ITEM 1. SEMIANNUAL REPORT TO STOCKHOLDERS.
USAA MUTUAL FUNDS TRUST - SEMIANNUAL REPORT FOR PERIOD ENDED JANUARY 31, 2014
[LOGO OF USAA]
USAA(R)
[GRAPHIC OF USAA HIGH INCOME FUND]
SEMIANNUAL REPORT
USAA HIGH INCOME FUND
FUND SHARES o INSTITUTIONAL SHARES o ADVISER SHARES
JANUARY 31, 2014
PRESIDENT'S MESSAGE
"IN MY OPINION, THE CONTINUATION OF
THE TAPER IS AN INDICATION THAT FED [PHOTO OF DANIEL S. McNAMARA]
POLICYMAKERS BELIEVE THE U.S. ECONOMIC
RECOVERY IS STRENGTHENING."
FEBRUARY 2014
For much of the reporting period, market sentiment was driven by the potential
for -- and then the reality of -- Federal Reserve (the Fed) "tapering." The Fed
had hinted during the spring of 2013 that it might start reducing its asset
purchase program (also known as quantitative easing, or QE) if U.S. economic
conditions improved. (In September 2012, the U.S. central bank began purchasing
$85 billion of U.S. Treasury securities and mortgage-backed securities every
month to push down long-term interest rates and stimulate economic growth.) The
Fed also continued to reiterate its "forward guidance" -- the promise to hold
short-term interest rates near zero until unemployment falls below 6.5% and
inflation rises above 2.5%.
In general, equity investors seemed to like the Fed's promise of "low rates for
longer" more than they disliked the prospect of the taper. Though stocks had
briefly declined in response to the Fed's springtime "taper talk," they moved
higher overall during the reporting period, reaching new all-time highs in
mid-January 2014. In the bond market, longer-term yields -- especially in
five-year, 10-year, and 30-year maturities -- rose on expectations that the Fed
would begin tapering sooner rather than later. Bond prices, which move in the
opposite direction of yields, declined. However, not all bonds performed the
same way during the reporting period. The fixed-income market is, after all, a
market of bonds and not a single bond market. It comprises different types of
bonds with different maturities and risk characteristics, including U.S.
Treasuries, mortgage-backed securities, investment-grade bonds, high-yield
bonds, municipal securities and more. While U.S. Treasury securities
underperformed during the reporting period, bonds with more exposure to the U.S.
economy's health (i.e., those with credit risk) outperformed.
In December, the Fed announced it would taper its QE asset purchases by $10
billion beginning in January 2014. It subsequently announced additional tapering
of $10 billion in February and suggested it would continue reducing its asset
purchases in $10 billion increments through the end of 2014. In my opinion, the
continuation of the taper is an indication that Fed policymakers believe the
U.S. economic recovery is strengthening. Indeed, near the end of the reporting
period, the U.S. Department of Commerce estimated that fourth-quarter gross
domestic product growth was 3.2%, which was later revised downward to 2.4% on
February 28, 2014. Combined with a third-quarter
growth rate of 4.1%, the U.S. economy experienced one of its strongest six-month
periods in a decade during the second half of 2013.
In mid-January, stocks underwent a sell-off. According to some observers, the
decline was a response to slowing global economic growth, especially in China
and Brazil, as well as currency weakness in Turkey and South Africa. However, in
my opinion, the predominant driver of market behavior is how investors interpret
macroeconomic data and future earnings trends. Some companies that met or beat
earnings expectations in the fourth-quarter 2013 have guided down forecasts for
coming quarters. Downward earnings guidance feeds into the belief held by many,
including USAA Asset Management Company, that it may be harder than the markets
expect for U.S. companies to find the earnings growth needed to support current
valuations.
Meanwhile, as stocks declined in late January, investors sought safety in U.S.
Treasuries and other conservative fixed-income securities. Though yields trended
down, they generally remained higher at the end of the reporting period than
they were at the beginning. Higher yields mean that investors have the
opportunity to reinvest at higher rates and can potentially earn more on new
investments.
Nevertheless, the shift in market sentiment during January underlines the
importance of diversification. Different asset classes, such as stocks and
bonds, move up and down at different rates and often at different times. I urge
all investors to hold diversified portfolios directly tied to their goals, risk
tolerance and time horizon. It is also a good idea to regularly reassess your
investment risk and rebalance your portfolio. Regular rebalancing can
potentially help you protect your gains and prepare for what happens next.
Looking ahead, I expect U.S. economic growth to continue getting stronger,
albeit slowly. While some investors may believe the economy is already on a
clear path to normalization, I believe the ride will be bumpier than many of us
would like. Rest assured we will continue to monitor economic trends, Fed
policy, geopolitical events, and other factors that could potentially affect
your investments. From all of us at USAA Asset Management Company, thank you for
allowing us to help you with your investment needs.
Sincerely,
/S/ DANIEL S. MCNAMARA
Daniel S. McNamara
President
USAA Investment Management Company
|
Past performance is no guarantee of future results. o As interest rates
rise, bond prices generally fall; given the historically low interest rate
environment, risks associated with rising interest rates may be heightened.
o Diversification is a technique intended to help reduce risk and does not
guarantee a profit or prevent a loss. o Financial advice provided by USAA
Financial Planning Services Insurance Agency, Inc. (known as USAA Financial
Insurance Agency in California, License # 0E36312), and USAA Financial Advisors,
Inc., a registered broker-dealer.
TABLE OF CONTENTS
FUND OBJECTIVE 1
MANAGERS' COMMENTARY 2
INVESTMENT OVERVIEW 7
FINANCIAL INFORMATION
Portfolio of Investments 15
Notes to Portfolio of Investments 38
Financial Statements 42
Notes to Financial Statements 45
EXPENSE EXAMPLE 65
|
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND, MANAGED BY
USAA ASSET MANAGEMENT COMPANY. IT MAY BE USED AS SALES LITERATURE ONLY WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS, WHICH PROVIDES FURTHER DETAILS
ABOUT THE FUND.
(C)2014, USAA. All rights reserved.
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.
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.
FUND OBJECTIVE | 1
MANAGERS' COMMENTARY ON THE FUND
--------------------------------------------------------------------------------
[PHOTO OF R. MATTHEW FREUND] [PHOTO OF JULIANNE BASS]
R. MATTHEW FREUND, CFA JULIANNE BASS, CFA
USAA Asset USAA Asset
Management Company Management Company
|
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, 2014, the
Fund Shares, Institutional Shares, and Adviser Shares had a total return of
4.50%, 4.57%, and 4.35%, respectively. This compares to returns of 4.47% for
the Lipper High Current Yield Bond Funds Index and 4.65% for the Credit Suisse
High Yield Index. At the same time, the Fund Shares, Institutional Shares, and
Adviser Shares provided a one-year dividend yield of 5.89%, 6.04%, and 5.62%,
respectively, compared to 5.59% for the Lipper High Current 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 MARKET CONDITIONS DURING THE REPORTING PERIOD?
Though progress was uneven, U.S. economic growth continued to improve during
the reporting period, fueling speculation that the U.S
Refer to page 8 for benchmark definitions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. o As interest rates rise,
bond prices generally fall; given the historically low interest rate
environment, risks associated with rising interest rates may be heightened.
o Diversification is a technique to help reduce risk and does not guarantee a
profit or prevent a loss.
2 | USAA HIGH INCOME FUND
o 10-YEAR U.S. TREASURY YIELDS o
[CHART OF 10-YEAR U.S. TREASURY YIELDS]
YIELD IN PERCENT
8/1/2013 2.707%
8/2/2013 2.597
8/5/2013 2.634
8/6/2013 2.643
8/7/2013 2.600
8/8/2013 2.590
8/9/2013 2.579
8/12/2013 2.621
8/13/2013 2.720
8/14/2013 2.714
8/15/2013 2.767
8/16/2013 2.826
8/19/2013 2.881
8/20/2013 2.815
8/21/2013 2.894
8/22/2013 2.885
8/23/2013 2.815
8/26/2013 2.786
8/27/2013 2.710
8/28/2013 2.766
8/29/2013 2.763
8/30/2013 2.785
9/3/2013 2.859
9/4/2013 2.898
9/5/2013 2.995
9/6/2013 2.935
9/9/2013 2.913
9/10/2013 2.965
9/11/2013 2.913
9/12/2013 2.910
9/13/2013 2.886
9/16/2013 2.865
9/17/2013 2.848
9/18/2013 2.689
9/19/2013 2.753
9/20/2013 2.735
9/23/2013 2.701
9/24/2013 2.656
9/25/2013 2.629
9/26/2013 2.651
9/27/2013 2.625
9/30/2013 2.611
10/1/2013 2.651
10/2/2013 2.618
10/3/2013 2.605
10/4/2013 2.646
10/7/2013 2.627
10/8/2013 2.633
10/9/2013 2.664
10/10/2013 2.682
10/11/2013 2.688
10/15/2013 2.729
10/16/2013 2.664
10/17/2013 2.590
10/18/2013 2.579
10/21/2013 2.602
10/22/2013 2.513
10/23/2013 2.502
10/24/2013 2.521
10/25/2013 2.510
10/28/2013 2.524
10/29/2013 2.504
10/30/2013 2.539
10/31/2013 2.555
11/1/2013 2.623
11/4/2013 2.604
11/5/2013 2.671
11/6/2013 2.643
11/7/2013 2.601
11/8/2013 2.749
11/12/2013 2.774
11/13/2013 2.700
11/14/2013 2.691
11/15/2013 2.704
11/18/2013 2.667
11/19/2013 2.708
11/20/2013 2.800
11/21/2013 2.785
11/22/2013 2.744
11/25/2013 2.729
11/26/2013 2.709
11/27/2013 2.738
11/29/2013 2.745
12/2/2013 2.796
12/3/2013 2.783
12/4/2013 2.835
12/5/2013 2.873
12/6/2013 2.856
12/9/2013 2.840
12/10/2013 2.802
12/11/2013 2.854
12/12/2013 2.878
12/13/2013 2.866
12/16/2013 2.879
12/17/2013 2.836
12/18/2013 2.894
12/19/2013 2.930
12/20/2013 2.890
12/23/2013 2.928
12/24/2013 2.979
12/26/2013 2.991
12/27/2013 3.001
12/30/2013 2.971
12/31/2013 3.029
1/2/2014 2.990
1/3/2014 2.996
1/6/2014 2.959
1/7/2014 2.940
1/8/2014 2.990
1/9/2014 2.966
1/10/2014 2.859
1/13/2014 2.827
1/14/2014 2.872
1/15/2014 2.892
1/16/2014 2.842
1/17/2014 2.820
1/21/2014 2.830
1/22/2014 2.866
1/23/2014 2.778
1/24/2014 2.716
1/27/2014 2.749
1/28/2014 2.750
1/29/2014 2.678
1/30/2014 2.696
1/31/2014 2.645
|
[END CHART]
Source: Bloomberg Finance L.P.
Federal Reserve (the Fed) would announce a reduction -- or "taper" -- in the
pace of its monthly purchases of U.S. Treasury securities and mortgage-backed
securities. Interest rates increased and bond prices (which move in the
opposite direction of rates) declined on expectations of Fed tapering. The
yield on a 10-year U.S. Treasury, which began the period at 2.71%, rose to
nearly 3% in early September. Meanwhile, stock prices -- which had declined
during August -- rose during the first half of September in anticipation of
Fed action.
After Fed policymakers said in September that it will continue the pace of its
bond purchases, stocks declined and the 10-year U.S. Treasury yield drifted
down. Stocks were volatile in October amid partisan wrangling over the federal
budget, but then rallied strongly when it became apparent the U.S. would avoid
a debt default. The 10-year U.S. Treasury yield edged up during October and
November as investors sought to divine the timing of a Fed taper. In December,
Fed policymakers said it would reduce its January 2014 bond purchases
MANAGERS' COMMENTARY ON THE FUND | 3
by $10 billion and subsequently announced it would trim an additional $10
billion from its February bond purchases.
During January, stock prices fell as the global economy weakened and U.S.
corporations reduced their earnings guidance. As investors shifted into the
perceived safe haven of U.S. Treasury securities, the yield on a 10-year U.S.
Treasury bond declined, ending the reporting period at 2.65%.
High-yield bonds generated solid gains during the reporting period, benefiting
from investors' push for yield. In addition, and as expected, high-yield bonds
outperformed U.S. Treasury securities and underperformed the S&P 500 Index(R).
High-yield securities are a unique asset class with characteristics of both
stocks and higher-quality bonds, and therefore, their long-term return
generally falls between these two asset classes (see the Comparative Returns
chart on the page 5), which can provide long-term investors with a significant
diversification advantage. During the reporting period, high-yield bonds also
benefited from low default expectations. According to J.P. Morgan, the
trailing 12-month high-yield default rate at the end of January was 0.63%,
which is well below the long-term average of 3.90%.
o WHAT WERE YOUR STRATEGIES IN THIS ENVIRONMENT?
During the reporting period, we sought to maximize the Fund's income while
maintaining an acceptable level of price volatility. We have always believed
the Fund should be adequately compensated for any risk taken. As always, we
continued to rely on our team of skilled credit analysts to help us identify
attractive relative values across asset classes and among high-yield
securities. During the reporting period, we found opportunities in airline
enhanced equipment trust certificates and junior subordinated debt. We also
purchased a select number of new issues and added to some of the portfolio's
existing positions.
4 | USAA HIGH INCOME FUND
o HYBRID ASSET CLASS COMPARATIVE RETURNS o
[CHART OF HYBRID ASSET CLASS COMPARATIVE RETURNS]
USAA HIGH CITIGROUP 10-YEAR
S&P 500 INDEX INCOME FUND SHARES U.S. TREASURY INDEX
8/01/13 0.00% 0.00% 0.00%
8/02/13 0.17 0.00 1.11
8/05/13 0.03 0.00 0.78
8/06/13 -0.54 0.00 0.77
8/07/13 -0.89 -0.11 1.15
8/08/13 -0.48 0.00 1.36
8/09/13 -0.82 0.00 1.38
8/12/13 -0.93 0.00 1.17
8/13/13 -0.63 -0.11 0.18
8/14/13 -1.13 -0.11 0.20
8/15/13 -2.52 -0.46 -0.17
8/16/13 -2.84 -0.46 -0.89
8/19/13 -3.41 -0.68 -1.38
8/20/13 -3.03 -0.68 -0.77
8/21/13 -3.59 -0.91 -1.11
8/22/13 -2.76 -0.91 -1.50
8/23/13 -2.36 -0.80 -0.80
8/26/13 -2.75 -0.68 -0.68
8/27/13 -4.30 -0.80 0.09
8/28/13 -4.01 -0.74 -0.42
8/29/13 -3.81 -0.74 -0.10
8/30/13 -4.11 -0.74 -0.10
9/02/13 0.00 0.00 -0.09
9/03/13 -3.70 -0.62 -0.94
9/04/13 -2.90 -0.74 -1.33
9/05/13 -2.78 -0.85 -2.02
9/06/13 -2.76 -0.74 -1.68
9/09/13 -1.79 -0.62 -1.31
9/10/13 -1.06 -0.62 -1.81
9/11/13 -0.75 -0.62 -1.47
9/12/13 -1.05 -0.51 -1.37
9/13/13 -0.78 -0.40 -1.27
9/16/13 -0.22 -0.28 -1.06
9/17/13 0.20 -0.17 -0.86
9/18/13 1.42 0.18 0.49
9/19/13 1.25 0.41 0.06
9/20/13 0.52 0.41 0.21
9/23/13 0.05 0.29 0.39
9/24/13 -0.20 0.29 0.91
9/25/13 -0.47 0.29 1.27
9/26/13 -0.10 0.32 1.02
9/27/13 -0.51 0.20 1.25
9/30/13 -1.10 0.09 1.29
10/01/13 -0.30 0.20 1.02
10/02/13 -0.35 0.20 1.21
10/03/13 -1.25 0.20 1.37
10/04/13 -0.55 0.32 1.03
10/07/13 -1.39 0.32 1.19
10/08/13 -2.58 0.32 1.20
10/09/13 -2.51 0.32 1.05
10/10/13 -0.37 0.43 0.75
10/11/13 0.26 0.66 0.79
10/14/13 0.67 0.66 0.81
10/15/13 -0.04 0.66 0.48
10/16/13 1.35 0.89 0.92
10/17/13 2.04 1.24 1.68
10/18/13 2.71 1.47 1.67
10/21/13 2.72 1.58 1.51
10/22/13 3.31 1.81 2.36
10/23/13 2.82 1.81 2.59
10/24/13 3.16 1.92 2.31
10/25/13 3.61 2.15 2.48
10/28/13 3.75 2.15 2.39
10/29/13 4.34 2.23 2.46
10/30/13 3.83 2.23 2.28
10/31/13 3.44 2.23 2.16
11/01/13 3.74 2.23 1.49
11/04/13 4.12 2.23 1.69
11/05/13 3.84 2.11 1.15
11/06/13 4.34 2.23 1.34
11/07/13 2.98 2.23 1.61
11/08/13 4.37 2.00 0.46
11/11/13 4.44 2.00 0.48
11/12/13 4.20 1.88 0.29
11/13/13 5.08 1.88 0.65
11/14/13 5.61 2.00 1.04
11/15/13 6.05 2.11 1.00
11/18/13 5.66 2.34 1.27
11/19/13 5.47 2.34 1.01
11/20/13 5.09 2.23 0.37
11/21/13 5.95 2.34 0.42
11/22/13 6.49 2.46 0.70
11/25/13 6.36 2.58 0.81
11/26/13 6.39 2.58 1.21
11/27/13 6.68 2.70 0.86
11/28/13 0.00 0.00 0.87
11/29/13 6.60 2.70 0.82
12/02/13 6.31 2.70 0.33
12/03/13 5.98 2.70 0.57
12/04/13 5.87 2.58 0.01
12/05/13 5.41 2.70 -0.18
12/06/13 6.61 2.71 -0.32
12/09/13 6.80 2.71 -0.09
12/10/13 6.46 2.83 0.44
12/11/13 5.27 2.83 0.02
12/12/13 4.90 2.71 -0.26
12/13/13 4.89 2.83 -0.15
12/16/13 5.56 2.94 -0.23
12/17/13 5.23 2.87 0.10
12/18/13 6.99 2.99 -0.27
12/19/13 6.94 2.99 -0.61
12/20/13 7.45 3.11 -0.26
12/23/13 8.04 3.11 -0.61
12/24/13 8.36 3.11 -1.06
12/25/13 8.36 3.11 -1.06
12/26/13 8.88 3.23 -1.11
12/27/13 8.86 3.23 -1.21
12/30/13 8.85 3.34 -0.97
12/31/13 9.29 3.34 -1.20
1/01/14 9.29 3.34 -1.20
1/02/14 8.33 3.46 -0.99
1/03/14 8.30 3.58 -1.06
1/06/14 8.03 3.70 -0.76
1/07/14 8.69 3.82 -0.54
1/08/14 8.70 3.82 -1.01
1/09/14 8.74 3.94 -0.75
1/10/14 8.99 4.18 0.12
1/13/14 7.63 4.18 0.44
1/14/14 8.79 4.18 0.08
1/15/14 9.36 4.30 -0.04
1/16/14 9.21 4.41 0.31
1/17/14 8.79 4.41 0.46
1/20/14 0.00 0.00 0.48
1/21/14 9.09 4.53 0.54
1/22/14 9.17 4.53 0.21
1/23/14 8.20 4.53 0.98
1/24/14 5.94 4.30 1.32
1/27/14 5.43 4.18 1.07
1/28/14 6.08 4.30 1.24
1/29/14 5.01 4.26 1.86
1/30/14 6.20 4.38 1.71
1/31/14 5.51 4.50 1.98
|
[END CHART]
Source: Bloomberg L.P.
o WHAT IS THE OUTLOOK?
Looking ahead, we expect the U.S. economy to continue strengthening during
2014, perhaps at a slightly faster rate than in 2013. This should allow the
Fed to continue scaling back its bond-buying program, though we believe the
Fed will taper gradually so as not to undermine the economic recovery.
Meanwhile, we expect interest rates to continue rising at a modest pace.
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 IndexSM; 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.
MANAGERS' COMMENTARY ON THE FUND | 5
While interest rates increased during the reporting period, high-yield
securities continue to be attractive relative to other fixed-income
alternatives. In addition, the high-yield default rate is likely to remain low
for the next several years, which is likely to be positive for high-yield
debt. High-yield securities tend to perform well when defaults are low.
Nevertheless, high-yield bonds are unlikely to experience strong price
appreciation in the months ahead. Investors should expect the majority of
their return to come from the income provided by the Fund.
As always, we recommend shareholders remain disciplined and hold diversified
portfolios through all market conditions. We believe high-yield securities can
contribute to such diversification. Over the long-term, it is our opinion that
the high-yield bond market has the potential to provide a total return greater
than high-quality bonds (with less interest-rate sensitivity) and lower than
the broad equity markets (with more predictability and higher current income).
Thank you for the opportunity to serve your investment needs.
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)
--------------------------------------------------------------------------------
1/31/14 7/31/13
--------------------------------------------------------------------------------
Net Assets $1,363.3 Million $1,250.7 Million
Net Asset Value Per Share $8.75 $8.79
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14
--------------------------------------------------------------------------------
8/1/13-1/31/14* 1 Year 5 Years 10 Years
4.50% 7.61% 17.95% 7.89%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
8.47% 18.54% 8.01%
--------------------------------------------------------------------------------
30-DAY SEC YIELD AS OF 1/31/14** EXPENSE RATIO AS OF 7/31/13***
--------------------------------------------------------------------------------
4.98% 0.95%
|
(includes acquired fund fees and expenses of 0.01%)
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, 2013, and
is calculated as a percentage of average net assets. This expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
INVESTMENT OVERVIEW | 7
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
CREDIT SUISSE USAA HIGH LIPPER HIGH CURRENT
HIGH YIELD INDEX INCOME FUND SHARES YIELD BOND FUNDS INDEX
1/31/2004 $10,000.00 $10,000.00 $10,000.00
2/29/2004 10,004.62 9,971.83 9,980.44
3/31/2004 10,071.17 10,026.61 10,018.51
4/30/2004 10,057.12 9,993.27 9,995.75
5/31/2004 9,898.52 9,844.55 9,841.29
6/30/2004 10,052.31 9,963.11 9,978.98
7/31/2004 10,180.97 10,032.09 10,058.52
8/31/2004 10,346.96 10,199.04 10,222.67
9/30/2004 10,504.09 10,341.97 10,364.57
10/31/2004 10,684.31 10,509.86 10,548.97
11/30/2004 10,820.36 10,642.44 10,698.70
12/31/2004 10,982.66 10,812.13 10,860.06
1/31/2005 10,980.81 10,790.50 10,833.31
2/28/2005 11,126.29 10,924.39 10,998.86
3/31/2005 10,860.48 10,717.50 10,707.12
4/30/2005 10,753.45 10,634.76 10,582.01
5/31/2005 10,885.25 10,745.30 10,751.59
6/30/2005 11,067.14 10,922.25 10,924.59
7/31/2005 11,218.34 11,071.44 11,094.25
8/31/2005 11,276.20 11,172.28 11,146.95
9/30/2005 11,167.33 11,062.00 11,074.58
10/31/2005 11,062.33 10,970.24 10,983.28
11/30/2005 11,138.12 11,048.34 11,083.35
12/31/2005 11,231.10 11,169.35 11,185.58
1/31/2006 11,375.47 11,308.29 11,329.83
2/28/2006 11,489.70 11,411.41 11,424.82
3/31/2006 11,578.62 11,461.25 11,471.55
4/30/2006 11,656.62 11,523.31 11,537.65
5/31/2006 11,688.60 11,524.64 11,512.42
6/30/2006 11,623.17 11,471.60 11,448.19
7/31/2006 11,722.80 11,579.09 11,535.55
8/31/2006 11,886.02 11,772.24 11,692.66
9/30/2006 12,034.09 11,917.60 11,821.92
10/31/2006 12,200.27 12,091.12 11,992.79
11/30/2006 12,421.90 12,275.27 12,199.85
12/31/2006 12,569.23 12,398.07 12,322.91
1/31/2007 12,713.59 12,509.20 12,454.92
2/28/2007 12,910.46 12,694.72 12,616.42
3/31/2007 12,947.43 12,725.70 12,656.54
4/30/2007 13,130.98 12,898.09 12,831.32
5/31/2007 13,233.02 12,973.46 12,940.67
6/30/2007 13,031.35 12,820.66 12,730.42
7/31/2007 12,621.72 12,490.17 12,317.72
8/31/2007 12,753.52 12,605.90 12,436.51
9/30/2007 13,037.27 12,824.16 12,736.27
10/31/2007 13,139.30 12,875.25 12,845.95
11/30/2007 12,895.30 12,585.84 12,572.90
12/31/2007 12,901.96 12,555.59 12,585.28
1/31/2008 12,697.51 12,268.94 12,328.83
2/29/2008 12,557.21 12,133.70 12,162.75
3/31/2008 12,528.19 12,056.54 12,144.32
4/30/2008 13,020.63 12,350.17 12,599.47
5/31/2008 13,069.61 12,440.56 12,664.44
6/30/2008 12,754.82 12,149.16 12,331.12
7/31/2008 12,582.91 11,986.45 12,171.15
8/31/2008 12,617.47 12,015.01 12,188.09
9/30/2008 11,729.64 11,184.30 11,278.14
10/31/2008 9,871.16 9,705.71 9,460.26
11/30/2008 9,019.56 8,915.83 8,650.12
12/31/2008 9,525.12 9,028.64 8,955.19
1/31/2009 10,084.66 9,361.22 9,345.93
2/28/2009 9,878.18 9,101.10 9,129.69
3/31/2009 10,078.56 9,177.85 9,264.92
4/30/2009 11,094.50 9,989.42 10,164.04
5/31/2009 11,697.66 10,870.19 10,754.99
6/30/2009 12,117.45 11,345.83 11,116.93
7/31/2009 12,852.79 12,021.70 11,821.34
8/31/2009 13,090.69 12,352.88 12,019.37
9/30/2009 13,827.68 13,092.74 12,647.78
10/31/2009 14,079.82 13,394.88 12,834.38
11/30/2009 14,276.13 13,569.63 12,997.93
12/31/2009 14,689.82 13,923.13 13,387.21
1/31/2010 14,876.89 14,240.95 13,556.88
2/28/2010 14,922.18 14,302.30 13,577.32
3/31/2010 15,346.96 14,804.90 14,008.83
4/30/2010 15,702.80 15,172.56 14,313.40
5/31/2010 15,202.78 14,561.27 13,783.56
6/30/2010 15,378.57 14,704.70 13,892.90
7/31/2010 15,853.82 15,165.28 14,389.28
8/31/2010 15,874.15 15,227.14 14,380.66
9/30/2010 16,295.24 15,666.60 14,818.55
10/31/2010 16,680.47 16,083.00 15,230.44
11/30/2010 16,504.31 15,988.41 15,077.10
12/31/2010 16,808.02 16,309.43 15,383.34
1/31/2011 17,146.47 16,623.41 15,704.56
2/28/2011 17,370.14 16,951.02 15,957.60
3/31/2011 17,440.94 17,048.38 15,990.42
4/30/2011 17,683.46 17,360.18 16,241.26
5/31/2011 17,759.81 17,449.78 16,277.13
6/30/2011 17,622.09 17,206.30 16,096.54
7/31/2011 17,863.88 17,331.31 16,230.21
8/31/2011 17,202.85 16,540.43 15,500.71
9/30/2011 16,720.03 15,987.00 14,952.95
10/31/2011 17,618.77 16,668.39 15,824.66
11/30/2011 17,299.53 16,362.28 15,468.24
12/31/2011 17,727.09 16,721.30 15,821.73
1/31/2012 18,199.01 17,215.12 16,348.40
2/29/2012 18,614.37 17,613.58 16,726.52
3/31/2012 18,617.88 17,690.81 16,729.80
4/30/2012 18,811.05 17,809.42 16,878.45
5/31/2012 18,562.24 17,557.25 16,603.80
6/30/2012 18,908.28 17,844.97 16,915.73
7/31/2012 19,240.82 18,196.94 17,225.27
8/31/2012 19,471.88 18,521.05 17,443.24
9/30/2012 19,716.26 18,808.36 17,684.71
10/31/2012 19,885.21 19,088.85 17,837.30
11/30/2012 20,035.49 19,150.56 17,980.06
12/31/2012 20,335.13 19,485.87 18,264.27
1/31/2013 20,599.28 19,860.77 18,529.40
2/28/2013 20,718.14 20,030.21 18,627.09
3/31/2013 20,932.01 20,282.98 18,821.56
4/30/2013 21,317.24 20,630.79 19,175.60
5/31/2013 21,194.31 20,640.49 19,067.30
6/30/2013 20,643.09 20,112.71 18,570.88
7/31/2013 21,054.01 20,452.33 18,935.59
8/31/2013 20,932.75 20,301.33 18,801.13
9/30/2013 21,137.20 20,469.94 19,001.14
10/31/2013 21,648.67 20,908.20 19,460.37
11/30/2013 21,733.89 21,004.27 19,541.26
12/31/2013 21,866.98 21,136.39 19,658.70
1/31/2014 22,033.53 21,372.13 19,781.84
|
[END CHART]
Data from 1/31/04 to 1/31/14.
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA 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 Current Yield Bond Funds Index tracks the total
return performance of the 30 largest funds in the Lipper High Current 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
indices does not reflect the deduction of any fees or expenses.
8 | USAA HIGH INCOME FUND
USAA HIGH INCOME FUND INSTITUTIONAL SHARES (INSTITUTIONAL SHARES)
(Ticker Symbol: UIHIX)
--------------------------------------------------------------------------------
1/31/14 7/31/13
--------------------------------------------------------------------------------
Net Assets $798.6 Million $764.6 Million
Net Asset Value Per Share $8.75 $8.78
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14
--------------------------------------------------------------------------------
8/1/13-1/31/14* 1 Year 5 Years Since Inception 8/01/08
4.57% 7.64% 18.21% 11.33%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception 8/01/08
8.63% 18.83% 11.31%
--------------------------------------------------------------------------------
EXPENSE RATIO AS OF 7/31/13**
--------------------------------------------------------------------------------
0.77%
(includes acquired fund fees and expenses of 0.01%)
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
DATA QUOTED. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO
THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, VISIT
USAA.COM.
*Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
**The expense ratio represents the total annual operating expenses, before
reductions of any expenses paid indirectly and including any acquired fund fees
and expenses, as reported in the Fund's prospectus dated December 1, 2013, and
is calculated as a percentage of average net assets. This expense ratio may
differ from the expense ratio disclosed in the Financial Highlights, which
excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
The Institutional Shares are available for investment through a USAA
discretionary managed account program, and certain advisory programs sponsored
by financial intermediaries, such as brokerage firms, investment advisors,
financial planners, third-party administrators, and insurance companies.
Institutional Shares also are available to institutional investors, which
include retirement plans, endowments, foundations, and bank trusts, as well as
other persons or legal entities that the Fund may approve from time to time, or
for purchase by a USAA Fund participating in a fund-of-funds investment strategy
(USAA fund-of-funds) and not to the general public.
================================================================================
INVESTMENT OVERVIEW | 9
|
================================================================================
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA HIGH INCOME FUND CREDIT SUISSE LIPPER HIGH CURRENT
INSTITUTIONAL SHARES HIGH YIELD INDEX YIELD BOND 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
|
[END CHART]
Data from 7/31/08 to 1/31/14.*
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA 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
Current Yield Bond Funds Index is calculated from the end of the month, July 31,
2008, while the Institutional Shares' inception date is August 1, 2008. There
may be a slight variation of performance numbers because of this difference.
Past performance is no guarantee of future results, and the cumulative
performance quoted does not reflect the deduction of taxes that a shareholder
would pay on distributions or the redemption of shares. Indexes are unmanaged
and you cannot invest directly in an index. The return information for the
indices does not reflect the deduction of any fees or expenses.
10 | USAA HIGH INCOME FUND
USAA HIGH INCOME FUND ADVISER SHARES (ADVISER SHARES) (Ticker Symbol: UHYOX)
--------------------------------------------------------------------------------
1/31/14 7/31/13
--------------------------------------------------------------------------------
Net Assets $7.8 Million $7.1 Million
Net Asset Value Per Share $8.74 $8.79
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/14
--------------------------------------------------------------------------------
8/1/13-1/31/14* 1 Year Since Inception 8/01/10
4.35% 7.19% 10.00%
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/13
--------------------------------------------------------------------------------
1 Year Since Inception 8/01/10
8.30% 9.95%
--------------------------------------------------------------------------------
30-DAY SEC YIELD AS OF 1/31/14**
--------------------------------------------------------------------------------
Unsubsidized 4.54% Subsidized 4.70%
--------------------------------------------------------------------------------
EXPENSE RATIOS AS OF 7/31/13***
--------------------------------------------------------------------------------
Before Reimbursement 1.35% After Reimbursement 1.21%
|
(includes acquired fund fees and expenses of 0.01%)
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, 2013, and
are calculated as a percentage of average net assets. USAA Asset Management
Company (the Manager) has agreed, through December 1, 2014, to make payments or
waive management, administration, and other fees so that the total annual
operating expenses of the Adviser Shares (exclusive of commission recapture,
expense offset arrangements, acquired fund fees and expenses, and extraordinary
expenses) do not exceed an annual rate of 1.20% 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, 2014.
These expense ratios may differ from the expense ratios disclosed in the
Financial Highlights, which excludes acquired fund fees and expenses.
Total return measures the price change in a share assuming the reinvestment of
all net investment income and realized capital gain distributions. The total
returns quoted do not reflect adjustments made to the enclosed financial
statements in accordance with U.S. generally accepted accounting principles or
the deduction of taxes that a shareholder would pay on distributions or the
redemption of shares.
INVESTMENT OVERVIEW | 11
o CUMULATIVE PERFORMANCE COMPARISON o
[CHART OF CUMULATIVE PERFORMANCE COMPARISON]
USAA HIGH INCOME CREDIT SUISSE LIPPER HIGH CURRENT
FUND ADVISER SHARES HIGH YIELD INDEX YIELD BOND FUNDS 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
|
[END CHART]
Data from 7/31/10 to 1/31/14.*
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
Current Yield Bond Funds Index is calculated from the end of the month, July 31,
2010, while the Adviser Shares' inception date 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
indices does not reflect the deduction of any fees or expenses.
12 | USAA HIGH INCOME FUND
o TOP 10 HOLDINGS* o
AS OF 1/31/2014
(% of Net Assets)
COUPON RATE % % OF NET ASSETS
-------------------------------
NuStar Logistics, LP ......................... 7.63% 2.1%
StanCorp Financial Group, Inc. ............... 6.90% 1.2%
PPL Capital Funding, Inc. .................... 6.70% 1.2%
Glen Meadow Pass-Through Trust ............... 6.51% 1.1%
Lincoln National Corp. ....................... 7.00% 1.1%
QBE Capital Funding III Ltd. ................. 7.25% 1.0%
Dairy Farmers of America, Inc.,
7.88%, cumulative redeemable, perpetual ... 7.88% 1.0%
Textron Financial Corp. ...................... 6.00% 0.9%
Chesapeake Energy Corp., 5.75%, perpetual .... 5.75% 0.9%
Genworth Holdings, Inc. ...................... 6.15% 0.9%
|
You will find a complete list of securities that the Fund owns on pages 15-37.
* Excludes money market instruments.
INVESTMENT OVERVIEW | 13
o ASSET ALLOCATION -- 1/31/2014 o
[PIE CHART OF ASSET ALLOCATION]
FINANCIALS 26.0%
ENERGY 17.2%
CONSUMER DISCRETIONARY 11.1%
INDUSTRIALS 9.4%
MATERIALS 9.1%
TELECOMMUNICATION SERVICES 7.1%
UTILITIES 6.4%
CONSUMER STAPLES 3.6%
INFORMATION TECHNOLOGY 3.1%
HEALTH CARE 2.8%
MONEY MARKET INSTRUMENTS 1.7%
EXCHANGE-TRADED FUNDS* 0.9%
MUNCIPAL BONDS 0.1%
|
[END 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 (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.
14 | USAA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS
January 31, 2014 (unaudited)
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (71.0%)
CONSUMER DISCRETIONARY (9.7%)
-----------------------------
ADVERTISING (0.6%)
$ 233 Clear Channel Communications, Inc.(a) 3.81% 1/29/2016 $ 228
2,240 Clear Channel Communications, Inc.(a) 6.91 1/30/2019 2,178
4,310 Clear Channel Communications, Inc.(a) 7.66 7/30/2019 4,300
5,000 Clear Channel Worldwide Holdings, Inc. 7.63 3/15/2020 5,300
----------
12,006
----------
APPAREL RETAIL (0.9%)
18,162 L Brands, Inc. 6.95 3/01/2033 17,935
2,362 L Brands, Inc. 7.60 7/15/2037 2,397
----------
20,332
----------
AUTO PARTS & EQUIPMENT (0.2%)
1,093 Federal-Mogul Corp.(a) 2.11 12/29/2014 1,087
643 Federal-Mogul Corp.(a) 2.11 12/28/2015 640
2,000 Lear Corp.(b) 4.75 1/15/2023 1,900
----------
3,627
----------
AUTOMOTIVE RETAIL (0.2%)
5,000 CST Brands, Inc. 5.00 5/01/2023 4,825
----------
BROADCASTING (0.3%)
100 CBS Outdoor Americas Capital, LLC(b) 5.25 2/15/2022 101
100 CBS Outdoor Americas Capital, LLC(b) 5.63 2/15/2024 101
3,000 Sinclair Television Group, Inc. 6.13 10/01/2022 3,045
4,000 Univision Communications, Inc.(b) 8.50 5/15/2021 4,410
----------
7,657
----------
CABLE & SATELLITE (1.5%)
5,000 Cablevision Systems Corp. 8.00 4/15/2020 5,638
5,000 CCO Holdings, LLC(b) 5.25 3/15/2021 4,881
5,000 CCO Holdings, LLC 6.63 1/31/2022 5,250
5,000 CCO Holdings, LLC 5.75 1/15/2024 4,875
5,000 Cequel Communications Holdings I,
LLC & Cequel Capital Corp.(b) 6.38 9/15/2020 5,138
7,000 Mediacom Broadband, LLC 6.38 4/01/2023 7,192
----------
32,974
----------
|
PORTFOLIO OF INVESTMENTS | 15
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
CASINOS & GAMING (3.0%)
$ 5,000 Caesar's Entertainment Operating Co., Inc. 10.00% 12/15/2018 $ 2,537
4,000 Caesar's Entertainment Operating Co., Inc. 8.50 2/15/2020 3,792
10,000 Caesar's Entertainment Resort Properties, LLC(a) 7.00 10/12/2020 10,137
6,000 Chester Downs & Marina, LLC(b) 9.25 2/01/2020 5,925
1,500 Eldorado Resorts, LLC(b) 8.63 6/15/2019 1,594
2,472 Inn of the Mountain Gods Resort & Casino(b) 9.25 11/30/2020 2,453
4,000 Isle of Capri Casinos 8.88 6/15/2020 4,340
5,000 Marina District Finance Co., Inc. 9.88 8/15/2018 5,400
8,000 MGM Resorts International 8.63 2/01/2019 9,460
3,050 MTR Gaming Group, Inc. 11.50 8/01/2019 3,447
5,000 Pinnacle Entertainment, Inc. 8.75 5/15/2020 5,500
5,000 Scientific Games International, Inc. 6.25 9/01/2020 5,250
3,000 Snoqualmie Entertainment Auth.(b) 4.15(c) 2/01/2014 3,000
850 Snoqualmie Entertainment Auth.(b) 9.13 2/01/2015 850
600 Sugarhouse HSP Gaming Prop Mezz,
LP & Sugarhouse HSP Gaming Finance Corp.(b) 6.38 6/01/2021 584
----------
64,269
----------
DEPARTMENT STORES (0.3%)
3,200 Dillard's, Inc. 7.13 8/01/2018 3,696
2,100 Macy's Retail Holdings, Inc. 7.88 8/15/2036 2,355
----------
6,051
----------
HOMEBUILDING (0.7%)
5,000 Beazer Homes USA, Inc. 9.13 5/15/2019 5,400
2,000 D.R. Horton, Inc. 5.75 8/15/2023 2,064
5,000 KB Home 7.50 9/15/2022 5,350
1,596 Taylor Morrison Communities, Inc.(b) 7.75 4/15/2020 1,755
----------
14,569
----------
HOTELS, RESORTS & CRUISE LINES (0.2%)
5,000 Royal Caribbean Cruises Ltd. 5.25 11/15/2022 5,088
----------
MOVIES & ENTERTAINMENT (0.1%)
2,000 Production Resource Group, Inc. 8.88 5/01/2019 1,560
----------
PUBLISHING (0.7%)
195 American Media, Inc.(b) 13.50 6/15/2018 211
6,248 McGraw-Hill Global Education Holdings, LLC(a) 9.00 3/22/2019 6,373
7,500 McGraw-Hill Global Education Holdings, LLC(b) 9.75 4/01/2021 8,194
----------
14,778
----------
RESTAURANTS (0.2%)
4,000 NPC International, Inc. 10.50 1/15/2020 4,620
----------
|
16 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
SPECIALIZED CONSUMER SERVICES (0.1%)
$ 3,000 Weight Watchers International, Inc.(a),(d) 6.21% 4/02/2020 $ 2,691
----------
SPECIALTY STORES (0.5%)
4,938 Harbor Freight Tools USA, Inc.(a) 4.75 7/26/2019 5,021
5,000 Michaels Stores, Inc. 7.75 11/01/2018 5,362
----------
10,383
----------
TIRES & RUBBER (0.2%)
5,000 Goodyear Tire & Rubber Co. 6.50 3/01/2021 5,356
----------
Total Consumer Discretionary 210,786
----------
CONSUMER STAPLES (1.4%)
-----------------------
PACKAGED FOODS & MEAT (1.4%)
5,000 B&G Foods, Inc. 4.63 6/01/2021 4,856
4,882 Chiquita Brands International, Inc.(b) 7.88 2/01/2021 5,285
15,000 Kraft Foods Group, Inc. 3.50 6/06/2022 15,042
5,000 Sun Merger Sub, Inc.(b) 5.88 8/01/2021 5,087
----------
30,270
----------
Total Consumer Staples 30,270
----------
ENERGY (16.8%)
--------------
COAL & CONSUMABLE FUELS (0.5%)
5,000 Alpha Natural Resources 9.75 4/15/2018 5,288
5,000 Arch Coal, Inc. 9.88 6/15/2019 4,400
1,000 James River Coal Co. 7.88 4/01/2019 275
2,000 Peabody Energy Corp. 7.88 11/01/2026 2,065
----------
12,028
----------
OIL & GAS EQUIPMENT & SERVICES (0.7%)
3,000 Basic Energy Services 7.75 2/15/2019 3,165
3,000 Brand Energy & Infrastructure Service, Inc.(b) 8.50 12/01/2021 3,053
5,000 Exterran Partners, LP 6.00 4/01/2021 4,987
4,000 Global Geophysical Services, Inc. 10.50 5/01/2017 3,130
----------
14,335
----------
OIL & GAS EXPLORATION & PRODUCTION (6.8%)
5,000 Alta Mesa Holdings, LP 9.63 10/15/2018 5,388
10,000 Bill Barrett Corp.(e) 7.00 10/15/2022 10,475
5,000 BreitBurn Energy Partners, LP 7.88 4/15/2022 5,344
5,000 Carrizo Oil & Gas, Inc. 8.63 10/15/2018 5,425
2,000 Chaparral Energy, Inc. 8.25 9/01/2021 2,190
5,000 Comstock Resources, Inc. 7.75 4/01/2019 5,350
5,000 EP Energy, LLC & Everest Acquisition Finance, Inc. 9.38 5/01/2020 5,775
1,000 EP Energy, LLC & Everest Acquisition Finance, Inc. 7.75 9/01/2022 1,110
|
PORTFOLIO OF INVESTMENTS | 17
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
$ 5,000 EV Energy Partners, LP 8.00% 4/15/2019 $ 5,119
5,000 Forest Oil Corp. 7.50 9/15/2020 4,950
2,194 GMX Resources, Inc.(f) 11.00 12/01/2017 1,975
3,000 Halcon Resources Corp.(b) 9.25 2/15/2022 3,038
4,000 Magnum Hunter Resources Corp. 9.75 5/15/2020 4,370
5,000 Midstates Petroleum Co., Inc. &
Midstates Petroleum Co., LLC 9.25 6/01/2021 5,225
1,400 Murphy USA, Inc.(b) 6.00 8/15/2023 1,404
5,000 PDC Energy, Inc. 7.75 10/15/2022 5,412
7,300 Penn Virginia Corp. 8.50 5/01/2020 7,993
10,000 Quicksilver Resources, Inc. 7.13 4/01/2016 9,650
7,000 Quicksilver Resources, Inc.(a) 7.00 6/21/2019 6,982
5,000 Resolute Energy Corp. 8.50 5/01/2020 5,250
5,000 Rex Energy Corp. 8.88 12/01/2020 5,525
6,000 Rosetta Resources, Inc. 5.88 6/01/2022 5,962
7,250 Sabine Oil & Gas, LLC 9.75 2/15/2017 7,576
5,000 Samson Investment Co.(a) 5.00 9/25/2018 5,053
5,000 Samson Investment Co.(b) 10.50 2/15/2020 5,525
10,000 Sandridge Energy, Inc. 7.50 2/15/2023 10,237
5,000 Ultra Petroleum Corp.(b) 5.75 12/15/2018 5,188
----------
147,491
----------
OIL & GAS REFINING & MARKETING (0.2%)
5,000 Northern Tier Energy, LLC &
Northern Tier Finance Corp. 7.13 11/15/2020 5,325
----------
OIL & GAS STORAGE & TRANSPORTATION (8.6%)
5,000 Atlas Pipeline, LP & Atlas Pipeline Finance Corp. 6.63 10/01/2020 5,262
5,000 Crestwood Midstream Partners, LP 6.00 12/15/2020 5,162
2,000 Crestwood Midstream Partners, LP(b) 6.13 3/01/2022 2,050
15,000 DCP Midstream, LLC(b) 5.85 5/21/2043 13,950
5,061 El Paso, LLC 7.80 8/01/2031 5,271
2,500 Energy Transfer Equity, LP 7.50 10/15/2020 2,828
5,000 Energy Transfer Partners, LP 3.26(c) 11/01/2066 4,575
12,250 Enterprise Products Operating, LLC 7.00 6/01/2067 12,719
9,000 Enterprise Products Operating, LLC 7.03 1/15/2068 9,999
5,000 Genesis Energy, LP & Genesis Energy Finance Corp. 5.75 2/15/2021 5,100
8,000 Martin Midstream Partners, LP 7.25 2/15/2021 8,320
3,000 NGL Energy Partners, LP(b) 6.88 10/15/2021 3,098
12,000 NGPL PipeCo, LLC(b) 7.12 12/15/2017 11,400
3,000 NGPL PipeCo, LLC(b) 9.63 6/01/2019 2,993
5,000 NGPL PipeCo, LLC(b) 7.77 12/15/2037 4,300
3,000 Niska Gas Storage 8.88 3/15/2018 3,135
1,730 NuStar Logistics, LP 7.63 1/15/2043 45,593
|
18 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
$ 5,000 PVR Partners, LP(b) 6.50% 5/15/2021 $ 5,262
13,000 Sabine Pass Liquefaction, LLC(b) 5.63 2/01/2021 13,032
2,000 Sabine Pass LNG, LP 6.50 11/01/2020 2,100
5,000 Southern Union Co. 3.26(c) 11/01/2066 4,075
3,000 Targa Resources Partners, LP 6.88 2/01/2021 3,218
3,000 Targa Resources Partners, LP 5.25 5/01/2023 2,918
1,000 Teekay Corp. 8.50 1/15/2020 1,111
3,000 TEPPCO Partners, LP 7.00 6/01/2067 3,085
5,000 Tesoro Logistics, LP & Tesoro Logistics Finance Corp. 6.13 10/15/2021 5,162
----------
185,718
----------
Total Energy 364,897
----------
FINANCIALS (14.5%)
------------------
ASSET MANAGEMENT & CUSTODY BANKS (0.9%)
8,461 Walter Investment Management Corp.(a) 4.75 12/11/2020 8,542
10,000 Walter Investment Management Corp.(b) 7.88 12/15/2021 10,175
----------
18,717
----------
CONSUMER FINANCE (0.6%)
4,000 American Express Co. 6.80 9/01/2066 4,320
6,000 Credit Acceptance Corp. 9.13 2/01/2017 6,300
3,000 Credit Acceptance Corp.(b) 6.13 2/15/2021 3,067
----------
13,687
----------
DIVERSIFIED BANKS (1.0%)
4,000 Compass Bank 6.40 10/01/2017 4,463
1,800 USB Realty Corp.(b) 1.39(c) -(g) 1,638
15,000 Wells Fargo & Co. 3.50 3/08/2022 15,200
----------
21,301
----------
INVESTMENT BANKING & BROKERAGE (0.0%)
1,000 Lehman Brothers Holdings, Inc.(h) 5.75 4/25/2011 220
1,500 Lehman Brothers Treasury Co. B.V.(h) 6.88 12/29/2010 461
----------
681
----------
LIFE & HEALTH INSURANCE (3.5%)
3,000 American Equity Investment Life Holding Co. 6.63 7/15/2021 3,142
274 Delphi Financial Group, Inc. 7.38 5/15/2037 6,603
3,000 Forethought Financial Group(b) 8.63 4/15/2021 3,377
23,000 Lincoln National Corp. 7.00 5/17/2066 23,575
2,000 MetLife, Inc. 10.75 8/01/2039 2,970
10,000 Prudential Financial, Inc. 5.20 3/15/2044 9,670
25,465 StanCorp Financial Group, Inc. 6.90 6/01/2067 25,529
----------
74,866
----------
|
PORTFOLIO OF INVESTMENTS | 19
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
MULTI-LINE INSURANCE (2.7%)
$ 21,299 Genworth Holdings, Inc. 6.15% 11/15/2066 $ 19,116
25,000 Glen Meadow Pass-Through Trust(b) 6.51 2/12/2067 25,000
15,000 Nationwide Mutual Insurance Co.(b) 5.81 12/15/2024 15,244
----------
59,360
----------
OTHER DIVERSIFIED FINANCIAL SERVICES (1.7%)
4,000 GE Capital Trust I 6.38 11/15/2067 4,390
5,000 General Electric Capital Corp. 6.25 -(g) 5,234
6,034 ILFC E-Capital Trust I(b) 5.46(c) 12/21/2065 5,574
16,362 ILFC E-Capital Trust II(b) 6.25 12/21/2065 15,462
5,000 International Lease Finance Corp. 8.63 1/15/2022 5,962
1,000 Washington Mutual Bank(h) 5.55 6/16/2010 294
----------
36,916
----------
PROPERTY & CASUALTY INSURANCE (1.5%)
10,000 AmTrust Financial Services, Inc.(b) 6.13 8/15/2023 10,100
1,000 Assured Guaranty Municipal Holdings, Inc.(b) 6.40 12/15/2066 790
2,300 Assured Guaranty U.S. Holdings, Inc. 6.40 12/15/2066 2,057
3,780 Hanover Insurance Group, Inc. 8.21 2/03/2027 3,940
5,400 Ironshore Holdings, Inc.(b) 8.50 5/15/2020 6,328
817 Kingsway America, Inc. 7.50 2/01/2014 817
6,000 Liberty Mutual Group, Inc.(b) 7.00 3/15/2037 6,270
2,000 Zenith National Insurance Capital Trust I(b) 8.55 8/01/2028 2,010
----------
32,312
----------
REAL ESTATE DEVELOPMENT (0.1%)
2,500 Howard Hughes Corp.(b) 6.88 10/01/2021 2,619
----------
REGIONAL BANKS (1.2%)
1,000 AmSouth Bancorp. 6.75 11/01/2025 1,097
6,940 First Tennessee Capital II 6.30 4/15/2034 6,784
1,500 M&T Capital Trust I 8.23 2/01/2027 1,522
2,000 M&T Capital Trust II 8.28 6/01/2027 2,045
10,409 Regions Bank 6.45 6/26/2037 11,329
1,790 Regions Financial Corp. 7.38 12/10/2037 2,050
----------
24,827
----------
REINSURANCE (0.1%)
2,000 Alterra USA Holdings Ltd.(b) 7.20 4/14/2017 2,263
----------
REITs -- RETAIL (0.3%)
3,000 Brixmor, LLC 5.30 1/15/2015 3,049
2,675 Brixmor, LLC 5.25 9/15/2015 2,715
1,550 Brixmor, LLC 7.50 7/30/2029 1,529
----------
7,293
----------
|
20 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
REITs - SPECIALIZED (0.2%)
$ 5,000 Aviv Heathcare Properties, LP 6.00% 10/15/2021 $ 5,150
----------
SPECIALIZED FINANCE (0.7%)
10,000 National Rural Utilities Cooperative Finance Corp. 4.75 4/30/2043 9,425
5,000 PHH Corp. 6.38 8/15/2021 5,037
----------
14,462
----------
Total Financials 314,454
----------
HEALTH CARE (2.4%)
------------------
HEALTH CARE EQUIPMENT (0.4%)
1,500 Accellent, Inc. 8.38 2/01/2017 1,575
1,500 Accellent, Inc. 10.00 11/01/2017 1,609
5,000 Universal Hospital Services, Inc. 7.63 8/15/2020 5,312
----------
8,496
----------
HEALTH CARE FACILITIES (0.8%)
1,000 Community Health Systems, Inc.(b) 5.13 8/01/2021 1,008
500 Community Health Systems, Inc.(b) 6.88 2/01/2022 513
5,000 HCA Holdings, Inc. 7.75 5/15/2021 5,500
5,000 Kindred Healthcare, Inc. 8.25 6/01/2019 5,388
2,000 Tenet Healthcare Corp. 8.00 8/01/2020 2,190
2,000 Tenet Healthcare Corp. 4.50 4/01/2021 1,945
500 United Surgical Partners International, Inc. 9.00 4/01/2020 561
----------
17,105
----------
HEALTH CARE SERVICES (0.3%)
5,000 Radiation Therapy Services, Inc. 9.88 4/15/2017 4,788
2,000 ResCare, Inc. 10.75 1/15/2019 2,235
----------
7,023
----------
HEALTH CARE SUPPLIES (0.4%)
1,000 DJO Finance, LLC 9.75 10/15/2017 1,035
3,000 DJO Finance, LLC 7.75 4/15/2018 3,083
4,000 VWR Funding, Inc. 7.25 9/15/2017 4,280
----------
8,398
----------
PHARMACEUTICALS (0.5%)
5,000 Valeant Pharmaceuticals International, Inc.(b) 6.38 10/15/2020 5,362
5,000 Valeant Pharmaceuticals International, Inc.(b) 6.75 8/15/2021 5,363
----------
10,725
----------
Total Health Care 51,747
----------
INDUSTRIALS (8.0%)
------------------
AEROSPACE & DEFENSE (0.9%)
22,500 Textron Financial Corp.(b) 6.00 2/15/2067 20,419
----------
|
PORTFOLIO OF INVESTMENTS | 21
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
AIRLINES (3.5%)
$ 721 America West Airlines, Inc. Pass-Through Trust 6.87% 1/02/2017 $ 757
506 America West Airlines, Inc. Pass-Through Trust 7.12 1/02/2017 516
4,854 American Airlines, Inc. "B" Pass-Through Trust(b) 5.63 1/15/2021 4,860
6,233 American Airlines, Inc. Pass-Through Trust(b) 7.00 1/31/2018 6,669
3,134 Continental Airlines, Inc. "B" Pass-Through Trust 6.25 4/11/2020 3,306
5,000 Continental Airlines, Inc. Pass-Through Trust 6.13 4/29/2018 5,225
3,000 Continental Airlines, Inc. Pass-Through Trust 5.50 4/29/2022 3,060
20,000 Hawaiian Airlines Pass-Through Trust 4.95 1/15/2022 18,700
5,000 United Air Lines, Inc. "B" Pass-Through Trust 5.38 8/15/2021 5,125
4,488 United Air Lines, Inc. Pass-Through Trust(b) 12.00 7/15/2017 5,082
7,000 US Airways Group, Inc. "B" Pass-Through Trust 5.38 5/15/2023 6,860
6,286 US Airways Group, Inc. Pass-Through Trust 8.50 4/22/2017 6,852
5,000 US Airways Group, Inc. Pass-Through Trust 5.45 6/03/2018 5,013
2,645 US Airways Group, Inc. Pass-Through Trust 9.75 10/22/2018 3,081
1,679 US Airways Group, Inc. Pass-Through Trust (INS) 7.08 3/20/2021 1,813
----------
76,919
----------
BUILDING PRODUCTS (0.3%)
5,000 USG Corp.(b) 8.38 10/15/2018 5,425
----------
COMMERCIAL PRINTING (0.8%)
5,000 Cenveo Corp. 8.88 2/01/2018 4,975
5,035 Harland Clarke Holdings Corp. 6.00(c) 5/15/2015 5,048
6,000 R.R. Donnelley & Sons Co. 8.25 3/15/2019 6,975
----------
16,998
----------
CONSTRUCTION & ENGINEERING (0.1%)
2,000 Zachry Holdings, Inc.(b) 7.50 2/01/2020 2,110
----------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.2%)
5,000 Navistar International Corp. 8.25 11/01/2021 5,169
----------
ELECTRICAL COMPONENTS & EQUIPMENT (0.1%)
1,000 Artesyn Escrow, Inc.(b) 9.75 10/15/2020 1,042
----------
INDUSTRIAL CONGLOMERATES (0.0%)
530 Tomkins, LLC 9.00 10/01/2018 577
----------
INDUSTRIAL MACHINERY (0.7%)
5,000 Dynacast International, LLC 9.25 7/15/2019 5,544
5,000 Stanley Black & Decker, Inc. 5.75 12/15/2053 5,337
4,542 Thermadyne Holdings Corp. 9.00 12/15/2017 4,872
----------
15,753
----------
MARINE (0.8%)
1,000 Navios Maritime Acquisition Corp.(b) 8.13 11/15/2021 1,025
5,000 Navios Maritime Holdings, Inc. 8.13 2/15/2019 5,125
|
22 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
$ 10,000 Navios Maritime Holdings, Inc.(b) 7.38% 1/15/2022 $ 10,100
----------
16,250
----------
RAILROADS (0.4%)
4,135 Florida East Coast Railway Corp. 8.13 2/01/2017 4,320
3,693 Southern Capital Pass-Through Trust(b) 5.70 6/30/2022 4,095
----------
8,415
----------
TRADING COMPANIES & DISTRIBUTORS (0.0%)
1,000 WESCO International, Inc.(b) 5.38 12/15/2021 1,008
----------
TRUCKING (0.2%)
2,500 Avis Budget Car Rental, LLC &
Avis Budget Finance, Inc. 5.50 4/01/2023 2,425
2,000 Jurassic Holdings III, Inc.(b),(d) 6.88 2/15/2021 2,015
----------
4,440
----------
Total Industrials 174,525
----------
INFORMATION TECHNOLOGY (2.6%)
-----------------------------
COMMUNICATIONS EQUIPMENT (0.3%)
3,500 Avaya, Inc.(b) 7.00 4/01/2019 3,474
3,500 Avaya, Inc.(b) 10.50 3/01/2021 3,255
----------
6,729
----------
COMPUTER HARDWARE (0.2%)
5,000 Denali Borrower, LLC & Denali Finance Corp.(b) 5.63 10/15/2020 5,006
----------
DATA PROCESSING & OUTSOURCED SERVICES (1.2%)
4,750 First Data Corp.(b) 7.38 6/15/2019 5,082
2,000 First Data Corp.(b) 6.75 11/01/2020 2,115
8,000 First Data Corp.(b) 11.25 1/15/2021 8,860
4,000 Lender Processing Services, Inc. 5.75 4/15/2023 4,220
4,000 SunGard Data Systems, Inc. 6.63 11/01/2019 4,210
1,985 SunGard Data Systems, Inc.(a) 4.00 3/09/2020 1,999
----------
26,486
----------
HOME ENTERTAINMENT SOFTWARE (0.3%)
5,000 Activision Blizzard, Inc.(b) 5.63 9/15/2021 5,187
2,000 Activision Blizzard, Inc.(b) 6.13 9/15/2023 2,090
----------
7,277
----------
SYSTEMS SOFTWARE (0.6%)
4,000 BMC Software, Inc.(a) 5.00 9/10/2020 4,003
2,000 BMC Software, Inc.(b) 8.13 7/15/2021 2,075
5,000 Sophia, LP(b) 9.75 1/15/2019 5,563
----------
11,641
----------
Total Information Technology 57,139
----------
|
PORTFOLIO OF INVESTMENTS | 23
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
MATERIALS (4.3%)
----------------
ALUMINUM (0.2%)
$ 4,000 Aleris International, Inc. 7.63% 2/15/2018 $ 4,235
----------
COMMODITY CHEMICALS (0.5%)
5,000 Hexion U.S. Finance Corp. 8.88 2/01/2018 5,225
5,000 Hexion U.S. Finance Corp. 6.63 4/15/2020 5,212
----------
10,437
----------
DIVERSIFIED METALS & MINING (0.2%)
4,000 Thompson Creek Metals Co., Inc. 7.38 6/01/2018 3,610
----------
METAL & GLASS CONTAINERS (1.2%)
250 Beverage Packaging Holdings Luxembourg II S.A.(b) 5.63 12/15/2016 256
8,500 Reynolds Group Issuer, Inc. 7.88 8/15/2019 9,392
9,000 Reynolds Group Issuer, Inc. 9.88 8/15/2019 9,990
5,000 Reynolds Group Issuer, Inc. 5.75 10/15/2020 5,138
----------
24,776
----------
PAPER PACKAGING (0.3%)
7,000 Sealed Air Corp.(b) 6.88 7/15/2033 6,895
----------
PAPER PRODUCTS (0.5%)
8,725 Mercer International, Inc. 9.50 12/01/2017 9,554
4,000 Verso Paper Holdings, LLC 8.75 2/01/2019 2,160
----------
11,714
----------
SPECIALTY CHEMICALS (0.2%)
5,000 Momentive Performance Materials, Inc. 9.00 1/15/2021 4,562
----------
STEEL (1.2%)
5,456 Allegheny Ludlum Corp. 6.95 12/15/2025 5,978
10,800 Atkore International, Inc. 9.88 1/01/2018 11,664
2,600 Edgen Murray Corp.(b) 8.75 11/01/2020 3,006
4,000 JMC Steel Group(b) 8.25 3/15/2018 4,150
1,000 Severstal Columbus, LLC 10.25 2/15/2018 1,056
----------
25,854
----------
Total Materials 92,083
----------
TELECOMMUNICATION SERVICES (6.1%)
---------------------------------
ALTERNATIVE CARRIERS (0.8%)
10,000 Level 3 Financing, Inc. 8.13 7/01/2019 11,050
1,000 Level 3 Financing, Inc.(b) 6.13 1/15/2021 1,025
5,000 TW Telecom Holdings, Inc. 6.38 9/01/2023 5,238
----------
17,313
----------
|
24 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (2.9%)
$ 10,000 CenturyLink, Inc. 5.80% 3/15/2022 $ 9,900
5,000 Frontier Communications Corp. 7.63 4/15/2024 4,988
9,000 Frontier Communications Corp. 9.00 8/15/2031 9,045
627 Qwest Corp. 7.38 6/01/2051 15,681
10,000 Verizon Communications, Inc. 4.50 9/15/2020 10,786
10,000 Windstream Corp. 7.50 6/01/2022 10,225
3,000 Windstream Corp. 6.38 8/01/2023 2,805
----------
63,430
----------
WIRELESS TELECOMMUNICATION SERVICES (2.4%)
4,000 MetroPCS Wireless, Inc. 6.63 11/15/2020 4,245
1,600 MetroPCS Wireless, Inc.(b) 6.25 4/01/2021 1,668
2,000 MetroPCS Wireless, Inc.(b) 6.63 4/01/2023 2,082
3,000 NII Capital Corp. 8.88 12/15/2019 1,425
2,000 NII Capital Corp. 7.63 4/01/2021 860
12,000 Sprint Communications, Inc. 7.00 8/15/2020 12,990
6,000 Sprint Communications, Inc. 6.00 11/15/2022 5,925
10,000 Sprint Corp.(b) 7.25 9/15/2021 10,812
5,000 Sprint Corp.(b) 7.88 9/15/2023 5,350
2,000 T-Mobile USA, Inc. 6.13 1/15/2022 2,050
1,000 T-Mobile USA, Inc. 6.73 4/28/2022 1,054
250 T-Mobile USA, Inc. 6.84 4/28/2023 262
2,000 T-Mobile USA, Inc. 6.50 1/15/2024 2,048
----------
50,771
----------
Total Telecommunication Services 131,514
----------
UTILITIES (5.2%)
----------------
ELECTRIC UTILITIES (2.6%)
10,975 Enel S.p.A.(b) 8.75 9/24/2073 11,935
288 FPL Energy National Wind Portfolio, LLC(b) 6.13 3/25/2019 286
126 FPL Energy Wind Funding, LLC(b) 6.88 6/27/2017 125
2,000 NextEra Energy Capital Holdings, Inc. 6.65 6/15/2067 2,039
2,000 NextEra Energy Capital Holdings, Inc. 7.30 9/01/2067 2,202
24,630 PPL Capital Funding, Inc.(e) 6.70 3/30/2067 24,894
4,000 Texas Competitive Electric Holdings Co., LLC 10.25 11/01/2015 245
16,960 Texas Competitive Electric Holdings Co., LLC(a) 4.73 10/10/2017 11,832
3,000 Texas Competitive Electric Holdings Co., LLC(b) 11.50 10/01/2020 2,228
----------
55,786
----------
GAS UTILITIES (0.2%)
5,000 ONEOK, Inc. 4.25 2/01/2022 4,871
----------
|
PORTFOLIO OF INVESTMENTS | 25
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.3%)
$ 7,000 AES Corp. 7.38% 7/01/2021 $ 7,788
4,795 Calpine Corp.(b) 7.88 1/15/2023 5,310
15,000 Genon Energy, Inc. 9.88 10/15/2020 15,900
----------
28,998
----------
MULTI-UTILITIES (1.1%)
10,790 Integrys Energy Group, Inc. 6.11 12/01/2066 10,891
11,025 Puget Sound Energy, Inc. 6.97 6/01/2067 11,618
----------
22,509
----------
Total Utilities 112,164
----------
Total Corporate Obligations (cost: $1,454,474) 1,539,579
----------
EURODOLLAR AND YANKEE OBLIGATIONS (12.4%)
CONSUMER DISCRETIONARY (0.4%)
-----------------------------
CABLE & SATELLITE (0.3%)
5,000 Nara Cable Funding Ltd.(b) 8.88 12/01/2018 5,450
----------
HOTELS, RESORTS & CRUISE LINES (0.1%)
2,500 Carlson Wagonlit B.V.(b) 6.88 6/15/2019 2,622
----------
Total Consumer Discretionary 8,072
----------
CONSUMER STAPLES (0.7%)
-----------------------
PACKAGED FOODS & MEAT (0.7%)
1,300 Fage USA Dairy Industry, Inc.(b) 9.88 2/01/2020 1,378
9,425 JBS S.A. 10.50 8/04/2016 10,603
3,000 Minerva Luxembourg, S.A. 7.75 1/31/2023 2,925
----------
14,906
----------
Total Consumer Staples 14,906
----------
ENERGY (0.1%)
-------------
OIL & GAS EQUIPMENT & SERVICES (0.1%)
2,000 Expro Finance Luxembourg SCA(b) 8.50 12/15/2016 2,091
----------
OIL & GAS EXPLORATION & PRODUCTION (0.0%)
1,000 OGX Austria GmbH(b),(h) 8.38 4/01/2022 37
----------
Total Energy 2,128
----------
FINANCIALS (3.9%)
-----------------
DIVERSIFIED BANKS (1.0%)
1,000 Barclays Bank plc(b) 5.93 -(g) 1,060
3,500 BayernLB Capital Trust l 6.20 -(g) 2,975
5,000 Royal Bank of Scotland Group plc 7.64 -(g) 4,950
|
26 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
$ 10,000 Royal Bank of Scotland Group plc 9.50% 3/16/2022 $ 11,716
----------
20,701
----------
DIVERSIFIED CAPITAL MARKETS (0.2%)
5,000 Deutsche Bank Capital Trust IV 4.59(c) -(g) 4,600
----------
LIFE & HEALTH INSURANCE (0.1%)
2,000 Great-West Life & Annuity Insurance Capital, LP(b) 7.15 5/16/2046 2,070
----------
MULTI-LINE INSURANCE (0.7%)
5,000 AXA S.A.(b) 6.46 -(g) 5,150
9,072 ZFS Finance USA Trust II(b) 6.45 12/15/2065 9,775
----------
14,925
----------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.5%)
2,000 ING Capital Funding Trust III 3.85(c) -(g) 2,005
6,986 ING Groep N.V. 5.78 -(g) 7,213
36 ING Groep N.V. 7.20 -(g) 915
27 ING Groep N.V. 7.38 -(g) 673
----------
10,806
----------
PROPERTY & CASUALTY INSURANCE (1.2%)
22,000 QBE Capital Funding III Ltd.(b) 7.25 5/24/2041 22,747
4,000 XL Group plc 6.50 -(g) 3,940
----------
26,687
----------
REINSURANCE (0.2%)
5,000 Swiss Re Capital I, LP(b) 6.85 -(g) 5,375
----------
Total Financials 85,164
----------
INDUSTRIALS (1.3%)
------------------
AEROSPACE & DEFENSE (0.1%)
2,000 Bombardier, Inc.(b) 6.13 1/15/2023 1,980
----------
AIRLINES (0.9%)
12,000 Air Canada "B" Pass-Through Trust(b) 5.38 5/15/2021 12,000
2,500 Air Canada "C" Pass-Through Trust(b) 6.63 5/15/2018 2,539
5,000 Virgin Australia Holdings Ltd. Pass-Through Trust(b) 7.13 10/23/2018 5,125
----------
19,664
----------
TRADING COMPANIES & DISTRIBUTORS (0.3%)
5,250 Ashtead Capital, Inc.(b) 6.50 7/15/2022 5,644
----------
Total Industrials 27,288
----------
INFORMATION TECHNOLOGY (0.2%)
-----------------------------
ELECTRONIC MANUFACTURING SERVICES (0.1%)
2,000 MMI International Ltd.(b) 8.00 3/01/2017 1,970
----------
|
PORTFOLIO OF INVESTMENTS | 27
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT (0.1%)
$ 4,000 Global A&T Electronics(b) 10.00% 2/01/2019 $ 3,450
----------
Total Information Technology 5,420
----------
MATERIALS (4.2%)
----------------
COMMODITY CHEMICALS (0.5%)
10,000 Braskem Finance Ltd.(d) 6.45 2/03/2024 9,845
----------
CONSTRUCTION MATERIALS (0.3%)
1,000 CEMEX Finance, LLC(b) 9.38 10/12/2022 1,120
1,000 CEMEX S.A. de C.V.(b) 9.00 1/11/2018 1,085
3,000 CEMEX S.A. de C.V.(b) 6.50 12/10/2019 3,053
----------
5,258
----------
DIVERSIFIED METALS & MINING (0.9%)
15,000 Glencore Funding, LLC(b) 4.13 5/30/2023 14,062
5,000 Vedanta Resources plc(b) 8.25 6/07/2021 5,022
----------
19,084
----------
GOLD (0.6%)
5,000 Eldorado Gold Corp.(b) 6.13 12/15/2020 4,800
5,000 New Gold, Inc.(b) 6.25 11/15/2022 4,825
4,000 Newcrest Finance Property Ltd.(b) 4.20 10/01/2022 3,341
1,000 St. Barbara Ltd.(b) 8.88 4/15/2018 835
----------
13,801
----------
METAL & GLASS CONTAINERS (0.3%)
2,000 Ardagh Packaging Finance plc(b),(d) 6.25 1/31/2019 2,027
4,000 Ardagh Packaging Finance plc(b) 9.13 10/15/2020 4,390
176 Ardagh Packaging Finance plc(b) 7.00 11/15/2020 180
----------
6,597
----------
PAPER PACKAGING (0.3%)
6,200 Smurfit Kappa Treasury Funding Ltd. 7.50 11/20/2025 6,820
----------
PAPER PRODUCTS (0.2%)
5,000 Sappi Papier Holding GmbH(b) 6.63 4/15/2021 5,050
----------
PRECIOUS METALS & MINERALS (0.2%)
5,000 Fresnillo plc(b) 5.50 11/13/2023 4,875
----------
STEEL (0.9%)
15,000 ArcelorMittal 7.50 10/15/2039 14,812
5,000 FMG Resources (August 2006) Pty Ltd.(b) 6.88 4/01/2022 5,419
----------
20,231
----------
Total Materials 91,561
----------
|
28 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (0.6%)
---------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.6%)
$ 5,000 Digicel Ltd.(b) 6.00% 4/15/2021 $ 4,862
5,000 Intelsat Jackson Holdings Ltd. 7.25 4/01/2019 5,400
3,500 NII International Telecom SCA(b) 7.88 8/15/2019 2,660
----------
12,922
----------
Total Telecommunication Services 12,922
----------
UTILITIES (1.0%)
----------------
ELECTRIC UTILITIES (0.7%)
5,000 EDP Finance B.V.(b) 5.25 1/14/2021 5,103
10,000 Electricite De France S.A.(b) 5.25 -(g) 9,679
----------
14,782
----------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.3%)
7,000 AES Gener S.A.(b) 8.38 12/18/2073 7,368
----------
Total Utilities 22,150
----------
Total Eurodollar and Yankee Obligations (cost: $255,435) 269,611
----------
COMMERCIAL MORTGAGE SECURITIES (4.9%)
FINANCIALS (4.9%)
-----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (4.9%)
2,444 Banc of America Commercial Mortgage, Inc.(b) 5.31 12/10/2042 2,368
6,900 Banc of America Commercial Mortgage, Inc. 5.42 10/10/2045 6,902
6 Banc of America Commercial Mortgage, Inc.(b) 5.64 9/10/2047 7
495 Banc of America Commercial Mortgage, Inc.(b) 6.14 9/10/2047 516
5,000 Banc of America Commercial Mortgage, Inc. 6.26 2/10/2051 5,250
2,500 Bear Stearns Commercial Mortgage Securities, Inc. 5.49 12/11/2040 2,345
3,176 Bear Stearns Commercial Mortgage Securities, Inc.(b) 5.66 9/11/2041 3,087
5,000 Bear Stearns Commercial Mortgage Securities, Inc. 5.57 1/12/2045 4,922
2,500 Citigroup Commercial Mortgage Trust 5.78 3/15/2049 2,580
2,950 Credit Suisse Commercial Mortgage Pass-Through Trust 5.79 6/15/2038 2,913
15,000 Credit Suisse Commercial Mortgage Pass-Through Trust 0.35 2/15/2040 12,749
3,213 Credit Suisse First Boston Mortgage Securities Corp.(b) 5.02 1/15/2037 3,205
7,110 GE Capital Commercial Mortgage Corp. 5.28 3/10/2044 6,882
5,000 GE Capital Commercial Mortgage Corp. 5.61 12/10/2049 5,206
2,000 GMAC Commercial Mortgage Securities, Inc. 4.97 12/10/2041 1,918
10,000 GS Mortgage Securities Corp. II 5.59 4/10/2038 10,109
6,000 GS Mortgage Securities Corp. II 5.82 8/10/2038 5,983
|
PORTFOLIO OF INVESTMENTS | 29
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
$ 2,830 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.97% 9/12/2037 $ 2,709
3,750 Merrill Lynch Mortgage Trust 5.19 7/12/2038 3,658
5,000 Merrill Lynch Mortgage Trust 5.69 5/12/2039 5,082
5,000 Merrill Lynch Mortgage Trust 5.05 8/12/2039 4,944
1,445 Morgan Stanley Capital I, Inc. 5.17 8/13/2042 1,475
2,000 Wachovia Bank Commercial Mortgage Trust(b) 4.99 5/15/2044 1,905
4,000 Wachovia Bank Commercial Mortgage Trust 5.38 12/15/2044 4,050
5,000 Wachovia Bank Commercial Mortgage Trust 5.37 11/15/2048 4,732
----------
105,497
----------
INTEREST-ONLY COMMERCIAL MORTGAGE-BACKED SECURITIES (0.0%)
673 Credit Suisse First Boston Corp.,
acquired 6/13/2003; cost $33(i) 1.77 5/17/2040 34
----------
Total Financials 105,531
----------
Total Commercial Mortgage Securities (cost: $100,661) 105,531
----------
MUNICIPAL BONDS (0.1%)
CASINOS& GAMING (0.1%)
5,091 Mashantucket (Western) Pequot Tribe(f)
(cost: $2,796) 7.35 7/01/2026 3,089
----------
EXCHANGE-TRADED FUNDS (0.9%)
106 iShares iBoxx High Yield Corporate Bond Fund 9,885
246 SPDR Barclays High Yield Bond Fund 10,034
----------
Total Exchange-Traded Funds (cost: $19,938) 19,919
----------
-----------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
-----------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES (8.4%)
COMMON STOCKS (4.1%)
CONSUMER DISCRETIONARY (1.0%)
-----------------------------
APPAREL, ACCESSORIES & LUXURY GOODS (0.1%)
58,400 LVMH Moet Hennessy ADR 2,076
----------
AUTO PARTS & EQUIPMENT (0.2%)
57,766 Lear Corp. 4,178
427 MD Investors Corp., acquired 10/16/2009; cost $0*(i),(j) 3
----------
4,181
----------
|
30 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
CABLE & SATELLITE (0.3%)
20,000 Charter Communications, Inc. "A"* $ 2,740
72,680 Comcast Corp. "A" 3,958
---------
6,698
---------
CATALOG RETAIL (0.1%)
10,874 Harry & David Holdings, Inc., acquired 9/13/2011; cost $2,528(i),(j) 1,354
---------
GENERAL MERCHANDISE STORES (0.1%)
40,435 Target Corp. 2,290
---------
HOME FURNISHINGS (0.1%)
54,070 Tempur Sealy International, Inc.* 2,665
---------
HOTELS, RESORTS & CRUISE LINES (0.1%)
25,400 Hyatt Hotels Corp. "A"* 1,214
---------
PUBLISHING (0.0%)
50,096 American Media, Inc., acquired 12/22/2010; cost $969*(i),(j) 609
---------
Total Consumer Discretionary 21,087
---------
CONSUMER STAPLES (0.2%)
-----------------------
DRUG RETAIL (0.1%)
28,400 CVS Caremark Corp. 1,923
---------
HOUSEHOLD PRODUCTS (0.0%)
11,242 Kimberly-Clark Corp. 1,230
---------
PACKAGED FOODS & MEAT (0.1%)
25,100 Green Mountain Coffee Roasters, Inc. 2,033
---------
Total Consumer Staples 5,186
---------
ENERGY (0.3%)
-------------
INTEGRATED OIL & GAS (0.1%)
8,522 Chevron Corp. 951
32,263 Royal Dutch Shell plc ADR 2,229
---------
3,180
---------
OIL & GAS EQUIPMENT & SERVICES (0.2%)
88,602 Deepocean Group Holdings AS, acquired 6/28/2011; cost $1,636*(i),(j) 3,757
---------
Total Energy 6,937
---------
FINANCIALS (0.7%)
-----------------
LIFE & HEALTH INSURANCE (0.1%)
21,952 MetLife, Inc. 1,077
---------
OTHER DIVERSIFIED FINANCIAL SERVICES (0.0%)
18,507 JPMorgan Chase & Co. 1,025
---------
|
PORTFOLIO OF INVESTMENTS | 31
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
REGIONAL BANKS (0.0%)
27,800 BB&T Corp. $ 1,040
---------
REITs - MORTGAGE (0.4%)
140,100 Hatteras Financial Corp. 2,513
350,600 MFA Financial, Inc. 2,556
263,200 Two Harbors Investment Corp. 2,587
---------
7,656
---------
SPECIALIZED FINANCE (0.1%)
35,130 CME Group, Inc. 2,626
---------
THRIFTS & MORTGAGE FINANCE (0.1%)
115,241 People's United Financial, Inc. 1,638
---------
Total Financials 15,062
---------
HEALTH CARE (0.4%)
------------------
HEALTH CARE EQUIPMENT (0.0%)
3,407 Diagnostic Services Holdings, acquired 6/01/2009; cost $756*(i),(j) 173
---------
PHARMACEUTICALS (0.4%)
22,300 AbbVie, Inc. 1,098
21,662 Johnson & Johnson 1,916
50,900 Merck & Co., Inc. 2,696
27,607 Novartis AG ADR 2,183
---------
7,893
---------
Total Health Care 8,066
---------
INDUSTRIALS (0.1%)
------------------
COMMERCIAL PRINTING (0.0%)
518 Quad Graphics, Inc. 12
---------
INDUSTRIAL CONGLOMERATES (0.1%)
83,000 General Electric Co. 2,086
---------
Total Industrials 2,098
---------
INFORMATION TECHNOLOGY (0.3%)
-----------------------------
DATA PROCESSING & OUTSOURCED SERVICES (0.1%)
27,798 Automatic Data Processing, Inc. 2,129
---------
SEMICONDUCTORS (0.1%)
74,500 Intel Corp. 1,828
---------
SYSTEMS SOFTWARE (0.1%)
61,150 Microsoft Corp. 2,315
---------
Total Information Technology 6,272
---------
|
32 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
MATERIALS (0.6%)
----------------
COMMODITY CHEMICALS (0.2%)
61,015 LyondellBasell Industries N.V. "A" $ 4,806
---------
CONSTRUCTION MATERIALS (0.1%)
596 Panolam Holdings Co., acquired 1/20/2010; cost $315*(i),(j) 1,293
---------
GOLD (0.1%)
43,000 Barrick Gold Corp. 829
28,300 Goldcorp, Inc. 704
33,650 Newmont Mining Corp. 727
---------
2,260
---------
PAPER PRODUCTS (0.2%)
54,650 Clearwater Paper Corp.* 3,113
39,300 International Paper Co. 1,876
534 Resolute Forest Products* 10
---------
4,999
---------
Total Materials 13,358
---------
TELECOMMUNICATION SERVICES (0.4%)
---------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.2%)
50,503 AT&T, Inc. 1,683
29,000 CenturyLink, Inc. 837
50,650 Verizon Communications, Inc. 2,432
---------
4,952
---------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
40,677 Crown Castle International Corp.* 2,886
---------
Total Telecommunication Services 7,838
---------
UTILITIES (0.1%)
----------------
MULTI-UTILITIES (0.1%)
15,200 Dominion Resources, Inc. 1,032
30,400 NiSource, Inc. 1,045
---------
2,077
---------
Total Utilities 2,077
---------
Total Common Stocks (cost: $65,085) 87,981
---------
|
PORTFOLIO OF INVESTMENTS | 33
-----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
$(000)/ VALUE
SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------
PREFERRED STOCKS (4.3%)
CONSUMER STAPLES (1.3%)
-----------------------
AGRICULTURAL PRODUCTS (1.3%)
200,000 CHS, Inc., Series B, 7.88%, cumulative redeemable, perpetual $ 5,740
200,000 Dairy Farmers of America, Inc., 7.88%,
cumulative redeemable, perpetual(b) 21,762
---------
27,502
---------
Total Consumer Staples 27,502
---------
ENERGY (0.9%)
-------------
OIL & GAS EXPLORATION & PRODUCTION (0.9%)
17,000 Chesapeake Energy Corp., 5.75%, perpetual(b) 19,582
---------
FINANCIALS (2.0%)
-----------------
CONSUMER FINANCE (0.5%)
3,000 Ally Financial, Inc., 7.00%, perpetual(b) 2,918
$320,000 GMAC Capital Trust I, 8.13%, cumulative redeemable 8,762
---------
11,680
---------
DIVERSIFIED BANKS (0.3%)
8,000 US Bancorp, 7.19%, perpetual 6,261
---------
PROPERTY & CASUALTY INSURANCE (0.1%)
$3,000 Catlin Insurance Co. Ltd., 7.25%, perpetual(b) 3,120
$2,000 Syncora Holdings Ltd., 6.88%, perpetual(j) -
---------
3,120
---------
REGIONAL BANKS (0.1%)
1,090 M&T Bank Corp., 6.38%, cumulative redeemable, perpetual 1,046
---------
REINSURANCE (0.0%)
3,000 American Overseas Group Ltd., 7.50%, non-cumulative,
acquired 1/23/2007 - 3/02/2007; cost $3,109*(i),(j) 750
---------
REITs - INDUSTRIAL (0.5%)
185,741 ProLogis, Inc., Series Q, 8.54%, cumulative redeemable, perpetual 10,587
---------
REITs - OFFICE (0.3%)
240,000 CommonWealth REIT, Series E, 7.25%, cumulative redeemable, perpetual 5,472
---------
REITs - SPECIALIZED (0.2%)
170,000 Felcor Lodging Trust, Inc., Series C, 8.00%, perpetual 4,198
---------
|
34 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------------
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
-----------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.0%)
20,000 Freddie Mac, 6.02%, perpetual* $ 173
80,000 Freddie Mac, 8.38%, perpetual* 801
---------
974
---------
Total Financials 44,088
---------
UTILITIES (0.1%)
----------------
ELECTRIC UTILITIES (0.1%)
27,000 Southern California Edison, Series D, 6.50%,
cumulative redeemable, perpetual 2,660
---------
Total Preferred Stocks (cost: $90,493) 93,832
---------
WARRANTS (0.0%)
CONSUMER DISCRETIONARY (0.0%)
-----------------------------
AUTO PARTS & EQUIPMENT (0.0%)
147 Lear Corp.* 22
---------
CABLE & SATELLITE (0.0%)
5,016 Charter Communications Inc. "A"* 469
---------
PUBLISHING (0.0%)
12,745 Reader's Digest Association, Inc.*(j) -
---------
Total Consumer Discretionary 491
---------
Total Warrants (cost: $28) 491
---------
Total Equity Securities (cost: $155,606) 182,304
---------
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON
(000) RATE MATURITY
-----------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS (1.7%)
COMMERCIAL PAPER (1.3%)
ENERGY (0.9%)
-------------
OIL & GAS EXPLORATION & PRODUCTION (0.9%)
$ 13,360 Talisman Energy, Inc.(b),(k) 0.67% 2/03/2014 13,360
---------
7,296 Talisman Energy, Inc.(b),(k) 0.50 2/05/2014 7,296
---------
20,656
---------
Total Energy 20,656
---------
|
PORTFOLIO OF INVESTMENTS | 35
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON VALUE
(000) SECURITY RATE MATURITY (000)
-----------------------------------------------------------------------------------------------------------------
UTILITIES (0.4%)
----------------
ELECTRIC UTILITIES (0.4%)
$ 7,820 Northeast Utilities(b),(k) 0.15% 2/04/2014 $ 7,820
----------
Total Commercial Paper 28,476
----------
VARIABLE-RATE DEMAND NOTES (0.3%)
ENERGY (0.3%)
-------------
OIL & GAS REFINING & MARKETING (0.3%)
5,000 Port of Port Arthur Navigation District 0.42 12/01/2039 5,000
----------
-----------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
-----------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS (0.1%)
2,625,000 State Street Institutional Liquid Reserve Fund, 0.06%(l) 2,625
----------
Total Money Market Instruments (cost: $36,101) 36,101
----------
TOTAL INVESTMENTS (COST: $2,025,011) $2,156,134
==========
|
36 | USAA HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------
($ 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
-----------------------------------------------------------------------------------------------------
Bonds:
Corporate Obligations $ 15,681 $1,523,898 $ - $1,539,579
Eurodollar and Yankee
Obligations - 269,611 - 269,611
Commercial Mortgage
Securities - 105,531 - 105,531
Municipal Bonds - 3,089 - 3,089
Exchange-Traded Funds 19,919 - - 19,919
Equity Securities:
Common Stocks 80,792 - 7,189 87,981
Preferred Stocks 8,762 84,320 750 93,832
Warrants 491 - - 491
Money Market Instruments:
Commercial Paper - 28,476 - 28,476
Variable-Rate Demand Notes - 5,000 - 5,000
Money Market Funds 2,625 - - 2,625
-----------------------------------------------------------------------------------------------------
Total $128,270 $2,019,925 $7,939 $2,156,134
-----------------------------------------------------------------------------------------------------
|
Reconciliation of investments in which significant unobservable inputs (Level 3)
were used in determining value:
-----------------------------------------------------------------------------------------------------
COMMON STOCKS PREFERRED STOCKS
-----------------------------------------------------------------------------------------------------
Balance as of July 31, 2013 $4,159 $750
Purchases - -
Sales - -
Transfers into Level 3 - -
Transfers out of Level 3 - -
Net realized gain (loss) on investments - -
Change in net unrealized appreciation/depreciation
of investments. 3,030 -
-----------------------------------------------------------------------------------------------------
Balance as of January 31, 2014 $7,189 $750
-----------------------------------------------------------------------------------------------------
|
For the period of August 1, 2013, through January 31, 2014, there were no
transfers of securities between levels. The Fund's policy is to recognize any
transfers into and out of the levels as of the beginning of the period in which
the event or circumstance that caused the transfer occurred.
PORTFOLIO OF INVESTMENTS | 37
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2014 (unaudited)
o GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the financial statements.
The portfolio of investments category percentages shown represent the
percentages of the investments to net assets, and, in total, may not equal
100%. A category percentage of 0.0% represents less than 0.1% of net assets.
Investments in foreign securities were 13.2% of net assets at January 31,
2014.
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
EURODOLLAR AND YANKEE OBLIGATIONS -- Eurodollar obligations are
dollar-denominated instruments that are issued outside the U.S. capital
markets by foreign corporations and financial institutions and by foreign
branches of U.S. corporations and financial institutions. Yankee
obligations are dollar-denominated instruments that are issued by foreign
issuers in the U.S. capital markets.
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
38 | USAA HIGH INCOME FUND
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.
VARIABLE-RATE DEMAND NOTES (VRDNs) -- provide the right to sell the security
at face value on either that day or within the rate-reset period. The
interest rate is adjusted at a stipulated daily, weekly, monthly, quarterly,
or other specified time interval to reflect current market conditions. VRDNs
will normally trade as if the maturity is the earlier put date, even though
stated maturity is longer.
WARRANTS -- entitle the holder to buy a proportionate amount of common stock
at a specified price for a stated period.
CREDIT ENHANCEMENTS -- add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal and
interest payments when due. The enhancement may be provided by a
high-quality bank, insurance company or other corporation, or a collateral
trust. The enhancements do not guarantee the market values of the
securities.
(INS) Principal and interest payments are insured by 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.
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS | 39
|
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) Senior loan (loan) -- is not registered under the Securities Act of
1933. The loan contains certain restrictions on resale and cannot be
sold publicly. The interest rate is adjusted periodically, and the rate
disclosed represents the current rate at January 31, 2014. The
weighted average life of the loan is likely to be shorter than the
stated final maturity date due to mandatory or optional prepayments.
The loan is deemed liquid by USAA Asset Management Company (the
Manager), under liquidity guidelines approved by the Trust's Board of
Trustees (the Board), unless otherwise noted as illiquid.
(b) 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 the Manager under
liquidity guidelines approved by the Board, unless otherwise noted as
illiquid.
(c) Variable-rate or floating-rate security -- interest rate is adjusted
periodically. The interest rate disclosed represents the current rate
at January 31, 2014.
(d) At January 31, 2014, the aggregate market value of securities purchased
on a delayed-delivery basis was $16,578,000, which included when-issued
securities of $13,887,000.
(e) At January 31, 2014, portions of these securities were segregated to
cover delayed-delivery and/or when-issued purchases.
40 | USAA HIGH INCOME FUND
(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 is perpetual and has no final maturity date but may be subject
to calls at various dates in the future.
(h) Currently the issuer is in default with respect to interest and/or
principal payments.
(i) Security deemed illiquid by the Manager, under liquidity guidelines
approved by the Board. The aggregate market value of these securities
at January 31, 2014, was $7,973,000, which represented 0.4% of the
Fund's net assets.
(j) Security was fair valued at January 31, 2014, by the Manager in
accordance with valuation procedures approved by the Board. The total
value of all such securities was $7,939,000, which represented 0.4% of
net assets of the Fund.
(k) 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.
(l) Rate represents the money market fund annualized seven-day yield at
January 31, 2014.
* Non-income-producing security.
See accompanying notes to financial statements.
NOTES TO PORTFOLIO OF INVESTMENTS | 41
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
January 31, 2014 (unaudited)
ASSETS
Investments in securities, at market value (cost of $2,025,011) $2,156,134
Cash 341
Receivables:
Capital shares sold 2,627
Dividends and interest 33,021
Securities sold 2,818
----------
Total assets 2,194,941
----------
LIABILITIES
Payables:
Securities purchased 22,717
Capital shares redeemed 1,293
Accrued management fees 993
Accrued transfer agent's fees 75
Other accrued expenses and payables 113
----------
Total liabilities 25,191
----------
Net assets applicable to capital shares outstanding $2,169,750
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,030,612
Accumulated undistributed net investment income 1,326
Accumulated net realized gain on investments 6,689
Net unrealized appreciation of investments 131,123
----------
Net assets applicable to capital shares outstanding $2,169,750
==========
Net asset value, redemption price, and offering price per share:
Fund Shares (net assets of $1,363,348/155,946 shares outstanding) $ 8.74
==========
Institutional Shares (net assets of $798,583/91,390
shares outstanding) $ 8.74
==========
Adviser Shares (net assets of $7,819/893 shares outstanding) $ 8.75
==========
|
See accompanying notes to financial statements.
42 | USAA HIGH INCOME FUND
STATEMENT OF OPERATIONS (IN THOUSANDS)
Six-month period ended January 31, 2014 (unaudited)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $20) $ 6,672
Interest 65,620
-------
Total income 72,292
-------
EXPENSES
Management fees 5,688
Administration and servicing fees:
Fund Shares 983
Institutional Shares 391
Adviser Shares 6
Transfer agent's fees:
Fund Shares 1,062
Institutional Shares 391
Adviser Shares 1
Distribution and service fees (Note 6E):
Adviser Shares 9
Custody and accounting fees:
Fund Shares 100
Institutional Shares 56
Adviser Shares 1
Postage:
Fund Shares 32
Institutional Shares 13
Shareholder reporting fees:
Fund Shares 19
Institutional Shares 12
Trustees' fees 7
Registration fees:
Fund Shares 40
Institutional Shares 13
Adviser Shares 8
Professional fees 76
Other 17
-------
Total expenses 8,925
-------
NET INVESTMENT INCOME 63,367
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on:
Unaffiliated transactions 11,018
Affiliated transactions (Note 8) 2,979
Change in net unrealized appreciation/depreciation 14,157
-------
Net realized and unrealized gain 28,154
-------
Increase in net assets resulting from operations $91,521
=======
|
See accompanying notes to financial statements.
FINANCIAL STATEMENTS | 43
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six-month period ended January 31, 2014 (unaudited), and year ended
July 31, 2013
-----------------------------------------------------------------------------------------------
1/31/2014 7/31/2013
-----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 63,367 $ 124,702
Net realized gain on investments 13,997 43,047
Change in net unrealized appreciation/depreciation
of investments 14,157 57,303
-------------------------------
Increase in net assets resulting from operations 91,521 225,052
-------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Fund Shares (39,429) (76,922)
Institutional Shares (24,006) (46,909)
Adviser Shares (217) (382)
-------------------------------
Total distributions of net investment income (63,652) (124,213)
-------------------------------
Net realized gains:
Fund Shares (24,229) (14,530)
Institutional Shares (14,384) (10,155)
Adviser Shares (141) (79)
-------------------------------
Total distributions of net realized gains (38,754) (24,764)
-------------------------------
Distributions to shareholders (102,406) (148,977)
-------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (NOTE 5)
Fund Shares 119,413 (275,508)
Institutional Shares 38,075 486,358
Adviser Shares 753 1,148
-------------------------------
Total net increase in net assets from
capital share transactions 158,241 211,998
-------------------------------
Net increase in net assets 147,356 288,073
NET ASSETS
Beginning of period 2,022,394 1,734,321
-------------------------------
End of period $2,169,750 $2,022,394
===============================
Accumulated undistributed net investment income:
End of period $ 1,326 $ 1,611
===============================
|
See accompanying notes to financial statements.
44 | USAA HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 2014 (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act
of 1940, as amended (the 1940 Act), is an open-end management investment company
organized as a Delaware statutory trust consisting of 52 separate funds. The
information presented in this semiannual report pertains only to the USAA 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,
NOTES TO FINANCIAL STATEMENTS | 45
and insurance companies. Institutional Shares also are available to
institutional investors, which include retirement plans, endowments,
foundations, and bank trusts, as well as other persons or legal entities that
the Fund may approve from time to time, or for purchase by a USAA Fund
participating in a fund-of-funds investment strategy (USAA fund-of-funds) and
not to the general public. 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.
46 | USAA HIGH INCOME FUND
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 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. 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.
4. Debt securities purchased with original or remaining maturities of 60
days or less may be valued at amortized cost, which approximates market
value.
5. Repurchase agreements are valued at cost, which approximates market value.
NOTES TO FINANCIAL STATEMENTS | 47
6. Securities for which market quotations are not readily available or are
considered unreliable, or whose values have been materially affected by
events occurring after the close of their primary markets but before the
pricing of the Fund, are valued in good faith at fair value, using
methods determined by the Manager under valuation procedures approved by
the Board. The effect of fair value pricing is that securities may not be
priced on the basis of quotations from the primary market in which they
are traded and the actual price realized from the sale of a security may
differ materially from the fair value price. Valuing these securities at
fair value is intended to cause the Fund's NAV to be more reliable than
it otherwise would be.
Fair value methods used by the Manager include, but are not limited to,
obtaining market quotations from secondary pricing services,
broker-dealers, or widely used quotation systems. General factors
considered in determining the fair value of securities include
fundamental analytical data, the nature and duration of any restrictions
on disposition of the securities, and an evaluation of the forces that
influenced the market in which the securities are purchased and sold.
B. FAIR VALUE MEASUREMENTS -- Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
three-level valuation hierarchy disclosed in the portfolio of investments is
based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as
follows:
Level 1 -- inputs to the valuation methodology are quoted prices
(unadjusted) in active markets for identical securities.
Level 2 -- inputs to the valuation methodology are other significant
observable inputs, including quoted prices for similar securities, inputs
that are observable for the securities, either directly or
48 | USAA HIGH INCOME FUND
indirectly, and market-corroborated inputs such as market indices. Level 2
securities include certain preferred stocks, which are valued based on
methods discussed in Note 1A2, certain bonds, which are 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
some securities falling in the Level 3 category are primarily supported by
discounted prior tender offers and quoted prices obtained from
broker-dealers participating in the market for these securities, as well as,
other relevant information related to the security. 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.
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.
NOTES TO FINANCIAL STATEMENTS | 49
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, 2014 VALUATION UNOBSERVABLE
ASSETS ($ IN 000's) TECHNIQUE(S) INPUT(S) RANGE
------------------------------------------------------------------------------------------
EQUITY SECURITIES:
Common Stocks $5,832 Market Revenue Multiple(a) 0.5x - 1.2x
Comparables EBITDA Multiple(a) 2.5x - 16.4x
Earnings per
Share Multiple(a) 14.2x
Discount for lack
of marketability(b) 0.4x - 2.2x
------------------------------------------------------------------------------------------
|
(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 applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore,
no federal income tax provision is required.
D. INVESTMENTS IN SECURITIES -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gains or losses from
sales of investment securities are computed on the identified cost basis.
Dividend income, less foreign taxes, if any, is recorded on the ex-dividend
date. If the ex-dividend date has passed, certain dividends from foreign
securities are recorded upon notification. Interest income is recorded daily
on the accrual basis. Discounts and premiums 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.
50 | USAA HIGH INCOME FUND
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 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
NOTES TO FINANCIAL STATEMENTS | 51
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. As of January 31, 2014, the Fund's outstanding
delayed-delivery commitments, including interest purchased, were
$18,550,000; which included when-issued securities of $15,925,000. Also,
included in these amounts is $1,950,000, for securities which were sold
prior to January 31, 2014.
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, 2014, 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, 2014, the Fund Shares and Adviser Shares incurred redemption
fees of $23,000 and $4,000, 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. The
Trust's maximum
52 | USAA HIGH INCOME FUND
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, 2014, the Fund paid CAPCO facility
fees of $6,000, which represents 3.3% of the total fees paid to CAPCO by the
USAA Funds. The Fund had no borrowings under this agreement during the six-month
period ended January 31, 2014.
(3) DISTRIBUTIONS
The tax basis of distributions and accumulated undistributed net investment
income will be determined based upon the Fund's tax year end of July 31, 2014,
in accordance with applicable tax law.
Distributions of net investment income are made monthly. Distributions of
realized gains from security transactions not offset by capital losses
NOTES TO FINANCIAL STATEMENTS | 53
are made annually in the succeeding fiscal year or as otherwise required
to avoid the payment of federal taxes.
Under the Regulated Investment Company Modernization Act of 2010 (the Act), a
fund is permitted to carry forward net capital losses indefinitely.
Additionally, such capital losses that are carried forward will retain their
character as short-term and/or long-term capital losses. Post-enactment capital
loss carryforwards must be used before pre-enactment capital loss
carryforwards. As a result, pre-enactment capital loss carryforwards may be more
likely to expire unused.
At July 31, 2013, the Fund had no pre-enactment or post-enactment capital loss
carryforwards, for federal income tax purposes.
For the six-month period ended January 31, 2014, the Fund did not incur any
income tax, interest, or penalties, and has recorded no liability for net
unrecognized tax benefits relating to uncertain income tax positions. On an
ongoing basis the Manager will monitor its tax positions to determine if
adjustments to this conclusion are necessary. The statute of limitations on the
Fund's tax return filings generally remain open for the three preceding fiscal
reporting year ends and remain subject to examination by the Internal Revenue
Service and state taxing authorities.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the six-month period ended January 31, 2014, were
$362,607,000 and $225,183,000, respectively.
As of January 31, 2014, the cost of securities, including short-term securities,
for federal income tax purposes, was approximately the same as that reported in
the financial statements.
Gross unrealized appreciation and depreciation of investments as of January 31,
2014, were $171,912,000 and $40,789,000, respectively, resulting in net
unrealized appreciation of $131,123,000.
54 | USAA HIGH INCOME FUND
(5) CAPITAL SHARE TRANSACTIONS
At January 31, 2014, there were an unlimited number of shares of capital stock
at no par value authorized for the Fund.
Capital share transactions for the Institutional Shares resulted from purchases
and sales by the affiliated USAA fund-of-funds. Capital share transactions for
all classes were as follows, in thousands:
SIX-MONTH
PERIOD ENDED YEAR ENDED
JANUARY 31, 2014 JULY 31, 2013
--------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------
FUND SHARES:
Shares sold 26,217 $ 229,793 58,445 $ 513,780
Shares issued from reinvested
dividends 6,780 59,139 9,721 84,713
Shares redeemed* (19,367) (169,519) (99,767) (874,001)
---------------------------------------------
Net increase (decrease) from
capital share transactions 13,630 $ 119,413 (31,601) $(275,508)
=============================================
INSTITUTIONAL SHARES:
Shares sold 10,475 $ 91,744 89,777 $ 786,599
Shares issued from reinvested
dividends 4,307 37,556 6,479 56,611
Shares redeemed (10,430) (91,225) (40,658) (356,852)
---------------------------------------------
Net increase from capital
share transactions 4,352 $ 38,075 55,598 $ 486,358
=============================================
ADVISER SHARES:
Shares sold 160 $ 1,409 163 $ 1,439
Shares issued from reinvested
dividends 10 85 6 57
Shares redeemed* (85) (741) (39) (348)
---------------------------------------------
Net increase from capital
share transactions 85 $ 753 130 $ 1,148
=============================================
|
*Net of redemption fees.
NOTES TO FINANCIAL STATEMENTS | 55
(6) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES -- The Manager provides investment management services to
the Fund pursuant to an Advisory Agreement. Under this agreement, the
Manager is responsible for managing the business and affairs of the Fund,
and for directly managing the day-to-day investment of a portion of the
Fund's assets, subject to the authority of and supervision by the Board. The
Manager also is authorized to select (with approval of the Board and without
shareholder approval) one or more subadvisers to manage the day-to-day
investment of a portion of the Fund's assets. For the six-month period ended
January 31, 2014, the Fund had no subadviser(s).
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 Current Yield Bond Funds Index over the performance period. The Lipper
High Current Yield Bond Funds Index tracks the total return performance of
the 30 largest funds in the Lipper High Current 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 ANNUAL ADJUSTMENT RATE
RELATIVE TO INDEX(1) AS A % OF THE FUND'S AVERAGE NET ASSETS(1)
--------------------------------------------------------------------------------
+/- 0.20% to 0.50% +/- 0.04%
+/- 0.51% to 1.00% +/- 0.05%
+/- 1.01% and greater +/- 0.06%
|
(1)Based on the difference between average annual performance of the relevant
share class of the Fund and its relevant index, rounded to the nearest
basis point (0.01%). Average net assets of the share class are calculated
over a rolling 36-month period.
56 | USAA HIGH INCOME FUND
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.
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 Current 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, 2014, the Fund incurred total
management fees, paid or payable to the Manager, of $5,688,000, which
included a performance adjustment for the Fund Shares, Institutional Shares,
and Adviser Shares of $333,000, $105,000, and $1,000, respectively. For the
Fund Shares, Institutional Shares, and Adviser Shares the performance
adjustments were 0.05%, 0.03%, and 0.03%, 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, 2014, the Fund Shares, Institutional Shares, and
Adviser Shares incurred administration and servicing fees, paid or payable
to the Manager, of $983,000, $391,000, and $6,000, 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
NOTES TO FINANCIAL STATEMENTS | 57
January 31, 2014, the Fund reimbursed the Manager $29,000 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 has agreed, through December 1, 2014, to
limit the annual expenses of the Adviser Shares to 1.20% of its average net
assets, excluding extraordinary expenses and before reductions of any
expenses paid indirectly, and will reimburse the Adviser Shares for all
expenses in excess of that amount. This expense limitation arrangement may
not be changed or terminated through December 1, 2014, without approval of
the Board, and may be changed or terminated by the Manager at any time after
that date. For the six-month period ended January 31, 2014, 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, 2014, the Fund Shares, Institutional Shares and Adviser
Shares incurred transfer agent's fees, paid or payable to SAS, of
$1,062,000, $391,000, and $1,000, 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
58 | USAA HIGH INCOME FUND
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, 2014, the Adviser Shares incurred
distribution and service (12b-1) fees of $9,000.
F. UNDERWRITING SERVICES -- USAA Investment Management Company provides
exclusive underwriting and distribution of the Fund's shares on a continuing
best-efforts basis and receives no commissions or fees for this service.
(7) TRANSACTIONS WITH AFFILIATES
The Fund offers its Institutional Shares for investment by other USAA Funds and
is one of 17 USAA mutual funds in which the affiliated USAA fund-of-funds may
invest. The USAA fund-of-funds do not invest in the underlying funds for the
purpose of exercising management or control. As of January 31, 2014, the USAA
fund-of-funds owned the following percentages of the total outstanding shares of
the Fund:
AFFILIATED USAA FUND OWNERSHIP %
------------------------------------------------------------------------------
USAA Cornerstone Conservative Fund 0.2
USAA Target Retirement Income Fund 0.9
USAA Target Retirement 2020 Fund 1.7
USAA Target Retirement 2030 Fund 2.3
USAA Target Retirement 2040 Fund 1.2
USAA Target Retirement 2050 Fund 0.2
|
The Manager is indirectly wholly owned by United Services Automobile Association
(USAA), a large, diversified financial services institution. At January 31,
2014, USAA and its affiliates owned 617,000 shares which represents 69.1% 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.
NOTES TO FINANCIAL STATEMENTS | 59
(8) SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
During the six-month period ended January 31, 2014, 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.
NET REALIZED
COST TO GAIN (LOSS)
SELLER PURCHASER PURCHASER TO SELLER
------------------------------------------------------------------------------
USAA High Income Fund USAA Income Fund $11,614,000 $ 922,000
USAA High Income Fund USAA Intermediate-Term
Bond Fund 18,128,000 1,718,000
USAA High Income Fund USAA Short-Term Bond Fund 2,297,000 339,000
|
60 | USAA HIGH INCOME FUND
(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,
-----------------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009
-----------------------------------------------------------------------------------
Net asset value at
beginning of period $ 8.79 $ 8.42 $ 8.60 $ 8.08 $ 6.96 $ 7.68
-----------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .26 .55 .57 .60 .66 .62
Net realized and
unrealized gain (loss) .11 .46 (.18) .52 1.11 (.72)
-----------------------------------------------------------------------------------
Total from investment
operations .37 1.01 .39 1.12 1.77 (.10)
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income (.26) (.53) (.57) (.60) (.65) (.62)
Realized capital gains (.16) (.11) - - - -
Redemption fees .00(e) - - - - -
-----------------------------------------------------------------------------------
Total distributions (.42) (.64) (.57) (.60) (.65) (.62)
-----------------------------------------------------------------------------------
Net asset value at
end of period $ 8.74 $ 8.79 $ 8.42 $ 8.60 $ 8.08 $ 6.96
===================================================================================
Total return (%)* 4.38 12.39 4.99 14.28 26.15(a) .29
Net assets at end
of period (000) $1,363,348 $1,250,728 $1,464,070 $1,482,706 $1,139,425 $836,042
Ratios to average
net assets:**
Expenses (%)(d) .90(f) .94 .95 .90 .92(a) .99(b)
Expenses, excluding
reimbursements (%)(d) .90(f) .94 .95 - .92(a) 1.02
Net investment
income (%) 5.98(f) 6.15 6.96 7.06 8.43 9.98
Portfolio turnover (%) 11 47 52 54(c) 62(c) 46(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, 2014, average net assets were
$1,300,497,000.
NOTES TO FINANCIAL STATEMENTS | 61
(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
ratios by 0.01%. This decrease is excluded from the expense ratios in the
Financial Highlights table.
(b) Effective April 13, 2007, through November 30, 2008, the Manager voluntarily
agreed to limit the annual expenses of the Fund Shares to 0.90% of the Fund
Shares' average net assets. Prior to April 13, 2007, the voluntary expense
limit was 1.00%.
(c) Reflects increased trading activity due to market volatility.
(d) Reflects total operating expenses of the Fund Shares before reductions of
any expenses paid indirectly. The Fund Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
(e) Represents less than $0.01 per share.
(f) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
62 | 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 PERIOD ENDED
JANUARY 31, YEAR ENDED JULY 31, JULY 31,
-----------------------------------------------------------------------------
2014 2013 2012 2011 2010 2009***
-----------------------------------------------------------------------------
Net asset value at
beginning of period $ 8.78 $ 8.41 $ 8.60 $ 8.08 $ 6.95 $ 7.68
----------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .27 .54 .58 .62 .68 .65(a)
Net realized and
unrealized gain (loss) .12 .49 (.18) .52 1.12 (.74)(a)
----------------------------------------------------------------------------
Total from investment
operations .39 1.03 .40 1.14 1.80 (.09)(a)
----------------------------------------------------------------------------
Less distributions from:
Net investment income (.27) (.55) (.59) (.62) (.67) (.64)
Realized capital gains (.16) (.11) - - - -
----------------------------------------------------------------------------
Total distributions (.43) (.66) (.59) (.62) (.67) (.64)
----------------------------------------------------------------------------
Net asset value at
end of period $ 8.74 $ 8.78 $ 8.41 $ 8.60 $ 8.08 $ 6.95
============================================================================
Total return (%)* 4.57 12.63 5.09 14.57 26.68 .51
Net assets at end
of period (000) $798,583 $764,558 $264,540 $146,535 $95,618 $48,528
Ratios to average
net assets:**
Expenses (%)(d) .76(c) .76 .76 .65(b) .63(b) .64(b),(c)
Net investment income (%) 6.12(c) 6.22 7.09 7.30 8.65 10.55(c)
Portfolio turnover (%) 11 47 52 54(e) 62(e) 46(e)
|
* Assumes reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in accordance
with U.S. generally accepted accounting principles and could differ from the
Lipper reported return. Total returns for periods of less than one year are
not annualized.
** For the six-month period ended January 31, 2014, average net assets were
$775,837,000.
*** Institutional Shares were initiated on August 1, 2008.
(a) Calculated using average shares.
(b) Prior to December 1, 2010, the Manager had voluntarily agreed to limit the
annual expenses of the Institutional Shares to 0.65% of the Institutional
Shares' average net assets.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(d) Reflects total operating expenses of the Institutional Shares before
reductions of any expenses paid indirectly. The Institutional Shares'
expenses paid indirectly decreased the expense ratios by less than 0.01%.
(e) Reflects increased trading activity due to market volatility.
NOTES TO FINANCIAL STATEMENTS | 63
(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,
--------------------------------------------------
2014 2013 2012 2011***
--------------------------------------------------
Net asset value at
beginning of period $ 8.79 $ 8.42 $ 8.60 $ 8.09
-------------------------------------------
Income (loss) from
investment operations:
Net investment income .25 .52 .55 .55
Net realized and unrealized
gain (loss) .12 .47 (.19) .54
-------------------------------------------
Total from investment operations .37 .99 .36 1.09
-------------------------------------------
Less distributions from:
Net investment income (.25) (.51) (.55) (.58)
Realized capital gains (.16) (.11) - -
Redemption fees .00(d) .00(d) .01 -
-------------------------------------------
Total distributions (.41) (.62) (.54) (.58)
-------------------------------------------
Net asset value at end of period $ 8.75 $ 8.79 $ 8.42 $ 8.60
===========================================
Total return (%)* 4.35 12.13 4.76 13.90
Net assets at end of period (000) $7,819 $7,108 $5,711 $5,533
Ratios to average net assets:**
Expenses (%)(b) 1.19(a) 1.20 1.20 1.20(a)
Expenses, excluding
reimbursements (%)(b) 1.19(a) 1.34 1.45 1.86(a)
Net investment income (%) 5.69(a) 5.85 6.71 6.77(a)
Portfolio turnover (%) 11 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, 2014, average net assets were
$7,462,000.
*** Adviser Shares were initiated on August 1, 2010.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Reflects total operating expenses of the Adviser Shares before reductions of
any expenses paid indirectly. The Adviser Shares' expenses paid indirectly
decreased the expense ratios by less than 0.01%.
(c) Reflects increased trading activity due to market volatility.
(d) Represents less than $0.01 per share.
64 | USAA HIGH INCOME FUND
EXPENSE EXAMPLE
January 31, 2014 (unaudited)
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: direct costs, such
as wire fees, redemption fees, and low balance fees; and indirect costs,
including management fees, transfer agency fees, 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, 2013, through
January 31, 2014.
ACTUAL EXPENSES
The line labeled "actual" under each share class in the table on the next page
provides information about actual account values and actual expenses. You may
use the information in this line, together with the amount you invested at the
beginning of the period, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number for your share
class in the "actual" line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The line labeled "hypothetical" under each share class in the table provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratios for each class and an assumed rate of return of
5% per year before
EXPENSE EXAMPLE | 65
expenses, which is not the Fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any direct costs, such as wire fees,
redemption fees, or low balance fees. Therefore, the line labeled "hypothetical"
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these direct
costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE AUGUST 1, 2013 -
AUGUST 1, 2013 JANUARY 31, 2014 JANUARY 31, 2014
------------------------------------------------------------------
FUND SHARES
Actual $1,000.00 $1,043.80 $4.64
Hypothetical
(5% return before expenses) 1,000.00 1,020.67 4.58
INSTITUTIONAL SHARES
Actual 1,000.00 1,045.70 3.92
Hypothetical
(5% return before expenses) 1,000.00 1,021.37 3.87
ADVISER SHARES
Actual 1,000.00 1,043.50 6.17
Hypothetical
(5% return before expenses) 1,000.00 1,019.16 6.11
|
* Expenses are equal to the annualized expense ratio of 0.90% for Fund Shares,
0.76% for Institutional Shares, and 1.19% 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 4.38% for Fund Shares, 4.57% for Institutional
Shares, and 4.35% for Adviser Shares for the six-month period of August 1,
2013, through January 31, 2014.
66 | USAA HIGH INCOME FUND
TRUSTEES Daniel S. McNamara
Robert L. Mason, Ph.D.
Jefferson C. Boyce
Paul L. McNamara
Barbara B. Ostdiek, Ph.D.
Michael F. Reimherr
--------------------------------------------------------------------------------
ADMINISTRATOR AND USAA Asset Management Company
INVESTMENT ADVISER P.O.Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
UNDERWRITER AND USAA Investment Management Company
DISTRIBUTOR P.O.Box 659453
San Antonio, Texas 78265-9825
--------------------------------------------------------------------------------
TRANSFER AGENT USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
--------------------------------------------------------------------------------
CUSTODIAN AND State Street Bank and Trust Company
ACCOUNTING AGENT P.O.Box 1713
Boston, Massachusetts 02105
--------------------------------------------------------------------------------
INDEPENDENT Ernst & Young LLP
REGISTERED PUBLIC 100 West Houston St., Suite 1800
ACCOUNTING FIRM San Antonio, Texas 78205
--------------------------------------------------------------------------------
MUTUAL FUND Under "My Accounts" on
SELF-SERVICE 24/7 usaa.com select your mutual fund
AT USAA.COM account and either click the link or
select 'I want to...' and select
OR CALL the desired action.
|
(800) 531-USAA
(8722)
Copies of the Manager's proxy voting policies and procedures, approved by the
Trust's Board of Trustees for use in voting proxies on behalf of the Fund, are
available without charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) in summary within the Statement of Additional Information on the SEC's
website at HTTP://WWW.SEC.GOV. Information regarding how the Fund voted proxies
relating to portfolio securities during the most recent 12-month period ended
June 30 is available without charge (i) at USAA.COM; and (ii) on the SEC's
website at HTTP://WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. These Forms N-Q are
available at no charge (i) by calling (800) 531-USAA (8722); (ii) at USAA.COM;
and (iii) on the SEC's website at HTTP://WWW.SEC.GOV. These Forms N-Q also may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) 732-0330.
USAA --------------
9800 Fredericksburg Road PRSRT STD
San Antonio, TX 78288 U.S. Postage
PAID
USAA
--------------
>> SAVE PAPER AND FUND COSTS
Under MY PROFILE on USAA.COM select MANAGE PREFERENCES
Set your DOCUMENT PREFERENCES to USAA DOCUMENTS ONLINE.
[LOGO OF USAA]
|
USAA WE KNOW WHAT IT MEANS TO SERVE.(R)
40051-0314 (C)2014, USAA. All rights reserved.