UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/S
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-7852
Exact name of registrant as specified in charter: USAA MUTUAL FUNDS TRUST
Address of principal executive offices and zip code: 9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Name and address of agent for service: DANIEL J. MAVICO
USAA MUTUAL FUNDS TRUST
9800 FREDERICKSBURG ROAD
SAN ANTONIO, TX 78288
Registrant's telephone number, including area code: (210) 498-0226
Date of fiscal year end: JULY 31
Date of reporting period: JANUARY 31, 2015
ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2015
LOGO OF USAA
USAA(R)
[GRAPHIC OF USAA HIGH INCOME FUND]
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SEMIANNUAL REPORT
USAA HIGH INCOME FUND
FUND SHARES o INSTITUTIONAL SHARES o ADVISER SHARES
JANUARY 31, 2015
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PRESIDENT'S MESSAGE
"...WE BELIEVE THAT IT IS IMPORTANT FOR INVESTORS
TO FOCUS LESS ON WHAT'S HAPPENING DAY-TO-DAY IN [PHOTO OF BROOKS ENGLEHARDT]
THE FINANCIAL MARKETS AND MORE ON THEIR OWN
FINANCIAL WELL-BEING."
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MARCH 2015
The United States was the place to be during the six-month reporting period
ended January 31, 2015. Those investors who concentrated their investments in
U.S. stocks and/or longer-term U.S. Treasury securities were fortuitously
positioned, as these asset classes generally outperformed all other market
segments. U.S. equities recorded strong gains, surpassing developed equities
markets and emerging markets equities, both of which declined during the
reporting period. Among U.S. stocks, growth-oriented names outperformed their
value counterparts, while mid-cap stocks outpaced small-cap and large-cap
stocks. Meanwhile, yields on longer-term U.S. Treasuries trended down, driving
up bond prices. (Bond prices move in the opposite direction of interest rates.)
Though yields were near historic lows during the period, they still remained the
highest among developed nations. U.S. Treasuries also benefited from their
perceived status as high-quality, safe-haven investments.
What circumstances produced these results? At USAA Investments, we believe a
series of interconnected factors were at work, all of which were still in place
at the end of the reporting period. These factors include:
o SLOWING INTERNATIONAL GROWTH. U.S. economic conditions improved during the
reporting period, but most other countries struggled with economic weakness.
The economy of continental Europe was stagnant, with some countries falling
into recession, while Japan's government continued to attempt to jumpstart
its sluggish economy. China's economy weakened, growing at its slowest pace
in more than 24 years. At the same time, a sharp drop in commodities and
energy prices weighed on emerging markets economies. Although economic
divergence is likely to continue for a time, we do not believe it is likely
to endure over the long term. We believe that eventually, either the global
economy will rebound or else global economic weakness will dampen U.S.
economic growth.
o DIVERGENT MONETARY POLICIES. Reflecting the disparity between international
and U.S. economic growth, the monetary policies of the world's central banks
diverged. In the United States, the Federal Reserve ended its quantitative
easing asset purchases and signaled its willingness--should the data support
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it--to raise short-term interest rates. Elsewhere, central banks continued to
cut rates and increase monetary stimulus to support their faltering
economies.
o STRONGER U.S. DOLLAR. The divergence in monetary policies, along with
differing expectations about U.S. and international economic growth, had a
major impact on currencies. During the reporting period, the U.S. dollar
strengthened, appreciating significantly compared to most other global
currencies. In response, some countries devalued their currencies as an
attempt to make their exports cheaper to foreign buyers, and therefore to
boost economic growth.
o DECREASING INFLATION. Slowing international growth, divergent global monetary
policies, and currency movements combined to reduce inflation expectations.
The drop in energy prices was a prime example. Oil prices fell nearly 50%
during 2014. Lower oil prices do have some advantages--automobile owners have
more money to spend on other things--but extended periods of low inflation
can lead to economic stagnation, cause consumers to postpone spending, and
put pressure on corporate profit margins.
In this economic environment we believe that it is important for investors to
focus less on what's happening day-to-day in the financial markets and more on
their own financial well-being. As I write to you, tax season is upon us. You
may be preparing to make contributions to your IRA. You may also consider
setting near term goals, such as reviewing your investment strategy to make sure
it still suits your objectives, time horizon, and tolerance for risk. If you'd
like assistance, please call one of our financial advisors. They would be happy
to help.
Looking ahead, it is too soon to identify a dominant market trend for 2015.
However, we believe investors are likely to focus on higher asset quality as
long as the financial markets continue to grapple with the implications of
slowing global growth, divergent monetary policy, a stronger U.S. dollar, and
lower oil prices. On behalf of everyone here at USAA Investments, thank you for
your continued investment in our family of mutual funds.
Sincerely,
/S/ BROOKS ENGLEHARDT
Brooks Englehardt
President
USAA Investments
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. o As interest rates rise,
bond prices generally fall; given the historically low interest rate
environment, risks associated with rising interest rates may be heightened.
o Emerging Market countries are less diverse and mature than other countries and
tend to be politically less stable. o Investments provided by USAA Investment
Management Company and USAA Financial Advisors Inc., both registered broker
dealers. o Financial advice provided by USAA Financial Planning Services
Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California,
License # 0E36312), and USAA Financial Advisors, Inc., a registered broker
dealer.
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TABLE OF CONTENTS
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FUND OBJECTIVE 1
MANAGER'S COMMENTARY 2
INVESTMENT OVERVIEW 7
FINANCIAL INFORMATION
Portfolio of Investments 15
Notes to Portfolio of Investments 37
Financial Statements 41
Notes to Financial Statements 44
EXPENSE EXAMPLE 63
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)2015, USAA. All rights reserved.
202741-0315
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FUND OBJECTIVE
THE USAA HIGH INCOME FUND (THE FUND) SEEKS TO PROVIDE AN ATTRACTIVE TOTAL RETURN
PRIMARILY THROUGH HIGH CURRENT INCOME AND SECONDARILY THROUGH CAPITAL
APPRECIATION.
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TYPES OF INVESTMENTS
The Fund primarily invests its assets in a broad range of U.S. dollar-
denominated high-yield securities, including bonds (often referred to as "junk"
bonds), convertible securities, leveraged loans, or preferred stocks, with an
emphasis on non-investment-grade debt securities. Although the Fund will invest
primarily in U.S. securities, it may invest without limit in dollar-denominated
foreign securities and to a limited extent in non-dollar-denominated foreign
securities, including in each case emerging markets securities.
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'S COMMENTARY ON THE FUND
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[PHOTO OF R. MATTHEW FREUND] [PHOTO OF JULIANNE BASS]
R. MATTHEW FREUND, CFA JULIANNE BASS, CFA
USAA Asset USAA Asset
Management Company Management Company
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o WHAT WERE MARKET CONDITIONS DURING THE REPORTING PERIOD?
When the six-month reporting period began, longer-term interest rates
trended down. They edged up during September 2014 on speculation that an
improving U.S. economy would lead the Federal Reserve (the Fed) to raise
short-term interest rates sooner than expected. In early October, rates fell
on a slide in oil prices as well as fears regarding the Ebola outbreak. The
U.S. equity market also declined, with the S&P 500(R) Index dropping almost
100 points during the month. On October 29, 2014, as previously announced,
the Fed ended its quantitative easing (QE) bond-buying program. Almost
immediately, the Bank of Japan announced an even larger QE program.
During November, after the Fed suggested it would wait a "considerable time"
before raising short-term interest rates, stocks rebounded and longer-term
interest rates rose. Rates took a new turn downward in early December 2014
on a further drop in oil prices, eurozone economic weakness, slowing growth
in China, and concerns about Russia. During January 2015, longer-term rates
continued to fall, with volatility increasing mid-month after Switzerland's
central bank announced it was exiting its currency peg to the euro, causing
the Swiss franc to appreciate significantly versus the euro and driving the
yield on Swiss government bonds into negative territory. Also in January,
the Fed said it believed the U.S. economy was on more solid footing, but it
did not withdraw earlier statements that it would be "patient" about raising
short-term interest rates. Meanwhile, the European Central Bank said it
would expand its own QE program by increasing the amount and types of bonds
it can purchase.
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2 | USAA HIGH INCOME FUND
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o 10-YEAR U.S. TREASURY YIELDS o
[CHART OF 10-YEAR U.S. TREASURY YIELDS]
YIELD IN
PERCENT
7/31/2014 2.559
8/1/2014 2.493
8/4/2014 2.483
8/5/2014 2.485
8/6/2014 2.472
8/7/2014 2.412
8/8/2014 2.421
8/11/2014 2.428
8/12/2014 2.45
8/13/2014 2.418
8/14/2014 2.402
8/15/2014 2.341
8/18/2014 2.394
8/19/2014 2.401
8/20/2014 2.427
8/21/2014 2.408
8/22/2014 2.403
8/25/2014 2.383
8/26/2014 2.397
8/27/2014 2.358
8/28/2014 2.337
8/29/2014 2.344
9/1/2014 2.344
9/2/2014 2.422
9/3/2014 2.397
9/4/2014 2.451
9/5/2014 2.46
9/8/2014 2.472
9/9/2014 2.504
9/10/2014 2.542
9/11/2014 2.551
9/12/2014 2.611
9/15/2014 2.59
9/16/2014 2.593
9/17/2014 2.621
9/18/2014 2.615
9/19/2014 2.575
9/22/2014 2.565
9/23/2014 2.528
9/24/2014 2.565
9/25/2014 2.503
9/26/2014 2.529
9/29/2014 2.478
9/30/2014 2.49
10/1/2014 2.386
10/2/2014 2.426
10/3/2014 2.435
10/6/2014 2.421
10/7/2014 2.34
10/8/2014 2.322
10/9/2014 2.314
10/10/2014 2.281
10/13/2014 2.281
10/14/2014 2.198
10/15/2014 2.137
10/16/2014 2.157
10/17/2014 2.194
10/20/2014 2.192
10/21/2014 2.223
10/22/2014 2.217
10/23/2014 2.272
10/24/2014 2.269
10/27/2014 2.261
10/28/2014 2.297
10/29/2014 2.318
10/30/2014 2.306
10/31/2014 2.336
11/3/2014 2.343
11/4/2014 2.334
11/5/2014 2.343
11/6/2014 2.387
11/7/2014 2.298
11/10/2014 2.361
11/11/2014 2.361
11/12/2014 2.372
11/13/2014 2.341
11/14/2014 2.321
11/17/2014 2.341
11/18/2014 2.316
11/19/2014 2.36
11/20/2014 2.338
11/21/2014 2.311
11/24/2014 2.307
11/25/2014 2.258
11/26/2014 2.246
11/27/2014 2.246
11/28/2014 2.165
12/1/2014 2.236
12/2/2014 2.293
12/3/2014 2.281
12/4/2014 2.235
12/5/2014 2.307
12/8/2014 2.258
12/9/2014 2.214
12/10/2014 2.165
12/11/2014 2.163
12/12/2014 2.083
12/15/2014 2.119
12/16/2014 2.06
12/17/2014 2.137
12/18/2014 2.208
12/19/2014 2.163
12/22/2014 2.159
12/23/2014 2.262
12/24/2014 2.264
12/25/2014 2.264
12/26/2014 2.251
12/29/2014 2.203
12/30/2014 2.188
12/31/2014 2.172
1/1/2015 2.172
1/2/2015 2.111
1/5/2015 2.033
1/6/2015 1.941
1/7/2015 1.969
1/8/2015 2.019
1/9/2015 1.946
1/12/2015 1.908
1/13/2015 1.901
1/14/2015 1.856
1/15/2015 1.716
1/16/2015 1.838
1/19/2015 1.838
1/20/2015 1.789
1/21/2015 1.873
1/22/2015 1.864
1/23/2015 1.798
1/26/2015 1.825
1/27/2015 1.824
1/28/2015 1.722
1/29/2015 1.752
1/30/2015 1.642
[END OF CHART]
Source: Bloomberg Finance L.P.
At the end of the reporting period, market participants seemed to believe
that the Fed might raise interest rates late during the fourth quarter of
2015. However, we believe that the Fed is likely to keep rates lower for a
longer period of time, as inflation remains muted and unemployment levels
have improved despite the global economic slowdown. We consider it unlikely
that the Fed will act solely out of a desire to normalize interest rates.
The U.S. Treasury yield curve flattened during the reporting period, with
longer-term maturities falling more than shorter-term maturities. The
10-year U.S. Treasury yield, which had started the period at 2.56%, fell 92
basis points to end the period at 1.64%. The 30-year U.S. Treasury yield
fell 109 basis points, while three-year and five-year U.S. Treasury yields
fell by 26 basis points and 60 basis points, respectively. The flattening
yield curve was attributable to eurozone economic weakness, slowing growth
in China, a decline in oil prices, and a stronger U.S. dollar, which
collectively dampened inflationary expectations. Meanwhile, the U.S. stock
market generated a modest gain for the reporting period overall.
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MANAGER'S COMMENTARY ON THE FUND | 3
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Yield spreads widened across the credit spectrum, with single A, BBB, and
high-yield spreads widening 28 basis points, 53 basis points, and 122 basis
points, respectively. Spreads (yield differentials versus U.S. Treasury
securities of comparable maturity) are generally considered an indication of
risk: the wider the spread, the greater the credit risk. Altogether, yields
on investment-grade corporate bonds fell slightly, while yields on
high-yield bonds rose.
High-yield bond prices (which move in the opposite direction of yields)
declined during the reporting period, pressured by the precipitous drop in
oil prices and the deteriorating outlook for energy companies, especially
exploration and production companies. Weakness in the metals and mining
sector, driven by lower commodity prices, also dampened the performance of
high-yield bonds. In this environment, high-yield securities underperformed
both stocks and intermediate-term bonds--a departure from the asset class'
long-term track record. Historically, high-yield securities tend to perform
between stocks and high-quality bonds, with generally less volatility. This
tendency to act differently, which reoccurred in January, could provide
long-term investors with diversification benefits.
At the end of the reporting period, default expectations remained relatively
low, with the high-yield default rate below the 20-year average. The
trailing 12-month high-yield default rate, according to J.P. Morgan, was
3.03% at the end of January 2015 versus 0.63% in January 2014. The increase
was due to the very large and widely expected defaults of Energy Futures
Holdings and a unit of Caesar's Entertainment Operating Co., Inc. Excluding
the Energy Futures Holdings default (which falls out of the 12-month default
calculation in April 2015), the trailing 12-month default rate would have
been 1.73% at the end of the reporting period. That said, default risk in
the energy sector is expected to increase as long as crude oil prices remain
low.
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4 | USAA HIGH INCOME FUND
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o HYBRID ASSET CLASS COMPARATIVE RETURNS o
[CHART OF HYBRID ASSET CLASS COMPARATIVE RETURNS]
CITIGROUP 10-YEAR USAA HIGH
U.S. TREASURY S&P 500 INCOME FUND
INDEX INDEX SHARES
7/31/2014 0.00% 0.00% 0.00%
8/1/2014 0.44% -0.29% -0.22%
8/4/2014 0.59% 0.43% -0.22%
8/5/2014 0.64% -0.53% -0.11%
8/6/2014 0.73% -0.50% -0.22%
8/7/2014 1.19% -1.03% -0.22%
8/8/2014 1.27% 0.11% -0.11%
8/11/2014 1.25% 0.41% 0.00%
8/12/2014 1.05% 0.25% 0.11%
8/13/2014 1.31% 0.95% 0.22%
8/14/2014 1.53% 1.39% 0.34%
8/15/2014 2.00% 1.40% 0.45%
8/18/2014 1.67% 2.27% 0.56%
8/19/2014 1.55% 2.80% 0.56%
8/20/2014 1.32% 3.06% 0.67%
8/21/2014 1.51% 3.37% 0.67%
8/22/2014 1.54% 3.18% 0.67%
8/25/2014 1.69% 3.67% 0.79%
8/26/2014 1.69% 3.78% 0.79%
8/27/2014 1.94% 3.81% 0.87%
8/28/2014 2.18% 3.65% 0.98%
8/29/2014 2.12% 4.00% 0.98%
9/2/2014 1.45% 3.95% 0.98%
9/3/2014 1.53% 3.89% 0.98%
9/4/2014 1.20% 3.73% 0.75%
9/5/2014 1.10% 4.25% 0.75%
9/8/2014 1.04% 3.95% 0.64%
9/9/2014 0.79% 3.27% 0.53%
9/10/2014 0.48% 3.66% 0.42%
9/11/2014 0.52% 3.78% 0.30%
9/12/2014 -0.19% 3.16% 0.19%
9/15/2014 0.02% 3.09% 0.19%
9/16/2014 0.04% 3.86% 0.19%
9/17/2014 -0.05% 4.00% 0.30%
9/18/2014 -0.29% 4.53% 0.30%
9/19/2014 0.08% 4.48% 0.42%
9/22/2014 0.29% 3.64% 0.30%
9/23/2014 0.58% 3.05% 0.08%
9/24/2014 0.27% 3.86% -0.04%
9/25/2014 0.80% 2.18% -0.26%
9/26/2014 0.59% 3.08% -0.47%
9/29/2014 0.97% 2.82% -0.70%
9/30/2014 0.87% 2.54% -0.47%
10/1/2014 1.79% 1.19% -0.47%
10/2/2014 1.50% 1.20% -0.47%
10/3/2014 1.43% 2.33% -0.36%
10/6/2014 1.64% 2.18% -0.25%
10/7/2014 2.29% 0.63% -0.36%
10/8/2014 2.48% 2.42% -0.36%
10/9/2014 2.51% 0.31% -0.59%
10/10/2014 2.73% -0.83% -0.93%
10/13/2014 2.75% -2.46% -1.04%
10/14/2014 3.64% -2.31% -1.27%
10/15/2014 4.68% -3.09% -1.49%
10/16/2014 4.13% -3.07% -1.38%
10/17/2014 3.73% -1.82% -0.81%
10/20/2014 3.89% -0.92% -0.70%
10/21/2014 3.67% 1.02% -0.25%
10/22/2014 3.46% 0.29% -0.25%
10/23/2014 3.07% 1.53% -0.13%
10/24/2014 3.09% 2.24% -0.13%
10/27/2014 3.24% 2.09% -0.25%
10/28/2014 3.02% 3.31% -0.13%
10/29/2014 2.69% 3.18% -0.22%
10/30/2014 2.84% 3.83% -0.11%
10/31/2014 2.61% 5.05% 0.01%
11/3/2014 2.49% 5.03% 0.01%
11/4/2014 2.54% 4.74% -0.22%
11/5/2014 2.49% 5.37% -0.22%
11/6/2014 2.27% 5.80% -0.33%
11/7/2014 2.85% 5.86% -0.22%
11/10/2014 2.44% 6.20% -0.33%
11/11/2014 2.45% 6.27% -0.33%
11/12/2014 2.45% 6.22% -0.22%
11/13/2014 2.60% 6.29% -0.33%
11/14/2014 2.83% 6.33% -0.33%
11/17/2014 2.66% 6.41% -0.45%
11/18/2014 2.81% 6.98% -0.56%
11/19/2014 2.57% 6.83% -0.67%
11/20/2014 2.74% 7.04% -0.79%
11/21/2014 2.92% 7.62% -0.45%
11/24/2014 2.98% 7.93% -0.45%
11/25/2014 3.38% 7.81% -0.27%
11/26/2014 3.66% 8.14% -0.27%
11/28/2014 4.07% 7.87% -0.39%
12/1/2014 3.84% 7.14% -0.96%
12/2/2014 3.23% 7.83% -1.19%
12/3/2014 3.23% 8.26% -1.19%
12/4/2014 3.51% 8.14% -1.30%
12/5/2014 3.05% 8.32% -1.30%
12/8/2014 3.52% 7.55% -1.60%
12/9/2014 3.87% 7.52% -1.95%
12/10/2014 4.36% 5.77% -2.29%
12/11/2014 4.27% 6.28% -2.41%
12/12/2014 4.99% 4.56% -2.98%
12/15/2014 4.86% 3.90% -3.21%
12/16/2014 5.32% 3.02% -3.77%
12/17/2014 4.60% 5.12% -3.43%
12/18/2014 4.09% 7.66% -2.73%
12/19/2014 4.34% 8.15% -2.50%
12/22/2014 4.50% 8.58% -2.27%
12/23/2014 3.60% 8.78% -2.27%
12/24/2014 3.59% 8.76% -2.27%
12/26/2014 3.74% 9.12% -2.15%
12/29/2014 4.11% 9.23% -2.15%
12/30/2014 4.28% 8.71% -2.04%
12/31/2014 4.46% 7.59% -2.15%
1/2/2015 4.90% 7.57% -2.04%
1/5/2015 5.72% 5.61% -2.27%
1/6/2015 6.44% 4.67% -2.50%
1/7/2015 6.51% 5.92% -2.27%
1/8/2015 5.94% 7.82% -2.04%
1/9/2015 6.38% 6.91% -1.92%
1/12/2015 6.97% 6.05% -2.04%
1/13/2015 7.13% 5.79% -2.15%
1/14/2015 7.67% 5.17% -2.38%
1/15/2015 8.25% 4.21% -2.38%
1/16/2015 7.88% 5.61% -2.27%
1/20/2015 7.99% 5.77% -2.27%
1/21/2015 7.56% 6.29% -2.27%
1/22/2015 7.16% 7.91% -2.15%
1/23/2015 7.89% 7.32% -2.04%
1/26/2015 7.80% 7.59% -1.92%
1/27/2015 7.87% 6.15% -2.04%
1/28/2015 8.81% 4.73% -2.02%
1/29/2015 8.55% 5.74% -1.91%
1/30/2015 9.30% 4.36% -1.91%
[END OF CHART]
Source: Bloomberg L.P.
o HOW DID THE USAA HIGH INCOME FUND (THE FUND) PERFORM DURING THE REPORTING
PERIOD?
The Fund has three share classes: Fund Shares, Institutional Shares, and
Adviser Shares. For the six-month reporting period ended January 31, 2015,
the Fund Shares, Institutional Shares, and Adviser Shares had total returns
of -1.91%, -1.97%, and -2.04%, respectively. This compares to returns of
-1.84% for the Credit Suisse High Yield Index (the Index) and -1.08% for the
Lipper High Yield Bond Funds Index. At the same
The S&P 500 Index is an unmanaged index representing the weighted average
performance of a group of 500 widely-held, publicly-traded stocks. o The
unmanaged Citigroup 10-year U.S. Treasury Index is a component of the
Salomon Smith Barney U.S. Broad Investment-Grade (USBIG) Bond Index(SM); it
measures the performance of the most recently auctioned U.S. Treasury issues
with 10 years to maturity. The USBIG is an unmanaged,
market-capitalization-weighted index and includes fixed-rate U.S. Treasury,
government-sponsored, mortgage, asset-backed, and investment-grade issues
with a maturity of one year or longer and a minimum amount outstanding of $1
billion in U.S. Treasuries.
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MANAGER'S COMMENTARY ON THE FUND | 5
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time, the Fund Shares, Institutional Shares, and Adviser Shares provided a
one-year dividend yield of 5.67%, 5.78%, and 5.37%, respectively, compared
to 5.50% for the Lipper High Yield Bond Funds Average.
USAA Asset Management Company is the Fund's investment adviser. The
investment adviser provides day-to-day discretionary management for the
Fund's assets.
o WHAT WERE YOUR STRATEGIES IN THIS ENVIRONMENT?
In keeping with our investment process, we sought to maximize the Fund's
income while maintaining an acceptable level of price volatility, consistent
with our belief that the Fund's performance should benefit from any risks
taken. In choosing investments, we continued to select securities one at a
time for the portfolio, evaluating each potential investment individually,
rather than on the basis of thematic trends. Our team of credit analysts
helped us identify attractive relative values across asset classes and among
high-yield securities. They also continued to analyze and monitor every
holding in the portfolio.
During the reporting period, the Fund underperformed versus the Index and
the Lipper High Yield Funds Index. The Fund benefited from its holdings of
financial and health care high-yield bonds. Some of the portfolio's equity
investments also enhanced returns. Conversely, the Fund's holdings of
energy-related and metals and mining high-yield bonds detracted from
performance. Many of these names were hurt by the decline in oil prices and
the drop in commodities prices during the period.
Thank you for your continued investment in the Fund.
Refer to page 8 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
As interest rates rise, bond prices generally fall; given the historically
low interest rate environment, risks associated with rising interest rates
may be heightened. o Diversification is a technique intended to help reduce
risk and does not guarantee a profit or prevent a loss. o Non-investment
grade securities are considered speculative and are subject to significant
risk. They are sometimes referred to as "junk" bonds since they represent a
greater risk of default than more credit worthy investment-grade securities.
================================================================================
6 | USAA HIGH INCOME FUND
================================================================================
INVESTMENT OVERVIEW
USAA HIGH INCOME FUND SHARES (FUND SHARES) (Ticker Symbol: USHYX)
--------------------------------------------------------------------------------
1/31/15 7/31/14
--------------------------------------------------------------------------------
Net Assets $1.4 Billion $1.5 Billion
Net Asset Value Per Share $8.44 $8.91
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/15
--------------------------------------------------------------------------------
7/31/14 - 1/31/15* 1 YEAR 5 YEARS 10 YEARS
-1.91% 2.65% 9.03% 7.35%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/14
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
3.53% 9.46% 7.30%
--------------------------------------------------------------------------------
30-DAY SEC YIELD** AS OF 1/31/15 EXPENSE RATIO AS OF 7/31/14***
--------------------------------------------------------------------------------
5.29% 0.89%
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.
**Calculated as prescribed by the Securities and Exchange Commission.
***The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2014, and
is calculated as a percentage of average net assets. This expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions, 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.
================================================================================
INVESTMENT OVERVIEW | 7
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
CREDIT SUISSE USAA HIGH LIPPER HIGH YIELD
HIGH YIELD INCOME FUND BOND FUNDS
INDEX SHARES INDEX
1/31/2005 $10,000.00 $10,000.00 $10,000.00
2/28/2005 10,132.48 10,124.08 10,152.82
3/31/2005 9,890.41 9,932.35 9,883.51
4/30/2005 9,792.94 9,855.66 9,768.03
5/31/2005 9,912.97 9,958.10 9,924.57
6/30/2005 10,078.61 10,122.10 10,084.26
7/31/2005 10,216.32 10,260.36 10,240.87
8/31/2005 10,269.01 10,353.81 10,289.51
9/30/2005 10,169.85 10,251.61 10,222.71
10/31/2005 10,074.24 10,166.57 10,138.43
11/30/2005 10,143.26 10,238.95 10,230.81
12/31/2005 10,227.93 10,351.09 10,325.17
1/31/2006 10,359.40 10,479.86 10,458.33
2/28/2006 10,463.44 10,575.42 10,546.01
3/31/2006 10,544.41 10,621.61 10,589.14
4/30/2006 10,615.45 10,679.12 10,650.16
5/31/2006 10,644.57 10,680.35 10,626.88
6/30/2006 10,584.98 10,631.20 10,567.58
7/31/2006 10,675.71 10,730.81 10,648.23
8/31/2006 10,824.36 10,909.81 10,793.25
9/30/2006 10,959.19 11,044.52 10,912.57
10/31/2006 11,110.53 11,205.33 11,070.30
11/30/2006 11,312.37 11,376.00 11,261.42
12/31/2006 11,446.54 11,489.80 11,375.02
1/31/2007 11,578.01 11,592.79 11,496.88
2/28/2007 11,757.29 11,764.72 11,645.96
3/31/2007 11,790.96 11,793.42 11,682.99
4/30/2007 11,958.12 11,953.19 11,844.32
5/31/2007 12,051.04 12,023.04 11,945.27
6/30/2007 11,867.38 11,881.43 11,751.19
7/31/2007 11,494.34 11,575.15 11,370.24
8/31/2007 11,614.37 11,682.40 11,479.88
9/30/2007 11,872.77 11,884.68 11,756.59
10/31/2007 11,965.69 11,932.02 11,857.83
11/30/2007 11,743.49 11,663.81 11,605.79
12/31/2007 11,749.55 11,635.77 11,617.21
1/31/2008 11,563.36 11,370.13 11,380.49
2/29/2008 11,435.59 11,244.79 11,227.18
3/31/2008 11,409.16 11,173.29 11,210.17
4/30/2008 11,857.62 11,445.41 11,630.31
5/31/2008 11,902.23 11,529.17 11,690.28
6/30/2008 11,615.55 11,259.12 11,382.60
7/31/2008 11,458.99 11,108.33 11,234.94
8/31/2008 11,490.47 11,134.80 11,250.57
9/30/2008 10,681.94 10,364.94 10,410.62
10/31/2008 8,989.46 8,994.68 8,732.57
11/30/2008 8,213.92 8,262.66 7,984.75
12/31/2008 8,674.33 8,367.21 8,266.35
1/31/2009 9,183.89 8,675.42 8,627.03
2/28/2009 8,995.86 8,434.36 8,427.43
3/31/2009 9,178.34 8,505.49 8,552.26
4/30/2009 10,103.53 9,257.60 9,382.21
5/31/2009 10,652.82 10,073.85 9,927.71
6/30/2009 11,035.12 10,514.64 10,261.81
7/31/2009 11,704.77 11,141.00 10,912.04
8/31/2009 11,921.42 11,447.92 11,094.84
9/30/2009 12,592.59 12,133.57 11,674.91
10/31/2009 12,822.20 12,413.58 11,847.15
11/30/2009 13,000.98 12,575.53 11,998.12
12/31/2009 13,377.72 12,903.13 12,357.46
1/31/2010 13,548.08 13,197.67 12,514.07
2/28/2010 13,589.32 13,254.53 12,532.94
3/31/2010 13,976.16 13,720.31 12,931.26
4/30/2010 14,300.22 14,061.03 13,212.40
5/31/2010 13,844.86 13,494.52 12,723.32
6/30/2010 14,004.95 13,627.45 12,824.25
7/31/2010 14,437.75 14,054.28 13,282.45
8/31/2010 14,456.27 14,111.61 13,274.49
9/30/2010 14,839.74 14,518.87 13,678.70
10/31/2010 15,190.56 14,904.77 14,058.90
11/30/2010 15,030.13 14,817.12 13,917.36
12/31/2010 15,306.71 15,114.61 14,200.04
1/31/2011 15,614.94 15,405.60 14,496.56
2/28/2011 15,818.63 15,709.20 14,730.13
3/31/2011 15,883.11 15,799.43 14,760.42
4/30/2011 16,103.97 16,088.39 14,991.97
5/31/2011 16,173.49 16,171.42 15,025.08
6/30/2011 16,048.08 15,945.78 14,858.38
7/31/2011 16,268.26 16,061.64 14,981.77
8/31/2011 15,666.29 15,328.69 14,308.39
9/30/2011 15,226.58 14,815.80 13,802.76
10/31/2011 16,045.05 15,447.28 14,607.42
11/30/2011 15,754.33 15,163.59 14,278.41
12/31/2011 16,143.69 15,496.31 14,604.71
1/31/2012 16,573.46 15,953.96 15,090.87
2/29/2012 16,951.72 16,323.22 15,439.91
3/31/2012 16,954.92 16,394.80 15,442.94
4/30/2012 17,130.83 16,504.71 15,580.15
5/31/2012 16,904.25 16,271.02 15,326.63
6/30/2012 17,219.38 16,537.66 15,614.56
7/31/2012 17,522.22 16,863.85 15,900.29
8/31/2012 17,732.64 17,164.21 16,101.49
9/30/2012 17,955.19 17,430.47 16,324.39
10/31/2012 18,109.05 17,690.41 16,465.25
11/30/2012 18,245.91 17,747.61 16,597.03
12/31/2012 18,518.79 18,058.35 16,859.38
1/31/2013 18,759.34 18,405.78 17,104.11
2/28/2013 18,867.58 18,562.81 17,194.28
3/31/2013 19,062.35 18,797.07 17,373.79
4/30/2013 19,413.17 19,119.39 17,700.60
5/31/2013 19,301.23 19,128.38 17,600.63
6/30/2013 18,799.24 18,639.27 17,142.40
7/31/2013 19,173.46 18,954.01 17,479.05
8/31/2013 19,063.03 18,814.07 17,354.94
9/30/2013 19,249.21 18,970.33 17,539.56
10/31/2013 19,715.00 19,376.48 17,963.46
11/30/2013 19,792.61 19,465.52 18,038.13
12/31/2013 19,913.81 19,587.95 18,146.54
1/31/2014 20,065.48 19,806.43 18,260.21
2/28/2014 20,470.17 20,149.19 18,619.49
3/31/2014 20,525.22 20,268.92 18,673.48
4/30/2014 20,657.36 20,440.23 18,767.19
5/31/2014 20,844.05 20,663.54 18,942.10
6/30/2014 21,019.96 20,877.57 19,103.63
7/31/2014 20,755.00 20,725.87 18,856.85
8/31/2014 21,056.66 20,928.78 19,107.84
9/30/2014 20,611.74 20,627.89 18,739.80
10/31/2014 20,807.18 20,727.52 18,946.72
11/30/2014 20,639.18 20,645.65 18,834.31
12/31/2014 20,284.66 20,279.70 18,552.40
1/31/2015 20,371.86 20,330.33 18,653.34
[END OF CHART]
Data from 1/31/05 to 1/31/15.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA High Income Fund Shares to the following benchmarks:
o The Credit Suisse High Yield Index is an unmanaged, trader-priced portfolio
constructed to mirror the high-yield debt market.
o The unmanaged Lipper High Yield Bond Funds Index tracks the total return
performance of the 30 largest funds in the Lipper High Yield Funds category.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index. The return information for the
indexes does not reflect the deduction of any fees, expenses, or taxes.
================================================================================
8 | USAA HIGH INCOME FUND
================================================================================
USAA HIGH INCOME FUND INSTITUTIONAL SHARES
(INSTITUTIONAL SHARES) (Ticker Symbol: UIHIX)
--------------------------------------------------------------------------------
1/31/15 7/31/14
--------------------------------------------------------------------------------
Net Assets $776.0 Million $757.4 Million
Net Asset Value Per Share $8.43 $8.91
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/15
--------------------------------------------------------------------------------
7/31/14 - 1/31/15* 1 YEAR 5 YEARS SINCE INCEPTION 8/01/08
-1.97% 2.75% 9.22% 9.98%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/14
--------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION 8/01/08
3.64% 9.68% 10.09%
--------------------------------------------------------------------------------
30-DAY SEC YIELD AS OF 1/31/15** EXPENSE RATIO AS OF 7/31/14***
--------------------------------------------------------------------------------
5.39% 0.76%
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.
**Calculated as prescribed by the Securities and Exchange Commission.
***The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2014, and
is calculated as a percentage of average net assets. This expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions, 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 Institutional Shares are available for investment through a USAA
discretionary managed account program, and certain advisory programs sponsored
by financial intermediaries, such as brokerage firms, investment advisors,
financial planners, third-party administrators, and insurance companies.
Institutional Shares also are available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds).
================================================================================
INVESTMENT OVERVIEW | 9
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
USAA HIGH INCOME CREDIT SUISSE LIPPER HIGH
FUND INSTITUTIONAL HIGH YIELD YIELD BOND
SHARES INDEX FUNDS INDEX
7/31/2008 $10,000.00 $10,000.00 $10,000.00
8/31/2008 10,026.02 10,027.47 10,013.91
9/30/2008 9,335.20 9,321.88 9,266.29
10/31/2008 8,103.33 7,844.90 7,772.69
11/30/2008 7,445.43 7,168.10 7,107.07
12/31/2008 7,543.33 7,569.89 7,357.71
1/31/2009 7,823.87 8,014.57 7,678.75
2/28/2009 7,609.28 7,850.48 7,501.09
3/31/2009 7,676.57 8,009.73 7,612.19
4/30/2009 8,357.89 8,817.12 8,350.92
5/31/2009 9,096.76 9,296.47 8,836.46
6/30/2009 9,497.08 9,630.09 9,133.84
7/31/2009 10,065.93 10,214.48 9,712.59
8/31/2009 10,345.72 10,403.55 9,875.29
9/30/2009 10,968.20 10,989.26 10,391.60
10/31/2009 11,223.91 11,189.64 10,544.91
11/30/2009 11,372.72 11,345.65 10,679.29
12/31/2009 11,671.04 11,674.43 10,999.13
1/31/2010 11,939.80 11,823.10 11,138.53
2/28/2010 11,993.82 11,859.09 11,155.32
3/31/2010 12,402.89 12,196.68 11,509.86
4/30/2010 12,729.23 12,479.47 11,760.10
5/31/2010 12,219.38 12,082.09 11,324.77
6/30/2010 12,327.95 12,221.80 11,414.61
7/31/2010 12,733.43 12,599.49 11,822.45
8/31/2010 12,772.39 12,615.65 11,815.36
9/30/2010 13,143.99 12,950.30 12,175.14
10/31/2010 13,512.55 13,256.45 12,513.55
11/30/2010 13,435.99 13,116.45 12,387.57
12/31/2010 13,709.37 13,357.82 12,639.18
1/31/2011 13,976.04 13,626.80 12,903.10
2/28/2011 14,254.25 13,804.56 13,111.00
3/31/2011 14,339.23 13,860.82 13,137.96
4/30/2011 14,587.46 14,053.56 13,344.06
5/31/2011 14,665.36 14,114.23 13,373.53
6/30/2011 14,463.99 14,004.79 13,225.15
7/31/2011 14,588.71 14,196.94 13,334.98
8/31/2011 13,926.64 13,671.61 12,735.61
9/30/2011 13,445.71 13,287.89 12,285.56
10/31/2011 14,021.53 14,002.14 13,001.78
11/30/2011 13,766.01 13,748.44 12,708.93
12/31/2011 14,070.91 14,088.23 12,999.37
1/31/2012 14,488.88 14,463.28 13,432.09
2/29/2012 14,844.97 14,793.38 13,742.76
3/31/2012 14,912.45 14,796.17 13,745.45
4/30/2012 15,014.83 14,949.68 13,867.58
5/31/2012 14,804.97 14,751.95 13,641.93
6/30/2012 15,050.08 15,026.96 13,898.22
7/31/2012 15,349.07 15,291.24 14,152.54
8/31/2012 15,606.31 15,474.87 14,331.62
9/30/2012 15,869.23 15,669.08 14,530.02
10/31/2012 16,093.89 15,803.35 14,655.40
11/30/2012 16,168.58 15,922.79 14,772.69
12/31/2012 16,455.70 16,160.92 15,006.20
1/31/2013 16,774.76 16,370.85 15,224.03
2/28/2013 16,920.46 16,465.31 15,304.29
3/31/2013 17,116.97 16,635.28 15,464.07
4/30/2013 17,432.33 16,941.43 15,754.96
5/31/2013 17,442.77 16,843.74 15,665.98
6/30/2013 16,998.05 16,405.66 15,258.11
7/31/2013 17,267.67 16,732.24 15,557.76
8/31/2013 17,161.63 16,635.87 15,447.29
9/30/2013 17,286.37 16,798.34 15,611.62
10/31/2013 17,679.02 17,204.83 15,988.93
11/30/2013 17,762.06 17,272.55 16,055.39
12/31/2013 17,875.99 17,378.33 16,151.88
1/31/2014 18,056.69 17,510.69 16,253.06
2/28/2014 18,391.93 17,863.85 16,572.84
3/31/2014 18,481.69 17,911.89 16,620.90
4/30/2014 18,639.83 18,027.21 16,704.31
5/31/2014 18,865.99 18,190.13 16,860.00
6/30/2014 19,041.80 18,343.64 17,003.77
7/31/2014 18,926.50 18,112.41 16,784.12
8/31/2014 19,113.39 18,375.67 17,007.52
9/30/2014 18,818.71 17,987.40 16,679.94
10/31/2014 18,911.20 18,157.95 16,864.11
11/30/2014 18,837.81 18,011.34 16,764.06
12/31/2014 18,527.14 17,701.96 16,513.13
1/31/2015 18,552.88 17,778.06 16,602.97
[END OF CHART]
Data from 7/31/08 to 1/31/15.*
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA High Income Fund Institutional Shares to the Fund's benchmarks listed above
(see page 8 for benchmark definitions).
*The performance of the Credit Suisse High Yield Index and the Lipper High Yield
Bond Funds Index is calculated from the end of the month, July 31, 2008, while
the inception date of the Institutional Shares is August 1, 2008. There may be a
slight variation of performance numbers because of this difference.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index. The return information for the
indexes does not reflect the deduction of any fees, expenses, or taxes.
================================================================================
10 | USAA HIGH INCOME FUND
================================================================================
USAA HIGH INCOME FUND ADVISER SHARES
(ADVISER SHARES) (Ticker Symbol: UHYOX)
--------------------------------------------------------------------------------
1/31/15 7/31/14
--------------------------------------------------------------------------------
Net Assets $12.1 Million $9.2 Million
Net Asset Value Per Share $8.45 $8.92
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/15
--------------------------------------------------------------------------------
7/31/14 - 1/31/15* 1 YEAR SINCE INCEPTION 8/01/10
-2.04% 2.48% 8.29%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/14
--------------------------------------------------------------------------------
1 YEAR SINCE INCEPTION 8/01/10
3.36% 8.42%
--------------------------------------------------------------------------------
30-DAY SEC YIELD** AS OF 1/31/15
--------------------------------------------------------------------------------
UNSUBSIDIZED 5.06% SUBSIDIZED 5.10%
--------------------------------------------------------------------------------
EXPENSE RATIOS AS OF 7/31/14***
--------------------------------------------------------------------------------
BEFORE REIMBURSEMENT 1.19% AFTER REIMBURSEMENT 1.15%
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.
**Calculated as prescribed by the Securities and Exchange Commission.
***The expense ratios represent the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2014, and
are calculated as a percentage of average net assets. USAA Asset Management
Company (the Manager) has agreed, through December 1, 2015, to make payments or
waive management, administration, and other fees so that the total annual
operating expenses of the Adviser Shares (exclusive of commission recapture,
expense offset arrangements, acquired fund fees and expenses, and extraordinary
expenses) do not exceed an annual rate of 1.15% of the Adviser Shares' average
net assets. This reimbursement arrangement may not be changed or terminated
during this time period without approval of the Fund's Board of Trustees and may
be changed or terminated by the Manager at any time after December 1, 2015.
These expense ratios may differ from the expense ratios disclosed in the
Financial Highlights, which excludes acquired fund fees and expenses. Prior to
December 1, 2014, the Adviser Shares' expense limitation was 1.20% of average
net assets.
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.
================================================================================
INVESTMENT OVERVIEW | 11
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA HIGH INCOME CREDIT SUISSE LIPPER HIGH YIELD
FUND ADVISER HIGH YIELD BOND FUNDS
SHARES INDEX INDEX
7/31/2010 $10,000.00 $10,000.00 $10,000.00
8/31/2010 10,030.71 10,012.83 9,994.01
9/30/2010 10,316.99 10,278.43 10,298.32
10/31/2010 10,588.61 10,521.42 10,584.57
11/30/2010 10,524.02 10,410.30 10,478.01
12/31/2010 10,732.48 10,601.87 10,690.83
1/31/2011 10,937.44 10,815.36 10,914.07
2/28/2011 11,150.86 10,956.44 11,089.92
3/31/2011 11,212.33 11,001.10 11,112.72
4/30/2011 11,402.05 11,154.07 11,287.05
5/31/2011 11,458.62 11,202.22 11,311.98
6/30/2011 11,296.48 11,115.36 11,186.47
7/31/2011 11,389.73 11,267.87 11,279.37
8/31/2011 10,867.67 10,850.92 10,772.40
9/30/2011 10,488.62 10,546.37 10,391.72
10/31/2011 10,935.08 11,113.26 10,997.53
11/30/2011 10,744.35 10,911.90 10,749.83
12/31/2011 10,977.63 11,181.59 10,995.50
1/31/2012 11,300.22 11,479.26 11,361.51
2/29/2012 11,573.59 11,741.25 11,624.29
3/31/2012 11,622.25 11,743.46 11,626.57
4/30/2012 11,698.18 11,865.31 11,729.87
5/31/2012 11,530.79 11,708.37 11,539.01
6/30/2012 11,703.61 11,926.64 11,755.79
7/31/2012 11,932.28 12,136.39 11,970.90
8/31/2012 12,142.34 12,282.14 12,122.38
9/30/2012 12,342.50 12,436.28 12,290.19
10/31/2012 12,510.75 12,542.85 12,396.25
11/30/2012 12,549.54 12,637.64 12,495.46
12/31/2012 12,766.88 12,826.64 12,692.97
1/31/2013 13,025.23 12,993.26 12,877.22
2/28/2013 13,118.86 13,068.23 12,945.11
3/31/2013 13,281.44 13,203.13 13,080.26
4/30/2013 13,506.02 13,446.12 13,326.30
5/31/2013 13,523.71 13,368.58 13,251.04
6/30/2013 13,160.55 13,020.89 12,906.05
7/31/2013 13,379.59 13,280.09 13,159.51
8/31/2013 13,293.36 13,203.60 13,066.07
9/30/2013 13,385.58 13,332.56 13,205.07
10/31/2013 13,684.01 13,655.18 13,524.21
11/30/2013 13,743.82 13,708.93 13,580.43
12/31/2013 13,826.14 13,792.88 13,662.04
1/31/2014 13,961.33 13,897.93 13,747.62
2/28/2014 14,216.55 14,178.23 14,018.11
3/31/2014 14,282.69 14,216.36 14,058.76
4/30/2014 14,417.38 14,307.88 14,129.31
5/31/2014 14,570.63 14,437.19 14,261.00
6/30/2014 14,716.84 14,559.03 14,382.61
7/31/2014 14,604.62 14,375.51 14,196.82
8/31/2014 14,744.01 14,584.45 14,385.78
9/30/2014 14,528.89 14,276.29 14,108.70
10/31/2014 14,595.51 14,411.65 14,264.48
11/30/2014 14,535.31 14,295.29 14,179.85
12/31/2014 14,290.31 14,049.74 13,967.61
1/31/2015 14,307.20 14,110.14 14,043.60
[END OF CHART]
Data from 7/31/10 to 1/31/15.*
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA High Income Fund Adviser Shares to the Fund's benchmarks listed above (see
page 8 for benchmark definitions).
*The performance of the Credit Suisse High Yield Index and the Lipper High Yield
Bond Funds Index is calculated from the end of the month, July 31, 2010, while
the inception date of the Adviser Shares is August 1, 2010. There may be a
slight variation of performance numbers because of this difference.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index. The return information for the
indexes does not reflect the deduction of any fees, expenses, or taxes.
================================================================================
12 | USAA HIGH INCOME FUND
================================================================================
o TOP 10 HOLDINGS* - 1/31/15 o
(% of Net Assets)
COUPON RATE % % OF NET ASSETS
-----------------------------------
NuStar Logistics, LP, 7.63% ................. 7.63% 2.1%
StanCorp Financial Group, Inc. .............. 6.90% 1.2%
Glen Meadow Pass-Through
Trust .................................... 6.51% 1.1%
QBE Capital Funding III Ltd. ................ 7.25% 1.1%
PPL Capital Funding, Inc. ................... 6.70% 1.1%
Lincoln National Corp. ...................... 7.00% 1.1%
Dairy Farmers of America, Inc.,
7.88%, cumulative redeemable,
perpetual ................................ 7.88% 1.0%
Textron Financial Corp. ..................... 6.00% 0.9%
L Brands, Inc. .............................. 6.95% 0.9%
Hawaiian Airlines Pass-Through
Trust .................................... 4.95% 0.9%
You will find a complete list of securities that the Fund owns on pages 15-36.
*Excludes money market instruments.
================================================================================
INVESTMENT OVERVIEW | 13
================================================================================
o ASSET ALLOCATION - 1/31/15 o
[CHART OF ASSET ALLOCATION - 1/31/15]
FINANCIALS 25.4%
ENERGY 15.6%
CONSUMER DISCRETIONARY 11.8%
INDUSTRIALS 10.3%
MATERIALS 9.3%
UTILITIES 6.9%
TELECOMMUNICATION SERVICES 6.5%
CONSUMER STAPLES 3.7%
INFORMATION TECHNOLOGY 3.0%
HEALTH CARE 2.2%
EXCHANGE-TRADED FUNDS* 0.4%
MONEY MARKET INSTRUMENTS 3.6%
[END OF CHART]
Percentages are of the net assets of the Fund and may not equal 100%.
*The Fund may rely on certain Securities and Exchange Commission exemptive
orders or rules that permit funds meeting various conditions to invest in an
exchange-traded fund (ETF) in amounts exceeding limits set forth in the
Investment Company Act of 1940, as amended, that would otherwise be applicable.
================================================================================
14 | USAA HIGH INCOME FUND
================================================================================
PORTFOLIO OF INVESTMENTS
January 31, 2015 (unaudited)
------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (62.9%)
CONSUMER DISCRETIONARY (10.0%)
------------------------------
ADVERTISING (0.5%)
$ 1,000 Acosta, Inc. (a) 7.75% 10/01/2022 $ 1,012
1,000 Advantage Sales & Marketing Inc.(b) 7.50 7/25/2022 983
5,000 Checkout Holding Corp.(b) 7.75 4/11/2022 4,525
5,000 Clear Channel Worldwide Holdings, Inc. 7.63 3/15/2020 5,300
---------
11,820
---------
APPAREL RETAIL (1.0%)
18,162 L Brands, Inc. 6.95 3/01/2033 19,660
2,362 L Brands, Inc. 7.60 7/15/2037 2,687
---------
22,347
---------
AUTOMOTIVE RETAIL (0.5%)
5,000 CST Brands, Inc. 5.00 5/01/2023 5,100
5,000 Group 1 Automotive, Inc.(a) 5.00 6/01/2022 4,962
1,400 Murphy Oil USA, Inc. 6.00 8/15/2023 1,488
---------
11,550
---------
BROADCASTING (0.5%)
2,240 iHeartCommunications, Inc.(b) 6.92 1/30/2019 2,092
4,310 iHeartCommunications, Inc.(b) 7.67 7/30/2019 4,084
4,000 Univision Communications, Inc.(a) 8.50 5/15/2021 4,310
---------
10,486
---------
CABLE & SATELLITE (1.3%)
5,000 Cablevision Systems Corp. 8.00 4/15/2020 5,657
5,000 CCO Holdings, LLC 6.63 1/31/2022 5,306
5,000 CCO Holdings, LLC 5.75 1/15/2024 5,081
1,000 CCO Safari, LLC(b) 4.25 9/12/2021 1,006
5,000 Cequel Communications Holdings I, LLC &
Cequel Capital Corp.(a) 6.38 9/15/2020 5,225
5,000 Mediacom Broadband, LLC 6.38 4/01/2023 5,225
---------
27,500
---------
CASINOS & GAMING (2.8%)
4,000 Caesar's Entertainment Operating Co., Inc.(c) 8.50 2/15/2020 3,100
9,900 Caesar's Entertainment Resort Properties, LLC(b) 7.00 10/11/2020 9,472
================================================================================
PORTFOLIO OF INVESTMENTS | 15
================================================================================
------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------
$ 5,000 Chester Downs & Marina, LLC (a) 9.25% 2/01/2020 $ 3,625
1,500 Eldorado Resorts, LLC(a) 8.63 6/15/2019 1,582
7,500 Golden Nugget Escrow, Inc.(a) 8.50 12/01/2021 7,491
2,472 Inn of the Mountain Gods Resort & Casino (a) 9.25 11/30/2020 2,385
4,000 Isle of Capri Casinos 8.88 6/15/2020 4,250
5,000 Marina District Finance Co., Inc. 9.88 8/15/2018 5,256
8,000 MGM Resorts International 8.63 2/01/2019 9,060
3,050 MTR Gaming Group, Inc. 11.50 8/01/2019 3,317
5,000 Pinnacle Entertainment, Inc. 8.75 5/15/2020 5,275
5,000 Scientific Games International, Inc. 6.25 9/01/2020 3,525
3,000 Scientific Games International, Inc.(a) 7.00 1/01/2022 3,049
---------
61,387
---------
DEPARTMENT STORES (0.3%)
2,100 Macy's Retail Holdings, Inc. 7.88 8/15/2036 2,293
5,000 Neiman Marcus Group Ltd.(a) 8.00 10/15/2021 5,200
---------
7,493
---------
HOMEBUILDING (0.5%)
4,000 Beazer Homes USA, Inc. 9.13 5/15/2019 4,183
2,000 D.R. Horton, Inc. 5.75 8/15/2023 2,155
3,000 KB Home 7.50 9/15/2022 3,060
2,000 Standard Pacific Corp. 5.88 11/15/2024 1,995
---------
11,393
---------
HOTELS, RESORTS & CRUISE LINES (0.3%)
5,000 Royal Caribbean Cruises Ltd. 5.25 11/15/2022 5,362
---------
MOVIES & ENTERTAINMENT (0.1%)
2,000 Production Resource Group, Inc. 8.88 5/01/2019 1,470
---------
PUBLISHING (0.9%)
195 American Media, Inc.(a) 13.50 6/15/2018 207
4,987 Cengage Learning Acquisitions, Inc.(b) 7.00 3/31/2020 4,968
5,886 McGraw-Hill Global Education Holdings, LLC(b) 5.75 3/22/2019 5,896
7,500 McGraw-Hill Global Education Holdings, LLC 9.75 4/01/2021 8,344
---------
19,415
---------
RESTAURANTS (0.2%)
4,000 NPC International, Inc. 10.50 1/15/2020 4,165
---------
SPECIALIZED CONSUMER SERVICES (0.1%)
2,962 Weight Watchers International, Inc.(b) 4.00 4/02/2020 2,012
---------
SPECIALTY STORES (0.7%)
2,500 Guitar Center, Inc.(a) 6.50 4/15/2019 2,069
2,500 Guitar Center, Inc.(a) 9.63 4/15/2020 1,600
4,764 Harbor Freight Tools USA, Inc.(b) 4.75 7/26/2019 4,767
================================================================================
16 | USAA HIGH INCOME FUND
================================================================================
------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------
$ 7,000 Toys R Us Property Co. II, LLC 8.50% 12/01/2017 $ 6,947
---------
15,383
---------
TIRES & RUBBER (0.3%)
5,000 Goodyear Tire & Rubber Co. 6.50 3/01/2021 5,394
---------
Total Consumer Discretionary 217,177
---------
CONSUMER STAPLES (1.3%)
-----------------------
PACKAGED FOODS & MEAT (1.3%)
5,000 B&G Foods, Inc. 4.63 6/01/2021 4,994
2,750 Chiquita Brands International, Inc. 7.88 2/01/2021 2,994
15,000 Kraft Foods Group, Inc. 3.50 6/06/2022 15,748
5,000 Smithfield Foods, Inc.(a) 5.88 8/01/2021 5,150
---------
28,886
---------
Total Consumer Staples 28,886
---------
ENERGY (12.1%)
--------------
COAL & CONSUMABLE FUELS (0.2%)
4,000 Alpha Natural Resources 9.75 4/15/2018 1,420
5,000 Arch Coal, Inc. 9.88 6/15/2019 1,450
2,000 Peabody Energy Corp. 7.88 11/01/2026 1,545
---------
4,415
---------
OIL & GAS DRILLING (0.2%)
3,000 Paragon Offshore plc(a) 7.25 8/15/2024 1,463
5,396 Schahin II Finance Co. SPV Ltd.(a) 5.88 9/25/2023 3,197
---------
4,660
---------
OIL & GAS EQUIPMENT & SERVICES (0.5%)
3,000 Basic Energy Services 7.75 2/15/2019 2,130
2,000 Brand Energy & Infrastructure Service, Inc.(a) 8.50 12/01/2021 1,800
1,500 Compressco Partners, LP & Compressco
Finance Corp.(a) 7.25 8/15/2022 1,260
5,000 Exterran Partners, LP 6.00 4/01/2021 4,300
---------
9,490
---------
OIL & GAS EXPLORATION & PRODUCTION (3.6%)
5,000 Alta Mesa Holdings, LP 9.63 10/15/2018 4,050
10,000 Bill Barrett Corp. 7.00 10/15/2022 8,350
5,000 BreitBurn Energy Partners, LP 7.88 4/15/2022 3,225
5,000 Carrizo Oil & Gas, Inc. 8.63 10/15/2018 5,033
5,000 Comstock Resources, Inc. 7.75 4/01/2019 2,575
5,000 EP Energy, LLC & Everest Acquisition Finance, Inc. 9.38 5/01/2020 5,062
3,000 EV Energy Partners, LP 8.00 4/15/2019 2,618
3,000 Halcon Resources Corp. 9.25 2/15/2022 1,995
2,000 Magnum Hunter Resources Corp. 9.75 5/15/2020 1,480
================================================================================
PORTFOLIO OF INVESTMENTS | 17
================================================================================
------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------
$ 5,000 PDC Energy, Inc. 7.75% 10/15/2022 $ 4,850
7,300 Penn Virginia Corp. 8.50 5/01/2020 6,095
5,000 Quicksilver Resources, Inc.(b) 7.00 6/21/2019 3,288
3,000 Resolute Energy Corp. 8.50 5/01/2020 1,200
5,000 Rex Energy Corp. 8.88 12/01/2020 4,325
6,000 Rosetta Resources, Inc. 5.88 6/01/2022 5,670
3,000 Sabine Oil & Gas Corp. 7.50 9/15/2020 795
7,250 Sabine Oil & Gas, LLC 9.75 2/15/2017 2,809
5,000 Samson Investment Co.(b) 5.00 9/25/2018 3,139
5,000 Samson Investment Co. 9.75 2/15/2020 1,575
10,000 Sandridge Energy, Inc. 7.50 2/15/2023 6,800
5,000 Ultra Petroleum Corp.(a) 6.13 10/01/2024 4,300
---------
79,234
---------
OIL & GAS REFINING & MARKETING (0.3%)
1,000 Citgo Petroleum Corp.(a) 6.25 8/15/2022 975
5,000 Northern Tier Energy, LLC &
Northern Tier Finance Corp. 7.13 11/15/2020 5,100
---------
6,075
---------
OIL & GAS STORAGE & TRANSPORTATION (7.3%)
5,000 Atlas Pipeline, LP & Atlas Pipeline Finance Corp. 6.63 10/01/2020 5,062
5,000 Blue Racer Midstream, LLC &
Blue Racer Finance Corp.(a) 6.13 11/15/2022 4,962
10,000 Boardwalk Pipelines, LP 4.95 12/15/2024 10,234
5,000 Crestwood Midstream Partners, LP 6.00 12/15/2020 4,900
2,000 Crestwood Midstream Partners, LP 6.13 3/01/2022 1,955
15,000 DCP Midstream, LLC(a) 5.85 5/21/2043 13,875
2,500 Energy Transfer Equity, LP 7.50 10/15/2020 2,794
5,000 Energy Transfer Partners, LP 3.25(d) 11/01/2066 4,450
12,250 Enterprise Products Operating, LLC 7.00 6/01/2067 12,439
9,000 Enterprise Products Operating, LLC 7.03 1/15/2068 9,817
5,000 Genesis Energy, LP & Genesis Energy Finance Corp. 5.75 2/15/2021 4,738
8,000 Martin Midstream Partners, LP 7.25 2/15/2021 7,600
3,000 NGL Energy Partners, LP(a) 6.88 10/15/2021 2,918
12,000 NGPL PipeCo, LLC(a) 7.12 12/15/2017 11,701
3,000 NGPL PipeCo, LLC(a) 9.63 6/01/2019 2,951
5,000 ONEOK, Inc. 4.25 2/01/2022 4,651
5,000 Penn Virginia Resource Partners, LP 6.50 5/15/2021 5,362
5,000 Regency Energy Partners, LP 5.88 3/01/2022 5,500
13,000 Sabine Pass Liquefaction, LLC 5.63 2/01/2021 13,081
2,000 Sabine Pass LNG, LP 6.50 11/01/2020 2,040
5,000 Southern Union Co. 3.25(d) 11/01/2066 3,950
3,000 Targa Resources Partners, LP 6.88 2/01/2021 3,158
3,000 Targa Resources Partners, LP 5.25 5/01/2023 3,000
================================================================================
18 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 3,000 TEPPCO Partners, LP 7.00% 6/01/2067 $ 3,059
5,000 Tesoro Logistics, LP & Tesoro Logistics Finance Corp. 6.13 10/15/2021 5,100
1,000 Tesoro Logistics, LP & Tesoro Logistics Finance Corp. (a) 6.25 10/15/2022 1,020
10,000 Williams Companies, Inc. 4.55 6/24/2024 9,300
---------
159,617
---------
Total Energy 263,491
---------
FINANCIALS (13.2%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (1.4%)
5,000 Main Street Capital Corp. 4.50 12/01/2019 5,162
10,000 Prospect Capital Corp. 5.00 7/15/2019 10,345
8,377 Walter Investment Management Corp.(b) 4.75 12/19/2020 7,360
10,000 Walter Investment Management Corp. 7.88 12/15/2021 8,458
---------
31,325
---------
CONSUMER FINANCE (0.3%)
4,000 American Express Co. 6.80 9/01/2066 4,230
3,000 Credit Acceptance Corp. (a) 6.13 2/15/2021 3,015
---------
7,245
---------
DIVERSIFIED BANKS (0.8%)
1,800 USB Realty Corp(a) 1.40(d) -(e) 1,650
15,000 Wells Fargo & Co. 3.50 3/08/2022 16,081
---------
17,731
---------
INVESTMENT BANKING & BROKERAGE (0.0%)
1,000 Lehman Brothers Holdings, Inc.(c) 5.75 4/25/2011 147
1,500 Lehman Brothers Treasury Co. B.V.(c) 6.88 12/29/2010 319
---------
466
---------
LIFE & HEALTH INSURANCE (3.2%)
3,000 American Equity Investment Life Holding Co. 6.63 7/15/2021 3,210
3,000 Forethought Financial Group (a) 8.63 4/15/2021 3,576
23,000 Lincoln National Corp. 7.00 5/17/2066 23,000
2,000 MetLife, Inc. 10.75 8/01/2069 3,310
10,000 Prudential Financial, Inc. 5.20 3/15/2044 10,113
25,465 StanCorp Financial Group, Inc. 6.90 6/01/2067 26,420
---------
69,629
---------
MULTI-LINE INSURANCE (2.4%)
21,299 Genworth Holdings, Inc. 6.15 11/15/2066 13,419
25,000 Glen Meadow Pass-Through Trust(a) 6.51 2/12/2067 24,531
15,000 Nationwide Mutual Insurance Co.(a) 2.53(d) 12/15/2024 15,032
---------
52,982
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 19
================================================================================
------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
------------------------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.5%)
$ 4,000 GE Capital Trust I 6.38% 11/15/2067 $ 4,338
5,000 General Electric Capital Corp. 6.25 -(e) 5,535
1,000 Washington Mutual Bank(c) 5.55 6/16/2010 274
---------
10,147
---------
PROPERTY & CASUALTY INSURANCE (1.6%)
10,000 AmTrust Financial Services, Inc. 6.13 8/15/2023 10,926
1,950 Assured Guaranty Municipal Holdings, Inc.(a) 6.40 12/15/2066 1,662
2,300 Assured Guaranty U.S. Holdings, Inc. 6.40 12/15/2066 2,024
3,780 Hanover Insurance Group, Inc. 8.21 2/03/2027 4,304
5,400 Ironshore Holdings, Inc.(a) 8.50 5/15/2020 6,498
6,000 Liberty Mutual Group, Inc.(a) 7.00 3/07/2067 6,165
2,000 Zenith National Insurance Capital Trust I(a) 8.55 8/01/2028 1,930
---------
33,509
---------
REGIONAL BANKS (1.3%)
1,000 AmSouth Bancorp. 6.75 11/01/2025 1,226
6,940 First Tennessee Capital II 6.30 4/15/2034 6,805
1,500 M&T Capital Trust I 8.23 2/01/2027 1,515
2,000 M&T Capital Trust II 8.28 6/01/2027 2,033
10,409 Regions Bank 6.45 6/26/2037 13,831
1,790 Regions Financial Corp. 7.38 12/10/2037 2,484
---------
27,894
---------
REINSURANCE (0.1%)
2,000 Alterra USA Holdings Ltd.(a) 7.20 4/14/2017 2,193
---------
REITs - HEALTH CARE (0.5%)
5,000 Aviv Heathcare Properties, LP 6.00 10/15/2021 5,244
2,000 CTR Partnership, LP & CareTrust Capital Corp. 5.88 6/01/2021 2,045
4,000 Sabra Health Care, LP & Sabra Capital Corp. 5.50 2/01/2021 4,240
---------
11,529
---------
REITs - RETAIL (0.1%)
2,675 Brixmor, LLC 5.25 9/15/2015 2,708
---------
SPECIALIZED FINANCE (0.8%)
1,500 MSCI, Inc.(a) 5.25 11/15/2024 1,567
10,000 National Rural Utilities Cooperative Finance Corp. 4.75 4/30/2043 9,955
5,000 PHH Corp. 6.38 8/15/2021 4,700
---------
16,222
---------
THRIFTS & MORTGAGE FINANCE (0.2%)
5,000 Ocwen Financial Corp.(a) 6.63 5/15/2019 3,900
---------
Total Financials 287,480
---------
================================================================================
20 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
HEALTH CARE (1.8%)
-----------------
HEALTH CARE EQUIPMENT (0.2%)
$ 5,000 Universal Hospital Services, Inc. 7.63% 8/15/2020 $ 4,400
---------
HEALTH CARE FACILITIES (0.7%)
5,000 HCA, Inc. 5.25 4/15/2025 5,456
5,000 Kindred Healthcare, Inc. 6.38 4/15/2022 4,837
2,000 Tenet Healthcare Corp. 8.00 8/01/2020 2,115
2,000 Tenet Healthcare Corp. 4.50 4/01/2021 2,028
---------
14,436
---------
HEALTH CARE SERVICES (0.2%)
2,500 21st Century Oncology Holdings, Inc. 9.88 4/15/2017 2,413
2,000 DaVita HealthCare Partners, Inc. 5.13 7/15/2024 2,059
---------
4,472
---------
HEALTH CARE SUPPLIES (0.4%)
1,000 DJO Finance, LLC 9.75 10/15/2017 985
3,000 DJO Finance, LLC 7.75 4/15/2018 2,940
1,000 Halyard Health, Inc.(a) 6.25 10/15/2022 1,022
4,000 VWR Funding, Inc. 7.25 9/15/2017 4,201
---------
9,148
---------
PHARMACEUTICALS (0.3%)
5,000 Mallinckrodt International Finance S.A. 4.75 4/15/2023 4,762
2,000 Valeant Pharmaceuticals International, Inc.(a) 6.38 10/15/2020 2,123
---------
6,885
---------
Total Health Care 39,341
---------
INDUSTRIALS (8.7%)
-----------------
AEROSPACE & DEFENSE (0.9%)
22,500 Textron Financial Corp.(a) 6.00 2/15/2067 20,475
---------
AIRLINES (3.6%)
432 America West Airlines, Inc. Pass-Through Trust 6.87 7/02/2018 451
506 America West Airlines, Inc. Pass-Through Trust 7.12 7/02/2018 544
4,568 American Airlines, Inc. "B" Pass-Through Trust 5.63 1/15/2021 4,728
5,652 American Airlines, Inc. Pass-Through Trust(a) 7.00 7/31/2019 6,034
2,799 Continental Airlines, Inc. "B" Pass-Through Trust 6.25 10/11/2021 2,946
5,000 Continental Airlines, Inc. Pass-Through Trust 6.13 4/29/2018 5,250
2,718 Continental Airlines, Inc. Pass-Through Trust 5.50 4/29/2022 2,813
19,439 Hawaiian Airlines Pass-Through Trust 4.95 1/15/2022 19,002
5,000 United Air Lines, Inc. "B" Pass-Through Trust 5.38 2/15/2023 5,137
3,144 United Air Lines, Inc. Pass-Through Trust(a) 12.00 7/15/2017 3,396
5,000 United Airlines, Inc. Pass-Through Trust 4.63 3/03/2024 4,975
6,924 US Airways Group, Inc. "B" Pass-Through Trust 5.38 5/15/2023 7,114
================================================================================
PORTFOLIO OF INVESTMENTS | 21
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 5,000 US Airways Group, Inc. Pass-Through Trust 5.45% 6/03/2018 $ 5,075
5,201 US Airways Group, Inc. Pass-Through Trust 8.50 10/22/2018 5,695
2,462 US Airways Group, Inc. Pass-Through Trust 9.75 4/22/2020 2,745
1,394 US Airways Group, Inc. Pass-Through Trust (INS) 7.08 9/20/2022 1,530
---------
77,435
---------
BUILDING PRODUCTS (0.2%)
5,000 USG Corp.(a) 8.38 10/15/2018 5,235
---------
COMMERCIAL PRINTING (0.4%)
6,000 R.R. Donnelley & Sons Co. 8.25 3/15/2019 6,960
2,000 R.R. Donnelley & Sons Co. 6.00 4/01/2024 2,020
---------
8,980
---------
CONSTRUCTION MACHINERY & HEAVY TRUCKS (0.2%)
5,000 Navistar International Corp. 8.25 11/01/2021 4,900
---------
ELECTRICAL COMPONENTS & EQUIPMENT (0.1%)
1,000 Artesyn Embedded Technologies, Inc.(a) 9.75 10/15/2020 943
---------
INDUSTRIAL MACHINERY (0.5%)
5,000 Dynacast International, LLC 9.25 7/15/2019 5,381
5,000 Stanley Black & Decker, Inc. 5.75 12/15/2053 5,447
---------
10,828
---------
MARINE (0.6%)
1,000 Navios Maritime Acquisition Corp.(a) 8.13 11/15/2021 952
5,000 Navios Maritime Holdings, Inc. 8.13 2/15/2019 3,975
10,000 Navios Maritime Holdings, Inc.(a) 7.38 1/15/2022 8,950
---------
13,877
---------
RAILROADS (0.1%)
1,250 Florida East Coast Holdings Corp.(a) 6.75 5/01/2019 1,237
---------
TRADING COMPANIES & DISTRIBUTORS (1.5%)
6,034 ILFC E-Capital Trust I (a) 4.37(d) 12/21/2065 5,649
16,362 ILFC E-Capital Trust II (a) 6.25(d) 12/21/2065 15,585
5,000 International Lease Finance Corp. 8.63 1/15/2022 6,344
2,000 Jurassic Holdings III, Inc. (a) 6.88 2/15/2021 1,720
4,000 United Rentals North America, Inc. 5.75 11/15/2024 4,080
---------
33,378
---------
TRUCKING (0.6%)
4,000 Avis Budget Car Rental, LLC &
Avis Budget Finance, Inc.(a) 5.13 6/01/2022 4,020
2,500 Avis Budget Car Rental, LLC &
Avis Budget Finance, Inc. 5.50 4/01/2023 2,563
================================================================================
22 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 6,930 YRC Worldwide, Inc.(b) 8.25% 2/13/2019 $ 6,791
---------
13,374
---------
Total Industrials 190,662
---------
INFORMATION TECHNOLOGY (2.3%)
----------------------------
COMMUNICATIONS EQUIPMENT (0.3%)
3,500 Avaya, Inc.(a) 7.00 4/01/2019 3,417
3,500 Avaya, Inc.(a) 10.50 3/01/2021 2,883
---------
6,300
---------
DATA PROCESSING & OUTSOURCED SERVICES (1.0%)
4,750 First Data Corp.(a) 7.38 6/15/2019 4,994
1,300 First Data Corp.(a) 6.75 11/01/2020 1,394
5,200 First Data Corp. 11.25 1/15/2021 5,902
4,000 Lender Processing Services, Inc. 5.75 4/15/2023 4,255
4,000 SunGard Data Systems, Inc. 6.63 11/01/2019 4,040
1,743 SunGard Data Systems, Inc.(b) 4.00 3/08/2020 1,740
---------
22,325
---------
HOME ENTERTAINMENT SOFTWARE (0.3%)
5,000 Activision Blizzard, Inc.(a) 5.63 9/15/2021 5,369
SYSTEMS SOFTWARE (0.5%)
3,821 BMC Software Finance, Inc.(b) 5.00 9/10/2020 3,709
2,000 BMC Software Finance, Inc.(a) 8.13 7/15/2021 1,758
5,000 Sophia, LP(a) 9.75 1/15/2019 5,356
---------
10,823
---------
TECHNOLOGY HARDWARE, STORAGE, & PERIPHERALS (0.2%)
5,000 Denali Borrower, LLC & Denali Finance Corp.(a) 5.63 10/15/2020 5,362
---------
Total Information Technology 50,179
---------
MATERIALS (3.6%)
---------------
ALUMINUM (0.2%)
4,000 Aleris International, Inc. 7.63 2/15/2018 3,925
---------
COMMODITY CHEMICALS (0.4%)
5,000 Hexion U.S. Finance Corp. 8.88 2/01/2018 4,300
5,000 Hexion U.S. Finance Corp. 6.63 4/15/2020 4,722
---------
9,022
---------
DIVERSIFIED METALS & MINING (0.4%)
5,000 Compass Minerals International, Inc.(a) 4.88 7/15/2024 4,900
4,000 Thompson Creek Metals Co., Inc. 7.38 6/01/2018 2,970
---------
7,870
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 23
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
GOLD (0.0%)
$ 2,000 Allied Nevada Gold Corp.(a) 8.75% 6/01/2019 $ 642
---------
METAL & GLASS CONTAINERS (1.4%)
2,000 Ardagh Packaging Finance plc(a) 6.25 1/31/2019 1,955
4,000 Ardagh Packaging Finance plc(a) 9.13 10/15/2020 4,260
4,975 BWAY Holding Co.(b) 5.50 8/14/2020 4,992
8,500 Reynolds Group Issuer, Inc. 7.88 8/15/2019 8,999
9,000 Reynolds Group Issuer, Inc. 9.88 8/15/2019 9,608
---------
29,814
---------
PAPER PACKAGING (0.3%)
7,000 Sealed Air Corp.(a) 6.88 7/15/2033 7,245
---------
PAPER PRODUCTS (0.1%)
2,375 Verso Paper Holdings, LLC(a),(f) 13.00 8/01/2020 1,532
---------
STEEL (0.8%)
10,456 Allegheny Ludlum Corp. 6.95 12/15/2025 11,862
2,600 Edgen Murray Corp.(a) 8.75 11/01/2020 2,837
4,000 JMC Steel Group(a) 8.25 3/15/2018 3,325
---------
18,024
---------
Total Materials 78,074
---------
TELECOMMUNICATION SERVICES (5.0%)
--------------------------------
ALTERNATIVE CARRIERS (0.2%)
5,000 Level 3 Financing, Inc. 6.13 1/15/2021 5,213
---------
INTEGRATED TELECOMMUNICATION SERVICES (2.6%)
10,000 CenturyLink, Inc. 5.80 3/15/2022 10,575
5,000 Cogent Communications Finance, Inc.(a) 5.63 4/15/2021 4,900
5,000 Frontier Communications Corp. 7.63 4/15/2024 5,313
3,000 Frontier Communications Corp. 6.88 1/15/2025 3,049
9,000 Frontier Communications Corp. 9.00 8/15/2031 9,765
10,000 Verizon Communications, Inc. 4.50 9/15/2020 11,043
10,000 Windstream Corp. 7.50 6/01/2022 10,012
3,000 Windstream Corp. 6.38 8/01/2023 2,775
---------
57,432
---------
WIRELESS TELECOMMUNICATION SERVICES (2.2%)
12,000 Sprint Communications, Inc. 7.00 8/15/2020 12,150
6,000 Sprint Communications, Inc. 6.00 11/15/2022 5,617
10,000 Sprint Corp. 7.25 9/15/2021 10,035
5,000 Sprint Corp. 7.88 9/15/2023 5,094
4,000 T-Mobile USA, Inc. 6.63 11/15/2020 4,174
4,500 T-Mobile USA, Inc. 6.13 1/15/2022 4,646
================================================================================
24 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 5,000 T-Mobile USA, Inc. 6.50% 1/15/2024 $ 5,200
---------
46,916
---------
Total Telecommunication Services 109,561
---------
UTILITIES (4.9%)
---------------
ELECTRIC UTILITIES (2.0%)
43 FPL Energy National Wind Portfolio, LLC(a) 6.13 3/25/2019 44
91 FPL Energy Wind Funding, LLC(a) 6.88 6/27/2017 92
2,000 NextEra Energy Capital Holdings, Inc. 6.35 10/01/2066 1,991
2,000 NextEra Energy Capital Holdings, Inc. 6.65 6/15/2067 2,029
2,000 NextEra Energy Capital Holdings, Inc. 7.30 9/01/2067 2,146
24,630 PPL Capital Funding, Inc. 6.70 3/30/2067 24,129
17,134 Texas Competitive Electric Holdings Co., LLC(b) 4.66 10/10/2017 10,737
3,000 Texas Competitive Electric Holdings Co., LLC(a),(c) 11.50 10/01/2020 2,047
---------
43,215
---------
GAS UTILITIES (0.2%)
4,000 Southern Star Central Corp.(a) 5.13 7/15/2022 4,060
---------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.7%)
7,000 AES Corp. 7.38 7/01/2021 7,787
5,000 Calpine Corp. 5.75 1/15/2025 5,119
4,000 DPL, Inc.(a) 6.75 10/01/2019 4,100
5,000 Dynegy Finance I , Inc. & Dynegy Finance II, Inc.(a) 7.38 11/01/2022 5,169
15,000 Genon Energy, Inc. 9.88 10/15/2020 14,625
1,500 TerraForm Power Operating, LLC(a) 5.88 2/01/2023 1,536
---------
38,336
---------
MULTI-UTILITIES (1.0%)
10,790 Integrys Energy Group, Inc. 6.11 12/01/2066 10,854
11,025 Puget Sound Energy, Inc. 6.97 6/01/2067 11,232
---------
22,086
---------
Total Utilities 107,697
---------
Total Corporate Obligations (cost: $1,361,710) 1,372,548
---------
EURODOLLAR AND YANKEE OBLIGATIONS (12.9%)
CONSUMER DISCRETIONARY (0.7%)
----------------------------
CABLE & SATELLITE (0.7%)
2,000 Altice Finco S.A. (a) 7.63 2/15/2025 2,000
2,000 Altice S.A. (a) 7.75 5/15/2022 2,075
2,000 Altice S.A. (a) 7.63 2/15/2025 2,000
3,000 Numericable Group S.A. (a) 4.88 5/15/2019 3,011
================================================================================
PORTFOLIO OF INVESTMENTS | 25
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 5,000 Numericable Group S.A.(a) 6.00% 5/15/2022 $ 5,121
---------
14,207
---------
Total Consumer Discretionary 14,207
---------
CONSUMER STAPLES (0.4%)
----------------------
PACKAGED FOODS & MEAT (0.4%)
1,000 JBS Investments GmbH(a) 7.25 4/03/2024 995
5,000 JBS USA, LLC(a) 5.88 7/15/2024 4,838
3,000 Minerva Luxembourg S.A. 7.75 1/31/2023 2,895
---------
8,728
---------
Total Consumer Staples 8,728
---------
FINANCIALS (3.2%)
----------------
DIVERSIFIED BANKS (0.7%)
1,000 Barclays Bank plc(a) 5.93 -(e) 1,052
3,500 BayernLB Capital Trust l 6.20 -(e) 3,113
5,000 Royal Bank of Scotland Group plc 7.64 -(e) 5,375
5,000 Royal Bank of Scotland Group plc 9.50 3/16/2022 5,659
---------
15,199
---------
DIVERSIFIED CAPITAL MARKETS (0.2%)
5,000 Deutsche Bank Capital Trust IV 4.59 -(e) 4,850
---------
LIFE & HEALTH INSURANCE (0.1%)
2,000 Great-West Life & Annuity Insurance Capital, LP(a) 7.15 5/16/2046 2,080
---------
MULTI-LINE INSURANCE (0.3%)
5,000 AXA S.A.(a) 6.46 -(e) 5,356
---------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.4%)
2,000 ING Capital Funding Trust III 3.86(d) -(e) 1,980
6,986 ING Groep N.V. 5.78 -(e) 7,126
---------
9,106
---------
PROPERTY & CASUALTY INSURANCE (1.3%)
22,000 QBE Capital Funding III Ltd.(a) 7.25 5/24/2041 24,231
4,000 XLIT Ltd. 6.50 -(e) 3,610
---------
27,841
---------
REINSURANCE (0.2%)
5,000 Swiss Re Capital I, LP (a) 6.85 -(e) 5,258
---------
Total Financials 69,690
---------
INDUSTRIALS (1.4%)
-----------------
AEROSPACE & DEFENSE (0.1%)
2,000 Bombardier, Inc.(a) 6.13 1/15/2023 1,900
---------
================================================================================
26 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
AIRLINES (1.1%)
$ 1,000 Air Canada (a) 7.75% 4/15/2021 $ 1,044
11,078 Air Canada "B" Pass-Through Trust(a) 5.38 11/15/2022 11,466
2,500 Air Canada "C" Pass-Through Trust(a) 6.63 5/15/2018 2,576
8,034 Virgin Australia Holdings Ltd. Pass-Through Trust(a) 7.13 10/23/2018 8,154
---------
23,240
---------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
5,250 Ashtead Capital, Inc.(a) 6.50 7/15/2022 5,696
---------
Total Industrials 30,836
---------
INFORMATION TECHNOLOGY (0.3%)
----------------------------
ELECTRONIC MANUFACTURING SERVICES (0.1%)
2,000 MMI International Ltd.(a) 8.00 3/01/2017 2,000
---------
SEMICONDUCTOR EQUIPMENT (0.2%)
4,000 Global A&T Electronics(a) 10.00 2/01/2019 3,730
---------
Total Information Technology 5,730
---------
MATERIALS (4.8%)
---------------
COMMODITY CHEMICALS (0.5%)
10,000 Braskem Finance Ltd. 6.45 2/03/2024 9,775
---------
CONSTRUCTION MATERIALS (0.5%)
1,000 CEMEX Finance, LLC(a) 9.38 10/12/2022 1,106
1,500 CEMEX Finance, LLC(a) 6.00 4/01/2024 1,416
132 CEMEX S.A. de C.V.(a) 9.00 1/11/2018 138
3,000 CEMEX S.A. de C.V.(a) 6.50 12/10/2019 3,037
5,000 Companhia Brasileira de Aluminio(a) 4.75 6/17/2024 4,775
---------
10,472
---------
DIVERSIFIED METALS & MINING (0.7%)
700 First Quantum Minerals Ltd.(a) 7.25 5/15/2022 586
10,000 Glencore Funding, LLC(a) 4.13 5/30/2023 9,671
1,000 Imperial Metals Corp.(a) 7.00 3/15/2019 880
5,000 Vedanta Resources plc(a) 8.25 6/07/2021 4,547
---------
15,684
---------
GOLD (1.5%)
3,000 AuRico Gold, Inc.(a) 7.75 4/01/2020 2,925
5,000 Eldorado Gold Corp.(a) 6.13 12/15/2020 4,956
5,000 New Gold, Inc.(a) 6.25 11/15/2022 4,963
4,000 Newcrest Finance Property Ltd.(a) 4.20 10/01/2022 3,782
20,000 St. Barbara Ltd.(a) 8.88 4/15/2018 16,100
---------
32,726
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 27
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
PAPER PACKAGING (0.3%)
$ 6,200 Smurfit Kappa Treasury Funding Ltd. 7.50% 11/20/2025 $ 7,301
---------
PAPER PRODUCTS (0.2%)
5,000 Sappi Papier Holding GmbH(a) 6.63 4/15/2021 5,150
---------
PRECIOUS METALS & MINERALS (0.2%)
5,000 Fresnillo plc(a) 5.50 11/13/2023 5,219
---------
STEEL (0.9%)
15,000 ArcelorMittal 7.50 10/15/2039 15,600
5,000 FMG Resources (August 2006) Proprietary Ltd.(a) 6.88 4/01/2022 3,944
---------
19,544
---------
Total Materials 105,871
---------
TELECOMMUNICATION SERVICES (0.4%)
--------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.4%)
5,000 Digicel Ltd.(a) 6.00 4/15/2021 4,700
3,000 NII Capital Corp.(c) 8.88 12/15/2019 1,320
3,500 NII International Telecom SCA(a),(c) 7.88 8/15/2019 3,115
---------
9,135
---------
Total Telecommunication Services 9,135
---------
UTILITIES (1.7%)
---------------
ELECTRIC UTILITIES (1.3%)
5,000 EDP Finance B.V.(a) 5.25 1/14/2021 5,339
10,000 Electricite De France S.A.(a) 5.25 -(e) 10,525
10,975 Enel S.p.A.(a) 8.75 9/24/2073 13,057
---------
28,921
---------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.4%)
7,000 AES Gener S.A.(a) 8.38 12/18/2073 7,595
---------
Total Utilities 36,516
---------
Total Eurodollar and Yankee Obligations (cost: $265,650) 280,713
---------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.1%)
FINANCIALS (0.1%)
----------------
2,911 Wells Fargo Mortgage Backed Securities Trust
(cost: $2,820) 4.21(d) 4/25/2035 2,795
---------
COMMERCIAL MORTGAGE SECURITIES (4.8%)
FINANCIALS (4.8%)
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (4.8%)
2,444 Banc of America Commercial Mortgage, Inc.(a) 5.28 12/10/2042 2,384
================================================================================
28 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
$ 6,900 Banc of America Commercial Mortgage, Inc. 5.42% 10/10/2045 $ 7,177
6 Banc of America Commercial Mortgage, Inc.(a) 5.64 9/10/2047 6
485 Banc of America Commercial Mortgage, Inc.(a) 6.14 9/10/2047 494
5,000 Banc of America Commercial Mortgage, Inc. 6.27 2/10/2051 5,379
2,500 Bear Stearns Commercial Mortgage Securities, Inc. 5.43 12/11/2040 2,478
8,610 Bear Stearns Commercial Mortgage Securities, Inc.(a) 5.66 9/11/2041 8,356
5,000 Bear Stearns Commercial Mortgage Securities, Inc. 5.57 1/12/2045 5,205
5,278 CD Commercial Mortgage Trust 5.69 10/15/2048 5,216
2,500 Citigroup Commercial Mortgage Trust 5.77 3/15/2049 2,604
5,497 Citigroup Commercial Mortgage Trust 6.15 12/10/2049 5,583
15,000 Credit Suisse Commercial Mortgage Pass-Through
Trust 0.36 2/15/2040 13,831
7,110 GE Capital Commercial Mortgage Corp. 5.28 3/10/2044 7,213
5,000 GE Capital Commercial Mortgage Corp. 5.31 11/10/2045 5,039
1,363 GMAC Commercial Mortgage Securities, Inc. 4.97 12/10/2041 1,393
2,830 J.P. Morgan Chase Commercial Mortgage Securities
Corp. 4.97 9/12/2037 2,700
3,750 Merrill Lynch Mortgage Trust 5.24 7/12/2038 3,700
5,000 Merrill Lynch Mortgage Trust 5.69 5/12/2039 5,040
5,000 Merrill Lynch Mortgage Trust 5.05 8/12/2039 5,003
4,000 Morgan Stanley Capital I Trust 5.49 3/12/2044 4,029
1,445 Morgan Stanley Capital I, Inc. 5.17 8/13/2042 1,460
2,000 Wachovia Bank Commercial Mortgage Trust(a) 4.99 5/15/2044 1,991
4,000 Wachovia Bank Commercial Mortgage Trust 5.36 12/15/2044 4,063
5,000 Wachovia Bank Commercial Mortgage Trust 5.37 11/15/2048 5,050
---------
105,394
---------
INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (0.0%)
587 Credit Suisse First Boston Corp.,
acquired 6/13/2003; cost $29(g) 1.78 5/17/2040 24
---------
Total Financials 105,418
---------
Total Commercial Mortgage Securities (cost: $101,697) 105,418
---------
MUNICIPAL BONDS (0.0%)
CASINOS & GAMING (0.0%)
5,142 Mashantucket (Western) Pequot Tribe (f) (cost: $2,915) 7.35 7/01/2026 910
---------
EXCHANGE-TRADED FUNDS (0.4%)
EXCHANGE-TRADED FUNDS (0.4%)
198 SPDR Barclays High Yield Bond Fund (cost: $8,043) 7,696
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 29
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
EQUITY SECURITIES (14.0%)
COMMON STOCKS (5.3%)
CONSUMER DISCRETIONARY (1.1%)
----------------------------
APPAREL, ACCESSORIES & LUXURY GOODS (0.1%)
58,400 LVMH Moet Hennessy Louis Vuitton S.A. ADR $ 1,881
---------
AUTO PARTS & EQUIPMENT (0.3%)
33,600 Johnson Controls, Inc. 1,562
58,059 Lear Corp. 5,826
---------
7,388
---------
CABLE & SATELLITE (0.4%)
23,483 Charter Communications, Inc. "A"* 3,549
72,680 Comcast Corp. "A" 3,862
---------
7,411
---------
CASINOS & GAMING (0.0%)
13,500 Las Vegas Sands Corp. 734
---------
GENERAL MERCHANDISE STORES (0.1%)
30,435 Target Corp. 2,240
---------
HOME FURNISHINGS (0.1%)
54,070 Tempur Sealy International, Inc.* 2,976
---------
HOTELS, RESORTS & CRUISE LINES (0.1%)
25,400 Hyatt Hotels Corp. "A"* 1,429
---------
Total Consumer Discretionary 24,059
---------
CONSUMER STAPLES (0.3%)
----------------------
DRUG RETAIL (0.1%)
28,400 CVS Health Corp. 2,788
---------
HOUSEHOLD PRODUCTS (0.1%)
11,242 Kimberly-Clark Corp. 1,214
---------
PACKAGED FOODS & MEAT (0.1%)
15,530 Keurig Green Mountain, Inc. 1,903
---------
Total Consumer Staples 5,905
---------
ENERGY (0.3%)
------------
INTEGRATED OIL & GAS (0.1%)
8,522 Chevron Corp. 874
32,263 Royal Dutch Shell plc ADR "A" 1,982
---------
2,856
---------
OIL & GAS EQUIPMENT & SERVICES (0.1%)
88,602 Deepocean Group Holdings AS, acquired 6/28/2011; cost $1,636*(g),(h) 1,324
---------
================================================================================
30 | USAA HIGH INCOME FUND
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION (0.1%)
22,883 Thunderbird Resources Equity, Inc., acquired 5/27/2014; cost $1,821*(g),(h) $ 1,821
---------
Total Energy 6,001
---------
FINANCIALS (1.2%)
----------------
ASSET MANAGEMENT & CUSTODY BANKS (0.1%)
202,000 Prospect Capital Corp. 1,667
---------
DIVERSIFIED BANKS (0.0%)
18,507 JPMorgan Chase & Co. 1,006
---------
LIFE & HEALTH INSURANCE (0.0%)
21,952 MetLife, Inc. 1,021
---------
REGIONAL BANKS (0.2%)
27,800 BB&T Corp. 981
151,918 KeyCorp 1,973
201,207 Regions Financial Corp. 1,751
---------
4,705
---------
REITs - MORTGAGE (0.5%)
140,100 Hatteras Financial Corp. 2,547
475,600 MFA Financial, Inc. 3,729
361,200 Two Harbors Investment Corp. 3,727
---------
10,003
---------
REITs - SPECIALIZED (0.2%)
40,677 Crown Castle International Corp. 3,519
---------
SPECIALIZED FINANCE (0.1%)
35,130 CME Group, Inc. 2,997
---------
THRIFTS & MORTGAGE FINANCE (0.1%)
115,241 People's United Financial, Inc. 1,621
---------
Total Financials 26,539
---------
HEALTH CARE (0.4%)
-----------------
HEALTH CARE EQUIPMENT (0.0%)
3,407 Diagnostic Services Holdings, acquired 6/01/2009; cost $756*(g),(h) 233
---------
HEALTH CARE SUPPLIES (0.0%)
1,405 Halyard Health, Inc. 63
---------
PHARMACEUTICALS (0.4%)
22,300 AbbVie, Inc. 1,346
21,662 Johnson & Johnson 2,169
50,900 Merck & Co., Inc. 3,068
================================================================================
PORTFOLIO OF INVESTMENTS | 31
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
27,607 Novartis AG ADR $ 2,689
---------
9,272
---------
Total Health Care 9,568
---------
INDUSTRIALS (0.2%)
-----------------
AIRLINES (0.1%)
46,000 United Continental Holdings, Inc.* 3,191
---------
COMMERCIAL PRINTING (0.0%)
2,060 Quad Graphics, Inc. 41
---------
INDUSTRIAL CONGLOMERATES (0.1%)
83,000 General Electric Co. 1,983
---------
Total Industrials 5,215
---------
INFORMATION TECHNOLOGY (0.4%)
----------------------------
APPLICATION SOFTWARE (0.1%)
9,266 CDK Global, Inc. 418
---------
DATA PROCESSING & OUTSOURCED SERVICES (0.1%)
27,798 Automatic Data Processing, Inc. 2,294
---------
SEMICONDUCTORS (0.1%)
74,500 Intel Corp. 2,462
---------
SYSTEMS SOFTWARE (0.1%)
61,150 Microsoft Corp. 2,471
---------
Total Information Technology 7,645
---------
MATERIALS (0.9%)
---------------
COMMODITY CHEMICALS (0.2%)
61,015 LyondellBasell Industries N.V. "A" 4,826
---------
CONSTRUCTION MATERIALS (0.1%)
596 Panolam Holdings Co., acquired 1/20/2010; cost $315*(g),(h) 1,139
---------
GOLD (0.1%)
245,000 Alamos Gold, Inc. 1,298
56,750 Goldcorp, Inc. 1,364
33,650 Newmont Mining Corp. 846
---------
3,508
---------
PAPER PRODUCTS (0.3%)
54,650 Clearwater Paper Corp.* 4,045
39,300 International Paper Co. 2,070
534 Resolute Forest Products* 9
123,689 Verso Corp.* 260
---------
6,384
---------
================================================================================
32 | USAA HIGH INCOME FUND
================================================================================
---------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
SPECIALTY CHEMICALS (0.2%)
172,882 MPM Holdings, Inc.(h) $ 4,581
---------
Total Materials 20,438
---------
TELECOMMUNICATION SERVICES (0.3%)
--------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.3%)
50,503 AT&T, Inc. 1,662
63,000 CenturyLink, Inc. 2,342
50,650 Verizon Communications, Inc. 2,315
---------
6,319
---------
Total Telecommunication Services 6,319
---------
UTILITIES (0.2%)
---------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%)
325,000 AES Corp. 3,972
---------
Total Common Stocks (cost: $87,347) 115,661
---------
PREFERRED STOCKS (8.7%)
CONSUMER STAPLES (1.7%)
----------------------
AGRICULTURAL PRODUCTS (1.7%)
400,000 CHS, Inc., 7.10%, cumulative redeemable, perpetual 10,545
200,000 CHS, Inc., Series B, 7.88%, cumulative redeemable, perpetual 5,621
200,000 Dairy Farmers of America, Inc., 7.88%, cumulative redeemable, perpetual(a) 21,819
---------
37,985
---------
Total Consumer Staples 37,985
---------
ENERGY (3.2%)
------------
OIL & GAS EXPLORATION & PRODUCTION (0.8%)
17,000 Chesapeake Energy Corp., 5.75%, perpetual (a) 17,244
---------
OIL & GAS STORAGE & TRANSPORTATION (2.4%)
5,061 Kinder Morgan Inc., 7.80% 6,237
1,730,117 NuStar Logistics, LP, 7.63% 45,610
---------
51,847
---------
Total Energy 69,091
---------
FINANCIALS (2.9%)
----------------
CONSUMER FINANCE (0.5%)
3,000 Ally Financial, Inc., 7.00%, perpetual(a) 3,015
320,000 GMAC Capital Trust I, 8.13%, cumulative redeemable 8,416
---------
11,431
---------
DIVERSIFIED BANKS (0.3%)
8,000 US Bancorp, 7.19%, perpetual 6,793
---------
================================================================================
PORTFOLIO OF INVESTMENTS | 33
================================================================================
---------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
$(000)SHARES SECURITY (000)
---------------------------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE (0.3%)
274,059 Delphi Financial Group, Inc., 7.38%, cumulative redeemable $ 6,852
---------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.1%)
36,000 ING Groep N.V., 7.20%, perpetual 934
26,500 ING Groep N.V., 7.38%, perpetual 683
---------
1,617
---------
PROPERTY & CASUALTY INSURANCE (0.2%)
$ 3,000 Catlin Insurance Co. Ltd., 7.25%, perpetual(a) 2,993
---------
REGIONAL BANKS (0.1%)
1,515 M&T Bank Corp., 6.38%, cumulative redeemable, perpetual 1,545
---------
REINSURANCE (0.0%)
3,000 American Overseas Group Ltd., 7.50%, non-cumulative,
acquired 1/23/2007 - 3/02/2007; cost $3,109*(g),(h) 750
---------
REITs - HOTEL & RESORT (0.3%)
210,000 Felcor Lodging Trust, Inc., Series C, 8.00%, perpetual 5,353
---------
REITs - INDUSTRIAL (0.5%)
185,741 ProLogis, Inc., Series Q, 8.54%, cumulative redeemable, perpetual 11,702
---------
REITs - OFFICE (0.3%)
240,000 Commonwealth, Series E, 7.25%, cumulative redeemable, perpetual 6,226
---------
REITs - RESIDENTIAL (0.3%)
100,000 Equity Residential Properties Trust, depositary shares,
Series K, 8.29%, cumulative redeemable, perpetual 6,531
---------
THRIFTS & MORTGAGE FINANCE (0.0%)
20,000 Freddie Mac, 6.02%, perpetual* 62
80,000 Freddie Mac, 8.38%, perpetual* 329
---------
391
---------
Total Financials 62,184
---------
TELECOMMUNICATION SERVICES (0.8%)
--------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.8%)
627,000 Qwest Corp., 7.38% 16,747
---------
UTILITIES (0.1%)
---------------
ELECTRIC UTILITIES (0.1%)
29,100 Southern California Edison, Series D, 6.50%,
cumulative redeemable, perpetual 3,121
---------
Total Preferred Stocks (cost: $179,961) 189,128
---------
Total Equity Securities (cost: $267,309) 304,789
---------
================================================================================
34 | USAA HIGH INCOME FUND
================================================================================
----------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
----------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS (3.6%)
COMMERCIAL PAPER (3.4%)
ENERGY (3.1%)
-------------
OIL & GAS EXPLORATION & PRODUCTION (1.0%)
$ 8,579 Talisman Energy, Inc. (a),(i) 0.65% 2/04/2015 $ 8,579
12,332 Talisman Energy, Inc. (a),(i) 0.65 2/05/2015 12,331
----------
20,910
----------
OIL & GAS STORAGE & TRANSPORTATION (2.1%)
13,527 Enbridge Energy Partners, LP (a),(i) 0.52 2/04/2015 13,527
7,000 Enbridge, Inc.(a),(i) 0.55 2/10/2015 6,999
5,368 Spectra Energy Capital, LLC(a),(i) 0.40 2/03/2015 5,368
10,110 Spectra Energy Partners, LP (a),(i) 0.42 2/10/2015 10,109
11,000 Williams Partners, LP (a),(i) 0.42 2/02/2015 11,000
----------
47,003
----------
Total Energy 67,913
----------
INDUSTRIALS (0.3%)
------------------
INDUSTRIAL MACHINERY (0.3%)
6,618 Pentair Finance S.A. (a),(i) 0.48 2/06/2015 6,617
----------
Total Commercial Paper 74,530
----------
VARIABLE-RATE DEMAND NOTES (0.2%)
MATERIALS (0.2%)
----------------
STEEL (0.2%)
5,000 Illinois Finance Auth. (LOC - UniCredit Bank A.G.) 2.25 2/01/2037 5,000
----------
Total Money Market Instruments (cost: $79,530) 79,530
----------
TOTAL INVESTMENTS (COST: $2,089,673) $2,154,399
==========
================================================================================
PORTFOLIO OF INVESTMENTS | 35
================================================================================
<TALE>
-----------------------------------------------------------------------------------------------------
($ IN 000s) VALUATION HIERARCHY
-----------------------------------------------------------------------------------------------------
(LEVEL 1) (LEVEL 2) (LEVEL 3)
QUOTED PRICES OTHER SIGNIFICANT SIGNIFICANT
IN ACTIVE MARKETS OBSERVABLE UNOBSERVABLE
ASSETS FOR IDENTICAL ASSETS INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------------------------
Corporate Obligations $ - $1,372,548 $ - $1,372,548
Eurodollar and Yankee Obligations - 280,713 - 280,713
Collateralized Mortgage Obligations - 2,795 - 2,795
Commercial Mortgage Securities - 105,418 - 105,418
Municipal Bonds - 910 - 910
Exchange-Traded Funds 7,696 - - 7,696
Equity Securities:
Common Stocks 106,563 4,581 4,517 115,661
Preferred Stocks 25,163 163,215 750 189,128
Money Market Instruments:
Commercial Paper - 74,530 - 74,530
Variable-Rate Demand Notes - 5,000 - 5,000
-----------------------------------------------------------------------------------------------------
Total $139,422 $2,009,710 $5,267 $2,154,399
-----------------------------------------------------------------------------------------------------
Reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining value:
-----------------------------------------------------------------------------------------------
COMMON STOCKS PREFERRED STOCKS
-----------------------------------------------------------------------------------------------
Balance as of July 31, 2014 $5,044 $750
Purchases -
Sales (12) -
Transfers into Level 3 - -
Transfers out of Level 3 - -
Net realized gain (loss) on investments (957) -
Change in net unrealized appreciation/depreciation
of investments 442 -
-----------------------------------------------------------------------------------------------
Balance as of January 31, 2015 $4,517 $750
-----------------------------------------------------------------------------------------------
For the period of August 1, 2014, through January 31, 2015, 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.
================================================================================
36 | USAA HIGH INCOME FUND
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2015 (unaudited)
--------------------------------------------------------------------------------
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
Investments in foreign securities were 15.0% of net assets at January 31,
2015.
The Fund may rely on certain Securities and Exchange Commission (SEC)
exemptive orders or rules that permit funds meeting various conditions to
invest in an exchange-traded fund (ETF) in amounts exceeding limits set forth
in the Investment Company Act of 1940, as amended, that would otherwise be
applicable.
o CATEGORIES AND DEFINITIONS
ASSET-BACKED AND COMMERCIAL MORTGAGE-BACKED SECURITIES - Asset-backed
securities represent a participation in, or are secured by and payable from,
a stream of payments generated by particular assets. Commercial
mortgage-backed securities reflect an interest in, and are secured by,
mortgage loans on commercial real property. These securities represent
ownership in a pool of loans and are divided into pieces (tranches) with
varying maturities. The stated final maturity of such securities represents
when the final principal payment will be made for all underlying loans. The
weighted average life is the average time for principal to be repaid, which
is calculated by assuming prepayment rates of the underlying loans. The
weighted average life is likely to be substantially shorter than
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 37
================================================================================
the stated final maturity as a result of scheduled principal payments and
unscheduled principal prepayments. Stated interest rates on commercial
mortgage-backed securities may change slightly over time as underlying
mortgages pay down.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - Collateralized mortgage
obligations are debt obligations of a legal entity that are fully
collateralized by a portfolio of mortgages or mortgage-related securities.
CMOs are issued in multiple classes (tranches), with specific adjustable or
fixed interest rates, varying maturities, and must be fully retired no later
than its final distribution date. The cash flow from the underlying mortgages
is used to pay off each tranche separately. CMOs are designed to provide
investors with more predictable maturities than regular mortgage securities
but such maturities can be difficult to predict because of the effect of
prepayments.
EURODOLLAR AND YANKEE OBLIGATIONS - Eurodollar obligations are U.S.
dollar-denominated instruments that are issued outside the U.S. capital
markets by foreign corporations and financial institutions and by foreign
branches of U.S. corporations and financial institutions. Yankee obligations
are dollar-denominated instruments that are issued by foreign issuers in the
U.S. capital markets.
INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS IOs) - represent
the right to receive only the interest payments on an underlying pool of
commercial mortgage loans. The purchase yield reflects an anticipated yield
based upon interest rates at the time of purchase and the estimated timing
and amount of future cash flows. Coupon rates after purchase vary from period
to period. The principal amount represents the notional amount of the
underlying pool on which current interest is calculated. CMBS IOs are backed
by loans that have various forms of prepayment protection, which include
lock-out provisions, yield maintenance provisions, and prepayment penalties.
This serves to moderate their prepayment risk. CMBS IOs are subject to
default-related prepayments that may have a negative impact on yield.
CREDIT ENHANCEMENTS - add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
================================================================================
38 | USAA HIGH INCOME FUND
================================================================================
interest payments when due. The enhancement may be provided by a high-quality
bank, insurance company or other corporation, or a collateral trust. The
enhancements do not guarantee the market values of the securities.
(INS) Principal and interest payments are insured by MBIA Insurance Corp.
Although bond insurance reduces the risk of loss due to default by an
issuer, such bonds remain subject to the risk that value may fluctuate
for other reasons, and there is no assurance that the insurance
company will meet its obligations.
(LOC) Principal and interest payments are guaranteed by a bank letter of
credit or other bank credit agreement.
o PORTFOLIO ABBREVIATION(S) AND DESCRIPTION(S)
ADR - American depositary receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S.
dollars.
REIT - Real estate investment trust
o SPECIFIC NOTES
(a) Restricted security that is not registered under the Securities Act of
1933. A resale of this security in the United States may occur in an
exempt transaction to a qualified institutional buyer as defined by Rule
144A, and as such has been deemed liquid by USAA Asset Management Company
(the Manager) under liquidity guidelines approved by USAA Mutual Funds
Trust's Board of Trustees (the Board), unless otherwise noted as
illiquid.
(b) Senior loan (loan) - is not registered under the Securities Act of 1933.
The loan contains certain restrictions on resale and cannot be sold
publicly. The stated interest rate represents the weighted average
interest rate of all contracts within the senior loan facility and
includes commitment fees on unfunded loan commitments. The interest rate
is adjusted periodically, and the rate disclosed represents the current
rate at January 31, 2015. The weighted average life of the loan is likely
to be shorter than the stated final maturity date due to
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 39
================================================================================
mandatory or optional prepayments. The loan is deemed liquid by the
Manager, under liquidity guidelines approved by the Board, unless
otherwise noted as illiquid.
(c) At January 31, 2015, the issuer was in default with respect to interest
and/or principal payments.
(d) Variable-rate or floating-rate security - interest rate is adjusted
periodically. The interest rate disclosed represents the rate at January
31, 2015.
(e) Security is perpetual and has no final maturity date but may be subject
to calls at various dates in the future.
(f) Pay-in-kind (PIK) - Security in which the issuer will have or has the
option to make all or a portion of the interest or dividend payments in
additional securities.
(g) Security deemed illiquid by the Manager, under liquidity guidelines
approved by the Board. The aggregate market value of these securities at
January 31, 2015, was $5,291,000, which represented 0.2% of the Fund's
net assets.
(h) Security was fair valued at January 31, 2015, by the Manager in
accordance with valuation procedures approved by the Board. The total
value of all such securities was $9,848,000, which represented 0.5% of
the Fund's net assets.
(i) Commercial paper issued in reliance on the "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Unless this commercial paper is subsequently registered, a resale of this
commercial paper in the United States must be effected in a transaction
exempt from registration under the Securities Act of 1933. Section 4(2)
commercial paper is normally resold to other investors through or with
the assistance of the issuer or an investment dealer who makes a market
in this security, and as such has been deemed liquid by the Manager under
liquidity guidelines approved by the Board, unless otherwise noted as
illiquid.
* Non-income-producing security.
================================================================================
40 | USAA HIGH INCOME FUND
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2015 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (cost of $2,089,673) $2,154,399
Cash 234
Receivables:
Capital shares sold 1,702
Dividends and interest 32,730
Securities sold 321
----------
Total assets 2,189,386
----------
LIABILITIES
Payables:
Securities purchased 4,180
Capital shares redeemed 1,295
Accrued management fees 1,026
Accrued transfer agent's fees 85
Other accrued expenses and payables 103
----------
Total liabilities 6,689
----------
Net assets applicable to capital shares outstanding $2,182,697
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,124,846
Accumulated undistributed net investment income 1,848
Accumulated net realized loss on investments (8,722)
Net unrealized appreciation of investments 64,726
Net unrealized depreciation of foreign currency translations (1)
----------
Net assets applicable to capital shares outstanding $2,182,697
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $1,394,605/165,333 shares outstanding) $ 8.44
==========
Institutional Shares (net assets of $775,968/92,043
shares outstanding) $ 8.43
==========
Adviser Shares (net assets of $12,124/1,435 shares outstanding) $ 8.45
==========
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 41
================================================================================
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2015 (unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $47) $ 8,500
Interest 63,096
---------
Total income 71,596
---------
EXPENSES
Management fees 6,212
Administration and servicing fees:
Fund Shares 1,101
Institutional Shares 387
Adviser Shares 8
Transfer agent's fees:
Fund Shares 1,136
Institutional Shares 387
Adviser Shares 3
Distribution and service fees (Note 6E):
Adviser Shares 13
Custody and accounting fees:
Fund Shares 112
Institutional Shares 57
Adviser Shares 1
Postage:
Fund Shares 43
Institutional Shares 65
Shareholder reporting fees:
Fund Shares 20
Institutional Shares 15
Trustees' fees 12
Registration fees:
Fund Shares 33
Institutional Shares 13
Adviser Shares 8
Professional fees 71
Other 18
---------
Total expenses 9,715
---------
NET INVESTMENT INCOME 61,881
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain (loss) on:
Unaffiliated transactions (7,667)
Affiliated transactions (Note 8) 57
Foreign currency transactions (3)
Change in net unrealized appreciation/depreciation of:
Investments (99,607)
Foreign currency translations (1)
---------
Net realized and unrealized loss (107,221)
---------
Decrease in net assets resulting from operations $(45,340)
=========
See accompanying notes to financial statements.
================================================================================
42 | USAA HIGH INCOME FUND
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended January 31, 2015 (unaudited), and year ended July 31,
2014
--------------------------------------------------------------------------------
1/31/2015 7/31/2014
---------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 61,881 $ 124,529
Net realized gain (loss) on investments (7,610) 22,727
Net realized loss on foreign currency transactions (3) -
Change in net unrealized appreciation/depreciation of
Investments (99,607) 47,367
Foreign currency translations (1) -
-----------------------
Increase (decrease) in net assets resulting from operations (45,340) 194,623
-----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares (39,718) (79,590)
Institutional Shares (21,411) (44,905)
Adviser Shares (280) (439)
----------------------
Total distributions of net investment income (61,409) (124,934)
----------------------
Net realized gains:
Fund Shares (10,575) (24,229)
Institutional Shares (5,699) (14,384)
Adviser Shares (84) (141)
----------------------
Total distributions of net realized gains (16,358) (38,754)
----------------------
Distributions to shareholders (77,767) (163,688)
----------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (NOTE 5)
Fund Shares (46,955) 251,025
Institutional Shares 60,975 (18,088)
Adviser Shares 3,514 2,004
----------------------
Total net increase in net assets from
capital share transactions 17,534 234,941
----------------------
Net increase (decrease) in net assets (105,573) 265,876
NET ASSETS
Beginning of period 2,288,270 2,022,394
----------------------
End of period $2,182,697 $2,288,270
======================
Accumulated undistributed net investment income:
End of period $ 1,848 $ 1,376
======================
See accompanying notes to financial statements.
================================================================================
FINANCIAL STATEMENTS | 43
================================================================================
NOTES TO FINANCIAL STATEMENTS
January 31, 2015 (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.
Additionally, the Fund qualifies as a registered investment company under
Accounting Standards Codification Topic 946. The information presented in this
semiannual report pertains only to the USAA High Income Fund (the Fund), which
is classified as diversified under the 1940 Act. The Fund's investment objective
is to seek to provide an attractive total return primarily through high current
income and secondarily through capital appreciation.
The Fund consists of three classes of shares: High Income Fund Shares (Fund
Shares), High Income Fund Institutional Shares (Institutional Shares), and High
Income Fund Adviser Shares (Adviser Shares). Each class of shares has equal
rights to assets and earnings, except that each class bears certain
class-related expenses specific to the particular class. These expenses include
administration and servicing fees, transfer agent fees, postage, shareholder
reporting fees, distribution and service (12b-1) fees, and certain registration
and custodian fees. Expenses not attributable to a specific class, income, and
realized gains or losses on investments are allocated to each class of shares
based on each class's relative net assets. Each class has exclusive voting
rights on matters related solely to that class and separate voting rights on
matters that relate to all classes. The Institutional Shares are available for
investment through a USAA discretionary managed account program, and certain
advisory programs sponsored by financial intermediaries, such as brokerage
firms, investment advisors, financial planners, third-party administrators, and
insurance companies. Institutional Shares also are available to institutional
investors, which include retirement
================================================================================
44 | USAA HIGH INCOME FUND
================================================================================
plans, endowments, foundations, and bank trusts, as well as other persons or
legal entities that the Fund may approve from time to time, or for purchase by a
USAA fund participating in a fund-of-funds investment strategy (USAA
fund-of-funds). The Adviser Shares permit investors to purchase shares through
financial intermediaries, including banks, broker-dealers, insurance companies,
investment advisers, plan sponsors, and financial professionals that provide
various administrative and distribution services.
A. SECURITY VALUATION - The Trust's Board of Trustees (the Board) has
established the Valuation Committee (the Committee), and subject to Board
oversight, the Committee administers and oversees the Fund's valuation
policies and procedures which are approved by the Board. Among other
things, these policies and procedures allow the Fund to utilize independent
pricing services, quotations from securities dealers, and a wide variety of
sources and information to establish and adjust the fair value of securities
as events occur and circumstances warrant.
The Committee reports to the Board on a quarterly basis and makes
recommendations to the Board as to pricing methodologies and services used
by the Fund and presents additional information to the Board regarding
application of the pricing and fair valuation policies and procedures during
the preceding quarter.
The Committee meets as often as necessary to make pricing and fair value
determinations. In addition, the Committee holds regular monthly meetings to
review prior actions taken by the Committee and USAA Asset Management
Company (the Manager). Among other 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. 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
================================================================================
NOTES TO FINANCIAL STATEMENTS | 45
================================================================================
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.
2. Equity securities, including exchange-traded funds (ETFs), except as
otherwise noted, traded primarily on a domestic securities exchange or
the Nasdaq over-the-counter markets, are valued at the last sales price
or official closing price on the exchange or primary market on which
they trade. Equity securities traded primarily on foreign securities
exchanges or markets are valued at the last quoted sales price, or the
most recently determined official closing price calculated according to
local market convention, available at the time the Fund is valued. If no
last sale or official closing price is reported or available, the
average of the bid and asked prices generally is used.
3. Equity securities trading in various foreign markets may take place on
days when the NYSE is closed. Further, when the NYSE is open, the
foreign markets may be closed. Therefore, the calculation of the Fund's
net asset value (NAV) may not take place at the same time the prices of
certain foreign securities held by the Fund are determined. In most
cases, events affecting the values of foreign securities that occur
between the time of their last quoted sales or official closing prices
and the close of normal trading on the NYSE on a day the Fund's NAV is
calculated will not be reflected in the value of the Fund's foreign
securities. However, the Manager will monitor for events that would
materially affect the value of the Fund's foreign securities and, if
necessary, the Manager will value the foreign securities in good faith,
considering such available information that the Manager deems relevant,
under valuation procedures approved by the Board. In addition, the Fund
may use information from an external vendor or other sources to adjust
the foreign market closing prices of foreign equity securities to
reflect what the Fund believes to
================================================================================
46 | USAA HIGH INCOME FUND
================================================================================
be the fair value of the securities as of the close of the NYSE. Fair
valuation of affected foreign equity securities may occur frequently
based on an assessment that events that occur on a fairly regular basis
(such as U.S. market movements) are significant.
4. 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.
5. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
6. Repurchase agreements are valued at cost, which approximates market
value.
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 under valuation procedures approved by
the Board. The effect of fair value pricing is that securities may not
be priced on the basis of quotations from the primary market in which
they are traded and the actual price realized from the sale of a
security may differ materially from the fair value price. Valuing these
securities at fair value is intended to cause the Fund's NAV to be more
reliable than it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any restrictions
on disposition of the securities, and an evaluation of the forces that
influenced the market in which the securities are purchased and sold.
B. FAIR VALUE MEASUREMENTS - Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
================================================================================
NOTES TO FINANCIAL STATEMENTS | 47
================================================================================
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments is
based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted)
in active markets for identical securities.
Level 2 - inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or indirectly, and
market-corroborated inputs such as market indices. Level 2 securities
include certain equity securities, which are valued based on methods
discussed in Note 1A3. Additionally, certain bonds, valued based on methods
discussed in Note 1A1, and commercial paper and variable-rate demand notes,
which are valued at amortized cost.
Level 3 - inputs to the valuation methodology are unobservable and
significant to the fair value measurement, including the Manager's own
assumptions in determining the fair value.
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risks associated with investing in those securities.
For the securities valued using significant unobservable inputs, market
quotations were not available from the pricing services. As such, the
securities were valued in good faith using methods determined by the
Manager, under valuation procedures approved by the Board. The valuation of
securities falling in the Level 3 category are supported by: values ascribed
to the stock in recent equity compensation awards, values assigned in the
recent restructuring, or discounted prior tender offer. However, these
securities are included in the Level 3 category due to limited market
transparency and or a lack of corroboration to support the quoted prices.
================================================================================
48 | USAA HIGH INCOME FUND
================================================================================
The methods used may include valuation models that rely on significant
assumptions and or unobservable inputs to determine the fair value
measurement for the securities. A market-based approach may be employed
using related or comparable securities, recent transactions, market
multiples, book values and other relevant information or an income-based
approach may be employed whereby estimated future cash flows are discounted
to determine the fair value. In some cases discounts may be applied due to
market liquidity limitations.
Refer to the portfolio of investments for a reconciliation of investments in
which significant unobservable inputs (Level 3) were used in determining
value.
QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS
FAIR VALUE AT SIGNIFICANT
JANUARY 31, 2015 VALUATION UNOBSERVABLE
ASSETS ($ IN 000's) TECHNIQUE(s) INPUT(s) RANGE
---------------------------------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks $1,372 Market Revenue Multiple(a) 0.7x - 1.2x
Comparables EBITDA Multiple(a) 4.1x - 12.4x
Discount for lack
of marketability(b) 25%
(a) Represents amounts used when the reporting entity has determined that
market participants would use such multiples when pricing the security.
(b) Represents amounts used when the reporting entity has determined that
market participants would take into account these discounts when pricing
the security.
Increases in the earnings before interest depreciation and amortization
(EBITDA), revenue multiples, or earnings per share will increase the value
of the security while an increase in the discount for lack of marketability
will decrease the value of the security.
C. 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.
D. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses
================================================================================
NOTES TO FINANCIAL STATEMENTS | 49
================================================================================
from sales of investment securities are computed on the identified cost
basis. Dividend income, less foreign taxes, if any, is recorded on the ex-
dividend date. If the ex-dividend date has passed, certain dividends from
foreign securities are recorded upon notification. Interest income is
recorded daily on the accrual basis. Discounts and premiums are amortized
over the life of the respective securities, using the effective yield method
for long-term securities and the straight-line method for short-term
securities.
E. FOREIGN CURRENCY TRANSLATIONS - The Fund's assets may be invested in the
securities of foreign issuers and may be traded in foreign currency. Since
the Fund's accounting records are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following bases:
1. Purchases and sales of securities, income, and expenses at the exchange
rate obtained from an independent pricing service on the respective
dates of such transactions.
2. Market value of securities, other assets, and liabilities at the
exchange rate obtained from an independent pricing service on a daily
basis.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Separately, net realized foreign currency gains/losses may arise from sales
of foreign currency, currency gains/losses realized between the trade and
settlement dates on security transactions, and from the difference between
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts received. At
the end of the Fund's fiscal year, these net realized foreign currency
gains/losses are reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and
================================================================================
50 | USAA HIGH INCOME FUND
================================================================================
liabilities, other than investments in securities, resulting from changes in
the exchange rate.
F. SECURITIES PURCHASED ON A DELAYED-DELIVERY OR WHEN-ISSUED BASIS - Delivery
and payment for securities that have been purchased by the Fund on a
delayed-delivery or when-issued basis or for delayed draws on loans can take
place a month or more after the trade date. During the period prior to
settlement, these securities do not earn interest, are subject to market
fluctuation, and may increase or decrease in value prior to their delivery.
The Fund receives a commitment fee for delayed draws on loans. The Fund
maintains segregated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a
delayed-delivery or when-issued basis and delayed-draw loan commitments may
increase the volatility of the Fund's NAV to the extent that the Fund makes
such purchases and commitments while remaining substantially fully invested.
G. EXPENSES PAID INDIRECTLY - Through arrangements with the Fund's custodian
and other banks utilized by the Fund for cash management purposes, realized
credits, if any, generated from cash balances in the Fund's bank accounts
may be used to directly reduce the Fund's expenses. For the six-month period
ended January 31, 2015, there were no custodian and other bank credits.
H. REDEMPTION FEES - All share classes held in the Fund less than 180 days are
subject to a redemption fee equal to 1.00% of the proceeds of the redeemed
or exchanged shares. All redemption fees paid will be accounted for by the
Fund as an addition to paid in capital. For the six-month period ended
January 31, 2015, the Fund Shares, Institutional Shares, and Adviser Shares
incurred redemption fees of $100,000, $1,000 and $7,000, respectively.
I. INDEMNIFICATIONS - Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, in the normal course
of business, the Trust enters into contracts that contain a variety of
representations and warranties that provide general indemnifications.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 51
================================================================================
The Trust's maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Trust that have not
yet occurred. However, the Trust expects the risk of loss to be remote.
J. USE OF ESTIMATES - The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINE OF CREDIT
The Fund participates in a joint, short-term, revolving, committed loan
agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of
the Manager. The purpose of the agreement is to meet temporary or emergency cash
needs, including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at an interest rate based on
the London Interbank Offered Rate (LIBOR).
The USAA Funds that are party to the loan agreement are assessed facility fees
by CAPCO in the amount of 7.0 basis points of the amount of the committed loan
agreement. The facility fees are allocated among the Funds based on their
respective average net assets for the period.
For the six-month period ended January 31, 2015, the Fund paid CAPCO facility
fees of $6,000, which represents 3.2% of the total fees paid to CAPCO by the
USAA Funds. The Fund had no borrowings under this agreement during the six-month
period ended January 31, 2015.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year-end of July 31, 2015,
in accordance with applicable tax law.
Distributions of net investment income are made monthly. 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.
================================================================================
52 | USAA HIGH INCOME FUND
================================================================================
The Fund is permitted to carry forward post-enactment 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.
For the year ended July 31, 2014, the Fund had no capital loss carryforwards,
for federal income tax purposes.
For the six-month period ended January 31, 2015, the Fund did not incur any
income tax, interest, or penalties, and has recorded no liability for net
unrecognized tax benefits relating to uncertain income tax positions. On an
ongoing basis, the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary. The statute of limitations on the
Fund's tax return filings generally remain open for the three preceding fiscal
reporting year ends and remain subject to examination by the Internal Revenue
Service and state taxing authorities.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2015, were
$143,632,000 and $120,150,000, respectively.
As of January 31, 2015, the cost of securities, including short-term securities,
for federal income tax purposes, was approximately the same as that reported in
the financial statements.
Gross unrealized appreciation and depreciation of investments as of January 31,
2015, were $159,181,000 and $94,455,000, respectively, resulting in net
unrealized appreciation of $64,726,000.
(5) CAPITAL SHARE TRANSACTIONS
At January 31, 2015, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated USAA fund-of-funds as well as other
================================================================================
NOTES TO FINANCIAL STATEMENTS | 53
================================================================================
persons or legal entities that the Fund may approve from time to time. Capital
share transactions for all classes were as follows, in thousands:
SIX-MONTH PERIOD ENDED YEAR ENDED
JANUARY 31, 2015 JULY 31, 2014
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------
FUND SHARES:
Shares sold 21,288 $ 185,345 53,201 $ 470,320
Shares issued from reinvested
dividends 5,424 46,795 10,946 96,272
Shares redeemed* (32,109) (279,095) (35,733) (315,567)
-------------------------------------------------
Net increase (decrease) from
capital share transactions (5,397) $ (46,955) 28,414 $ 251,025
=================================================
INSTITUTIONAL SHARES:
Shares sold 14,359 $ 125,365 20,459 $ 180,757
Shares issued from reinvested
dividends 3,070 26,464 6,603 58,002
Shares redeemed* (10,409) (90,854) (29,077) (256,847)
-------------------------------------------------
Net increase (decrease) from
capital share transactions 7,020 $ 60,975 (2,015) $ (18,088)
=================================================
ADVISER SHARES:
Shares sold 559 $ 4,858 342 $ 3,030
Shares issued from reinvested
dividends 20 175 17 153
Shares redeemed* (177) (1,519) (134) (1,179)
-------------------------------------------------
Net increase from capital
share transactions 402 $ 3,514 225 $ 2,004
=================================================
*Net of redemption fees.
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES - The Manager provides investment management services to the
Fund pursuant to an Advisory Agreement. Under this agreement, the Manager is
responsible for managing the business and affairs of the Fund, and for
directly managing the day-to-day investment of 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
================================================================================
54 | USAA HIGH INCOME FUND
================================================================================
and without shareholder approval) one or more subadvisers to manage the
actual day-to-day investment of a portion of the Fund's assets. For the
six-month period ended January 31, 2015, there were no subadvisers.
The investment management fee for the Fund is comprised of a base fee and a
performance adjustment. The Fund's base fee is accrued daily and paid
monthly at an annualized rate of 0.50% of the Fund's average net assets for
the fiscal year.
The performance adjustment is calculated separately for each share class on
a monthly basis by comparing each class's performance to that of the Lipper
High Yield Bond Funds Index over the performance period. The Lipper High
Yield Bond Funds Index tracks the total return performance of the 30 largest
funds within the Lipper High Yield Funds category. The performance period
for each class consists of the current month plus the previous 35 months.
The following table is utilized to determine the extent of the performance
adjustment:
OVER/UNDER PERFORMANCE
RELATIVE TO INDEX ANNUAL ADJUSTMENT RATE
(IN BASIS POINTS)(1) (IN BASIS POINTS)(1)
-------------------------------------------------------------------
+/- 20 to 50 +/- 4
+/- 51 to 100 +/- 5
+/- 101 and greater +/- 6
(1)Based on the difference between average annual performance of the
relevant share class of the Fund and its relevant index, rounded to the
nearest basis point. Average net assets of the share class are calculated
over a rolling 36-month period.
Each class's annual performance adjustment rate is multiplied by the average
net assets of each respective class over the entire performance period,
which is then multiplied by a fraction, the numerator of which is the number
of days in the month and the denominator of which is 365 (366 in leap
years). The resulting amount is then added to (in the case of
overperformance) or subtracted from (in the case of underperformance) the
base fee.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 55
================================================================================
Under the performance fee arrangement, each class will pay a positive
performance fee adjustment for a performance period whenever the class
outperforms the Lipper High Yield Bond Funds Index over that period, even if
the class had overall negative returns during the performance period.
For the six-month period ended January 31, 2015, the Fund incurred total
management fees, paid or payable to the Manager, of $6,212,000, which
included a performance adjustment for the Fund Shares, Institutional Shares,
and Adviser Shares of $390,000, $189,000, and $2,000, respectively. For the
Fund Shares, Institutional Shares, and Adviser Shares the performance
adjustments were 0.05%, 0.05%, and 0.04%, respectively.
B. ADMINISTRATION AND SERVICING FEES - The Manager provides certain
administration and servicing functions for the Fund. For such services, the
Manager receives a fee accrued daily and paid monthly at an annualized rate
of 0.15% of average net assets of the Fund Shares and Adviser Shares, and
0.10% of average net assets of the Institutional Shares. For the six-month
period ended January 31, 2015, the Fund Shares, Institutional Shares, and
Adviser Shares incurred administration and servicing fees, paid or payable
to the Manager, of $1,101,000, $387,000, and $8,000, respectively.
In addition to the services provided under its Administration and Servicing
Agreement with the Fund, the Manager also provides certain compliance and
legal services for the benefit of the Fund. The Board has approved the
reimbursement of a portion of these expenses incurred by the Manager. For
the six-month period ended January 31, 2015, the Fund reimbursed the Manager
$35,000 for these compliance and legal services. These expenses are included
in the professional fees on the Fund's statement of operations.
C. EXPENSE LIMITATION - The Manager agreed, through December 1, 2015, to limit
the total annual operating expenses of the Adviser Shares to 1.15% of its
average net assets, excluding extraordinary expenses and before reductions
of any expenses paid indirectly, and will reimburse the
================================================================================
56 | USAA HIGH INCOME FUND
================================================================================
Adviser Shares for all expenses in excess of that amount. This expense
limitation arrangement may not be changed or terminated through December 1,
2015, without approval of the Board, and may be changed or terminated by the
Manager at any time after that date. Prior to December 1, 2014, the Adviser
Shares' expense limitation was 1.20% of average net assets. For the
six-month period ended January 31, 2015, there were no reimbursable expenses
incurred by the Adviser Shares.
D. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services (SAS), an affiliate of the Manager, provides transfer agent
services to the Fund. Transfer agent's fees for both the Fund Shares and
Adviser Shares are paid monthly based on an annual charge of $25.50 per
shareholder account plus out-of-pocket expenses. SAS pays a portion of these
fees to certain intermediaries for administration and servicing of accounts
that are held with such intermediaries. Transfer agent's fees for
Institutional Shares are paid monthly based on a fee accrued daily at an
annualized rate of 0.10% of the Institutional Shares' average net assets,
plus out-of-pocket expenses. For the six-month period ended January 31,
2015, the Fund Shares, Institutional Shares and Adviser Shares incurred
transfer agent's fees, paid or payable to SAS, of $1,136,000, $387,000, and
$3,000, respectively.
E. DISTRIBUTION AND SERVICE (12B-1) FEES - The Fund has adopted a plan pursuant
to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under
the plan, the Adviser Shares pay fees to USAA Investment Management Company,
the distributor, for distribution and shareholder services. USAA Investment
Management Company pays all or a portion of such fees to intermediaries that
make the Adviser Shares available for investment by their customers. The fee
is accrued daily and paid monthly at an annual rate of 0.25% of the Adviser
Shares' average net assets. Adviser Shares are offered and sold without
imposition of an initial sales charge or a contingent deferred sales charge.
For the six-month period ended January 31, 2015, the Adviser Shares
incurred distribution and service (12b-1) fees of $13,000.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 57
================================================================================
F. UNDERWRITING SERVICES - USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares on a continuing
best-efforts basis and receives no commissions or fees for this service.
(7) TRANSACTIONS WITH AFFILIATES
The Fund offers its Institutional Shares for investment by other USAA funds and
is one of 17 USAA mutual funds in which the affiliated USAA fund-of- funds may
invest. The USAA fund-of-funds do not invest in the underlying funds for the
purpose of exercising management or control. As of January 31, 2015, the USAA
fund-of-funds owned the following percentages of the total outstanding shares of
the Fund:
AFFILIATED USAA FUND OWNERSHIP %
--------------------------------------------------------------------------------
USAA Cornerstone Conservative Fund 0.4
USAA Target Retirement Income Fund 0.9
USAA Target Retirement 2020 Fund 1.6
USAA Target Retirement 2030 Fund 2.0
USAA Target Retirement 2040 Fund 1.0
USAA Target Retirement 2050 Fund 0.1
USAA Target Retirement 2060 Fund 0.0*
*Represents less than 0.1%.
The Manager is indirectly wholly owned by United Services Automobile Association
(USAA), a large, diversified financial services institution. At January 31,
2015, USAA and its affiliates owned 617,000 shares which represent 43.0% of the
Adviser Shares and 0.2% of the Fund.
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
================================================================================
58 | USAA HIGH INCOME FUND
================================================================================
(8) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
During the six-month period ended January 31, 2015, in accordance with
affiliated transaction procedures approved by the Board, purchases and sales of
security transactions were executed between the Fund and the following
affiliated USAA Funds at the then-current market price with no brokerage
commissions incurred.
COST TO NET REALIZED
SELLER PURCHASER PURCHASER GAIN (LOSS) TO SELLER
----------------------------------------------------------------------------------------
USAA High Income Fund USAA Income Fund $5,040,000 $42,000
USAA High Income Fund USAA Intermediate-Term
Bond Fund 2,015,000 15,000
USAA Global Managed USAA High Income Fund 820,000 (40,000)
Volatility Fund
================================================================================
NOTES TO FINANCIAL STATEMENTS | 59
================================================================================
(9) FINANCIAL HIGHLIGHTS - FUND SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31,
--------------------------------------------------------------------------------
2015 2014 2013 2012 2011 2010
--------------------------------------------------------------------------------
Net asset value at
beginning of period $ 8.91 $ 8.79 $ 8.42 $ 8.60 $ 8.08 $ 6.96
--------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .24 .50 .55 .57 .60 .66
Net realized and
unrealized gain (loss) (.41) .29 .46 (.18) .52 1.11
--------------------------------------------------------------------------------
Total from investment
operations (.17) .79 1.01 .39 1.12 1.77
--------------------------------------------------------------------------------
Less distributions from:
Net investment income (.24) (.51) (.53) (.57) (.60) (.65)
Realized capital gains (.06) (.16) (.11) - - -
Redemption fees .00(f) .00(f) - - - -
--------------------------------------------------------------------------------
Total distributions (.30) (.67) (.64) (.57) (.60) (.65)
--------------------------------------------------------------------------------
Net asset value at end
of period $ 8.44 $ 8.91 $ 8.79 $ 8.42 $ 8.60 $ 8.08
================================================================================
Total return (%)* (1.91) 9.35 12.39 4.99 14.28 26.15(a)
Net assets at end of
period (000) $1,394,605 $1,521,633 $1,250,728 $1,464,070 $1,482,706 $1,139,425
Ratios to average
net assets:**
Expenses (%)(b) .90(e) .89 .94 .95 .90 .92(a)
Net investment
income (%) 5.46(e) 5.71 6.15 6.96 7.06 8.43
Portfolio turnover (%) 6 21 47 52 54(d) 62(c)
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during
the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and
could differ from the Lipper reported return. Total returns for periods of less than one year are not
annualized.
** For the six-month period ended January 31, 2015, average net assets were $1,454,996,000.
(a) During the year ended July 31, 2010, SAS reimbursed the Fund Shares $124,000 for corrections in fees
paid for the administration and servicing of certain accounts. The effect of this reimbursement on the
Fund Shares' total return was less than 0.01%. The reimbursement decreased the Fund Shares' expense
ratio by 0.01%. This decrease is excluded from the expense ratio in the Financial Highlights table.
(b) Reflects total annual operating expenses of the Fund Shares before reductions of any expenses paid
indirectly. The Fund Shares' expenses paid indirectly decreased the expense ratios as follows:
- - (.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
(c) Reflects increased trading activity due to market volatility.
(d) Reflects decreased trading activity due to market volatility.
(e) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(f) Represents less than $0.01 per share.
================================================================================
60 | USAA HIGH INCOME FUND
================================================================================
(9) FINANCIAL HIGHLIGHTS (CONTINUED) - INSTITUTIONAL SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31,
------------------------------------------------------------------------
2015 2014 2013 2012 2011 2010
------------------------------------------------------------------------
Net asset value at
beginning of period $ 8.91 $ 8.78 $ 8.41 $ 8.60 $ 8.08 $ 6.95
------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .25 .52 .54 .58 .62 .68
Net realized and
unrealized gain (loss) (.43) .29 .49 (.18) .52 1.12
------------------------------------------------------------------------
Total from investment
operations (.18) .81 1.03 .40 1.14 1.80
------------------------------------------------------------------------
Less distributions from:
Net investment income (.24) (.52) (.55) (.59) (.62) (.67)
Realized capital gains (.06) (.16) (.11) - - -
Redemption fees .00(f) - - - - -
------------------------------------------------------------------------
Total distributions (.30) (.68) (.66) (.59) (.62) (.67)
------------------------------------------------------------------------
Net asset value at
end of period $ 8.43 $ 8.91 $ 8.78 $ 8.41 $ 8.60 $ 8.08
========================================================================
Total return (%)* (1.97) 9.61 12.63 5.09 14.57 26.68
Net assets at end
of period (000) $775,968 $757,419 $764,558 $264,540 $146,535 $95,618
Ratios to average
net assets:**
Expenses (%)(b) .80(e) .76 .76 .76 .65(a) .63(a)
Net investment
income (%) 5.56(e) 5.87 6.22 7.09 7.30 8.65
Portfolio turnover (%) 6 21 47 52 54(d) 62(c)
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during
the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and
could differ from the Lipper reported return. Total returns for periods of less than one year are not
annualized.
** For the six-month period ended January 31, 2015, average net assets were $768,135,000.
(a) Prior to December 1, 2010, the Manager had voluntarily agreed to limit the annual expenses of the
Institutional Shares to .65% of the Institutional Shares' average net assets.
(b) Reflects total annual operating expenses of the Institutional Shares before reductions of any expenses paid
indirectly. The Institutional Shares' expenses paid indirectly decreased the expense ratios as follows:
- - (.00%)(+) (.00%)(+) (.00%)(+) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
(c) Reflects increased trading activity due to market volatility.
(d) Reflects decreased trading activity due to market volatility.
(e) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(f) Represents less than $0.01 per share.
================================================================================
NOTES TO FINANCIAL STATEMENTS | 61
================================================================================
(9) FINANCIAL HIGHLIGHTS (continued) - ADVISER SHARES
Per share operating performance for a share outstanding throughout each period
is as follows:
SIX-MONTH
PERIOD ENDED PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31, JULY 31,
-----------------------------------------------------------------------------
2015 2014 2013 2012 2011***
-----------------------------------------------------------------------------
Net asset value at
beginning of period $ 8.92 $ 8.79 $ 8.42 $ 8.60 $ 8.09
--------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .23 .49 .52 .55 .55
Net realized and
unrealized gain (loss) (.41) .27 .47 (.19) .54
--------------------------------------------------------------------------
Total from investment
operations (.18) .76 .99 .36 1.09
--------------------------------------------------------------------------
Less distributions from:
Net investment income (.23) (.48) (.51) (.55) (.58)
Realized capital gains (.06) (.16) (.11) - -
Redemption fees .00(e) .01 .00(e) .01 -
--------------------------------------------------------------------------
Total distributions (.29) (.63) (.62) (.54) (.58)
--------------------------------------------------------------------------
Net asset value at end of
period $ 8.45 $ 8.92 $ 8.79 $ 8.42 $ 8.60
==========================================================================
Total return (%)* (2.04) 9.16 12.13 4.76 13.90
Net assets at end of
period (000) $12,124 $9,218 $7,108 $5,711 $5,533
Ratios to average
net assets:**
Expenses (%)(b) 1.17(a),(d) 1.19 1.20 1.20 1.20(a)
Expenses, excluding
reimbursements (%)(b) 1.17(a) 1.19 1.34 1.45 1.86(a)
Net investment income (%) 5.20(a) 5.41 5.85 6.71 6.77(a)
Portfolio turnover (%) 6 21 47 52 54(c)
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any,
during the period. Includes adjustments in accordance with U.S. generally accepted accounting
principles and could differ from the Lipper reported return. Total returns for periods of less than one
year are not annualized.
** For the six-month period ended January 31, 2015, average net assets were $10,576,000.
*** Adviser Shares were initiated on August 1, 2010.
(a) Annualized. The ratio is not necessarily indicative of 12 months of operations.
(b) Reflects total annual operating expenses of the Adviser Shares before reductions of any expenses paid
indirectly. The Adviser Shares' expenses paid indirectly decreased the expense ratios as follows:
- - (.00%)(+) (.00%)(+) (.00%)(+)
(+) Represents less than 0.01% of average net assets.
(c) Reflects decreased trading activity due to market volatility.
(d) Effective December 1, 2014, the Manager voluntarily agreed to reimburse the Adviser Shares for
expenses in excess of 1.15% of their annual average net assets. Prior to December 1, 2014, the
Manager voluntarily agreed to reimburse the Adviser Shares for expenses in excess of 1.20% of their
annual average net assets.
(e) Represents less than $0.01 per share.
================================================================================
62 | USAA HIGH INCOME FUND
================================================================================
EXPENSE EXAMPLE
January 31, 2015 (unaudited)
--------------------------------------------------------------------------------
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, distribution and service
(12b-1) fees, and other Fund operating expenses. This example is intended to
help you understand your indirect costs, also referred to as "ongoing costs" (in
dollars), of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 invested at the beginning of the period and held for the entire
six-month period of August 1, 2014, through January 31, 2015.
ACTUAL EXPENSES
The line labeled "actual" under each share class in the table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested at the beginning
of the period, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number for your share
class in the "actual" line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class and an assumed rate of return of
5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be 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
================================================================================
EXPENSE EXAMPLE | 63
================================================================================
and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the line labeled "hypothetical"
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2014 -
AUGUST 1, 2014 JANUARY 31, 2015 JANUARY 31, 2015
--------------------------------------------------------------
FUND SHARES
Actual $1,000.00 $ 980.90 $4.49
Hypothetical
(5% return before expenses) 1,000.00 1,020.67 4.58
INSTITUTIONAL SHARES
Actual 1,000.00 980.30 3.99
Hypothetical
(5% return before expenses) 1,000.00 1,021.17 4.08
ADVISER SHARES
Actual 1,000.00 979.60** 5.84**
Hypothetical
(5% return before expenses) 1,000.00 1,019.31** 5.96**
*Expenses are equal to the annualized expense ratio of 0.90% for Fund Shares,
0.80% for Institutional Shares, and 1.17% for Adviser Shares, which are net of
any reimbursements and expenses paid indirectly, multiplied by the average
account value over the period, multiplied by 184 days/365 days (to reflect the
one-half-year period). The Fund's actual ending account values are based on its
actual total returns of (1.91)% for Fund Shares, (1.97)% for Institutional
Shares, and (2.04)% for Adviser Shares for the six-month period of August 1,
2014, through January 31, 2015.
** The Funds' annualized expense ratio of 1.17% for Adviser Shares above
reflects a change effective December 1, 2014, in the Manager's voluntary expense
limitation for the Adviser Shares from 1.20% to 1.15% of the Fund's annual net
assets. Had the expense limitation of 1.15% been in effect for the entire
six-month period of August 1, 2014, through January 31, 2015, the values in the
table above would be as shown below.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2014 -
AUGUST 1, 2014 JANUARY 31, 2015 JANUARY 31, 2015
----------------------------------------------------------------
ADVISER SHARES
Actual $1,000.00 $ 979.60 $5.74
Hypothetical
(5% return before expenses) 1,000.00 1,019.41 5.85
================================================================================
64 | USAA HIGH INCOME 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 78265-9825
--------------------------------------------------------------------------------
UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O. Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT One Lincoln Street
Boston, Massachusetts 02111
--------------------------------------------------------------------------------
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
OR CALL select `I want to...' and select
(800) 531-USAA the desired action.
(8722)
--------------------------------------------------------------------------------
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) in summary within the Statement of Additional Information on the SEC's
website at HTTP://WWW.SEC.GOV. Information regarding how the Fund voted proxies
relating to portfolio securities during the most recent 12-month period ended
June 30 is available without charge (i) at USAA.COM; and (ii) on the SEC's
website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
================================================================================
--------------
USAA PRSRT STD
9800 Fredericksburg Road U.S. Postage
San Antonio, TX 78288 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)
=============================================================================
40051-0315 (C)2015, 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 trustees. The Corporate Governance
Committee has adopted procedures to consider Board candidates suggested by
shareholders. The procedures are initiated by the receipt of nominations
submitted by a fund shareholder sent to Board member(s) at the address specified
in fund disclosure documents or as received by AMCO or a fund officer. Any
recommendations for a nomination by a shareholder, to be considered by the
Board, must include at least the following information: name; date of birth;
contact information; education; business profession and other expertise;
affiliations; experience relating to serving on the Board; and references. The
Corporate Governance Committee gives shareholder recommendations the same
consideration as any other candidate.
ITEM 11. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of USAA Mutual
Funds Trust (Trust) have concluded that the Trust's disclosure controls and
procedures are sufficient to ensure that information required to be disclosed by
the Trust in this Form N-CSR/S was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation. The only change to the
procedures was to document the annual disclosure controls and procedures
established for the new section of the shareholder reports detailing the factors
considered by the Funds' Board in approving the Funds' advisory agreements.
ITEM 12. EXHIBITS.
(a)(1). NOT APPLICABLE. This item must be disclosed only in annual reports.
(a)(2). Certification pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit
99.CERT.
(a)(3). Not Applicable.
(b). Certification pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(b))is filed and attached hereto as Exhibit
99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: USAA MUTUAL FUNDS TRUST, Period Ended January 31, 2015
By:* /S/ DANIEL J. MAVICO
-----------------------------------------------------------
Signature and Title: Daniel J. Mavico, Assistant Secretary
Date: 03/26/2015
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:* /S/ DANIEL S. MCNAMARA
-----------------------------------------------------
Signature and Title: Daniel S. McNamara, President
Date: 03/30/2015
------------------------------
By:* /S/ ROBERTO GALINDO, JR.
-----------------------------------------------------
Signature and Title: Roberto Galindo, Jr., Treasurer
Date: 03/30/2015
------------------------------
*Print the name and title of each signing officer under his or her signature.