ANNUAL REPORT - USAA

MANAGER’SCOMMENTARYON THE FUNDTony EraUSAA Asset Management Company■How did the USAA Ultra Short-Term Bond Fund (theFund) perform during the reporting period?The Fund has two share classes: Fund Shares and Institutional Shares.The Fund Shares provided a total return of 1.32% for the year,compared to the 0.50% return of the Lipper Ultra Short ObligationsFunds Index and 0.05% return of the Citigroup 3-Month U.S. TreasuryBill Index. The Institutional Shares began operations on July 12, 2013,and returned 0.92% through the period end. This compares to returnsof 0.39% for the Lipper Ultra Short Obligations Funds Index and0.02% for the Citigroup 3-Month U.S. Treasury Bill Index, each abenchmark of the Fund.■What were the market conditions during the reportingperiod?The financial markets generally took their cue from the Federal Reserve(the Fed). Throughout the reporting period, the Fed continued to holdshort-term interest rates near zero and continued to buy $85 billionof U.S. Treasury securities and mortgage-backed securities everymonth in an effort to stimulate economic growth. Early in the reportingperiod, yields on longer-term bonds rose (and their prices fell) onspeculation the Fed might reduce the pace of its monthly bondpurchases before the end of 2013. After softer economic data led theRefer to page 5 for benchmark definitions.Past performance is no guarantee of future results.2 | USAA Ultra Short-Term Bond Fund