON THE FUND | 3
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INVESTMENT OVERVIEW
USAA S&P 500 INDEX FUND MEMBER SHARES (MEMBER SHARES) (Ticker Symbol: USSPX)
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6/30/14 12/31/13
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Net Assets $2.69 Billion $2.57 Billion
Net Asset Value Per Share $27.98 $26.39
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AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/14*
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12/31/13 - 6/30/14** 1 YEAR 5 YEARS 10 YEARS
6.98% 24.28% 18.54% 7.55%
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EXPENSE RATIOS AS OF 12/31/13***
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BEFORE REIMBURSEMENT 0.30% AFTER REIMBURSEMENT 0.25%
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.
*Returns for the Member Shares exclude the account maintenance fee.
**Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
***The expense ratios represent the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated May 1, 2014, and are
calculated as a percentage of average net assets. USAA Asset Management Company
(the Manager) has agreed, through May 1, 2015, to make payments or waive
management, administration, and other fees so that the total annual operating
expenses of the Member Shares (exclusive of commission recapture, expense offset
arrangements, acquired fund fees and expenses, and extraordinary expenses) do
not exceed an annual rate of 0.25% of the Member Shares' average net assets.
This reimbursement arrangement may not be changed or terminated during this time
period without approval of the Fund's Board of Trustees and may be changed or
terminated by the Manager at any time after May 1, 2015. These expense ratios
may differ from the expense ratios disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions, if any. 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 (including
capital gains distributions), redemption of shares, or reinvested net investment
income. The performance data excludes the impact of a $10 account maintenance
fee that is assessed on acounts of less than $10,000. Performance of Member
Shares will vary from Reward Shares due to differences in expenses.
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4 | USAA S&P 500 INDEX FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
MEMBER SHARES
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA S&P 500
INDEX FUND
S&P 500 INDEX MEMBER SHARES
6/30/2004 $10,000.00 $10,000.00
7/31/2004 9,669.03 9,667.44
8/31/2004 9,708.14 9,702.45
9/30/2004 9,813.29 9,803.60
10/31/2004 9,963.21 9,955.86
11/30/2004 10,366.33 10,354.10
12/31/2004 10,719.08 10,702.43
1/31/2005 10,457.81 10,442.98
2/28/2005 10,677.88 10,661.16
3/31/2005 10,488.80 10,471.21
4/30/2005 10,289.87 10,269.96
5/31/2005 10,617.28 10,595.52
6/30/2005 10,632.35 10,609.07
7/31/2005 11,027.75 11,001.33
8/31/2005 10,927.13 10,900.30
9/30/2005 11,015.64 10,986.92
10/31/2005 10,832.00 10,801.91
11/30/2005 11,241.69 11,207.73
12/31/2005 11,245.54 11,212.70
1/31/2006 11,543.36 11,506.51
2/28/2006 11,574.68 11,536.49
3/31/2006 11,718.76 11,679.09
4/30/2006 11,876.11 11,829.60
5/31/2006 11,534.30 11,492.47
6/30/2006 11,549.94 11,505.65
7/31/2006 11,621.18 11,572.15
8/31/2006 11,897.69 11,844.23
9/30/2006 12,204.29 12,148.50
10/31/2006 12,601.98 12,543.13
11/30/2006 12,841.62 12,779.91
12/31/2006 13,021.76 12,954.61
1/31/2007 13,218.69 13,149.78
2/28/2007 12,960.15 12,893.62
3/31/2007 13,105.11 13,035.04
4/30/2007 13,685.60 13,610.84
5/31/2007 14,163.16 14,082.50
6/30/2007 13,927.87 13,849.71
7/31/2007 13,496.03 13,419.21
8/31/2007 13,698.34 13,616.01
9/30/2007 14,210.64 14,125.38
10/31/2007 14,436.69 14,347.73
11/30/2007 13,833.14 13,742.45
12/31/2007 13,737.17 13,643.96
1/31/2008 12,913.19 12,824.58
2/29/2008 12,493.70 12,408.68
3/31/2008 12,439.75 12,348.37
4/30/2008 13,045.60 12,953.31
5/31/2008 13,214.58 13,115.46
6/30/2008 12,100.54 12,008.53
7/31/2008 11,998.82 11,908.25
8/31/2008 12,172.38 12,077.47
9/30/2008 11,087.73 10,995.48
10/31/2008 9,225.57 9,149.25
11/30/2008 8,563.60 8,487.63
12/31/2008 8,654.71 8,577.66
1/31/2009 7,925.24 7,853.86
2/28/2009 7,081.38 7,015.78
3/31/2009 7,701.67 7,630.64
4/30/2009 8,438.79 8,359.19
5/31/2009 8,910.80 8,825.72
6/30/2009 8,928.48 8,844.57
7/31/2009 9,603.80 9,512.57
8/31/2009 9,950.54 9,853.00
9/30/2009 10,321.85 10,218.42
10/31/2009 10,130.10 10,024.89
11/30/2009 10,737.74 10,624.84
12/31/2009 10,945.14 10,831.66
1/31/2010 10,551.40 10,442.73
2/28/2010 10,878.26 10,760.36
3/31/2010 11,534.70 11,412.27
4/30/2010 11,716.81 11,587.94
5/31/2010 10,781.21 10,657.52
6/30/2010 10,216.84 10,096.90
7/31/2010 10,932.66 10,802.71
8/31/2010 10,439.11 10,312.57
9/30/2010 11,370.75 11,229.76
10/31/2010 11,803.40 11,656.37
11/30/2010 11,804.91 11,656.37
12/31/2010 12,593.85 12,435.80
1/31/2011 12,892.34 12,725.93
2/28/2011 13,334.02 13,161.12
3/31/2011 13,339.33 13,158.37
4/30/2011 13,734.37 13,549.67
5/31/2011 13,578.91 13,390.50
6/30/2011 13,352.56 13,169.27
7/31/2011 13,081.04 12,896.16
8/31/2011 12,370.45 12,190.07
9/30/2011 11,500.82 11,331.88
10/31/2011 12,757.78 12,570.16
11/30/2011 12,729.59 12,536.69
12/31/2011 12,859.80 12,662.39
1/31/2012 13,436.12 13,227.25
2/29/2012 14,017.12 13,798.84
3/31/2012 14,478.42 14,246.79
4/30/2012 14,387.54 14,158.93
5/31/2012 13,522.84 13,300.61
6/30/2012 14,080.01 13,849.18
7/31/2012 14,275.57 14,039.36
8/31/2012 14,597.09 14,351.80
9/30/2012 14,974.31 14,721.95
10/31/2012 14,697.81 14,442.11
11/30/2012 14,783.08 14,524.01
12/31/2012 14,917.82 14,657.03
1/31/2013 15,690.49 15,413.66
2/28/2013 15,903.49 15,615.43
3/31/2013 16,499.92 16,193.17
4/30/2013 16,817.82 16,504.58
5/31/2013 17,211.22 16,888.41
6/30/2013 16,980.09 16,657.47
7/31/2013 17,844.11 17,515.42
8/31/2013 17,327.31 16,991.93
9/30/2013 17,870.69 17,522.39
10/31/2013 18,692.16 18,325.84
11/30/2013 19,261.79 18,880.94
12/31/2013 19,749.42 19,350.96
1/31/2014 19,066.60 18,676.36
2/28/2014 19,938.78 19,526.95
3/31/2014 20,106.38 19,687.81
4/30/2014 20,255.01 19,827.81
5/31/2014 20,730.48 20,292.00
6/30/2014 21,158.72 20,701.28
[END CHART]
Data from 6/30/04 to 6/30/14.
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P 500
Index Fund's Member Shares closely tracks the S&P 500 Index. The S&P 500 Index
is an unmanaged index representing the weighted average performance of a group
of 500 widely held, publicly traded U.S. stocks.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for our use. The USAA S&P 500 Index Fund is not sponsored, endorsed, sold, or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the USAA S&P 500 Index Fund. o Index
products incur fees and expenses and may not always be invested in all
securities of the index the Fund attempts to mirror.
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
indexes does not reflect the deduction of any fees or expenses.
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INVESTMENT OVERVIEW | 5
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USAA S&P 500 INDEX FUND REWARD SHARES (REWARD SHARES) (Ticker Symbol: USPRX)
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6/30/14 12/31/13
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Net Assets $2.03 Billion $1.83 Billion
Net Asset Value Per Share $27.99 $26.39
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AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/14
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12/31/13 - 6/30/14* 1 YEAR 5 YEARS 10 YEARS
7.07% 24.44% 18.69% 7.68%
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EXPENSE RATIOS AS OF 12/31/13**
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BEFORE REIMBURSEMENT 0.20% AFTER REIMBURSEMENT 0.15%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratios represent the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated May 1, 2014, and are
calculated as a percentage of average net assets. USAA Asset Management Company
(the Manager) has agreed, through May 1, 2015, to make payments or waive
management, administration, and other fees so that the total annual operating
expenses of the Reward Shares (exclusive of commission recapture, expense offset
arrangements, acquired fund fees and expenses, and extraordinary expenses) do
not exceed an annual rate of 0.15% of the Reward Shares' average net assets.
This reimbursement arrangement may not be changed or terminated during this time
period without approval of the Fund's Board of Trustees and may be changed or
terminated by the Manager at any time after May 1, 2015. These expense ratios
may differ from the expense ratios disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions, if any. 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 (including
capital gains distributions), redemption of shares, or reinvested net investment
income.
The Reward Shares are currently offered for sale to qualified shareholders, USAA
discretionary managed account program, and a USAA Fund participating in a
fund-of-funds investment strategy.
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6 | USAA S&P 500 INDEX FUND
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o CUMULATIVE PERFORMANCE COMPARISON o
REWARD SHARES
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA S&P 500
INDEX FUND
S&P 500 INDEX REWARD SHARES
6/30/2004 $10,000.00 $10,000.00
7/31/2004 9,669.03 9,667.44
8/31/2004 9,708.14 9,702.45
9/30/2004 9,813.29 9,807.52
10/31/2004 9,963.21 9,953.99
11/30/2004 10,366.33 10,358.24
12/31/2004 10,719.08 10,707.30
1/31/2005 10,457.81 10,447.73
2/28/2005 10,677.88 10,666.01
3/31/2005 10,488.80 10,476.58
4/30/2005 10,289.87 10,281.14
5/31/2005 10,617.28 10,606.87
6/30/2005 10,632.35 10,617.12
7/31/2005 11,027.75 11,015.63
8/31/2005 10,927.13 10,914.52
9/30/2005 11,015.64 10,998.20
10/31/2005 10,832.00 10,813.00
11/30/2005 11,241.69 11,225.21
12/31/2005 11,245.54 11,227.15
1/31/2006 11,543.36 11,521.34
2/28/2006 11,574.68 11,551.36
3/31/2006 11,718.76 11,696.83
4/30/2006 11,876.11 11,853.59
5/31/2006 11,534.30 11,509.92
6/30/2006 11,549.94 11,526.35
7/31/2006 11,621.18 11,599.03
8/31/2006 11,897.69 11,871.59
9/30/2006 12,204.29 12,179.32
10/31/2006 12,601.98 12,574.75
11/30/2006 12,841.62 12,812.01
12/31/2006 13,021.76 12,990.45
1/31/2007 13,218.69 13,186.07
2/28/2007 12,960.15 12,929.32
3/31/2007 13,105.11 13,068.04
4/30/2007 13,685.60 13,651.43
5/31/2007 14,163.16 14,124.29
6/30/2007 13,927.87 13,888.18
7/31/2007 13,496.03 13,456.48
8/31/2007 13,698.34 13,660.00
9/30/2007 14,210.64 14,167.78
10/31/2007 14,436.69 14,390.80
11/30/2007 13,833.14 13,789.89
12/31/2007 13,737.17 13,694.80
1/31/2008 12,913.19 12,872.74
2/29/2008 12,493.70 12,449.25
3/31/2008 12,439.75 12,397.98
4/30/2008 13,045.60 12,998.79
5/31/2008 13,214.58 13,167.77
6/30/2008 12,100.54 12,061.40
7/31/2008 11,998.82 11,954.44
8/31/2008 12,172.38 12,130.61
9/30/2008 11,087.73 11,049.04
10/31/2008 9,225.57 9,188.55
11/30/2008 8,563.60 8,530.42
12/31/2008 8,654.71 8,618.29
1/31/2009 7,925.24 7,897.44
2/28/2009 7,081.38 7,055.39
3/31/2009 7,701.67 7,669.63
4/30/2009 8,438.79 8,408.33
5/31/2009 8,910.80 8,877.24
6/30/2009 8,928.48 8,893.16
7/31/2009 9,603.80 9,564.83
8/31/2009 9,950.54 9,913.58
9/30/2009 10,321.85 10,278.51
10/31/2009 10,130.10 10,090.33
11/30/2009 10,737.74 10,693.80
12/31/2009 10,945.14 10,899.75
1/31/2010 10,551.40 10,508.38
2/28/2010 10,878.26 10,834.52
3/31/2010 11,534.70 11,488.11
4/30/2010 11,716.81 11,664.95
5/31/2010 10,781.21 10,734.90
6/30/2010 10,216.84 10,168.35
7/31/2010 10,932.66 10,885.73
8/31/2010 10,439.11 10,392.12
9/30/2010 11,370.75 11,320.18
10/31/2010 11,803.40 11,749.98
11/30/2010 11,804.91 11,749.98
12/31/2010 12,593.85 12,533.83
1/31/2011 12,892.34 12,826.25
2/28/2011 13,334.02 13,264.86
3/31/2011 13,339.33 13,273.80
4/30/2011 13,734.37 13,661.65
5/31/2011 13,578.91 13,507.84
6/30/2011 13,352.56 13,282.12
7/31/2011 13,081.04 13,006.67
8/31/2011 12,370.45 12,301.25
9/30/2011 11,500.82 11,432.59
10/31/2011 12,757.78 12,681.87
11/30/2011 12,729.59 12,654.86
12/31/2011 12,859.80 12,778.88
1/31/2012 13,436.12 13,355.73
2/29/2012 14,017.12 13,925.79
3/31/2012 14,478.42 14,388.00
4/30/2012 14,387.54 14,292.49
5/31/2012 13,522.84 13,432.89
6/30/2012 14,080.01 13,983.25
7/31/2012 14,275.57 14,175.27
8/31/2012 14,597.09 14,490.74
9/30/2012 14,974.31 14,868.18
10/31/2012 14,697.81 14,592.46
11/30/2012 14,783.08 14,675.18
12/31/2012 14,917.82 14,806.13
1/31/2013 15,690.49 15,570.46
2/28/2013 15,903.49 15,781.56
3/31/2013 16,499.92 16,370.36
4/30/2013 16,817.82 16,685.03
5/31/2013 17,211.22 17,072.88
6/30/2013 16,980.09 16,835.02
7/31/2013 17,844.11 17,702.12
8/31/2013 17,327.31 17,180.39
9/30/2013 17,870.69 17,713.56
10/31/2013 18,692.16 18,525.77
11/30/2013 19,261.79 19,086.93
12/31/2013 19,749.42 19,567.31
1/31/2014 19,066.60 18,892.58
2/28/2014 19,938.78 19,752.68
3/31/2014 20,106.38 19,912.47
4/30/2014 20,255.01 20,061.51
5/31/2014 20,730.48 20,523.56
6/30/2014 21,158.72 20,950.18
[END CHART]
Data from 6/30/04 to 6/30/14.
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P 500
Index Fund's Reward Shares closely tracks the S&P 500 Index (see page 5 for the
benchmark definition).
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for our use. The USAA S&P 500 Index Fund is not sponsored, endorsed, sold, or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the USAA S&P 500 Index Fund. o Index
products incur fees and expenses and may not always be invested in all
securities of the index the Fund attempts to mirror.
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
indexes does not reflect the deduction of any fees or expenses.
================================================================================
INVESTMENT OVERVIEW | 7
================================================================================
o TOP 10 EQUITY HOLDINGS o
AS OF 6/30/14
(% of Net Assets)
Apple, Inc. ........................................................... 3.1%
Exxon Mobil Corp. ..................................................... 2.4%
Microsoft Corp. ....................................................... 1.8%
Johnson & Johnson ..................................................... 1.7%
General Electric Co. .................................................. 1.5%
Wells Fargo & Co. ..................................................... 1.4%
Chevron Corp. ......................................................... 1.4%
Berkshire Hathaway, Inc. "B" .......................................... 1.3%
JPMorgan Chase & Co. .................................................. 1.2%
Procter & Gamble Co. .................................................. 1.2%
You will find a complete list of securities that the Fund owns on pages 9-29.
o SECTOR ALLOCATION* - 6/30/14 o
[PIE CHART OF SECTOR ALLOCATION]
INFORMATION TECHNOLOGY 18.4%
FINANCIALS 15.7%
HEALTH CARE 13.0%
CONSUMER DISCRETIONARY 11.6%
ENERGY 10.6%
INDUSTRIALS 10.2%
CONSUMER STAPLES 9.3%
MATERIALS 3.4%
UTILITIES 3.1%
TELECOMMUNICATION SERVICES 2.3%
* Excludes money market instruments.
Percentages are of the net assets of the Fund, and may not equal 100%.
================================================================================
8 | USAA S&P 500 INDEX FUND
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 2014 (unaudited)
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
COMMON STOCKS (97.6%)
CONSUMER DISCRETIONARY (11.6%)
------------------------------
ADVERTISING (0.1%)
111,646 Interpublic Group of Companies, Inc. $ 2,178
68,686 Omnicom Group, Inc. 4,892
----------
7,070
----------
APPAREL & ACCESSORIES & LUXURY GOODS (0.5%)
73,075 Coach, Inc. 2,498
12,560 Fossil Group, Inc.* 1,313
47,789 Michael Kors Holding LTD* 4,236
21,969 PVH Corp. 2,562
15,651 Ralph Lauren Corp. 2,515
43,193 Under Armour, Inc. "A"* 2,569
90,803 VF Corp. 5,721
----------
21,414
----------
APPAREL RETAIL (0.4%)
68,245 Gap, Inc. 2,837
64,937 L Brands, Inc. 3,809
55,835 Ross Stores, Inc. 3,692
185,258 TJX Companies, Inc. 9,847
27,043 Urban Outfitters, Inc.* 916
----------
21,101
----------
AUTO PARTS & EQUIPMENT (0.4%)
60,754 BorgWarner, Inc. 3,961
73,101 Delphi Automotive plc 5,025
175,791 Johnson Controls, Inc. 8,777
----------
17,763
----------
AUTOMOBILE MANUFACTURERS (0.6%)
1,045,670 Ford Motor Co. 18,027
347,729 General Motors Co. 12,623
----------
30,650
----------
AUTOMOTIVE RETAIL (0.3%)
16,359 AutoNation, Inc.* 976
8,775 AutoZone, Inc.* 4,706
================================================================================
PORTFOLIO OF INVESTMENTS | 9
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
58,822 CarMax, Inc.* $ 3,059
27,936 O'Reilly Automotive, Inc.* 4,207
----------
12,948
----------
BROADCASTING (0.3%)
139,751 CBS Corp. "B" 8,684
57,673 Discovery Communications, Inc. "A"* 4,284
28,380 Scripps Networks Interactive "A" 2,303
----------
15,271
----------
CABLE & SATELLITE (1.3%)
56,858 Cablevision Systems Corp. "A" 1,003
687,456 Comcast Corp. "A" 36,903
123,903 DIRECTV* 10,533
73,679 Time Warner Cable, Inc. 10,853
----------
59,292
----------
CASINOS & GAMING (0.1%)
21,311 Wynn Resorts Ltd. 4,423
----------
COMPUTER & ELECTRONICS RETAIL (0.1%)
72,048 Best Buy Co., Inc. 2,234
30,631 GameStop Corp. "A" 1,240
----------
3,474
----------
CONSUMER ELECTRONICS (0.1%)
32,552 Garmin Ltd. 1,982
18,195 Harman International Industries, Inc. 1,955
----------
3,937
----------
DEPARTMENT STORES (0.2%)
51,645 Kohl's Corp. 2,721
95,382 Macy's, Inc. 5,534
36,890 Nordstrom, Inc. 2,506
----------
10,761
----------
DISTRIBUTORS (0.1%)
40,539 Genuine Parts Co. 3,559
----------
EDUCATION SERVICES (0.0%)
1,154 Graham Holdings Company "B" 829
----------
FOOTWEAR (0.3%)
194,742 NIKE, Inc. "B" 15,102
----------
GENERAL MERCHANDISE STORES (0.4%)
80,227 Dollar General Corp.* 4,602
54,676 Dollar Tree, Inc.* 2,978
================================================================================
10 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
25,257 Family Dollar Stores, Inc. $ 1,670
167,564 Target Corp. 9,710
----------
18,960
----------
HOME FURNISHINGS (0.1%)
36,192 Leggett & Platt, Inc. 1,241
16,029 Mohawk Industries, Inc.* 2,217
----------
3,458
----------
HOME IMPROVEMENT RETAIL (0.9%)
361,810 Home Depot, Inc. 29,292
263,798 Lowe's Companies, Inc. 12,660
----------
41,952
----------
HOMEBUILDING (0.1%)
76,535 D.R. Horton, Inc. 1,881
46,249 Lennar Corp. "A" 1,941
90,954 PulteGroup, Inc. 1,834
----------
5,656
----------
HOMEFURNISHING RETAIL (0.1%)
53,987 Bed Bath & Beyond, Inc.* 3,098
----------
HOTELS, RESORTS & CRUISE LINES (0.3%)
115,732 Carnival Corp. 4,357
58,099 Marriott International, Inc. "A" 3,724
50,674 Starwood Hotels & Resorts Worldwide, Inc. 4,096
33,709 Wyndham Worldwide Corp. 2,552
----------
14,729
----------
HOUSEHOLD APPLIANCES (0.1%)
20,465 Whirlpool Corp. 2,849
----------
HOUSEWARES & SPECIALTIES (0.0%)
73,431 Newell Rubbermaid, Inc. 2,276
----------
INTERNET RETAIL (1.3%)
98,569 Amazon.com, Inc.* 32,013
27,033 Expedia, Inc. 2,129
15,854 Netflix, Inc.* 6,985
13,866 Priceline.com, Inc.* 16,681
29,330 TripAdvisor, Inc.* 3,187
----------
60,995
----------
LEISURE PRODUCTS (0.1%)
30,745 Hasbro, Inc. 1,631
89,577 Mattel, Inc. 3,491
----------
5,122
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 11
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
MOTORCYCLE MANUFACTURERS (0.1%)
57,709 Harley-Davidson, Inc. $ 4,031
----------
MOVIES & ENTERTAINMENT (1.7%)
233,226 Time Warner, Inc. 16,384
506,312 Twenty-First Centry Fox, Inc. 17,797
103,456 Viacom, Inc. "B" 8,973
425,869 Walt Disney Co. 36,514
----------
79,668
----------
PUBLISHING (0.1%)
59,525 Gannett Co., Inc. 1,863
133,320 News Corp. "A"* 2,392
----------
4,255
----------
RESTAURANTS (1.2%)
8,256 Chipotle Mexican Grill, Inc.* 4,892
35,370 Darden Restaurants, Inc. 1,637
261,337 McDonald's Corp. 26,327
198,962 Starbucks Corp. 15,396
116,545 Yum! Brands, Inc. 9,463
----------
57,715
----------
SPECIALIZED CONSUMER SERVICES (0.1%)
72,551 H&R Block, Inc. 2,432
----------
SPECIALTY STORES (0.2%)
26,258 PetSmart, Inc. 1,570
170,546 Staples, Inc. 1,849
29,460 Tiffany & Co. 2,953
36,597 Tractor Supply Company 2,211
----------
8,583
----------
TIRES & RUBBER (0.0%)
72,558 Goodyear Tire & Rubber Co. 2,016
----------
Total Consumer Discretionary 545,389
----------
CONSUMER STAPLES (9.3%)
-----------------------
AGRICULTURAL PRODUCTS (0.2%)
173,029 Archer-Daniels-Midland Co. 7,632
----------
BREWERS (0.1%)
42,341 Molson Coors Brewing Co. "B" 3,140
----------
DISTILLERS & VINTNERS (0.2%)
43,094 Brown-Forman Corp. "B" 4,058
44,641 Constellation Brands, Inc. "A"* 3,934
----------
7,992
----------
================================================================================
12 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
DRUG RETAIL (0.9%)
309,259 CVS Caremark Corp. $ 23,309
232,204 Walgreen Co. 17,213
----------
40,522
----------
FOOD DISTRIBUTORS (0.1%)
155,325 Sysco Corp. 5,817
----------
FOOD RETAIL (0.3%)
134,874 Kroger Co. 6,667
60,607 Safeway, Inc. 2,081
96,690 Whole Foods Market, Inc. 3,735
----------
12,483
----------
HOUSEHOLD PRODUCTS (1.8%)
34,215 Clorox Co. 3,127
229,824 Colgate-Palmolive Co. 15,670
99,464 Kimberly-Clark Corp. 11,062
715,509 Procter & Gamble Co.(f) 56,232
----------
86,091
----------
HYPERMARKETS & SUPER CENTERS (1.0%)
115,746 Costco Wholesale Corp. 13,329
426,542 Wal-Mart Stores, Inc.(f) 32,021
----------
45,350
----------
PACKAGED FOODS & MEAT (1.4%)
47,851 Campbell Soup Co. 2,192
111,983 ConAgra Foods, Inc. 3,324
162,334 General Mills, Inc. 8,529
39,508 Hershey Co. 3,847
35,685 Hormel Foods Corp. 1,761
27,245 J.M. Smucker Co. 2,904
67,530 Kellogg Co. 4,437
33,567 Keurig Green Mountain, Inc. 4,183
157,057 Kraft Foods Group, Inc. "A" 9,416
34,631 McCormick & Co., Inc. 2,479
53,603 Mead Johnson Nutrition Co. 4,994
447,816 Mondelez International, Inc. Companies 16,842
72,786 Tyson Foods, Inc. "A" 2,732
----------
67,640
----------
PERSONAL PRODUCTS (0.1%)
114,371 Avon Products, Inc. 1,671
66,519 Estee Lauder Companies, Inc. "A" 4,940
----------
6,611
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 13
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
SOFT DRINKS (1.8%)
999,374 Coca-Cola Co. $ 42,333
61,502 Coca-Cola Enterprises, Inc. 2,938
51,961 Dr Pepper Snapple Group, Inc. 3,044
35,613 Monster Beverage Corp.* 2,530
400,793 PepsiCo, Inc. 35,807
----------
86,652
----------
TOBACCO (1.4%)
524,806 Altria Group, Inc. 22,011
96,118 Lorillard, Inc. 5,860
415,791 Philip Morris International, Inc. 35,055
82,704 Reynolds American, Inc. 4,991
----------
67,917
----------
Total Consumer Staples 437,847
----------
ENERGY (10.6%)
--------------
COAL & CONSUMABLE FUELS (0.1%)
60,352 CONSOL Energy, Inc. 2,780
70,857 Peabody Energy Corp. 1,159
----------
3,939
----------
INTEGRATED OIL & GAS (4.4%)
503,433 Chevron Corp. 65,723
1,135,656 Exxon Mobil Corp.(f) 114,338
69,868 Hess Corp. 6,909
207,795 Occidental Petroleum Corp. 21,326
----------
208,296
----------
OIL & GAS DRILLING (0.4%)
18,071 Diamond Offshore Drilling, Inc. 897
62,162 Ensco plc "A" 3,454
28,778 Helmerich & Payne, Inc. 3,342
69,893 Nabors Industries Ltd. 2,053
67,047 Noble Corporation PLC 2,250
32,738 Rowan Companies plc "A" 1,045
90,263 Transocean, Ltd. 4,065
----------
17,106
----------
OIL & GAS EQUIPMENT & SERVICES (1.7%)
115,126 Baker Hughes, Inc. 8,571
53,757 Cameron International Corp.* 3,640
62,237 FMC Technologies, Inc.* 3,801
223,329 Halliburton Co. 15,858
================================================================================
14 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
113,512 National Oilwell Varco, Inc. $ 9,348
344,255 Schlumberger Ltd. 40,605
----------
81,823
----------
OIL & GAS EXPLORATION & PRODUCTION (2.8%)
133,570 Anadarko Petroleum Corp. 14,622
102,035 Apache Corp. 10,267
110,894 Cabot Oil & Gas Corp. 3,786
133,108 Chesapeake Energy Corp. 4,137
23,033 Cimarex Energy Co.(f) 3,304
324,719 ConocoPhillips 27,838
91,819 Denbury Resources, Inc. 1,695
101,481 Devon Energy Corp. 8,058
144,549 EOG Resources, Inc. 16,892
40,165 EQT Corp. 4,294
178,924 Marathon Oil Corp. 7,143
44,574 Murphy Oil Corp. 2,963
36,135 Newfield Exploration Co.* 1,597
94,762 Noble Energy, Inc. 7,340
37,842 Pioneer Natural Resources Co. 8,696
48,227 QEP Resources, Inc. 1,664
44,646 Range Resources Corp. 3,882
92,918 Southwestern Energy Co.* 4,227
----------
132,405
----------
OIL & GAS REFINING & MARKETING (0.6%)
76,350 Marathon Petroleum Corp. 5,961
149,681 Phillips 66 12,039
34,012 Tesoro Corp. 1,995
141,143 Valero Energy Corp. 7,071
----------
27,066
----------
OIL & GAS STORAGE & TRANSPORTATION (0.6%)
177,367 Kinder Morgan, Inc. 6,431
54,755 ONEOK, Inc. 3,728
177,720 Spectra Energy Corp. 7,550
195,302 Williams Companies, Inc. 11,368
----------
29,077
----------
Total Energy 499,712
----------
FINANCIALS (15.7%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (1.3%)
50,382 Ameriprise Financial, Inc. 6,046
301,952 Bank of New York Mellon Corp., Inc. 11,317
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
33,104 BlackRock, Inc. $ 10,580
106,558 Franklin Resources, Inc. 6,163
114,125 Invesco Ltd. 4,308
26,976 Legg Mason, Inc. 1,384
56,079 Northern Trust Corp.(c) 3,601
113,733 State Street Corp. 7,650
69,750 T. Rowe Price Group, Inc. 5,888
14,622 Affiliated Managers Group, Inc. 3,003
----------
59,940
----------
CONSUMER FINANCE (1.0%)
240,548 American Express Co. 22,821
151,423 Capital One Financial Corp. 12,508
123,157 Discover Financial Services 7,633
112,886 Navient Corp. 1,999
----------
44,961
----------
DIVERSIFIED BANKS (4.8%)
2,782,007 Bank of America Corp.(f) 42,760
803,352 Citigroup, Inc. 37,838
47,971 Comerica, Inc. 2,406
1,000,881 JPMorgan Chase & Co. 57,671
479,824 U.S. Bancorp 20,786
1,267,512 Wells Fargo & Co. 66,620
----------
228,081
----------
HEALTH CARE REITs (0.3%)
120,819 HCP, Inc. 5,000
81,215 Health Care REIT, Inc. 5,090
77,510 Ventas, Inc. 4,968
----------
15,058
----------
HOTEL & RESORT REITs (0.1%)
200,791 Host Hotels & Resorts, Inc. 4,419
----------
INSURANCE BROKERS (0.3%)
78,454 Aon plc 7,068
145,541 Marsh & McLennan Companies, Inc. 7,542
----------
14,610
----------
INVESTMENT BANKING & BROKERAGE (0.8%)
309,943 Charles Schwab Corp. 8,347
75,452 E*TRADE Financial Corp.* 1,604
110,041 Goldman Sachs Group, Inc. 18,425
370,979 Morgan Stanley 11,994
----------
40,370
----------
================================================================================
16 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE (1.0%)
120,007 AFLAC, Inc. $ 7,470
69,433 Lincoln National Corp. 3,572
297,680 MetLife, Inc. 16,539
72,277 Principal Financial Group, Inc. 3,648
122,450 Prudential Financial, Inc. 10,870
23,497 Torchmark Corp. 1,925
68,237 Unum Group 2,372
----------
46,396
----------
MULTI-LINE INSURANCE (0.7%)
382,575 American International Group, Inc. 20,881
13,675 American International Group, Inc.* -
19,028 Assurant, Inc. 1,247
130,199 Genworth Financial, Inc. "A"* 2,266
119,109 Hartford Financial Services Group, Inc. 4,265
80,274 Loews Corp. 3,533
----------
32,192
----------
MULTI-SECTOR HOLDINGS (1.3%)
476,086 Berkshire Hathaway, Inc. "B"* 60,253
84,120 Leucadia National Corp. 2,206
----------
62,459
----------
PROPERTY & CASUALTY INSURANCE (0.8%)
89,376 ACE Ltd. 9,268
114,839 Allstate Corp. 6,743
64,657 Chubb Corp. 5,960
39,025 Cincinnati Financial Corp. 1,875
143,860 Progressive Corp. 3,648
91,929 Travelers Companies, Inc. 8,648
71,153 XL Group plc 2,329
----------
38,471
----------
REAL ESTATE SERVICES (0.0%)
73,098 CBRE Group, Inc.* 2,342
----------
REGIONAL BANKS (1.0%)
190,242 BB&T Corp. 7,501
224,174 Fifth Third Bancorp 4,786
218,891 Huntington Bancshares, Inc. 2,088
234,050 KeyCorp 3,354
34,913 M&T Bank Corp. 4,331
141,337 PNC Financial Services Group, Inc. 12,586
365,279 Regions Financial Corp. 3,879
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
141,078 SunTrust Banks, Inc. $ 5,652
48,270 Zions Bancorp 1,423
----------
45,600
----------
REITs - DIVERSIFIED (0.1%)
46,243 Vornado Realty Trust 4,935
----------
REITs - INDUSTRIAL (0.1%)
131,637 Prologis, Inc. 5,409
----------
REITs - OFFICE (0.1%)
40,611 Boston Properties, Inc. 4,799
----------
REITs - RESIDENTIAL (0.3%)
37,983 Apartment Investment & Management Co. "A" 1,225
32,406 AvalonBay Communities, Inc. 4,608
88,964 Equity Residential Properties Trust 5,605
16,564 Essex Property Trust, Inc. 3,063
----------
14,501
----------
REITs - RETAIL (0.5%)
137,338 General Growth Properties, Inc. 3,236
108,399 Kimco Realty Corp. 2,491
37,012 The Macerich Company 2,470
82,167 Simon Property Group, Inc. 13,663
----------
21,860
----------
REITs - SPECIALIZED (0.6%)
104,678 American Tower Corp. 9,419
88,025 Crown Castle International Corp. 6,537
46,503 Plum Creek Timber Co., Inc. 2,097
38,369 Public Storage 6,574
155,539 Weyerhaeuser Co. 5,147
----------
29,774
----------
SPECIALIZED FINANCE (0.5%)
83,785 CME Group, Inc. 5,945
30,521 Intercontinental Exchange Group, Inc.(f) 5,765
72,074 McGraw-Hill Companies, Inc. 5,984
49,670 Moody's Corp. 4,354
30,728 Nasdaq OMX Group, Inc. 1,187
----------
23,235
----------
THRIFTS & MORTGAGE FINANCE (0.1%)
123,879 Hudson City Bancorp, Inc. 1,218
81,941 People's United Financial, Inc. 1,243
----------
2,461
----------
Total Financials 741,873
----------
================================================================================
18 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
HEALTH CARE (13.0%)
-------------------
BIOTECHNOLOGY (2.5%)
52,389 Alexion Pharmaceuticals, Inc.* $ 8,186
200,157 Amgen, Inc. 23,693
62,718 Biogen Idec, Inc.* 19,776
211,738 Celgene Corp.* 18,184
406,085 Gilead Sciences, Inc.* 33,668
21,071 Regeneron Parmaceuticals, Inc.* 5,952
62,837 Vertex Pharmaceuticals, Inc.* 5,949
----------
115,408
----------
HEALTH CARE DISTRIBUTORS (0.5%)
59,648 AmerisourceBergen Corp. 4,334
90,271 Cardinal Health, Inc. 6,189
60,982 McKesson Corp. 11,356
21,368 Patterson Companies, Inc. 844
----------
22,723
----------
HEALTH CARE EQUIPMENT (2.0%)
397,118 Abbott Laboratories 16,242
143,678 Baxter International, Inc. 10,388
51,204 Becton, Dickinson & Co. 6,058
348,260 Boston Scientific Corp.* 4,447
20,104 C.R. Bard, Inc. 2,875
54,879 CareFusion Corp.* 2,434
119,228 Covidien plc 10,752
28,184 Edwards Lifesciences Corp.* 2,419
10,178 Intuitive Surgical, Inc.* 4,191
264,234 Medtronic, Inc. 16,848
75,456 St. Jude Medical, Inc. 5,225
78,236 Stryker Corp. 6,597
27,269 Varian Medical Systems, Inc.* 2,267
44,576 Zimmer Holdings, Inc. 4,630
----------
95,373
----------
HEALTH CARE FACILITIES (0.0%)
25,523 Tenet Healthcare Corp.* 1,198
----------
HEALTH CARE SERVICES (0.5%)
47,098 DaVita HealthCare Partners, Inc.* 3,406
204,283 Express Scripts Holding Company* 14,163
22,459 Laboratory Corp. of America Holdings* 2,300
38,124 Quest Diagnostics, Inc. 2,237
----------
22,106
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
HEALTH CARE SUPPLIES (0.0%)
37,104 DENTSPLY International, Inc. $ 1,757
----------
HEALTH CARE TECHNOLOGY (0.1%)
77,876 Cerner Corp.* 4,017
----------
LIFE SCIENCES TOOLS & SERVICES (0.4%)
87,774 Agilent Technologies, Inc. 5,042
29,579 PerkinElmer, Inc. 1,385
105,527 Thermo Fisher Scientific, Inc. 12,452
22,433 Waters Corp.* 2,343
----------
21,222
----------
MANAGED HEALTH CARE (1.0%)
94,526 Aetna, Inc. 7,664
71,055 CIGNA Corp. 6,535
41,054 Humana, Inc. 5,244
259,124 UnitedHealth Group, Inc. 21,183
73,885 WellPoint, Inc. 7,951
----------
48,577
----------
PHARMACEUTICALS (6.0%)
420,551 AbbVie, Inc. 23,736
49,212 Actavis plc* 10,977
78,569 Allergan, Inc. 13,295
438,269 Bristol-Myers Squibb Co. 21,260
260,555 Eli Lilly and Co. 16,199
62,777 Forest Laboratories, Inc.* 6,215
44,101 Hospira, Inc.* 2,266
748,159 Johnson & Johnson 78,272
772,834 Merck & Co., Inc. 44,708
98,888 Mylan, Inc.* 5,099
35,559 Perrigo Company PLC 5,183
1,686,868 Pfizer, Inc.(f) 50,066
132,814 Zoetis, Inc. 4,286
----------
281,562
----------
Total Health Care 613,943
----------
INDUSTRIALS (10.2%)
-------------------
AEROSPACE & DEFENSE (2.6%)
177,406 Boeing Co. 22,571
86,126 General Dynamics Corp. 10,038
207,050 Honeywell International, Inc. 19,245
23,013 L-3 Communications Holdings, Inc. 2,779
70,510 Lockheed Martin Corp. 11,333
================================================================================
20 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
56,637 Northrop Grumman Corp. $ 6,775
38,184 Precision Castparts Corp. 9,638
82,796 Raytheon Co. 7,638
35,757 Rockwell Collins, Inc. 2,794
74,372 Textron, Inc. 2,848
222,980 United Technologies Corp. 25,743
----------
121,402
----------
AGRICULTURAL & FARM MACHINERY (0.2%)
96,265 Deere & Co. 8,717
----------
AIR FREIGHT & LOGISTICS (0.7%)
39,094 C.H. Robinson Worldwide, Inc. 2,494
51,980 Expeditors International of Washington, Inc. 2,296
73,490 FedEx Corp. 11,125
186,541 United Parcel Service, Inc. "B" 19,150
----------
35,065
----------
AIRLINES (0.3%)
224,864 Delta Air Lines, Inc. 8,707
182,404 Southwest Airlines Co. 4,899
----------
13,606
----------
BUILDING PRODUCTS (0.1%)
23,720 Allegion Public Ltd. 1,344
94,261 Masco Corp. 2,093
----------
3,437
----------
CONSTRUCTION & ENGINEERING (0.1%)
42,187 Fluor Corp. 3,244
34,851 Jacobs Engineering Group, Inc.* 1,857
57,295 Quanta Services, Inc.* 1,981
----------
7,082
----------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.7%)
165,089 Caterpillar, Inc. 17,940
45,265 Cummins, Inc. 6,984
26,334 Joy Global, Inc. 1,622
94,023 PACCAR, Inc. 5,907
----------
32,453
----------
DIVERSIFIED SUPPORT SERVICES (0.1%)
26,613 Cintas Corp. 1,691
45,313 Iron Mountain, Inc. 1,606
----------
3,297
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 21
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.6%)
65,146 Ametek, Inc. $ 3,406
126,075 Eaton Corp. plc 9,731
185,839 Emerson Electric Co. 12,332
36,608 Rockwell Automation, Inc. 4,582
----------
30,051
----------
ENVIRONMENTAL & FACILITIES SERVICES (0.2%)
71,324 Republic Services, Inc. 2,708
22,517 Stericycle, Inc.* 2,667
114,896 Waste Management, Inc. 5,139
----------
10,514
----------
HUMAN RESOURCE & EMPLOYMENT SERVICES (0.0%)
36,410 Robert Half International, Inc. 1,738
----------
INDUSTRIAL CONGLOMERATES (2.3%)
164,410 3M Co. 23,550
159,144 Danaher Corp. 12,529
2,651,801 General Electric Co. 69,689
26,447 Roper Industries, Inc. 3,862
----------
109,630
----------
INDUSTRIAL MACHINERY (0.8%)
44,098 Dover Corp. 4,011
36,299 Flowserve Corp. 2,699
100,493 Illinois Tool Works, Inc. 8,799
66,456 Ingersoll-Rand plc 4,154
29,042 Pall Corp. 2,480
39,250 Parker-Hannifin Corp. 4,935
51,261 Pentair plc 3,697
15,311 Snap-On, Inc. 1,814
41,088 Stanley Black & Decker, Inc. 3,608
48,611 Xylem, Inc. 1,900
----------
38,097
----------
OFFICE SERVICES & SUPPLIES (0.0%)
52,752 Pitney Bowes, Inc. 1,457
----------
RAILROADS (0.9%)
264,890 CSX Corp. 8,161
29,143 Kansas City Southern 3,133
82,013 Norfolk Southern Corp. 8,450
239,574 Union Pacific Corp. 23,898
----------
43,642
----------
================================================================================
22 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
RESEARCH & CONSULTING SERVICES (0.2%)
9,884 Dun & Bradstreet Corp. $ 1,089
32,076 Equifax, Inc. 2,327
79,788 Nielsen Holdings N.V. 3,863
----------
7,279
----------
SECURITY & ALARM SERVICES (0.2%)
46,109 ADT Corp. 1,611
122,037 Tyco International Ltd. 5,565
----------
7,176
----------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
71,850 Fastenal Co. 3,556
16,110 W.W. Grainger, Inc. 4,096
----------
7,652
----------
TRUCKING (0.0%)
14,097 Ryder System, Inc. 1,242
----------
Total Industrials 483,537
----------
INFORMATION TECHNOLOGY (18.4%)
------------------------------
APPLICATION SOFTWARE (0.6%)
122,310 Adobe Systems, Inc.* 8,851
60,683 Autodesk, Inc.* 3,422
43,138 Citrix Systems, Inc.* 2,698
75,341 Intuit, Inc. 6,067
149,349 salesforce.com, Inc.* 8,674
----------
29,712
----------
COMMUNICATIONS EQUIPMENT (1.7%)
1,354,021 Cisco Systems, Inc. 33,647
19,934 F5 Networks, Inc.* 2,222
28,038 Harris Corp. 2,124
124,601 Juniper Networks, Inc.* 3,058
60,259 Motorola Solutions, Inc. 4,011
446,333 QUALCOMM, Inc. 35,350
----------
80,412
----------
DATA PROCESSING & OUTSOURCED SERVICES (1.8%)
14,337 Alliance Data Systems Corp.* 4,032
127,496 Automatic Data Processing, Inc. 10,108
38,260 Computer Sciences Corp. 2,418
75,850 Fidelity National Information Services, Inc. 4,152
65,934 Fiserv, Inc.* 3,977
265,703 MasterCard, Inc. "A" 19,521
85,487 Paychex, Inc. 3,553
43,648 Total System Services, Inc. 1,371
================================================================================
PORTFOLIO OF INVESTMENTS | 23
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
132,918 Visa, Inc. "A" $ 28,007
144,063 Western Union Co. 2,498
288,865 Xerox Corp. 3,594
----------
83,231
----------
ELECTRONIC COMPONENTS (0.2%)
41,645 Amphenol Corp. "A" 4,012
346,793 Corning, Inc. 7,612
----------
11,624
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.0%)
37,080 FLIR Systems, Inc. 1,288
----------
ELECTRONIC MANUFACTURING SERVICES (0.2%)
48,717 Jabil Circuit, Inc. 1,018
108,152 TE Connectivity Ltd. 6,688
----------
7,706
----------
HOME ENTERTAINMENT SOFTWARE (0.1%)
83,168 Electronic Arts, Inc.* 2,983
----------
INTERNET SOFTWARE & SERVICES (3.1%)
46,765 Akamai Technologies, Inc.* 2,856
301,625 eBay, Inc.* 15,099
454,705 Facebook, Inc. "A"* 30,597
74,912 Google, Inc. "C"* 43,095
74,912 Google, Inc. "A"* 43,799
33,070 VeriSign, Inc.* 1,614
247,452 Yahoo!, Inc.* 8,693
----------
145,753
----------
IT CONSULTING & OTHER SERVICES (1.5%)
167,687 Accenture plc "A" 13,556
160,913 Cognizant Technology Solutions Corp. "A"* 7,870
251,592 International Business Machines Corp. 45,606
41,908 Teradata Corp.* 1,685
----------
68,717
----------
SEMICONDUCTOR EQUIPMENT (0.3%)
321,947 Applied Materials, Inc. 7,260
43,852 KLA-Tencor Corp. 3,185
42,541 Lam Research Corp. 2,875
----------
13,320
----------
SEMICONDUCTORS (2.0%)
82,478 Altera Corp. 2,867
83,160 Analog Devices, Inc. 4,496
66,585 Avago Technologies Ltd. 4,799
================================================================================
24 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
146,956 Broadcom Corp. "A" $ 5,455
18,715 First Solar, Inc.* 1,330
1,316,339 Intel Corp. 40,675
62,067 Linear Technology Corp. 2,921
53,341 Microchip Technology, Inc. 2,603
283,068 Micron Technology, Inc.* 9,327
148,424 NVIDIA Corp. 2,752
285,345 Texas Instruments, Inc. 13,637
71,562 Xilinx, Inc. 3,386
----------
94,248
----------
SYSTEMS SOFTWARE (2.7%)
84,980 CA, Inc. 2,442
1,988,405 Microsoft Corp.(f) 82,917
907,781 Oracle Corp. 36,792
49,896 Red Hat, Inc.* 2,758
183,684 Symantec Corp. 4,206
----------
129,115
----------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS (4.2%)
1,594,523 Apple, Inc.(f) 148,179
541,274 EMC Corp. 14,257
494,846 Hewlett-Packard Co. 16,666
87,200 NetApp, Inc. 3,185
59,856 SanDisk Corp. 6,251
86,535 Seagate Technology plc 4,917
55,409 Western Digital Corp. 5,114
----------
198,569
----------
Total Information Technology 866,678
----------
MATERIALS (3.4%)
----------------
ALUMINUM (0.1%)
311,725 Alcoa, Inc. 4,642
----------
COMMODITY CHEMICALS (0.2%)
110,183 LyondellBasell Industrues N.V. 10,759
----------
CONSTRUCTION MATERIALS (0.1%)
34,343 Vulcan Materials Co. 2,189
----------
DIVERSIFIED CHEMICALS (0.8%)
318,431 Dow Chemical Co. 16,387
242,884 E.I. du Pont de Nemours & Co. 15,894
39,548 Eastman Chemical Co. 3,455
35,598 FMC Corp. 2,534
----------
38,270
----------
================================================================================
PORTFOLIO OF INVESTMENTS | 25
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
DIVERSIFIED METALS & MINING (0.2%)
274,781 Freeport-McMoRan Copper & Gold, Inc. $ 10,030
----------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.5%)
13,709 CF Industries Holdings, Inc. 3,297
138,623 Monsanto Co. 17,292
85,577 Mosaic Co. 4,232
----------
24,821
----------
GOLD (0.1%)
131,683 Newmont Mining Corp. 3,350
----------
INDUSTRIAL GASES (0.4%)
56,150 Air Products & Chemicals, Inc. 7,222
17,570 Airgas, Inc. 1,913
77,460 Praxair, Inc. 10,290
----------
19,425
----------
METAL & GLASS CONTAINERS (0.1%)
37,058 Ball Corp. 2,323
42,941 Owens-Illinois, Inc.* 1,487
----------
3,810
----------
PAPER PACKAGING (0.1%)
25,193 Avery Dennison Corp. 1,291
26,763 Bemis Co., Inc. 1,088
44,396 MeadWestvaco Corp. 1,965
51,721 Sealed Air Corp. 1,768
----------
6,112
----------
PAPER PRODUCTS (0.1%)
114,536 International Paper Co. 5,781
----------
SPECIALTY CHEMICALS (0.6%)
71,279 Ecolab, Inc. 7,936
21,400 International Flavors & Fragrances, Inc. 2,232
36,679 PPG Industries, Inc. 7,708
22,428 Sherwin-Williams Co. 4,640
31,433 Sigma-Aldrich Corp. 3,190
----------
25,706
----------
STEEL (0.1%)
28,423 Allegheny Technologies, Inc. 1,282
83,741 Nucor Corp. 4,124
38,482 United States Steel Corp. 1,002
----------
6,408
----------
Total Materials 161,303
----------
================================================================================
26 | USAA S&P 500 INDEX FUND
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (2.3%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (2.3%)
1,372,383 AT&T, Inc.(f) $ 48,527
152,150 CenturyLink, Inc. 5,508
263,291 Frontier Communications Corp. 1,538
1,095,093 Verizon Communications, Inc. 53,583
158,620 Windstream Holdings, Inc. 1,580
----------
110,736
----------
Total Telecommunication Services 110,736
----------
UTILITIES (3.1%)
----------------
ELECTRIC UTILITIES (1.7%)
129,247 American Electric Power Co., Inc. 7,208
85,933 Edison International 4,994
47,592 Entergy Corp. 3,907
227,084 Exelon Corp. 8,284
111,551 FirstEnergy Corp. 3,873
115,359 NextEra Energy, Inc. 11,822
83,085 Northeast Utilities 3,927
66,576 Pepco Holdings, Inc. 1,830
29,076 Pinnacle West Capital Corp. 1,682
167,405 PPL Corp. 5,948
235,662 Southern Co. 10,694
133,252 Xcel Energy, Inc. 4,295
----------
68,464
----------
GAS UTILITIES (0.1%)
31,625 AGL Resources, Inc. 1,740
----------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
173,849 AES Corp. 2,704
89,228 NRG Energy, Inc. 3,319
----------
6,023
----------
MULTI-UTILITIES (1.2%)
64,055 Ameren Corp. 2,619
113,206 CenterPoint Energy, Inc. 2,891
70,537 CMS Energy Corp. 2,197
77,941 Consolidated Edison, Inc. 4,500
153,915 Dominion Resources, Inc. 11,008
46,579 DTE Energy Co. 3,627
187,037 Duke Energy Corp. 13,876
20,957 Integrys Energy Group, Inc. 1,491
83,707 NiSource, Inc. 3,293
================================================================================
PORTFOLIO OF INVESTMENTS | 27
================================================================================
-------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-------------------------------------------------------------------------------------------
122,986 PG&E Corp. $ 5,906
133,256 Public Service Enterprise Group, Inc. 5,435
37,356 SCANA Corp. 2,010
60,375 Sempra Energy 6,322
54,108 TECO Energy, Inc. 1,000
59,314 Wisconsin Energy Corp. 2,783
----------
68,958
----------
Total Utilities 145,185
----------
Total Common Stocks (cost: $2,675,037) 4,606,203
----------
MONEY MARKET INSTRUMENTS (2.4%)
MONEY MARKET FUND (2.3%)
106,910,780 Northern Institutional Funds - Diversified Assets
Portfolio, 0.01%(a),(d) 106,911
----------
-------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
-------------------------------------------------------------------------------------------
U.S. TREASURY BILLS (0.1%)
$7,014 0.04%, 10/02/14(b),(e) 7,014
----------
Total Money Market Instruments (cost: $113,925) 113,925
----------
TOTAL INVESTMENTS (COST: $2,788,962) $4,720,128
==========
================================================================================
28 | USAA S&P 500 INDEX FUND
================================================================================
------------------------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
------------------------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
------------------------------------------------------------------------------------------------------------------
Equity Securities:
Common Stocks $4,606,203 $- $- $4,606,203
Money Market Instruments:
Money Market Fund 106,911 - - 106,911
U.S. Treasury Bills 7,014 - - 7,014
Other financial instruments(1) 1,172 - - 1,172
------------------------------------------------------------------------------------------------------------------
Total $4,721,300 $- $- $4,721,300
------------------------------------------------------------------------------------------------------------------
(1)Other financial instruments are derivative instruments reflected in the
notes to portfolio of investments, such as futures, which are valued at the
unrealized appreciation/depreciation on the investment.
For the period of January 1, 2014, through June 30, 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.
================================================================================
PORTFOLIO OF INVESTMENTS | 29
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
June 30, 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)
REIT - Real estate investment trust
o SPECIFIC NOTES
(a) Rate represents the money market fund annualized seven-day yield at
June 30, 2014.
(b) Rate represents an annualized yield at time of purchase, not a coupon
rate.
(c) Northern Trust Corp. is the parent to Northern Trust Investments, Inc.
(NTI), which is the subadviser of the Fund.
(d) NTI is both the subadviser of the Fund and the adviser of the Northern
Institutional Funds.
(e) Security with a value of $7,014,000 is segregated as collateral for
initial margin requirements on open futures contracts.
================================================================================
30 | USAA S&P 500 INDEX FUND
================================================================================
(f) Security, or a portion thereof, is segregated to cover the value of open
futures contracts at June 30, 2014.
VALUE AT
JUNE 30, UNREALIZED
TYPE OF FUTURE EXPIRATION CONTRACTS POSITION 2014 APPRECIATION
------------------------------------------------------------------------------------------------
E-mini S&P 500
Index Futures September 19, 2014 1,182 Long $115,387,000 $1,172,000
* Non-income-producing security.
See accompanying notes to financial statements.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 31
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
June 30, 2014 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $2,788,962) $4,720,128
Receivables:
Capital shares sold 2,858
USAA Asset Management Company (Note 6D) 115
Dividends and interest 4,878
Other 17
Variation margin on futures contracts 24
----------
Total assets 4,728,020
----------
LIABILITIES
Payables:
Securities purchased 4,509
Capital shares redeemed 5,023
Accrued management fees 398
Accrued administration and servicing fees 6
Accrued transfer agent's fees 47
Other accrued expenses and payables 118
----------
Total liabilities 10,101
----------
Net assets applicable to capital shares outstanding $4,717,919
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,817,901
Accumulated undistributed net investment income 1,104
Accumulated net realized loss on investments and futures transactions (33,424)
Net unrealized appreciation of investments and futures contracts 1,932,338
----------
Net assets applicable to capital shares outstanding $4,717,919
==========
Net asset value, redemption price, and offering price per share:
Member Shares (net assets of $2,686,676/96,007 shares outstanding) $ 27.98
==========
Reward Shares (net assets of $2,031,243/72,575 shares outstanding) $ 27.99
==========
See accompanying notes to financial statements.
================================================================================
32 | USAA S&P 500 INDEX FUND
================================================================================
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended June 30, 2014 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 44,122
Interest 15
--------
Total income 44,137
--------
EXPENSES
Management fees 2,210
Administration and servicing fees:
Member Shares 767
Reward Shares 559
Transfer agent's fees:
Member Shares 1,368
Reward Shares 82
Custody and accounting fees:
Member Shares 13
Reward Shares 9
Postage:
Member Shares 65
Reward Shares 3
Shareholder reporting fees:
Member Shares 41
Reward Shares 2
Trustees' fees 11
Registration fees:
Member Shares 29
Reward Shares 32
Professional fees 118
Other 55
--------
Total expenses 5,364
Expenses reimbursed:
Member Shares (459)
Reward Shares (294)
--------
Net expenses 4,611
--------
NET INVESTMENT INCOME 39,526
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS
Net realized gain on:
Investments 2,232
Futures transactions 10,874
Change in net unrealized appreciation/depreciation of:
Investments 261,038
Futures contracts (3,260)
--------
Net realized and unrealized gain 270,884
--------
Increase in net assets resulting from operations $310,410
========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 33
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended June 30, 2014 (unaudited), and year ended
December 31, 2013
-----------------------------------------------------------------------------------------------
6/30/2014 12/31/2013
-----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 39,526 $ 72,874
Net realized gain(loss) on investments 2,232 (49,133)
Net realized gain on futures transactions 10,874 14,236
Change in net unrealized appreciation/depreciation of:
Investments 261,038 1,019,633
Futures contracts (3,260) 4,402
--------------------------
Increase in net assets resulting from operations 310,410 1,062,012
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Member Shares (23,423) (41,086)
Reward Shares (18,261) (28,088)
--------------------------
Distributions to shareholders (41,684) (69,174)
--------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (NOTE 5)
Member Shares (40,100) (155,609)
Reward Shares 84,890 277,372
--------------------------
Total net increase in net assets
from capital share transactions 44,790 121,763
--------------------------
Capital contribution from USAA Transfer Agency Company:
Reward Shares - 11
--------------------------
Net increase in net assets 313,516 1,114,612
NET ASSETS
Beginning of period 4,404,403 3,289,791
--------------------------
End of period $4,717,919 $4,404,403
==========================
Accumulated undistributed net investment income:
End of period $ 1,104 $ 3,262
==========================
See accompanying notes to financial statements.
================================================================================
34 | USAA S&P 500 INDEX FUND
================================================================================
NOTES TO FINANCIAL STATEMENTS
June 30, 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 S&P
500 Index Fund (the Fund), which is classified as diversified under the 1940
Act. The Fund seeks to match, before fees and expenses, the performance of the
S&P 500 Index. USAA Asset Management Company (the Manager), an affiliate of the
Fund, has retained Northern Trust Investments, Inc. (NTI) to serve as subadviser
for the Fund. NTI is responsible for investing the Fund's assets. Under normal
market conditions, NTI attempts to achieve the Fund's objective by investing at
least 80% of the Fund's assets in the common stocks of companies composing the
S&P 500 Index.
The Fund consists of two classes of shares: Member Shares and Reward 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 agency 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 Reward Shares are currently offered for sale to qualified
shareholders, USAA discretionary managed account program, and a USAA Fund
participating in a fund-of-funds investment strategy (USAA fund-of-funds).
================================================================================
NOTES TO FINANCIAL STATEMENTS | 35
================================================================================
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 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. If no last sale or official closing price is reported
or available, the average of the bid and asked prices generally is used.
2. Investments in open-end investment companies, hedge, or other funds, other
than ETFs, are valued at their net asset value (NAV) at the end of each
business day.
================================================================================
36 | USAA S&P 500 INDEX FUND
================================================================================
3. Debt securities purchased with original or remaining maturities of 60 days
or less may be valued at amortized cost, which approximates market value.
4. Debt securities with maturities greater than 60 days are valued each
business day by a pricing service (the Service) approved by the Board. The
Service uses an evaluated mean between quoted bid and asked prices or
the last sales price to price securities when, in the Service's judgment,
these prices are readily available and are representative of the
securities' market values. For many securities, such prices are not
readily available. The Service generally prices these securities based on
methods that include consideration of yields or prices of securities of
comparable quality, coupon, maturity, and type; indications as to values
from dealers in securities; and general market conditions.
5. Repurchase agreements are valued at cost, which approximates market value.
6. Futures are valued based upon the last sale price at the close of market
on the principal exchange on which they are traded.
7. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before the
pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager in consultation with the Fund's
subadviser, if applicable, under valuation procedures approved by the
Board. The effect of fair value pricing is that securities may not be
priced on the basis of quotations from the primary market in which they
are traded and the actual price realized from the sale of a security may
differ materially from the fair value price. Valuing these securities at
fair value is intended to cause the Fund's NAV to be more reliable than
it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
================================================================================
NOTES TO FINANCIAL STATEMENTS | 37
================================================================================
fundamental analytical data, the nature and duration of any restrictions
on disposition of the securities, and an evaluation of the forces that
influenced the market in which the securities are purchased and sold.
B. FAIR VALUE MEASUREMENTS - Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments is
based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted)
in active markets for identical securities.
Level 2 - inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices.
Level 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. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - The Fund may buy, sell, and
enter into certain types of derivatives, including, but not limited to
futures contracts, options, and options on futures contracts, under
circumstances in which such instruments are expected by the portfolio
manager to aid in achieving the Fund's investment objective. The Fund also
may use derivatives in circumstances where the portfolio manager believes
they offer an economical means of gaining exposure to a particular asset
class or securities market or to keep cash on hand to meet shareholder
redemptions or other needs while maintaining exposure to the market. With
exchange-listed futures contracts and options, counterparty credit risk to
the Fund is limited to the exchange's clearinghouse which, as counterparty
to all exchange-traded futures contracts and options, guarantees the
transactions against default from the actual counterparty
================================================================================
38 | USAA S&P 500 INDEX FUND
================================================================================
to the trade. The Fund's derivative agreements held at June 30, 2014, did
not include master netting provisions.
FUTURES CONTRACTS - The Fund is subject to cash flow and tracking error risk
in the normal course of pursuing its investment objectives. The Fund may use
stock index futures contracts in an attempt to reduce any performance
discrepancies between the Fund and the S&P 500 Index. A futures contract
represents a commitment for the future purchase or sale of an asset at a
specified price on a specified date. Upon entering into such contracts, the
Fund is required to deposit with the broker in either cash or securities an
initial margin in an amount equal to a certain percentage of the contract
amount. Subsequent payments (variation margin) are made or received by the
Fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized
gains or losses. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed. Upon
entering into such contracts, the Fund bears the risk of interest or
exchange rates or securities prices moving unexpectedly in an unfavorable
direction, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AS OF JUNE 30, 2014*
(IN THOUSANDS)
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------------------------------------------------------------------
DERIVATIVES NOT STATEMENT OF STATEMENT OF
ACCOUNTED ASSETS AND ASSETS AND
FOR AS HEDGING LIABILITIES LIABILITIES
INSTRUMENTS LOCATION FAIR VALUE LOCATION FAIR VALUE
---------------------------------------------------------------------------------------------------
Equity contracts Net unrealized $1,172** - $-
appreciation of
investments and
futures contracts
---------------------------------------------------------------------------------------------------
*For open derivative instruments as of June 30, 2014, see the notes to
portfolio of investments, which also is indicative of activity for the
six-month period ended June 30, 2014.
**Includes cumulative appreciation (depreciation) of futures as reported on
the notes to portfolio of investments. Only current day's variation margin is
reported within the statement of assets and liabilities.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 39
================================================================================
THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE
SIX-MONTH PERIOD ENDED JUNE 30, 2014
(IN THOUSANDS)
CHANGE IN
UNREALIZED
DERIVATIVES NOT REALIZED APPRECIATION
ACCOUNTED FOR AS STATEMENT OF GAIN ON (DEPRECIATION)
HEDGING INSTRUMENTS OPERATIONS LOCATION DERIVATIVES ON DERIVATIVES
--------------------------------------------------------------------------------
Equity contracts Net realized gain on $10,874 $(3,260)
futures transactions/
Change in net unrealized
appreciation/depreciation
of futures contracts
--------------------------------------------------------------------------------
E. FEDERAL TAXES - The Fund's policy is to comply with the requirements of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income to
its shareholders. Therefore, no federal income tax provision is required.
F. 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.
G. EXPENSES PAID INDIRECTLY - Through arrangements with 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 June 30, 2014, there were no
custodian and other bank credits.
H. INDEMNIFICATIONS - Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business, the Trust enters into contracts that contain a variety of
representations and warranties that provide general indemnifications.
================================================================================
40 | USAA S&P 500 INDEX FUND
================================================================================
The Trust's maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Trust that have not
yet occurred. However, the Trust expects the risk of loss to be remote.
I. USE OF ESTIMATES - The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests 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 June 30, 2014, the Fund paid CAPCO facility fees
of $12,000, which represents 6.8% 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 June 30, 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 December 31,
2014, in accordance with applicable tax law.
Distributions of net investment income are made quarterly. Distributions of
realized gains from security transactions not offset by capital losses are made
annually in the succeeding fiscal year or as otherwise required to avoid the
payment of federal taxes.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 41
================================================================================
The 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 December 31, 2013, the Fund had no pre-enactment capital loss carryforwards
and post-enactment capital loss carryforwards of $26,539,000, for federal income
tax purposes. It is unlikely that the Board will authorize a distribution of
capital gains realized in the future until the capital loss carryforwards have
been used.
For the six-month period ended June 30, 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 remains 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 June 30, 2014, were
$137,258,000 and $56,195,000, respectively.
As of June 30, 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 June 30,
2014, were $2,112,817,000 and $181,651,000, respectively, resulting in net
unrealized appreciation of $1,931,166,000.
================================================================================
42 | USAA S&P 500 INDEX FUND
================================================================================
(5) CAPITAL SHARE TRANSACTIONS
At June 30, 2014, there were an unlimited number of shares of capital stock at
no par value authorized for the Fund.
Capital share transactions were as follows, in thousands:
SIX-MONTH
PERIOD ENDED YEAR ENDED
JUNE 30, 2014 DECEMBER 31, 2013
-----------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------
MEMBER SHARES:
Shares sold 8,456 $ 224,806 16,621 $ 388,805
Shares issued from reinvested
dividends 848 22,977 1,697 40,074
Shares redeemed (10,750) (287,883) (24,918) (584,488)
---------------------------------------------
Net decrease from capital
share transactions (1,446) $ (40,100) (6,600) $(155,609)
=============================================
REWARD SHARES:
Shares sold 8,264 $ 221,882 19,506 $ 459,343
Shares issued from
reinvested dividends 644 17,473 1,135 26,883
Shares redeemed (5,765) (154,465) (8,907) (208,854)
---------------------------------------------
Net increase from capital
share transactions 3,143 $ 84,890 11,734 $ 277,372
=============================================
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES - The Manager provides investment management services to the
Fund pursuant to a Management 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 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 subadvisers to manage the actual day-to-day investment of a portion of
the Fund's assets.
The Manager monitors each subadviser's performance through quantitative and
qualitative analysis and periodically reports to the Board as to whether
each subadviser's agreement should be renewed,
================================================================================
NOTES TO FINANCIAL STATEMENTS | 43
================================================================================
terminated, or modified. The Manager also is responsible for allocating
assets to the subadviser(s). The allocation for each subadviser could range
from 0% to 100% of the Fund's assets, and the Manager could change the
allocations without shareholder approval.
The investment management fee for the Fund is accrued daily and paid monthly
at an annualized rate of 0.10% of the Fund's average net assets for the
fiscal year. For the six-month period ended June 30, 2014, the Fund incurred
management fees, paid or payable to the Manager, of $2,210,000.
B. SUBADVISORY ARRANGEMENT(S) - The Manager has entered into an investment
subadvisory agreement with NTI, under which NTI directs the investment and
reinvestment of the Fund's assets (as allocated from time to time by the
Manager). The Manager (not the Fund) pays NTI a subadvisory fee in an annual
amount of 0.02% of the Fund's average daily net assets on amounts up to $1.5
billion; 0.01% of the Fund's average daily net assets for the next $1.5
billion; and 0.005% of the Fund's average daily net assets that exceed $3
billion. For the six-month period ended June 30, 2014, the Manager incurred
subadvisory fees, paid or payable to NTI, of $258,000.
NTI has agreed to remit to the Fund all subadvisory fees earned on Fund
assets invested in any of NTI's affiliated money market funds. For the
six-month period ended June 30, 2014, NTI remitted $2,000 to the Fund for
the investments in the Northern Institutional Funds Money Market Portfolios.
NTI is a direct subsidiary of The Northern Trust Company, the Fund's
custodian and accounting agent.
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 0.06% of the Fund's average net assets for the fiscal year. For the
six-month period ended June 30, 2014, the Member Shares and Reward Shares
incurred administration and servicing fees, paid or payable to the Manager,
of $767,000 and $559,000, respectively.
================================================================================
44 | USAA S&P 500 INDEX FUND
================================================================================
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 June 30, 2014, the Fund reimbursed the Manager
$58,000 for these compliance and legal services. These expenses are
included in the professional fees on the Fund's statement of operations.
D. EXPENSE LIMITATION - The Manager agreed, through May 1, 2015, to limit the
total annual operating expenses of the Member Shares and the Reward Shares
to 0.25% and 0.15%, respectively, of their average net assets, excluding
extraordinary expenses and before reductions of any expenses paid
indirectly, and will reimburse the Fund for all expenses in excess of those
amounts. This expense limitation arrangement may not be changed or
terminated through May 1, 2015, without approval of the Board, and may be
changed or terminated by the Manager at any time after that date. For the
six-month period ended June 30, 2014, the Fund incurred reimbursable
expenses from the Manager for the Member Shares and the Reward Shares of
$459,000 and $294,000, respectively, of which $115,000 in total was
receivable from the Manager.
In addition, NTI has contractually agreed to reimburse the Fund for all
license fees paid by the Fund to Standard & Poor's, in amounts not exceeding
the annual rate of 0.001% of the average daily net assets of the Fund. For
the six-month period ended June 30, 2014, the Fund incurred reimbursable
expenses from NTI for the Member Shares and the Reward Shares of $16,000 and
$12,000, respectively.
E. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services (SAS), an affiliate of the Manager, provides transfer agent
services to the Fund based on an annual charge of $20 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 that
are held with such intermediaries. For the six-month period ended June 30,
2014, the Fund incurred transfer agent's fees, paid or payable to SAS for
the Member Shares and Reward Shares, of $1,368,000 and $82,000, respectively.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 45
================================================================================
F. UNDERWRITING SERVICES - USAA Investment Management Company provides exclusive
underwriting and distribution of the Fund's shares on a continuing
best-efforts basis and receives no commissions or fees for this service.
G. ACCOUNT MAINTENANCE FEE - SAS assesses a $10 annual account maintenance fee
to allocate part of the fixed cost of maintaining shareholder accounts. This
fee is charged directly to the shareholders' accounts and does not impact
the Fund. The fee is waived on accounts with balances of $10,000 or more.
(7) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
The Fund's Reward Shares is one of 17 USAA mutual funds in which the affiliated
USAA fund-of-funds may invest. The USAA fund-of-funds do not invest in the
underlying funds for the purpose of exercising management or control. As of June
30, 2014, the USAA fund-of-funds owned the following percentages of the total
outstanding shares of the Fund:
AFFILIATED USAA FUND OWNERSHIP %
--------------------------------------------------------------------------------
USAA Cornerstone Equity Fund 0.1
USAA Cornerstone Conservative Fund 0.0*
USAA Target Retirement Income Fund 0.2
USAA Target Retirement 2020 Fund 0.4
USAA Target Retirement 2030 Fund 1.1
USAA Target Retirement 2040 Fund 1.4
USAA Target Retirement 2050 Fund 0.8
USAA Target Retirement 2060 Fund 0.0*
*Represents less than 0.01%
================================================================================
46 | USAA S&P 500 INDEX FUND
================================================================================
(8) FINANCIAL HIGHLIGHTS - MEMBER SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009
---------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 26.39 $ 20.34 $ 18.83 $ 18.86 $ 16.71 $ 13.51
---------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .23 .44 .41 .39 .30 .30
Net realized and
unrealized gain (loss) 1.60 6.02 2.54 (.05) 2.15 3.20
---------------------------------------------------------------------------------------
Total from investment
operations 1.83 6.46 2.95 .34 2.45 3.50
---------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.24) (.41) (.43) (.37) (.30) (.30)
Realized capital gains - - (1.01) - - -
---------------------------------------------------------------------------------------
Total distributions (.24) (.41) (1.44) (.37) (.30) (.30)
---------------------------------------------------------------------------------------
Net asset value at end
of period $ 27.98 $ 26.39 $ 20.34 $ 18.83 $ 18.86 $ 16.71
=======================================================================================
Total return (%)* 6.98 32.03 15.75 1.82 14.81 26.28
Net assets at end of
period (000) $2,686,676 $2,571,828 $2,116,203 $1,967,983 $2,021,901 $1,831,645
Ratios to average
net assets:**
Expenses (%) .25(b) .25(a) .25(a) .25(a) .25(a) .25(a)
Expenses, excluding
reimbursements (%) .29(b) .30(a) .32(a) .33(a) .36(a) .40(a)
Net investment
income (%) 1.74(b) 1.85 2.06 2.03 1.75 2.11
Portfolio turnover (%) 1 3 4 3 4 5
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period; does not reflect $10 annual
account maintenance fee. 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 June 30, 2014, average net assets were
$2,592,702,000.
(a) Reflects total annual operating expenses of the Member Shares before
reductions of any expenses paid indirectly. The Member Shares' expenses paid
indirectly decreased the expense ratios by less than 0.01%.
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 47
================================================================================
(8) FINANCIAL HIGHLIGHTS (CONTINUED) - REWARD SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009
---------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 26.39 $ 20.34 $ 18.83 $ 18.86 $ 16.71 $ 13.51
---------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .24 .45 .43 .40 .33 .32
Net realized and
unrealized gain (loss) 1.62 6.04 2.54 (.04) 2.15 3.20
---------------------------------------------------------------------------------------
Total from investment
operations 1.86 6.49 2.97 .36 2.48 3.52
---------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.26) (.44) (.45) (.39) (.33) (.32)
Realized capital gains - - (1.01) - - -
---------------------------------------------------------------------------------------
Total distributions (.26) (.44) (1.46) (.39) (.33) (.32)
---------------------------------------------------------------------------------------
Net asset value at end
of period $ 27.99 $ 26.39 $ 20.34 $ 18.83 $ 18.86 $ 16.71
=======================================================================================
Total return (%)* 7.07 32.16 15.86 1.96 14.99 26.47
Net assets at end of
period (000) $2,031,243 $1,832,575 $1,173,588 $1,316,754 $1,159,476 $894,035
Ratios to average
net assets:**
Expenses (%) .15(c) .15(a) .15(a) .13(a),(b) .09(a) .09(a)
Expenses, excluding
reimbursements (%) .18(c) .20(a) .27(a) .24(a) .24(a) .23(a)
Net investment
income (%) 1.83(c) 1.95 2.15 2.14 1.92 2.26
Portfolio turnover (%) 1 3 4 3 4 5
* 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 June 30, 2014, average net assets were
$1,890,730,000.
(a) Reflects total annual operating expenses of the Reward Shares before
reductions of any expenses paid indirectly. The Reward Shares' expenses paid
indirectly decreased the expense ratios by less than 0.01%.
(b) Effective May 1, 2011, the Manager voluntarily agreed to reimburse the
Reward Shares for expenses in excess of 0.15% of their annual average net
assets. Prior to May 1, 2011, the Manager voluntarily agreed to reimburse
the Reward Shares for expenses in excess of 0.09% of their annual average
net assets.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
================================================================================
48 | USAA S&P 500 INDEX FUND
================================================================================
EXPENSE EXAMPLE
June 30, 2014 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as account maintenance fees, 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 January 1, 2014, through June
30, 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.
Actual expenses in the table on the next page do not reflect the effect of the
annual $10.00 account maintenance fee that is assessed on accounts with balances
of less than $10,000, at a rate of $2.50 per quarter. To include the effect of
this fee on the expenses that you paid, add $5.00 ($2.50 for two quarters) to
your calculated estimated expenses. If you are currently assessed this fee, your
ending account value reflects the quarterly deduction from your account.
================================================================================
EXPENSE EXAMPLE | 49
================================================================================
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 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 account
maintenance fees, 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 JANUARY 1, 2014 -
JANUARY 1, 2014 JUNE 30, 2014 JUNE 30, 2014
---------------------------------------------------------------
MEMBER SHARES
Actual $1,000.00 $1,069.80 $1.28
Hypothetical
(5% return before expenses) 1,000.00 1,023.55 1.25
REWARD SHARES
Actual 1,000.00 1,070.70 0.77
Hypothetical
(5% return before expenses) 1,000.00 1,024.05 0.75
* Expenses are equal to the Fund's annualized expense ratio of 0.25% for Member
Shares and 0.15% for Reward Shares, which are net of any reimbursements and
expenses paid indirectly, multiplied by the average account value over the
period, multiplied by 181 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 6.98% for Member Shares and 7.07% for Reward Shares for the six-month
period of January 1, 2014, through June 30, 2014.
================================================================================
50 | USAA S&P 500 INDEX FUND
================================================================================
ADVISORY AGREEMENT(S)
June 30, 2014 (unaudited)
--------------------------------------------------------------------------------
At an in-person meeting of the Board of Trustees (the Board) held on April 30,
2014, the Board, including the Trustees who are not "interested persons" of the
Trust (the Independent Trustees), approved for an annual period the continuance
of the Management Agreement between the Trust and the Manager with respect to
the Fund and the Subadvisory Agreement between the Manager and the Subadviser
with respect to the Fund.
In advance of the meeting, the Trustees received and considered a variety of
information relating to the Management Agreement and Subadvisory Agreement and
the Manager and the Subadviser, and were given the opportunity to ask questions
and request additional information from management. The information provided to
the Board included, among other things: (i) a separate report prepared by an
independent third party, which provided a statistical analysis comparing the
Fund's investment performance, expenses, and fees to comparable investment
companies; (ii) information concerning the services rendered to the Fund, as
well as information regarding the Manager's revenues and costs of providing
services to the Fund and compensation paid to affiliates of the Manager; and
(iii) information about the Manager's and Subadviser's operations and personnel.
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the Management Agreement and the Subadvisory Agreement with management and with
experienced independent counsel and received materials from such counsel
discussing the legal standards for their consideration of the proposed
continuation of the Management Agreement and the Subadvisory Agreement with
respect to the Fund. The Independent Trustees also reviewed the proposed
continuation of the Management Agreement and the Subadvisory Agreement with
respect to the Fund in private sessions with their counsel at which no
representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board
receives and reviews, among other things, information concerning the Fund's
performance and related services provided by the Manager and by the
================================================================================
ADVISORY AGREEMENT(S) | 51
================================================================================
Subadviser. At the meeting at which the renewal of the Management Agreement and
Subadvisory Agreement is considered, particular focus is given to information
concerning Fund performance, comparability of fees and total expenses, and
profitability. However, the Board noted that the evaluation process with respect
to the Manager and the Subadviser is an ongoing one. In this regard, the Board's
and its committees' consideration of the Management Agreement and Subadvisory
Agreement included certain information previously received at such meetings.
MANAGEMENT AGREEMENT
After full consideration of a variety of factors, the Board, including the
Independent Trustees, voted to approve the Management Agreement. In approving
the Management Agreement, the Trustees did not identify any single factor as
controlling, and each Trustee may have attributed different weights to various
factors. Throughout their deliberations, the Independent Trustees were
represented and assisted by independent counsel.
NATURE, EXTENT, AND QUALITY OF SERVICES - In considering the nature, extent, and
quality of the services provided by the Manager under the Management Agreement,
the Board reviewed information provided by the Manager relating to its
operations and personnel. The Board also took into account its knowledge of the
Manager's management and the quality of the performance of the Manager's duties
through Board meetings, discussions, and reports during the preceding year. The
Board considered the fees paid to the Manager and the services provided to the
Fund by the Manager under the Management Agreement, as well as other services
provided by the Manager and its affiliates under other agreements, and the
personnel who provide these services. In addition to the investment advisory
services provided to the Fund, the Manager and its affiliates provide
administrative services, stockholder services, oversight of Fund accounting,
marketing services, assistance in meeting legal and regulatory requirements, and
other services necessary for the operation of the Fund and the Trust.
The Board considered the Manager's management style and the performance of the
Manager's duties under the Management Agreement. The Board considered the level
and depth of knowledge of the Manager, including the professional experience and
qualifications of senior personnel and investment personnel, as
================================================================================
52 | USAA S&P 500 INDEX FUND
================================================================================
well as current staffing levels. The Board discussed the Manager's effectiveness
in monitoring the performance of the Subadviser and its timeliness in responding
to performance issues. The allocation of the Fund's brokerage, including the
Manager's process for monitoring "best execution," also was considered. The
Manager's role in coordinating the activities of the Fund's other service
providers also was considered. The Board also considered the Manager's risk
management processes. The Board considered the Manager's financial condition and
that it had the financial wherewithal to continue to provide the same scope and
high quality of services under the Management Agreement. In reviewing the
Management Agreement, the Board focused on the experience, resources, and
strengths of the Manager and its affiliates in managing the Fund, as well as the
other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to
the Fund by the Manager, including the Manager's oversight of the Fund's
day-to-day operations and oversight of Fund accounting. The Trustees, guided
also by information obtained from their experiences as trustees of the Trust,
also focused on the quality of the Manager's compliance and administrative
staff.
EXPENSES AND PERFORMANCE - In connection with its consideration of the
Management Agreement, the Board evaluated the advisory fees and total expense
ratios of each of the Member Shares and Reward Shares classes of the Fund as
compared to other open-end investment companies deemed to be comparable to each
class of the Fund as determined by the independent third party in its report.
The expenses of each class of the Fund were compared to (i) a group of
investment companies chosen by the independent third party to be comparable to
the class of the Fund based upon certain factors, including fund type,
comparability of investment objective and classification, sales load type (in
this case, pure-index retail investment companies with front-end loads and no
sales loads), asset size, and expense components (the "expense group") and (ii)
a larger group of investment companies that includes all front-end and no-load
load retail open-end investment companies in the same investment
classification/objective as the Fund regardless of asset size, excluding
outliers (the "expense universe"). Among other data, the Board noted that the
Fund's management fee rate - which includes advisory and administrative services
and the effects of any reimbursements - was below the median of its expense
group
================================================================================
ADVISORY AGREEMENT(S) | 53
================================================================================
and its expense universe for the Member Shares and for the Reward Shares. The
data indicated that the Fund's total expenses, after reimbursements, were below
the median of its expense group and its expense universe for the Member Shares
and for the Reward Shares. The Trustees also took into account the Manager's
current undertakings to maintain expense limitations for the Fund. The Board
took into account the various services provided to the Fund by the Manager and
its affiliates, including the high quality of services received by the Fund from
the Manager. The Board also noted the high level of correlation between the S&P
500 Index and the Fund and the relatively low tracking error between the Fund
and the S&P 500 Index, and noted that it reviews such information on a quarterly
basis. The Board also noted the level and method of computing the management
fee. The Trustees also took into account that the subadvisory fees under the
Subadvisory Agreement are paid by the Manager. The Board also considered and
discussed information about the Subadviser's fees, including the amount of
management fees retained by the Manager after payment of the subadvisory fee.
In considering the Fund's performance, the Board noted that it reviews at its
regularly scheduled meetings information about the Fund's performance results.
The Trustees also reviewed various comparative data provided to them in
connection with their consideration of the renewal of the Management Agreement,
including, among other information, a comparison of the average annual total
return of each class of the Fund with its Lipper index and with that of other
mutual funds deemed to be in its peer group by the independent third party in
its report (the "performance universe"). The performance universe of each class
of the Fund consisted of the Fund and all retail and institutional open-end
investment companies with the same classification/objective as the Fund
regardless of asset size or primary channel of distribution. This comparison
indicated that, among other data, the performance of the Fund's Member Shares
was above the average of its performance universe and lower than its Lipper
index for the one- and three-year periods ended December 31, 2013, and was
above the average of its performance universe and equal to its Lipper index for
the five-year period ended December 31, 2013. The comparison indicated that the
performance of the Fund's Reward Shares was above the average of its performance
universe and its Lipper index for the one-, three-, and five-year periods ended
December 31, 2013. The Board also noted that the percentile performance
================================================================================
54 | USAA S&P 500 INDEX FUND
================================================================================
ranking of the Fund's Member Shares was in the top 35% of its performance
universe for the one-year period ended December 31, 2013, and was in the top
30% of its performance universe for the three-, and five-year periods ended
December 31, 2013, and that the percentile performance ranking for the Fund's
Reward Shares was in the top 20% of its performance universe for the one- and
three-year periods ended December 31, 2013, and was in the top 15% of its
performance universe for the five-year period ended December 31, 2013.
COMPENSATION AND PROFITABILITY - The Board took into consideration the level and
method of computing the Fund's management fee. The information considered by the
Board included operating profit margin information for the Manager's business as
a whole. The Board also received and considered profitability information
related to the level of management revenues from the Fund. This information
included a review of the methodology used in the allocation of certain costs to
the Fund. In considering the profitability data with respect to the Fund, the
Trustees noted that the Manager reimbursed a portion of its management fees to
the Fund and also pays the Fund's subadvisory fees. The Trustees reviewed the
profitability of the Manager's relationship with the Fund before tax expenses.
In reviewing the overall profitability of the management fee to the Manager, the
Board also considered the fact that affiliates provide shareholder servicing and
administrative services to the Fund for which they receive compensation. The
Board also considered the possible direct and indirect benefits to the Manager
from its relationship with the Trust, including that the Manager may derive
reputational and other benefits from its association with the Fund. The Trustees
recognized that the Manager should be able to earn a reasonable level of profits
in exchange for the level of services it provides to the Fund and the
entrepreneurial risk that it assumes as Manager.
ECONOMIES OF SCALE - The Board considered whether there should be changes in the
management fee rate or structure in order to enable the Fund to participate in
any economies of scale. The Board took into account management's discussion of
the Fund's current advisory fee structure. The Board also considered the fee
waivers and expense reimbursements arrangements by the Manager and noted the
fact that the Manager pays the subadvisory fee. The Board also considered the
effects of each class's growth
================================================================================
ADVISORY AGREEMENT(S) | 55
================================================================================
and size on the class's performance and fees, noting that if the Fund's assets
increase over time, the Fund may realize other economies of scale if assets
increase proportionally more than some expenses. The Board determined that the
current investment management fee structure was reasonable.
CONCLUSIONS - The Board reached the following conclusions regarding the Fund's
Management Agreement with the Manager, among others: (i) the Manager has
demonstrated that it possesses the capability and resources to perform the
duties required of it under the Management Agreement; (ii) the Manager maintains
an appropriate compliance program; (iii) the performance of the Fund is
reasonable in relation to the performance of funds with similar investment
objectives and to relevant indices; (iv) the Fund's advisory expenses are
reasonable in relation to those of similar funds and to the services to be
provided by the Manager; and (v) the Manager's level of profitability, if any,
from its relationship with the Fund is reasonable. Based on its conclusions, the
Board determined that continuation of the Management Agreement would be in the
best interests of the Fund and its shareholders.
SUBADVISORY AGREEMENT
In approving the Fund's Subadvisory Agreement, the Board considered various
factors, among them: (i) the nature, extent, and quality of services provided to
the Fund, including the personnel providing services; (ii) the Subadviser's
compensation and any other benefits derived from the subadvisory relationship;
(iii) comparisons, to the extent applicable, of subadvisory fees and performance
to comparable investment companies; and (iv) the terms of the Subadvisory
Agreement. The Board's analysis of these factors is set forth below.
After full consideration of a variety of factors, the Board, including the
Independent Trustees, voted to approve the Subadvisory Agreement. In approving
the Subadvisory Agreement, the Trustees did not identify any single factor as
controlling, and each Trustee may have attributed different weights to various
factors. Throughout their deliberations, the Independent Trustees were
represented and assisted by independent counsel.
NATURE, EXTENT, AND QUALITY OF SERVICES PROVIDED; INVESTMENT PERSONNEL - The
Trustees considered information provided to them regarding the services provided
by the Subadviser, including information presented periodically
================================================================================
56 | USAA S&P 500 INDEX FUND
================================================================================
throughout the previous year. The Board noted that the Subadviser and its
affiliates also provide accounting and custody services to the Fund at no
additional charge. The Board considered the Subadviser's level of knowledge and
investment style. The Board reviewed the experience and credentials of the
investment personnel who are responsible for managing the investment of
portfolio securities with respect to the Fund and the Subadviser's level of
staffing. The Trustees noted that the materials provided to them indicated that
the method of compensating portfolio managers is reasonable and includes
appropriate mechanisms to prevent a manager with underperformance from taking
undue risks. The Trustees also noted the Subadviser's brokerage practices. The
Board also considered the Subadviser's regulatory and compliance history. The
Board also took into account the Subadviser's risk management processes. The
Board noted that the Manager's monitoring processes of the Subadviser include:
(i) regular telephonic meetings to discuss, among other matters, investment
strategies and to review portfolio performance; (ii) monthly portfolio
compliance checklists and quarterly compliance certifications to the Board; and
(iii) due diligence visits to the Subadviser.
SUBADVISER COMPENSATION - The Board also took into consideration the
financial condition of the Subadviser. In considering the cost of services to be
provided by the Subadviser and the profitability to the Subadviser of its
relationship with the Fund, the Trustees noted the undertakings of the Manager
to maintain expense limitations for the Fund and also noted that the fees under
the Subadvisory Agreement were paid by the Manager and that the Subadviser
had agreed to reimburse the Fund for license fees paid to Standard & Poor's.
The Trustees also relied on the ability of the Manager to negotiate the
Subadvisory Agreement and the fees thereunder at arm's length. For the above
reasons, the Board determined that the profitability of the Subadviser from its
relationship with the Fund was not a material factor in its deliberations with
respect to the consideration of the approval of the Subadvisory Agreement. For
similar reasons, the Board concluded that the potential for economies of scale
in the Subadviser's management of the Fund was not a material factor in
considering the Subadvisory Agreement, although the Board noted that the
Subadvisory Agreement contains breakpoints in its fee schedule.
================================================================================
ADVISORY AGREEMENT(S) | 57
================================================================================
SUBADVISORY FEES AND FUND PERFORMANCE - The Board noted that the Subadviser
reported that the subadvisory fees that the Subadviser charges the Fund are
unique due to the type of fund and could not be compared to the fees that the
Subadviser charges to other clients. The Board considered that the Fund pays a
management fee to the Manager and that, in turn, the Manager pays a subadvisory
fee to the Subadviser. As noted above, the Board considered, among other data,
the Fund's performance with respect to each class during the one-, three-, and
five-year periods ended December 31, 2013, as compared to the Fund's peer group
and noted that the Board reviews at its regularly scheduled meetings information
about the Fund's performance results. The Board noted the Manager's expertise
and resources in monitoring the performance, investment style, and risk-adjusted
performance of the Subadviser.
CONCLUSIONS - The Board reached the following conclusions regarding the
Subadvisory Agreement, among others: (i) the Subadviser is qualified to manage
the Fund's assets in accordance with its investment objectives and policies;
(ii) the Subadviser maintains an appropriate compliance program; (iii) the
performance of the Fund is reasonable in relation to the performance of funds
with similar investment objectives and to relevant indices; and (iv) the Fund's
advisory expenses are reasonable in relation to those of similar funds and to
the services to be provided by the Manager and the Subadviser. Based on its
conclusions, the Board determined that approval of the subadvisory Agreement
with respect to the Fund would be in the best interests of the Fund and its
shareholders.
================================================================================
58 | USAA S&P 500 INDEX FUND
================================================================================
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Jefferson C. Boyce
Dawn M. Hawley
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 78265-9453
--------------------------------------------------------------------------------
UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O. Box 659453
San Antonio, Texas 78265-9453
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND The Northern Trust Company
ACCOUNTING AGENT 50 S. LaSalle St.
Chicago, Illinois 60603
--------------------------------------------------------------------------------
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 Ref erence 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)
============================================================================
28651-0814 (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 June 30, 2014
By:* /S/ DANIEL J. MAVICO
-----------------------------------------------------------
Signature and Title: Daniel J. Mavico, Assistant Secretary
Date: 08/27/2014
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /S/ DANIEL S. MCNAMARA
-----------------------------------------------------
Signature and Title: Daniel S. McNamara, President
Date: 08/27/2014
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 08/27/2014
------------------------------
*Print the name and title of each signing officer under his or her signature.