UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07852
USAA Mutual Funds Trust
(Exact name of registrant as specified in charter)
| 15935 La Cantera Pkwy, San Antonio, Texas | 78256 |
| (Address of principal executive offices) | (Zip code) |
Citi Fund Services Ohio, Inc., 4400 Easton Commons, Suite 200, Columbus, Ohio 43219
(Name and address of agent for service)
Registrant’s telephone number, including area code: 800-235-8396
Date of fiscal year end: May 31
Date of reporting period: May 31, 2022
Item 1. Reports to Stockholders.
MAY 31, 2022
Annual Report
USAA Cornerstone Moderately
Conservative Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 14 | ||||||
Statement of Operations | 15 | ||||||
Statements of Changes in Net Assets | 16 | ||||||
Financial Highlights | 18 | ||||||
Notes to Financial Statements | 20 | ||||||
| Report of Independent Registered Public Accounting Firm | 32 | ||||||
Supplemental Information (Unaudited) | 33 | ||||||
Trustee and Officer Information | 33 | ||||||
Proxy Voting and Portfolio Holdings Information | 39 | ||||||
Expense Example | 39 | ||||||
Additional Federal Income Tax Information | 40 | ||||||
Advisory Contract Renewal | 41 | ||||||
Liquidity Risk Management Program | 44 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Cornerstone Moderately Conservative Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Cornerstone Moderately Conservative Fund
Managers' Commentary (continued)
• How did the USAA Cornerstone Moderately Conservative Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a total return of -5.95%. This compares to returns of -8.41% for the Bloomberg U.S. Universal Index, and -7.02% for the Cornerstone Moderately Conservative Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative one-year total return, as both equity and fixed income markets sold off, as inflation concerns, rising interest rates, the end of Quantitative Easing, and the Russian invasion of Ukraine created a concerning and volatile investment environment. Major equity and fixed income asset classes were negative over the past year, while real estate investment trusts and commodities were positive. The Fund outperformed the Cornerstone Moderately Conservative Composite Index.
Positive contributors to the relative performance included security selection within the U.S. large-cap, U.S. small-cap, and international portions of the portfolio. The Fund benefited from the rotation of growth stocks into value stocks around the beginning of the year. Over the period, the Fund maintained a large allocation to short term corporate bonds and an overall shorter duration, which contributed positively as rising interest rates weighed on traditional fixed income markets in early 2022.
These positive drivers were slightly offset by an overweight to emerging market stocks as more developed markets withstood macroeconomic shocks better in the past year. The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Cornerstone Moderately Conservative Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | Bloomberg U.S. | Cornerstone Moderately | |||||||||||||
One Year | –5.95 | % | –8.41 | % | –7.02 | % | |||||||||
Five Year | 3.62 | % | 1.33 | % | 4.83 | % | |||||||||
Since Inception | 4.59 | % | 2.08 | % | 5.83 | % | |||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Moderately Conservative Fund — Growth of $10,000
*Inception Date for the USAA Cornerstone Moderately Conservative Fund is 6/8/12.
1The unmanaged Bloomberg U.S. Universal Index is an index that represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index, and the non-ERISA eligible portion of the CMBS Index. The index covers USD denominated, taxable bonds that are rated either investment-grade or below investment-grade. This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The Cornerstone Moderately Conservative Composite Index is a combination of unmanaged indexes representing the Fund's model allocation, and consists of the MSCI USA Investable Market Index (IMI) Gross (23%), the MSCI ACWI ex USA IMI Net (15%), the Bloomberg U.S. Universal Index (58%), the Bloomberg Commodity Index Total Return (1%), the MSCI U.S. Real Estate Investment Trust (REIT) Index Gross (1%), and the Bloomberg U.S. Treasury—Bills (1-3M) (2%). This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks current income with a secondary focus on capital appreciation.
Asset Allocation*:
May 31, 2022
(% of Net Assets)
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
7
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Asset-Backed Securities (0.3%) | |||||||||||
| Drive Auto Receivables Trust, Series 2018-4, Class D, 4.09%, 1/15/26, Callable 11/15/22 @ 100 | $ | 63 | $ | 64 | |||||||
| Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 6/15/22 @ 100 (a) | 110 | 110 | |||||||||
| HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 8/20/22 @ 100 (a) | 48 | 48 | |||||||||
| HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 55 | 55 | |||||||||
| NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 6/20/22 @ 100 (a) | 59 | 56 | |||||||||
| SCF Equipment Leasing LLC, Series 2020-1A, Class B, 2.02%, 3/20/28, Callable 3/20/25 @ 100 (a) | 107 | 102 | |||||||||
| Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 10/15/23 @ 100 (a) | 120 | 120 | |||||||||
Total Asset-Backed Securities (Cost $561) | 555 | ||||||||||
Collateralized Mortgage Obligations (0.2%) | |||||||||||
| Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51, Callable 6/10/22 @ 100 (b) | 26 | 25 | |||||||||
| Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 1.08% (LIBOR01M+19bps), 2/15/40, Callable 6/15/22 @ 100 (c) | 3 | 3 | |||||||||
| DBJPM Mortgage Trust, Series 2016-SFC, Class A, 2.83%, 8/10/36, Callable 8/10/26 @ 100 (a) | 500 | 470 | |||||||||
Total Collateralized Mortgage Obligations (Cost $537) | 498 | ||||||||||
Common Stocks (16.1%) | |||||||||||
Communication Services (1.3%): | |||||||||||
AT&T, Inc. | 33,800 | 720 | |||||||||
Comcast Corp. Class A | 7,526 | 333 | |||||||||
Omnicom Group, Inc. | 3,624 | 271 | |||||||||
The Interpublic Group of Cos., Inc. | 19,124 | 616 | |||||||||
Verizon Communications, Inc. | 11,698 | 600 | |||||||||
2,540 | |||||||||||
Consumer Discretionary (1.1%): | |||||||||||
Best Buy Co., Inc. | 2,392 | 196 | |||||||||
eBay, Inc. | 5,669 | 276 | |||||||||
Garmin Ltd. | 779 | 82 | |||||||||
Lennar Corp. Class A | 8,376 | 672 | |||||||||
Target Corp. (d) | 3,508 | 568 | |||||||||
Whirlpool Corp. | 1,858 | 343 | |||||||||
2,137 | |||||||||||
Consumer Staples (0.8%): | |||||||||||
Altria Group, Inc. | 14,663 | 793 | |||||||||
Philip Morris International, Inc. | 5,046 | 536 | |||||||||
Walgreens Boots Alliance, Inc. | 8,616 | 378 | |||||||||
1,707 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (0.7%): | |||||||||||
EOG Resources, Inc. | 3,338 | $ | 457 | ||||||||
Exxon Mobil Corp. | 9,274 | 890 | |||||||||
ONEOK, Inc. | 1,333 | 88 | |||||||||
1,435 | |||||||||||
Financials (1.9%): | |||||||||||
Discover Financial Services | 3,447 | 391 | |||||||||
JPMorgan Chase & Co. | 4,349 | 575 | |||||||||
M&T Bank Corp. | 473 | 85 | |||||||||
Moody's Corp. | 2,114 | 637 | |||||||||
Regions Financial Corp. | 3,807 | 84 | |||||||||
Synchrony Financial | 11,463 | 425 | |||||||||
T. Rowe Price Group, Inc. | 4,963 | 631 | |||||||||
The Goldman Sachs Group, Inc. | 807 | 264 | |||||||||
The Hartford Financial Services Group, Inc. | 6,007 | 436 | |||||||||
3,528 | |||||||||||
Health Care (3.0%): | |||||||||||
Abbott Laboratories | 5,342 | 628 | |||||||||
AbbVie, Inc. | 2,571 | 379 | |||||||||
Agilent Technologies, Inc. | 5,327 | 680 | |||||||||
Amgen, Inc. | 2,105 | 540 | |||||||||
Bristol-Myers Squibb Co. | 2,929 | 221 | |||||||||
Cardinal Health, Inc. | 10,200 | 574 | |||||||||
Gilead Sciences, Inc. (d) | 12,599 | 817 | |||||||||
Medtronic PLC | 4,550 | 456 | |||||||||
Merck & Co., Inc. | 3,810 | 351 | |||||||||
Pfizer, Inc. | 4,805 | 255 | |||||||||
West Pharmaceutical Services, Inc. | 1,657 | 514 | |||||||||
Zoetis, Inc. | 3,191 | 545 | |||||||||
5,960 | |||||||||||
Industrials (1.3%): | |||||||||||
3M Co. | 5,027 | 751 | |||||||||
Cintas Corp. | 299 | 119 | |||||||||
Cummins, Inc. | 326 | 68 | |||||||||
Lockheed Martin Corp. | 981 | 432 | |||||||||
Masco Corp. | 8,628 | 489 | |||||||||
Robert Half International, Inc. | 3,318 | 299 | |||||||||
United Parcel Service, Inc. Class B | 2,477 | 451 | |||||||||
2,609 | |||||||||||
Information Technology (5.2%): | |||||||||||
Accenture PLC Class A | 732 | 218 | |||||||||
Apple, Inc. | 16,033 | 2,386 | |||||||||
Applied Materials, Inc. | 2,891 | 339 | |||||||||
Broadcom, Inc. | 1,201 | 697 | |||||||||
Cisco Systems, Inc. | 9,138 | 412 | |||||||||
Cognizant Technology Solutions Corp. Class A | 749 | 56 | |||||||||
HP, Inc. | 7,634 | 296 | |||||||||
Intel Corp. | 6,861 | 305 | |||||||||
International Business Machines Corp. | 5,969 | 829 | |||||||||
KLA Corp. | 1,549 | 565 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Lam Research Corp. | 460 | $ | 239 | ||||||||
Mastercard, Inc. Class A | 327 | 117 | |||||||||
Microsoft Corp. (d) | 9,012 | 2,450 | |||||||||
Monolithic Power Systems, Inc. | 808 | 364 | |||||||||
Motorola Solutions, Inc. | 706 | 155 | |||||||||
NetApp, Inc. | 1,920 | 138 | |||||||||
QUALCOMM, Inc. | 1,767 | 253 | |||||||||
Seagate Technology Holdings PLC | 2,223 | 188 | |||||||||
Skyworks Solutions, Inc. | 502 | 55 | |||||||||
Teradyne, Inc. | 618 | 68 | |||||||||
Visa, Inc. Class A | 461 | 98 | |||||||||
10,228 | |||||||||||
Materials (0.2%): | |||||||||||
LyondellBasell Industries NV Class A | 4,352 | 497 | |||||||||
Real Estate (0.2%): | |||||||||||
American Tower Corp. | 635 | 163 | |||||||||
Crown Castle International Corp. | 933 | 177 | |||||||||
Equinix, Inc. | 45 | 31 | |||||||||
Prologis, Inc. | 336 | 43 | |||||||||
Public Storage | 86 | 28 | |||||||||
442 | |||||||||||
Utilities (0.6%): | |||||||||||
Evergy, Inc. (d) | 1,003 | 70 | |||||||||
NRG Energy, Inc. | 18,237 | 839 | |||||||||
The Southern Co. (d) | 3,512 | 266 | |||||||||
1,175 | |||||||||||
Total Common Stocks (Cost $31,133) | 32,258 | ||||||||||
Corporate Bonds (0.2%) | |||||||||||
Financials (0.2%): | |||||||||||
| Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/11/22 @ 100 (c) | $ | 500 | 450 | ||||||||
Total Corporate Bonds (Cost $462) | 450 | ||||||||||
U.S. Government Agency Mortgages (0.1%) | |||||||||||
Federal National Mortgage Association | |||||||||||
Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 136 | 135 | |||||||||
Total U.S. Government Agency Mortgages (Cost $136) | 135 | ||||||||||
U.S. Treasury Obligations (1.9%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 | 3,800 | 3,784 | |||||||||
Total U.S. Treasury Obligations (Cost $3,793) | 3,784 | ||||||||||
Exchange-Traded Funds (41.2%) | |||||||||||
First Trust TCW Securitized Plus ETF | 239,250 | 5,594 | |||||||||
Invesco DB Commodity Index Tracking Fund (e) | 22,900 | 660 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 35,176 | $ | 1,584 | ||||||||
Invesco FTSE RAFI Emerging Markets ETF | 86,305 | 1,710 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 30,537 | 3,155 | |||||||||
iShares Core MSCI Emerging Markets ETF | 86,733 | 4,560 | |||||||||
iShares Core S&P 500 ETF | 4,196 | 1,741 | |||||||||
iShares Core S&P Small-Cap ETF | 34,499 | 3,494 | |||||||||
iShares Core US Aggregate Bond ETF | 76,799 | 7,946 | |||||||||
iShares Core US REIT ETF (d) | 2,685 | 156 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 5,268 | 481 | |||||||||
iShares MSCI Canada ETF (f) | 67,168 | 2,541 | |||||||||
iShares MSCI International Momentum Factor ETF | 71,831 | 2,386 | |||||||||
iShares MSCI International Quality Factor ETF | 81,444 | 2,795 | |||||||||
JPMorgan BetaBuilders Canada ETF | 8,198 | 539 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 170,705 | 4,766 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 237,343 | 7,510 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 50,100 | 1,692 | |||||||||
SPDR Bloomberg High Yield Bond ETF (d) | 5,106 | 504 | |||||||||
SPDR Gold Shares (e) | 9,286 | 1,589 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 7,496 | 396 | |||||||||
U.S. Oil Fund LP (e) (f) | 7,312 | 625 | |||||||||
VanEck Gold Miners ETF | 13,586 | 431 | |||||||||
Vanguard FTSE All-World ex-US ETF | 39,958 | 2,187 | |||||||||
Vanguard FTSE Developed Markets ETF | 100,729 | 4,584 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 56,777 | 2,759 | |||||||||
Vanguard Real Estate ETF | 15,719 | 1,557 | |||||||||
Vanguard Short-Term Bond ETF | 33,858 | 2,625 | |||||||||
Vanguard Small-Cap Value ETF (d) (f) | 11,516 | 1,933 | |||||||||
Vanguard Total Bond Market ETF (f) | 49,999 | 3,834 | |||||||||
Vanguard Total Stock Market ETF (d) | 16,013 | 3,304 | |||||||||
Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 5,259 | 263 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF (f) | 69,791 | 2,547 | |||||||||
Total Exchange-Traded Funds (Cost $78,077) | 82,448 | ||||||||||
Affiliated Exchange-Traded Funds (38.8%) | |||||||||||
Victoryshares ESG Core Plus Bond ETF (f) | 672,115 | 15,102 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF (f) | 1,236,020 | 59,452 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 54,683 | 2,712 | |||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF (d) | 9,770 | 436 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $85,605) | 77,702 | ||||||||||
Collateral for Securities Loaned (6.5%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 0.67% (g) | 6,215,197 | 6,215 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (g) | 6,877,430 | 6,878 | |||||||||
Total Collateral for Securities Loaned (Cost $13,093) | 13,093 | ||||||||||
Total Investments (Cost $213,397) — 105.3% | 210,923 | ||||||||||
Liabilities in excess of other assets — (5.3)% | (10,579 | ) | |||||||||
NET ASSETS — 100.00% | $ | 200,344 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
At May 31, 2022, the Fund's investments in foreign securities were 18.6% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $961 thousands and amounted to 0.5% of net assets.
(b) The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2022.
(c) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(d) All or a portion of this security has been segregated as collateral for derivative instruments.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) Rate disclosed is the daily yield on May 31, 2022.
bps — Basis points
ETF — Exchange-Traded Fund
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PLC — Public Limited Company
REIT — Real Estate Investment Trust
Futures Contracts Purchased
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
FTSE 100 Index Futures | 17 | 6/20/22 | $ | 1,572,905 | $ | 1,624,693 | $ | 51,788 | |||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 9 | 6/16/22 | 1,834,730 | 1,784,059 | (50,671 | ) | |||||||||||||||||
$ | 1,117 | ||||||||||||||||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
Futures Contracts Sold
(Amounts not in thousands)
Number of | Expiration | Notional | Value | Unrealized | |||||||||||||||||||
ASX SPI 200 Index Futures | 11 | 6/16/22 | $ | 1,396,939 | $ | 1,423,016 | $ | (26,077 | ) | ||||||||||||||
Euro Stoxx 50 Futures | 28 | 6/20/22 | 1,099,679 | 1,137,288 | (37,609 | ) | |||||||||||||||||
Hang Seng Index Futures | 7 | 6/29/22 | 912,096 | 954,237 | (42,141 | ) | |||||||||||||||||
Tokyo Price Index Futures | 8 | 6/9/22 | 1,121,886 | 1,186,451 | (64,565 | ) | |||||||||||||||||
| $ | (170,392 | ) | ||||||||||||||||||||
Total unrealized appreciation | $ | 51,788 | |||||||||||||||||||||
Total unrealized depreciation | (221,063 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | (169,275 | ) | ||||||||||||||||||||
See notes to financial statements.
13
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Moderately Conservative Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $85,605) | $ | 77,702 | |||||
Unaffiliated investments, at value (Cost $127,792) | 133,221 | (a) | |||||
Cash | 2,814 | ||||||
Deposit with broker for futures contracts | 445 | ||||||
Receivables: | |||||||
Interest and dividends | 92 | ||||||
Capital shares issued | 55 | ||||||
Variation margin on open futures contracts | 7 | ||||||
From Adviser | 33 | ||||||
Prepaid expenses | 15 | ||||||
Total Assets | 214,384 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 13,093 | ||||||
Collateral received from broker for futures contract | 84 | ||||||
Investments purchased | 596 | ||||||
Capital shares redeemed | 43 | ||||||
Variation margin on open futures contracts | 36 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 84 | ||||||
Administration fees | 25 | ||||||
Custodian fees | 3 | ||||||
Transfer agent fees | 34 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 41 | ||||||
Total Liabilities | 14,040 | ||||||
Net Assets: | |||||||
Capital | 192,995 | ||||||
Total accumulated earnings/(loss) | 7,349 | ||||||
Net Assets | $ | 200,344 | |||||
Shares (unlimited number of shares authorized with no par value): | 17,847 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 11.23 | |||||
(a) Includes $12,748 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
14
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderately Conservative Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 1,004 | |||||
Dividends from unaffiliated investments | 2,721 | ||||||
Interest from unaffiliated investments | 849 | ||||||
Securities lending (net of fees) | 54 | ||||||
Foreign tax withholding | — | (a) | |||||
Total Income | 4,628 | ||||||
Expenses: | |||||||
Investment advisory fees | 1,088 | ||||||
Administration fees | 326 | ||||||
Sub-Administration fees | 71 | ||||||
Custodian fees | 20 | ||||||
Transfer agent fees | 462 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 2 | ||||||
Legal and audit fees | 54 | ||||||
State registration and filing fees | 23 | ||||||
Other expenses | 55 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 32 | ||||||
Total Expenses | 2,181 | ||||||
Expenses waived/reimbursed by Adviser | (222 | ) | |||||
Net Expenses | 1,959 | ||||||
Net Investment Income (Loss) | 2,669 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | 13,887 | ||||||
Capital gain distributions received from affiliated funds | 125 | ||||||
Net realized gains (losses) from futures contracts | 291 | ||||||
Net change in unrealized appreciation/depreciation on affiliated investment securities | (7,625 | ) | |||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (22,136 | ) | |||||
Net change in unrealized appreciation/depreciation on futures contracts | (46 | ) | |||||
Net realized/unrealized gains (losses) on investments | (15,504 | ) | |||||
Change in net assets resulting from operations | $ | (12,835 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
15
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderately Conservative Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 2,669 | $ | 3,052 | |||||||
Net realized gains (losses) | 14,303 | 8,850 | |||||||||
Net change in unrealized appreciation/depreciation | (29,807 | ) | 22,233 | ||||||||
Change in net assets resulting from operations | (12,835 | ) | 34,135 | ||||||||
Change in net assets resulting from distributions to shareholders | (14,110 | ) | (3,777 | ) | |||||||
Change in net assets resulting from capital transactions | 5,397 | (29,253 | ) | ||||||||
Change in net assets | (21,548 | ) | 1,105 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 221,892 | 220,787 | |||||||||
End of period | $ | 200,344 | $ | 221,892 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 24,022 | $ | 24,253 | |||||||
Distributions reinvested | 14,047 | 3,582 | |||||||||
Cost of shares redeemed | (32,672 | ) | (57,088 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 5,397 | $ | (29,253 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 1,948 | 2,002 | |||||||||
Reinvested | 1,142 | 303 | |||||||||
Redeemed | (2,665 | ) | (4,710 | ) | |||||||
Change in Shares | 425 | (2,405 | ) | ||||||||
See notes to financial statements.
16
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17
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
| Investment Activities | Distributions to Shareholders From | |||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Moderately Conservative Fund | |||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||
2022 | $ | 12.74 | 0.15 | (d) | (0.85 | ) | (0.70 | ) | (0.17 | ) | (0.64 | ) | |||||||||||||||
2021 | $ | 11.14 | 0.16 | (d) | 1.64 | 1.80 | (0.17 | ) | (0.03 | ) | |||||||||||||||||
2020 | $ | 10.94 | 0.23 | (d) | 0.22 | 0.45 | (0.23 | ) | (0.02 | ) | |||||||||||||||||
2019 | $ | 11.29 | 0.24 | (0.14 | ) | 0.10 | (0.24 | ) | (0.21 | ) | |||||||||||||||||
2018 | $ | 11.34 | 0.21 | 0.23 | 0.44 | (0.21 | ) | (0.28 | ) | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019, and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Reflects increased usage of quantitative investment strategies.
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return(a) | Net Expenses(b)(c) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Moderately Conservative Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||||||
2022 | (0.81 | ) | $ | 11.23 | (5.95 | )% | 0.90 | % | 1.23 | % | 1.00 | % | $ | 200,344 | 61 | % | |||||||||||||||||||
2021 | (0.20 | ) | $ | 12.74 | 16.30 | % | 0.90 | % | 1.35 | % | 1.02 | % | $ | 221,892 | 52 | % | |||||||||||||||||||
2020 | (0.25 | ) | $ | 11.14 | 4.09 | % | 0.90 | % | 2.05 | % | 1.02 | % | $ | 220,787 | 84 | % | |||||||||||||||||||
2019 | (0.45 | ) | $ | 10.94 | 0.99 | % | 0.90 | % | 2.22 | % | 1.08 | % | $ | 226,484 | 77 | %(e) | |||||||||||||||||||
2018 | (0.49 | ) | $ | 11.29 | 3.89 | % | 0.90 | % | 1.84 | % | 1.07 | % | $ | 221,721 | 45 | % | |||||||||||||||||||
See notes to financial statements.
19
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Cornerstone Moderately Conservative Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments in open-end investment companies, including underlying funds, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities are valued each business day by a pricing service approved by the Board. The approved pricing service uses the evaluated bid or the last sale price to value securities. Debt obligations maturing within 60 days may be valued at amortized cost, provided that the amortized cost represents the fair value of such securities. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 555 | $ | — | $ | 555 | |||||||||||
Collateralized Mortgage Obligations | — | 498 | — | 498 | |||||||||||||||
Common Stocks | 32,258 | — | — | 32,258 | |||||||||||||||
Corporate Bonds | — | 450 | — | 450 | |||||||||||||||
U.S. Government Agency Mortgages | — | 135 | — | 135 | |||||||||||||||
U.S. Treasury Obligations | — | 3,784 | — | 3,784 | |||||||||||||||
Exchange-Traded Funds | 82,448 | — | — | 82,448 | |||||||||||||||
Affiliated Exchange-Traded Funds | 77,702 | — | — | 77,702 | |||||||||||||||
Collateral for Securities Loaned | 13,093 | — | — | 13,093 | |||||||||||||||
Total | $ | 205,501 | $ | 5,422 | $ | — | $ | 210,923 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 52 | $ | — | $ | — | $ | 52 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (221 | ) | $ | — | $ | — | $ | (221 | ) | |||||||||
Total | $ | (169 | ) | $ | — | $ | — | $ | (169 | ) | |||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Mortgage- and Asset-Backed Securities:
The values of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Fund to a lower rate of return upon reinvestment of principal. The values of mortgage- and asset-backed securities depend in part on the credit quality and adequacy of the underlying assets or collateral and may fluctuate in response to the market's perception of these factors as well as current and future repayment rates. Some mortgage-backed securities are backed by the full faith and credit of the U.S. government (e.g., mortgage-backed securities issued by the Government National Mortgage Association, commonly known as "Ginnie Mae"), while other mortgage-backed securities (e.g., mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as "Fannie Mae" and "Freddie Mac," respectively), are backed only by the credit of the government entity issuing them. In addition, some mortgage-backed securities are issued by private entities and, as such, are not guaranteed by the U.S. government or any agency or instrumentality of the U.S. government.
Derivative Instruments:
Futures Contracts:
The Fund may enter into contracts for the future delivery of securities or foreign currencies and futures contracts based on a specific security, class of securities, foreign currency or an index, and purchase or sell options on any such futures contracts. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. No physical delivery of the underlying asset is made. The Fund may enter into futures contracts in an effort to hedge against market risks. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. A good faith margin deposit, known as initial margin, of cash or government securities with a broker or custodian is required to initiate and maintain open positions in futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund based on the change in the market value of the position and are recorded as unrealized appreciation or depreciation until the contract is closed out, at which time the gain or loss is realized. The Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices change in an unanticipated manner. Such unanticipated changes may also result in lower overall performance than if the Fund had not entered into any futures transactions. In addition, the value of the Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions.
The collateral held by the Fund is reflected on the Statement of Assets and Liabilities under Deposit with broker for futures contracts and Collateral received from broker for futures contracts.
Management has determined that no offsetting requirements exist as a result of their conclusion that the Fund is not subject to master netting agreements for futures contracts. During the year ended May 31, 2022, the Fund entered into futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market.
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statement of Assets and Liabilities, categorized by risk exposure, as of May 31, 2022 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 52 | $ | 221 | |||||||
* Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts is reported within the Statement of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2022 (amounts in thousands):
| Net Realized Gains (Losses) on Derivatives Recognized as a Result of Operations | Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result of Operations | ||||||||||
| Net Realized Gains (Losses) from Futures Contracts | Net Change in Unrealized Appreciation/Depreciation on Futures Contracts | ||||||||||
Equity Risk Exposure | $ | 291 | $ | (46 | ) | ||||||
All open derivative positions at year end are reflected on the Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to the Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statement of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 12,748 | $ | — | $ | 13,093 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades, which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2022, the Fund engaged in the following securities transactions with affiliated funds, which resulted in the following net realized gains (losses) (amounts in thousands):
| Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| $ | — | $ | 7,210 | $ | 127 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 131,098 | $ | 111,597 | $ | — | $ | 25,463 | ||||||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.50% of the Fund's average daily net assets. Amounts
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, which is based on the Fund's average daily net assets. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 0.90%.
In addition, the Fund invests in affiliated VCM exchange-traded fund(s) ("affiliated ETFs"). The Fund's advisory fee is reimbursed by VCM that to the extent of the indirect advisory fee incurred through the Fund's proportional investment in the affiliated ETFs. These affiliated ETF advisory fee reimbursements are not available for recoupment. For the year ended May 31, 2022, the Fund incurred reimbursable expenses of $222 thousand, of which $175 thousand consisted of affiliated ETF Adviser fee reimbursements. The Fund has a receivable related to these reimbursable expenses from the Adviser for $33 thousand, pursuant to the Fund's expense limitation agreement.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 219 | $ | 246 | $ | 47 | $ | 512 | ||||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Tactical Allocation Risk — The Fund has a targeted risk tolerance and a corresponding asset allocation target; however, mere asset allocation and volatility are not the sole determination of risk. The Fund's managers will tactically allocate away from the target allocation as market conditions and the perceived risks warrant. The Fund bears the risk that the managers' tactical allocation will not be successful.
Affiliated Funds Risk — The risks of the Fund directly correspond to the risks of the underlying affiliated funds in which the Fund invests. By investing in the underlying affiliated funds, the Fund has exposure to the risk of many different areas of the market. The degree to which the risks described below apply to the Fund varies according to the Fund's asset allocation. For instance, the more the Fund is allocated to stock funds, the greater the risk associated with equity securities. The Fund also is subject to asset allocation risk (i.e., the risk that allocations will not produce the intended results) and to management risk (i.e., the risk that the selection of underlying affiliated funds will not produce the intended results).
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Conflict of Interest Risk — In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
ETF Risk — ETFs, which generally are registered investment companies, incur their own management and other fees and expenses, such as trustees' fees, operating expenses, registration fees, and marketing expenses, a proportionate share of which will be borne indirectly by the Fund as a shareholder in an ETF. As a result, the Fund's investment in an ETF will cause the Fund to indirectly bear the fees and expenses of the ETF and, in turn, the Fund's performance may be lower than if the Fund were to invest directly in the underlying securities held by the ETF. For investments in affiliated ETFs, the Fund's management fee is reimbursed by the Adviser to the extent of the indirect management fee incurred through the Fund's investment in the affiliated ETFs. The Adviser may have conflicts of interest in allocating assets among affiliated and unaffiliated ETFs, because the Adviser also manages and administers the affiliated ETFs, and the Adviser and its affiliates receive other fees from the affiliated ETFs. In addition, the Fund also will be subject to the risks associated with the securities or other investments held by the ETFs.
LIBOR Discontinuation Risk — The London Interbank Offered Rate ("LIBOR") discontinuation may adversely affect the financial markets generally and the Fund's operations, finances and investments specifically. LIBOR has been the principal floating-rate benchmark in the financial markets, and a large portion of the Fund's assets are tied to LIBOR. However, LIBOR has been or will be discontinued as a floating rate benchmark. The date of discontinuation depends on the LIBOR currency and tenor. With limited exceptions, no new LIBOR obligations will be entered into after December 31, 2021. Existing LIBOR obligations have transitioned or will transition to another benchmark, depending on the LIBOR currency and tenor. For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
Non-LIBOR floating-rate obligations, including Secured Overnight Financing Rate ("SOFR")-based obligations, may have returns and values that fluctuate more than those of floating-rate debt obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest-rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Various SOFR-based rates, including SOFR-based term rates, and various non-SOFR-based rates are expected to develop in response to the discontinuation of U.S. dollar LIBOR, which may create various risks for the Fund and the financial markets more generally. There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Such rates include AMERIBOR (American Interbank Offered Rate), BSBY (Bloomberg Short-Term Bank Yield Index) and BYI (Bank Yield Index). Unlike forward-looking SOFR-based term rates, such rates are intended to reflect a bank credit spread component.
It is not clear how replacement rates for LIBOR — including SOFR-based rates and non-SOFR-based rates — will develop and to what extent they will be used. There is no assurance that these replacement rates will be suitable substitutes for LIBOR, and thus the substitution of such rates for LIBOR could have an adverse effect on the Fund and the financial markets more generally. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, which may or may not be similar to the risks relating to SOFR.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month LIBOR plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||
$ | (395 | ) | $ | 395 | |||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 6,440 | $ | 7,670 | $ | 14,110 | $ | 3,243 | $ | 534 | $ | 3,777 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Other Earnings (Loss) | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 935 | $ | 9,720 | $ | (1 | ) | $ | 10,654 | $ | (3,305 | ) | $ | 7,349 | ||||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, futures, trust preferred and grantor trust securities accruals, partnership, and REITs/return of capital.
As of May 31, 2022, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 214,045 | $ | 9,749 | $ | (13,054 | ) | $ | (3,305 | ) | ||||||
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares, an investment company managed by VCM, or an issuer under common control with a Fund or VCM. The Fund does not invest in affiliated securities for the purpose of exercising management or control. These securities are noted as affiliated on the Fund's Schedule of Portfolio Investments. The financial statements of the underlying funds can be found in shareholder reports filed with the SEC by each such underlying fund semi-annually on Form N-CSR and are available for
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
download from both the SEC's as well as each respective underlying fund's website. Transactions in affiliated securities during the year ended May 31, 2022, were as follows (amounts in thousands):
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | $ | — | $ | 33,279 | $ | (16,640 | ) | $ | — | $ | — | $ | (1,537 | ) | $ | 15,102 | $ | 142 | |||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 24,121 | 82,451 | (41,225 | ) | — | 119 | (5,895 | ) | 59,452 | 792 | |||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 2,838 | — | — | — | 6 | (126 | ) | 2,712 | 49 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 503 | — | — | — | — | (67 | ) | 436 | 21 | ||||||||||||||||||||||||||
$ | 27,462 | $ | 115,730 | $ | (57,865 | ) | $ | — | $ | 125 | $ | (7,625 | ) | $ | 77,702 | $ | 1,004 | ||||||||||||||||||
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Moderately Conservative Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Moderately Conservative Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
32
USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
33
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
34
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
35
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
36
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
37
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
38
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 933.10 | $ | 1,020.39 | $ | 4.39 | $ | 4.58 | 0.91 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
39
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 12 | % | 12 | % | $ | 3,443 | $ | 8,025 | ||||||||
40
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Cornerstone Moderately Conservative Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
41
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services, as well as any fee waivers and reimbursements — was below the median of its expense group and equal to the median of its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were above the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe for the one-year period ended September 30, 2021, and was below the average of its performance universe for the three- and five-year periods ended September 30, 2021, and was below its Lipper index for the one-, three- and five-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance relative to its peers for the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees
42
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
noted that the Adviser waived a portion of its management fees and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
43
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
44
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
97447-0722
MAY 31, 2022
Annual Report
USAA Cornerstone Aggressive Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 20 | ||||||
Statement of Operations | 21 | ||||||
Statements of Changes in Net Assets | 22 | ||||||
Financial Highlights | 24 | ||||||
Notes to Financial Statements | 26 | ||||||
| Report of Independent Registered Public Accounting Firm | 38 | ||||||
Supplemental Information (Unaudited) | 39 | ||||||
Trustee and Officer Information | 39 | ||||||
Proxy Voting and Portfolio Holdings Information | 45 | ||||||
Expense Example | 45 | ||||||
Additional Federal Income Tax Information | 46 | ||||||
Advisory Contract Renewal | 47 | ||||||
Liquidity Risk Management Program | 50 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Cornerstone Aggressive Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Cornerstone Aggressive Fund
Managers' Commentary (continued)
• How did the USAA Cornerstone Aggressive Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a total return of -3.84%. This compares to returns of -6.78% for the MSCI All-Country World Index, and -5.94% for the Cornerstone Aggressive Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative one-year total return, as both equity and fixed income markets sold off, as inflation concerns, rising interest rates, the end of Quantitative Easing, and the Russian invasion of Ukraine created a concerning and volatile investment environment. Major equity and fixed income asset classes were negative over the past year, while real estate investment trusts and commodities were positive. The Fund outperformed the Cornerstone Aggressive Composite Index.
Positive contributors to the relative performance included security selection within the U.S. large-cap, U.S. small-cap, and international portions of the portfolio. The Fund benefited from the rotation of growth stocks into value stocks around the beginning of the year. Over the period, the Fund maintained an allocation to short term corporate bonds and an overall shorter duration, which contributed positively as rising interest rates weighed on traditional fixed income markets in early 2022.
The Fund held modest positions in equity index futures to provide tactical adjustments to various equity asset classes. In particular, a short position in Russell 2000 Index futures positively contributed to the Fund's returns during the reporting period.
These positive drivers were slightly offset by an underweight to commodities, which performed well as prices of energy soared during the period.
Further detractors from the relative performance were led by an overweight to international stocks. The U.S. economy recovered faster than the international economies, in part due to the United States' rapid vaccine dissemination and geographic distance from the Russian conflict.
Thank you for allowing us to assist you with your investment needs.
5
USAA Cornerstone Aggressive Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | MSCI All-Country | Cornerstone Aggressive | |||||||||||||
One Year | –3.84 | % | –6.78 | % | –5.94 | % | |||||||||
Five Year | 6.54 | % | 9.00 | % | 8.07 | % | |||||||||
Since Inception | 6.88 | % | 10.17 | % | 8.43 | % | |||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Aggressive Fund — Growth of $10,000
*Inception Date for the USAA Cornerstone Aggressive Fund is 6/8/12.
1The unmanaged MSCI All-Country World Index is a free float-adjusted, market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The Cornerstone Aggressive Composite Index is a combination of unmanaged indexes representing the Fund's model allocation, and consists of the MSCI USA Investable Market Index (IMI) Gross (46%), the MSCI ACWI ex USA IMI Net (30%), the Bloomberg U.S. Universal Index (18%), the Bloomberg Commodity Index Total Return (2%), the MSCI U.S. Real Estate Investment Trust (REIT) Index Gross (2%), and the Bloomberg U.S. Treasury — Bills (1-3M) (2%). This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation over the long term and also considers the potential for current income.
Asset Allocation*:
May 31, 2022
(% of Net Assets)
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
** Percentage is less than 0.05%.
Percentages are of the net assets of the Fund and may not equal 100%.
7
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Asset-Backed Securities (0.1%) | |||||||||||
| Drive Auto Receivables Trust, Series 2018-4, Class D, 4.09%, 1/15/26, Callable 11/15/22 @ 100 | $ | 28 | $ | 28 | |||||||
| Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 6/15/22 @ 100 (a) | 50 | 50 | |||||||||
| HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 8/20/22 @ 100 (a) | 25 | 25 | |||||||||
| HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 29 | 29 | |||||||||
| NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 6/20/22 @ 100 (a) | 25 | 24 | |||||||||
| SCF Equipment Leasing LLC, Series 2020-1A, Class B, 2.02%, 3/20/28, Callable 3/20/25 @ 100 (a) | 47 | 45 | |||||||||
| Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 10/15/23 @ 100 (a) | 63 | 63 | |||||||||
Total Asset-Backed Securities (Cost $267) | 264 | ||||||||||
Collateralized Mortgage Obligations (0.0%) (b) | |||||||||||
| Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51, Callable 6/10/22 @ 100 (c) | 7 | 7 | |||||||||
| Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 1.08% (LIBOR01M+19bps), 2/15/40, Callable 6/15/22 @ 100 (d) | 1 | 1 | |||||||||
Total Collateralized Mortgage Obligations (Cost $8) | 8 | ||||||||||
Common Stocks (35.7%) | |||||||||||
Communication Services (2.2%): | |||||||||||
Alphabet, Inc. Class C (e) | 1,519 | 3,465 | |||||||||
AMC Networks, Inc. Class A (e) | 1,349 | 53 | |||||||||
AT&T, Inc. | 32,776 | 698 | |||||||||
Cargurus, Inc. (e) | 3,246 | 82 | |||||||||
Comcast Corp. Class A | 17,115 | 758 | |||||||||
EchoStar Corp. Class A (e) | 3,044 | 73 | |||||||||
Gray Television, Inc. | 2,455 | 49 | |||||||||
Match Group, Inc. (e) | 6,745 | 531 | |||||||||
Sirius XM Holdings, Inc. (f) | 78,749 | 504 | |||||||||
TechTarget, Inc. (e) | 1,222 | 87 | |||||||||
The Interpublic Group of Cos., Inc. | 14,126 | 455 | |||||||||
Thryv Holdings, Inc. (e) | 2,337 | 61 | |||||||||
United States Cellular Corp. (e) | 2,868 | 88 | |||||||||
Verizon Communications, Inc. | 13,902 | 713 | |||||||||
World Wrestling Entertainment, Inc. Class A | 2,503 | 167 | |||||||||
Ziff Davis, Inc. (e) | 663 | 51 | |||||||||
7,835 | |||||||||||
Consumer Discretionary (3.4%): | |||||||||||
Adtalem Global Education, Inc. (e) | 2,071 | 68 | |||||||||
AutoNation, Inc. (e) | 1,910 | 228 | |||||||||
AutoZone, Inc. (e) | 508 | 1,046 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Best Buy Co., Inc. | 5,248 | $ | 431 | ||||||||
Big Lots, Inc. (f) | 3,144 | 77 | |||||||||
Boot Barn Holdings, Inc. (e) | 970 | 78 | |||||||||
Crocs, Inc. (e) | 1,349 | 75 | |||||||||
Deckers Outdoor Corp. (e) | 169 | 45 | |||||||||
Dick's Sporting Goods, Inc. (f) | 904 | 73 | |||||||||
Dillard's, Inc. Class A (f) | 233 | 70 | |||||||||
eBay, Inc. | 10,904 | 531 | |||||||||
Ford Motor Co. | 41,719 | 571 | |||||||||
General Motors Co. (e) | 14,516 | 561 | |||||||||
G-III Apparel Group Ltd. (e) | 3,108 | 78 | |||||||||
Graham Holdings Co. Class B | 275 | 169 | |||||||||
Group 1 Automotive, Inc. | 879 | 158 | |||||||||
Harley-Davidson, Inc. | 3,757 | 132 | |||||||||
KB Home | 3,436 | 119 | |||||||||
Kontoor Brands, Inc. | 2,786 | 112 | |||||||||
Lennar Corp. Class A | 6,829 | 548 | |||||||||
Lithia Motors, Inc. | 331 | 101 | |||||||||
Lowe's Cos., Inc. | 5,949 | 1,162 | |||||||||
McDonald's Corp. | 2,553 | 644 | |||||||||
Meritage Homes Corp. (e) | 990 | 84 | |||||||||
Murphy USA, Inc. | 387 | 96 | |||||||||
O'Reilly Automotive, Inc. (e) | 1,627 | 1,037 | |||||||||
Perdoceo Education Corp. (e) | 10,197 | 111 | |||||||||
Ralph Lauren Corp. | 975 | 99 | |||||||||
Signet Jewelers Ltd. | 1,156 | 69 | |||||||||
Sonic Automotive, Inc. Class A | 3,303 | 151 | |||||||||
Target Corp. (g) | 2,503 | 405 | |||||||||
Taylor Morrison Home Corp. (e) | 3,153 | 91 | |||||||||
Tesla, Inc. (e) | 1,392 | 1,055 | |||||||||
The Home Depot, Inc. | 5,069 | 1,535 | |||||||||
Thor Industries, Inc. (f) | 1,054 | 80 | |||||||||
Toll Brothers, Inc. | 1,552 | 78 | |||||||||
Tri Pointe Homes, Inc. (e) | 3,488 | 73 | |||||||||
Williams-Sonoma, Inc. (f) | 743 | 95 | |||||||||
Wingstop, Inc. | 989 | 79 | |||||||||
YETI Holdings, Inc. (e) | 886 | 41 | |||||||||
12,256 | |||||||||||
Consumer Staples (1.9%): | |||||||||||
Altria Group, Inc. | 10,939 | 592 | |||||||||
BJ's Wholesale Club Holdings, Inc. (e) | 1,220 | 71 | |||||||||
Coca-Cola Consolidated, Inc. | 147 | 83 | |||||||||
Colgate-Palmolive Co. | 6,670 | 526 | |||||||||
Costco Wholesale Corp. | 1,334 | 622 | |||||||||
Ingles Markets, Inc. Class A | 1,185 | 105 | |||||||||
National Beverage Corp. | 2,797 | 139 | |||||||||
Nu Skin Enterprises, Inc. Class A | 1,890 | 88 | |||||||||
PepsiCo, Inc. | 3,972 | 666 | |||||||||
Philip Morris International, Inc. | 6,077 | 646 | |||||||||
Sprouts Farmers Market, Inc. (e) | 5,671 | 154 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
The Clorox Co. | 3,031 | $ | 440 | ||||||||
The Coca-Cola Co. | 10,965 | 695 | |||||||||
The Hershey Co. | 2,181 | 462 | |||||||||
The Kroger Co. | 9,932 | 526 | |||||||||
Tyson Foods, Inc. Class A | 5,750 | 515 | |||||||||
Vector Group Ltd. | 5,535 | 68 | |||||||||
Walgreens Boots Alliance, Inc. | 11,736 | 514 | |||||||||
WD-40 Co. | 503 | 95 | |||||||||
7,007 | |||||||||||
Energy (1.6%): | |||||||||||
Antero Resources Corp. (e) | 3,767 | 162 | |||||||||
California Resources Corp. | 2,829 | 124 | |||||||||
CNX Resources Corp. (e) | 3,549 | 77 | |||||||||
ConocoPhillips | 12,458 | 1,400 | |||||||||
Denbury, Inc. (e) | 987 | 72 | |||||||||
Devon Energy Corp. | 7,963 | 596 | |||||||||
EOG Resources, Inc. | 4,448 | 609 | |||||||||
Exxon Mobil Corp. | 10,045 | 964 | |||||||||
HF Sinclair Corp. | 3,158 | 155 | |||||||||
Marathon Oil Corp. | 4,143 | 130 | |||||||||
Marathon Petroleum Corp. | 5,604 | 570 | |||||||||
Ovintiv, Inc. | 5,260 | 295 | |||||||||
PDC Energy, Inc. | 1,972 | 156 | |||||||||
Peabody Energy Corp. (e) (g) | 2,695 | 64 | |||||||||
SM Energy Co. | 1,864 | 90 | |||||||||
Texas Pacific Land Corp. | 71 | 111 | |||||||||
World Fuel Services Corp. (g) | 5,304 | 132 | |||||||||
5,707 | |||||||||||
Financials (5.3%): | |||||||||||
Affiliated Managers Group, Inc. | 832 | 111 | |||||||||
AGNC Investment Corp. (f) | 1,416 | 17 | |||||||||
American Express Co. | 3,458 | 584 | |||||||||
American Financial Group, Inc. | 3,230 | 456 | |||||||||
Annaly Capital Management, Inc. | 3,774 | 25 | |||||||||
Aon PLC Class A | 1,897 | 523 | |||||||||
Artisan Partners Asset Management, Inc. Class A | 3,252 | 125 | |||||||||
Bank of Hawaii Corp. | 686 | 55 | |||||||||
Berkshire Hathaway, Inc. Class B (e) | 5,562 | 1,757 | |||||||||
Blackstone, Inc. | 5,370 | 633 | |||||||||
Capital One Financial Corp. | 4,526 | 579 | |||||||||
Cathay General Bancorp | 5,287 | 217 | |||||||||
Citigroup, Inc. | 12,068 | 645 | |||||||||
Cohen & Steers, Inc. | 1,254 | 96 | |||||||||
Cowen, Inc. Class A | 3,772 | 100 | |||||||||
Cullen/Frost Bankers, Inc. | 561 | 70 | |||||||||
Enstar Group Ltd. (e) | 651 | 151 | |||||||||
Erie Indemnity Co. Class A | 547 | 92 | |||||||||
Essent Group Ltd. | 4,995 | 214 | |||||||||
International Bancshares Corp. | 4,425 | 186 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Jefferies Financial Group, Inc. | 3,408 | $ | 113 | ||||||||
JPMorgan Chase & Co. | 6,982 | 923 | |||||||||
Lakeland Financial Corp. | 1,706 | 123 | |||||||||
M&T Bank Corp. | 2,883 | 519 | |||||||||
Marsh & McLennan Cos., Inc. | 3,383 | 541 | |||||||||
Meta Financial Group, Inc. | 3,109 | 129 | |||||||||
MetLife, Inc. | 8,138 | 548 | |||||||||
MGIC Investment Corp. | 10,620 | 148 | |||||||||
Morgan Stanley | 7,539 | 649 | |||||||||
MSCI, Inc. | 1,289 | 570 | |||||||||
NMI Holdings, Inc. Class A (e) | 9,856 | 183 | |||||||||
OneMain Holdings, Inc. | 3,091 | 136 | |||||||||
Peoples Bancorp, Inc. | 2,367 | 68 | |||||||||
PJT Partners, Inc. Class A | 1,730 | 131 | |||||||||
Prudential Financial, Inc. | 5,191 | 552 | |||||||||
Radian Group, Inc. | 10,679 | 230 | |||||||||
Raymond James Financial, Inc. | 5,045 | 497 | |||||||||
Regions Financial Corp. | 23,215 | 513 | |||||||||
RLI Corp. | 894 | 108 | |||||||||
S&P Global, Inc. | 1,733 | 606 | |||||||||
SEI Investments Co. | 8,032 | 469 | |||||||||
ServisFirst Bancshares, Inc. | 2,015 | 168 | |||||||||
Signature Bank | 2,129 | 460 | |||||||||
Starwood Property Trust, Inc. | 3,503 | 84 | |||||||||
SVB Financial Group (e) | 1,032 | 504 | |||||||||
T. Rowe Price Group, Inc. | 3,961 | 503 | |||||||||
The Bancorp, Inc. (e) | 3,125 | 65 | |||||||||
The Goldman Sachs Group, Inc. | 1,965 | 642 | |||||||||
The Progressive Corp. | 4,776 | 570 | |||||||||
Unum Group | 3,784 | 138 | |||||||||
Virtu Financial, Inc. Class A | 2,540 | 66 | |||||||||
Wells Fargo & Co. | 29,518 | 1,351 | |||||||||
Western Alliance Bancorp | 1,248 | 102 | |||||||||
19,045 | |||||||||||
Health Care (5.6%): | |||||||||||
AbbVie, Inc. | 9,752 | 1,437 | |||||||||
Alkermes PLC (e) | 4,886 | 146 | |||||||||
AmerisourceBergen Corp. | 3,046 | 472 | |||||||||
Amgen, Inc. | 5,113 | 1,313 | |||||||||
AMN Healthcare Services, Inc. (e) | 1,078 | 104 | |||||||||
Amneal Pharmaceuticals, Inc. (e) | 23,545 | 85 | |||||||||
Anthem, Inc. | 2,425 | 1,236 | |||||||||
Arrowhead Pharmaceuticals, Inc. (e) | 2,761 | 92 | |||||||||
Biogen, Inc. (e) | 2,847 | 569 | |||||||||
Bristol-Myers Squibb Co. | 8,772 | 662 | |||||||||
Bruker Corp. | 1,420 | 89 | |||||||||
Chemed Corp. | 264 | 128 | |||||||||
Cigna Corp. | 2,258 | 606 | |||||||||
Corcept Therapeutics, Inc. (e) | 4,159 | 87 | |||||||||
CVS Health Corp. | 6,367 | 616 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Dynavax Technologies Corp. (e) | 5,082 | $ | 60 | ||||||||
Eli Lilly & Co. | 4,711 | 1,477 | |||||||||
Emergent BioSolutions, Inc. (e) | 2,376 | 78 | |||||||||
Encompass Health Corp. | 1,716 | 112 | |||||||||
Exelixis, Inc. (e) | 5,464 | 100 | |||||||||
Fulgent Genetics, Inc. (e) | 2,016 | 110 | |||||||||
Gilead Sciences, Inc. (g) | 9,427 | 611 | |||||||||
Halozyme Therapeutics, Inc. (e) | 4,072 | 187 | |||||||||
IDEXX Laboratories, Inc. (e) | 1,410 | 552 | |||||||||
Innoviva, Inc. (e) (f) | 7,178 | 109 | |||||||||
iTeos Therapeutics, Inc. (e) | 3,096 | 54 | |||||||||
Johnson & Johnson (g) | 10,466 | 1,879 | |||||||||
Maravai LifeSciences Holdings, Inc. Class A (e) | 2,142 | 67 | |||||||||
McKesson Corp. | 1,541 | 507 | |||||||||
MEDNAX, Inc. (e) | 3,011 | 58 | |||||||||
Medpace Holdings, Inc. (e) | 546 | 78 | |||||||||
Merck & Co., Inc. | 8,200 | 755 | |||||||||
Mettler-Toledo International, Inc. (e) | 405 | 521 | |||||||||
Multiplan Corp. (e) | 12,052 | 60 | |||||||||
National HealthCare Corp. (g) | 1,863 | 131 | |||||||||
Owens & Minor, Inc. | 1,814 | 63 | |||||||||
Pfizer, Inc. | 15,876 | 842 | |||||||||
Premier, Inc. Class A | 2,131 | 80 | |||||||||
Prestige Consumer Healthcare, Inc. (e) | 1,630 | 91 | |||||||||
QuidelOrtho Corp. (e) | 1,363 | 130 | |||||||||
Select Medical Holdings Corp. | 3,774 | 92 | |||||||||
Supernus Pharmaceuticals, Inc. (e) | 3,955 | 110 | |||||||||
Tenet Healthcare Corp. (e) | 2,001 | 129 | |||||||||
Thermo Fisher Scientific, Inc. | 1,254 | 712 | |||||||||
United Therapeutics Corp. (e) | 568 | 131 | |||||||||
UnitedHealth Group, Inc. | 3,675 | 1,826 | |||||||||
Waters Corp. (e) | 1,498 | 491 | |||||||||
West Pharmaceutical Services, Inc. | 1,606 | 498 | |||||||||
20,343 | |||||||||||
Industrials (4.1%): | |||||||||||
3M Co. | 7,476 | 1,116 | |||||||||
ACCO Brands Corp. | 14,319 | 108 | |||||||||
AGCO Corp. | 683 | 88 | |||||||||
Allison Transmission Holdings, Inc. | 4,733 | 189 | |||||||||
American Woodmark Corp. (e) | 1,517 | 79 | |||||||||
ArcBest Corp. | 996 | 75 | |||||||||
Atkore, Inc. (e) | 1,336 | 146 | |||||||||
Boise Cascade Co. | 2,397 | 185 | |||||||||
CACI International, Inc. Class A (e) | 366 | 103 | |||||||||
Cimpress PLC (e) | 1,716 | 75 | |||||||||
Cintas Corp. | 1,306 | 520 | |||||||||
Crane Holdings Co. | 472 | 45 | |||||||||
Cummins, Inc. | 2,535 | 530 | |||||||||
EMCOR Group, Inc. | 1,020 | 108 | |||||||||
Fastenal Co. | 9,189 | 492 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
FedEx Corp. | 2,678 | $ | 601 | ||||||||
General Dynamics Corp. | 4,653 | 1,046 | |||||||||
GrafTech International Ltd. | 7,447 | 65 | |||||||||
Hillenbrand, Inc. | 1,297 | 54 | |||||||||
HNI Corp. | 2,040 | 78 | |||||||||
Illinois Tool Works, Inc. | 2,416 | 503 | |||||||||
Insperity, Inc. | 659 | 66 | |||||||||
Kforce, Inc. | 1,263 | 83 | |||||||||
Landstar System, Inc. | 432 | 65 | |||||||||
Lockheed Martin Corp. | 3,950 | 1,738 | |||||||||
ManpowerGroup, Inc. | 1,586 | 142 | |||||||||
Masco Corp. | 8,426 | 478 | |||||||||
Masonite International Corp. (e) | 1,328 | 122 | |||||||||
Matson, Inc. | 1,373 | 123 | |||||||||
MSC Industrial Direct Co., Inc. | 1,964 | 167 | |||||||||
Mueller Industries, Inc. | 2,854 | 154 | |||||||||
Northrop Grumman Corp. | 1,147 | 537 | |||||||||
Old Dominion Freight Line, Inc. | 1,763 | 455 | |||||||||
Oshkosh Corp. | 1,171 | 109 | |||||||||
Otis Worldwide Corp. | 6,411 | 477 | |||||||||
PACCAR, Inc. | 5,984 | 520 | |||||||||
Republic Services, Inc. (g) | 3,692 | 494 | |||||||||
Rush Enterprises, Inc. Class A | 2,084 | 106 | |||||||||
SkyWest, Inc. (e) | 1,766 | 48 | |||||||||
Steelcase, Inc. Class A | 6,952 | 85 | |||||||||
The Timken Co. | 2,348 | 143 | |||||||||
The Toro Co. | 497 | 41 | |||||||||
TriNet Group, Inc. (e) | 759 | 60 | |||||||||
Triton International Ltd. | 2,376 | 152 | |||||||||
Union Pacific Corp. | 2,636 | 579 | |||||||||
United Parcel Service, Inc. Class B | 3,493 | 637 | |||||||||
W.W. Grainger, Inc. | 1,004 | 489 | |||||||||
Waste Management, Inc. | 3,261 | 517 | |||||||||
14,793 | |||||||||||
Information Technology (8.0%): | |||||||||||
Accenture PLC Class A | 4,385 | 1,309 | |||||||||
Adobe, Inc. (e) | 1,670 | 695 | |||||||||
Amkor Technology, Inc. | 7,375 | 151 | |||||||||
Apple, Inc. | 25,097 | 3,735 | |||||||||
Applied Materials, Inc. | 5,661 | 664 | |||||||||
Avid Technology, Inc. (e) | 3,076 | 90 | |||||||||
Badger Meter, Inc. | 1,029 | 81 | |||||||||
Broadcom, Inc. | 2,458 | 1,426 | |||||||||
Ciena Corp. (e) | 1,946 | 99 | |||||||||
Cisco Systems, Inc. | 27,779 | 1,251 | |||||||||
Cognizant Technology Solutions Corp. Class A | 7,158 | 535 | |||||||||
CSG Systems International, Inc. | 2,858 | 178 | |||||||||
Diodes, Inc. (e) | 1,276 | 98 | |||||||||
DXC Technology Co. (e) | 3,240 | 114 | |||||||||
Ebix, Inc. | 1,879 | 55 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
EVERTEC, Inc. | 2,999 | $ | 114 | ||||||||
Fair Isaac Corp. (e) | 1,369 | 561 | |||||||||
Fortinet, Inc. (e) | 1,991 | 586 | |||||||||
Gartner, Inc. (e) | 1,983 | 520 | |||||||||
HP, Inc. | 28,314 | 1,100 | |||||||||
Intel Corp. | 15,664 | 696 | |||||||||
International Business Machines Corp. | 4,631 | 643 | |||||||||
Intuit, Inc. | 1,498 | 621 | |||||||||
Jabil, Inc. | 1,708 | 105 | |||||||||
Kulicke & Soffa Industries, Inc. | 1,429 | 77 | |||||||||
Lattice Semiconductor Corp. (e) | 2,351 | 122 | |||||||||
Lumentum Holdings, Inc. (e) | 1,123 | 97 | |||||||||
Manhattan Associates, Inc. (e) | 692 | 84 | |||||||||
Maximus, Inc. | 1,473 | 95 | |||||||||
Methode Electronics, Inc. | 3,307 | 149 | |||||||||
Micron Technology, Inc. | 8,540 | 631 | |||||||||
Microsoft Corp. (g) | 17,046 | 4,634 | |||||||||
MKS Instruments, Inc. | 897 | 111 | |||||||||
Motorola Solutions, Inc. | 2,389 | 525 | |||||||||
NCR Corp. (e) | 3,060 | 106 | |||||||||
NVIDIA Corp. | 5,071 | 947 | |||||||||
Oracle Corp. | 8,660 | 623 | |||||||||
Palo Alto Networks, Inc. (e) (g) | 1,086 | 546 | |||||||||
Paychex, Inc. | 4,072 | 504 | |||||||||
Perficient, Inc. (e) | 1,173 | 115 | |||||||||
QUALCOMM, Inc. | 9,298 | 1,332 | |||||||||
Qualys, Inc. (e) | 1,015 | 133 | |||||||||
Sanmina Corp. (e) | 2,610 | 114 | |||||||||
SPS Commerce, Inc. (e) | 899 | 96 | |||||||||
Synaptics, Inc. (e) | 609 | 90 | |||||||||
Teradata Corp. (e) | 1,772 | 68 | |||||||||
Texas Instruments, Inc. | 7,620 | 1,347 | |||||||||
The Hackett Group, Inc. | 4,379 | 90 | |||||||||
TTEC Holdings, Inc. | 1,040 | 70 | |||||||||
VeriSign, Inc. (e) | 2,878 | 502 | |||||||||
Vishay Intertechnology, Inc. | 5,421 | 111 | |||||||||
Xperi Holding Corp. | 5,350 | 88 | |||||||||
28,834 | |||||||||||
Materials (1.3%): | |||||||||||
Avery Dennison Corp. | 2,656 | 458 | |||||||||
CF Industries Holdings, Inc. | 5,253 | 519 | |||||||||
Commercial Metals Co. | 2,845 | 113 | |||||||||
Huntsman Corp. | 2,562 | 93 | |||||||||
Linde PLC | 2,006 | 651 | |||||||||
Louisiana-Pacific Corp. (f) | 3,324 | 230 | |||||||||
LyondellBasell Industries NV Class A | 5,017 | 573 | |||||||||
Minerals Technologies, Inc. | 867 | 57 | |||||||||
Nucor Corp. | 7,955 | 1,054 | |||||||||
Reliance Steel & Aluminum Co. | 751 | 146 | |||||||||
The Sherwin-Williams Co. | 1,894 | 508 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tronox Holdings PLC Class A | 4,189 | $ | 75 | ||||||||
United States Steel Corp. | 2,933 | 74 | |||||||||
Warrior Met Coal, Inc. | 2,891 | 97 | |||||||||
4,648 | |||||||||||
Real Estate (1.2%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 378 | 63 | |||||||||
American Tower Corp. | 1,341 | 343 | |||||||||
AvalonBay Communities, Inc. | 376 | 78 | |||||||||
Boston Properties, Inc. | 400 | 44 | |||||||||
Brixmor Property Group, Inc. | 2,598 | 63 | |||||||||
Camden Property Trust | 263 | 38 | |||||||||
CBRE Group, Inc. Class A (e) | 905 | 75 | |||||||||
Cousins Properties, Inc. | 1,378 | 48 | |||||||||
Crown Castle International Corp. | 1,273 | 241 | |||||||||
CubeSmart | 2,102 | 94 | |||||||||
Digital Realty Trust, Inc. | 759 | 106 | |||||||||
Duke Realty Corp. | 1,007 | 53 | |||||||||
Equinix, Inc. | 241 | 166 | |||||||||
Equity LifeStyle Properties, Inc. | 467 | 35 | |||||||||
Equity Residential | 958 | 74 | |||||||||
Essex Property Trust, Inc. | 175 | 50 | |||||||||
Extra Space Storage, Inc. | 360 | 64 | |||||||||
Federal Realty Investment Trust | 507 | 58 | |||||||||
First Industrial Realty Trust, Inc. | 1,825 | 97 | |||||||||
Franklin Street Properties Corp. | 12,562 | 57 | |||||||||
Gaming and Leisure Properties, Inc. | 1,545 | 72 | |||||||||
Healthpeak Properties, Inc. | 1,454 | 43 | |||||||||
Host Hotels & Resorts, Inc. | 1,905 | 38 | |||||||||
Invitation Homes, Inc. | 1,531 | 58 | |||||||||
Iron Mountain, Inc. | 779 | 42 | |||||||||
Jones Lang LaSalle, Inc. (e) | 363 | 72 | |||||||||
Kimco Realty Corp. | 4,921 | 116 | |||||||||
Lamar Advertising Co. Class A | 465 | 46 | |||||||||
LTC Properties, Inc. | 1,829 | 71 | |||||||||
Medical Properties Trust, Inc. | 1,587 | 30 | |||||||||
Mid-America Apartment Communities, Inc. | 308 | 56 | |||||||||
National Health Investors, Inc. | 2,031 | 120 | |||||||||
Omega Healthcare Investors, Inc. | 635 | 19 | |||||||||
One Liberty Properties, Inc. | 1,831 | 50 | |||||||||
Prologis, Inc. | 2,178 | 278 | |||||||||
Public Storage | 425 | 141 | |||||||||
Realty Income Corp. | 1,440 | 98 | |||||||||
Regency Centers Corp. | 412 | 28 | |||||||||
Rexford Industrial Realty, Inc. | 2,197 | 140 | |||||||||
Ryman Hospitality Properties, Inc. (e) | 1,239 | 111 | |||||||||
SBA Communications Corp. | 295 | 99 | |||||||||
Simon Property Group, Inc. | 886 | 102 | |||||||||
SITE Centers Corp. | 7,123 | 112 | |||||||||
Sun Communities, Inc. | 301 | 49 | |||||||||
Tejon Ranch Co. (e) | 3,100 | 53 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Terreno Realty Corp. | 1,332 | $ | 81 | ||||||||
UDR, Inc. | 801 | 38 | |||||||||
Ventas, Inc. | 1,061 | 60 | |||||||||
VICI Properties, Inc. | 2,835 | 87 | |||||||||
Vornado Realty Trust | 439 | 15 | |||||||||
Welltower, Inc. | 1,118 | 100 | |||||||||
Weyerhaeuser Co. | 2,021 | 80 | |||||||||
WP Carey, Inc. | 480 | 40 | |||||||||
Zillow Group, Inc. Class C (e) | 603 | 24 | |||||||||
4,416 | |||||||||||
Utilities (1.1%): | |||||||||||
American States Water Co. | 1,937 | 154 | |||||||||
CenterPoint Energy, Inc. | 15,605 | 500 | |||||||||
Exelon Corp. | 10,687 | 525 | |||||||||
FirstEnergy Corp. | 11,329 | 487 | |||||||||
MDU Resources Group, Inc. | 5,622 | 154 | |||||||||
National Fuel Gas Co. | 2,194 | 161 | |||||||||
NorthWestern Corp. | 2,637 | 162 | |||||||||
NRG Energy, Inc. | 11,308 | 521 | |||||||||
Otter Tail Corp. (g) | 2,371 | 155 | |||||||||
The AES Corp. | 23,509 | 518 | |||||||||
UGI Corp. | 12,711 | 543 | |||||||||
3,880 | |||||||||||
Total Common Stocks (Cost $107,753) | 128,764 | ||||||||||
Corporate Bonds (0.1%) | |||||||||||
Financials (0.1%): | |||||||||||
Capital One NA, 2.15%, 9/6/22, Callable 8/6/22 @ 100 | $ | 150 | 150 | ||||||||
| Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/11/22 @ 100 (d) | 175 | 157 | |||||||||
307 | |||||||||||
Total Corporate Bonds (Cost $312) | 307 | ||||||||||
U.S. Government Agency Mortgages (0.0%) (b) | |||||||||||
| Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 68 | 68 | |||||||||
Total U.S. Government Agency Mortgages (Cost $68) | 68 | ||||||||||
U.S. Treasury Obligations (0.4%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 | 1,567 | 1,560 | |||||||||
Total U.S. Treasury Obligations (Cost $1,577) | 1,560 | ||||||||||
Exchange-Traded Funds (51.3%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (e) | 28,600 | 824 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 43,991 | 1,980 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF (f) | 240,641 | 4,767 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
iShares 7-10 Year Treasury Bond ETF | 5,485 | $ | 567 | ||||||||
iShares Core MSCI EAFE ETF | 103,179 | 6,800 | |||||||||
iShares Core MSCI Emerging Markets ETF | 305,327 | 16,051 | |||||||||
iShares Core S&P 500 ETF | 55,688 | 23,103 | |||||||||
iShares Core US Aggregate Bond ETF | 47,109 | 4,874 | |||||||||
iShares Core US REIT ETF (g) | 13,132 | 762 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 11,616 | 1,060 | |||||||||
iShares MSCI Canada ETF (f) | 216,200 | 8,179 | |||||||||
iShares MSCI International Momentum Factor ETF | 146,564 | 4,867 | |||||||||
iShares MSCI International Quality Factor ETF | 165,207 | 5,670 | |||||||||
JPMorgan BetaBuilders Canada ETF | 15,897 | 1,046 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 430,014 | 12,006 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 829,619 | 26,249 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 91,800 | 3,101 | |||||||||
SPDR Gold Shares (e) | 14,022 | 2,400 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 14,790 | 781 | |||||||||
U.S. Oil Fund LP (e) | 15,125 | 1,293 | |||||||||
VanEck Gold Miners ETF | 24,925 | 791 | |||||||||
Vanguard FTSE All-World ex-US ETF | 142,613 | 7,807 | |||||||||
Vanguard FTSE Developed Markets ETF | 434,913 | 19,793 | |||||||||
Vanguard FTSE Emerging Markets ETF (g) | 23,072 | 1,007 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 18,666 | 907 | |||||||||
Vanguard Real Estate ETF (f) | 35,391 | 3,506 | |||||||||
Vanguard S&P 500 ETF (g) | 8,718 | 3,310 | |||||||||
Vanguard Short-Term Bond ETF | 54,018 | 4,189 | |||||||||
Vanguard Short-Term Corporate Bond ETF (f) | 23,551 | 1,823 | |||||||||
Vanguard Total Bond Market ETF (f) | 68,416 | 5,246 | |||||||||
Vanguard Total Stock Market ETF (g) | 40,024 | 8,259 | |||||||||
| Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 16,645 | 833 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF (f) | 42,134 | 1,538 | |||||||||
Total Exchange-Traded Funds (Cost $164,004) | 185,389 | ||||||||||
Affiliated Exchange-Traded Funds (10.9%) | |||||||||||
VictoryShares ESG Core Plus Bond ETF | 295,569 | 6,641 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF (f) | 559,715 | 26,922 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 103,145 | 5,115 | |||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF (g) | 16,000 | 714 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $43,129) | 39,392 | ||||||||||
Collateral for Securities Loaned (5.9%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 0.67% (h) | 2,035,117 | 2,035 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (h) | 19,227,206 | 19,227 | |||||||||
Total Collateral for Securities Loaned (Cost $21,262) | 21,262 | ||||||||||
Total Investments (Cost $338,380) — 104.4% | 377,014 | ||||||||||
Liabilities in excess of other assets — (4.4)% | (15,931 | ) | |||||||||
NET ASSETS — 100.00% | $ | 361,083 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
At May 31, 2022, the Fund's investments in foreign securities were 34.2% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $236 thousands and amounted to 0.1% of net assets.
(b) Amount represents less than 0.05% of net assets.
(c) The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2022.
(d) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) All or a portion of this security has been segregated as collateral for derivative instruments.
(h) Rate disclosed is the daily yield on May 31, 2022.
bps — Basis points
ETF — Exchange-Traded Fund
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PLC — Public Limited Company
REIT — Real Estate Investment Trust
Futures Contracts Purchased
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
FTSE 100 Index Futures | 34 | 6/20/22 | $ | 3,125,527 | $ | 3,249,386 | $ | 123,859 | |||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 18 | 6/16/22 | 3,669,462 | 3,568,119 | (101,343 | ) | |||||||||||||||||
$ | 22,516 | ||||||||||||||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
Futures Contracts Sold
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 23 | 6/16/22 | $ | 2,920,873 | $ | 2,975,397 | $ | (54,524 | ) | ||||||||||||||
Hang Seng Index Futures | 16 | 6/29/22 | 2,084,792 | 2,181,114 | (96,322 | ) | |||||||||||||||||
Russell 2000 E-Mini Index Futures | 32 | 6/20/22 | 3,158,146 | 2,979,040 | 179,106 | ||||||||||||||||||
Tokyo Price Index Futures | 8 | 6/09/22 | 1,121,886 | 1,186,451 | (64,565 | ) | |||||||||||||||||
(36,305 | ) | ||||||||||||||||||||||
Total unrealized appreciation | $ | 302,965 | |||||||||||||||||||||
Total unrealized depreciation | (316,754 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | (13,789 | ) | ||||||||||||||||||||
See notes to financial statements.
19
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Aggressive Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $43,129) | $ | 39,392 | |||||
Unaffiliated investments, at value (Cost $295,251) | 337,622 | (a) | |||||
Cash | 3,419 | ||||||
Deposit with broker for futures contracts | 2,535 | ||||||
Receivables: | |||||||
Interest and dividends | 233 | ||||||
Capital shares issued | 164 | ||||||
Variation margin on open futures contracts | 40 | ||||||
From Adviser | 5 | ||||||
Prepaid expenses | 17 | ||||||
Total Assets | 383,427 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 21,262 | ||||||
Collateral received from broker for futures contract | 71 | ||||||
Investments purchased | 376 | ||||||
Capital shares redeemed | 213 | ||||||
Variation margin on open futures contracts | 65 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 181 | ||||||
Administration fees | 45 | ||||||
Custodian fees | 4 | ||||||
Transfer agent fees | 80 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 46 | ||||||
Total Liabilities | 22,344 | ||||||
Net Assets: | |||||||
Capital | 310,930 | ||||||
Total accumulated earnings/(loss) | 50,153 | ||||||
Net Assets | $ | 361,083 | |||||
Shares (unlimited number of shares authorized with no par value): | 26,653 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 13.55 | |||||
(a) Includes $20,708 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
20
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Cornerstone Aggressive Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 549 | |||||
Dividends from unaffliated investments | 7,493 | ||||||
Interest from unaffiliated investments | 393 | ||||||
Securities lending (net of fees) | 101 | ||||||
Foreign tax withholding | — | (a) | |||||
Total Income | 8,536 | ||||||
Expenses: | |||||||
Investment advisory fees | 2,314 | ||||||
Administration fees | 579 | ||||||
Sub-Administration fees | 91 | ||||||
Custodian fees | 25 | ||||||
Transfer agent fees | 1,040 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 3 | ||||||
Legal and audit fees | 54 | ||||||
State registration and filing fees | 27 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 78 | ||||||
Other expenses | 67 | ||||||
Total Expenses | 4,326 | ||||||
Expenses waived/reimbursed by Adviser | (91 | ) | |||||
Net Expenses | 4,235 | ||||||
Net Investment Income (Loss) | 4,301 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | 19,222 | ||||||
Capital gain distributions from affiliated funds | 65 | ||||||
Net realized gains (losses) from futures contracts | 1,528 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (3,644 | ) | |||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (35,714 | ) | |||||
Net change in unrealized appreciation/depreciation on futures contracts | (103 | ) | |||||
Net realized/unrealized gains (losses) on investments | (18,646 | ) | |||||
Change in net assets resulting from operations | $ | (14,345 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
21
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Cornerstone Aggressive Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 4,301 | $ | 3,261 | |||||||
Net realized gains (losses) | 20,815 | 26,897 | |||||||||
Net change in unrealized appreciation/depreciation | (39,461 | ) | 74,955 | ||||||||
Change in net assets resulting from operations | (14,345 | ) | 105,113 | ||||||||
Change in net assets resulting from distributions to shareholders | (31,884 | ) | (7,114 | ) | |||||||
Change in net assets resulting from capital transactions | 19,816 | (54,063 | ) | ||||||||
Change in net assets | (26,413 | ) | 43,936 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 387,496 | 343,560 | |||||||||
End of period | $ | 361,083 | $ | 387,496 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 46,933 | $ | 43,105 | |||||||
Distributions reinvested | 31,825 | 6,811 | |||||||||
Cost of shares redeemed | (58,942 | ) | (103,979 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 19,816 | $ | (54,063 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 3,145 | 3,112 | |||||||||
Reinvested | 2,151 | 494 | |||||||||
Redeemed | (3,957 | ) | (7,566 | ) | |||||||
Change in Shares | 1,339 | (3,960 | ) | ||||||||
See notes to financial statements.
22
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23
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Aggressive Fund | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 15.31 | 0.17 | (d) | (0.66 | ) | (0.49 | ) | (0.17 | ) | (1.10 | ) | |||||||||||||||
2021 | $ | 11.74 | 0.12 | (d) | 3.71 | 3.83 | (0.18 | ) | (0.08 | ) | |||||||||||||||||
2020 | $ | 11.73 | 0.20 | (d) | 0.03 | 0.23 | (0.15 | ) | (0.07 | ) | |||||||||||||||||
2019 | $ | 12.81 | 0.15 | (0.57 | ) | (0.42 | ) | (0.18 | ) | (0.48 | ) | ||||||||||||||||
2018 | $ | 12.57 | 0.16 | 0.94 | 1.10 | (0.14 | ) | (0.72 | ) | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
24
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return(a) | Net Expenses(b)(c) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Aggressive Fund | |||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (1.27 | ) | $ | 13.55 | (3.84 | )% | 1.10 | % | 1.11 | % | 1.12 | % | $ | 361,083 | 43 | % | |||||||||||||||||||
2021 | (0.26 | ) | $ | 15.31 | 32.91 | % | 1.10 | % | 0.88 | % | 1.17 | % | $ | 387,496 | 64 | % | |||||||||||||||||||
2020 | (0.22 | ) | $ | 11.74 | 1.78 | % | 1.10 | % | 1.68 | % | 1.18 | % | $ | 343,560 | 90 | % | |||||||||||||||||||
2019 | (0.66 | ) | $ | 11.73 | (3.04 | )% | 1.10 | % | 1.54 | % | 1.24 | % | $ | 351,410 | 95 | %(e) | |||||||||||||||||||
2018 | (0.86 | ) | $ | 12.81 | 8.85 | % | 1.10 | % | 1.18 | % | 1.25 | % | $ | 344,768 | 65 | % | |||||||||||||||||||
See notes to financial statements.
25
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Cornerstone Aggressive Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, including underlying funds, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities are valued each business day by a pricing service approved by the Board. The approved pricing service uses the evaluated bid or the last sale price to value securities. Debt obligations maturing within 60 days may be valued at amortized cost, provided that the amortized cost represents the fair value of such securities. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 264 | $ | — | $ | 264 | |||||||||||
Collateralized Mortgage Obligations | — | 8 | — | 8 | |||||||||||||||
Common Stocks | 128,764 | — | — | 128,764 | |||||||||||||||
Corporate Bonds | — | 307 | — | 307 | |||||||||||||||
U.S. Government Agency Mortgages | — | 68 | — | 68 | |||||||||||||||
U.S. Treasury Obligations | — | 1,560 | — | 1,560 | |||||||||||||||
Exchange-Traded Funds | 185,389 | — | — | 185,389 | |||||||||||||||
Affiliated Exchange-Traded Funds | 39,392 | — | — | 39,392 | |||||||||||||||
Collateral for Securities Loaned | 21,262 | — | — | 21,262 | |||||||||||||||
Total | $ | 374,807 | $ | 2,207 | $ | — | $ | 377,014 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 303 | $ | — | $ | — | $ | 303 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (317 | ) | $ | — | $ | — | $ | (317 | ) | |||||||||
Total | $ | (14 | ) | $ | — | $ | — | $ | (14 | ) | |||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Mortgage- and Asset-Backed Securities:
The values of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Fund to a lower rate of return upon reinvestment of principal. The values of mortgage- and asset-backed securities depend in part on the credit quality and adequacy of the underlying assets or collateral and may fluctuate in response to the market's perception of these factors as well as current and future repayment rates. Some mortgage-backed securities are backed by the full faith and credit of the U.S. government (e.g., mortgage-backed securities issued by the Government National Mortgage Association, commonly known as "Ginnie Mae"), while other mortgage-backed securities (e.g., mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as "Fannie Mae" and "Freddie Mac," respectively), are backed only by the credit of the government entity issuing them. In addition, some mortgage-backed securities are issued by private entities and, as such, are not guaranteed by the U.S. government or any agency or instrumentality of the U.S. government.
Derivative Instruments:
Futures Contracts:
The Fund may enter into contracts for the future delivery of securities or foreign currencies and futures contracts based on a specific security, class of securities, foreign currency or an index, and purchase or sell options on any such futures contracts. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. No physical delivery of the underlying asset is made. The Fund may enter into futures contracts in an effort to hedge against market risks. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. A good faith margin deposit, known as initial margin, of cash or government securities with a broker or custodian is required to initiate and maintain open positions in futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund based on the change in the market value of the position and are recorded as unrealized appreciation or depreciation until the contract is closed out, at which time the gain or loss is realized. The Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices change in an unanticipated
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
manner. Such unanticipated changes may also result in lower overall performance than if the Fund had not entered into any futures transactions. In addition, the value of the Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions.
The collateral held by the Fund is reflected on the Statement of Assets and Liabilities under Deposit with broker for futures contracts and Collateral received from broker for futures contracts.
Management has determined that no offsetting requirements exist as a result of their conclusion that the Fund is not subject to master netting agreements for futures contracts. During the year ended May 31, 2022, the Fund entered into futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market.
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statement of Assets and Liabilities, categorized by risk exposure, as of May 31, 2022 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 303 | $ | 317 | |||||||
* Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts is reported within the Statement of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2022 (amounts in thousands):
| Net Realized Gains (Losses) on Derivatives Recognized as a Result of Operations | Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result of Operations | ||||||||||
| Net Realized Gains (Losses) from Futures Contracts | Net Change in Unrealized Appreciation/Depreciation on Futures Contracts | ||||||||||
Equity Risk Exposure | $ | 1,528 | $ | (103 | ) | ||||||
All open derivative positions at year end are reflected on the Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to the Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statement of Operations.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 20,708 | $ | — | $ | 21,262 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades, which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2022, the Fund engaged in the following securities transactions with affiliated funds, which resulted in the following net realized gains (losses) (amounts in thousands):
| Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| $ | — | $ | 2,957 | $ | 55 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 162,524 | $ | 162,770 | $ | — | $ | 9,603 | ||||||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.60% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, which is based on the Fund's average daily net assets. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 1.10%.
In addition, the Fund invests in affiliated VCM exchange-traded fund(s) ("affiliated ETFs"). The Fund's advisory fee is reimbursed by VCM that to the extent of the indirect advisory fee incurred through the Fund's proportional investment in the affiliated ETFs. These affiliated ETF advisory fee reimbursements are not available for recoupment. For the year ended May 31, 2022, the Fund incurred reimbursable expenses of $91 thousand which consisted of affiliated ETF Adviser fee reimbursements. The Fund has a receivable related to these reimbursable expenses from the Adviser for $5 thousand, pursuant to the Fund's expense limitation agreement.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Total | |||||||||
| $ | 187 | $ | 236 | $ | 423 | ||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Tactical Allocation Risk — The Fund has a targeted risk tolerance and a corresponding asset allocation target; however, mere asset allocation and volatility are not the sole determination of risk. The Fund's managers will tactically allocate away from the target allocation as market conditions and the perceived risks warrant. The Fund bears the risk that the managers' tactical allocation will not be successful.
Affiliated Funds Risk — The risks of the Fund directly correspond to the risks of the underlying affiliated funds in which the Fund invests. By investing in the underlying affiliated funds, the Fund has exposure to the risk of many different areas of the market. The degree to which the risks described below apply to the Fund varies according to the Fund's asset allocation. For instance, the more the Fund is allocated to stock funds, the greater the risk associated with equity securities. The Fund also is subject to asset allocation risk (i.e., the risk that allocations will not produce the intended results) and to management risk (i.e., the risk that the selection of underlying affiliated funds will not produce the intended results).
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Conflict of Interest Risk — In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
ETF Risk — ETFs, which generally are registered investment companies, incur their own management and other fees and expenses, such as trustees' fees, operating expenses, registration fees, and marketing expenses, a proportionate share of which will be borne indirectly by the Fund as a shareholder in an ETF. As a result, the Fund's investment in an ETF will cause the Fund to indirectly bear the fees and expenses of the ETF and, in turn, the Fund's performance may be lower than if the Fund were to invest directly in the underlying securities held by the ETF. For investments in affiliated ETFs, the Fund's management fee is reimbursed by the Adviser to the extent of the indirect management fee incurred through the Fund's investment in the affiliated ETFs. The Adviser may have conflicts of interest in allocating assets among affiliated and unaffiliated ETFs, because the Adviser also manages and administers the affiliated ETFs, and the Adviser and its affiliates receive other fees from the affiliated ETFs. In addition, the Fund also will be subject to the risks associated with the securities or other investments held by the ETFs.
LIBOR Discontinuation Risk — The London Interbank Offered Rate ("LIBOR") discontinuation may adversely affect the financial markets generally and the Fund's operations, finances and investments specifically. LIBOR has been the principal floating-rate benchmark in the financial markets, and a large portion of the Fund's assets are tied to LIBOR. However, LIBOR has been or will be discontinued as a floating rate benchmark. The date of discontinuation depends on the LIBOR currency and tenor. With limited exceptions, no new LIBOR obligations will be entered into after December 31, 2021. Existing LIBOR obligations have transitioned or will transition to another benchmark, depending on the LIBOR currency and tenor. For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
Non-LIBOR floating-rate obligations, including Secured Overnight Financing Rate ("SOFR")-based obligations, may have returns and values that fluctuate more than those of floating-rate debt obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest-rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Various SOFR-based rates, including SOFR-based term rates, and various non-SOFR-based rates are expected to develop in response to the discontinuation of U.S. dollar LIBOR, which may create various risks for the Fund and the financial markets more generally. There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Such rates include AMERIBOR (American Interbank Offered Rate), BSBY (Bloomberg Short-Term Bank Yield Index) and BYI (Bank Yield Index). Unlike forward-looking SOFR-based term rates, such rates are intended to reflect a bank credit spread component.
It is not clear how replacement rates for LIBOR — including SOFR-based rates and non-SOFR-based rates — will develop and to what extent they will be used. There is no assurance that these replacement rates will be suitable substitutes for LIBOR, and thus the substitution of such rates for LIBOR could have an adverse effect on the Fund and the financial markets more generally. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, which may or may not be similar to the risks relating to SOFR.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month LIBOR plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||
| $ | (751 | ) | $ | 751 | |||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 16,878 | $ | 15,006 | $ | 31,884 | $ | 6,174 | $ | 940 | $ | 7,114 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Other Earnings (Loss) | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 1,970 | $ | 11,395 | $ | (5 | ) | $ | 13,360 | $ | 36,793 | $ | 50,153 | |||||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, futures, trust preferred and grantor trust securities accruals, partnership, and REITs/return of capital.
As of May 31, 2022, the Fund had no capital loss carryforwards, for capital income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 339,904 | $ | 49,031 | $ | (12,238 | ) | $ | 36,793 | |||||||
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares, an investment company managed by VCM, or an issuer under common control with a Fund or VCM. The Fund does not invest in affiliated securities for the purpose of exercising management or control. These securities are noted as affiliated on the Fund's Schedule of Portfolio Investments. The financial statements of the underlying funds can be found in shareholder reports filed with the SEC by each such underlying fund semi-annually on Form N-CSR and are available for
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
download from both the SEC's as well as each respective underlying fund's website. Transactions in affiliated securities during the year ended May 31, 2022, were as follows (amounts in thousands):
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | $ | — | $ | 14,618 | $ | (7,309 | ) | $ | — | $ | — | $ | (668 | ) | $ | 6,641 | $ | 62 | |||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 11,794 | 35,514 | (17,758 | ) | — | 54 | (2,628 | ) | 26,922 | 361 | |||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 5,353 | — | — | — | 11 | (238 | ) | 5,115 | 92 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 824 | — | — | — | — | (110 | ) | 714 | 34 | ||||||||||||||||||||||||||
$ | 17,971 | $ | 50,132 | $ | (25,067 | ) | $ | — | $ | 65 | $ | (3,644 | ) | $ | 39,392 | $ | 549 | ||||||||||||||||||
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Aggressive Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Aggressive Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
38
USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 948.00 | $ | 1,019.40 | $ | 5.39 | $ | 5.59 | 1.11 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 20 | % | 21 | % | $ | 12,676 | $ | 15,584 | ||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Cornerstone Aggressive Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder
47
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services, as well as any fee waivers and reimbursements — was below the medians of its expense group and expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were above the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe and its Lipper index for the one-year period ended September 30, 2021, and was below the average of its performance universe and its Lipper index for the three- and five-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance relative to its peers over the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to
48
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser waived a portion of its management fees and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
49
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
50
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
97448-0722
MAY 31, 2022
Annual Report
USAA Cornerstone Conservative Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 9 | ||||||
Statement of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
| Report of Independent Registered Public Accounting Firm | 22 | ||||||
Supplemental Information (Unaudited) | 23 | ||||||
Trustee and Officer Information | 23 | ||||||
Proxy Voting and Portfolio Holdings Information | 28 | ||||||
Expense Example | 28 | ||||||
Additional Federal Income Tax Information | 29 | ||||||
Advisory Contract Renewal | 30 | ||||||
Liquidity Risk Management Program | 33 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Cornerstone Conservative Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Cornerstone Conservative Fund
Managers' Commentary (continued)
• How did the USAA Cornerstone Conservative Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a total return of -6.19%. This compares to returns of -8.41% for the Bloomberg U.S. Universal Index, and -7.66% for the Cornerstone Conservative Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative one-year total return, as both equity and fixed income markets sold off, as inflation concerns, rising interest rates, the end of Quantitative Easing, and the Russian invasion of Ukraine created a concerning and volatile investment environment. Major equity and fixed income asset classes were negative over the past year, while real estate investment trust ("REITs") and commodities were positive. The Fund outperformed the Cornerstone Conservative Composite Index.
Positive contributors to the relative performance included the underlying funds' stock selection within fixed income. Over the period, the Fund maintained a large allocation to short term corporate bonds and an overall shorter duration, which contributed positively as rising interest rates weighed on traditional fixed income markets in early 2022. Other positive contributors to the relative performance included security selection within the U.S. large-cap, U.S. small-cap, and international portions of the portfolio. The Fund benefited from the rotation of growth stocks into value stocks around the beginning of the year.
Another positive performance driver was a slight overweight to commodities, which performed well as prices of energy soared during the period.
Detractors to the relative performance were underweights to both REITs and cash. REITs did well due to investors seeking yield and concerns over rising interest rates.
Thank you for allowing us to assist you with your investment needs.
5
USAA Cornerstone Conservative Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | Bloomberg U.S. | Cornerstone Conservative | |||||||||||||
One Year | –6.19 | % | –8.41 | % | –7.66 | % | |||||||||
Five Year | 3.26 | % | 1.33 | % | 3.07 | % | |||||||||
Since Inception | 3.95 | % |
| 2.08 | % |
| 3.83 | % | |||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Conservative Fund — Growth of $10,000
*The performance of the Bloomberg Barclays U.S. Universal Index and Cornerstone Conservative Composite Index is calculated from the end of the month, May 31, 2012, while the inception date of the Cornerstone Aggressive Fund is June 8, 2012. There might be a slight variation of performance numbers because of the difference.
1The unmanaged Bloomberg U.S. Universal Index is an index that represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index, and the non-ERISA eligible portion of the CMBS Index. The index covers USD denominated, taxable bonds that are rated either investment-grade or below investment-grade. This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The Cornerstone Conservative Composite Index is a combination of unmanaged indexes representing the Fund's model allocation, and consists of the MSCI USA Investable Market Index (IMI) Gross (11%), the MSCI ACWI ex USA IMI Net (8%), the Bloomberg U.S. Universal Index (78%), the Bloomberg Commodity Index Total Return (0.5%), the MSCI U.S. Real Estate Investment Trust (REIT) Index Gross (0.5%), and the Bloomberg U.S. Treasury — Bills (1-3M) (2%). This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Cornerstone Conservative Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks current income and also considers the potential for capital appreciation.
Top 10 Holdings*:
May 31, 2022
(% of Net Assets)
USAA Intermediate-Term Bond Fund Institutional Shares | 18.8 | % | |||||
VictoryShares USAA Core Short-Term Bond ETF | 14.9 | % | |||||
USAA Government Securities Fund Institutional Shares | 14.9 | % | |||||
USAA Income Fund Institutional Shares | 11.5 | % | |||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 7.2 | % | |||||
USAA High Income Fund Institutional Shares | 5.2 | % | |||||
USAA 500 Index Fund Reward Shares | 4.3 | % | |||||
USAA International Fund Institutional Shares | 3.4 | % | |||||
USAA Short-Term Bond Fund Institutional Shares | 2.9 | % | |||||
USAA Target Managed Allocation Fund | 2.5 | % | |||||
Asset Allocation*:
May 31, 2022
(% of Net Assets)
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Cornerstone Conservative Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (28.7%) | |||||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 334,133 | $ | 16,072 | ||||||||
VictoryShares USAA Core Short-Term Bond ETF | 669,201 | 33,186 | |||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 67,940 | 3,030 | |||||||||
VictoryShares USAA MSCI International Value Momentum ETF | 113,561 | 5,063 | |||||||||
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 18,550 | 1,228 | |||||||||
VictoryShares USAA MSCI USA Value Momentum ETF | 81,189 | 5,364 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $63,944) | 63,943 | ||||||||||
Affiliated Mutual Funds (71.0%) | |||||||||||
USAA 500 Index Fund Reward Shares | 177,505 | 9,498 | |||||||||
USAA Emerging Markets Fund Institutional Shares | 120,040 | 2,397 | |||||||||
USAA Government Securities Fund Institutional Shares | 3,608,273 | 33,143 | |||||||||
USAA Growth Fund Institutional Shares | 59,004 | 1,584 | |||||||||
USAA High Income Fund Institutional Shares | 1,655,124 | 11,702 | |||||||||
USAA Income Fund Institutional Shares | 2,170,397 | 25,719 | |||||||||
USAA Income Stock Fund Institutional Shares | 100,587 | 1,942 | |||||||||
USAA Intermediate-Term Bond Fund Institutional Shares | 4,381,999 | 41,913 | |||||||||
USAA International Fund Institutional Shares | 314,618 | 7,592 | |||||||||
USAA Nasdaq-100 Index Fund Class R6 | 47,363 | 1,588 | |||||||||
USAA Precious Metals and Minerals Fund Institutional Shares | 61,676 | 1,143 | |||||||||
USAA Short-Term Bond Fund Institutional Shares | 741,370 | 6,564 | |||||||||
USAA Small Cap Stock Fund Institutional Shares | 101,426 | 1,293 | |||||||||
USAA Target Managed Allocation Fund | 581,717 | 5,689 | |||||||||
USAA Value Fund Institutional Shares | 112,498 | 2,057 | |||||||||
Victory Market Neutral Income Fund Class I | 486,887 | 4,689 | |||||||||
Total Affiliated Mutual Funds (Cost $163,063) | 158,513 | ||||||||||
Total Investments (Cost $227,007) — 99.7% | 222,456 | ||||||||||
Other assets in excess of liabilities — 0.3% | 681 | ||||||||||
NET ASSETS — 100.00% | $ | 223,137 | |||||||||
At May 31, 2022, the Fund's investments in foreign securities were 8.1% of net assets.
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Conservative Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $227,007) | $ | 222,456 | |||||
Cash | 654 | ||||||
Receivables: | |||||||
Capital shares issued | 160 | ||||||
Prepaid expenses | 23 | ||||||
Total Assets | 223,293 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Capital shares redeemed | 122 | ||||||
Accrued expenses and other payables: | |||||||
Custodian fees | 1 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
Other accrued expenses | 33 | ||||||
Total Liabilities | 156 | ||||||
Net Assets: | |||||||
Capital | 223,843 | ||||||
Total accumulated earnings/(loss) | (706 | ) | |||||
Net Assets | $ | 223,137 | |||||
Shares (unlimited number of shares authorized with no par value): | 20,852 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 10.70 | |||||
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
9
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Cornerstone Conservative Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 6,718 | |||||
Interest from unaffiliated investments | — | (a) | |||||
Securities lending (net of fees) | 1 | ||||||
Total Income | 6,719 | ||||||
Expenses: | |||||||
Sub-Administration fees | 18 | ||||||
Custodian fees | 7 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 2 | ||||||
Printing fees | 23 | ||||||
Legal and audit fees | 50 | ||||||
State registration and filing fees | 35 | ||||||
Interfund lending fees | — | (a) | |||||
Other expenses | 21 | ||||||
Total Expenses | 204 | ||||||
Net Investment Income (Loss) | 6,515 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from sales of affiliated funds | (339 | ) | |||||
Capital gain distributions received from affiliated funds | 4,343 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (25,778 | ) | |||||
Net realized/unrealized gains (losses) on investments | (21,774 | ) | |||||
Change in net assets resulting from operations | $ | (15,259 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Cornerstone Conservative Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 6,515 | $ | 5,871 | |||||||
Net realized gains (losses) | 4,004 | 3,646 | |||||||||
Net change in unrealized appreciation/depreciation | (25,778 | ) | 15,992 | ||||||||
Change in net assets resulting from operations | (15,259 | ) | 25,509 | ||||||||
Change in net assets resulting from distributions to shareholders | (9,581 | ) | (8,183 | ) | |||||||
Change in net assets resulting from capital transactions | 4,027 | 20,674 | |||||||||
Change in net assets | (20,813 | ) | 38,000 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 243,950 | 205,950 | |||||||||
End of period | $ | 223,137 | $ | 243,950 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 60,512 | $ | 66,446 | |||||||
Distributions reinvested | 9,518 | 8,144 | |||||||||
Cost of shares redeemed | (66,003 | ) | (53,916 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 4,027 | $ | 20,674 | |||||||
Share Transactions: | |||||||||||
Issued | 5,222 | 5,750 | |||||||||
Reinvested | 819 | 711 | |||||||||
Redeemed | (5,759 | ) | (4,674 | ) | |||||||
Change in Shares | 282 | 1,787 | |||||||||
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Conservative Fund | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 11.86 | 0.31 | (d) | (1.01 | ) | (0.70 | ) | (0.31 | ) | (0.15 | ) | |||||||||||||||
2021 | $ | 10.96 | 0.30 | (d) | 1.03 | 1.33 | (0.31 | ) | (0.12 | ) | |||||||||||||||||
2020 | $ | 10.72 | 0.32 | (d) | 0.25 | 0.57 | (0.33 | ) | — | ||||||||||||||||||
2019 | $ | 10.64 | 0.32 | 0.08 | 0.40 | (0.32 | ) | — | |||||||||||||||||||
2018 | $ | 10.76 | 0.30 | (0.11 | ) | 0.19 | (0.31 | ) | — | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023 instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return(a) | Net Expenses(b)(c) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Conservative Fund | |||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (0.46 | ) | $ | 10.70 | (6.19 | )% | 0.08 | % | 2.68 | % | 0.08 | % | $ | 223,137 | 11 | % | |||||||||||||||||||
2021 | (0.43 | ) | $ | 11.86 | 12.28 | % | 0.10 | % | 2.61 | % | 0.10 | % | $ | 243,950 | 15 | % | |||||||||||||||||||
2020 | (0.33 | ) | $ | 10.96 | 5.45 | % | 0.09 | % | 2.92 | % | 0.10 | % | $ | 205,950 | 8 | % | |||||||||||||||||||
2019 | (0.32 | ) | $ | 10.72 | 3.84 | % | 0.10 | % | 2.99 | % | 0.12 | % | $ | 193,265 | 22 | % | |||||||||||||||||||
2018 | (0.31 | ) | $ | 10.64 | 1.79 | % | 0.10 | % | 2.87 | % | 0.12 | % | $ | 196,292 | 5 | % | |||||||||||||||||||
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Cornerstone Conservative Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act. The Fund is a "fund of funds" in that it invests in a selection of affiliated mutual funds and exchange-traded funds ("ETFS") managed by the Fund's Adviser, Victory Capital Management Inc. ("VCM"), an affiliate of the Fund.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including ETFs, are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments in open-end investment companies, including underlying funds, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Affiliated Exchange-Traded Funds | $ | 63,943 | $ | — | $ | — | $ | 63,943 | |||||||||||
Affiliated Mutual Funds | 158,513 | — | — | 158,513 | |||||||||||||||
Total | $ | 222,456 | $ | — | $ | — | $ | 222,456 | |||||||||||
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
As of May 31, 2022, the Fund did not have any securities on loan.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$31,005 | $25,518 | ||||||
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC. The Adviser does not receive any fees from the Fund for these services.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisors.
Administration and Servicing Fees:
VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM does not receive any fees from the Fund for these services.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA does not receive any fees from the Fund for these services.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 0.10%.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, there are no amounts available to be repaid to the Adviser.
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Tactical Allocation Risk — The Fund has a targeted risk tolerance and a corresponding asset allocation target; however, mere asset allocation and volatility are not the sole determination of risk. The Fund's managers will tactically allocate away from the target allocation as market conditions and the perceived risks warrant. The Fund bears the risk that the managers' tactical allocation will not be successful.
Affiliated Funds Risk — The risks of the Fund directly correspond to the risks of the underlying affiliated funds in which the Fund invests. By investing in the underlying affiliated funds, the Fund has exposure to the risk of many different areas of the market. The degree to which the risks described below apply to the Fund varies according to the Fund's asset allocation. For instance, the more the Fund is allocated to stock funds, the greater the risk associated with equity securities. The Fund also is subject to asset allocation risk (i.e., the risk that allocations will not produce the intended results) and to management risk (i.e., the risk that the selection of underlying affiliated funds will not produce the intended results).
Conflict of Interest Risk — In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 1,245 | 1 | 1.33 | % | $ | 1,245 | ||||||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
(e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 6,665 | $ | 2,916 | $ | 9,581 | $ | 6,144 | $ | 2,039 | $ | 8,183 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 749 | $ | 3,684 | $ | 4,433 | $ | (5,139 | ) | $ | (706 | ) | ||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales.
As of May 31, 2022, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 227,595 | $ | 7,975 | $ | (13,114 | ) | $ | (5,139 | ) | ||||||
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares, an investment company managed by VCM, or an issuer under common control with a Fund or VCM. The Fund does not invest in affiliated securities for the purpose of exercising management or control. These securities are noted as affiliated on the Fund's Schedule of Portfolio Investments. The financial statements of the underlying funds can be found in shareholder reports filed with the SEC by each such underlying fund semi-annually on Form N-CSR and are available for download from both the SEC's as well as each respective underlying fund's website. Transactions in affiliated securities during the year ended May 31, 2022, were as follows (amounts in thousands):
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| USAA 500 Index Fund Reward Shares | $ | 9,138 | $ | 2,349 | $ | (1,470 | ) | $ | 196 | $ | 339 | $ | (715 | ) | $ | 9,498 | $ | 121 | |||||||||||||||||
| USAA Aggressive Growth Fund Institutional Shares | 1,899 | 214 | (1,456 | ) | 18 | 212 | (675 | ) | — | 2 | |||||||||||||||||||||||||
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| USAA Emerging Markets Fund Institutional Shares | $ | 2,639 | $ | 270 | $ | — | $ | — | $ | — | $ | (512 | ) | $ | 2,397 | $ | 24 | ||||||||||||||||||
| USAA Government Securities Fund Institutional Shares | 42,504 | 1,927 | (7,601 | ) | (714 | ) | 479 | (2,973 | ) | 33,143 | 752 | ||||||||||||||||||||||||
| USAA Growth Fund Institutional Shares | 2,141 | 200 | (248 | ) | 80 | 167 | (589 | ) | 1,584 | 33 | |||||||||||||||||||||||||
| USAA High Income Fund Institutional Shares | 12,325 | 1,783 | (1,230 | ) | (23 | ) | — | (1,153 | ) | 11,702 | 589 | ||||||||||||||||||||||||
| USAA Income Fund Institutional Shares | 37,419 | 1,702 | (8,866 | ) | (538 | ) | 675 | (3,998 | ) | 25,719 | 1,027 | ||||||||||||||||||||||||
| USAA Income Stock Fund Institutional Shares | 2,749 | 475 | (1,211 | ) | 201 | 166 | (272 | ) | 1,942 | 64 | |||||||||||||||||||||||||
| USAA Intermediate-Term Bond Fund Institutional Shares | 40,005 | 7,665 | — | — | 780 | (5,757 | ) | 41,913 | 1,378 | ||||||||||||||||||||||||||
| USAA International Fund Institutional Shares | 8,430 | 1,908 | (1,213 | ) | (11 | ) | 395 | (1,522 | ) | 7,592 | 290 | ||||||||||||||||||||||||
| USAA Nasdaq-100 Index Fund Class R6 | — | 1,500 | — | — | — | 88 | 1,588 | — | |||||||||||||||||||||||||||
| USAA Precious Metals and Minerals Fund Institutional Shares | 1,408 | 12 | — | — | (1 | ) | (277 | ) | 1,143 | 11 | |||||||||||||||||||||||||
| USAA Short-Term Bond Fund Institutional Shares | 6,750 | 166 | — | — | 40 | (352 | ) | 6,564 | 139 | ||||||||||||||||||||||||||
| USAA Small Cap Stock Fund Institutional Shares | 1,486 | 616 | (253 | ) | 91 | 232 | (647 | ) | 1,293 | 139 | |||||||||||||||||||||||||
| USAA Target Managed Allocation Fund | 6,359 | 1,394 | (508 | ) | 95 | 662 | (1,651 | ) | 5,689 | 733 | |||||||||||||||||||||||||
| USAA Value Fund Institutional Shares | 2,195 | 396 | (483 | ) | (2 | ) | 84 | (49 | ) | 2,057 | 66 | ||||||||||||||||||||||||
| Victory Market Neutral Income Fund Class I | — | 4,684 | — | — | — | 5 | 4,689 | 28 | |||||||||||||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 17,831 | — | — | — | 41 | (1,759 | ) | 16,072 | 310 | ||||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 30,971 | 3,744 | — | — | 72 | (1,529 | ) | 33,186 | 574 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 3,500 | — | — | — | — | (470 | ) | 3,030 | 144 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI International Value Momentum ETF | 5,763 | — | — | — | — | (700 | ) | 5,063 | 191 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 1,313 | — | — | — | — | (85 | ) | 1,228 | 12 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI USA Value Momentum ETF | 6,261 | — | (979 | ) | 268 | — | (186 | ) | 5,364 | 91 | |||||||||||||||||||||||||
$ | 243,086 | $ | 31,005 | $ | (25,518 | ) | $ | (339 | ) | $ | 4,343 | $ | (25,778 | ) | $ | 222,456 | $ | 6,718 | |||||||||||||||||
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Conservative Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Conservative Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 932.00 | $ | 1,024.53 | $ | 0.39 | $ | 0.40 | 0.08 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | Foreign Taxes Paid | |||||||||||||||
4 | % | 10 | % | $ | 98 | $ | 2,916 | $ | 344 | ||||||||||
The Fund intends to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on May 31, 2022, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.01 | $ | 0.02 | ||||
29
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Cornerstone Conservative Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). The Board noted that the Adviser does not receive a management fee from the Fund. The data indicated that the Fund's total expenses, which included underlying fund expenses, were below the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe and its Lipper index for the one- and five-year periods ended September 30, 2021, and was above the average of its performance universe and below its Lipper index for the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration that the Adviser does not collect a management fee from the Fund. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser
31
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — With respect to the consideration of any economies of scale to be realized by the Fund, the Board took into account that the Adviser does not receive any advisory fees under the Advisory Agreement. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
32
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage each Fund's liquidity risk, taking into consideration each Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Funds' Board of Trustees approved the appointment of the Funds' investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Funds' investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of each Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Funds' portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Funds did not experience any significant liquidity challenges during the covered period, and the Funds' LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure each Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in each Fund. During the review period, each Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that each Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Funds have not adopted a highly liquid investment minimum. The Funds' investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
33
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
97446-0722
MAY 31, 2022
Annual Report
USAA Cornerstone Equity Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 9 | ||||||
Statement of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
| Report of Independent Registered Public Accounting Firm | 23 | ||||||
Supplemental Information (Unaudited) | 24 | ||||||
Trustee and Officer Information | 24 | ||||||
Proxy Voting and Portfolio Holdings Information | 30 | ||||||
Expense Example | 30 | ||||||
Additional Federal Income Tax Information | 31 | ||||||
Advisory Contract Renewal | 32 | ||||||
Liquidity Risk Management Program | 35 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Cornerstone Equity Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Cornerstone Equity Fund
Managers' Commentary (continued)
• How did the USAA Cornerstone Equity Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a total return of –6.41%. This compares to returns of –6.78% for the MSCI All-Country World Index, and –5.50% for the Cornerstone Equity Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative one-year total return, as both equity and fixed income markets sold off, as inflation concerns, rising interest rates, the end of Quantitative Easing, and the Russian invasion of Ukraine created a concerning and volatile investment environment. Major equity asset classes were negative over the past year, while real estate investment trusts ("REITs") and commodities were positive. The Fund underperformed the Cornerstone Equity Composite Index.
Overall, the underlying funds' stock selection in equities was positive for the Fund, led by emerging markets, U.S. small-cap, and international stocks. The Fund benefited from the rotation of growth stocks into value stocks around the beginning of the year. An overweight to U.S. large-cap stocks also aided the Fund as larger companies were able to absorb market shocks better than smaller companies.
These positive drivers were offset by an underweight to commodities, which performed well as prices of energy soared during the period. Other detractors to the relative performance included stock selection within U.S. large-cap and an underweight to REITs.
Thank you for allowing us to assist you with your investment needs.
5
USAA Cornerstone Equity Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | MSCI All-Country | Cornerstone Equity | |||||||||||||
One Year | –6.41 | % | –6.78 | % | –5.50 | % | |||||||||
Five Year | 7.07 | % | 9.00 | % | 9.41 | % | |||||||||
Since Inception | 8.50 | % |
| 10.17 | % |
| 10.62 | % | |||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Equity Fund — Growth of $10,000
*The performance of the MSCI All-Country World Index and Cornerstone Equity Composite Index is calculated from the end of the month, May 31, 2012, while the inception date of the Cornerstone Equity Fund is June 8, 2012. There might be a slight variation of performance numbers because of the difference.
1The unmanaged MSCI All-Country World Index is a free float-adjusted, market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The Cornerstone Equity Composite Index is a combination of unmanaged indexes representing the Fund's model allocation, and consists of the MSCI USA Investable Market Index (IMI) Gross (56%), the MSCI ACWI ex USA IMI Net (37%), the Bloomberg Commodity Index Total Return (2.5%), the MSCI U.S. Real Estate Investment Trust (REIT) Index Gross (2.5%), and the Bloomberg U.S. Treasury — Bills (1–3M) (2%). This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
USAA Mutual Funds Trust
USAA Cornerstone Equity Fund May 31, 2022
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation over the long term.
Top 10 Holdings*:
May 31, 2022
(% of Net Assets)
USAA 500 Index Fund Reward Shares | 20.6 | % | |||||
USAA International Fund Institutional Shares | 14.7 | % | |||||
VictoryShares USAA MSCI USA Value Momentum ETF | 12.9 | % | |||||
VictoryShares USAA MSCI International Value Momentum ETF | 11.9 | % | |||||
USAA Target Managed Allocation Fund | 6.7 | % | |||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 5.7 | % | |||||
USAA Emerging Markets Fund Institutional Shares | 5.0 | % | |||||
USAA Income Stock Fund Institutional Shares | 4.4 | % | |||||
USAA Value Fund Institutional Shares | 4.3 | % | |||||
USAA Growth Fund Institutional Shares | 3.8 | % | |||||
Asset Allocation*:
May 31, 2022
(% of Net Assets)
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Cornerstone Equity Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (33.7%) | |||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 266,858 | $ | 11,900 | ||||||||
VictoryShares USAA MSCI International Value Momentum ETF | 555,112 | 24,749 | |||||||||
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF (a) | 100,558 | 6,659 | |||||||||
VictoryShares USAA MSCI USA Value Momentum ETF | 405,692 | 26,806 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $65,785) | 70,114 | ||||||||||
Affiliated Mutual Funds (66.0%) | |||||||||||
USAA 500 Index Fund Reward Shares | 799,318 | 42,772 | |||||||||
USAA Emerging Markets Fund Institutional Shares | 521,672 | 10,418 | |||||||||
USAA Growth Fund Institutional Shares | 295,666 | 7,936 | |||||||||
USAA Income Stock Fund Institutional Shares | 478,100 | 9,232 | |||||||||
USAA International Fund Institutional Shares | 1,265,206 | 30,529 | |||||||||
USAA Nasdaq-100 Index Fund Class R6 | 216,980 | 7,275 | |||||||||
USAA Precious Metals and Minerals Fund Institutional Shares | 44,305 | 821 | |||||||||
USAA Small Cap Stock Fund Institutional Shares | 416,784 | 5,314 | |||||||||
USAA Target Managed Allocation Fund | 1,425,755 | 13,944 | |||||||||
USAA Value Fund Institutional Shares | 485,864 | 8,882 | |||||||||
Total Affiliated Mutual Funds (Cost $118,967) | 137,123 | ||||||||||
Collateral for Securities Loaned (0.5%)^ | |||||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (b) | 993,250 | 993 | |||||||||
Total Collateral for Securities Loaned (Cost $993) | 993 | ||||||||||
Total Investments (Cost $185,745) — 100.2% | 208,230 | ||||||||||
Liabilities in excess of other assets — (0.2)% | (321 | ) | |||||||||
NET ASSETS — 100.00% | $ | 207,909 | |||||||||
At May 31, 2022, the Fund's investments in foreign securities were 37.3% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Rate disclosed is the daily yield on May 31, 2022.
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Equity Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $184,752) | $ | 207,237 | |||||
Unaffiliated investments, at value (Cost $993) | 993 | (a) | |||||
Cash | 633 | ||||||
Receivables: | |||||||
Interest and dividends | 3 | ||||||
Capital shares issued | 154 | ||||||
Prepaid expenses | 16 | ||||||
Total Assets | 209,036 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 993 | ||||||
Capital shares redeemed | 97 | ||||||
Accrued expenses and other payables: | |||||||
Custodian fees | 1 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | — | (b) | |||||
Other accrued expenses | 36 | ||||||
Total Liabilities | 1,127 | ||||||
Net Assets: | |||||||
Capital | 176,291 | ||||||
Total accumulated earnings/(loss) | 31,618 | ||||||
Net Assets | $ | 207,909 | |||||
Shares (unlimited number of shares authorized with no par value): | 13,337 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 15.59 | |||||
(a) Includes $960 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
9
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Cornerstone Equity Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 7,123 | |||||
Securities lending (net of fees) | 18 | ||||||
Total Income | 7,141 | ||||||
Expenses: | |||||||
Sub-Administration fees | 19 | ||||||
Custodian fees | 7 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 2 | ||||||
Printing fees | 25 | ||||||
Legal and audit fees | 50 | ||||||
State registration and filing fees | 23 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 18 | ||||||
Other expenses | 19 | ||||||
Total Expenses | 211 | ||||||
Net Investment Income (Loss) | 6,930 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from sales of affiliated funds | 1,258 | ||||||
Capital gain distributions received from affiliated funds | 9,193 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (31,549 | ) | |||||
Net realized/unrealized gains (losses) on investments | (21,098 | ) | |||||
Change in net assets resulting from operations | $ | (14,168 | ) | ||||
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Cornerstone Equity Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 6,930 | $ | 3,618 | |||||||
Net realized gains (losses) | 10,451 | 1,909 | |||||||||
Net change in unrealized appreciation/depreciation | (31,549 | ) | 67,536 | ||||||||
Change in net assets resulting from operations | (14,168 | ) | 73,063 | ||||||||
Change in net assets resulting from distributions to shareholders | (10,625 | ) | (16,403 | ) | |||||||
Change in net assets resulting from capital transactions | 466 | (15,437 | ) | ||||||||
Change in net assets | (24,327 | ) | 41,223 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 232,236 | 191,013 | |||||||||
End of period | $ | 207,909 | $ | 232,236 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 27,268 | $ | 26,443 | |||||||
Distributions reinvested | 10,602 | 16,362 | |||||||||
Cost of shares redeemed | (37,404 | ) | (58,242 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 466 | $ | (15,437 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 1,585 | 1,681 | |||||||||
Reinvested | 608 | 1,061 | |||||||||
Redeemed | (2,174 | ) | (3,809 | ) | |||||||
Change in Shares | 19 | (1,067 | ) | ||||||||
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Equity Fund | |||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||
2022 | $ | 17.44 | 0.52 | (d) | (1.56 | ) | (1.04 | ) | (0.59 | ) | (0.22 | ) | |||||||||||||||
2021 | $ | 13.28 | 0.27 | (d) | 5.16 | 5.43 | (0.20 | ) | (1.07 | ) | |||||||||||||||||
2020 | $ | 13.90 | 0.34 | (d) | (0.24 | ) | 0.10 | (0.32 | ) | (0.40 | ) | ||||||||||||||||
2019 | $ | 15.49 | 0.26 | (0.99 | ) | (0.73 | ) | (0.25 | ) | (0.61 | ) | ||||||||||||||||
2018 | $ | 14.31 | 0.22 | 1.26 | 1.48 | (0.22 | ) | (0.08 | ) | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Reflects increased usage of quantitative investment strategies.
(f) Reflects an increase in trading activity due to asset allocation shifts.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return(a) | Net Expenses(b)(c) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Equity Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||||||
2022 | (0.81 | ) | $ | 15.59 | (6.41 | )% | 0.09 | % | 3.04 | % | 0.09 | % | $ | 207,909 | 12 | % | |||||||||||||||||||
2021 | (1.27 | ) | $ | 17.44 | 42.26 | % | 0.10 | % | 1.74 | % | 0.11 | % | $ | 232,236 | 5 | % | |||||||||||||||||||
2020 | (0.72 | ) | $ | 13.28 | 0.14 | % | 0.10 | % | 2.38 | % | 0.10 | % | $ | 191,013 | 6 | % | |||||||||||||||||||
2019 | (0.86 | ) | $ | 13.90 | (4.35 | )% | 0.10 | % | 1.79 | % | 0.13 | % | $ | 202,288 | 11 | %(e) | |||||||||||||||||||
2018 | (0.30 | ) | $ | 15.49 | 10.32 | % | 0.10 | % | 1.46 | % | 0.13 | % | $ | 200,186 | 38 | %(f) | |||||||||||||||||||
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Cornerstone Equity Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act. The Fund is a "fund of funds" in that it invests in a selection of affiliated mutual funds and exchange-traded funds ("ETFs") managed by the Fund's Adviser, Victory Capital Management Inc. ("VCM"), an affiliate of the Fund.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including ETFs, are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, including underlying funds, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Affiliated Exchange-Traded Funds | $ | 70,114 | $ | — | $ | — | $ | 70,114 | |||||||||||
Affiliated Mutual Funds | 137,123 | — | — | 137,123 | |||||||||||||||
Collateral for Securities Loaned | 993 | — | — | 993 | |||||||||||||||
Total | $ | 208,230 | $ | — | $ | — | $ | 208,230 | |||||||||||
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis.
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 960 | $ | — | $ | 993 | ||||||
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | |||||||
| Purchases | Sales | ||||||
| $ | 33,848 | $ | 28,012 | ||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC. The Adviser does not receive any fees from the Fund for these services.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM does not receive any fees from the Fund for these services.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA does not receive any fees from the Fund for these services.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 0.10%.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment. As of May 31, 2022, there are no amounts available to be repaid to the Adviser.
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Affiliated Funds Risk — The risks of the Fund directly correspond to the risks of the underlying affiliated funds in which the Fund invests. By investing in the underlying affiliated funds, the Fund has exposure to the risk of many different areas of the market. The degree to which the risks described below apply to the Fund varies according to the Fund's asset allocation. For instance, the more the Fund is allocated to stock funds, the greater the risk associated with equity securities. The Fund also is subject to asset allocation risk (i.e., the risk that allocations will not produce the intended results) and to management risk (i.e., the risk that the selection of underlying affiliated funds will not produce the intended results).
Conflict of Interest Risk — In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Equity Risk — The Fund may invest in underlying affiliated funds that invest in equity securities. The values of the equity securities in which the Fund invests may decline in response to developments affecting individual companies and/or general market, economic and political conditions and other factors. A company's earnings or dividends may not increase as expected due to poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters, military confrontations, war, terrorism, public health crises, or other events, conditions, and factors. Price changes may be temporary or may last for extended periods.
ETF Risk — The Fund may invest in shares of ETFs, which generally are investment companies that hold a portfolio of common stocks or debt securities, the shares of which are traded on an exchange. ETFs incur their own management and other fees and expenses, such as trustees' fees, operating expenses, registration fees, and marketing expenses, a proportionate share of which would be indirectly borne by the Fund. As a result, an investment by the Fund in an ETF will cause the Fund to indirectly bear the fees and expenses of the ETF and, in turn, performance may be lower than if the Fund were to invest directly in the securities underlying the ETF. In addition, the Fund will be indirectly exposed to all of the risk of securities held by the ETFs.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||
| $ | (591 | ) | $ | 591 | |||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 7,967 | $ | 2,658 | $ | 10,625 | $ | 2,667 | $ | 13,736 | $ | 16,403 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 480 | $ | 9,091 | $ | 9,571 | $ | 22,047 | $ | 31,618 | ||||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
As of May 31, 2022, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 186,183 | $ | 29,547 | $ | (7,500 | ) | $ | 22,047 | |||||||
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares, an investment company managed by VCM, or an issuer under common control with a Fund or VCM. The Fund does not invest in affiliated securities for the purpose of exercising management or control. These securities are noted as affiliated on the Fund's Schedule of Portfolio Investments. The financial statements of the underlying funds can be found in shareholder reports filed with the SEC by each such underlying fund semi-annually on Form N-CSR and are available for download from both the SEC's as well as each respective underlying fund's website. Transactions in affiliated securities during the year ended May 31, 2022, were as follows (amounts in thousands):
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| USAA 500 Index Fund Reward Shares | $ | 39,191 | $ | 7,649 | $ | (942 | ) | $ | 57 | $ | 1,620 | $ | (3,183 | ) | $ | 42,772 | $ | 559 | |||||||||||||||||
| USAA NASDAQ-100 INDEX FUND | — | 7,020 | — | — | — | 255 | 7,275 | — | |||||||||||||||||||||||||||
| USAA Aggressive Growth Fund Institutional Shares | 10,431 | 1,138 | (8,472 | ) | (152 | ) | 1,128 | (2,945 | ) | — | 10 | ||||||||||||||||||||||||
| USAA Emerging Markets Fund Institutional Shares | 11,042 | 2,540 | (891 | ) | (99 | ) | — | (2,174 | ) | 10,418 | 106 | ||||||||||||||||||||||||
| USAA Growth Fund Institutional Shares | 11,057 | 1,062 | (1,506 | ) | 191 | 885 | (2,868 | ) | 7,936 | 178 | |||||||||||||||||||||||||
| USAA Income Stock Fund Institutional Shares | 12,321 | 1,146 | (3,760 | ) | 155 | 833 | (630 | ) | 9,232 | 313 | |||||||||||||||||||||||||
| USAA International Fund Institutional Shares | 32,254 | 6,282 | (1,580 | ) | (131 | ) | 1,646 | (6,296 | ) | 30,529 | 1,206 | ||||||||||||||||||||||||
| USAA Precious Metals and Minerals Fund Institutional Shares | 1,011 | 9 | — | — | — | (199 | ) | 821 | 8 | ||||||||||||||||||||||||||
| USAA Small Cap Stock Fund Institutional Shares | 5,781 | 2,180 | — | — | 1,073 | (2,647 | ) | 5,314 | 644 | ||||||||||||||||||||||||||
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| USAA Target Managed Allocation Fund | $ | 15,092 | $ | 3,419 | $ | (711 | ) | $ | 139 | $ | 1,622 | $ | (3,995 | ) | $ | 13,944 | $ | 1,796 | |||||||||||||||||
| USAA Value Fund Institutional Shares | 11,619 | 688 | (3,127 | ) | (141 | ) | 386 | (157 | ) | 8,882 | 302 | ||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 13,745 | — | — | — | — | (1,845 | ) | 11,900 | 564 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI International Value Momentum ETF | 29,558 | — | (1,399 | ) | (74 | ) | — | (3,336 | ) | 24,749 | 935 | ||||||||||||||||||||||||
| VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 6,641 | 715 | (240 | ) | 82 | — | (539 | ) | 6,659 | 60 | |||||||||||||||||||||||||
| VictoryShares USAA MSCI USA Value Momentum ETF | 31,949 | — | (5,384 | ) | 1,231 | — | (990 | ) | 26,806 | 442 | |||||||||||||||||||||||||
$ | 231,692 | $ | 33,848 | $ | (28,012 | ) | $ | 1,258 | $ | 9,193 | $ | (31,549 | ) | $ | 207,237 | $ | 7,123 | ||||||||||||||||||
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Equity Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
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Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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| Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 924.70 | $ | 1,024.43 | $ | 0.48 | $ | 0.50 | 0.10 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | Foreign Taxes Paid | |||||||||||||||
| 21 | % | 42 | % | $ | 135 | $ | 3,249 | $ | 1,436 | ||||||||||
The Fund intends to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on May 31, 2022, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.06 | $ | 0.11 | ||||
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Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Cornerstone Equity Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder
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services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). The Board noted that the Adviser does not receive a management fee from the Fund. The data indicated that the Fund's total expenses, which included underlying fund expenses, including after any reimbursements, were below the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe and below its Lipper index for the one-year period ended September 30, 2021, and was below the average of its performance universe and its Lipper index for the three- and five-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance relative to its peers for the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration that the Adviser does not collect a management fee from the Fund. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability
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information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — With respect to the consideration of any economies of scale to be realized by the Fund, the Board took into account that the Adviser does not receive any advisory fees under the Advisory Agreement. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
34
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage each Fund's liquidity risk, taking into consideration each Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Funds' Board of Trustees approved the appointment of the Funds' investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Funds' investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of each Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Funds' portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Funds did not experience any significant liquidity challenges during the covered period, and the Funds' LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure each Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in each Fund. During the review period, each Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that each Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Funds have not adopted a highly liquid investment minimum. The Funds' investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
35
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
97449-0722
MAY 31, 2022
Annual Report
USAA Cornerstone Moderate Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 16 | ||||||
Statement of Operations | 17 | ||||||
Statements of Changes in Net Assets | 18 | ||||||
Financial Highlights | 20 | ||||||
Notes to Financial Statements | 22 | ||||||
| Report of Independent Registered Public Accounting Firm | 34 | ||||||
Supplemental Information (Unaudited) | 35 | ||||||
Trustee and Officer Information | 35 | ||||||
Proxy Voting and Portfolio Holdings Information | 41 | ||||||
Expense Example | 41 | ||||||
Additional Federal Income Tax Information | 42 | ||||||
Advisory Contract Renewal | 43 | ||||||
Liquidity Risk Management Program | 46 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Cornerstone Moderate Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Cornerstone Moderate Fund
Managers' Commentary (continued)
• How did the USAA Cornerstone Moderate Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a total return of -5.82%. This compares to returns of -6.78% for the MSCI All-Country World Index, and -6.87% for the Cornerstone Moderate Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative one-year total return, as both equity and fixed income markets sold off, as inflation concerns, rising interest rates, the end of Quantitative Easing, and the Russian invasion of Ukraine created a concerning and volatile investment environment. Major equity and fixed income asset classes were negative over the past year, while real estate investment trusts and commodities were positive. The Fund outperformed the Cornerstone Moderate Composite Index.
Positive contributors to the relative performance included security selection within the U.S. large-cap, U.S. small-cap, and international portions of the portfolio. The Fund benefited from the rotation of growth stocks into value stocks around the beginning of the year. Over the period, the Fund maintained a large allocation to short term corporate bonds and an overall shorter duration, which contributed positively as rising interest rates weighed on traditional fixed income markets in early 2022.
These positive drivers were slightly offset by an underweight to commodities, which performed well as prices of energy soared during the period, and an overweight to emerging market stocks, as more developed markets withstood macroeconomic shocks better in the past year. The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Cornerstone Moderate Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||||||||||
INCEPTION DATE | 9/1/95 | ||||||||||||||
Net Asset Value | MSCI All-Country | Cornerstone Moderate | |||||||||||||
One Year | –5.82 | % | –6.78 | % | –6.87 | % | |||||||||
Five Year | 4.38 | % | 9.00 | % | 5.66 | % | |||||||||
Ten Year | 5.27 | % | 10.25 | % | 6.57 | % | |||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Moderate Fund — Growth of $10,000
1The unmanaged MSCI All-Country World Index is a free float-adjusted, market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The Cornerstone Moderate Composite Index is a combination of unmanaged indexes representing the Fund's model allocation, and consists of the MSCI USA Investable Market Index (IMI) Gross (29%), the MSCI ACWI ex USA IMI Net (19%), the Bloomberg U.S. Universal Index (48%), the Bloomberg Commodity Index Total Return (1%), the MSCI U.S. Real Estate Investment Trust (REIT) Index Gross (1%), and the Bloomberg U.S. Treasury — Bills (1-3M) (2%). This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks high total return.
Asset Allocation*:
May 31, 2022
(% of Net Assets)
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
7
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Asset-Backed Securities (0.2%) | |||||||||||
| Drive Auto Receivables Trust, Series 2018-4, Class D, 4.09%, 1/15/26, Callable 11/15/22 @ 100 | $ | 300 | $ | 301 | |||||||
| Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 6/15/22 @ 100 (a) | 490 | 490 | |||||||||
| HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 8/20/22 @ 100 (a) | 216 | 216 | |||||||||
| HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 249 | 249 | |||||||||
| NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 6/20/22 @ 100 (a) | 268 | 257 | |||||||||
| SCF Equipment Leasing LLC, Series 2020-1A, Class B, 2.02%, 3/20/28, Callable 3/20/25 @ 100 (a) | 506 | 483 | |||||||||
| Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 10/15/23 @ 100 (a) | 543 | 543 | |||||||||
Total Asset-Backed Securities (Cost $2,570) | 2,539 | ||||||||||
Collateralized Mortgage Obligations (0.1%) | |||||||||||
| Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51, Callable 6/10/22 @ 100 (b) | 130 | 127 | |||||||||
| Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 1.08% (LIBOR01M+19bps), 2/15/40, Callable 6/15/22 @ 100 (c) | 25 | 24 | |||||||||
| DBJPM Mortgage Trust, Series 2016-SFC, Class A, 2.83%, 8/10/36, Callable 8/10/26 @ 100 (a) | 1,500 | 1,410 | |||||||||
Total Collateralized Mortgage Obligations (Cost $1,681) | 1,561 | ||||||||||
Common Stocks (17.6%) | |||||||||||
Communication Services (1.2%): | |||||||||||
Alphabet, Inc. Class C (d) | 2,827 | 6,448 | |||||||||
AT&T, Inc. | 61,000 | 1,299 | |||||||||
Comcast Corp. Class A | 31,852 | 1,410 | |||||||||
Match Group, Inc. (d) | 12,554 | 989 | |||||||||
Sirius XM Holdings, Inc. (e) | 146,514 | 938 | |||||||||
The Interpublic Group of Cos., Inc. | 26,226 | 845 | |||||||||
Verizon Communications, Inc. | 25,815 | 1,324 | |||||||||
13,253 | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
AutoZone, Inc. (d) | 946 | 1,948 | |||||||||
Best Buy Co., Inc. | 9,768 | 802 | |||||||||
eBay, Inc. | 20,294 | 988 | |||||||||
Ford Motor Co. | 77,643 | 1,062 | |||||||||
General Motors Co. (d) | 27,017 | 1,045 | |||||||||
Lennar Corp. Class A | 12,710 | 1,020 | |||||||||
Lowe's Cos., Inc. | 11,071 | 2,162 | |||||||||
McDonald's Corp. | 4,753 | 1,199 | |||||||||
O'Reilly Automotive, Inc. (d) | 3,029 | 1,930 | |||||||||
Target Corp. (f) | 4,658 | 754 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tesla, Inc. (d) | 2,591 | $ | 1,965 | ||||||||
The Home Depot, Inc. | 9,434 | 2,856 | |||||||||
17,731 | |||||||||||
Consumer Staples (1.0%): | |||||||||||
Altria Group, Inc. | 20,358 | 1,101 | |||||||||
Colgate-Palmolive Co. | 12,414 | 978 | |||||||||
Costco Wholesale Corp. | 2,484 | 1,158 | |||||||||
PepsiCo, Inc. | 7,392 | 1,240 | |||||||||
Philip Morris International, Inc. | 11,311 | 1,202 | |||||||||
The Clorox Co. | 5,642 | 820 | |||||||||
The Coca-Cola Co. | 20,407 | 1,294 | |||||||||
The Hershey Co. | 4,059 | 859 | |||||||||
The Kroger Co. | 18,485 | 979 | |||||||||
Tyson Foods, Inc. Class A | 10,701 | 959 | |||||||||
Walgreens Boots Alliance, Inc. | 22,856 | 1,002 | |||||||||
11,592 | |||||||||||
Energy (0.7%): | |||||||||||
ConocoPhillips | 23,185 | 2,605 | |||||||||
Devon Energy Corp. | 14,820 | 1,110 | |||||||||
EOG Resources, Inc. | 8,278 | 1,134 | |||||||||
Exxon Mobil Corp. | 18,695 | 1,795 | |||||||||
Marathon Petroleum Corp. | 10,429 | 1,061 | |||||||||
7,705 | |||||||||||
Financials (2.6%): | |||||||||||
AGNC Investment Corp. (e) | 2,798 | 34 | |||||||||
American Express Co. | 6,436 | 1,087 | |||||||||
American Financial Group, Inc. | 6,011 | 849 | |||||||||
Annaly Capital Management, Inc. | 7,018 | 46 | |||||||||
Aon PLC Class A | 3,523 | 971 | |||||||||
Berkshire Hathaway, Inc. Class B (d) | 10,352 | 3,271 | |||||||||
Blackstone, Inc. | 9,995 | 1,177 | |||||||||
Capital One Financial Corp. | 8,424 | 1,077 | |||||||||
Citigroup, Inc. | 22,460 | 1,200 | |||||||||
Erie Indemnity Co. Class A | 1,017 | 171 | |||||||||
JPMorgan Chase & Co. | 12,994 | 1,718 | |||||||||
M&T Bank Corp. | 5,367 | 966 | |||||||||
Marsh & McLennan Cos., Inc. | 6,297 | 1,007 | |||||||||
MetLife, Inc. | 15,109 | 1,018 | |||||||||
Morgan Stanley | 14,031 | 1,209 | |||||||||
MSCI, Inc. | 2,398 | 1,061 | |||||||||
Prudential Financial, Inc. | 9,055 | 962 | |||||||||
Raymond James Financial, Inc. | 9,390 | 925 | |||||||||
Regions Financial Corp. | 43,206 | 954 | |||||||||
S&P Global, Inc. | 3,225 | 1,127 | |||||||||
SEI Investments Co. | 14,911 | 871 | |||||||||
Signature Bank | 3,963 | 857 | |||||||||
SVB Financial Group (d) | 1,921 | 939 | |||||||||
T. Rowe Price Group, Inc. | 7,373 | 937 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
The Goldman Sachs Group, Inc. | 3,657 | $ | 1,195 | ||||||||
The Progressive Corp. | 8,889 | 1,061 | |||||||||
Wells Fargo & Co. | 54,936 | 2,515 | |||||||||
29,205 | |||||||||||
Health Care (2.9%): | |||||||||||
AbbVie, Inc. | 18,149 | 2,675 | |||||||||
AmerisourceBergen Corp. | 5,669 | 877 | |||||||||
Amgen, Inc. | 9,517 | 2,443 | |||||||||
Anthem, Inc. | 4,514 | 2,300 | |||||||||
Biogen, Inc. (d) | 5,299 | 1,060 | |||||||||
Bristol-Myers Squibb Co. | 16,326 | 1,232 | |||||||||
Cigna Corp. | 4,202 | 1,127 | |||||||||
CVS Health Corp. | 11,820 | 1,144 | |||||||||
Eli Lilly & Co. | 8,769 | 2,749 | |||||||||
Gilead Sciences, Inc. (f) | 17,545 | 1,138 | |||||||||
IDEXX Laboratories, Inc. (d) | 2,625 | 1,028 | |||||||||
Johnson & Johnson (f) | 19,479 | 3,497 | |||||||||
McKesson Corp. | 2,869 | 943 | |||||||||
Merck & Co., Inc. | 15,261 | 1,404 | |||||||||
Mettler-Toledo International, Inc. (d) | 754 | 970 | |||||||||
Pfizer, Inc. | 29,478 | 1,564 | |||||||||
Thermo Fisher Scientific, Inc. | 2,329 | 1,322 | |||||||||
UnitedHealth Group, Inc. | 6,839 | 3,397 | |||||||||
Waters Corp. (d) | 2,782 | 912 | |||||||||
West Pharmaceutical Services, Inc. | 2,989 | 928 | |||||||||
32,710 | |||||||||||
Industrials (1.9%): | |||||||||||
3M Co. | 13,879 | 2,072 | |||||||||
Cintas Corp. | 2,432 | 969 | |||||||||
Cummins, Inc. | 4,706 | 984 | |||||||||
Fastenal Co. | 17,396 | 932 | |||||||||
FedEx Corp. | 4,985 | 1,119 | |||||||||
General Dynamics Corp. | 8,660 | 1,947 | |||||||||
Illinois Tool Works, Inc. | 4,488 | 934 | |||||||||
Lockheed Martin Corp. | 7,353 | 3,236 | |||||||||
Masco Corp. | 15,643 | 887 | |||||||||
Northrop Grumman Corp. | 2,135 | 999 | |||||||||
Old Dominion Freight Line, Inc. | 3,274 | 845 | |||||||||
Otis Worldwide Corp. | 11,905 | 886 | |||||||||
PACCAR, Inc. | 11,110 | 965 | |||||||||
Republic Services, Inc. (f) | 6,872 | 920 | |||||||||
Union Pacific Corp. | 4,906 | 1,078 | |||||||||
United Parcel Service, Inc. Class B | 6,501 | 1,185 | |||||||||
W.W. Grainger, Inc. | 1,868 | 910 | |||||||||
Waste Management, Inc. | 6,069 | 962 | |||||||||
21,830 | |||||||||||
Information Technology (4.2%): | |||||||||||
Accenture PLC Class A | 8,161 | 2,436 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Adobe, Inc. (d) | 3,109 | $ | 1,295 | ||||||||
Apple, Inc. | 46,708 | 6,952 | |||||||||
Applied Materials, Inc. | 10,537 | 1,236 | |||||||||
Broadcom, Inc. | 4,563 | 2,647 | |||||||||
Cisco Systems, Inc. | 51,699 | 2,329 | |||||||||
Cognizant Technology Solutions Corp. Class A | 13,322 | 995 | |||||||||
Fair Isaac Corp. (d) | 2,549 | 1,044 | |||||||||
Fortinet, Inc. (d) | 3,706 | 1,090 | |||||||||
Gartner, Inc. (d) | 3,691 | 969 | |||||||||
HP, Inc. | 52,696 | 2,047 | |||||||||
Intel Corp. | 29,152 | 1,295 | |||||||||
International Business Machines Corp. | 8,619 | 1,197 | |||||||||
Intuit, Inc. | 2,788 | 1,155 | |||||||||
Micron Technology, Inc. | 15,895 | 1,174 | |||||||||
Microsoft Corp. (f) | 31,725 | 8,625 | |||||||||
Motorola Solutions, Inc. | 4,436 | 975 | |||||||||
NVIDIA Corp. | 9,437 | 1,762 | |||||||||
Oracle Corp. | 16,118 | 1,159 | |||||||||
Palo Alto Networks, Inc. (d) (f) | 2,021 | 1,016 | |||||||||
Paychex, Inc. | 7,579 | 938 | |||||||||
QUALCOMM, Inc. | 17,305 | 2,478 | |||||||||
Texas Instruments, Inc. | 14,181 | 2,507 | |||||||||
VeriSign, Inc. (d) | 5,357 | 935 | |||||||||
48,256 | |||||||||||
Materials (0.6%): | |||||||||||
Avery Dennison Corp. | 4,931 | 851 | |||||||||
CF Industries Holdings, Inc. | 9,777 | 966 | |||||||||
Linde PLC | 3,734 | 1,212 | |||||||||
LyondellBasell Industries NV Class A | 9,337 | 1,067 | |||||||||
Nucor Corp. | 14,806 | 1,961 | |||||||||
The Sherwin-Williams Co. | 3,524 | 945 | |||||||||
7,002 | |||||||||||
Real Estate (0.5%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 636 | 106 | |||||||||
American Tower Corp. | 2,496 | 639 | |||||||||
AvalonBay Communities, Inc. | 708 | 147 | |||||||||
Boston Properties, Inc. | 747 | 83 | |||||||||
Camden Property Trust | 487 | 70 | |||||||||
CBRE Group, Inc. Class A (d) | 1,679 | 139 | |||||||||
Crown Castle International Corp. | 2,209 | 419 | |||||||||
Digital Realty Trust, Inc. | 1,370 | 191 | |||||||||
Duke Realty Corp. | 1,869 | 99 | |||||||||
Equinix, Inc. | 493 | 339 | |||||||||
Equity LifeStyle Properties, Inc. | 879 | 66 | |||||||||
Equity Residential | 1,868 | 143 | |||||||||
Essex Property Trust, Inc. | 327 | 93 | |||||||||
Extra Space Storage, Inc. | 661 | 118 | |||||||||
Healthpeak Properties, Inc. | 2,671 | 79 | |||||||||
Host Hotels & Resorts, Inc. | 3,450 | 69 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Invitation Homes, Inc. | 2,844 | $ | 107 | ||||||||
Iron Mountain, Inc. | 1,461 | 79 | |||||||||
Kimco Realty Corp. | 3,379 | 80 | |||||||||
Medical Properties Trust, Inc. | 2,885 | 54 | |||||||||
Mid-America Apartment Communities, Inc. | 574 | 104 | |||||||||
Prologis, Inc. | 4,053 | 517 | |||||||||
Public Storage | 803 | 265 | |||||||||
Realty Income Corp. | 3,102 | 212 | |||||||||
Regency Centers Corp. | 861 | 59 | |||||||||
SBA Communications Corp. | 560 | 188 | |||||||||
Simon Property Group, Inc. | 1,694 | 194 | |||||||||
Sun Communities, Inc. | 501 | 82 | |||||||||
UDR, Inc. | 1,487 | 71 | |||||||||
Ventas, Inc. | 1,882 | 107 | |||||||||
VICI Properties, Inc. | 5,277 | 163 | |||||||||
Vornado Realty Trust | 808 | 28 | |||||||||
Welltower, Inc. | 2,095 | 187 | |||||||||
Weyerhaeuser Co. | 3,701 | 146 | |||||||||
WP Carey, Inc. | 880 | 74 | |||||||||
Zillow Group, Inc. Class C (d) | 1,120 | 45 | |||||||||
5,562 | |||||||||||
Utilities (0.5%): | |||||||||||
CenterPoint Energy, Inc. | 29,043 | 931 | |||||||||
Exelon Corp. | 19,891 | 978 | |||||||||
FirstEnergy Corp. | 21,085 | 906 | |||||||||
NRG Energy, Inc. | 21,046 | 969 | |||||||||
The AES Corp. | 43,753 | 964 | |||||||||
UGI Corp. | 23,599 | 1,008 | |||||||||
5,756 | |||||||||||
Total Common Stocks (Cost $166,244) | 200,602 | ||||||||||
Corporate Bonds (0.2%) | |||||||||||
Financials (0.2%): | |||||||||||
| Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/11/22 @ 100 (c) | $ | 2,500 | 2,248 | ||||||||
Total Corporate Bonds (Cost $2,312) | 2,248 | ||||||||||
U.S. Government Agency Mortgages (0.1%) | |||||||||||
| Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 611 | 610 | |||||||||
Total U.S. Government Agency Mortgages (Cost $611) | 610 | ||||||||||
U.S. Treasury Obligations (1.3%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 | 14,658 | 14,596 | |||||||||
Total U.S. Treasury Obligations (Cost $14,643) | 14,596 | ||||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Exchange-Traded Funds (43.9%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (d) | 114,500 | $ | 3,298 | ||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 335,920 | 15,123 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 686,690 | 13,603 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 174,456 | 18,025 | |||||||||
iShares Core MSCI EAFE ETF | 123,049 | 8,109 | |||||||||
iShares Core MSCI Emerging Markets ETF | 608,488 | 31,988 | |||||||||
iShares Core S&P 500 ETF | 115,881 | 48,076 | |||||||||
iShares Core S&P Small-Cap ETF | 368,066 | 37,278 | |||||||||
iShares Core US Aggregate Bond ETF | 352,644 | 36,488 | |||||||||
iShares Core US REIT ETF (f) | 19,853 | 1,152 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 45,129 | 4,118 | |||||||||
iShares MSCI Canada ETF (e) | 429,417 | 16,245 | |||||||||
iShares MSCI International Momentum Factor ETF | 401,271 | 13,326 | |||||||||
iShares MSCI International Quality Factor ETF | 457,001 | 15,684 | |||||||||
JPMorgan BetaBuilders Canada ETF | 42,837 | 2,819 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 920,892 | 25,711 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 1,549,839 | 49,037 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 266,700 | 9,009 | |||||||||
SPDR Gold Shares (d) | 51,619 | 8,834 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 34,497 | 1,822 | |||||||||
U.S. Oil Fund LP (d) (e) | 41,247 | 3,525 | |||||||||
VanEck Gold Miners ETF | 78,868 | 2,502 | |||||||||
Vanguard FTSE All-World ex-US ETF | 275,172 | 15,063 | |||||||||
Vanguard FTSE Developed Markets ETF | 605,569 | 27,559 | |||||||||
Vanguard FTSE Emerging Markets ETF (f) | 47,000 | 2,051 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 131,392 | 6,386 | |||||||||
Vanguard Real Estate ETF (e) | 102,754 | 10,180 | |||||||||
Vanguard S&P 500 ETF (f) | 15,160 | 5,756 | |||||||||
Vanguard Short-Term Bond ETF (e) | 231,686 | 17,965 | |||||||||
Vanguard Short-Term Corporate Bond ETF (e) | 73,962 | 5,725 | |||||||||
Vanguard Total Bond Market ETF | 155,566 | 11,929 | |||||||||
Vanguard Total Stock Market ETF (f) | 82,822 | 17,091 | |||||||||
Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 59,797 | 2,993 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF (e) | 332,534 | 12,138 | |||||||||
Total Exchange-Traded Funds (Cost $454,612) | 500,608 | ||||||||||
Affiliated Exchange-Traded Funds (34.9%) | |||||||||||
VictoryShares ESG Core Plus Bond ETF | 3,224,188 | 72,447 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 6,359,015 | 305,869 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 341,251 | 16,922 | |||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF (f) | 51,500 | 2,297 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $438,635) | 397,535 | ||||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned (3.6%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 0.67% (g) | 22,971,848 | $ | 22,972 | ||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (g) | 18,291,299 | 18,291 | |||||||||
Total Collateral for Securities Loaned (Cost $41,263) | 41,263 | ||||||||||
Total Investments (Cost $1,122,571) — 101.9% | 1,161,562 | ||||||||||
Liabilities in excess of other assets — (1.9)% | (21,654 | ) | |||||||||
NET ASSETS — 100.00% | $ | 1,139,908 | |||||||||
At May 31, 2022, the Fund's investments in foreign securities were 21.3% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $3,648 thousand and amounted to 0.3% of net assets.
(b) The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2022.
(c) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(d) Non-income producing security.
(e) All or a portion of this security is on loan.
(f) All or a portion of this security has been segregated as collateral for derivative instruments.
(g) Rate disclosed is the daily yield on May 31, 2022.
bps — Basis points
ETF — Exchange-Traded Fund
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PLC — Public Limited Company
REIT — Real Estate Investment Trust
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
Futures Contracts Purchased | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
FTSE 100 Index Futures | 118 | 6/20/22 | $ | 10,838,595 | $ | 11,277,280 | $ | 438,685 | |||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 71 | 6/16/22 | 14,397,990 | 14,074,247 | (323,743 | ) | |||||||||||||||||
$ | 114,942 | ||||||||||||||||||||||
Futures Contracts Sold | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 74 | 6/16/22 | $ | 9,397,591 | $ | 9,573,016 | $ | (175,425 | ) | ||||||||||||||
Euro Stoxx 50 Futures | 78 | 6/20/22 | 3,063,391 | 3,168,159 | (104,768 | ) | |||||||||||||||||
Hang Seng Index Futures | 27 | 6/29/22 | 3,518,087 | 3,680,630 | (162,543 | ) | |||||||||||||||||
Tokyo Price Index Futures | 35 | 6/09/22 | 4,908,253 | 5,190,724 | (282,471 | ) | |||||||||||||||||
(725,207 | ) | ||||||||||||||||||||||
Total unrealized appreciation | $ | 438,685 | |||||||||||||||||||||
Total unrealized depreciation | (1,048,950 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | (610,265 | ) | ||||||||||||||||||||
See notes to financial statements.
15
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Moderate Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $438,635) | $ | 397,535 | |||||
Unaffiliated investments, at value (Cost $683,936) | 764,027 | (a) | |||||
Cash | 21,684 | ||||||
Deposit with broker for futures contracts | 2,607 | ||||||
Receivables: | |||||||
Interest and dividends | 447 | ||||||
Capital shares issued | 667 | ||||||
Variation margin on open futures contracts | 23 | ||||||
From Adviser | 302 | ||||||
Prepaid expenses | 22 | ||||||
Total Assets | 1,187,314 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 41,263 | ||||||
Collateral received from brokers for futures contracts | 325 | ||||||
Investments purchased | 3,327 | ||||||
Capital shares redeemed | 1,379 | ||||||
Variation margin on open futures contracts | 162 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 564 | ||||||
Administration fees | 143 | ||||||
Custodian fees | 10 | ||||||
Transfer agent fees | 166 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | — | (b) | |||||
Other accrued expenses | 66 | ||||||
Total Liabilities | 47,406 | ||||||
Net Assets: | |||||||
Capital | 1,072,249 | ||||||
Total accumulated earnings/(loss) | 67,659 | ||||||
Net Assets | $ | 1,139,908 | |||||
Shares (unlimited number of shares authorized with no par value): | 76,497 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 14.90 | |||||
(a) Includes $40,068 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
16
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderate Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 5,425 | |||||
Dividends from unaffiliated investments | 16,711 | ||||||
Interest from unaffiliated investments | 4,133 | ||||||
Securities lending (net of fees) | 275 | ||||||
Foreign tax withholding | — | (a) | |||||
Total Income | 26,544 | ||||||
Expenses: | |||||||
Investment advisory fees | 7,286 | ||||||
Administration fees | 1,852 | ||||||
Sub-Administration fees | 73 | ||||||
Custodian fees | 64 | ||||||
Transfer agent fees | 2,147 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 9 | ||||||
Legal and audit fees | 68 | ||||||
State registration and filing fees | 35 | ||||||
Interfund lending fees | — | (a) | |||||
Other expenses | 129 | ||||||
Total Expenses | 11,711 | ||||||
Expenses waived/reimbursed by Adviser | (940 | ) | |||||
Net Expenses | 10,771 | ||||||
Net Investment Income (Loss) | 15,773 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | 57,072 | ||||||
Capital gain distributions received from affiliated funds | 678 | ||||||
Net realized gains (losses) from futures contracts | 1,833 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (39,617 | ) | |||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (105,352 | ) | |||||
Net change in unrealized appreciation/depreciation on futures contracts | (309 | ) | |||||
Net realized/unrealized gains (losses) on investments | (85,695 | ) | |||||
Change in net assets resulting from operations | $ | (69,922 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
17
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Cornerstone Moderate Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 15,773 | $ | 15,524 | |||||||
Net realized gains (losses) | 59,583 | 48,393 | |||||||||
Net change in unrealized appreciation/depreciation | (145,278 | ) | 163,676 | ||||||||
Change in net assets resulting from operations | (69,922 | ) | 227,593 | ||||||||
Change in net assets resulting from distributions to shareholders | (85,781 | ) | (18,770 | ) | |||||||
Change in net assets resulting from capital transactions | 30,079 | (74,749 | ) | ||||||||
Change in net assets | (125,624 | ) | 134,074 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 1,265,532 | 1,131,458 | |||||||||
End of period | $ | 1,139,908 | $ | 1,265,532 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 94,555 | $ | 92,413 | |||||||
Distributions reinvested | 85,309 | 18,673 | |||||||||
Cost of shares redeemed | (149,785 | ) | (185,835 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 30,079 | $ | (74,749 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 5,775 | 5,807 | |||||||||
Reinvested | 5,212 | 1,216 | |||||||||
Redeemed | (9,130 | ) | (11,817 | ) | |||||||
Change in Shares | 1,857 | (4,794 | ) | ||||||||
See notes to financial statements.
18
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19
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Moderate Fund | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 16.96 | 0.21 | (d) | (1.11 | ) | (0.90 | ) | (0.23 | ) | (0.93 | ) | |||||||||||||||
2021 | $ | 14.24 | 0.20 | (d) | 2.76 | 2.96 | (0.21 | ) | (0.03 | ) | |||||||||||||||||
2020 | $ | 14.11 | 0.29 | (d) | 0.13 | 0.42 | (0.29 | ) | — | ||||||||||||||||||
2019 | $ | 14.83 | 0.30 | (0.31 | ) | (0.01 | ) | (0.29 | ) | (0.42 | ) | ||||||||||||||||
2018 | $ | 15.05 | 0.26 | 0.55 | 0.81 | (0.26 | ) | (0.77 | ) | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
20
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return(a) | Net Expenses(b)(c) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Moderate Fund | |||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (1.16 | ) | $ | 14.90 | (5.82 | )% | 0.87 | % | 1.28 | % | 0.95 | % | $ | 1,139,908 | 47 | % | |||||||||||||||||||
2021 | (0.24 | ) | $ | 16.96 | 21.00 | % | 0.97 | % | 1.29 | % | 0.98 | % | $ | 1,265,532 | 53 | % | |||||||||||||||||||
2020 | (0.29 | ) | $ | 14.24 | 2.98 | % | 1.00 | % | 2.01 | % | 1.00 | % | $ | 1,131,458 | 87 | % | |||||||||||||||||||
2019 | (0.71 | ) | $ | 14.11 | 0.13 | % | 1.00 | % | 2.10 | % | 1.02 | % | $ | 1,163,374 | 81 | %(e) | |||||||||||||||||||
2018 | (1.03 | ) | $ | 14.83 | 5.42 | % | 1.00 | % | 1.73 | % | 1.03 | % | $ | 1,184,032 | 51 | % | |||||||||||||||||||
See notes to financial statements.
21
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Cornerstone Moderate Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts (ADRs), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, including underlying funds, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities are valued each business day by a pricing service approved by the Board. The approved pricing service uses the evaluated bid or the last sale price to value securities. Debt obligations maturing within 60 days may be valued at amortized cost, provided that the amortized cost represents the fair value of such securities. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 2,539 | $ | — | $ | 2,539 | |||||||||||
Collateralized Mortgage Obligations | — | 1,561 | — | 1,561 | |||||||||||||||
Common Stocks | 200,602 | — | — | 200,602 | |||||||||||||||
Corporate Bonds | — | 2,248 | — | 2,248 | |||||||||||||||
U.S. Government Agency Mortgages | — | 610 | — | 610 | |||||||||||||||
U.S. Treasury Obligations | — | 14,596 | — | 14,596 | |||||||||||||||
Exchange-Traded Funds | 500,608 | — | — | 500,608 | |||||||||||||||
Affiliated Exchange-Traded Funds | 397,535 | — | — | 397,535 | |||||||||||||||
Collateral for Securities Loaned | 41,263 | — | — | 41,263 | |||||||||||||||
Total | $ | 1,140,008 | $ | 21,554 | $ | — | $ | 1,161,562 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 439 | $ | — | $ | — | $ | 439 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (1,049 | ) | $ | — | $ | — | $ | (1,049 | ) | |||||||||
Total | $ | (610 | ) | $ | — | $ | — | $ | (610 | ) | |||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Mortgage- and Asset-Backed Securities:
The values of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Fund to a lower rate of return upon reinvestment of principal. The values of mortgage- and asset-backed securities depend in part on the credit quality and adequacy of the underlying assets or collateral and may fluctuate in response to the market's perception of these factors as well as current and future repayment rates. Some mortgage-backed securities are backed by the full faith and credit of the U.S. government (e.g., mortgage-backed securities issued by the Government National Mortgage Association, commonly known as "Ginnie Mae"), while other mortgage-backed securities (e.g., mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as "Fannie Mae" and "Freddie Mac," respectively), are backed only by the credit of the government entity issuing them. In addition, some mortgage-backed securities are issued by private entities and, as such, are not guaranteed by the U.S. government or any agency or instrumentality of the U.S. government.
Derivative Instruments:
Futures Contracts:
The Fund may enter into contracts for the future delivery of securities or foreign currencies and futures contracts based on a specific security, class of securities, foreign currency or an index, and purchase or sell options on any such futures contracts. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. No physical delivery of the underlying asset is made. The Fund may enter into futures contracts in an effort to hedge against market risks. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. A good faith margin deposit, known as initial margin, of cash or government securities with a broker or custodian is required to initiate and maintain open positions in futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund based on the change in the market value of the position and are recorded as unrealized appreciation or depreciation until the contract is closed out, at which time the gain or loss is realized. The Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices change in an unanticipated manner. Such unanticipated changes may also result in lower overall performance than if the Fund
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
had not entered into any futures transactions. In addition, the value of the Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions.
The collateral held by the Fund is reflected on the Statement of Assets and Liabilities under Deposit with broker for futures contracts and Collateral received from broker for futures contracts.
Management has determined that no offsetting requirements exist as a result of their conclusion that the Fund is not subject to master netting agreements for futures contracts. During the year ended May 31, 2022, the Fund entered into futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market.
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statement of Assets and Liabilities, categorized by risk exposure, as of May 31, 2022 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 439 | $ | 1,049 | |||||||
* Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts is reported within the Statement of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2022 (amounts in thousands):
| Net Realized Gains (Losses) on Derivatives Recognized as a Result of Operations | Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result of Operations | ||||||||||
| Net Realized Gains (Losses) from Futures Contracts | Net Change in Unrealized Appreciation/Depreciation on Futures Contracts | ||||||||||
Equity Risk Exposure | $ | 1,833 | $ | (309 | ) | ||||||
All open derivative positions at year end are reflected on the Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to the Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statement of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 40,068 | $ | — | $ | 41,263 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades, which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2022, the Fund engaged in the following securities transactions with affiliated funds, which resulted in the following net realized gains (losses) (amounts in thousands):
| Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| $ | — | $ | 36,688 | $ | 489 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
| Purchases | Sales | Purchases | Sales | ||||||||||||
| $ | 566,411 | $ | 511,265 | $ | — | $ | 101,954 | ||||||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.59% of the Fund's average daily net assets. Amounts
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019, permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, which is based on the Fund's average daily net assets. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 1.00%.
In addition, the Fund invests in affiliated VCM exchange-traded fund(s) ("affiliated ETFs"). The Fund's advisory fee is reimbursed by VCM that to the extent of the indirect advisory fee incurred through the Fund's proportional investment in the affiliated ETFs. These affiliated ETF advisory fee reimbursements are not available for recoupment. For the year ended May 31, 2022, the Fund incurred affiliated ETFs advisory fee reimbursements of $940 thousand that were reimbursed by VCM and $302 thousand was receivable from the Adviser.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment. As of May 31, 2022, there are no amounts available to be repaid to the Adviser.
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Tactical Allocation Risk — The Fund has a targeted risk tolerance and a corresponding asset allocation target; however, mere asset allocation and volatility are not the sole determination of risk. The Fund's managers will tactically allocate away from the target allocation as market conditions and the perceived risks warrant. The Fund bears the risk that the managers' tactical allocation will not be successful.
Affiliated Funds Risk — The risks of the Fund directly correspond to the risks of the underlying affiliated funds in which the Fund invests. By investing in the underlying affiliated funds, the Fund has exposure to the risk of many different areas of the market. The degree to which the risks described below apply to the Fund varies according to the Fund's asset allocation. For instance, the more the Fund is allocated to stock funds, the greater the risk associated with equity securities. The Fund also is subject to asset allocation risk (i.e., the risk that allocations will not produce the intended results) and to management risk (i.e., the risk that the selection of underlying affiliated funds will not produce the intended results).
Conflict of Interest Risk — In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
ETF Risk — The Fund may invest in shares of ETFs, which generally are investment companies that hold a portfolio of common stocks or debt securities, the shares of which are traded on an exchange. ETFs incur their own management and other fees and expenses, such as trustees' fees, operating expenses, registration fees, and marketing expenses, a proportionate share of which will be borne indirectly by the Fund as a shareholder in an ETF. As a result, the Fund's investment in an ETF will cause the Fund to indirectly bear the fees and expenses of the ETF and, in turn, the Fund's performance may be lower than if the Fund were to invest directly in the underlying securities held by the ETF. For investments in affiliated ETFs, the Fund's management fee is reimbursed by the Adviser to the extent of the indirect management fee incurred through the Fund's investment in the affiliated ETFs. The Adviser may have conflicts of interest in allocating assets among affiliated and unaffiliated ETFs, because the Adviser also manages and administers the affiliated ETFs, and the Adviser and its affiliates receive other fees from the affiliated ETFs. In addition, the Fund also will be subject to the risks associated with the securities or other investments held by the ETFs.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
LIBOR Discontinuation Risk — The London Interbank Offered Rate ("LIBOR") discontinuation may adversely affect the financial markets generally and the Fund's operations, finances and investments specifically. LIBOR has been the principal floating-rate benchmark in the financial markets, and a large portion of the Fund's assets are tied to LIBOR. However, LIBOR has been or will be discontinued as a floating rate benchmark. The date of discontinuation depends on the LIBOR currency and tenor. With limited exceptions, no new LIBOR obligations will be entered into after December 31, 2021. Existing LIBOR obligations have transitioned or will transition to another benchmark, depending on the LIBOR currency and tenor. For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
Non-LIBOR floating-rate obligations, including Secured Overnight Financing Rate ("SOFR")-based obligations, may have returns and values that fluctuate more than those of floating-rate debt obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest-rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Various SOFR-based rates, including SOFR-based term rates, and various non-SOFR-based rates are expected to develop in response to the discontinuation of U.S. dollar LIBOR, which may create various risks for the Fund and the financial markets more generally. There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Such rates include AMERIBOR (American Interbank Offered Rate), BSBY (Bloomberg Short-Term Bank Yield Index) and BYI (Bank Yield Index). Unlike forward-looking SOFR-based term rates, such rates are intended to reflect a bank credit spread component.
It is not clear how replacement rates for LIBOR — including SOFR-based rates and non-SOFR-based rates — will develop and to what extent they will be used. There is no assurance that these replacement rates will be suitable substitutes for LIBOR, and thus the substitution of such rates for LIBOR could have an adverse effect on the Fund and the financial markets more generally. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, which may or may not be similar to the risks relating to SOFR.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month LIBOR plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statement of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at May 31, 2022 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
| Borrower | $ | — | $ | 2,276 | 3 | 0.55 | % | $ | 2,276 | ||||||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
(e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||
| $ | (1,639 | ) | $ | 1,639 | |||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Total Distributions Paid | |||||||||||||||
$ | 41,491 | $ | 44,290 | $ | 85,781 | $ | 18,770 | $ | 18,770 | ||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Other Earnings (Loss) | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 1,583 | $ | 32,750 | $ | (480 | ) | $ | 33,853 | $ | 33,806 | $ | 67,659 | |||||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, trust preferred and grantor trust securities accruals, futures, partnership, and REITs/return of capital.
As of May 31, 2022, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 1,126,812 | $ | 96,439 | $ | (62,633 | ) | $ | 33,806 | |||||||
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares, an investment company managed by VCM, or an issuer under common control with a Fund or VCM. The Fund does not invest in affiliated securities for the purpose of exercising management or control. These securities are noted as affiliated on a Fund's Schedule of Portfolio Investments. The financial statements of the underlying funds can be found in shareholder reports filed with the SEC by each such underlying fund semi-annually on Form N-CSR and are available for
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
download from both the SEC's as well as each respective underlying fund's website. Transactions in affiliated securities during the year ended May 31, 2022, were as follows (amounts in thousands):
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | $ | — | $ | 159,788 | $ | (79,894 | ) | $ | — | $ | — | $ | (7,447 | ) | $ | 72,447 | $ | 692 | |||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 146,328 | 381,135 | (190,567 | ) | — | 641 | (31,027 | ) | 305,869 | 4,320 | |||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 17,709 | — | — | — | 37 | (787 | ) | 16,922 | 304 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 2,653 | — | — | — | — | (356 | ) | 2,297 | 109 | ||||||||||||||||||||||||||
$ | 166,690 | $ | 540,923 | $ | (270,461 | ) | $ | — | $ | 678 | $ | (39,617 | ) | $ | 397,535 | $ | 5,425 | ||||||||||||||||||
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Moderate Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Moderate Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 932.90 | $ | 1,020.69 | $ | 4.10 | $ | 4.28 | 0.85 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 12 | % | 13 | % | $ | 24,109 | $ | 45,770 | ||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Cornerstone Moderate Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services, as well as any fee waivers and reimbursements — was equal to the median of its expense group and below the median of its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were above the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe and its Lipper index for the one-, three-, five- and ten-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance relative to its peers for the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser waived a portion of its management fees and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax
44
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
45
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
46
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
26889-0722
MAY 31, 2022
Annual Report
USAA Cornerstone Moderately
Aggressive Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 16 | ||||||
Statement of Operations | 17 | ||||||
Statements of Changes in Net Assets | 18 | ||||||
Financial Highlights | 20 | ||||||
Notes to Financial Statements | 22 | ||||||
| Report of Independent Registered Public Accounting Firm | 34 | ||||||
Supplemental Information (Unaudited) | 35 | ||||||
Trustee and Officer Information | 35 | ||||||
Proxy Voting and Portfolio Holdings Information | 41 | ||||||
Expense Example | 41 | ||||||
Additional Federal Income Tax Information | 42 | ||||||
Advisory Contract Renewal | 43 | ||||||
Liquidity Risk Management Program | 46 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
2
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Cornerstone Moderately Aggressive Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Cornerstone Moderately Aggressive Fund
Managers' Commentary (continued)
• How did the USAA Cornerstone Moderately Aggressive Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a total return of -5.43%. This compares to returns of -6.78% for the MSCI All-Country World Index, and -6.50% for the Cornerstone Moderately Aggressive Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative one-year total return, as both equity and fixed income markets sold off, as inflation concerns, rising interest rates, the end of Quantitative Easing, and the Russian invasion of Ukraine created a concerning and volatile investment environment. Major equity and fixed income asset classes were negative over the past year, while real estate investment trusts and commodities were positive. The Fund outperformed the Cornerstone Moderately Aggressive Composite Index.
Positive contributors to the relative performance included security selection within the U.S. large-cap, U.S. small-cap, and international portions of the portfolio. The Fund benefited from the rotation of growth stocks into value stocks around the beginning of the year. Over the period, the Fund maintained a large allocation to short term corporate bonds and an overall shorter duration, which contributed positively as rising interest rates weighed on traditional fixed income markets in early 2022.
These positive drivers were slightly offset by an underweight to commodities, which performed well as prices of energy soared during the period, and an overweight to emerging market stocks, as more developed markets withstood macroeconomic shocks better in the past year. The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Cornerstone Moderately Aggressive Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||||||||||
INCEPTION DATE | 8/15/84 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Moderately Aggressive Composite Index2 | |||||||||||||
One Year | –5.43 | % | –6.78 | % | –6.50 | % | |||||||||
Five Year | 4.93 | % | 9.00 | % | 6.45 | % | |||||||||
Ten Year | 5.74 | % | 10.25 | % | 7.38 | % | |||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Moderately Aggressive Fund — Growth of $10,000
1The unmanaged MSCI All-Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The Cornerstone Moderately Aggressive Composite Index is a combination of unmanaged indexes representing the Fund's model allocation, and consists of the MSCI USA Investable Market Index (IMI) Gross (34%), the MSCI ACWI ex USA IMI Net (23%), the Bloomberg U.S. Universal Index (38%), the Bloomberg Commodity Index Total Return (1.5%), the MSCI U.S. Real Estate Investment Trust (REIT) Index Gross (1.5%), and the Bloomberg U.S. Treasury — Bills (1-3M) (2%). This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation with a secondary focus on current income.
Asset Allocation*:
May 31, 2022
(% of Net Assets)
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
** Percentage is less than 0.05%.
Percentages are of the net assets of the Fund and may not equal 100%.
7
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Asset-Backed Securities (0.2%) | |||||||||||
| Drive Auto Receivables Trust, Series 2018-4, Class D, 4.09%, 1/15/26, Callable 11/15/22 @ 100 | $ | 515 | $ | 518 | |||||||
| Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 6/15/22 @ 100 (a) | 850 | 851 | |||||||||
| HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 8/20/22 @ 100 (a) | 378 | 378 | |||||||||
| HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 436 | 435 | |||||||||
| NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 6/20/22 @ 100 (a) | 485 | 466 | |||||||||
| SCF Equipment Leasing LLC, Series 2020-1A, Class B, 2.02%, 3/20/28, Callable 3/20/25 @ 100 (a) | 869 | 829 | |||||||||
| Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 10/15/23 @ 100 (a) | 952 | 952 | |||||||||
Total Asset-Backed Securities (Cost $4,482) | 4,429 | ||||||||||
Collateralized Mortgage Obligations (0.0%) (b) | |||||||||||
| Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51, Callable 6/10/22 @ 100 (c) | 130 | 127 | |||||||||
| Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 1.08% (LIBOR01M+19bps), 2/15/40, Callable 6/15/22 @ 100 (d) | 55 | 54 | |||||||||
| DBJPM Mortgage Trust, Series 2016-SFC, Class A, 2.83%, 8/10/36, Callable 8/10/26 @ 100 (a) | 1,000 | 940 | |||||||||
Total Collateralized Mortgage Obligations (Cost $1,197) | 1,121 | ||||||||||
Common Stocks (22.5%) | |||||||||||
Communication Services (1.5%): | |||||||||||
Alphabet, Inc. Class C (e) | 8,618 | 19,656 | |||||||||
AT&T, Inc. | 185,910 | 3,958 | |||||||||
Comcast Corp. Class A | 97,076 | 4,299 | |||||||||
Match Group, Inc. (e) | 38,261 | 3,014 | |||||||||
Sirius XM Holdings, Inc. (f) | 431,383 | 2,761 | |||||||||
The Interpublic Group of Cos., Inc. | 79,936 | 2,576 | |||||||||
Verizon Communications, Inc. | 78,690 | 4,036 | |||||||||
40,300 | |||||||||||
Consumer Discretionary (2.0%): | |||||||||||
AutoZone, Inc. (e) | 2,885 | 5,942 | |||||||||
Best Buy Co., Inc. | 29,771 | 2,443 | |||||||||
eBay, Inc. | 61,852 | 3,010 | |||||||||
Ford Motor Co. | 236,633 | 3,237 | |||||||||
General Motors Co. (e) | 82,340 | 3,185 | |||||||||
Lennar Corp. Class A | 38,738 | 3,109 | |||||||||
Lowe's Cos., Inc. | 33,743 | 6,590 | |||||||||
McDonald's Corp. | 14,485 | 3,653 | |||||||||
O'Reilly Automotive, Inc. (e) | 9,232 | 5,883 | |||||||||
Target Corp. (g) | 14,197 | 2,298 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tesla, Inc. (e) | 7,897 | $ | 5,988 | ||||||||
The Home Depot, Inc. | 28,752 | 8,705 | |||||||||
54,043 | |||||||||||
Consumer Staples (1.3%): | |||||||||||
Altria Group, Inc. | 62,046 | 3,356 | |||||||||
Colgate-Palmolive Co. | 37,836 | 2,982 | |||||||||
Costco Wholesale Corp. | 7,571 | 3,530 | |||||||||
PepsiCo, Inc. | 22,531 | 3,779 | |||||||||
Philip Morris International, Inc. | 34,472 | 3,663 | |||||||||
The Clorox Co. | 17,196 | 2,499 | |||||||||
The Coca-Cola Co. | 62,194 | 3,942 | |||||||||
The Hershey Co. | 12,370 | 2,619 | |||||||||
The Kroger Co. | 56,337 | 2,984 | |||||||||
Tyson Foods, Inc. Class A | 32,616 | 2,923 | |||||||||
Walgreens Boots Alliance, Inc. | 69,658 | 3,053 | |||||||||
35,330 | |||||||||||
Energy (0.9%): | |||||||||||
ConocoPhillips | 70,661 | 7,940 | |||||||||
Devon Energy Corp. | 45,168 | 3,383 | |||||||||
EOG Resources, Inc. | 25,229 | 3,455 | |||||||||
Exxon Mobil Corp. | 56,976 | 5,470 | |||||||||
Marathon Petroleum Corp. | 31,785 | 3,235 | |||||||||
23,483 | |||||||||||
Financials (3.3%): | |||||||||||
AGNC Investment Corp. (f) | 8,827 | 108 | |||||||||
American Express Co. | 19,616 | 3,312 | |||||||||
American Financial Group, Inc. | 18,321 | 2,589 | |||||||||
Annaly Capital Management, Inc. | 22,137 | 146 | |||||||||
Aon PLC Class A | 10,739 | 2,960 | |||||||||
Berkshire Hathaway, Inc. Class B (e) | 31,551 | 9,969 | |||||||||
Blackstone, Inc. | 30,463 | 3,588 | |||||||||
Capital One Financial Corp. | 25,674 | 3,283 | |||||||||
Citigroup, Inc. | 68,452 | 3,656 | |||||||||
Erie Indemnity Co. Class A | 3,102 | 520 | |||||||||
JPMorgan Chase & Co. | 39,603 | 5,237 | |||||||||
M&T Bank Corp. | 16,357 | 2,944 | |||||||||
Marsh & McLennan Cos., Inc. | 19,193 | 3,070 | |||||||||
MetLife, Inc. | 46,053 | 3,104 | |||||||||
Morgan Stanley | 42,764 | 3,684 | |||||||||
MSCI, Inc. | 7,311 | 3,234 | |||||||||
Prudential Financial, Inc. | 29,444 | 3,128 | |||||||||
Raymond James Financial, Inc. | 28,618 | 2,819 | |||||||||
Regions Financial Corp. | 131,679 | 2,909 | |||||||||
S&P Global, Inc. | 9,830 | 3,435 | |||||||||
SEI Investments Co. | 45,449 | 2,656 | |||||||||
Signature Bank | 12,079 | 2,612 | |||||||||
SVB Financial Group (e) | 5,856 | 2,861 | |||||||||
T. Rowe Price Group, Inc. | 22,471 | 2,856 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
The Goldman Sachs Group, Inc. | 11,146 | $ | 3,643 | ||||||||
The Progressive Corp. | 27,093 | 3,234 | |||||||||
Wells Fargo & Co. | 167,430 | 7,663 | |||||||||
89,220 | |||||||||||
Health Care (3.7%): | |||||||||||
AbbVie, Inc. | 55,313 | 8,152 | |||||||||
AmerisourceBergen Corp. | 17,280 | 2,675 | |||||||||
Amgen, Inc. | 29,004 | 7,447 | |||||||||
Anthem, Inc. | 13,758 | 7,011 | |||||||||
Biogen, Inc. (e) | 16,151 | 3,230 | |||||||||
Bristol-Myers Squibb Co. | 49,756 | 3,754 | |||||||||
Cigna Corp. | 12,808 | 3,436 | |||||||||
CVS Health Corp. | 36,028 | 3,486 | |||||||||
Eli Lilly & Co. | 26,726 | 8,377 | |||||||||
Gilead Sciences, Inc. (g) | 53,473 | 3,468 | |||||||||
IDEXX Laboratories, Inc. (e) | 8,001 | 3,133 | |||||||||
Johnson & Johnson (g) | 59,368 | 10,658 | |||||||||
McKesson Corp. | 8,745 | 2,874 | |||||||||
Merck & Co., Inc. | 46,512 | 4,281 | |||||||||
Mettler-Toledo International, Inc. (e) | 2,300 | 2,958 | |||||||||
Pfizer, Inc. | 89,852 | 4,766 | |||||||||
Thermo Fisher Scientific, Inc. | 7,100 | 4,030 | |||||||||
UnitedHealth Group, Inc. | 20,845 | 10,355 | |||||||||
Waters Corp. (e) | 8,481 | 2,781 | |||||||||
West Pharmaceutical Services, Inc. | 9,112 | 2,828 | |||||||||
99,700 | |||||||||||
Industrials (2.4%): | |||||||||||
3M Co. | 42,303 | 6,315 | |||||||||
Cintas Corp. | 7,412 | 2,952 | |||||||||
Cummins, Inc. | 14,345 | 3,000 | |||||||||
Fastenal Co. | 51,679 | 2,768 | |||||||||
FedEx Corp. | 15,192 | 3,412 | |||||||||
General Dynamics Corp. | 26,395 | 5,937 | |||||||||
Illinois Tool Works, Inc. | 13,717 | 2,854 | |||||||||
Lockheed Martin Corp. | 22,409 | 9,863 | |||||||||
Masco Corp. | 47,680 | 2,703 | |||||||||
Northrop Grumman Corp. | 6,509 | 3,046 | |||||||||
Old Dominion Freight Line, Inc. | 9,980 | 2,577 | |||||||||
Otis Worldwide Corp. | 36,288 | 2,700 | |||||||||
PACCAR, Inc. | 33,862 | 2,941 | |||||||||
Republic Services, Inc. (g) | 20,946 | 2,803 | |||||||||
Union Pacific Corp. | 14,953 | 3,286 | |||||||||
United Parcel Service, Inc. Class B | 19,814 | 3,611 | |||||||||
W.W. Grainger, Inc. | 5,695 | 2,774 | |||||||||
Waste Management, Inc. | 18,498 | 2,932 | |||||||||
66,474 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (5.4%): | |||||||||||
Accenture PLC Class A | 24,873 | $ | 7,424 | ||||||||
Adobe, Inc. (e) | 9,476 | 3,946 | |||||||||
Apple, Inc. | 142,356 | 21,188 | |||||||||
Applied Materials, Inc. | 32,114 | 3,767 | |||||||||
Broadcom, Inc. | 13,910 | 8,070 | |||||||||
Cisco Systems, Inc. | 157,565 | 7,098 | |||||||||
Cognizant Technology Solutions Corp. Class A | 40,601 | 3,033 | |||||||||
Fair Isaac Corp. (e) | 7,770 | 3,182 | |||||||||
Fortinet, Inc. (e) | 11,295 | 3,322 | |||||||||
Gartner, Inc. (e) | 11,249 | 2,952 | |||||||||
HP, Inc. | 160,601 | 6,238 | |||||||||
Intel Corp. | 88,848 | 3,947 | |||||||||
International Business Machines Corp. | 26,269 | 3,647 | |||||||||
Intuit, Inc. | 8,499 | 3,522 | |||||||||
Micron Technology, Inc. | 48,443 | 3,577 | |||||||||
Microsoft Corp. (g) | 96,689 | 26,287 | |||||||||
Motorola Solutions, Inc. | 13,520 | 2,971 | |||||||||
NVIDIA Corp. | 28,764 | 5,371 | |||||||||
Oracle Corp. | 49,122 | 3,533 | |||||||||
Palo Alto Networks, Inc. (e) (g) | 6,160 | 3,097 | |||||||||
Paychex, Inc. | 23,100 | 2,860 | |||||||||
QUALCOMM, Inc. | 52,741 | 7,553 | |||||||||
Texas Instruments, Inc. | 43,221 | 7,640 | |||||||||
VeriSign, Inc. (e) | 16,327 | 2,850 | |||||||||
147,075 | |||||||||||
Materials (0.8%): | |||||||||||
Avery Dennison Corp. | 15,032 | 2,594 | |||||||||
CF Industries Holdings, Inc. | 29,797 | 2,943 | |||||||||
Linde PLC | 11,381 | 3,695 | |||||||||
LyondellBasell Industries NV Class A | 28,457 | 3,251 | |||||||||
Nucor Corp. | 45,125 | 5,977 | |||||||||
The Sherwin-Williams Co. | 10,742 | 2,880 | |||||||||
21,340 | |||||||||||
Real Estate (0.6%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 2,007 | 333 | |||||||||
American Tower Corp. | 7,609 | 1,949 | |||||||||
AvalonBay Communities, Inc. | 2,235 | 465 | |||||||||
Boston Properties, Inc. | 2,356 | 262 | |||||||||
Camden Property Trust | 1,537 | 221 | |||||||||
CBRE Group, Inc. Class A (e) | 5,297 | 439 | |||||||||
Crown Castle International Corp. | 7,221 | 1,369 | |||||||||
Digital Realty Trust, Inc. | 4,323 | 603 | |||||||||
Duke Realty Corp. | 5,896 | 311 | |||||||||
Equinix, Inc. | 1,410 | 969 | |||||||||
Equity LifeStyle Properties, Inc. | 2,774 | 210 | |||||||||
Equity Residential | 5,893 | 453 | |||||||||
Essex Property Trust, Inc. | 1,030 | 292 | |||||||||
Extra Space Storage, Inc. | 2,085 | 372 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Healthpeak Properties, Inc. | 8,426 | $ | 250 | ||||||||
Host Hotels & Resorts, Inc. | 10,884 | 218 | |||||||||
Invitation Homes, Inc. | 8,971 | 338 | |||||||||
Iron Mountain, Inc. | 4,610 | 248 | |||||||||
Kimco Realty Corp. | 10,300 | 244 | |||||||||
Medical Properties Trust, Inc. | 9,101 | 169 | |||||||||
Mid-America Apartment Communities, Inc. | 1,812 | 328 | |||||||||
Prologis, Inc. | 12,353 | 1,575 | |||||||||
Public Storage | 2,533 | 837 | |||||||||
Realty Income Corp. | 9,455 | 645 | |||||||||
Regency Centers Corp. | 2,715 | 185 | |||||||||
SBA Communications Corp. | 1,767 | 595 | |||||||||
Simon Property Group, Inc. | 5,343 | 613 | |||||||||
Sun Communities, Inc. | 1,582 | 260 | |||||||||
UDR, Inc. | 4,691 | 224 | |||||||||
Ventas, Inc. | 5,937 | 337 | |||||||||
VICI Properties, Inc. | 16,083 | 496 | |||||||||
Vornado Realty Trust | 2,548 | 89 | |||||||||
Welltower, Inc. | 6,609 | 589 | |||||||||
Weyerhaeuser Co. | 11,676 | 461 | |||||||||
WP Carey, Inc. | 2,776 | 234 | |||||||||
Zillow Group, Inc. Class C (e) | 3,416 | 136 | |||||||||
17,319 | |||||||||||
Utilities (0.6%): | |||||||||||
CenterPoint Energy, Inc. | 88,514 | 2,837 | |||||||||
Exelon Corp. | 60,622 | 2,979 | |||||||||
FirstEnergy Corp. | 64,261 | 2,761 | |||||||||
NRG Energy, Inc. | 64,144 | 2,953 | |||||||||
The AES Corp. | 133,347 | 2,939 | |||||||||
UGI Corp. | 71,928 | 3,074 | |||||||||
17,543 | |||||||||||
Total Common Stocks (Cost $501,767) | 611,827 | ||||||||||
Corporate Bonds (0.2%) | |||||||||||
Financials (0.2%): | |||||||||||
| Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/11/22 @ 100 (d) | $ | 6,000 | 5,395 | ||||||||
Total Corporate Bonds (Cost $5,545) | 5,395 | ||||||||||
U.S. Government Agency Mortgages (0.0%) (b) | |||||||||||
| Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 1,018 | 1,017 | |||||||||
| Government National Mortgage Association 6.50%, 4/15/24 | 2 | 1 | |||||||||
1,018 | |||||||||||
Total U.S. Government Agency Mortgages (Cost $1,020) | 1,018 | ||||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
U.S. Treasury Obligations (1.1%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 | $ | 29,000 | $ | 28,878 | |||||||
Total U.S. Treasury Obligations (Cost $28,970) | 28,878 | ||||||||||
Exchange-Traded Funds (48.4%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (e) | 256,100 | 7,376 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 653,206 | 29,407 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 1,539,501 | 30,498 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 309,301 | 31,957 | |||||||||
iShares Core MSCI EAFE ETF | 32,626 | 2,150 | |||||||||
iShares Core MSCI Emerging Markets ETF | 2,061,951 | 108,397 | |||||||||
iShares Core S&P 500 ETF | 257,257 | 106,728 | |||||||||
iShares Core S&P Small-Cap ETF | 806,334 | 81,666 | |||||||||
iShares Core US Aggregate Bond ETF | 688,517 | 71,241 | |||||||||
iShares Core US REIT ETF (g) | 70,419 | 4,086 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 103,852 | 9,476 | |||||||||
iShares MSCI Canada ETF (f) | 1,178,481 | 44,582 | |||||||||
iShares MSCI International Momentum Factor ETF | 1,164,448 | 38,671 | |||||||||
iShares MSCI International Quality Factor ETF | 1,315,008 | 45,131 | |||||||||
JPMorgan BetaBuilders Canada ETF | 97,469 | 6,413 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 2,206,197 | 61,597 | |||||||||
Schwab Fundamental International Large Co. Index ETF (f) | 3,168,339 | 100,246 | |||||||||
Schwab Fundamental International Small Co. Index ETF (f) | 593,600 | 20,052 | |||||||||
SPDR Gold Shares (e) | 127,880 | 21,885 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 107,983 | 5,705 | |||||||||
U.S. Oil Fund LP (e) (f) | 99,974 | 8,545 | |||||||||
VanEck Gold Miners ETF | 191,058 | 6,062 | |||||||||
Vanguard FTSE All-World ex-US ETF | 806,251 | 44,134 | |||||||||
Vanguard FTSE Developed Markets ETF | 3,688,130 | 167,847 | |||||||||
Vanguard Mid-Capital ETF | 30,077 | 6,556 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 264,207 | 12,840 | |||||||||
Vanguard Real Estate ETF (f) | 247,167 | 24,487 | |||||||||
Vanguard S&P 500 ETF (g) | 79,469 | 30,173 | |||||||||
Vanguard Short-Term Bond ETF | 637,995 | 49,470 | |||||||||
Vanguard Short-Term Corporate Bond ETF | 186,391 | 14,427 | |||||||||
Vanguard Small-Cap Value ETF (f) (g) | 117,175 | 19,669 | |||||||||
Vanguard Total Bond Market ETF | 379,372 | 29,090 | |||||||||
Vanguard Total Stock Market ETF (g) | 180,196 | 37,185 | |||||||||
Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 202,622 | 10,141 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF (f) | 770,152 | 28,111 | |||||||||
Total Exchange-Traded Funds (Cost $1,194,011) | 1,316,001 | ||||||||||
Affiliated Exchange-Traded Funds (26.2%) | |||||||||||
VictoryShares ESG Core Plus Bond ETF | 5,553,028 | 124,777 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 11,148,150 | 536,226 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 969,310 | 48,068 | |||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF (g) | 68,000 | 3,032 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $784,101) | 712,103 | ||||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned (4.1%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 0.67% (h) | 55,178,282 | $ | 55,178 | ||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (h) | 57,405,579 | 57,406 | |||||||||
Total Collateral for Securities Loaned (Cost $112,584) | 112,584 | ||||||||||
Total Investments (Cost $2,633,677) — 102.7% | 2,793,356 | ||||||||||
Liabilities in excess of other assets — (2.7)% | (73,291 | ) | |||||||||
NET ASSETS — 100.00% | $ | 2,720,065 | |||||||||
At May 31, 2022, the Fund's investments in foreign securities were 26.0% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $4,851 thousands and amounted to 0.2% of net assets.
(b) Amount represents less than 0.05% of net assets.
(c) The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2022.
(d) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) All or a portion of this security has been segregated as collateral for derivative instruments.
(h) Rate disclosed is the daily yield on May 31, 2022.
bps — Basis points
ETF — Exchange-Traded Fund
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PLC — Public Limited Company
REIT — Real Estate Investment Trust
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
Futures Contracts Purchased
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
FTSE 100 Index Futures | 276 | 6/20/22 | $ | 25,377,395 | $ | 26,377,367 | $ | 999,972 | |||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 137 | 6/16/22 | 27,757,683 | 27,157,350 | (600,333 | ) | |||||||||||||||||
$ | 399,639 | ||||||||||||||||||||||
Futures Contracts Sold
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 202 | 6/16/22 | $ | 25,652,881 | $ | 26,131,747 | $ | (478,866 | ) | ||||||||||||||
Euro Stoxx 50 Futures | 177 | 6/20/22 | 6,951,540 | 7,189,283 | (237,743 | ) | |||||||||||||||||
Hang Seng Index Futures | 78 | 6/29/22 | 10,163,360 | 10,632,930 | (469,570 | ) | |||||||||||||||||
Tokyo Price Index Futures | 78 | 6/9/22 | 10,938,393 | 11,567,899 | (629,506 | ) | |||||||||||||||||
$ | (1,815,685 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 999,972 | |||||||||||||||||||||
Total unrealized depreciation | (2,416,018 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | (1,416,046 | ) | ||||||||||||||||||||
See notes to financial statements.
15
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Moderately Aggressive Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $784,101) | $ | 712,103 | |||||
Unaffiliated investments, at value (Cost $1,849,576) | 2,081,253 | (a) | |||||
Cash | 37,599 | ||||||
Deposit with broker for futures contracts | 5,539 | ||||||
Receivables: | |||||||
Interest and dividends | 1,229 | ||||||
Capital shares issued | 586 | ||||||
Variation margin on open futures contracts | 52 | ||||||
Reclaims | 6 | ||||||
From Adviser | 535 | ||||||
Prepaid expenses | 39 | ||||||
Total Assets | 2,838,941 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 112,584 | ||||||
Collateral received from brokers for futures contracts | 2,467 | ||||||
Investments purchased | 215 | ||||||
Capital shares redeemed | 1,001 | ||||||
Variation margin on open futures contracts | 421 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 1,341 | ||||||
Administration fees | 333 | ||||||
Custodian fees | 21 | ||||||
Transfer agent fees | 399 | ||||||
Compliance fees | 2 | ||||||
Trustees' fees | — | (b) | |||||
Other accrued expenses | 92 | ||||||
Total Liabilities | 118,876 | ||||||
Net Assets: | |||||||
Capital | 2,474,100 | ||||||
Total accumulated earnings/(loss) | 245,965 | ||||||
Net Assets | $ | 2,720,065 | |||||
Shares (unlimited number of shares authorized with no par value): | 105,598 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 25.76 | |||||
(a) Includes $109,743 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
16
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderately Aggressive Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 9,773 | |||||
Dividends from unaffiliated investments | 45,676 | ||||||
Interest from unaffiliated investments | 7,056 | ||||||
Securities lending (net of fees) | 713 | ||||||
Foreign tax withholding | (5 | ) | |||||
Total Income | 63,213 | ||||||
Expenses: | |||||||
Investment advisory fees | 17,408 | ||||||
Administration fees | 4,426 | ||||||
Sub-Administration fees | 76 | ||||||
Custodian fees | 126 | ||||||
Transfer agent fees | 5,116 | ||||||
Trustees' fees | 50 | ||||||
Compliance fees | 20 | ||||||
Legal and audit fees | 68 | ||||||
State registration and filing fees | 41 | ||||||
Interfund lending fees | 1 | ||||||
Other expenses | 274 | ||||||
Total Expenses | 27,606 | ||||||
Expenses waived/reimbursed by Adviser | (1,689 | ) | |||||
Net Expenses | 25,917 | ||||||
Net Investment Income (Loss) | 37,296 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | 126,892 | ||||||
Capital gain distributions received from affiliated funds | 1,214 | ||||||
Net realized gains (losses) from futures contracts | 2,816 | ||||||
| Net change in unrealized appreciation/depreciation on affiliated investment securities | (69,445 | ) | |||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (254,354 | ) | |||||
Net change in unrealized appreciation/depreciation on futures contracts | 33 | ||||||
Net realized/unrealized gains (losses) on investments | (192,844 | ) | |||||
Change in net assets resulting from operations | $ | (155,548 | ) | ||||
See notes to financial statements.
17
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderately Aggressive Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 37,296 | $ | 33,724 | |||||||
Net realized gains (losses) | 130,922 | 176,187 | |||||||||
Net change in unrealized appreciation/depreciation | (323,766 | ) | 415,330 | ||||||||
Change in net assets resulting from operations | (155,548 | ) | 625,241 | ||||||||
Change in net assets resulting from distributions to shareholders | (229,481 | ) | (55,505 | ) | |||||||
Change in net assets resulting from capital transactions | 78,119 | (205,115 | ) | ||||||||
Change in net assets | (306,910 | ) | 364,621 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 3,026,975 | 2,662,354 | |||||||||
End of period | $ | 2,720,065 | $ | 3,026,975 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 177,611 | $ | 174,743 | |||||||
Distributions reinvested | 227,559 | 55,021 | |||||||||
Cost of shares redeemed | (327,051 | ) | (434,879 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 78,119 | $ | (205,115 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 6,233 | 6,386 | |||||||||
Reinvested | 8,036 | 2,015 | |||||||||
Redeemed | (11,454 | ) | (16,102 | ) | |||||||
Change in Shares | 2,815 | (7,701 | ) | ||||||||
See notes to financial statements.
18
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19
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | Total Distributions | |||||||||||||||||||||||||
USAA Cornerstone Moderately Aggressive Fund | |||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||
2022 | $ | 29.45 | 0.36 | (d) | (1.77 | ) | (1.41 | ) | (0.35 | ) | (1.93 | ) | (2.28 | ) | |||||||||||||||||
2021 | $ | 24.10 | 0.32 | (d) | 5.56 | 5.88 | (0.37 | ) | (0.16 | ) | (0.53 | ) | |||||||||||||||||||
2020 | $ | 23.97 | 0.48 | (d) | 0.18 | 0.66 | (0.39 | ) | (0.14 | ) | (0.53 | ) | |||||||||||||||||||
2019 | $ | 25.78 | 0.46 | (0.79 | ) | (0.33 | ) | (0.39 | ) | (1.09 | ) | (1.48 | ) | ||||||||||||||||||
2018 | $ | 26.09 | 0.42 | 1.28 | 1.70 | (0.44 | ) | (1.57 | ) | (2.01 | ) | ||||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019, and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Effective June 22, 2018, USAA Asset Management Company ("AMCO") (previous Investment Adviser) voluntarily agreed to limit the annual expenses of the Fund to 0.98% of the Fund's average daily net assets.
(f) For the year ended May 31, 2019, the portfolio turnover calculation excludes the value of securities purchased of $370,785 thousand and sold of $3,096 thousand after the Fund's acquisition of First Start Growth Fund. Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
20
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
| Net Asset Value, End of Period | Total Return(a) | Net Expenses(b)(c) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover | |||||||||||||||||||||||||
USAA Cornerstone Moderately Aggressive Fund | |||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||
2022 | $ | 25.76 | (5.43 | )% | 0.88 | % | 1.26 | % | 0.93 | % | $ | 2,720,065 | 44 | % | |||||||||||||||||
2021 | $ | 29.45 | 24.58 | % | 0.96 | % | 1.18 | % | 0.97 | % | $ | 3,026,975 | 64 | % | |||||||||||||||||
2020 | $ | 24.10 | 2.59 | % | 0.98 | % | 1.94 | % | 0.99 | % | $ | 2,662,354 | 92 | % | |||||||||||||||||
2019 | $ | 23.97 | (1.20 | )% | 0.98 | %(e) | 1.91 | % | 1.01 | % | $ | 2,777,038 | 95 | %(f) | |||||||||||||||||
2018 | $ | 25.78 | 6.52 | % | 0.97 | % | 1.64 | % | 0.97 | % | $ | 2,493,883 | 56 | % | |||||||||||||||||
See notes to financial statements.
21
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Cornerstone Moderately Aggressive Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments in open-end investment companies, including underlying funds, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities are valued each business day by a pricing service approved by the Board. The approved pricing service uses the evaluated bid or the last sale price to value securities. Debt obligations maturing within 60 days may be valued at amortized cost, provided that the amortized cost represents the fair value of such securities. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 4,429 | $ | — | $ | 4,429 | |||||||||||
Collateralized Mortgage Obligations | — | 1,121 | — | 1,121 | |||||||||||||||
Common Stocks | 611,827 | — | — | 611,827 | |||||||||||||||
Corporate Bonds | — | 5,395 | — | 5,395 | |||||||||||||||
U.S. Government Agency Mortgages | — | 1,018 | — | 1,018 | |||||||||||||||
U.S. Treasury Obligations | — | 28,878 | — | 28,878 | |||||||||||||||
Exchange-Traded Funds | 1,316,001 | — | — | 1,316,001 | |||||||||||||||
Affiliated Exchange-Traded Funds | 712,103 | — | — | 712,103 | |||||||||||||||
Collateral for Securities Loaned | 112,584 | — | — | 112,584 | |||||||||||||||
Total | $ | 2,752,515 | $ | 40,841 | $ | — | $ | 2,793,356 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 1,000 | $ | — | $ | — | $ | 1,000 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (2,416 | ) | $ | — | $ | — | $ | (2,416 | ) | |||||||||
Total | $ | (1,416 | ) | $ | — | $ | — | $ | (1,416 | ) | |||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Mortgage- and Asset-Backed Securities:
The values of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Fund to a lower rate of return upon reinvestment of principal. The values of mortgage- and asset-backed securities depend in part on the credit quality and adequacy of the underlying assets or collateral and may fluctuate in response to the market's perception of these factors as well as current and future repayment rates. Some mortgage-backed securities are backed by the full faith and credit of the U.S. government (e.g., mortgage-backed securities issued by the Government National Mortgage Association, commonly known as "Ginnie Mae"), while other mortgage-backed securities (e.g., mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as "Fannie Mae" and "Freddie Mac," respectively), are backed only by the credit of the government entity issuing them. In addition, some mortgage-backed securities are issued by private entities and, as such, are not guaranteed by the U.S. government or any agency or instrumentality of the U.S. government.
Derivative Instruments:
Futures Contracts:
The Fund may enter into contracts for the future delivery of securities or foreign currencies and futures contracts based on a specific security, class of securities, foreign currency or an index, and purchase or sell options on any such futures contracts. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. No physical delivery of the underlying asset is made. The Fund may enter into futures contracts in an effort to hedge against market risks. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. A good faith margin deposit, known as initial margin, of cash or government securities with a broker or custodian is required to initiate and maintain open positions in futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund based on the change in the market value of the position and are recorded as unrealized appreciation or depreciation until the contract is closed out, at which time the gain or loss is realized. The Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices change in an unanticipated
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
manner. Such unanticipated changes may also result in lower overall performance than if the Fund had not entered into any futures transactions. In addition, the value of the Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions.
The collateral held by the Fund is reflected on the Statement of Assets and Liabilities under Deposit with broker for futures contracts and Collateral received from broker for futures contracts.
Management has determined that no offsetting requirements exist as a result of their conclusion that the Fund is not subject to master netting agreements for futures contracts. During the year ended May 31, 2022, the Fund entered into futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market.
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statement of Assets and Liabilities, categorized by risk exposure, as of May 31, 2022 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 1,000 | $ | 2,416 | |||||||
* Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts is reported within the Statement of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2022 (amounts in thousands):
| Net Realized Gains (Losses) on Derivatives Recognized as a Result of Operations | Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result of Operations | ||||||||||
| Net Realized Gains (Losses) from Futures Contracts | Net Change in Unrealized Appreciation/Depreciation on Futures Contracts | ||||||||||
Equity Risk Exposure | $ | 2,816 | $ | 33 | |||||||
All open derivative positions at year end are reflected on the Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to the Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statement of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 109,743 | $ | — | $ | 112,584 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades, which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2022, the Fund engaged in the following securities transactions with affiliated funds, which resulted in the following net realized gains (losses) (amounts in thousands):
| Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| $ | — | $ | 62,899 | $ | 1,537 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 1,261,904 | $ | 1,390,122 | $ | — | $ | 186,469 | ||||||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.59% of the Fund's average daily net assets. Amounts
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, which is based on the Fund's average daily net assets of the Fund Shares. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 0.98%.
In addition, the Fund invests in affiliated VCM exchange-traded fund(s) ("affiliated ETFs"). The Fund's advisory fee is reimbursed by VCM that to the extent of the indirect advisory fee incurred through the Fund's proportional investment in the affiliated ETFs. These affiliated ETF advisory fee reimbursements are not available for recoupment. For the year ended May 31, 2022, the Fund incurred affiliated ETFs advisory fee reimbursements of $1,689 thousand that were reimbursed by VCM and $535 thousand was receivable from the Adviser.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Tactical Allocation Risk — The Fund has a targeted risk tolerance and a corresponding asset allocation target; however, mere asset allocation and volatility are not the sole determination of risk. The Fund's managers will tactically allocate away from the target allocation as market conditions and the perceived risks warrant. The Fund bears the risk that the managers' tactical allocation will not be successful.
Affiliated Funds Risk — The risks of the Fund directly correspond to the risks of the underlying affiliated funds in which the Fund invests. By investing in the underlying affiliated funds, the Fund has exposure to the risk of many different areas of the market. The degree to which the risks described below apply to the Fund varies according to the Fund's asset allocation. For instance, the more the Fund is allocated to stock funds, the greater the risk associated with equity securities. The Fund also is subject to asset allocation risk (i.e., the risk that allocations will not produce the intended results) and to management risk (i.e., the risk that the selection of underlying affiliated funds will not produce the intended results).
Conflict of Interest Risk — In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
LIBOR Discontinuation Risk — The London Interbank Offered Rate ("LIBOR") discontinuation may adversely affect the financial markets generally and the Fund's operations, finances and investments specifically. LIBOR has been the principal floating-rate benchmark in the financial markets, and a large portion of the Fund's assets are tied to LIBOR. However, LIBOR has been or will be discontinued as a floating rate benchmark. The date of discontinuation depends on the LIBOR currency and tenor. With limited exceptions, no new LIBOR obligations will be entered into after December 31, 2021. Existing LIBOR obligations have transitioned or will transition to another benchmark, depending on the LIBOR currency and tenor. For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
Non-LIBOR floating-rate obligations, including Secured Overnight Financing Rate ("SOFR")-based obligations, may have returns and values that fluctuate more than those of floating-rate debt obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest-rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Various SOFR-based rates, including SOFR-based term rates, and various non-SOFR-based rates are expected to develop in response to the discontinuation of U.S. dollar LIBOR, which may create various risks for the Fund and the financial markets more generally. There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Such rates include AMERIBOR (American Interbank Offered Rate), BSBY (Bloomberg Short-Term Bank Yield Index) and BYI (Bank Yield Index). Unlike forward-looking SOFR-based term rates, such rates are intended to reflect a bank credit spread component.
It is not clear how replacement rates for LIBOR — including SOFR-based rates and non-SOFR-based rates — will develop and to what extent they will be used. There is no assurance that these replacement rates will be suitable substitutes for LIBOR, and thus the substitution of such rates for LIBOR could have an adverse effect on the Fund and the financial markets more generally. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, which may or may not be similar to the risks relating to SOFR.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
plus any interest (one-month LIBOR plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
| Amount Outstanding at May 31, 2022 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||
$ | — | $ | 2,800 | 4 | 1.85 | % | $ | 2,800 | |||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at May 31, 2022 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
| Borrower | $ | — | $ | 7,552 | 12 | 0.59 | % | $ | 15,154 | ||||||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||||||
| $ | (1,590 | ) | $ | 1,590 | ||||||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 117,188 | $ | 112,293 | $ | 229,481 | $ | 51,092 | $ | 4,413 | $ | 55,505 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Other Earnings (Loss) | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 25,740 | $ | 72,649 | $ | (4 | ) | $ | 98,385 | $ | 147,580 | $ | 245,965 | |||||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, futures, trust preferred and grantor trust securities accruals, partnership, and REITs/return of capital.
As of May 31, 2022, the Fund had no capital loss carryforwards, for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 2,643,598 | $ | 274,719 | $ | (127,139 | ) | $ | 147,580 | |||||||
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares, an investment company managed by VCM, or an issuer under common control with a Fund or VCM. The Fund does not invest in affiliated securities for the purpose of exercising management or control. These securities are noted as affiliated on a Fund's Schedule of Portfolio Investments. The financial statements of the underlying funds can be found in shareholder reports filed with the SEC by each such underlying fund semi-annually on Form N-CSR and are available for
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
download from both the SEC's as well as each respective underlying fund's website. Transactions in affiliated securities during the year ended May 31, 2022, were as follows (amounts in thousands):
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | $ | — | $ | 274,908 | $ | (137,454 | ) | $ | — | $ | — | $ | (12,677 | ) | $ | 124,777 | $ | 1,178 | |||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 257,355 | 665,870 | (332,936 | ) | — | 1,110 | (54,063 | ) | 536,226 | 7,586 | |||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 50,302 | — | — | — | 104 | (2,234 | ) | 48,068 | 865 | ||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 3,503 | — | — | — | — | (471 | ) | 3,032 | 144 | ||||||||||||||||||||||||||
$ | 311,160 | $ | 940,778 | $ | (470,390 | ) | $ | — | $ | 1,214 | $ | (69,445 | ) | $ | 712,103 | $ | 9,773 | ||||||||||||||||||
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Moderately Aggressive Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Moderately Aggressive Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
34
USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
40
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 935.60 | $ | 1,020.64 | $ | 4.15 | $ | 4.33 | 0.86 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 12 | % | 13 | % | $ | 80,038 | $ | 113,591 | ||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Cornerstone Moderately Aggressive Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder
43
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services, as well as any fee waivers and reimbursements — was equal to the medians of its expense group and expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were above the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe and its Lipper index for the one-, three-, five- and ten-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance relative to its peers for the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to
44
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser waived a portion of its management fees and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
45
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
46
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23405-0722
MAY 31, 2022
Annual Report
USAA Growth and Tax Strategy Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 7 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 8 | ||||||
Schedule of Portfolio Investments | 9 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 36 | ||||||
Statement of Operations | 37 | ||||||
Statements of Changes in Net Assets | 38 | ||||||
Financial Highlights | 40 | ||||||
Notes to Financial Statements | 42 | ||||||
| Report of Independent Registered Public Accounting Firm | 54 | ||||||
Supplemental Information (Unaudited) | 55 | ||||||
Trustee and Officer Information | 55 | ||||||
Proxy Voting and Portfolio Holdings Information | 61 | ||||||
Expense Example | 61 | ||||||
Additional Federal Income Tax Information | 62 | ||||||
Advisory Contract Renewal | 63 | ||||||
Liquidity Risk Management Program | 67 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Growth and Tax Strategy Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
Tax-exempt bonds as measured by the Bloomberg Municipal Bond Index generated negative returns during the 12-month reporting period ended May 31, 2022, due largely to rising municipal bond yields beginning at the start of 2022. (Bond prices and yields move in opposite directions.)
The reporting period began with the municipal market fighting the headwinds of potentially higher U.S. Treasury rates and inflation, but with several notable tailwinds in support to include: heavy fund flows into tax-exempt mutual funds, investor expectations of increasing tax rates, and stimulus money flowing to municipal borrowers. The Bloomberg Municipal Bond Index returned 0.73% from the start of the fiscal year through the end of calendar year 2021.
The municipal bond market turned meaningfully negative in 2022. The Bloomberg Municipal Bond Index returned -7.47% during the first five months of 2022. The negative returns were driven by a material increase in Treasury and AAA Municipal Bond yields. These rates rose significantly in response to the U.S. Federal Reserve's (the "Fed's") initiation of monetary tightening. Negative returns were also driven by significant outflows of assets from municipal bond mutual funds.
At the end of the reporting period, the yield on the Bloomberg Municipal Bond Index was 2.92%, which was notably higher than at the start of the fiscal year (1.02% on May 31, 2021). While the increase in rates detracted from performance during this fiscal year, we believe the higher rates should drive higher returns over the long-term.
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The Fed maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index.
4
USAA Growth and Tax Strategy Fund
Managers' Commentary (continued)
The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
The end of the reporting period saw continued pressure on stocks and bonds. The Fed's hawkish pivot, which started in the fourth quarter of 2021, continued to put pressure on equity multiples, especially for long-duration growth stocks. With inflation readings hitting four-decade highs, the Fed now faced an increasingly difficult task of implementing policy strong enough to tame inflation and provide a "soft landing" for the economy, while not being too aggressive and tilting the economy into recession. This risk contributed to the heightened stock market volatility, in addition to mounting COVID-related lockdowns in China, rising oil prices, and the ongoing conflict between Russia and the Ukraine.
• How did the USAA Growth and Tax Strategy Fund (the "Fund") perform during the reporting period?
The Fund has four share classes: Fund Shares, Institutional Shares, Class A, and Class C. For the reporting period ended May 31, 2022, the Fund Shares, Institutional Shares, Class A, and Class C had total returns of -4.80%, -4.79%, -5.10%, and -5.78%, respectively. This compares to a total return of -0.30% for the S&P 500® Index (the "Index"), -6.79% for the Bloomberg Municipal Bond Index, -3.55% for the Composite Index (50% of the S&P 500 Index and 50% of the Bloomberg Municipal Bond Index), and -4.03% for the Lipper Composite Index (51% of the Lipper General & Insured Municipal Debt Funds Index and 49% of the Lipper Large-Cap Core Funds Index).
Victory Capital Management Inc. ("VCM") is the Fund's investment adviser. As the investment adviser, VCM employs dedicated resources to support the research, selection, and monitoring of the Fund's subadviser. Northern Trust Investments, Inc., is a subadviser to the Fund. The investment adviser and the subadviser each provide day-to-day discretionary management for a portion of the Fund's assets.
5
USAA Growth and Tax Strategy Fund
Managers' Commentary (continued)
• What strategies did you employ during the reporting period?
In keeping with our investment approach in the municipal bond portion of the Fund, we continued to focus on income generation. Because of the Fund's income orientation, it has a higher allocation to BBB and A rated categories when compared to its benchmark.
Our commitment to independent credit research continued to help us identify attractive opportunities for the Fund. We employ fundamental analysis that emphasizes an issuer's ability and willingness to repay its debt. Through our credit research, we strive both to recognize relative value and to avoid potential pitfalls, which is especially important in volatile times like the present. As always, we worked with our in-house team of analysts to select investments for the Fund on a bond-by-bond basis. Our team continuously monitors all the holdings in the Fund's portfolio.
The Fund continues to hold a diversified portfolio of longer-term, primarily investment- grade municipal bonds. To limit exposure to an unexpected event, the Fund is diversified by sector, issuer, and geography. In addition, we avoid bonds subject to the federal alternative minimum tax for individuals.
The equity portion of the Fund continues to seek performance similar to the Index. The relative strength or weakness of certain sectors in the Index did not have an outsized impact on the equity portion of the Fund, as its sector exposures are similar to those of the Index. The Fund had a small allocation to derivatives during the period that did not have a material impact on performance. In keeping with our investment approach, we sought to limit both short-term and long-term capital gains. More specifically, we attempted to keep realized capital gains down by limiting the sale of securities that had increased in value and realizing capital losses on securities that had decreased in value. In addition, our investment process continued to manage the "active risk" (the risk that the equity portion of the Fund will not perform in line with the Index because of our efforts to achieve tax efficiency) in the portfolio. To the extent the Fund has a loss carryforward position, it will help offset any potential future capital gains.
Thank you for allowing us to assist you with your investment needs.
6
USAA Growth and Tax Strategy Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
| Fund Shares | Institutional Shares | Class A | Class C | ||||||||||||||||||||||||||||||||||||||||
| INCEPTION DATE | 1/11/89 | 6/29/20 | 6/29/20 | 6/29/20 | |||||||||||||||||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | S&P 500 Index1 | Bloomberg Municipal Bond Index2 | Composite Index1,2,3 | Lipper Composite Index4 | ||||||||||||||||||||||||||||||||||
One Year | –4.80 | % | –4.79 | % | –5.10 | % | –7.23 | % | –5.78 | % | –6.71 | % | –0.30 | % | –6.79 | % | –3.55 | % | –4.03 | % | |||||||||||||||||||||||
Five Year | 7.02 | % | NA | NA | N/A | NA | N/A | 13.37 | % | 1.78 | % | 7.58 | % | 1.56 | % | ||||||||||||||||||||||||||||
Ten Year | 7.84 | % | NA | NA | N/A | NA | N/A | 14.38 | % | 2.54 | % | 8.46 | % | 2.05 | % | ||||||||||||||||||||||||||||
| Since Inception | NA | 7.93 | % | 7.63 | % | 6.37 | % | 6.82 | % | 6.82 | % | NA | NA | NA | NA | ||||||||||||||||||||||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The maximum offering price figures reflect a maximum sales charge of 2.25% for Class A. Class C is not subject to an initial sales charge, but is subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. Net Asset Value does not reflect sales charges.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Growth and Tax Strategy Fund — Growth of $10,000
1The S&P 500® Index is an unmanaged index comprised of 500 domestically traded common stocks, is weighted according to the market value of each common stock in the index, and includes reinvestment of dividends. This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The unmanaged Bloomberg Municipal Bond Index is generally considered to be representative of the municipal bond market. This index does not include the effect of sales charges, commissions, expenses or taxes, is not representative of the Fund, and it is not possible to invest directly in an index. As of August 24, 2021, Bloomberg rebranded the Bloomberg Barclays fixed income indices as "Bloomberg Indices."
3The Composite Index is comprised of 50% of the S&P 500 Index and 50% of the Bloomberg Municipal Bond Index. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
4The Lipper Composite Index is comprised of 51% of the Lipper General & Insured Municipal Debt Funds Index and 49% of the Lipper Large-Cap Core Funds Index. The unmanaged Lipper General & Municipal Debt Funds Index tracks the total return performance of the funds within this same category. The unmanaged Lipper Large-Cap Core Funds Index tracks the total return performance of the funds within this same category. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
7
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks a conservative balance for the investor between income, the majority of which is exempt from federal income tax, and the potential for long-term growth of capital to preserve purchasing power.
Top 10 Sectors*:
May 31, 2022
(% of Net Assets)
Information Technology | 11.7 | % | |||||
Health Care | 6.2 | % | |||||
Financials | 5.0 | % | |||||
Consumer Discretionary | 4.8 | % | |||||
Communication Services | 3.7 | % | |||||
Industrials | 3.5 | % | |||||
Consumer Staples | 2.8 | % | |||||
Energy | 2.1 | % | |||||
Utilities | 1.3 | % | |||||
Materials | 1.2 | % | |||||
Top 5 Tax-Exempt Bonds:
May 31, 2022
(% of Net Assets)
Massachusetts Development Finance Agency Revenue | 2.0 | % | |||||
Public Finance Authority Revenue | 1.5 | % | |||||
Illinois Finance Authority Revenue | 1.2 | % | |||||
Port of Port Arthur Navigation District Revenue | 1.2 | % | |||||
New York State Dormitory Authority Revenue | 0.9 | % | |||||
Top 5 Blue Chip Stocks:
May 31, 2022
(% of Net Assets)
Apple, Inc. | 2.9 | % | |||||
Microsoft Corp. | 2.5 | % | |||||
Amazon.com, Inc. | 1.3 | % | |||||
Alphabet, Inc. Class A | 0.8 | % | |||||
Alphabet, Inc. Class C | 0.8 | % | |||||
Refer to the Schedule of Portfolio Investments for a complete list of securities.
* Does not include futures contracts, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
8
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (43.5%) | |||||||||||
Blue Chip Stocks: | |||||||||||
Communication Services (3.7%): | |||||||||||
Activision Blizzard, Inc. | 7,501 | $ | 584 | ||||||||
Alphabet, Inc. Class A (a) | 2,839 | 6,459 | |||||||||
Alphabet, Inc. Class C (a) | 2,729 | 6,224 | |||||||||
AT&T, Inc. (j) | 67,577 | 1,439 | |||||||||
Charter Communications, Inc. Class A (a) | 1,764 | 894 | |||||||||
Comcast Corp. Class A | 40,514 | 1,794 | |||||||||
DISH Network Corp. Class A (a) | 2,718 | 62 | |||||||||
Electronic Arts, Inc. | 2,332 | 323 | |||||||||
Fox Corp. Class A | 4,287 | 152 | |||||||||
Fox Corp. Class B | 1,615 | 53 | |||||||||
Live Nation Entertainment, Inc. (a) | 1,845 | 175 | |||||||||
Lumen Technologies, Inc. | 8,720 | 107 | |||||||||
Match Group, Inc. (a) | 1,963 | 155 | |||||||||
Meta Platforms, Inc. Class A (a) | 22,231 | 4,305 | |||||||||
Netflix, Inc. (a) | 3,933 | 776 | |||||||||
News Corp. Class A | 2,721 | 47 | |||||||||
Omnicom Group, Inc. | 2,667 | 199 | |||||||||
Paramount Global Class B | 5,699 | 196 | |||||||||
Take-Two Interactive Software, Inc. (a) | 1,750 | 218 | |||||||||
The Interpublic Group of Cos., Inc. | 4,839 | 156 | |||||||||
The Walt Disney Co. (a) | 17,228 | 1,903 | |||||||||
T-Mobile U.S., Inc. (a) | 5,556 | 741 | |||||||||
Twitter, Inc. (a) | 7,251 | 287 | |||||||||
Verizon Communications, Inc. | 26,469 | 1,358 | |||||||||
Warner Bros Discovery, Inc. (a) | 7,386 | 136 | |||||||||
28,743 | |||||||||||
Consumer Discretionary (4.8%): | |||||||||||
Advance Auto Parts, Inc. | 832 | 158 | |||||||||
Amazon.com, Inc. (a) | 4,213 | 10,129 | |||||||||
Aptiv PLC (a) | 2,354 | 250 | |||||||||
AutoZone, Inc. (a) | 255 | 525 | |||||||||
Bath & Body Works, Inc. | 2,727 | 112 | |||||||||
Best Buy Co., Inc. | 2,415 | 198 | |||||||||
Booking Holdings, Inc. (a) | 417 | 936 | |||||||||
BorgWarner, Inc. | 2,309 | 93 | |||||||||
Caesars Entertainment, Inc. (a) | 885 | 44 | |||||||||
CarMax, Inc. (a) | 2,090 | 207 | |||||||||
Carnival Corp. (a) | 2,980 | 41 | |||||||||
Chipotle Mexican Grill, Inc. (a) | 325 | 456 | |||||||||
D.R. Horton, Inc. | 3,030 | 228 | |||||||||
Darden Restaurants, Inc. | 1,633 | 204 | |||||||||
Dollar General Corp. | 2,461 | 542 | |||||||||
Dollar Tree, Inc. (a) | 1,591 | 255 | |||||||||
Domino's Pizza, Inc. | 149 | 54 | |||||||||
eBay, Inc. | 7,658 | 373 | |||||||||
Etsy, Inc. (a) (j) | 812 | 66 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Expedia Group, Inc. (a) | 1,583 | $ | 205 | ||||||||
Ford Motor Co. | 48,980 | 670 | |||||||||
Garmin Ltd. | 1,682 | 178 | |||||||||
General Motors Co. (a) | 13,698 | 530 | |||||||||
Genuine Parts Co. | 1,110 | 152 | |||||||||
Hasbro, Inc. | 1,004 | 90 | |||||||||
Hilton Worldwide Holdings, Inc. | 3,015 | 425 | |||||||||
Las Vegas Sands Corp. (a) (j) | 1,219 | 43 | |||||||||
Lennar Corp. Class A | 2,669 | 214 | |||||||||
Lennar Corp. Class B | 1 | — | (b) | ||||||||
LKQ Corp. | 3,837 | 197 | |||||||||
Lowe's Cos., Inc. | 7,437 | 1,452 | |||||||||
Marriott International, Inc. Class A | 2,953 | 507 | |||||||||
McDonald's Corp. | 7,151 | 1,803 | |||||||||
MGM Resorts International | 5,858 | 205 | |||||||||
Mohawk Industries, Inc. (a) | 618 | 87 | |||||||||
Newell Brands, Inc. | 4,177 | 90 | |||||||||
NIKE, Inc. Class B | 12,097 | 1,438 | |||||||||
Norwegian Cruise Line Holdings Ltd. (a) | 3,415 | 55 | |||||||||
O'Reilly Automotive, Inc. (a) | 800 | 510 | |||||||||
PulteGroup, Inc. | 2,360 | 107 | |||||||||
PVH Corp. | 928 | 66 | |||||||||
Ralph Lauren Corp. | 420 | 42 | |||||||||
Ross Stores, Inc. | 3,606 | 307 | |||||||||
Royal Caribbean Cruises Ltd. (a) | 2,147 | 125 | |||||||||
Starbucks Corp. | 11,086 | 870 | |||||||||
Tapestry, Inc. | 3,021 | 104 | |||||||||
Target Corp. (j) | 5,209 | 843 | |||||||||
Tesla, Inc. (a) | 7,720 | 5,854 | |||||||||
The Home Depot, Inc. | 10,478 | 3,172 | |||||||||
The TJX Cos., Inc. | 9,986 | 635 | |||||||||
Tractor Supply Co. | 1,578 | 296 | |||||||||
Ulta Beauty, Inc. (a) | 550 | 233 | |||||||||
Under Armour, Inc. Class A (a) | 2,088 | 22 | |||||||||
Under Armour, Inc. Class C (a) | 2,104 | 20 | |||||||||
VF Corp. | 3,574 | 180 | |||||||||
Victoria's Secret & Co. (a) | 1 | — | (b) | ||||||||
Whirlpool Corp. | 792 | 146 | |||||||||
Wynn Resorts Ltd. (a) | 642 | 42 | |||||||||
Yum! Brands, Inc. | 3,711 | 451 | |||||||||
37,237 | |||||||||||
Consumer Staples (2.8%): | |||||||||||
Altria Group, Inc. | 17,147 | 928 | |||||||||
Archer-Daniels-Midland Co. | 6,080 | 552 | |||||||||
Brown-Forman Corp. Class B | 1,744 | 115 | |||||||||
Campbell Soup Co. | 1,914 | 92 | |||||||||
Church & Dwight Co., Inc. | 2,723 | 245 | |||||||||
Colgate-Palmolive Co. | 7,976 | 629 | |||||||||
Conagra Brands, Inc. | 5,311 | 175 | |||||||||
Constellation Brands, Inc. Class A | 1,408 | 346 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Costco Wholesale Corp. | 4,112 | $ | 1,917 | ||||||||
General Mills, Inc. | 6,777 | 473 | |||||||||
Hormel Foods Corp. | 3,124 | 152 | |||||||||
Kellogg Co. | 1,080 | 75 | |||||||||
Kimberly-Clark Corp. | 2,235 | 297 | |||||||||
Lamb Weston Holdings, Inc. | 1,374 | 93 | |||||||||
McCormick & Co., Inc. | 2,942 | 273 | |||||||||
Molson Coors Beverage Co. Class B | 2,045 | 114 | |||||||||
Mondelez International, Inc. Class A | 12,769 | 812 | |||||||||
Monster Beverage Corp. (a) | 3,965 | 353 | |||||||||
PepsiCo, Inc. | 11,883 | 1,993 | |||||||||
Philip Morris International, Inc. | 14,666 | 1,558 | |||||||||
Sysco Corp. | 5,774 | 486 | |||||||||
The Clorox Co. | 1,340 | 195 | |||||||||
The Coca-Cola Co. | 32,518 | 2,061 | |||||||||
The Estee Lauder Cos., Inc. | 2,324 | 592 | |||||||||
The Hershey Co. | 1,885 | 399 | |||||||||
The J.M. Smucker Co. | 828 | 104 | |||||||||
The Kraft Heinz Co. | 7,759 | 294 | |||||||||
The Kroger Co. | 8,383 | 444 | |||||||||
The Procter & Gamble Co. | 22,787 | 3,370 | |||||||||
Tyson Foods, Inc. Class A | 2,142 | 192 | |||||||||
Walgreens Boots Alliance, Inc. | 5,210 | 228 | |||||||||
Walmart, Inc. | 13,093 | 1,684 | |||||||||
21,241 | |||||||||||
Energy (2.1%): | |||||||||||
APA Corp. | 1,896 | 89 | |||||||||
Baker Hughes Co. | 8,513 | 306 | |||||||||
Chevron Corp. | 19,016 | 3,321 | |||||||||
ConocoPhillips | 14,432 | 1,622 | |||||||||
Coterra Energy, Inc. | 4,263 | 146 | |||||||||
Devon Energy Corp. | 4,851 | 363 | |||||||||
Diamondback Energy, Inc. | 2,111 | 321 | |||||||||
EOG Resources, Inc. | 4,759 | 652 | |||||||||
Exxon Mobil Corp. (j) | 40,758 | 3,913 | |||||||||
Halliburton Co. | 9,010 | 365 | |||||||||
Hess Corp. | 2,683 | 330 | |||||||||
Kinder Morgan, Inc. | 7,546 | 149 | |||||||||
Marathon Oil Corp. | 10,479 | 329 | |||||||||
Marathon Petroleum Corp. | 8,076 | 822 | |||||||||
Occidental Petroleum Corp. | 6,361 | 441 | |||||||||
ONEOK, Inc. | 5,513 | 363 | |||||||||
Phillips 66 | 3,380 | 341 | |||||||||
Pioneer Natural Resources Co. | 2,039 | 567 | |||||||||
Schlumberger NV | 18,134 | 833 | |||||||||
The Williams Cos., Inc. | 14,342 | 532 | |||||||||
Valero Energy Corp. | 4,779 | 619 | |||||||||
16,424 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (5.0%): | |||||||||||
Aflac, Inc. | 6,526 | $ | 395 | ||||||||
American Express Co. | 6,409 | 1,082 | |||||||||
American International Group, Inc. | 10,328 | 606 | |||||||||
Ameriprise Financial, Inc. | 1,259 | 348 | |||||||||
Aon PLC Class A | 2,360 | 651 | |||||||||
Arthur J. Gallagher & Co. | 2,370 | 384 | |||||||||
Assurant, Inc. | 653 | 115 | |||||||||
Bank of America Corp. | 80,700 | 3,002 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 16,505 | 5,215 | |||||||||
BlackRock, Inc. | 1,116 | 747 | |||||||||
Capital One Financial Corp. | 4,854 | 621 | |||||||||
Cboe Global Markets, Inc. | 1,027 | 115 | |||||||||
Chubb Ltd. | 3,972 | 839 | |||||||||
Cincinnati Financial Corp. | 1,898 | 243 | |||||||||
Citigroup, Inc. | 14,818 | 791 | |||||||||
Citizens Financial Group, Inc. | 5,249 | 217 | |||||||||
CME Group, Inc. | 3,693 | 734 | |||||||||
Comerica, Inc. | 1,808 | 150 | |||||||||
Discover Financial Services | 3,983 | 452 | |||||||||
Everest Re Group Ltd. | 435 | 123 | |||||||||
Fifth Third Bancorp | 8,885 | 350 | |||||||||
First Republic Bank | 413 | 64 | |||||||||
Franklin Resources, Inc. | 2,763 | 75 | |||||||||
Huntington Bancshares, Inc. | 12,687 | 176 | |||||||||
Intercontinental Exchange, Inc. | 5,160 | 528 | |||||||||
Invesco Ltd. | 4,735 | 92 | |||||||||
JPMorgan Chase & Co. | 30,506 | 4,034 | |||||||||
KeyCorp | 12,202 | 244 | |||||||||
Lincoln National Corp. | 1,769 | 102 | |||||||||
Loews Corp. | 3,046 | 199 | |||||||||
M&T Bank Corp. | 2,214 | 398 | |||||||||
MarketAxess Holdings, Inc. | 420 | 118 | |||||||||
Marsh & McLennan Cos., Inc. | 5,030 | 805 | |||||||||
MetLife, Inc. | 7,410 | 499 | |||||||||
Moody's Corp. | 1,624 | 490 | |||||||||
Morgan Stanley | 14,869 | 1,281 | |||||||||
MSCI, Inc. | 992 | 439 | |||||||||
Nasdaq, Inc. | 1,159 | 180 | |||||||||
Northern Trust Corp. (c) | 2,000 | 223 | |||||||||
Principal Financial Group, Inc. | 2,476 | 181 | |||||||||
Prudential Financial, Inc. | 4,971 | 528 | |||||||||
Raymond James Financial, Inc. | 1,989 | 196 | |||||||||
Regions Financial Corp. | 9,790 | 216 | |||||||||
S&P Global, Inc. | 3,313 | 1,158 | |||||||||
State Street Corp. | 2,324 | 168 | |||||||||
SVB Financial Group (a) | 645 | 315 | |||||||||
Synchrony Financial | 6,793 | 252 | |||||||||
T. Rowe Price Group, Inc. | 2,189 | 278 | |||||||||
The Allstate Corp. | 3,040 | 416 | |||||||||
The Bank of New York Mellon Corp. | 5,526 | 258 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
The Charles Schwab Corp. | 13,865 | $ | 972 | ||||||||
The Goldman Sachs Group, Inc. | 3,096 | 1,012 | |||||||||
The Hartford Financial Services Group, Inc. | 2,900 | 210 | |||||||||
The PNC Financial Services Group, Inc. | 4,807 | 843 | |||||||||
The Progressive Corp. | 5,434 | 649 | |||||||||
The Travelers Cos., Inc. | 2,350 | 421 | |||||||||
Truist Financial Corp. | 9,641 | 480 | |||||||||
U.S. Bancorp | 11,380 | 604 | |||||||||
W.R. Berkley Corp. | 2,739 | 195 | |||||||||
Wells Fargo & Co. (j) | 35,551 | 1,627 | |||||||||
Willis Towers Watson PLC | 1,136 | 240 | |||||||||
Zions Bancorp NA | 2,017 | 115 | |||||||||
38,461 | |||||||||||
Health Care (6.2%): | |||||||||||
Abbott Laboratories (j) | 17,003 | 1,997 | |||||||||
AbbVie, Inc. | 16,903 | 2,491 | |||||||||
ABIOMED, Inc. (a) | 568 | 150 | |||||||||
Agilent Technologies, Inc. | 3,901 | 498 | |||||||||
Align Technology, Inc. (a) | 809 | 225 | |||||||||
AmerisourceBergen Corp. | 1,410 | 218 | |||||||||
Amgen, Inc. | 5,704 | 1,464 | |||||||||
Anthem, Inc. | 2,398 | 1,222 | |||||||||
Baxter International, Inc. | 4,106 | 312 | |||||||||
Becton Dickinson & Co. | 2,296 | 587 | |||||||||
Biogen, Inc. (a) | 1,391 | 278 | |||||||||
Bio-Rad Laboratories, Inc. Class A (a) | 240 | 129 | |||||||||
Bio-Techne Corp. | 372 | 138 | |||||||||
Boston Scientific Corp. (a) | 12,299 | 504 | |||||||||
Bristol-Myers Squibb Co. | 20,211 | 1,525 | |||||||||
Cardinal Health, Inc. | 2,310 | 130 | |||||||||
Catalent, Inc. (a) | 1,695 | 175 | |||||||||
Centene Corp. (a) | 5,336 | 435 | |||||||||
Cerner Corp. | 2,182 | 207 | |||||||||
Charles River Laboratories International, Inc. (a) | 478 | 112 | |||||||||
Cigna Corp. | 3,445 | 924 | |||||||||
CVS Health Corp. | 13,059 | 1,264 | |||||||||
Danaher Corp. | 6,489 | 1,712 | |||||||||
DaVita, Inc. (a) | 972 | 95 | |||||||||
DENTSPLY SIRONA, Inc. | 2,380 | 94 | |||||||||
Dexcom, Inc. (a) | 753 | 224 | |||||||||
Edwards Lifesciences Corp. (a) | 6,150 | 620 | |||||||||
Eli Lilly & Co. | 8,712 | 2,731 | |||||||||
Gilead Sciences, Inc. (j) | 11,871 | 770 | |||||||||
HCA Healthcare, Inc. | 2,625 | 552 | |||||||||
Henry Schein, Inc. (a) | 1,136 | 97 | |||||||||
Hologic, Inc. (a) | 2,461 | 185 | |||||||||
Humana, Inc. | 1,376 | 625 | |||||||||
IDEXX Laboratories, Inc. (a) | 1,036 | 406 | |||||||||
Illumina, Inc. (a) | 1,299 | 311 | |||||||||
Incyte Corp. (a) | 2,048 | 155 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Intuitive Surgical, Inc. (a) | 3,141 | $ | 715 | ||||||||
IQVIA Holdings, Inc. (a) | 1,890 | 407 | |||||||||
Johnson & Johnson (j) | 26,549 | 4,766 | |||||||||
Laboratory Corp. of America Holdings | 1,063 | 262 | |||||||||
McKesson Corp. | 1,450 | 477 | |||||||||
Medtronic PLC | 11,650 | 1,167 | |||||||||
Merck & Co., Inc. | 21,569 | 1,985 | |||||||||
Mettler-Toledo International, Inc. (a) | 250 | 322 | |||||||||
Moderna, Inc. (a) | 1,121 | 163 | |||||||||
Organon & Co. | 1,845 | 70 | |||||||||
PerkinElmer, Inc. | 1,164 | 174 | |||||||||
Pfizer, Inc. | 52,421 | 2,780 | |||||||||
Quest Diagnostics, Inc. | 1,126 | 159 | |||||||||
Regeneron Pharmaceuticals, Inc. (a) | 1,027 | 683 | |||||||||
ResMed, Inc. | 1,423 | 290 | |||||||||
STERIS PLC | 864 | 197 | |||||||||
Stryker Corp. | 3,361 | 788 | |||||||||
The Cooper Cos., Inc. | 445 | 156 | |||||||||
Thermo Fisher Scientific, Inc. | 3,958 | 2,246 | |||||||||
UnitedHealth Group, Inc. | 9,155 | 4,548 | |||||||||
Universal Health Services, Inc. Class B | 71 | 9 | |||||||||
Vertex Pharmaceuticals, Inc. (a) | 2,479 | 666 | |||||||||
Viatris, Inc. | 13,161 | 162 | |||||||||
Waters Corp. (a) | 690 | 226 | |||||||||
West Pharmaceutical Services, Inc. | 713 | 221 | |||||||||
Zimmer Biomet Holdings, Inc. | 2,312 | 278 | |||||||||
Zoetis, Inc. | 4,796 | 820 | |||||||||
48,299 | |||||||||||
Industrials (3.5%): | |||||||||||
3M Co. (j) | 6,322 | 944 | |||||||||
Alaska Air Group, Inc. (a) | 1,550 | 75 | |||||||||
Allegion PLC | 880 | 98 | |||||||||
American Airlines Group, Inc. (a) | 6,217 | 111 | |||||||||
AMETEK, Inc. | 2,905 | 353 | |||||||||
AO Smith Corp. | 1,795 | 108 | |||||||||
C.H. Robinson Worldwide, Inc. | 779 | 85 | |||||||||
Carrier Global Corp. | 7,990 | 314 | |||||||||
Caterpillar, Inc. | 5,175 | 1,117 | |||||||||
Cintas Corp. | 1,066 | 425 | |||||||||
Copart, Inc. (a) | 2,286 | 262 | |||||||||
CSX Corp. | 24,039 | 764 | |||||||||
Cummins, Inc. | 1,577 | 330 | |||||||||
Deere & Co. | 3,839 | 1,373 | |||||||||
Delta Air Lines, Inc. (a) | 7,217 | 301 | |||||||||
Dover Corp. | 1,435 | 192 | |||||||||
Eaton Corp. PLC | 4,316 | 598 | |||||||||
Emerson Electric Co. | 4,743 | 420 | |||||||||
Equifax, Inc. | 1,334 | 270 | |||||||||
Expeditors International of Washington, Inc. | 1,876 | 204 | |||||||||
Fastenal Co. | 5,972 | 320 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
FedEx Corp. | 2,126 | $ | 477 | ||||||||
Fortive Corp. | 2,506 | 155 | |||||||||
Fortune Brands Home & Security, Inc. | 1,743 | 121 | |||||||||
Generac Holdings, Inc. (a) | 284 | 70 | |||||||||
General Dynamics Corp. | 1,726 | 388 | |||||||||
General Electric Co. | 11,338 | 888 | |||||||||
Honeywell International, Inc. | 6,699 | 1,297 | |||||||||
Howmet Aerospace, Inc. | 3,713 | 133 | |||||||||
Huntington Ingalls Industries, Inc. | 470 | 99 | |||||||||
IDEX Corp. | 1 | — | (b) | ||||||||
Illinois Tool Works, Inc. | 2,480 | 516 | |||||||||
Ingersoll Rand, Inc. (j) | 4,166 | 196 | |||||||||
J.B. Hunt Transport Services, Inc. | 714 | 123 | |||||||||
Jacobs Engineering Group, Inc. | 1,124 | 157 | |||||||||
Johnson Controls International PLC | 6,676 | 364 | |||||||||
L3Harris Technologies, Inc. | 2,025 | 488 | |||||||||
Leidos Holdings, Inc. | 184 | 19 | |||||||||
Lockheed Martin Corp. | 2,228 | 981 | |||||||||
Masco Corp. | 2,915 | 165 | |||||||||
Nielsen Holdings PLC | 4,460 | 114 | |||||||||
Norfolk Southern Corp. | 2,582 | 619 | |||||||||
Northrop Grumman Corp. | 1,594 | 746 | |||||||||
Old Dominion Freight Line, Inc. | 882 | 228 | |||||||||
Otis Worldwide Corp. | 3,056 | 227 | |||||||||
PACCAR, Inc. | 2,564 | 223 | |||||||||
Parker-Hannifin Corp. | 1,216 | 331 | |||||||||
Pentair PLC | 869 | 44 | |||||||||
Quanta Services, Inc. | 1,444 | 172 | |||||||||
Raytheon Technologies Corp. | 14,809 | 1,409 | |||||||||
Republic Services, Inc. (j) | 2,086 | 279 | |||||||||
Robert Half International, Inc. | 1,284 | 116 | |||||||||
Rockwell Automation, Inc. | 980 | 209 | |||||||||
Roper Technologies, Inc. | 942 | 417 | |||||||||
Snap-on, Inc. | 594 | 132 | |||||||||
Southwest Airlines Co. (a) | 4,959 | 227 | |||||||||
Stanley Black & Decker, Inc. | 1,804 | 214 | |||||||||
Textron, Inc. | 2,070 | 135 | |||||||||
The Boeing Co. (a) | 4,735 | 622 | |||||||||
Trane Technologies PLC | 2,877 | 397 | |||||||||
TransDigm Group, Inc. (a) | 593 | 359 | |||||||||
Union Pacific Corp. | 7,288 | 1,602 | |||||||||
United Airlines Holdings, Inc. (a) | 3,649 | 174 | |||||||||
United Parcel Service, Inc. Class B | 6,904 | 1,258 | |||||||||
United Rentals, Inc. (a) | 750 | 224 | |||||||||
Verisk Analytics, Inc. | 1,450 | 254 | |||||||||
W.W. Grainger, Inc. | 478 | 233 | |||||||||
Waste Management, Inc. | 3,869 | 613 | |||||||||
Westinghouse Air Brake Technologies Corp. | 1,745 | 165 | |||||||||
Xylem, Inc. | 1,548 | 130 | |||||||||
27,174 | |||||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (11.7%): | |||||||||||
Accenture PLC Class A | 6,227 | $ | 1,858 | ||||||||
Adobe, Inc. (a) | 4,570 | 1,903 | |||||||||
Advanced Micro Devices, Inc. (a) | 16,362 | 1,667 | |||||||||
Akamai Technologies, Inc. (a) | 1,562 | 158 | |||||||||
Amphenol Corp. Class A | 5,634 | 399 | |||||||||
Analog Devices, Inc. | 5,096 | 858 | |||||||||
ANSYS, Inc. (a) | 796 | 207 | |||||||||
Apple, Inc. (j) | 149,432 | 22,241 | |||||||||
Applied Materials, Inc. | 10,258 | 1,203 | |||||||||
Arista Networks, Inc. (a) | 2,364 | 242 | |||||||||
Autodesk, Inc. (a) | 2,021 | 420 | |||||||||
Automatic Data Processing, Inc. | 4,040 | 901 | |||||||||
Broadcom, Inc. | 4,130 | 2,396 | |||||||||
Broadridge Financial Solutions, Inc. | 369 | 54 | |||||||||
Cadence Design Systems, Inc. (a) | 2,583 | 397 | |||||||||
CDW Corp. | 1,428 | 243 | |||||||||
Ceridian HCM Holding, Inc. (a) | 1,295 | 73 | |||||||||
Cisco Systems, Inc. | 39,302 | 1,771 | |||||||||
Citrix Systems, Inc. | 1,224 | 123 | |||||||||
Cognizant Technology Solutions Corp. Class A | 5,181 | 387 | |||||||||
Corning, Inc. | 7,670 | 275 | |||||||||
DXC Technology Co. (a) | 3,194 | 112 | |||||||||
Enphase Energy, Inc. (a) | 816 | 152 | |||||||||
EPAM Systems, Inc. (a) | 537 | 182 | |||||||||
F5, Inc. (a) | 673 | 110 | |||||||||
Fidelity National Information Services, Inc. | 6,742 | 705 | |||||||||
Fiserv, Inc. (a) | 5,751 | 576 | |||||||||
FleetCor Technologies, Inc. (a) | 399 | 99 | |||||||||
Fortinet, Inc. (a) | 1,459 | 429 | |||||||||
Gartner, Inc. (a) | 387 | 102 | |||||||||
Global Payments, Inc. | 2,592 | 340 | |||||||||
Hewlett Packard Enterprise Co. | 12,525 | 195 | |||||||||
HP, Inc. | 13,953 | 542 | |||||||||
Intel Corp. | 37,425 | 1,662 | |||||||||
International Business Machines Corp. | 7,649 | 1,062 | |||||||||
Intuit, Inc. | 2,726 | 1,130 | |||||||||
IPG Photonics Corp. (a) | 388 | 41 | |||||||||
Jack Henry & Associates, Inc. | 691 | 130 | |||||||||
Juniper Networks, Inc. | 2,447 | 75 | |||||||||
Keysight Technologies, Inc. (a) | 1,866 | 272 | |||||||||
KLA Corp. | 1,555 | 567 | |||||||||
Lam Research Corp. | 1,595 | 829 | |||||||||
Mastercard, Inc. Class A | 8,421 | 3,014 | |||||||||
Microchip Technology, Inc. | 3,820 | 277 | |||||||||
Micron Technology, Inc. | 10,223 | 755 | |||||||||
Microsoft Corp. (j) | 71,508 | 19,441 | |||||||||
Monolithic Power Systems, Inc. | 418 | 188 | |||||||||
Motorola Solutions, Inc. | 1,485 | 326 | |||||||||
NetApp, Inc. | 2,488 | 179 | |||||||||
NortonLifeLock, Inc. | 1,010 | 25 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
NVIDIA Corp. | 24,116 | $ | 4,503 | ||||||||
NXP Semiconductors NV | 1,831 | 347 | |||||||||
Oracle Corp. | 20,366 | 1,465 | |||||||||
Paychex, Inc. | 2,957 | 366 | |||||||||
Paycom Software, Inc. (a) | 617 | 175 | |||||||||
PayPal Holdings, Inc. (a) | 12,206 | 1,040 | |||||||||
PTC, Inc. (a) | 359 | 42 | |||||||||
Qorvo, Inc. (a) | 1,188 | 133 | |||||||||
QUALCOMM, Inc. | 12,055 | 1,726 | |||||||||
Salesforce, Inc. (a) | 9,482 | 1,519 | |||||||||
Seagate Technology Holdings PLC | 2,345 | 199 | |||||||||
ServiceNow, Inc. (a) (j) | 2,147 | 1,004 | |||||||||
Skyworks Solutions, Inc. | 1,622 | 177 | |||||||||
SolarEdge Technologies, Inc. (a) | 224 | 61 | |||||||||
Synopsys, Inc. (a) | 1,398 | 446 | |||||||||
TE Connectivity Ltd. | 3,470 | 449 | |||||||||
Teledyne Technologies, Inc. (a) | 189 | 77 | |||||||||
Teradyne, Inc. | 796 | 87 | |||||||||
Texas Instruments, Inc. | 8,840 | 1,563 | |||||||||
Trimble, Inc. (a) | 896 | 61 | |||||||||
Tyler Technologies, Inc. (a) | 105 | 37 | |||||||||
VeriSign, Inc. (a) | 785 | 137 | |||||||||
Visa, Inc. Class A | 16,518 | 3,505 | |||||||||
Western Digital Corp. (a) | 1,869 | 113 | |||||||||
Xerox Holdings Corp. | 1 | — | (b) | ||||||||
Zebra Technologies Corp. (a) | 706 | 239 | |||||||||
90,764 | |||||||||||
Materials (1.2%): | |||||||||||
Air Products and Chemicals, Inc. | 1,923 | 473 | |||||||||
Albemarle Corp. | 1,201 | 313 | |||||||||
Amcor PLC | 6,953 | 91 | |||||||||
Avery Dennison Corp. | 906 | 156 | |||||||||
Ball Corp. | 3,726 | 264 | |||||||||
Celanese Corp. | 463 | 72 | |||||||||
CF Industries Holdings, Inc. | 2,763 | 273 | |||||||||
Corteva, Inc. | 8,159 | 511 | |||||||||
Dow, Inc. | 9,091 | 618 | |||||||||
DuPont de Nemours, Inc. | 3,671 | 249 | |||||||||
Eastman Chemical Co. | 1,432 | 158 | |||||||||
Ecolab, Inc. | 1,707 | 280 | |||||||||
FMC Corp. | 1,168 | 143 | |||||||||
Freeport-McMoRan, Inc. | 15,889 | 621 | |||||||||
International Flavors & Fragrances, Inc. | 2,819 | 373 | |||||||||
International Paper Co. | 3,667 | 178 | |||||||||
Linde PLC | 4,727 | 1,535 | |||||||||
LyondellBasell Industries NV Class A | 2,696 | 308 | |||||||||
Martin Marietta Materials, Inc. | 721 | 245 | |||||||||
Newmont Corp. | 8,551 | 580 | |||||||||
Nucor Corp. | 2,642 | 350 | |||||||||
PPG Industries, Inc. | 1,640 | 207 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Sealed Air Corp. | 1,340 | $ | 83 | ||||||||
The Mosaic Co. | 4,580 | 287 | |||||||||
The Sherwin-Williams Co. | 2,304 | 618 | |||||||||
Vulcan Materials Co. | 1,110 | 183 | |||||||||
Westrock Co. | 2,863 | 139 | |||||||||
9,308 | |||||||||||
Real Estate (1.2%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 1,101 | 183 | |||||||||
American Tower Corp. | 4,297 | 1,101 | |||||||||
AvalonBay Communities, Inc. | 740 | 154 | |||||||||
Boston Properties, Inc. | 1,758 | 196 | |||||||||
CBRE Group, Inc. Class A (a) | 3,167 | 262 | |||||||||
Crown Castle International Corp. | 4,036 | 765 | |||||||||
Digital Realty Trust, Inc. | 2,478 | 346 | |||||||||
Duke Realty Corp. | 4,814 | 254 | |||||||||
Equinix, Inc. | 852 | 585 | |||||||||
Equity Residential | 2,215 | 170 | |||||||||
Essex Property Trust, Inc. | 290 | 82 | |||||||||
Extra Space Storage, Inc. | 1,147 | 204 | |||||||||
Federal Realty Investment Trust | 884 | 102 | |||||||||
Healthpeak Properties, Inc. | 5,103 | 152 | |||||||||
Host Hotels & Resorts, Inc. | 8,818 | 176 | |||||||||
Iron Mountain, Inc. | 3,600 | 194 | |||||||||
Kimco Realty Corp. | 5,368 | 127 | |||||||||
Mid-America Apartment Communities, Inc. | 1,273 | 230 | |||||||||
Prologis, Inc. | 6,287 | 802 | |||||||||
Public Storage | 1,221 | 404 | |||||||||
Realty Income Corp. | 6,263 | 427 | |||||||||
Regency Centers Corp. | 1,923 | 131 | |||||||||
SBA Communications Corp. | 1,109 | 373 | |||||||||
Simon Property Group, Inc. | 3,796 | 435 | |||||||||
UDR, Inc. | 3,662 | 175 | |||||||||
Ventas, Inc. | 4,666 | 265 | |||||||||
Vornado Realty Trust | 1,730 | 61 | |||||||||
Welltower, Inc. | 4,568 | 407 | |||||||||
Weyerhaeuser Co. | 6,892 | 272 | |||||||||
9,035 | |||||||||||
Utilities (1.3%): | |||||||||||
Alliant Energy Corp. | 3,054 | 195 | |||||||||
Ameren Corp. | 2,468 | 235 | |||||||||
American Electric Power Co., Inc. (j) | 4,277 | 436 | |||||||||
American Water Works Co., Inc. | 2,297 | 347 | |||||||||
Atmos Energy Corp. | 1,500 | 174 | |||||||||
CenterPoint Energy, Inc. | 6,318 | 203 | |||||||||
CMS Energy Corp. | 3,064 | 218 | |||||||||
Consolidated Edison, Inc. (j) | 3,917 | 389 | |||||||||
Constellation Energy Corp. | 3,575 | 222 | |||||||||
Dominion Energy, Inc. | 6,716 | 566 | |||||||||
DTE Energy Co. | 1,653 | 219 | |||||||||
Duke Energy Corp. (j) | 6,693 | 753 | |||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Edison International | 1,730 | $ | 121 | ||||||||
Entergy Corp. | 1,967 | 237 | |||||||||
Evergy, Inc. (j) | 2,539 | 178 | |||||||||
Eversource Energy (j) | 3,443 | 318 | |||||||||
Exelon Corp. | 10,726 | 527 | |||||||||
FirstEnergy Corp. | 1,793 | 77 | |||||||||
NextEra Energy, Inc. (j) | 18,576 | 1,406 | |||||||||
NiSource, Inc. | 4,671 | 147 | |||||||||
NRG Energy, Inc. | 2,789 | 128 | |||||||||
Pinnacle West Capital Corp. | 1,227 | 95 | |||||||||
PPL Corp. | 7,104 | 214 | |||||||||
Public Service Enterprise Group, Inc. | 6,188 | 424 | |||||||||
Sempra Energy | 2,076 | 340 | |||||||||
The AES Corp. | 6,122 | 135 | |||||||||
The Southern Co. (j) | 9,551 | 723 | |||||||||
WEC Energy Group, Inc. (j) | 3,492 | 367 | |||||||||
Xcel Energy, Inc. (j) | 5,211 | 393 | |||||||||
9,787 | |||||||||||
Total Common Stocks (Cost $105,367) | 336,473 | ||||||||||
Corporate Bonds (0.1%) | |||||||||||
Health Care (0.1%): | |||||||||||
Christian Care Centers, Inc., DIP Loan, 12.00%, 11/30/22 (e) | $ | 300 | 300 | ||||||||
Real Estate (0.0%): | |||||||||||
| Northwest Senior Housing Corp. — Edgemere Project, Promissory Note, DIP Loan, 10.00%, 12/31/23 (d) (e) (f) | 245 | 245 | |||||||||
Total Corporate Bonds (Cost $538) | 545 | ||||||||||
Municipal Bonds (54.3%) | |||||||||||
Alabama (0.9%): | |||||||||||
| Columbia Industrial Development Board Revenue, Series B, 0.65%, 12/1/37, Continuously Callable @100 (g) | 2,900 | 2,900 | |||||||||
| DCH Healthcare Authority Revenue, Series A, 4.00%, 6/1/51, Continuously Callable @100 | 1,000 | 983 | |||||||||
| Homewood Educational Building Authority Revenue, Series A, 4.00%, 12/1/51, Continuously Callable @100 | 2,000 | 1,921 | |||||||||
The Lower Alabama Gas District Revenue, Series A, 5.00%, 9/1/46 | 1,000 | 1,130 | |||||||||
6,934 | |||||||||||
Alaska (0.1%): | |||||||||||
| Northern Tobacco Securitization Corp. Revenue, Series A, 4.00%, 6/1/50, Continuously Callable @100 | 500 | 469 | |||||||||
Arizona (2.1%): | |||||||||||
| Arizona IDA Revenue 4.00%, 7/1/41, Continuously Callable @100 | 400 | 369 | |||||||||
5.00%, 7/1/47, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
4.00%, 7/1/52, Continuously Callable @100 | 840 | 727 | |||||||||
Series A, 4.00%, 7/1/51, Continuously Callable @100 | 750 | 661 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
City of Phoenix IDA Revenue, 5.00%, 7/1/46, Continuously Callable @100 | $ | 1,300 | $ | 1,325 | |||||||
| La Paz County IDA Revenue 4.00%, 2/15/41, Continuously Callable @100 | 425 | 399 | |||||||||
4.00%, 2/15/46, Continuously Callable @100 | 345 | 312 | |||||||||
4.00%, 2/15/51, Continuously Callable @100 | 300 | 265 | |||||||||
| Maricopa County IDA Revenue 4.00%, 7/1/51, Continuously Callable @100 (h) | 1,500 | 1,356 | |||||||||
Series A, 5.00%, 9/1/42, Continuously Callable @100 | 500 | 542 | |||||||||
Series A, 4.00%, 7/1/46, Continuously Callable @100 | 735 | 747 | |||||||||
Series A, 5.00%, 7/1/49, Continuously Callable @100 | 1,000 | 1,040 | |||||||||
Series A, 5.00%, 7/1/54, Continuously Callable @100 | 1,275 | 1,323 | |||||||||
Series A, 4.00%, 7/1/56, Continuously Callable @100 | 1,000 | 1,001 | |||||||||
Pima County IDA Revenue, 4.00%, 4/1/46, Continuously Callable @100 | 2,000 | 2,001 | |||||||||
| Student & Academic Services LLC Revenue, 5.00%, 6/1/44, Continuously Callable @100 | 1,000 | 1,034 | |||||||||
Tempe IDA Revenue, Series B, 4.00%, 12/1/46, Continuously Callable @102 | 1,185 | 926 | |||||||||
| The IDA of the County of Pima Revenue, 4.00%, 6/15/51, Continuously Callable @100 (h) | 1,000 | 884 | |||||||||
15,983 | |||||||||||
Arkansas (0.1%): | |||||||||||
| Arkansas Development Finance Authority Revenue, 4.00%, 12/1/44, Continuously Callable @100 | 1,000 | 962 | |||||||||
California (1.4%): | |||||||||||
| California Statewide Communities Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 11/15/49, Pre-refunded 11/15/24 @ 100 | 1,000 | 1,075 | |||||||||
| Jurupa Public Financing Authority Special Tax, Series A, 5.00%, 9/1/42, Continuously Callable @100 | 1,200 | 1,239 | |||||||||
| State of California, GO 5.00%, 2/1/43, Continuously Callable @100 | 1,000 | 1,018 | |||||||||
5.00%, 8/1/45, Continuously Callable @100 | 1,000 | 1,065 | |||||||||
| Sutter Butte Flood Agency Special Assessment (INS — Build America Mutual Assurance Co.), 5.00%, 10/1/40, Continuously Callable @100 | 1,000 | 1,037 | |||||||||
| Twin Rivers Unified School District, GO (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 8/1/40, Pre-refunded 2/1/24 @100 | 1,500 | 1,579 | |||||||||
| Val Verde Unified School District, GO (INS — Build America Mutual Assurance Co.), Series B, 5.00%, 8/1/44, Pre-refunded 8/1/25 @100 | 1,000 | 1,094 | |||||||||
| West Contra Costa Unified School District, GO (INS — National Public Finance Guarantee Corp.), 8/1/34 (i) | 4,435 | 2,915 | |||||||||
11,022 | |||||||||||
Colorado (1.5%): | |||||||||||
| Colorado Educational & Cultural Facilities Authority Revenue 5.00%, 12/1/38, Continuously Callable @100 | 1,000 | 1,096 | |||||||||
5.00%, 4/1/48, Continuously Callable @100 | 710 | 759 | |||||||||
4.00%, 1/1/52, Continuously Callable @100 | 675 | 560 | |||||||||
4.00%, 1/1/62, Continuously Callable @100 | 795 | 638 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Colorado Health Facilities Authority Revenue 5.00%, 6/1/45, Pre-refunded 6/1/25 @ 100 | $ | 1,000 | $ | 1,087 | |||||||
Series A, 4.00%, 9/1/50, Continuously Callable @100 | 1,000 | 910 | |||||||||
Series A, 4.00%, 12/1/50, Continuously Callable @103 | 1,000 | 874 | |||||||||
| Denver Convention Center Hotel Authority Revenue, 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 1,036 | |||||||||
| Denver Health & Hospital Authority Certificate of Participation, 5.00%, 12/1/48, Continuously Callable @100 | 1,900 | 2,013 | |||||||||
| Park Creek Metropolitan District Revenue 5.00%, 12/1/41, Continuously Callable @100 | 250 | 265 | |||||||||
5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,052 | |||||||||
| Rampart Range Metropolitan District No. 1 Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,072 | |||||||||
11,362 | |||||||||||
Connecticut (1.0%): | |||||||||||
| Connecticut State Health & Educational Facilities Authority Revenue 4.00%, 7/1/52, Continuously Callable @100 | 1,750 | 1,750 | |||||||||
Series T, 4.00%, 7/1/55, Continuously Callable @100 | 1,000 | 964 | |||||||||
Series U, 4.00%, 7/1/52, Continuously Callable @100 | 2,000 | 1,965 | |||||||||
| State of Connecticut, GO Series A, 5.00%, 4/15/36, Continuously Callable @100 | 1,500 | 1,674 | |||||||||
Series A, 5.00%, 4/15/37, Continuously Callable @100 | 1,000 | 1,100 | |||||||||
7,453 | |||||||||||
Florida (2.9%): | |||||||||||
| Brevard County Health Facilities Authority Revenue, Series A, 5.00%, 4/1/52, Continuously Callable @100 | 1,000 | 1,100 | |||||||||
| Capital Trust Agency, Inc. Revenue 5.00%, 8/1/40, Continuously Callable @100 | 300 | 307 | |||||||||
5.00%, 8/1/55, Continuously Callable @100 | 400 | 406 | |||||||||
| City of Atlantic Beach Revenue, Series A, 5.00%, 11/15/53, Continuously Callable @103 | 1,000 | 1,049 | |||||||||
City of Jacksonville Revenue, 5.00%, 10/1/29, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
| City of Pompano Beach Revenue 4.00%, 9/1/50, Continuously Callable @103 | 1,500 | 1,407 | |||||||||
Series A, 4.00%, 9/1/51, Continuously Callable @103 | 500 | 468 | |||||||||
| County of Miami-Dade Seaport Department Revenue, Series A-2, 4.00%, 10/1/49, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
| County of Polk Florida Utility System Revenue, 4.00%, 10/1/43, Continuously Callable @100 | 2,000 | 2,041 | |||||||||
Florida Development Finance Corp., 5.00%, 7/1/51, Continuously Callable @100 | 395 | 404 | |||||||||
| Florida Development Finance Corp. Revenue 4.00%, 2/1/52, Continuously Callable @100 | 2,000 | 1,796 | |||||||||
Series A, 5.00%, 6/15/52, Continuously Callable @100 | 1,250 | 1,291 | |||||||||
| Halifax Hospital Medical Center Revenue, 5.00%, 6/1/46, Pre-refunded 6/1/25 @ 100 | 1,000 | 1,087 | |||||||||
Lee County IDA Revenue, 5.50%, 10/1/47, Pre-refunded 10/1/22 @ 102 | 645 | 667 | |||||||||
| Lee County Industrial Development Authority Florida Revenue, Series A, 5.25%, 10/1/52, Continuously Callable @103 | 850 | 844 | |||||||||
| Lee Memorial Health System Revenue, Series A-1, 5.00%, 4/1/44, Continuously Callable @100 | 1,450 | 1,575 | |||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Miami Beach Health Facilities Authority Revenue, 4.00%, 11/15/51, Continuously Callable @100 | $ | 500 | $ | 466 | |||||||
| Miami-Dade County Health Facilities Authority Revenue, Series A, 4.00%, 8/1/51, Continuously Callable @100 | 1,000 | 986 | |||||||||
| Palm Beach County Educational Facilities Authority Revenue, 4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 962 | |||||||||
| Sarasota County Health Facilities Authority Revenue, 5.00%, 5/15/38, Continuously Callable @103 | 700 | 741 | |||||||||
Seminole County IDA Revenue, 4.00%, 6/15/51, Continuously Callable @100 (h) | 830 | 724 | |||||||||
| Southeast Overtown Park West Community Redevelopment Agency Tax Allocation, Series A-1, 5.00%, 3/1/30, Continuously Callable @100 (h) | 1,000 | 1,042 | |||||||||
| Volusia County Educational Facility Authority Revenue, Series B, 5.00%, 10/15/45, Pre-refunded 4/15/25 @ 100 | 1,000 | 1,083 | |||||||||
22,471 | |||||||||||
Georgia (1.8%): | |||||||||||
| Cobb County Kennestone Hospital Authority Revenue, 4.00%, 4/1/52, Continuously Callable @100 | 3,875 | 3,882 | |||||||||
| Crisp County Hospital Authority Revenue, 4.00%, 7/1/51, Continuously Callable @100 | 575 | 566 | |||||||||
| Gainesville & Hall County Hospital Authority Revenue, 4.00%, 2/15/45, Continuously Callable @100 | 2,000 | 1,969 | |||||||||
| Glynn-Brunswick Memorial Hospital Authority Revenue, 5.00%, 8/1/47, Continuously Callable @100 | 1,000 | 1,040 | |||||||||
| Milledgeville & Baldwin County Development Authority Revenue, 4.00%, 6/15/37, Continuously Callable @100 | 1,300 | 1,373 | |||||||||
| Municipal Electric Authority of Georgia Revenue, 4.00%, 1/1/51, Continuously Callable @100 | 425 | 418 | |||||||||
| Private Colleges & Universities Authority Revenue 4.00%, 6/1/45, Continuously Callable @100 | 750 | 740 | |||||||||
4.00%, 10/1/50, Continuously Callable @100 | 1,250 | 1,223 | |||||||||
| The Burke County Development Authority Revenue, 0.77%, 11/1/48, Continuously Callable @100 (g) | 900 | 900 | |||||||||
| The Development Authority of Monroe County Revenue, 0.77%, 11/1/48, Continuously Callable @100 (g) | 2,065 | 2,065 | |||||||||
14,176 | |||||||||||
Guam (0.2%): | |||||||||||
| Antonio B Won Pat International Airport Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.50%, 10/1/33, Pre-refunded 10/1/23 @ 100 | 750 | 790 | |||||||||
| Guam Government Waterworks Authority Revenue, 5.50%, 7/1/43, Pre-refunded 7/1/23 @ 100 | 1,000 | 1,045 | |||||||||
1,835 | |||||||||||
Illinois (5.3%): | |||||||||||
| Bureau County Township High School District No. 502, GO (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 12/1/37, Pre-refunded 12/1/27 @ 100 | 1,000 | 1,144 | |||||||||
| Chicago Board of Education, GO, Series A, 5.00%, 12/1/47, Continuously Callable @100 | 3,200 | 3,262 | |||||||||
| Chicago Midway International Airport Revenue, Series B, 5.00%, 1/1/41, Continuously Callable @100 | 1,000 | 1,055 | |||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Chicago O'Hare International Airport Revenue, Series C, 5.00%, 1/1/41, Continuously Callable @100 | $ | 1,000 | $ | 1,061 | |||||||
| Chicago O'Hare International Airport Revenue (INS — Assured Guaranty Municipal Corp.), 5.25%, 1/1/33, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
Chicago Park District, GO, Series C, 4.00%, 1/1/42, Continuously Callable @100 | 1,250 | 1,251 | |||||||||
| Chicago Transit Authority Sales Tax Receipts Fund Revenue Series A, 5.00%, 12/1/52, Continuously Callable @100 | 685 | 762 | |||||||||
Series A, 4.00%, 12/1/55, Continuously Callable @100 | 2,000 | 1,938 | |||||||||
| City of Chicago Wastewater Transmission Revenue 5.00%, 1/1/44, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
Series A, 5.00%, 1/1/47, Continuously Callable @100 | 1,000 | 1,057 | |||||||||
| City of Chicago Waterworks Revenue, 5.00%, 11/1/44, Continuously Callable @100 | 1,000 | 1,033 | |||||||||
| City of Galesburg Revenue, Series A, 4.00%, 10/1/46, Continuously Callable @100 | 1,000 | 976 | |||||||||
| Cook County Community College District No. 508, GO (INS — Build America Mutual Assurance Co.), 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,056 | |||||||||
| County of Cook Sales Tax Revenue, 5.00%, 11/15/38, Continuously Callable @100 | 1,000 | 1,091 | |||||||||
| Illinois Educational Facilities Authority Revenue, 4.00%, 11/1/36, Continuously Callable @102 | 1,000 | 1,019 | |||||||||
Illinois Finance Authority, 4.00%, 10/15/44, Continuously Callable @103 | 2,000 | 1,775 | |||||||||
| Illinois Finance Authority Revenue 3.90%, 3/1/30, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
5.00%, 5/15/37, Continuously Callable @100 | 1,000 | 1,053 | |||||||||
5.00%, 5/15/40, Continuously Callable @100 | 1,275 | 1,308 | |||||||||
5.00%, 8/15/44, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,118 | |||||||||
5.00%, 5/15/45, Continuously Callable @100 | 1,000 | 1,006 | |||||||||
Series A, 4.00%, 10/1/40, Continuously Callable @100 | 1,000 | 1,005 | |||||||||
Series A, 4.00%, 8/1/51, Continuously Callable @100 | 1,000 | 921 | |||||||||
Series C, 4.00%, 2/15/41, Continuously Callable @100 | 955 | 965 | |||||||||
Series C, 4.00%, 2/15/41, Pre-refunded 2/15/27 @ 100 | 45 | 49 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue, 4.00%, 6/15/50, Continuously Callable @100 | 2,500 | 2,419 | |||||||||
| Northern Illinois Municipal Power Agency Revenue, Series A, 4.00%, 12/1/41, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
| Northern Illinois University Revenue 4.00%, 10/1/37, Continuously Callable @100 | 550 | 567 | |||||||||
4.00%, 10/1/39, Continuously Callable @100 | 425 | 435 | |||||||||
| Northern Illinois University Revenue (INS — Build America Mutual Assurance Co.), Series B, 4.00%, 4/1/40, Continuously Callable @100 | 600 | 607 | |||||||||
| Sangamon County Water Reclamation District, GO Series A, 4.00%, 1/1/49, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
Series A, 5.75%, 1/1/53, Continuously Callable @100 | 1,235 | 1,310 | |||||||||
| State of Illinois, GO 5.50%, 5/1/39, Continuously Callable @100 | 225 | 247 | |||||||||
Series A, 5.00%, 3/1/46, Continuously Callable @100 | 1,000 | 1,048 | |||||||||
Series B, 4.00%, 10/1/32, Continuously Callable @100 | 2,300 | 2,281 | |||||||||
40,932 | |||||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Indiana (0.6%): | |||||||||||
| Evansville Redevelopment Authority Revenue (INS — Build America Mutual Assurance Co.), 4.00%, 2/1/39, Continuously Callable @100 | $ | 1,000 | $ | 1,016 | |||||||
| Indiana Finance Authority Revenue 5.00%, 2/1/40, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
5.00%, 10/1/44, Pre-refunded 10/1/23 @ 100 | 1,000 | 1,040 | |||||||||
| Richmond Hospital Authority Revenue, 5.00%, 1/1/39, Continuously Callable @100 | 1,500 | 1,556 | |||||||||
4,632 | |||||||||||
Iowa (0.1%): | |||||||||||
| Iowa Tobacco Settlement Authority Revenue, Series A-2, 4.00%, 6/1/49, Continuously Callable @100 | 1,000 | 974 | |||||||||
Kansas (1.3%): | |||||||||||
| City of Coffeyville Electric System Revenue (INS — National Public Finance Guarantee Corp.), Series B, 5.00%, 6/1/42, Pre-refunded 6/1/25 @ 100 (h) | 1,000 | 1,087 | |||||||||
| City of Lawrence Revenue 5.00%, 7/1/43, Continuously Callable @100 | 1,500 | 1,622 | |||||||||
Series A, 4.00%, 7/1/36, Continuously Callable @100 | 1,500 | 1,523 | |||||||||
| City of Manhattan Revenue, Series A, 4.00%, 6/1/46, Continuously Callable @103 | 1,000 | 858 | |||||||||
City of Wichita Revenue, 4.63%, 9/1/33, Continuously Callable @100 | 1,000 | 997 | |||||||||
| Wyandotte County Kansas City Unified Government Revenue, 5.75%, 3/1/41, Continuously Callable @103 (h) | 2,000 | 2,018 | |||||||||
| Wyandotte County-Kansas City Unified Government Utility System Revenue Series A, 5.00%, 9/1/44, Continuously Callable @100 | 1,250 | 1,290 | |||||||||
Series A, 5.00%, 9/1/45, Continuously Callable @100 | 1,000 | 1,045 | |||||||||
10,440 | |||||||||||
Kentucky (0.7%): | |||||||||||
City of Ashland Revenue, 5.00%, 2/1/40, Continuously Callable @100 | 1,000 | 1,046 | |||||||||
City of Hazard Revenue, 4.00%, 7/1/51, Continuously Callable @100 | 1,000 | 968 | |||||||||
| Kentucky Bond Development Corp. Revenue, 4.00%, 6/1/46, Continuously Callable @100 | 750 | 732 | |||||||||
| Kentucky Economic Development Finance Authority Revenue, 5.00%, 5/15/46, Continuously Callable @100 | 1,000 | 836 | |||||||||
| Kentucky Economic Development Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,113 | |||||||||
| Louisville Jefferson County Metropolitan Government Revenue, 5.00%, 5/15/52, Continuously Callable @100 | 1,000 | 1,075 | |||||||||
5,770 | |||||||||||
Louisiana (2.2%): | |||||||||||
| City of Shreveport Water & Sewer Revenue 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 1,059 | |||||||||
Series B, 4.00%, 12/1/44, Continuously Callable @100 | 500 | 514 | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Build America Mutual Assurance Co.), Series C, 5.00%, 12/1/39, Continuously Callable @100 | 1,000 | 1,053 | |||||||||
| Jefferson Sales Tax District Revenue, Series B, 4.00%, 12/1/42, Continuously Callable @100 | 1,500 | 1,506 | |||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 10/1/39, Continuously Callable @100 | $ | 1,000 | $ | 1,082 | |||||||
5.00%, 10/1/43, Continuously Callable @100 | 1,000 | 1,084 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
| Louisiana Public Facilities Authority Revenue 5.00%, 11/1/45, Pre-refunded 11/1/25 @ 100 | 1,000 | 1,097 | |||||||||
4.00%, 10/1/51, Continuously Callable @100 | 1,175 | 1,109 | |||||||||
5.00%, 7/1/52, Continuously Callable @100 | 1,000 | 1,056 | |||||||||
4.00%, 1/1/56, Continuously Callable @100 | 1,000 | 958 | |||||||||
| Louisiana Public Facilities Authority Revenue (INS — Build America Mutual Assurance Co.), 5.25%, 6/1/51, Pre-refunded 6/1/25 @ 100 | 1,000 | 1,093 | |||||||||
| Parish of East Baton Rouge Capital Improvements District Revenue, 4.00%, 8/1/44, Continuously Callable @100 | 1,400 | 1,461 | |||||||||
| State of Louisiana Gasoline & Fuels Tax Revenue, Series C, 5.00%, 5/1/45, Continuously Callable @100 | 1,500 | 1,629 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 5/15/35, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
16,732 | |||||||||||
Maine (0.3%): | |||||||||||
| Maine Health & Higher Educational Facilities Authority Revenue Series A, 4.00%, 7/1/46, Continuously Callable @100 | 1,000 | 915 | |||||||||
Series A, 4.00%, 7/1/50, Continuously Callable @100 | 1,175 | 1,147 | |||||||||
2,062 | |||||||||||
Maryland (0.4%): | |||||||||||
| City of Gaithersburg Maryland Revenue, 5.13%, 1/1/42, Continuously Callable @103 | 865 | 889 | |||||||||
| Maryland Health & Higher Educational Facilities Authority Revenue 4.00%, 7/1/45, Continuously Callable @100 | 1,100 | 1,072 | |||||||||
Series B, 4.00%, 1/1/51, Continuously Callable @100 | 1,000 | 974 | |||||||||
2,935 | |||||||||||
Massachusetts (2.0%): | |||||||||||
| Massachusetts Development Finance Agency Revenue 5.00%, 4/15/40, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
5.25%, 11/15/41, Pre-refunded 11/15/23 @ 100 | 1,000 | 1,051 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 1,000 | 1,033 | |||||||||
4.00%, 9/1/48, Continuously Callable @100 | 1,380 | 1,321 | |||||||||
1.31% (MUNIPSA+60bps), 7/1/49, Continuously Callable @100 (h) (k) | 1,250 | 1,244 | |||||||||
4.00%, 7/1/51, Continuously Callable @100 | 1,500 | 1,336 | |||||||||
5.00%, 10/1/57, Continuously Callable @105 (h) | 1,000 | 1,057 | |||||||||
Series A, 5.00%, 6/1/39, Pre-refunded 6/1/29 @ 100 | 1,000 | 1,096 | |||||||||
Series A, 5.50%, 7/1/44, Continuously Callable @100 | 500 | 459 | |||||||||
Series A, 5.00%, 7/1/44, Continuously Callable @100 | 1,600 | 1,718 | |||||||||
Series B, 4.00%, 6/1/50, Continuously Callable @100 | 1,000 | 936 | |||||||||
Series B, 4.00%, 7/1/50, Continuously Callable @100 | 850 | 806 | |||||||||
Series D, 5.00%, 7/1/44, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
Series F, 5.75%, 7/15/43, Continuously Callable @100 | 1,000 | 1,008 | |||||||||
15,122 | |||||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Michigan (1.6%): | |||||||||||
| City of Wyandotte Electric System Revenue (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 10/1/44, Continuously Callable @100 | $ | 1,000 | $ | 1,055 | |||||||
| Detroit Downtown Development Authority Tax Allocation (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/43, Continuously Callable @100 | 1,750 | 1,817 | |||||||||
| Jackson Public Schools, GO (NBGA — Michigan School Bond Qualification & Loan Program), 5.00%, 5/1/42, Continuously Callable @100 | 1,000 | 1,089 | |||||||||
| Karegnondi Water Authority Revenue, 5.00%, 11/1/41, Continuously Callable @100 | 1,000 | 1,113 | |||||||||
| Kentwood Economic Development Corp. Revenue, 4.00%, 11/15/45, Continuously Callable @103 | 500 | 439 | |||||||||
| Lincoln Consolidated School District, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 5/1/40, Continuously Callable @100 | 1,250 | 1,344 | |||||||||
| Livonia Public Schools, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 5/1/45, Continuously Callable @100 | 1,000 | 1,050 | |||||||||
| Michigan Finance Authority Revenue 4.00%, 2/1/42, Continuously Callable @100 | 745 | 698 | |||||||||
4.00%, 9/1/45, Continuously Callable @100 | 1,000 | 989 | |||||||||
4.00%, 12/1/51, Continuously Callable @100 | 1,665 | 1,539 | |||||||||
| Wayne County Airport Authority Revenue, 5.00%, 12/1/44, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
12,164 | |||||||||||
Minnesota (0.3%): | |||||||||||
| Housing & Redevelopment Authority Revenue 5.00%, 11/15/44, Pre-refunded 11/15/25 @ 100 | 1,000 | 1,093 | |||||||||
5.00%, 11/15/47, Continuously Callable @100 | 1,000 | 1,051 | |||||||||
2,144 | |||||||||||
Missouri (0.9%): | |||||||||||
| Cape Girardeau County IDA Revenue, 4.00%, 3/1/46, Continuously Callable @100 | 750 | 723 | |||||||||
| Health & Educational Facilities Authority of the State of Missouri Revenue 4.00%, 2/1/48, Continuously Callable @100 | 1,500 | 1,337 | |||||||||
4.00%, 2/15/51, Continuously Callable @100 | 480 | 433 | |||||||||
| Health & Educational Facilities Authority Revenue 5.00%, 8/1/45, Continuously Callable @100 | 1,270 | 1,295 | |||||||||
4.00%, 2/15/49, Continuously Callable @100 | 250 | 250 | |||||||||
| Missouri Development Finance Board Revenue, 4.00%, 3/1/51, Continuously Callable @100 | 1,000 | 874 | |||||||||
| St. Louis Municipal Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 10/1/38, Continuously Callable @100 | 1,000 | 1,087 | |||||||||
5.00%, 10/1/49, Continuously Callable @100 | 1,000 | 1,116 | |||||||||
7,115 | |||||||||||
Montana (0.1%): | |||||||||||
| Montana Facility Finance Authority Revenue, Series A, 4.00%, 6/1/45, Continuously Callable @100 | 485 | 487 | |||||||||
Nebraska (0.1%): | |||||||||||
| Douglas County Hospital Authority No. 3 Revenue, 5.00%, 11/1/48, Continuously Callable @100 | 1,000 | 1,043 | |||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Nevada (0.5%): | |||||||||||
City of Carson City Revenue, 5.00%, 9/1/42, Continuously Callable @100 | $ | 1,000 | $ | 1,048 | |||||||
| Las Vegas Convention & Visitors Authority Revenue, Series C, 4.00%, 7/1/41, Continuously Callable @100 | 1,555 | 1,590 | |||||||||
| Las Vegas Redevelopment Agency Tax Allocation, 5.00%, 6/15/45, Continuously Callable @100 | 1,500 | 1,582 | |||||||||
4,220 | |||||||||||
New Hampshire (0.2%): | |||||||||||
| New Hampshire Business Finance Authority Revenue, 4.00%, 1/1/51, Continuously Callable @103 | 2,000 | 1,811 | |||||||||
New Jersey (2.7%): | |||||||||||
| Essex County Improvement Authority Revenue, 4.00%, 6/15/51, Continuously Callable @100 | 1,100 | 972 | |||||||||
| New Jersey Economic Development Authority Revenue 5.00%, 6/15/42, Continuously Callable @100 | 2,000 | 2,094 | |||||||||
5.00%, 6/15/43, Continuously Callable @100 | 1,000 | 1,066 | |||||||||
Series A, 4.00%, 7/1/34, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
Series A, 5.00%, 6/15/47, Continuously Callable @100 | 1,000 | 1,050 | |||||||||
Series B, 5.00%, 6/15/43, Continuously Callable @100 | 1,000 | 1,060 | |||||||||
| New Jersey Economic Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/1/37, Continuously Callable @100 | 500 | 542 | |||||||||
| New Jersey Educational Facilities Authority Revenue, Series B, 5.00%, 9/1/36, Continuously Callable @100 | 1,000 | 1,048 | |||||||||
| New Jersey Educational Facilities Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series C, 4.00%, 7/1/50, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
| New Jersey Health Care Facilities Financing Authority Revenue, 5.00%, 10/1/37, Continuously Callable @100 | 1,000 | 1,062 | |||||||||
| New Jersey Transportation Trust Fund Authority Revenue Series A, 5.00%, 12/15/35, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
Series AA, 5.00%, 6/15/44, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
Series AA, 4.00%, 6/15/50, Continuously Callable @100 | 1,000 | 972 | |||||||||
Series BB, 4.00%, 6/15/50, Continuously Callable @100 | 1,000 | 963 | |||||||||
| New Jersey Turnpike Authority Revenue, Series A, 4.00%, 1/1/51, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
| South Jersey Transportation Authority LLC Revenue, Series A, 5.00%, 11/1/39, Continuously Callable @100 | 1,250 | 1,285 | |||||||||
| South Jersey Transportation Authority Revenue, Series A, 4.00%, 11/1/50, Continuously Callable @100 | 2,250 | 2,105 | |||||||||
| The Atlantic County Improvement Authority Revenue, 4.00%, 7/1/53, Continuously Callable @100 | 750 | 745 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 6/1/46, Continuously Callable @100 | 500 | 537 | |||||||||
20,641 | |||||||||||
New Mexico (0.2%): | |||||||||||
| New Mexico Hospital Equipment Loan Council Revenue, Series LA, 5.00%, 7/1/49, Continuously Callable @102 | 1,500 | 1,462 | |||||||||
New York (1.7%): | |||||||||||
| Genesee County Funding Corp. The Revenue, Series A, 5.25%, 12/1/52, Continuously Callable @100 | 500 | 535 | |||||||||
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Metropolitan Transportation Authority Revenue, Series C, 5.00%, 11/15/42, Continuously Callable @100 | $ | 1,000 | $ | 1,013 | |||||||
| New York Liberty Development Corp. Revenue 5.25%, 10/1/35 | 630 | 745 | |||||||||
5.50%, 10/1/37 | 1,500 | 1,826 | |||||||||
2.80%, 9/15/69, Continuously Callable @100 | 1,000 | 934 | |||||||||
| New York State Dormitory Authority Revenue 4.00%, 2/15/47, Continuously Callable @100 | 2,000 | 2,050 | |||||||||
4.00%, 3/15/49, Continuously Callable @100 | 750 | 774 | |||||||||
5.00%, 7/1/57, Continuously Callable @100 | 1,000 | 1,017 | |||||||||
Series A, 4.00%, 9/1/50, Continuously Callable @100 | 2,000 | 1,828 | |||||||||
Series A, 4.00%, 7/1/52, Continuously Callable @100 | 1,000 | 942 | |||||||||
| New York State Dormitory Authority Revenue (INS — AMBAC Assurance Corp.), Series 1, 5.50%, 7/1/40 | 1,205 | 1,497 | |||||||||
13,161 | |||||||||||
North Carolina (0.3%): | |||||||||||
| North Carolina Medical Care Commission Revenue 5.00%, 10/1/35, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
5.00%, 1/1/49, Continuously Callable @104 | 1,500 | 1,587 | |||||||||
2,629 | |||||||||||
North Dakota (0.6%): | |||||||||||
City of Grand Forks Revenue, 4.00%, 12/1/51, Continuously Callable @100 | 2,450 | 2,303 | |||||||||
County of Ward Revenue, Series C, 5.00%, 6/1/43, Continuously Callable @100 | 1,000 | 1,043 | |||||||||
| University of North Dakota Certificate of Participation, Series A, 4.00%, 6/1/51, Continuously Callable @100 | 1,000 | 977 | |||||||||
4,323 | |||||||||||
Ohio (0.7%): | |||||||||||
| County of Warren Revenue, Series A, 4.00%, 7/1/45, Continuously Callable @100 | 735 | 742 | |||||||||
| Ohio Higher Educational Facility Commission Revenue 4.00%, 12/1/46, Continuously Callable @100 | 750 | 753 | |||||||||
5.25%, 1/1/52, Continuously Callable @100 | 1,000 | 1,073 | |||||||||
4.00%, 10/1/52, Continuously Callable @100 | 2,000 | 1,884 | |||||||||
| Southeastern Ohio Port Authority Revenue, 5.00%, 12/1/43, Continuously Callable @100 | 750 | 755 | |||||||||
5,207 | |||||||||||
Oklahoma (0.4%): | |||||||||||
| Oklahoma Development Finance Authority Revenue, Series B, 5.50%, 8/15/57, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
| Oklahoma Municipal Power Authority Revenue, Series A, 4.00%, 1/1/47, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
| Pontotoc County Educational Facilities Authority Revenue, 4.00%, 9/1/40, Continuously Callable @100 | 500 | 504 | |||||||||
| Tulsa County Industrial Authority Revenue, 5.25%, 11/15/37, Continuously Callable @102 | 750 | 788 | |||||||||
3,323 | |||||||||||
See notes to financial statements.
28
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Oregon (0.5%): | |||||||||||
| Medford Hospital Facilities Authority Revenue, Series A, 4.00%, 8/15/50, Continuously Callable @100 | $ | 1,000 | $ | 1,005 | |||||||
| Oregon State Facilities Authority Revenue, Series A, 4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 977 | |||||||||
| Salem Hospital Facility Authority Revenue 4.00%, 5/15/47, Continuously Callable @103 | 1,000 | 912 | |||||||||
5.00%, 5/15/53, Continuously Callable @102 | 1,250 | 1,294 | |||||||||
4,188 | |||||||||||
Pennsylvania (6.0%): | |||||||||||
| Adams County General Authority Revenue, 4.00%, 8/15/45, Continuously Callable @100 | 1,455 | 1,435 | |||||||||
| Allegheny County Hospital Development Authority Revenue 4.00%, 7/15/39, Continuously Callable @100 | 1,185 | 1,218 | |||||||||
5.00%, 4/1/47, Continuously Callable @100 | 1,000 | 1,067 | |||||||||
| Altoona Area School District, GO (INS — Build America Mutual Assurance Co.), 5.00%, 12/1/48, Pre-refunded 12/1/25 @ 100 | 1,000 | 1,099 | |||||||||
| Berks County IDA Revenue 5.00%, 5/15/43, Continuously Callable @102 | 350 | 366 | |||||||||
5.00%, 11/1/50, Continuously Callable @100 | 1,500 | 1,392 | |||||||||
Bucks County IDA Revenue, 4.00%, 8/15/44, Continuously Callable @100 | 1,000 | 953 | |||||||||
| Butler County Hospital Authority Revenue, 5.00%, 7/1/39, Continuously Callable @100 | 1,125 | 1,168 | |||||||||
Canon Mcmillan School District, GO, 4.00%, 6/1/48, Continuously Callable @100 | 1,500 | 1,516 | |||||||||
| Central Bradford Progress Authority Revenue, Series B, 4.00%, 12/1/51, Continuously Callable @100 | 2,000 | 1,957 | |||||||||
Chester County IDA Revenue, 5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
| City of Erie Higher Education Building Authority Revenue, 5.00%, 5/1/47, Continuously Callable @100 | 1,050 | 1,135 | |||||||||
| Commonwealth Financing Authority Revenue, 5.00%, 6/1/35, Continuously Callable @100 | 1,000 | 1,086 | |||||||||
| Commonwealth of Pennsylvania Certificate of Participation, Series A, 5.00%, 7/1/43, Continuously Callable @100 | 1,000 | 1,067 | |||||||||
County of Lehigh Revenue, 4.00%, 7/1/49, Continuously Callable @100 | 1,000 | 997 | |||||||||
| Indiana County Hospital Authority Revenue, Series A, 6.00%, 6/1/39, Continuously Callable @100 | 1,625 | 1,650 | |||||||||
| Lancaster County Hospital Authority Revenue, 5.00%, 11/1/35, Continuously Callable @100 | 1,000 | 1,044 | |||||||||
Lancaster IDA Revenue, 4.00%, 7/1/51, Continuously Callable @103 | 500 | 436 | |||||||||
Latrobe IDA Revenue, 4.00%, 3/1/51, Continuously Callable @100 | 800 | 692 | |||||||||
| Montgomery County Higher Education And Health Authority Revenue, Series B, 4.00%, 5/1/52, Continuously Callable @100 | 3,000 | 2,899 | |||||||||
| Montgomery County IDA Revenue 5.25%, 1/15/45, Pre-refunded 1/15/25 @ 100 | 1,000 | 1,080 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 625 | 561 | |||||||||
4.00%, 10/1/51, Continuously Callable @100 | 825 | 721 | |||||||||
Series C, 4.00%, 11/15/43, Continuously Callable @103 | 600 | 594 | |||||||||
| Northampton County General Purpose Authority Revenue 4.00%, 8/15/40, Continuously Callable @100 | 1,000 | 983 | |||||||||
5.00%, 8/15/43, Continuously Callable @100 | 1,000 | 1,065 | |||||||||
See notes to financial statements.
29
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Pennsylvania Economic Development Financing Authority Revenue 4.00%, 7/1/46, Continuously Callable @103 | $ | 1,000 | $ | 1,000 | |||||||
Series A, 4.00%, 10/15/51, Continuously Callable @100 | 1,000 | 993 | |||||||||
| Pennsylvania Higher Educational Facilities Authority Revenue, Series A, 4.00%, 7/15/46, Continuously Callable @100 | 1,575 | 1,500 | |||||||||
| Pennsylvania Turnpike Commission Revenue 4.00%, 12/1/51, Continuously Callable @100 | 1,000 | 996 | |||||||||
Series A-1, 5.00%, 12/1/46, Continuously Callable @100 | 1,000 | 1,039 | |||||||||
Series A-1, 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,072 | |||||||||
Series B, 5.00%, 12/1/39, Continuously Callable @100 | 1,000 | 1,090 | |||||||||
Series B, 5.25%, 12/1/44, Continuously Callable @100 | 1,000 | 1,037 | |||||||||
Series B, 4.00%, 12/1/51, Continuously Callable @100 | 1,000 | 994 | |||||||||
Philadelphia IDA Revenue, 5.00%, 8/1/50, Continuously Callable @100 | 1,050 | 1,074 | |||||||||
| Reading School District, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 3/1/38, Continuously Callable @100 | 1,500 | 1,624 | |||||||||
| School District of Philadelphia, GO, Series F, 5.00%, 9/1/37, Continuously Callable @100 | 1,000 | 1,076 | |||||||||
| The Philadelphia School District, GO, Series A, 5.00%, 9/1/38, Continuously Callable @100 | 1,000 | 1,100 | |||||||||
| The School District of Philadelphia, GO, Series A, 4.00%, 9/1/46, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
| Wilkes-Barre Area School District, GO (INS — Build America Mutual Assurance Co.), 4.00%, 4/15/49, Continuously Callable @100 | 1,500 | 1,506 | |||||||||
46,312 | |||||||||||
Rhode Island (0.1%): | |||||||||||
| Rhode Island Housing & Mortgage Finance Corp. Revenue, Series 15-A, 6.85%, 10/1/24, Continuously Callable @100 | 40 | 40 | |||||||||
| Rhode Island Turnpike & Bridge Authority Revenue, Series A, 5.00%, 10/1/40, Continuously Callable @100 | 1,000 | 1,063 | |||||||||
1,103 | |||||||||||
South Carolina (1.0%): | |||||||||||
| Patriots Energy Group Revenue Series A, 4.00%, 6/1/46, Continuously Callable @100 | 500 | 502 | |||||||||
Series A, 4.00%, 6/1/51, Continuously Callable @100 | 600 | 600 | |||||||||
| South Carolina Jobs-Economic Development Authority Revenue 5.00%, 11/15/47, Continuously Callable @103 | 1,000 | 1,067 | |||||||||
4.00%, 4/1/49, Continuously Callable @103 | 620 | 535 | |||||||||
4.00%, 4/1/52, Continuously Callable @100 | 2,500 | 2,538 | |||||||||
| South Carolina Public Service Authority Revenue, Series A, 4.00%, 12/1/55, Continuously Callable @100 | 2,500 | 2,439 | |||||||||
7,681 | |||||||||||
Tennessee (0.8%): | |||||||||||
| Greeneville Health & Educational Facilities Board Revenue, 5.00%, 7/1/37, Continuously Callable @100 | 1,500 | 1,622 | |||||||||
| Metropolitan Government Nashville & Davidson Country Health & Educational Facilities Board Revenue, 4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 858 | |||||||||
| Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue | |||||||||||
5.00%, 10/1/45, Continuously Callable @100 | 1,000 | 1,052 | |||||||||
See notes to financial statements.
30
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | $ | 1,000 | $ | 1,039 | |||||||
5.00%, 10/1/48, Continuously Callable @100 | 500 | 517 | |||||||||
| The Metropolitan Nashville Airport Authority Revenue, Series A, 4.00%, 7/1/49, Continuously Callable @100 | 1,000 | 998 | |||||||||
6,086 | |||||||||||
Texas (7.0%): | |||||||||||
| Arlington Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund), 4.00%, 8/15/44, Continuously Callable @100 | 2,165 | 2,184 | |||||||||
| Bexar County Health Facilities Development Corp. Revenue, 5.00%, 7/15/37, Continuously Callable @105 | 1,000 | 1,018 | |||||||||
| Central Texas Regional Mobility Authority Revenue 4.00%, 1/1/41, Continuously Callable @100 | 1,000 | 996 | |||||||||
Series A, 5.00%, 1/1/45, Pre-refunded 7/1/25 @ 100 | 1,000 | 1,088 | |||||||||
| Central Texas Turnpike System Revenue, Series C, 5.00%, 8/15/42, Continuously Callable @100 | 1,000 | 1,027 | |||||||||
| City of Arlington Special Tax (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 2/15/48, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
City of Arlington Tax Allocation, 4.00%, 8/15/50, Continuously Callable @100 | 1,700 | 1,530 | |||||||||
| City of Garland Texas Electric Utility System Revenue, Series A, 4.00%, 3/1/51, Continuously Callable @100 | 1,000 | 975 | |||||||||
| City of Houston Hotel Occupancy Tax & Special Revenue 5.00%, 9/1/39, Continuously Callable @100 | 1,000 | 1,045 | |||||||||
5.00%, 9/1/40, Continuously Callable @100 | 1,000 | 1,043 | |||||||||
City of Irving Texas Revenue, 5.00%, 8/15/43, Continuously Callable @100 | 1,000 | 1,086 | |||||||||
| City of Laredo Waterworks & Sewer System Revenue, 4.00%, 3/1/41, Continuously Callable @100 | 1,000 | 1,019 | |||||||||
| City of Lewisville Special Assessment (INS — ACA Financial Guaranty Corp.), 5.80%, 9/1/25 (j) | 2,895 | 3,089 | |||||||||
| Clifton Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund) 5.00%, 8/15/39, Continuously Callable @100 | 1,000 | 1,046 | |||||||||
4.00%, 8/15/44, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
County of Bexar Revenue, 4.00%, 8/15/44, Continuously Callable @100 | 1,500 | 1,519 | |||||||||
| Everman Independent School District, GO (NBGA — Texas Permanent School Fund), 4.00%, 2/15/50, Continuously Callable @100 | 1,500 | 1,542 | |||||||||
| Greater Texas Cultural Education Facilities Finance Corp. Revenue, 4.00%, 3/1/50, Continuously Callable @100 | 2,000 | 2,012 | |||||||||
| Harris County Cultural Education Facilities Finance Corp. Revenue, 5.00%, 6/1/38, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
| Harris County Hospital District Revenue, 4.00%, 2/15/42, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
| Hidalgo County Regional Mobility Authority Revenue Series A, 4.00%, 12/1/41, Continuously Callable @100 | 735 | 697 | |||||||||
Series B, 4.00%, 12/1/41, Continuously Callable @100 | 700 | 663 | |||||||||
| Houston Higher Education Finance Corp. Revenue, 4.00%, 10/1/51, Continuously Callable @100 | 1,100 | 1,052 | |||||||||
| Karnes County Hospital District Revenue, 5.00%, 2/1/44, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
Martin County Hospital District, GO, 4.00%, 4/1/36, Continuously Callable @100 | 350 | 359 | |||||||||
See notes to financial statements.
31
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Matagorda County Navigation District No. 1 Revenue, 4.00%, 6/1/30, Continuously Callable @100 | $ | 1,000 | $ | 1,007 | |||||||
| Mesquite Health Facilities Development Corp. Revenue, 2/15/35, Continuously Callable @100 (l) (m) | 1,000 | 793 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue 2.25%, 7/1/47 (l) | 1,000 | 894 | |||||||||
Series A, 5.00%, 4/1/47, Pre-refunded 4/1/25 @ 100 | 1,600 | 1,731 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), Series A1, 5.00%, 7/1/38, Continuously Callable @100 | 225 | 241 | |||||||||
| North Texas Tollway Authority Revenue Series B, 5.00%, 1/1/31, Continuously Callable @100 | 1,500 | 1,564 | |||||||||
Series B, 5.00%, 1/1/45, Continuously Callable @100 | 1,000 | 1,040 | |||||||||
| Port of Port Arthur Navigation District Revenue 0.84%, 4/1/40, Continuously Callable @100 (g) | 2,415 | 2,415 | |||||||||
Series B, 0.84%, 4/1/40, Continuously Callable @100 (g) | 2,000 | 2,000 | |||||||||
Series C, 0.86%, 4/1/40, Continuously Callable @100 (g) | 4,700 | 4,700 | |||||||||
| Princeton Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/43, Continuously Callable @100 | 1,000 | 1,103 | |||||||||
| Prosper Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/48, Continuously Callable @100 | 1,000 | 1,099 | |||||||||
| San Antonio Education Facilities Corp. Revenue, 4.00%, 4/1/54, Continuously Callable @100 | 1,000 | 948 | |||||||||
| Tarrant County Cultural Education Facilities Finance Corp. Revenue 5.00%, 11/15/46, Continuously Callable @100 | 1,000 | 1,078 | |||||||||
Series A, 11/15/45 (l) (m) | 1,000 | 400 | |||||||||
Series B, 11/15/36 (l) (m) | 1,000 | 400 | |||||||||
Series B, 5.00%, 7/1/48, Continuously Callable @100 | 1,500 | 1,601 | |||||||||
| Waco Educational Finance Corp. Revenue, 4.00%, 3/1/51, Continuously Callable @100 | 1,000 | 970 | |||||||||
54,140 | |||||||||||
Utah (0.5%): | |||||||||||
| Military Installation Development Authority Revenue, Series A-1, 4.00%, 6/1/41, Continuously Callable @103 | 500 | 414 | |||||||||
| Utah Charter School Finance Authority Revenue Series A, 4.00%, 10/15/46, Continuously Callable @100 | 860 | 860 | |||||||||
Series A, 4.00%, 4/15/52, Continuously Callable @100 | 3,000 | 2,979 | |||||||||
4,253 | |||||||||||
Vermont (0.1%): | |||||||||||
| Vermont Economic Development Authority Revenue, 4.00%, 5/1/45, Continuously Callable @103 | 1,000 | 835 | |||||||||
Virginia (0.1%): | |||||||||||
Alexandria IDA Revenue, 5.00%, 10/1/45, Pre-refunded 10/1/25 @ 100 | 1,000 | 1,095 | |||||||||
Washington (0.7%): | |||||||||||
| King County Public Hospital District No 2, GO, Series A, 4.00%, 12/1/41, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
| Washington Health Care Facilities Authority Revenue 4.00%, 7/1/42, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
5.00%, 1/1/47, Pre-refunded 1/1/27 @ 100 | 1,000 | 1,122 | |||||||||
See notes to financial statements.
32
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Washington Higher Education Facilities Authority Revenue, 4.00%, 5/1/45, Continuously Callable @100 | $ | 1,100 | $ | 1,110 | |||||||
| Washington State Housing Finance Commission Revenue 5.00%, 1/1/38, Continuously Callable @102 (h) | 1,000 | 1,071 | |||||||||
Series A-1, 3.50%, 12/20/35 | 296 | 275 | |||||||||
5,601 | |||||||||||
West Virginia (0.2%): | |||||||||||
| West Virginia Hospital Finance Authority Revenue, 4.00%, 1/1/38, Continuously Callable @100 | 1,500 | 1,452 | |||||||||
Wisconsin (2.1%): | |||||||||||
| Public Finance Authority Revenue 5.00%, 7/1/38, Continuously Callable @100 | 1,000 | 1,090 | |||||||||
5.00%, 1/1/42, Continuously Callable @103 (h) | 600 | 600 | |||||||||
4.00%, 1/1/45, Continuously Callable @100 | 1,440 | 1,433 | |||||||||
4.00%, 1/1/47, Continuously Callable @103 | 1,000 | 1,003 | |||||||||
4.00%, 2/1/51, Continuously Callable @100 | 1,000 | 952 | |||||||||
Series A, 5.25%, 3/1/47, Continuously Callable @100 | 2,000 | 2,080 | |||||||||
Series A, 4.00%, 10/1/47, Continuously Callable @100 | 1,000 | 983 | |||||||||
Series A, 5.25%, 10/1/48, Continuously Callable @100 | 1,500 | 1,602 | |||||||||
Series A, 4.00%, 10/1/49, Continuously Callable @100 | 1,500 | 1,477 | |||||||||
Series A, 4.00%, 7/1/51, Continuously Callable @100 | 880 | 747 | |||||||||
| Public Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/44, Continuously Callable @100 | 600 | 661 | |||||||||
| Wisconsin Health & Educational Facilities Authority Revenue 5.25%, 4/15/35, Pre-refunded 4/15/23 @ 100 | 1,000 | 1,033 | |||||||||
5.00%, 9/15/45, Pre-refunded 9/15/23 @ 100 | 1,000 | 1,041 | |||||||||
4.00%, 1/1/47, Continuously Callable @103 | 600 | 498 | |||||||||
4.00%, 1/1/57, Continuously Callable @103 | 1,000 | 808 | |||||||||
16,008 | |||||||||||
Total Municipal Bonds (Cost $444,262) | 420,750 | ||||||||||
U.S. Treasury Obligations (0.1%) | |||||||||||
U.S. Treasury Bills, 0.85%, 6/30/22 (n) | 700 | 700 | |||||||||
Total U.S. Treasury Obligations (Cost $700) | 700 | ||||||||||
Total Investments (Cost $550,867) — 98.0% | 758,468 | ||||||||||
Other assets in excess of liabilities — 2.0% | 15,509 | ||||||||||
NET ASSETS — 100.00% | $ | 773,977 | |||||||||
(a) Non-income producing security.
(b) Rounds to less than $1 thousand.
(c) Northern Trust Corp. is the parent of Northern Trust Investments Inc., which is the sub adviser of the Fund.
(d) The Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these commitments at the borrower's discretion. At May 31, 2022, the Fund held unfunded or partially unfunded loan commitments of $196 thousands, which are held at par.
(e) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2022, illiquid securities were less than 0.05% of the Fund's net assets.
See notes to financial statements.
33
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(f) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.05% of net assets as of May 31, 2022. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(g) Variable Rate Demand Notes that provide the rights to sell the security at face value on either that day or within the rate-reset period. The interest rate is reset on the put date at a stipulated daily, weekly, monthly, quarterly, or other specified time interval to reflect current market conditions. These securities do not indicate a reference rate and spread in their description.
(h) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $11,083 thousands and amounted to 1.4% of net assets.
(i) Zero-coupon bond.
(j) All or a portion of this security has been segregated as collateral for derivative instruments, delayed delivered, and/or when-issued securities.
(k) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(l) Currently the issuer is in default with respect to interest and/or principal payments.
(m) Issuer filed for bankruptcy.
(n) Rate represents the effective yield at May 31, 2022.
AMBAC — American Municipal Bond Assurance Corporation
bps — Basis points
Continuously callable — Investment is continuously callable or will be continuously callable on any date after the first call date until its maturity.
DIP — Debtor-In-Possession
GO — General Obligation
IDA — Industrial Development Authority
LLC — Limited Liability Company
MUNIPSA — Municipal Swap Index
PLC — Public Limited Company
Credit Enhancements — Adds 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 the name listed. 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.
NBGA Principal and interest payments or, under certain circumstances, underlying mortgages are guaranteed by a nonbank guarantee agreement from the name listed.
See notes to financial statements.
34
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
Futures Contracts Purchased | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
E-Mini S&P 500 Futures | 25 | 6/20/22 | $ | 4,961,444 | $ | 5,164,062 | $ | 202,618 | |||||||||||||||
Total unrealized appreciation | $ | 202,618 | |||||||||||||||||||||
Total unrealized depreciation | — | ||||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 202,618 | |||||||||||||||||||||
See notes to financial statements.
35
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Growth and Tax Strategy Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $550,867) | $ | 758,468 | |||||
Cash | 10,610 | ||||||
Receivables: | |||||||
Interest and dividends | 5,963 | ||||||
Capital shares issued | 408 | ||||||
Investments sold | 1,513 | ||||||
Variation margin on open futures contracts | 4 | ||||||
Prepaid expenses | 46 | ||||||
Total Assets | 777,012 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Investments purchased | 2,221 | ||||||
Capital shares redeemed | 369 | ||||||
Variation margin on open futures contracts | 37 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 195 | ||||||
Administration fees | 94 | ||||||
Custodian fees | 7 | ||||||
Transfer agent fees | 61 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
| 12b-1 fees | 3 | ||||||
Other accrued expenses | 48 | ||||||
Total Liabilities | 3,035 | ||||||
Net Assets: | |||||||
Capital | 567,859 | ||||||
Total accumulated earnings/(loss) | 206,118 | ||||||
Net Assets | $ | 773,977 | |||||
Net Assets | |||||||
Fund Shares | $ | 694,234 | |||||
Institutional Shares | 64,446 | ||||||
Class A | 9,754 | ||||||
Class C | 5,543 | ||||||
Total | $ | 773,977 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 29,337 | ||||||
Institutional Shares | 2,725 | ||||||
Class A | 413 | ||||||
Class C | 236 | ||||||
Total | 32,711 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 23.66 | |||||
Institutional Shares | $ | 23.65 | |||||
Class A | $ | 23.59 | |||||
Class C (c) | $ | 23.46 | |||||
Maximum Sales Charge — Class A | 2.25 | % | |||||
| Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A | $ | 24.13 | |||||
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
(c) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
36
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Growth and Tax Strategy Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 5,204 | |||||
Interest | 12,977 | ||||||
Securities lending (net of fees) | — | (a) | |||||
Foreign tax withholding | — | (a) | |||||
Total Income | 18,181 | ||||||
Expenses: | |||||||
Investment advisory fees | 2,655 | ||||||
Administration fees — Fund Shares | 1,113 | ||||||
Administration fees — Institutional Shares | 64 | ||||||
Administration fees — Class A | 11 | ||||||
Administration fees — Class C | 5 | ||||||
Sub-Administration fees | 45 | ||||||
| 12b-1 fees — Class A | 19 | ||||||
| 12b-1 fees — Class C | 36 | ||||||
Custodian fees | 43 | ||||||
Transfer agent fees — Fund Shares | 417 | ||||||
Transfer agent fees — Institutional Shares | 64 | ||||||
Transfer agent fees — Class A | 7 | ||||||
Transfer agent fees — Class C | 4 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 6 | ||||||
Legal and audit fees | 68 | ||||||
State registration and filing fees | 73 | ||||||
Interfund lending fees | — | (a) | |||||
Other expenses | 122 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 5 | ||||||
Total Expenses | 4,805 | ||||||
Expenses waived/reimbursed by Adviser | (14 | ) | |||||
Net Expenses | 4,791 | ||||||
Net Investment Income (Loss) | 13,390 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities | 6,825 | ||||||
Net realized gains (losses) from futures contracts | 78 | ||||||
Net change in unrealized appreciation/depreciation on investment securities | (63,258 | ) | |||||
Net change in unrealized appreciation/depreciation on futures contracts | 87 | ||||||
Net realized/unrealized gains (losses) on investments | (56,268 | ) | |||||
Change in net assets resulting from operations | $ | (42,878 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
37
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Growth and Tax Strategy Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 13,390 | $ | 12,399 | |||||||
Net realized gains (losses) | 6,903 | 6,824 | |||||||||
Net change in unrealized appreciation/depreciation | (63,171 | ) | 116,209 | ||||||||
Change in net assets resulting from operations | (42,878 | ) | 135,432 | ||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (11,818 | ) | (11,933 | ) | |||||||
Institutional Shares | (1,016 | ) | (467 | ) | |||||||
Class A | (113 | ) | (1 | ) | |||||||
Class C | (32 | ) | (5 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (12,979 | ) | (12,406 | ) | |||||||
Change in net assets resulting from capital transactions | 70,706 | 42,523 | |||||||||
Change in net assets | 14,849 | 165,549 | |||||||||
Net Assets: | |||||||||||
Beginning of period | 759,128 | 593,579 | |||||||||
End of period | $ | 773,977 | $ | 759,128 | |||||||
(continues on next page)
See notes to financial statements.
38
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Growth and Tax Strategy Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 133,271 | $ | 128,688 | |||||||
Distributions reinvested | 11,312 | 11,096 | |||||||||
Cost of shares redeemed | (102,872 | ) | (149,077 | ) | |||||||
Total Fund Shares | $ | 41,711 | $ | (9,293 | ) | ||||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 28,783 | $ | 56,777 | |||||||
Distributions reinvested | 281 | 130 | |||||||||
Cost of shares redeemed | (15,453 | ) | (6,753 | ) | |||||||
Total Institutional Shares | $ | 13,611 | $ | 50,154 | |||||||
Class A | |||||||||||
Proceeds from shares issued | $ | 19,318 | $ | 520 | |||||||
Distributions reinvested | 42 | 1 | |||||||||
Cost of shares redeemed | (8,755 | ) | (22 | ) | |||||||
Total Class A | $ | 10,605 | $ | 499 | |||||||
Class C | |||||||||||
Proceeds from shares issued | $ | 4,830 | $ | 1,181 | |||||||
Distributions reinvested | 28 | 4 | |||||||||
Cost of shares redeemed | (79 | ) | (22 | ) | |||||||
Total Class C | $ | 4,779 | $ | 1,163 | |||||||
Change in net assets resulting from capital transactions | $ | 70,706 | $ | 42,523 | |||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 5,188 | 5,514 | |||||||||
Reinvested | 440 | 491 | |||||||||
Redeemed | (4,081 | ) | (6,530 | ) | |||||||
Total Fund Shares | 1,547 | (525 | ) | ||||||||
Institutional Shares | |||||||||||
Issued | 1,128 | 2,477 | |||||||||
Reinvested | 11 | 6 | |||||||||
Redeemed | (615 | ) | (282 | ) | |||||||
Total Institutional Shares | 524 | 2,201 | |||||||||
Class A | |||||||||||
Issued | 753 | 22 | |||||||||
Reinvested | 2 | — | (a) | ||||||||
Redeemed | (363 | ) | (1 | ) | |||||||
Total Class A | 392 | 21 | |||||||||
Class C | |||||||||||
Issued | 189 | 50 | |||||||||
Reinvested | 1 | — | (a) | ||||||||
Redeemed | (3 | ) | (1 | ) | |||||||
Total Class C | 187 | 49 | |||||||||
Change in Shares | 2,650 | 1,746 | |||||||||
(a) Rounds to less than 1 thousand shares.
See notes to financial statements.
39
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Growth and Tax Strategy Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Year Ended May 31 2022 | $ | 25.25 | 0.42 | (h) | (1.60 | ) | (1.18 | ) | (0.41 | ) | — | ||||||||||||||||
2021 | $ | 20.96 | 0.43 | (h) | 4.29 | 4.72 | (0.43 | ) | — | ||||||||||||||||||
2020 | $ | 20.18 | 0.47 | (h) | 0.77 | 1.24 | (0.46 | ) | — | ||||||||||||||||||
2019 | $ | 19.77 | 0.47 | 0.47 | 0.94 | (0.48 | ) | (0.05 | ) | ||||||||||||||||||
2018 | $ | 18.76 | 0.44 | 1.01 | 1.45 | (0.44 | ) | — | |||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Year Ended May 31, 2022 | $ | 25.24 | 0.42 | (h) | (1.60 | ) | (1.18 | ) | (0.41 | ) | — | ||||||||||||||||
| June 29, 2020 (j) through May 31, 2021 | $ | 21.05 | 0.40 | (h) | 4.12 | 4.52 | (0.33 | ) | — | ||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Year Ended May 31, 2022 | $ | 25.22 | 0.36 | (h) | (1.62 | ) | (1.26 | ) | (0.37 | ) | — | ||||||||||||||||
| June 29, 2020 (j) through May 31, 2021 | $ | 21.05 | 0.31 | (h) | 4.16 | 4.47 | (0.30 | ) | — | ||||||||||||||||||
Class C | |||||||||||||||||||||||||||
| Year Ended May 31, 2022 | $ | 25.12 | 0.17 | (h) | (1.60 | ) | (1.43 | ) | (0.23 | ) | — | ||||||||||||||||
| June 29, 2020 (j) through May 31, 2021 | $ | 21.05 | 0.16 | (h) | 4.13 | 4.29 | (0.22 | ) | — | ||||||||||||||||||
(a) Not annualized for periods less than one year.
(b) 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.
(c) Annualized for periods less than one year.
(d) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019, for Fund Shares, and June 29, 2020, for Institutional Shares, Class A, and Class C, and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(e) Does not include acquired fund fees and expenses, if any.
(f) From the period beginning July 1, 2019, the amount of any waivers or reimbursements and the amount of any recoupment is calculated without regard to the impact of any performance adjustment to the Fund's management fee.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(h) Per share net investment income (loss) has been calculated using the average daily shares method.
(i) Reflects an overall increase in purchases and sales of securities.
(j) Commencement of operations.
See notes to financial statements.
40
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(a)(b) | Net Expenses(c)(d)(e)(f) | Net Investment Income (Loss)(c) | Gross Expenses(c)(e) | Net Assets, End of Period (000's) | Portfolio Turnover(a)(g) | ||||||||||||||||||||||||||||
USAA Growth and Tax Strategy Fund | |||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||
| Year Ended May 31 2022 | (0.41 | ) | $ | 23.66 | (4.80 | )% | 0.58 | % | 1.64 | % | 0.58 | % | $ | 694,234 | 14 | % | |||||||||||||||||||
2021 | (0.43 | ) | $ | 25.25 | 22.79 | % | 0.59 | % | 1.86 | % | 0.59 | % | $ | 701,841 | 11 | % | |||||||||||||||||||
2020 | (0.46 | ) | $ | 20.96 | 6.25 | % | 0.57 | % | 2.25 | % | 0.57 | % | $ | 593,579 | 34 | %(i) | |||||||||||||||||||
2019 | (0.53 | ) | $ | 20.18 | 4.83 | % | 0.60 | % | 2.44 | % | 0.60 | % | $ | 526,320 | 7 | % | |||||||||||||||||||
2018 | (0.44 | ) | $ | 19.77 | 7.81 | % | 0.68 | % | 2.32 | % | 0.68 | % | $ | 459,682 | 10 | % | |||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||
| Year Ended May 31, 2022 | (0.41 | ) | $ | 23.65 | (4.79 | )% | 0.57 | % | 1.65 | % | 0.57 | % | $ | 64,446 | 14 | % | |||||||||||||||||||
| June 29, 2020 (j) through May 31, 2021 | (0.33 | ) | $ | 25.24 | 21.62 | % | 0.56 | % | 1.80 | % | 0.59 | % | $ | 55,541 | 11 | % | |||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
| Year Ended May 31, 2022 | (0.37 | ) | $ | 23.59 | (5.10 | )% | 0.86 | % | 1.42 | % | 1.03 | % | $ | 9,754 | 14 | % | |||||||||||||||||||
| June 29, 2020 (j) through May 31, 2021 | (0.30 | ) | $ | 25.22 | 21.35 | % | 0.86 | % | 1.38 | % | 13.45 | % | $ | 525 | 11 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
| Year Ended May 31, 2022 | (0.23 | ) | $ | 23.46 | (5.78 | )% | 1.61 | % | 0.66 | % | 1.67 | % | $ | 5,543 | 14 | % | |||||||||||||||||||
| June 29, 2020 (j) through May 31, 2021 | (0.22 | ) | $ | 25.12 | 20.47 | % | 1.60 | % | 0.70 | % | 5.63 | % | $ | 1,221 | 11 | % | |||||||||||||||||||
See notes to financial statements.
41
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Growth and Tax Strategy Fund (the "Fund"). The Fund offers four classes of shares: Fund Shares, Institutional Shares, Class A, and Class C. The Fund is classified as diversified under the 1940 Act.
Each class of shares of the Fund has substantially identical rights and privileges, except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, other than ETF's, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities are valued each business day by a pricing service approved by the Board. The approved pricing service uses the evaluated bid or the last sale price to value securities. Debt obligations maturing within 60 days may be valued at amortized cost, provided that the amortized cost represents the fair value of such securities. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 336,473 | $ | — | $ | — | $ | 336,473 | |||||||||||
Corporate Bonds | — | 300 | 245 | 545 | |||||||||||||||
Municipal Bonds | — | 420,750 | — | 420,750 | |||||||||||||||
U.S. Treasury Obligations | — | 700 | — | 700 | |||||||||||||||
Total | $ | 336,473 | $ | 421,750 | $ | 245 | $ | 758,468 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | 203 | — | — | 203 | |||||||||||||||
Total | $ | 203 | $ | — | $ | — | $ | 203 | |||||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investment Companies:
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Securities Purchased on a Delayed-Delivery or When-Issued Basis:
The Fund may purchase securities on a delayed-delivery or when-issued basis. Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis, or for delayed draws on loans can take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payables for Investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
Municipal Obligations:
The values of municipal obligations can fluctuate and may be affected by adverse tax, legislative, or political changes, and by financial developments affecting municipal issuers. Payments of municipal obligations may depend on a relatively limited source of revenue, resulting in greater credit risk. Future changes in federal tax laws or the activity of an issuer may adversely affect the tax-exempt status of municipal obligations.
Below-Investment-Grade Securities:
The Fund may invest in below-investment-grade securities (i.e., lower-quality, "junk" debt), which are subject to various risks. Lower-quality debt is considered to be speculative because it is less certain that the issuer will be able to pay interest or repay the principal than in the case of investment-grade debt. These securities can involve a substantially greater risk of default than higher-rated securities, and their values can decline significantly over short periods of time. Lower-quality debt securities tend to be more sensitive to adverse news about their issuers, the market and the economy in general, than higher-quality debt securities. The market for these securities can be less liquid, especially during periods of recession or general market decline.
Derivative Instruments:
Futures Contracts:
The Fund may enter into contracts for the future delivery of securities or foreign currencies and futures contracts based on a specific security, class of securities, foreign currency or an index, and purchase or sell options on any such futures contracts. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. No physical delivery of the underlying asset is made. The Fund may enter into futures contracts in an effort to hedge against market risks. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. A good faith margin deposit, known as initial margin, of cash or government securities with a broker or custodian is required to initiate and maintain open positions in futures contracts. Subsequent
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
payments, known as variation margin, are made or received by the Fund based on the change in the market value of the position and are recorded as unrealized appreciation or depreciation until the contract is closed out, at which time the gain or loss is realized. The Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices change in an unanticipated manner. Such unanticipated changes may also result in lower overall performance than if the Fund had not entered into any futures transactions. In addition, the value of the Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or foreign currencies, limiting the Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions.
The collateral held by the Fund is reflected on the Statement of Assets and Liabilities under Deposit with broker for futures contracts.
Management has determined that no offsetting requirements exist as a result of their conclusion that the Fund is not subject to master netting agreements for futures contracts. During the year ended May 31, 2022, the Fund entered into futures contracts primarily for the strategy of hedging or other purposes, including but not limited to, providing liquidity and equitizing cash.
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statement of Assets and Liabilities, categorized by risk exposure, as of May 31, 2022 (amounts in thousands):
Assets | |||||||
| Variation Margin Receivable on Open Futures Contracts* | |||||||
Equity Risk Exposure | $ | 203 | |||||
* Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts is reported within the Statement of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2022 (amounts in thousands):
| Net Realized Gains (Losses) on Derivatives Recognized as a Result of Operations | Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result of Operations | ||||||||||
| Net Realized Gains (Losses) from Futures Contracts | Net Change in Unrealized Appreciation/Depreciation on Futures Contracts | ||||||||||
Equity Risk Exposure | $ | 78 | $ | 87 | |||||||
All open derivative positions at year end are reflected on the Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to the Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis. Paydown
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statement of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
As of May 31, 2022, the Fund did not have any securities on loan.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing fees, and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades, which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2022, the Fund engaged in the following securities transactions with affiliated funds, which resulted in the following net realized gains (losses) (amounts in thousands):
| Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| $ | 42,115 | $ | 46,150 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statement of Operations, as applicable, as Custodian fees.
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
| $199,383 | $105,423 | ||||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.30% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the prior investment adviser to the Fund, announced that AMCO would be acquired by Victory Capital Holdings Inc. (the "Transaction"). A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and VCM. The Transaction closed on July 1, 2019, and effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and no performance adjustments were made for the period beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter is utilized in calculating future performance adjustments.
47
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Composite Index which is comprised of 51% of the Lipper General & Insured Municipal Bond Funds Index and 49% of the Lipper Large-Cap Core Funds Index.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points) | ||||||
| +/- 20 to 50 | +/- 4 | ||||||
| +/- 51 to 100 | +/- 5 | ||||||
| +/- 101 and greater | +/- 6 | ||||||
(a) Based on the difference between the average annual performance of the relevant share class of the Fund and its relevant Lipper index, rounded to the nearest basis point.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of the 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 pays a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper Composite Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2021, to May 31, 2022, performance adjustments were $203, $1, less than $1, and less than $(1) for Fund Shares, Institutional Shares, Class A, and Class C, in thousands, respectively. Performance adjustments were 0.03%, less than 0.01%, less than 0.01%, and less than (0.01)% for Fund Shares, Institutional Shares, Class A, and Class C, respectively. The performance adjustment rate included in the investment advisory fee may differ from the maximum over/under Annual Adjustment Rate due to differences in average net assets for the reporting period and rolling 36 month performance periods.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets.
VCM entered into a Subadvisory Agreement with Northern Trust Investments, Inc. ("NTI") under which NTI directs the investment and reinvestment of the Fund's assets allocated to it in accordance with the Fund's investment objective, policies, and restrictions, subject to the general supervision of the Board and VCM. This arrangement provides for monthly fees that are paid by VCM. VCM (not the Fund) pays the subadviser fees.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, 0.10%, 0.15%. and 0.15%, which is based on the Fund's average daily net assets of the Fund Shares, Institutional Shares, Class A, and Class C, respectively. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and
48
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund Shares based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Transfer agent fees for Institutional Shares, Class A, and Class C are paid monthly based on a fee accrued daily at an annualized rate of 0.10%, 0.10%, and 0.10%, respectively, of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 1.00% of the average daily net assets of Class C and 0.25% of the average daily net assets of Class A. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activity primarily intended to result in the sale of Class A and Class C. Amounts incurred and paid to the Distributor for the year ended May 31, 2022, are reflected on the Statement of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the year ended May 31, 2022, the Distributor received less than $4 thousand from commissions earned in connection with sales of Class A.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred by certain classes of the Fund in any fiscal year exceed the expense limits for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Performance adjustments, acquired fund fees and expenses, interest, taxes,
49
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limits (excluding voluntary waivers) were 0.61%, 0.57%, 0.86%, and 1.61% for Fund Shares, Institutional Shares, Class A, and Class C, respectively.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2024 | Expires 2025 | Total | |||||||||
| $ | 33 | $ | 14 | $ | 47 | ||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Debt Securities Risk — The value of a debt security or other income-producing security changes in response to various factors including, for example, market-related factors (such as changes in interest rates or changes in the risk appetite of investors generally) and changes in the actual or perceived ability of the issuer (or of issuers generally) to meet its (or their) obligations.
Other factors that may affect the value of debt securities include, among others, public health crises and responses by governments and companies to such crises. These and other events may affect the creditworthiness of the issuer of a debt security and may impair an issuer's ability to timely meet its debt obligations as they come due.
Credit Risk — The fixed-income securities in the Fund's portfolio are subject to credit risk, which is the possibility that an issuer of a fixed-income security will fail to make timely interest and/or principal payments on its securities or that negative market perceptions of the issuer's ability to make such payments will cause the price of that security to decline. The Fund accepts some credit risk as a recognized means to enhance an investor's return. All fixed-income securities, varying from the highest quality to the very speculative, have some degree of credit risk. All fixed-income securities, varying from the highest quality to the very speculative, have some degree of credit risk. Fixed-income securities related below investment grade, also known as "junk" or high-yield bonds, generally entail greater economic, credit, and liquidity risk than investment-grade securities. Their prices may be more volatile, especially during economic downturns, financial setbacks, or liquidity events.
Interest Rate Risk — The Fund is subject to the risk that the market value of the bonds in its portfolio will fluctuate because of changes in interest rates, changes in the supply of and demand for tax-exempt securities, and other market factors. Bond prices generally are linked to the prevailing market interest rates. In general, when interest rates rise, bond prices fall; conversely, when interest rates fall, bond
50
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
prices rise. The price volatility of a bond also depends on its duration. Generally, the longer the duration of a bond, the greater is its sensitivity to interest rates. To compensate investors for this higher interest rate risk, bonds with longer durations generally offer higher yields than bonds with shorter durations. The ability of an issuer of a debt security to repay principal prior to a security's maturity can increase the security's sensitivity to interest rate changes.
Decisions by the U.S. Federal Reserve (also known as the "Fed") regarding interest rate and monetary policy, which can be difficult to predict and sometimes change direction suddenly in response to economic and market events, can have a significant effect on the value of fixed-income securities as well as the overall strength of the U.S. economy. Precise interest rate predictions are difficult to make, and interest rates may change unexpectedly and dramatically in response to extreme changes in market or economic conditions. As a result, the value of fixed-income securities may vary widely under certain market conditions.
Equity Risk — The values of the equity securities in which the Fund invests may decline in response to developments affecting individual companies and/or general market, economic and political conditions and other factors. A company's earnings or dividends may not increase as expected due to poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters, military confrontations, war, terrorism, public health crises, or other events, conditions, and factors. Price changes may be temporary or may last for extended periods.
LIBOR Discontinuation Risk — The London Interbank Offered Rate ("LIBOR") discontinuation may adversely affect the financial markets generally and the Fund's operations, finances and investments specifically. LIBOR has been the principal floating-rate benchmark in the financial markets, and a large portion of the Fund's assets are tied to LIBOR. However, LIBOR has been or will be discontinued as a floating rate benchmark. The date of discontinuation depends on the LIBOR currency and tenor. With limited exceptions, no new LIBOR obligations will be entered into after December 31, 2021. Existing LIBOR obligations have transitioned or will transition to another benchmark, depending on the LIBOR currency and tenor. For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
Non-LIBOR floating-rate obligations, including Secured Overnight Financing Rate ("SOFR")-based obligations, may have returns and values that fluctuate more than those of floating-rate debt obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest-rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Various SOFR-based rates, including SOFR-based term rates, and various non-SOFR-based rates are expected to develop in response to the discontinuation of U.S. dollar LIBOR, which may create various risks for the Fund and the financial markets more generally. There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Such rates include AMERIBOR (American Interbank Offered Rate), BSBY (Bloomberg Short-Term Bank Yield Index) and BYI (Bank Yield Index). Unlike forward-looking SOFR-based term rates, such rates are intended to reflect a bank credit spread component.
It is not clear how replacement rates for LIBOR — including SOFR-based rates and non-SOFR-based rates — will develop and to what extent they will be used. There is no assurance that these replacement rates will be suitable substitutes for LIBOR, and thus the substitution of such rates for LIBOR could have an adverse effect on the Fund and the financial markets more generally. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, which may or may not be similar to the risks relating to SOFR.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and
51
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the year ended May 31, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month LIBOR plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 1,418 | 2 | 0.76 | % | $ | 1,794 | ||||||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
52
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
Ordinary Income | Tax-Exempt Income | Total Distributions Paid | Ordinary Income | Tax-Exempt Income | Total Distributions Paid | ||||||||||||||||||
$ | 3,675 | $ | 9,304 | $ | 12,979 | $ | 3,509 | $ | 8,897 | $ | 12,406 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Accumulated Earnings | Accumulated Capital and Other Earnings (Loss) | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 2,997 | $ | 2,997 | $ | (4,358 | ) | $ | 207,479 | $ | 206,118 | |||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, futures, defaulted bond accruals, and REITs/return of capital.
As of May 31, 2022, the Fund had net capital loss carryforwards as shown in the table below (amounts in thousands). It is unlikely that the Board will authorize a distribution of capital gains realized in the future until the capital loss carryforwards have been used.
| Short-Term Amount | Total | ||||||
$ | 4,358 | $ | 4,358 | ||||
During the tax year ended May 31, 2022, the Fund utilized $6,902 thousand of capital loss carryforwards.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 550,989 | $ | 235,325 | $ | (27,846 | ) | $ | 207,479 | |||||||
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Growth and Tax Strategy Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Growth and Tax Strategy Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
54
USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
55
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
56
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
57
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21- 5/31/22* | Hypothetical Expenses Paid During Period 12/1/21- 5/31/22* | Annualized Expense Ratio During Period 12/1/21- 5/31/22 | ||||||||||||||||||||||
Fund | $ | 1,000.00 | $ | 906.60 | $ | 1,022.04 | $ | 2.76 | $ | 2.92 | 0.58 | % | |||||||||||||||
Institutional | 1,000.00 | 907.00 | 1,021.99 | 2.81 | 2.97 | 0.59 | % | ||||||||||||||||||||
Class A | 1,000.00 | 905.50 | 1,020.59 | 4.13 | 4.38 | 0.87 | % | ||||||||||||||||||||
Class C | 1,000.00 | 902.30 | 1,016.85 | 7.68 | 8.15 | 1.62 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Tax Exempt Distributions | |||||||||
| 100 | % | 100 | % | $ | 9,304 | ||||||
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Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Growth & Tax Strategy Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") and the Subadvisory Agreement between the Adviser and Northern Trust Investments, Inc. (the "Subadviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement and Subadvisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement and Subadvisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and Subadvisory Agreement and the Adviser and the Subadviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's and the Subadviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement and Subadvisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement and the Subadvisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement and the Subadvisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
The Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Adviser and the Subadviser in providing services to the Fund.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser and the Subadviser. At the meeting at which the renewal of the Advisory Agreement and Subadvisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser and the Subadviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement and Subadvisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser and Subadviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management
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and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The Board considered the Adviser's process for monitoring the performance of the Subadviser and the Adviser's timeliness in responding to performance issues. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services and the effects of any performance adjustment1, as well as any fee waivers and reimbursements — was below the medians of its expense group and expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were below the medians of its expense group and its expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund. The Board also took into account that the subadvisory fees under the Subadvisory Agreement are paid by the Adviser. The Board also considered and discussed information about the Subadviser's fees, including the amount of management fees retained by the Adviser after payment of the subadvisory fees.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and
1 The Adviser previously agreed that no performance adjustment (positive or negative) would be made to the amount payable to the Adviser from July 1, 2019, through June 30, 2020.
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other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe and its Lipper index for the one-year period ended September 30, 2021, and was above the average of its performance universe and its Lipper index for the three-, five- and ten-year periods ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser pays the Fund's subadvisory fees and also noted that the Adviser waived a portion of its management fee and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board considered the fact that the Adviser also pays the Fund's subadvisory fees. The Board also considered the effect of the change in size, if any, of each of the Fund's classes on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
Subadvisory Agreement
In approving the Subadvisory Agreement with respect to the Fund, the Board considered various factors, among them: (i) the nature, extent, and quality of services provided to the Fund by the Subadviser, including the personnel providing services; (ii) the Subadviser's compensation and any other benefits derived from the subadvisory relationship; (iii) comparisons, to the extent applicable, of subadvisory fees and performance to comparable investment companies; and (iv) the terms of the Subadvisory Agreement. A summary of the Board's analysis of these factors is set forth below. After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Subadvisory Agreement. In approving the Subadvisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
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Nature, Extent, and Quality of Services Provided; Investment Personnel — The Trustees considered information provided to them regarding the services provided by the Subadviser, including information presented periodically throughout the previous year. The Board considered the Subadviser's level of knowledge and investment style. The Board reviewed the experience and credentials of the investment personnel who are responsible for managing the investment of portfolio securities with respect to the Fund and the Subadviser's level of staffing. The Trustees considered, based on the materials provided to them by the Subadviser, whether the method of compensating portfolio managers is reasonable and includes mechanisms to prevent a manager with underperformance from taking undue risks. The Trustees also noted the Subadviser's brokerage practices. The Board also considered the Subadviser's regulatory and compliance history. The Board also took into account the Subadviser's risk management processes. The Board noted that the Adviser's monitoring processes of the Subadviser include: (i) regular telephonic meetings to discuss, among other matters, investment strategies, and to review portfolio performance; (ii) quarterly portfolio compliance checklists and quarterly compliance certifications to the Board; and (iii) due diligence visits to the Subadviser.
Subadviser Compensation — The Board also took into consideration the financial condition of the Subadviser. In considering the cost of services to be provided by the Subadviser and the profitability to the Subadviser of its relationship with the Fund, the Trustees noted that the fees under the Subadvisory Agreement were paid by the Adviser. The Trustees also relied on the ability of the Adviser to negotiate the Subadvisory Agreement and the fees thereunder at arm's length. For the above reasons, the Board determined that the profitability of the Subadviser from its relationship with the Fund was not a material factor in its deliberations with respect to the consideration of the approval of the Subadvisory Agreement. For similar reasons, the Board concluded that the potential for economies of scale in the Subadviser's management of the Fund was not a material factor in considering the Subadvisory Agreement.
Subadvisory Fees and Fund Performance — The Board compared the subadvisory fees for the Fund with the fees that the Subadviser charges to comparable clients, as applicable. The Board considered that the Fund pays a management fee to the Adviser and that, in turn, the Adviser pays a subadvisory fee to the Subadviser. As noted above, the Board considered the Fund's performance during the one-, three-, five-, and ten-year periods ended September 30, 2021, as compared to the Fund's peer group and noted that the Board reviews at its regularly scheduled meetings information about the Fund's performance results. The Board also considered the performance of the Subadviser. The Board noted the Adviser's experience and resources in monitoring the performance, investment style, and risk-adjusted performance of the Subadviser. The Board was mindful of the Adviser's focus on the Subadviser's performance. The Board also noted the Subadviser's performance record for similar accounts, as applicable.
Conclusions — The Board reached the following conclusions regarding the Subadvisory Agreement: (i) the Subadviser is qualified to manage the Fund's assets in accordance with its investment objectives and policies; (ii) the Subadviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and relevant indices; and (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser and the Subadviser. Based on its conclusions, the Board determined that approval of the Subadvisory Agreement with respect to the Fund would be in the best interests of the Fund and its shareholders.
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Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
67
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23403-0722
MAY 31, 2022
Annual Report
USAA Emerging Markets Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 22 | ||||||
Statement of Operations | 23 | ||||||
Statements of Changes in Net Assets | 24 | ||||||
Financial Highlights | 26 | ||||||
Notes to Financial Statements | 28 | ||||||
| Report of Independent Registered Public Accounting Firm | 38 | ||||||
Supplemental Information (Unaudited) | 39 | ||||||
Trustee and Officer Information | 39 | ||||||
Proxy Voting and Portfolio Holdings Information | 45 | ||||||
Expense Examples | 45 | ||||||
Additional Federal Income Tax Information | 46 | ||||||
Advisory Contract Renewal | 47 | ||||||
Liquidity Risk Management Program | 51 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Emerging Markets Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Emerging Markets Fund
Managers' Commentary (continued)
The end of the reporting period saw continued pressure on stocks and bonds. The Fed's hawkish pivot, which started in the fourth quarter of 2021, continued to put pressure on equity valuation multiples, especially for long-duration growth stocks. With inflation readings hitting four-decade highs, the Fed now faced an increasingly difficult task of implementing policy strong enough to tame inflation and provide a "soft landing" for the economy, while not being too aggressive and tilting the economy into recession. This risk contributed to the heightened stock market volatility, in addition to mounting COVID-related lockdowns in China, rising oil prices, and the ongoing conflict between Russia and the Ukraine.
• How did the USAA Emerging Markets Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the reporting period ended May 31, 2022, the Fund Shares, Institutional Shares, and Class A had total returns of -17.79%, -17.62%, and -17.70%, respectively. This compares to returns of -19.83% for the MSCI Emerging Markets Index, and -22.34% for the Lipper Emerging Markets Funds Index.
Victory Capital Management Inc. ("VCM") is the Fund's investment adviser. As the investment adviser, VCM employs dedicated resources to support the research, selection, and monitoring of the Fund's subadviser. Lazard Asset Management is an external subadviser to the Fund, while Sophus Capital and Trivalent Investments are VCM investment franchises that each manage portions of the Fund. Primary responsibility for the day-to-day discretionary management of the Fund lies with the subadviser and the investment franchises.
• What strategies did you employ during the reporting period?
During the one-year period ending on May 31, 2022, the Fund outperformed its benchmark MSCI Emerging Markets Index. On a country basis, an underweight and stock selection in China were positive contributors to performance. On the negative side, an underweight and stock selection in India were detractors.
Reviewing performance from a sector standpoint, stock selection was a positive contributor in health care and materials. The financials sector had a negative stock selection effect. An underweight to the consumer discretionary sector benefited results during the reporting period.
Thank you for allowing us to assist you with your investment needs.
5
USAA Emerging Markets Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 11/7/94 | 8/1/08 | 8/1/10 | ||||||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | MSCI Emerging Markets Index1 | Lipper Emerging Markets Funds Index2 | ||||||||||||||||||||||
One Year | –17.79 | % | –17.62 | % | –17.70 | % | –22.43 | % | –19.83 | % | –22.34 | % | |||||||||||||||
Five Year | 3.36 | % | 3.57 | % | 3.21 | % | 1.99 | % | 3.80 | % | 3.53 | % | |||||||||||||||
Ten Year | 3.47 | % | 3.70 | % | 3.26 | % | 2.65 | % | 4.17 | % | 4.37 | % | |||||||||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The maximum offering price figures reflect a maximum sales charge of 5.75% for Class A. Net Asset Value does not reflect sales charges.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Emerging Markets Fund — Growth of $10,000
1The unmanaged MSCI Emerging Markets Index is a free-float-adjusted market capitalization index designed to measure equity market performance in the global emerging markets. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The unmanaged Lipper Emerging Markets Funds Index tracks the total return performance of the Lipper Emerging Markets Funds category. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Emerging Markets Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation.
Top 10 Sectors:
May 31, 2022
(% of Net Assets)
Information Technology | 24.3 | % | |||||
Financials | 21.7 | % | |||||
Consumer Discretionary | 10.6 | % | |||||
Materials | 8.9 | % | |||||
Communication Services | 7.4 | % | |||||
Industrials | 7.1 | % | |||||
Consumer Staples | 5.1 | % | |||||
Energy | 4.6 | % | |||||
Health Care | 3.9 | % | |||||
Real Estate | 2.6 | % | |||||
Country Allocation:
May 31, 2022
(% of Net Assets)
* Includes countries with less than 3.0% of portfolio and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (97.7%) | |||||||||||
Brazil (7.5%): | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
Grupo SBF SA | 81,214 | $ | 411 | ||||||||
Vibra Energia SA | 1,453,181 | 5,945 | |||||||||
6,356 | |||||||||||
Consumer Staples (1.3%): | |||||||||||
Sao Martinho SA | 268,400 | 2,846 | |||||||||
Sendas Distribuidora SA | 785,018 | 2,617 | |||||||||
SLC Agricola SA | 263,070 | 3,036 | |||||||||
8,499 | |||||||||||
Energy (1.0%): | |||||||||||
3R Petroleum Oleo e Gas SA (a) | 70,600 | 724 | |||||||||
Petro Rio SA (a) | 108,000 | 636 | |||||||||
Petroleo Brasileiro SA, ADR | 380,897 | 5,287 | |||||||||
6,647 | |||||||||||
Financials (1.4%): | |||||||||||
Banco Bradesco SA, ADR | 471,420 | 2,004 | |||||||||
Banco do Brasil SA | 431,295 | 3,324 | |||||||||
Banco do Estado do Rio Grande do Sul SA Preference Shares | 161,500 | 350 | |||||||||
Itau Unibanco Holding SA, ADR | 714,646 | 3,916 | |||||||||
9,594 | |||||||||||
Health Care (0.4%): | |||||||||||
Hypera SA | 310,000 | 2,530 | |||||||||
Industrials (1.1%): | |||||||||||
CCR SA | 1,047,520 | 2,941 | |||||||||
Randon SA Implementos e Participacoes Preference Shares | 1,016,400 | 2,188 | |||||||||
SIMPAR SA | 1,005,056 | 2,521 | |||||||||
7,650 | |||||||||||
Information Technology (0.3%): | |||||||||||
Cielo SA | 689,200 | 573 | |||||||||
Pagseguro Digital Ltd. Class A (a) | 92,681 | 1,424 | |||||||||
1,997 | |||||||||||
Materials (0.9%): | |||||||||||
Dexco SA | 594,175 | 1,402 | |||||||||
Gerdau SA Preference Shares | 352,800 | 2,165 | |||||||||
Vale SA, ADR | 119,344 | 2,154 | |||||||||
5,721 | |||||||||||
Utilities (0.2%): | |||||||||||
Eneva SA (a) | 143,200 | 469 | |||||||||
Equatorial Energia SA | 86,900 | 435 | |||||||||
Omega Energia SA (a) | 175,912 | 400 | |||||||||
1,304 | |||||||||||
50,298 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Canada (1.7%): | |||||||||||
Energy (0.6%): | |||||||||||
Parex Resources, Inc. | 170,902 | $ | 3,785 | ||||||||
Materials (1.1%): | |||||||||||
First Quantum Minerals Ltd. | 268,328 | 7,770 | |||||||||
11,555 | |||||||||||
Chile (0.1%): | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Cencosud SA | 215,686 | 346 | |||||||||
Real Estate (0.1%): | |||||||||||
Cencosud Shopping SA | 343,994 | 367 | |||||||||
713 | |||||||||||
China (22.8%): | |||||||||||
Communication Services (4.2%): | |||||||||||
Baidu, Inc. Class A (a) | 142,700 | 2,609 | |||||||||
Baidu, Inc., ADR (a) | 24,264 | 3,405 | |||||||||
NetEase, Inc., ADR | 49,585 | 5,144 | |||||||||
Tencent Holdings Ltd. | 377,063 | 17,239 | |||||||||
28,397 | |||||||||||
Consumer Discretionary (4.9%): | |||||||||||
Alibaba Group Holding Ltd., ADR (a) | 51,793 | 4,975 | |||||||||
| Alibaba Group Holding Ltd., GDR (a) | 618,904 | 7,431 | |||||||||
BYD Co. Ltd. Class H | 93,500 | 3,323 | |||||||||
China Harmony Auto Holding Ltd. | 968,000 | 431 | |||||||||
China Meidong Auto Holdings Ltd. | 456,000 | 1,636 | |||||||||
Fuyao Glass Industry Group Co. Ltd. Class H (c) | 397,200 | 1,921 | |||||||||
Gree Electric Appliances, Inc. Class A | 489,000 | 2,357 | |||||||||
JD.com, Inc., ADR | 79,940 | 4,486 | |||||||||
JD.com, Inc. Class A | 54,023 | 1,518 | |||||||||
Jiumaojiu International Holdings Ltd. (c) (d) | 777,000 | 1,821 | |||||||||
Meituan Class B (a) (c) | 131,800 | 3,093 | |||||||||
32,992 | |||||||||||
Consumer Staples (2.1%): | |||||||||||
Chacha Food Co. Ltd. Class A | 278,400 | 2,313 | |||||||||
Chenguang Biotech Group Co. Ltd. Class A (a) | 844,200 | 2,042 | |||||||||
Hengan International Group Co. Ltd. | 601,000 | 2,976 | |||||||||
Inner Mongolia Yili Industrial Group Co. Ltd. Class A | 396,100 | 2,256 | |||||||||
Wuliangye Yibin Co. Ltd. Class A | 176,100 | 4,519 | |||||||||
14,106 | |||||||||||
Energy (1.0%): | |||||||||||
China Shenhua Energy Co. Ltd. Class H | 636,500 | 2,125 | |||||||||
PetroChina Co. Ltd. Class H | 8,822,000 | 4,646 | |||||||||
6,771 | |||||||||||
Financials (4.0%): | |||||||||||
China Construction Bank Corp. Class H | 8,261,000 | 6,124 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
China Merchants Bank Co. Ltd. Class H | 430,000 | $ | 2,720 | ||||||||
Industrial & Commercial Bank of China Ltd. Class H | 5,303,000 | 3,175 | |||||||||
PICC Property & Casualty Co. Ltd. Class H | 3,426,000 | 3,318 | |||||||||
Ping An Insurance Group Co. of China Ltd. | 948,000 | 6,070 | |||||||||
Postal Savings Bank of China Co. Ltd. Class H (c) (d) | 7,394,000 | 5,492 | |||||||||
26,899 | |||||||||||
Health Care (1.3%): | |||||||||||
China Animal Healthcare Ltd. (a) (e) (f) | 1,673,000 | — | |||||||||
China Medical System Holdings Ltd. | 293,000 | 433 | |||||||||
Hygeia Healthcare Holdings Co. Ltd. (c) | 264,200 | 1,467 | |||||||||
Pharmaron Beijing Co. Ltd. Class H (c) | 110,400 | 1,331 | |||||||||
Shenzhen Mindray Bio-Medical Electronics Co. Ltd. Class A | 42,100 | 1,907 | |||||||||
Sinopharm Group Co. Ltd. Class H | 1,505,599 | 3,724 | |||||||||
8,862 | |||||||||||
Industrials (1.8%): | |||||||||||
Airtac International Group | 76,344 | 2,485 | |||||||||
China Railway Group Ltd. Class H | 6,244,000 | 4,316 | |||||||||
Xinte Energy Co. Ltd. Class H | 1,090,800 | 2,561 | |||||||||
Zhejiang Expressway Co. Ltd. Class H | 512,000 | 452 | |||||||||
ZTO Express Cayman, Inc., ADR | 75,280 | 2,028 | |||||||||
11,842 | |||||||||||
Information Technology (0.9%): | |||||||||||
Luxshare Precision Industry Co. Ltd. Class A | 307,500 | 1,558 | |||||||||
WUS Printed Circuit Kunshan Co. Ltd. Class A | 1,220,160 | 2,881 | |||||||||
Yonyou Network Technology Co. Ltd. Class A | 434,200 | 1,258 | |||||||||
5,697 | |||||||||||
Materials (1.5%): | |||||||||||
Anhui Conch Cement Co. Ltd. Class H | 636,500 | 3,224 | |||||||||
China Hongqiao Group Ltd. (d) | 2,450,500 | 3,038 | |||||||||
Shandong Nanshan Aluminum Co. Ltd. Class A | 2,723,108 | 1,445 | |||||||||
Wanhua Chemical Group Co. Ltd. Class A | 212,600 | 2,679 | |||||||||
10,386 | |||||||||||
Real Estate (0.6%): | |||||||||||
A-Living Smart City Services Co. Ltd. Class H (c) | 1,116,250 | 1,780 | |||||||||
China Vanke Co. Ltd. Class H | 1,089,100 | 2,406 | |||||||||
4,186 | |||||||||||
Utilities (0.5%): | |||||||||||
China Longyuan Power Group Corp. Ltd. Class H | 1,532,000 | 3,262 | |||||||||
Xinyi Energy Holdings Ltd. | 640,000 | 352 | |||||||||
3,614 | |||||||||||
153,752 | |||||||||||
Colombia (0.8%): | |||||||||||
Financials (0.8%): | |||||||||||
Bancolombia SA, ADR | 124,945 | 5,611 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Egypt (0.3%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telecom Egypt Co. | 519,749 | $ | 422 | ||||||||
Financials (0.2%): | |||||||||||
Commercial International Bank Egypt SAE Registered Shares, GDR | 862,286 | 1,728 | |||||||||
2,150 | |||||||||||
Greece (1.3%): | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
OPAP SA | 152,091 | 2,270 | |||||||||
Financials (0.5%): | |||||||||||
National Bank of Greece SA (a) | 779,977 | 2,969 | |||||||||
Industrials (0.4%): | |||||||||||
Mytilineos SA | 116,158 | 2,071 | |||||||||
Star Bulk Carriers Corp. (d) | 21,792 | 713 | |||||||||
2,784 | |||||||||||
Utilities (0.1%): | |||||||||||
Terna Energy SA | 24,589 | 476 | |||||||||
8,499 | |||||||||||
Hong Kong (3.6%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Bosideng International Holdings Ltd. | 4,040,000 | 2,150 | |||||||||
JS Global Lifestyle Co. Ltd. (c) | 1,350,500 | 1,439 | |||||||||
3,589 | |||||||||||
Financials (0.5%): | |||||||||||
BOC Hong Kong Holdings Ltd. | 913,000 | 3,508 | |||||||||
Health Care (0.1%): | |||||||||||
The United Laboratories International Holdings Ltd. | 800,000 | 382 | |||||||||
Industrials (1.3%): | |||||||||||
Pacific Basin Shipping Ltd. | 6,342,000 | 3,308 | |||||||||
Techtronic Industries Co. Ltd. | 395,000 | 5,160 | |||||||||
8,468 | |||||||||||
Information Technology (0.5%): | |||||||||||
Lenovo Group Ltd. | 3,588,000 | 3,535 | |||||||||
Materials (0.0%): (b) | |||||||||||
Nine Dragons Paper Holdings Ltd. | 357,000 | 321 | |||||||||
Real Estate (0.6%): | |||||||||||
China Overseas Grand Oceans Group Ltd. | 1,162,000 | 592 | |||||||||
China Resources Land Ltd. | 718,000 | 3,196 | |||||||||
3,788 | |||||||||||
Utilities (0.1%): | |||||||||||
China Water Affairs Group Ltd. | 556,000 | 553 | |||||||||
24,144 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Hungary (0.4%): | |||||||||||
Financials (0.3%): | |||||||||||
OTP Bank Nyrt | 79,384 | $ | 1,895 | ||||||||
Health Care (0.1%): | |||||||||||
Richter Gedeon Nyrt | 26,217 | 514 | |||||||||
2,409 | |||||||||||
India (10.3%): | |||||||||||
Communication Services (0.5%): | |||||||||||
Indus Towers Ltd. | 770,170 | 1,989 | |||||||||
Sun TV Network Ltd. | 231,502 | 1,323 | |||||||||
3,312 | |||||||||||
Consumer Discretionary (1.8%): | |||||||||||
Bajaj Auto Ltd. | 48,250 | 2,389 | |||||||||
Balkrishna Industries Ltd. | 112,516 | 3,368 | |||||||||
Indian Hotels Co. Ltd. | 126,796 | 382 | |||||||||
KPR Mill Ltd. | 80,201 | 642 | |||||||||
Mahindra & Mahindra Ltd. | 346,848 | 4,590 | |||||||||
Mahindra CIE Automotive Ltd. | 212,035 | 529 | |||||||||
11,900 | |||||||||||
Consumer Staples (0.2%): | |||||||||||
Dabur India Ltd. | 212,935 | 1,421 | |||||||||
Energy (0.6%): | |||||||||||
Aegis Logistics, Ltd. | 135,533 | 378 | |||||||||
Reliance Industries Ltd. | 110,150 | 3,711 | |||||||||
4,089 | |||||||||||
Financials (3.0%): | |||||||||||
Angel One Ltd. | 24,123 | 455 | |||||||||
Axis Bank Ltd. (a) | 287,844 | 2,526 | |||||||||
Canara Bank (a) | 280,666 | 734 | |||||||||
Cholamandalam Investment & Finance Co. Ltd. | 385,238 | 3,353 | |||||||||
CreditAccess Grameen, Ltd. (a) | 30,954 | 424 | |||||||||
ICICI Bank Ltd., ADR | 569,176 | 10,957 | |||||||||
Power Finance Corp. Ltd. | 371,065 | 531 | |||||||||
UTI Asset Management Co. Ltd. | 123,842 | 1,090 | |||||||||
20,070 | |||||||||||
Health Care (0.5%): | |||||||||||
Ajanta Pharma Ltd. | 16,957 | 374 | |||||||||
Apollo Hospitals Enterprise Ltd. | 50,599 | 2,583 | |||||||||
Aster Dm Healthcare, Ltd. (a) (c) | 162,943 | 417 | |||||||||
JB Chemicals & Pharmaceuticals Ltd. | 18,675 | 390 | |||||||||
3,764 | |||||||||||
Industrials (1.0%): | |||||||||||
Allcargo Logistics, Ltd. | 116,889 | 479 | |||||||||
Bharat Electronics Ltd. | 213,872 | 645 | |||||||||
Cummins India Ltd. | 33,108 | 437 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
HG Infra Engineering Ltd. | 49,074 | $ | 357 | ||||||||
KEI Industries Ltd. | 63,745 | 1,008 | |||||||||
Larsen & Toubro Ltd. | 169,082 | 3,581 | |||||||||
6,507 | |||||||||||
Information Technology (1.4%): | |||||||||||
eClerx Services Ltd. | 35,223 | 916 | |||||||||
Infosys Ltd., ADR | 262,730 | 4,955 | |||||||||
Mindtree Ltd. | 16,774 | 656 | |||||||||
WNS Holdings Ltd., ADR (a) | 37,118 | 2,701 | |||||||||
9,228 | |||||||||||
Materials (0.9%): | |||||||||||
Finolex Industries Ltd. | 210,084 | 422 | |||||||||
Jindal Steel & Power Ltd. | 145,857 | 709 | |||||||||
National Aluminium Co. Ltd. | 312,621 | 387 | |||||||||
NMDC Ltd. | 827,598 | 1,343 | |||||||||
Tata Chemicals, Ltd. | 51,501 | 626 | |||||||||
Tata Steel Ltd. | 195,192 | 2,651 | |||||||||
6,138 | |||||||||||
Real Estate (0.1%): | |||||||||||
Oberoi Realty, Ltd. (a) | 32,236 | 332 | |||||||||
Prestige Estates Projects Ltd. | 77,178 | 424 | |||||||||
756 | |||||||||||
Utilities (0.3%): | |||||||||||
CESC Ltd. | 452,001 | 452 | |||||||||
GAIL India Ltd. | 837,801 | 1,587 | |||||||||
2,039 | |||||||||||
69,224 | |||||||||||
Indonesia (2.4%): | |||||||||||
Communication Services (0.6%): | |||||||||||
PT Media Nusantara Citra Tbk | 5,930,600 | 394 | |||||||||
PT Telekomunikasi Indonesia Persero Tbk, ADR | 121,161 | 3,557 | |||||||||
3,951 | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Industri Jamu Dan Farmasi Sido Muncul Tbk PT | 5,773,700 | 404 | |||||||||
Financials (1.8%): | |||||||||||
PT Bank Mandiri Persero Tbk | 10,600,190 | 6,185 | |||||||||
PT Bank Rakyat Indonesia Persero Tbk | 18,450,046 | 5,845 | |||||||||
12,030 | |||||||||||
16,385 | |||||||||||
Korea, Republic Of (14.9%): | |||||||||||
Communication Services (1.0%): | |||||||||||
Cheil Worldwide, Inc. | 18,188 | 381 | |||||||||
JYP Entertainment Corp. | 71,470 | 3,271 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
LG Uplus Corp. | 270,452 | $ | 3,024 | ||||||||
6,676 | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
Coway Co. Ltd. | 5,427 | 312 | |||||||||
Hyundai Mobis Co. Ltd. | 17,972 | 3,158 | |||||||||
Shinsegae, Inc. | 12,435 | 2,540 | |||||||||
Youngone Corp. | 12,042 | 449 | |||||||||
6,459 | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Cosmax, Inc. | 3,503 | 197 | |||||||||
KT&G Corp. | 22,711 | 1,559 | |||||||||
Lotte Chilsung Beverage Co., Ltd. | 2,498 | 393 | |||||||||
2,149 | |||||||||||
Financials (2.1%): | |||||||||||
BNK Financial Group, Inc. | 81,821 | 522 | |||||||||
DB Insurance Co. Ltd. | 8,946 | 468 | |||||||||
Hana Financial Group, Inc. | 98,964 | 3,959 | |||||||||
Samsung Securities Co. Ltd. | 66,927 | 2,137 | |||||||||
Shinhan Financial Group Co. Ltd. | 101,143 | 3,521 | |||||||||
Woori Financial Group, Inc. | 310,513 | 3,740 | |||||||||
14,347 | |||||||||||
Health Care (0.7%): | |||||||||||
InBody Co. Ltd. | 54,161 | 1,214 | |||||||||
Osstem Implant Co. Ltd. | 5,400 | 477 | |||||||||
PharmaResearch Co. Ltd. | 7,701 | 513 | |||||||||
Samsung Biologics Co. Ltd. (a) (c) | 3,633 | 2,480 | |||||||||
4,684 | |||||||||||
Industrials (0.7%): | |||||||||||
CJ Corp. | 21,972 | 1,511 | |||||||||
DL E&C Co. Ltd. | 12,131 | 511 | |||||||||
Hyundai Glovis Co. Ltd. | 2,856 | 487 | |||||||||
KCC Corp. | 1,308 | 366 | |||||||||
LIG Nex1 Co. Ltd. | 9,750 | 624 | |||||||||
LX International Corp. | 15,206 | 467 | |||||||||
Samsung Engineering Co. Ltd. (a) | 33,196 | 656 | |||||||||
4,622 | |||||||||||
Information Technology (8.6%): | |||||||||||
DB HiTek Co., Ltd. | 10,024 | 553 | |||||||||
Innox Advanced Materials Co. Ltd. | 71,130 | 2,512 | |||||||||
LEENO Industrial, Inc. | 3,796 | 478 | |||||||||
LG Innotek Co. Ltd. | 3,017 | 932 | |||||||||
LX Semicon Co. Ltd. | 7,806 | 797 | |||||||||
Partron Co. Ltd. | 45,983 | 414 | |||||||||
Samsung Electro-Mechanics Co. Ltd. | 16,333 | 2,030 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Samsung Electronics Co. Ltd. | 615,955 | $ | 33,500 | ||||||||
SK Hynix, Inc. | 193,592 | 16,782 | |||||||||
57,998 | |||||||||||
Materials (0.6%): | |||||||||||
LOTTE Fine Chemical Co. Ltd. | 7,155 | 483 | |||||||||
OCI Co., Ltd. | 4,453 | 462 | |||||||||
PI Advanced Materials Co. Ltd. | 62,024 | 2,495 | |||||||||
Poongsan Corp. | 21,598 | 531 | |||||||||
3,971 | |||||||||||
100,906 | |||||||||||
Luxembourg (0.1%): | |||||||||||
Materials (0.1%): | |||||||||||
Ternium SA, ADR | 22,413 | 985 | |||||||||
Malaysia (1.7%): | |||||||||||
Communication Services (0.1%): | |||||||||||
TIME dotCom Bhd | 447,000 | 446 | |||||||||
Consumer Discretionary (0.2%): | |||||||||||
MR DIY Group M Bhd (c) | 1,740,300 | 1,292 | |||||||||
Consumer Staples (0.3%): | |||||||||||
Heineken Malaysia Bhd | 74,000 | 421 | |||||||||
Kuala Lumpur Kepong Bhd | 288,100 | 1,683 | |||||||||
2,104 | |||||||||||
Financials (0.6%): | |||||||||||
Alliance Bank Malaysia BHD | 689,400 | 566 | |||||||||
Public Bank Bhd | 3,325,700 | 3,594 | |||||||||
4,160 | |||||||||||
Materials (0.3%): | |||||||||||
Petronas Chemicals Group Bhd | 739,600 | 1,733 | |||||||||
Ta Ann Holdings Bhd | 350,400 | 398 | |||||||||
2,131 | |||||||||||
Real Estate (0.1%): | |||||||||||
Eco World Development Group Bhd | 3,621,000 | 611 | |||||||||
Utilities (0.1%): | |||||||||||
Mega First Corp. Bhd | 637,100 | 536 | |||||||||
11,280 | |||||||||||
Mexico (3.7%): | |||||||||||
Communication Services (0.4%): | |||||||||||
America Movil SAB de CV, ADR | 137,703 | 2,939 | |||||||||
Consumer Discretionary (0.2%): | |||||||||||
Alsea SAB de CV (a) | 727,330 | 1,558 | |||||||||
Consumer Staples (0.4%): | |||||||||||
Kimberly-Clark de Mexico SAB de CV Class A (d) | 1,542,500 | 2,389 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (0.1%): | |||||||||||
Vista Energy SAB de CV, ADR (a) | 76,648 | $ | 700 | ||||||||
Financials (1.3%): | |||||||||||
Banco del Bajio SA (c) (d) | 272,956 | 673 | |||||||||
Grupo Financiero Banorte SAB de CV Class O | 1,266,923 | 8,215 | |||||||||
8,888 | |||||||||||
Industrials (0.1%): | |||||||||||
Controladora Vuela Cia de Aviacion SAB de CV Class A (a) | 196,743 | 307 | |||||||||
Materials (0.8%): | |||||||||||
Alpek SAB de CV | 267,133 | 354 | |||||||||
GCC SAB de CV (d) | 136,843 | 954 | |||||||||
Grupo Mexico SAB de CV Class B | 853,599 | 4,217 | |||||||||
5,525 | |||||||||||
Real Estate (0.4%): | |||||||||||
Corp Inmobiliaria Vesta SAB de CV (d) | 1,011,040 | 2,061 | |||||||||
Macquarie Mexico Real Estate Management SA de CV (c) | 366,715 | 489 | |||||||||
2,550 | |||||||||||
24,856 | |||||||||||
Peru (0.5%): | |||||||||||
Financials (0.5%): | |||||||||||
Credicorp Ltd. | 23,437 | 3,290 | |||||||||
Philippines (0.4%): | |||||||||||
Financials (0.4%): | |||||||||||
BDO Unibank, Inc. | 1,111,780 | 2,829 | |||||||||
Portugal (0.5%): | |||||||||||
Energy (0.5%): | |||||||||||
Galp Energia SGPS SA | 279,271 | 3,646 | |||||||||
Qatar (0.9%): | |||||||||||
Energy (0.1%): | |||||||||||
Qatar Gas Transport Co. Ltd. | 499,104 | 513 | |||||||||
Financials (0.5%): | |||||||||||
Qatar Islamic Bank SAQ | 491,209 | 3,123 | |||||||||
Industrials (0.3%): | |||||||||||
Industries Qatar QSC | 471,607 | 2,370 | |||||||||
6,006 | |||||||||||
Russian Federation (0.0%): (b) | |||||||||||
Communication Services (0.0%): | |||||||||||
Mobile TeleSystems PJSC, ADR (e) (f) | 253,826 | 20 | |||||||||
Consumer Staples (0.0%): | |||||||||||
Magnit PJSC (e) (f) | 29,318 | 1 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (0.0%): | |||||||||||
Gazprom PJSC (e) (f) (i) (j) | 1,087,480 | $ | 60 | ||||||||
Rosneft Oil Co. PJSC, GDR (e) (f) (i) (j) | 457,159 | 31 | |||||||||
91 | |||||||||||
Financials (0.0%): | |||||||||||
Moscow Exchange MICEX-RTS PJSC (a) (e) (f) | 196,760 | 5 | |||||||||
Sberbank of Russia PJSC (a) (e) (f) (i) (j) | 687,954 | 2 | |||||||||
Sberbank of Russia PJSC, ADR (a) (e) (f) (i) (j) | 329,652 | 3 | |||||||||
10 | |||||||||||
122 | |||||||||||
Saudi Arabia (2.1%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Leejam Sports Co. JSC | 55,483 | 1,486 | |||||||||
Energy (0.1%): | |||||||||||
Aldrees Petroleum and Transport Services Co. | 17,838 | 364 | |||||||||
Financials (1.2%): | |||||||||||
Alinma Bank | 333,159 | 3,414 | |||||||||
The Saudi National Bank | 249,355 | 4,821 | |||||||||
8,235 | |||||||||||
Health Care (0.2%): | |||||||||||
Mouwasat Medical Services Co. | 28,499 | 1,660 | |||||||||
Materials (0.4%): | |||||||||||
Saudi Arabian Mining Co. (a) | 156,032 | 2,704 | |||||||||
14,449 | |||||||||||
South Africa (3.1%): | |||||||||||
Communication Services (0.4%): | |||||||||||
MTN Group Ltd. | 279,003 | 3,009 | |||||||||
Consumer Discretionary (0.3%): | |||||||||||
Truworths International Ltd. | 119,751 | 417 | |||||||||
Woolworths Holdings Ltd. | 470,311 | 1,672 | |||||||||
2,089 | |||||||||||
Energy (0.1%): | |||||||||||
Exxaro Resources Ltd. | 31,885 | 452 | |||||||||
Financials (1.6%): | |||||||||||
Absa Group Ltd. | 334,071 | 3,926 | |||||||||
Capitec Bank Holdings Ltd. | 28,955 | 4,168 | |||||||||
Standard Bank Group Ltd. | 236,804 | 2,707 | |||||||||
10,801 | |||||||||||
Industrials (0.1%): | |||||||||||
KAP Industrial Holdings Ltd. | 1,742,279 | 523 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.5%): | |||||||||||
African Rainbow Minerals Ltd. (d) | 44,947 | $ | 747 | ||||||||
Impala Platinum Holdings Ltd. | 223,729 | 3,052 | |||||||||
3,799 | |||||||||||
Real Estate (0.1%): | |||||||||||
Redefine Properties Ltd. | 1,763,333 | 494 | |||||||||
21,167 | |||||||||||
Taiwan (14.3%): | |||||||||||
Communication Services (0.1%): | |||||||||||
International Games System Co. Ltd. | 19,000 | 490 | |||||||||
Consumer Discretionary (0.3%): | |||||||||||
Fulgent Sun International Holding Co. Ltd. | 109,000 | 570 | |||||||||
Global PMX Co. Ltd. | 86,000 | 453 | |||||||||
KMC Kuei Meng International, Inc. | 71,000 | 417 | |||||||||
O-TA Precision Industry Co., Ltd. | 83,000 | 409 | |||||||||
Taiwan Paiho Ltd. | 133,000 | 310 | |||||||||
2,159 | |||||||||||
Financials (0.6%): | |||||||||||
CTBC Financial Holding Co. Ltd. | 3,928,000 | 3,648 | |||||||||
King's Town Bank Co. Ltd. | 380,000 | 469 | |||||||||
4,117 | |||||||||||
Health Care (0.1%): | |||||||||||
Pegavision Corp. | 36,000 | 544 | |||||||||
Industrials (0.2%): | |||||||||||
Bizlink Holding, Inc. | 45,000 | 481 | |||||||||
Chicony Power Technology Co. Ltd. | 203,000 | 495 | |||||||||
Eva Airways Corp. (a) | 357,000 | 417 | |||||||||
1,393 | |||||||||||
Information Technology (12.6%): | |||||||||||
Alchip Technologies, Ltd. | 12,000 | 381 | |||||||||
ASE Technology Holding Co. Ltd. | 998,000 | 3,554 | |||||||||
ASE Technology Holding Co. Ltd., ADR (d) | 532,186 | 3,805 | |||||||||
Chipbond Technology Corp. | 308,000 | 734 | |||||||||
E Ink Holdings, Inc. | 180,000 | 1,252 | |||||||||
Gigabyte Technology Co. Ltd. | 187,000 | 722 | |||||||||
Gold Circuit Electronics Ltd. | 1,069,000 | 2,973 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 944,000 | 3,661 | |||||||||
Hon Hai Precision Industry Co. Ltd., GDR | 436,013 | 3,365 | |||||||||
King Yuan Electronics Co. Ltd. | 339,000 | 533 | |||||||||
Kinsus Interconnect Technology Corp. | 109,000 | 647 | |||||||||
Macronix International Co. Ltd. | 322,000 | 435 | |||||||||
MediaTek, Inc. | 402,000 | 12,432 | |||||||||
Parade Technologies Ltd. | 14,000 | 722 | |||||||||
Phison Electronics Corp. | 22,000 | 298 | |||||||||
Quanta Computer, Inc. | 580,000 | 1,583 | |||||||||
Radiant Opto-Electronics Corp. | 139,000 | 498 | |||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Silicon Motion Technology Corp., ADR | 67,476 | $ | 6,094 | ||||||||
Simplo Technology Co. Ltd. | 46,000 | 475 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 1,806,000 | 34,159 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 35,600 | 3,393 | |||||||||
Tong Hsing Electronic Industries Ltd. | 85,000 | 745 | |||||||||
Unimicron Technology Corp. | 256,000 | 1,879 | |||||||||
Zhen Ding Technology Holding Ltd. | 154,000 | 637 | |||||||||
84,977 | |||||||||||
Materials (0.4%): | |||||||||||
China General Plastics Corp. | 325,550 | 351 | |||||||||
Formosa Plastics Corp. | 708,000 | 2,553 | |||||||||
2,904 | |||||||||||
96,584 | |||||||||||
Thailand (2.6%): | |||||||||||
Communication Services (0.0%): (b) | |||||||||||
BEC World PCL | 801,400 | 363 | |||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Sri Trang Agro-Industry PCL | 376,400 | 271 | |||||||||
Energy (0.5%): | |||||||||||
PTT PCL | 2,789,700 | 3,107 | |||||||||
Financials (0.4%): | |||||||||||
SCB X PCL (a) | 848,200 | 2,801 | |||||||||
Health Care (0.5%): | |||||||||||
Chularat Hospital PCL | 4,951,200 | 538 | |||||||||
Mega Lifesciences PCL | 1,823,600 | 2,772 | |||||||||
3,310 | |||||||||||
Materials (0.6%): | |||||||||||
Indorama Ventures PCL | 1,907,300 | 2,737 | |||||||||
The Siam Cement PCL (f) | 116,300 | 1,237 | |||||||||
3,974 | |||||||||||
Real Estate (0.5%): | |||||||||||
AP Thailand PCL | 8,239,300 | 2,697 | |||||||||
Origin Property PCL | 1,683,200 | 535 | |||||||||
3,232 | |||||||||||
Utilities (0.1%): | |||||||||||
Gunkul Engineering PCL | 2,715,500 | 458 | |||||||||
17,516 | |||||||||||
Turkey (0.3%): | |||||||||||
Communication Services (0.0%): (b) | |||||||||||
Turk Telekomunikasyon AS (d) | 487,282 | 291 | |||||||||
Consumer Discretionary (0.1%): | |||||||||||
Arcelik A/S (d) | 161,500 | 767 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Staples (0.1%): | |||||||||||
Coca-Cola Icecek A/S | 83,273 | $ | 661 | ||||||||
Industrials (0.0%): (b) | |||||||||||
Tekfen Holding A/S (d) | 199,108 | 239 | |||||||||
Utilities (0.1%): | |||||||||||
Enerjisa Enerji A/S (c) | 424,492 | 384 | |||||||||
2,342 | |||||||||||
United Arab Emirates (0.2%): | |||||||||||
Industrials (0.1%): | |||||||||||
Air Arabia PJSC | 900,331 | 492 | |||||||||
Real Estate (0.1%): | |||||||||||
Emaar Development PJSC (a) | 472,085 | 567 | |||||||||
1,059 | |||||||||||
United Kingdom (1.2%): | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Unilever PLC | 56,772 | 2,732 | |||||||||
Materials (0.8%): | |||||||||||
Anglo American PLC | 112,578 | 5,545 | |||||||||
8,277 | |||||||||||
Total Common Stocks (Cost $584,242) | 660,054 | ||||||||||
Exchange-Traded Funds (0.1%) | |||||||||||
United States (0.1%): | |||||||||||
iShares MSCI Emerging Markets Small-Cap ETF (d) | 14,141 | 754 | |||||||||
Total Exchange-Traded Funds (Cost $770) | 754 | ||||||||||
Collateral for Securities Loaned (0.6%)^ | |||||||||||
United States (0.6%): | |||||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (g) | 3,970,387 | 3,970 | |||||||||
Total Collateral for Securities Loaned (Cost $3,970) | 3,970 | ||||||||||
Total Investments (Cost $588,982) — 98.4% | 664,778 | ||||||||||
Other assets in excess of liabilities — 1.6% | 10,650 | ||||||||||
NET ASSETS — 100.00% | $ | 675,428 | |||||||||
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) Amount represents less than 0.05% of net assets.
(c) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $24,079 thousand and amounted to 3.6% of net assets.
(d) All or a portion of this security is on loan.
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(e) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.05% of the Fund's net assets as of May 31, 2022. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(f) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. At May 31, 2022, illiquid securities were 0.2% of the Fund's net assets.
(g) Rate disclosed is the daily yield on May 31, 2022.
(i) Restricted security that is not registered under the Securities Act of 1933.
(j) The following table details the acquisition date and cost of the Fund's restricted securities at May 31, 2022 (amount in thousand):
Security Name | Acquisition | Cost | |||||||||
Gazprom PJSC | 8/25/2021 | $ | 4,261 | ||||||||
Rosneft Oil Co. PJSC, GDR | 12/21/2021 |
| 2,920 | ||||||||
Sberbank of Russia PJSC | 9/29/2015 |
| 800 | ||||||||
Sberbank of Russia PJSC, ADR | 7/27/2021 |
| 4,362 | ||||||||
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
GDR — Global Depositary Receipt
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
21
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Emerging Markets Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $588,982) | $ | 664,778 | (a) | ||||
Foreign currency, at value (Cost $292) | 304 | ||||||
Cash | 11,688 | ||||||
Receivables: | |||||||
Interest and dividends | 2,027 | ||||||
Capital shares issued | 118 | ||||||
Investments sold | 2,209 | ||||||
Reclaims | 3 | ||||||
From Adviser | 19 | ||||||
Prepaid expenses | 29 | ||||||
Total Assets | 681,175 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 3,970 | ||||||
Capital shares redeemed | 357 | ||||||
Accrued foreign capital gains taxes | 528 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 577 | ||||||
Administration fees | 67 | ||||||
Custodian fees | 58 | ||||||
Transfer agent fees | 86 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | — | (b) | |||||
| 12b-1 fees | — | (b) | |||||
Other accrued expenses | 104 | ||||||
Total Liabilities | 5,747 | ||||||
Net Assets: | |||||||
Capital | 612,321 | ||||||
Total accumulated earnings/(loss) | 63,107 | ||||||
Net Assets | $ | 675,428 | |||||
Net Assets | |||||||
Fund Shares | $ | 276,456 | |||||
Institutional Shares | 398,909 | ||||||
Class A | 63 | ||||||
Total | $ | 675,428 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 13,822 | ||||||
Institutional Shares | 19,978 | ||||||
Class A | 3 | ||||||
Total | 33,803 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 20.00 | |||||
Institutional Shares | 19.97 | ||||||
Class A | 20.09 | ||||||
Maximum Sales Charge — Class A | 5.75 | % | |||||
| Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A | $ | 21.32 | |||||
(a) Includes $5,685 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
22
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Emerging Markets Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 21,957 | |||||
Interest | 2 | ||||||
Securities lending (net of fees) | 62 | ||||||
Foreign tax withholding | (2,046 | ) | |||||
Total Income | 19,975 | ||||||
Expenses: | |||||||
Investment advisory fees | 6,952 | ||||||
Administration fees — Fund Shares | 485 | ||||||
Administration fees — Institutional Shares | 379 | ||||||
Administration fees — Class A | — | (a) | |||||
Sub-Administration fees | 55 | ||||||
| 12b-1 fees — Class A | — | (a) | |||||
Custodian fees | 400 | ||||||
Transfer agent fees — Fund Shares | 669 | ||||||
Transfer agent fees — Institutional Shares | 379 | ||||||
Transfer agent fees — Class A | — | (a) | |||||
Trustees' fees | 48 | ||||||
Compliance fees | 5 | ||||||
Legal and audit fees | 122 | ||||||
State registration and filing fees | 46 | ||||||
Interfund lending fees | — | (a) | |||||
Other expenses | 141 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 29 | ||||||
Total Expenses | 9,710 | ||||||
Expenses waived/reimbursed by Adviser | (111 | ) | |||||
Net Expenses | 9,599 | ||||||
Net Investment Income (Loss) | 10,376 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | 30,126 | ||||||
Foreign taxes on realized gains | (749 | ) | |||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (182,925 | ) | |||||
Net change in accrued foreign taxes on unrealized gains | 1,385 | ||||||
Net realized/unrealized gains (losses) on investments | (152,163 | ) | |||||
Change in net assets resulting from operations | $ | (141,787 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
23
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Emerging Markets Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 10,376 | $ | 6,334 | |||||||
Net realized gains (losses) | 29,377 | 106,033 | |||||||||
Net change in unrealized appreciation/depreciation | (181,540 | ) | 195,626 | ||||||||
Change in net assets resulting from operations | (141,787 | ) | 307,993 | ||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (2,223 | ) | (3,653 | ) | |||||||
Institutional Shares | (3,355 | ) | (4,890 | ) | |||||||
Class A | — | (53 | ) | ||||||||
Change in net assets resulting from distributions to shareholders | (5,578 | ) | (8,596 | ) | |||||||
Change in net assets resulting from capital transactions | 49,614 | (139,789 | ) | ||||||||
Change in net assets | (97,751 | ) | 159,608 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 773,179 | 613,571 | |||||||||
End of period | $ | 675,428 | $ | 773,179 | |||||||
(continues on next page)
See notes to financial statements.
24
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
| USAA Emerging Markets Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 20,578 | $ | 26,675 | |||||||
Distributions reinvested | 2,195 | 3,610 | |||||||||
Cost of shares redeemed | (51,176 | ) | (77,583 | ) | |||||||
Total Fund Shares | $ | (28,403 | ) | $ | (47,298 | ) | |||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 122,913 | $ | 11,577 | |||||||
Distributions reinvested | 3,352 | 4,886 | |||||||||
Cost of shares redeemed | (48,191 | ) | (102,386 | ) | |||||||
Total Institutional Shares | $ | 78,074 | $ | (85,923 | ) | ||||||
Class A | |||||||||||
Proceeds from shares issued | $ | — | (a) | $ | 4,791 | ||||||
Distributions reinvested | — | 1 | |||||||||
Cost of shares redeemed | (57 | ) | (11,360 | ) | |||||||
Total Class A | $ | (57 | ) | $ | (6,568 | ) | |||||
Change in net assets resulting from capital transactions | $ | 49,614 | $ | (139,789 | ) | ||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 918 | 1,211 | |||||||||
Reinvested | 101 | 167 | |||||||||
Redeemed | (2,309 | ) | (3,708 | ) | |||||||
Total Fund Shares | (1,290 | ) | (2,330 | ) | |||||||
Institutional Shares | |||||||||||
Issued | 5,737 | 537 | |||||||||
Reinvested | 154 | 227 | |||||||||
Redeemed | (2,177 | ) | (4,773 | ) | |||||||
Total Institutional Shares | 3,714 | (4,009 | ) | ||||||||
Class A | |||||||||||
Issued | — | (b) | 278 | ||||||||
Reinvested | — | — | (b) | ||||||||
Redeemed | (3 | ) | (551 | ) | |||||||
Total Class A | (3 | ) | (273 | ) | |||||||
Change in Shares | 2,421 | (6,612 | ) | ||||||||
(a) Rounds to less than $1 thousand.
(b) Rounds to less than 1 thousand shares.
See notes to financial statements.
25
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
USAA Emerging Markets Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 24.66 | 0.30 | (g) | (4.81 | ) | (4.51 | ) | (0.15 | ) | (0.15 | ) | |||||||||||||||
2021 | $ | 16.16 | 0.16 | (g) | 8.57 | 8.73 | (0.23 | ) | (0.23 | ) | |||||||||||||||||
2020 | $ | 17.14 | 0.25 | (g) | (1.17 | ) | (0.92 | ) | (0.06 | ) | (0.06 | ) | |||||||||||||||
2019 | $ | 18.84 | 0.17 | (1.67 | ) | (1.50 | ) | (0.20 | ) | (0.20 | ) | ||||||||||||||||
2018 | $ | 17.60 | 0.16 | 1.15 | 1.31 | (0.07 | ) | (0.07 | ) | ||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 24.62 | 0.35 | (g) | (4.80 | ) | (4.45 | ) | (0.20 | ) | (0.20 | ) | |||||||||||||||
2021 | $ | 16.14 | 0.20 | (g) | 8.55 | 8.75 | (0.27 | ) | (0.27 | ) | |||||||||||||||||
2020 | $ | 17.10 | 0.29 | (g) | (1.17 | ) | (0.88 | ) | (0.08 | ) | (0.08 | ) | |||||||||||||||
2019 | $ | 18.79 | 0.18 | (1.62 | ) | (1.44 | ) | (0.25 | ) | (0.25 | ) | ||||||||||||||||
2018 | $ | 17.55 | 0.20 | 1.14 | 1.34 | (0.10 | ) | (0.10 | ) | ||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 24.58 | 0.35 | (g) | (4.84 | ) | (4.49 | ) | — | — | |||||||||||||||||
2021 | $ | 16.08 | 0.07 | (g) | 8.62 | 8.69 | (0.19 | ) | (0.19 | ) | |||||||||||||||||
2020 | $ | 17.08 | 0.20 | (g) | (1.16 | ) | (0.96 | ) | (0.04 | ) | (0.04 | ) | |||||||||||||||
2019 | $ | 18.76 | 0.10 | (1.62 | ) | (1.52 | ) | (0.16 | ) | (0.16 | ) | ||||||||||||||||
2018 | $ | 17.55 | 0.12 | 1.13 | 1.25 | (0.04 | ) | (0.04 | ) | ||||||||||||||||||
(a) 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.
(b) From the period beginning July 1, 2019, the amount of any waivers or reimbursements and the amount of any recoupment are calculated without regard to the impact of any performance adjustment to the Fund's management fee.
(c) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019, and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(d) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2019, 2018 and 2017. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(e) Does not include acquired fund fees and expenses, if any.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(g) Per share net investment income (loss) has been calculated using the average daily shares method.
(h) Reflects a return to normal trading levels after a prior year transition.
(i) Reflects increased trading activity due to current year transition or asset allocation shift.
(j) Prior to October 1, 2017, USAA Asset Management Company (AMCO) (previous Adviser) voluntarily agreed to limit the annual expenses of Class A to 1.65% of the Class A's average daily net assets.
See notes to financial statements.
26
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
| Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(a) | Net Expenses(b)(c)(d)(e) | Net Investment Income (Loss) | Gross Expenses(d)(e) | Net Assets, End of Period (000's) | Portfolio Turnover(f) | |||||||||||||||||||||||||
USAA Emerging Markets Fund | |||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 20.00 | (18.33 | )% | 1.47 | % | 1.35 | % | 1.47 | % | $ | 276,456 | 54 | % | |||||||||||||||||
2021 | $ | 24.66 | 54.25 | % | 1.45 | % | 0.77 | % | 1.47 | % | $ | 372,624 | 73 | %(h) | |||||||||||||||||
2020 | $ | 16.16 | (5.41 | )% | 1.48 | % | 1.44 | % | 1.54 | % | $ | 281,937 | 124 | %(i) | |||||||||||||||||
2019 | $ | 17.14 | (7.86 | )% | 1.48 | % | 1.02 | % | 1.48 | % | $ | 340,465 | 68 | % | |||||||||||||||||
2018 | $ | 18.84 | 7.41 | % | 1.46 | % | 0.86 | % | 1.46 | % | $ | 402,401 | 59 | % | |||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 19.97 | (18.15 | )% | 1.28 | % | 1.59 | % | 1.31 | % | $ | 398,909 | 54 | % | |||||||||||||||||
2021 | $ | 24.62 | 54.46 | % | 1.26 | % | 0.96 | % | 1.29 | % | $ | 400,408 | 73 | %(h) | |||||||||||||||||
2020 | $ | 16.14 | (5.17 | )% | 1.29 | % | 1.67 | % | 1.33 | % | $ | 327,156 | 124 | %(i) | |||||||||||||||||
2019 | $ | 17.10 | (7.58 | )% | 1.25 | % | 1.24 | % | 1.25 | % | $ | 491,978 | 68 | % | |||||||||||||||||
2018 | $ | 18.79 | 7.62 | % | 1.28 | % | 1.09 | % | 1.28 | % | $ | 596,185 | 59 | % | |||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 20.09 | (18.27 | )% | 1.24 | % | 1.57 | % | 11.21 | % | $ | 63 | 54 | % | |||||||||||||||||
2021 | $ | 24.58 | 54.22 | % | 1.72 | % | 0.36 | % | 1.98 | % | $ | 147 | 73 | %(h) | |||||||||||||||||
2020 | $ | 16.08 | (5.65 | )% | 1.75 | % | 1.13 | % | 1.76 | % | $ | 4,478 | 124 | %(i) | |||||||||||||||||
2019 | $ | 17.08 | (8.07 | )% | 1.75 | % | 0.73 | % | 1.79 | % | $ | 4,745 | 68 | % | |||||||||||||||||
2018 | $ | 18.76 | 7.09 | % | 1.72 | %(j) | 0.61 | % | 1.81 | % | $ | 5,186 | 59 | % | |||||||||||||||||
See notes to financial statements.
27
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Emerging Markets Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Class A. The Fund is classified as diversified under the 1940 Act.
Each class of shares of the Fund has substantially identical rights and privileges, except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, other than ETFs, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
In accordance with procedures adopted by the Board, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time the exchange on which they are traded closes and the time the Fund's NAV is calculated. The Fund uses a systematic valuation model, provided daily by an independent third party to fair value its international equity securities. The valuations are categorized as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 164,990 | $ | 494,942 | $ | 122 | $ | 660,054 | |||||||||||
Exchange-Traded Funds | 754 | — | — | 754 | |||||||||||||||
Collateral for Securities Loaned | 3,970 | — | — | 3,970 | |||||||||||||||
Total | $ | 169,714 | $ | 494,942 | $ | 122 | $ | 664,778 | |||||||||||
For the year ended May 31, 2022, the Fund had transfers into/out of Level 3 that were under 0.50% of net assets.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2022, the Fund had no open forward foreign exchange currency contracts.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 5,685 | $ | 2,013 | $ | 3,970 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing fees, and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 423,707 | $ | 370,301 | ||||
4. Affiliated Fund Ownership:
The Fund offers its shares for investment by other USAA Mutual Funds. The fund-of-funds do not invest in the underlying funds for the purpose of exercising management or control, and the affiliated fund-of-funds' annual and semi-annual reports may be viewed at www.vcm.com. As of May 31, 2022, certain fund-of-funds owned total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 0.4 | ||||||
USAA Cornerstone Equity Fund | 1.5 | ||||||
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 1.00% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the prior investment adviser to the Fund, announced that AMCO would be acquired by Victory Capital Holdings Inc. (the "Transaction"). A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and VCM. The Transaction closed on July 1, 2019, and effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and no performance adjustments were made for the period beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter is utilized in calculating future performance adjustments.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Emerging Markets Fund Index. The Lipper Emerging Markets Fund Index tracks the total return performance of the largest funds within the Lipper Emerging Markets Fund category.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points) | ||||||
| +/- 100 to 400 | +/- 4 | ||||||
| +/- 401 to 700 | +/- 5 | ||||||
| +/- 701 and greater | +/- 6 | ||||||
(a) Based on the difference between the average annual performance of the relevant share class of the Fund and its relevant Lipper index, rounded to the nearest basis point.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of the 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 pays a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper Emerging Markets Fund Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2021, to May 31, 2022, performance adjustments were $(45), $(26) and $(1) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were (0.01)%, (0.01)%, and (0.51)% for Fund Shares, Institutional Shares, and Class A, respectively. The performance adjustment rate included in the investment advisory fee may differ from the maximum over/under Annual Adjustment Rate due to differences in average net assets for the reporting period and rolling 36 month performance periods.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets.
VCM entered into an Investment Subadvisory Agreement with Lazard Asset Management LLC ("Lazard"), under which Lazard directs the investment and reinvestment of a portion of the Fund's assets (as allocated from time to time by VCM). This arrangement provides for monthly fees that are paid by VCM. VCM (not the Fund) pays the subadviser fees.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, 0.10% and 0.15%, which is based on the Fund's average daily net assets of the Fund Shares, of the Institutional Shares and of the Class A, respectively. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund Shares based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Transfer agent fees for Institutional Shares and Class A are paid monthly based on a fee accrued daily at an annualized rate of 0.10% and 0.10%, respectively, of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust.
Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activity primarily intended to result in the sale of Class A. Amounts incurred and paid to the Distributor for the year ended May 31, 2022, are reflected on the Statement of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the year ended May 31, 2022, the Distributor did not receive any commissions.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred by certain classes of the Fund in any fiscal year exceed the expense limits for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Performance adjustments, acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
the expense limits. As of May 31, 2022, the expense limits (excluding voluntary waivers) were 1.48%, 1.29%, and 1.75% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 316 | $ | 215 | $ | 111 | $ | 642 | ||||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
Equity Risk — The values of the equity securities in which the Fund invests may decline in response to developments affecting individual companies and/or general market, economic and political conditions and other factors. A company's earnings or dividends may not increase as expected due to poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters, military confrontations, war, terrorism, public health crises, or other events, conditions, and factors. Price changes may be temporary or may last for extended periods.
Foreign Securities Risk — Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market.
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
7. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the six months ended April 30, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
Borrower or | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 1,063 | 1 | 0.55 | % | $ | 1,063 | ||||||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
8. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
(e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Total Distributions Paid | ||||||||||||
| $ | 5,578 | $ | 5,578 | $ | 8,596 | $ | 8,596 | ||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Other Earnings (Loss) | Accumulated Earnings | Accumulated Capital and Other Earnings (Loss) | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
$ | 11,571 | $ | (514 | ) | $ | 11,057 | $ | (13,777 | ) | $ | 65,827 | $ | 63,107 | ||||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales and passive foreign investment company adjustments.
As of May 31, 2022, the Fund had net capital loss carryforwards as shown in the table below (amounts in thousands). It is unlikely that the Board will authorize a distribution of capital gains realized in the future until the capital loss carryforwards have been used.
| Short-Term Amount | Total | ||||||
| $ | 13,777 | $ | 13,777 | ||||
During the tax year ended May 31, 2022, the Fund utilized $29,524 thousand of capital loss carryforwards.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 598,951 | $ | 132,884 | $ | (67,057 | ) | $ | 65,827 | |||||||
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Emerging Markets Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Emerging Markets Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
38
USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
39
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
40
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
41
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
42
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21- 5/31/22* | Hypothetical Expenses Paid During Period 12/1/21- 5/31/22* | Annualized Expense Ratio During Period 12/1/21- 5/31/22 | ||||||||||||||||||||||
Fund | $ | 1,000.00 | $ | 938.10 | $ | 1,017.40 | $ | 7.30 | $ | 7.59 | 1.51 | % | |||||||||||||||
Institutional | 1,000.00 | 939.50 | 1,018.35 | 6.38 | 6.64 | 1.32 | % | ||||||||||||||||||||
Class A | 1,000.00 | 935.30 | 1,015.31 | 9.31 | 9.70 | 1.93 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
Qualified | Foreign | ||||||
83% | $ | 2,775 | |||||
The Fund intends to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on May 31, 2022, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.63 | $ | 0.08 | ||||
46
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Emerging Markets Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") and the Subadvisory Agreement between the Adviser and Lazard Asset Management LLC (the "Subadviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement and Subadvisory Agreement were approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement and Subadvisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and Subadvisory Agreement and the Adviser and the Subadviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's and the Subadviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement and Subadvisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement and the Subadvisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement and the Subadvisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
The Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Adviser and the Subadviser in providing services to the Fund.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser and the Subadviser. At the meeting at which the renewal of the Advisory Agreement and Subadvisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser and the Subadviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement and Subadvisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser and Subadviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management
47
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The Board considered the Adviser's process for monitoring the performance of the Subadviser and the Adviser's timeliness in responding to performance issues. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services and the effects of any performance adjustment1, as well as any fee waivers and reimbursements — was above the medians of its expense group and expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were above the medians of its expense group and its expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund. The Board also took into account that the subadvisory fees under the Subadvisory Agreement are paid by the Adviser. The Board also considered and discussed information about the Subadviser's fees, including the amount of management fees retained by the Adviser after payment of the subadvisory fees.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among
1 The Adviser previously agreed that no performance adjustment (positive or negative) would be made to the amount payable to the Adviser from July 1, 2019, through June 30, 2020.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe and its Lipper index for the one-, three-, five- and ten-year periods ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser pays the Fund's subadvisory fees and also noted that the Adviser waived a portion of its management fee and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board considered the fact that the Adviser also pays the Fund's subadvisory fees. The Board also considered the effect of the change in size, if any, of each of the Fund's classes on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
Subadvisory Agreement
In approving the Subadvisory Agreement with respect to the Fund, the Board considered various factors, among them: (i) the nature, extent, and quality of services provided to the Fund by the Subadviser, including the personnel providing services; (ii) the Subadviser's compensation and any other benefits derived from the subadvisory relationship; (iii) comparisons, to the extent applicable, of subadvisory fees and performance to comparable investment companies; and (iv) the terms of the Subadvisory Agreement. A summary of the Board's analysis of these factors is set forth below. After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Subadvisory Agreement. In approving the Subadvisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
49
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Nature, Extent, and Quality of Services Provided; Investment Personnel — The Trustees considered information provided to them regarding the services provided by the Subadviser, including information presented periodically throughout the previous year. The Board considered the Subadviser's level of knowledge and investment style. The Board reviewed the experience and credentials of the investment personnel who are responsible for managing the investment of portfolio securities with respect to the Fund and the Subadviser's level of staffing. The Trustees considered, based on the materials provided to them by the Subadviser, whether the method of compensating portfolio managers is reasonable and includes mechanisms to prevent a manager with underperformance from taking undue risks. The Trustees also noted the Subadviser's brokerage practices. The Board also considered the Subadviser's regulatory and compliance history. The Board also took into account the Subadviser's risk management processes. The Board noted that the Adviser's monitoring processes of the Subadviser include: (i) regular telephonic meetings to discuss, among other matters, investment strategies, and to review portfolio performance; (ii) quarterly portfolio compliance checklists and quarterly compliance certifications to the Board; and (iii) due diligence visits to the Subadviser.
Subadviser Compensation — The Board also took into consideration the financial condition of the Subadviser. In considering the cost of services to be provided by the Subadviser and the profitability to the Subadviser of its relationship with the Fund, the Trustees noted that the fees under the Subadvisory Agreement were paid by the Adviser. The Trustees also relied on the ability of the Adviser to negotiate the Subadvisory Agreement and the fees thereunder at arm's length. For the above reasons, the Board determined that the profitability of the Subadviser from its relationship with the Fund was not a material factor in its deliberations with respect to the consideration of the approval of the Subadvisory Agreement. For similar reasons, the Board concluded that the potential for economies of scale in the Subadviser's management of the Fund was not a material factor in considering the Subadvisory Agreement.
Subadvisory Fees and Fund Performance — The Board compared the subadvisory fees for the Fund with the fees that the Subadviser charges to comparable clients, as applicable. The Board considered that the Fund pays a management fee to the Adviser and that, in turn, the Adviser pays a subadvisory fee to the Subadviser. As noted above, the Board considered the Fund's performance during the one-, three-, five-, and ten-year periods ended September 30, 2021, as compared to the Fund's peer group and noted that the Board reviews at its regularly scheduled meetings information about the Fund's performance results. The Board also considered the performance of the Subadviser. The Board noted the Adviser's experience and resources in monitoring the performance, investment style, and risk-adjusted performance of the Subadviser. The Board was mindful of the Adviser's focus on the Subadviser's performance. The Board also noted the Subadviser's performance record for similar accounts, as applicable.
Conclusions — The Board reached the following conclusions regarding the Subadvisory Agreement: (i) the Subadviser is qualified to manage the Fund's assets in accordance with its investment objectives and policies; (ii) the Subadviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and relevant indices; and (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser and the Subadviser. Based on its conclusions, the Board determined that approval of the Subadvisory Agreement with respect to the Fund would be in the best interests of the Fund and its shareholders.
50
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
51
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
25558-0722
MAY 31, 2022
Annual Report
USAA Precious Metals and Minerals Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 10 | ||||||
Statement of Operations | 11 | ||||||
Statements of Changes in Net Assets | 12 | ||||||
Financial Highlights | 14 | ||||||
Notes to Financial Statements | 16 | ||||||
| Report of Independent Registered Public Accounting Firm | 26 | ||||||
Supplemental Information (Unaudited) | 27 | ||||||
Trustee and Officer Information | 27 | ||||||
Proxy Voting and Portfolio Holdings Information | 33 | ||||||
Expense Examples | 33 | ||||||
Additional Federal Income Tax Information | 34 | ||||||
Advisory Contract Renewal | 35 | ||||||
Liquidity Risk Management Program | 38 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Precious Metals and Minerals Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Precious Metals and Minerals Fund
Managers' Commentary (continued)
The end of the reporting period saw continued pressure on stocks and bonds. The Fed's hawkish pivot, which started in the fourth quarter of 2021, continued to put pressure on equity valuation multiples, especially for long-duration growth stocks. With inflation readings hitting four-decade highs, the Fed now faced an increasingly difficult task of implementing policy strong enough to tame inflation and provide a "soft landing" for the economy, while not being too aggressive and tilting the economy into recession. This risk contributed to the heightened stock market volatility, in addition to mounting COVID-related lockdowns in China, rising oil prices, and the ongoing conflict between Russia and the Ukraine.
The GOLDS Commodities Index posted a return of -3.65% during the one-year period, outperforming major equity and fixed income markets. The stocks of gold mining companies, as represented by the MSCI ACWI Gold Miners IMI Index, fared worse with a -20.26% return.
• How did the USAA Precious Metals and Minerals Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the reporting period ended May 31, 2022, the Fund Shares, Institutional Shares, and Class A had a total return of -18.93%, -18.84%, and -19.08%, respectively. This compares to a total return of -6.78% for the MSCI All-Country World Index, -20.26% for the MSCI ACWI Gold Miners IMI Index, and -18.73% for the Lipper Precious Metals Equity Funds Index.
• What strategies did you employ during the reporting period?
At the end of May 2022, the Fund held approximately 99% of its net assets in gold stocks. For the period, the Fund outperformed the MSCI ACWI Gold Miners IMI Index.
Within the MSCI ACWI Gold Miners IMI Index, two securities, Newmont Corp. and Barrick Gold Corp., accounted for approximately 30% of the index. Over the period, both Newmont and Barrick significantly outperformed other mining companies. The Fund's underweight to these securities detracted from relative performance.
Large positions in Russian securities Polymetal International and Polyus detracted from the Fund's absolute performance, although this was offset on a relative basis by similar weights in the index.
As always, we believe the primary purpose of maintaining exposure to gold should be to help diversify investor portfolios.
Thank you for allowing us to assist you with your investment needs.
Holdings are subject to change. There is no guarantee that securities mentioned remain in or out of the Fund
5
USAA Precious Metals and Minerals Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
| Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||||||
INCEPTION DATE | 8/15/94 | 8/1/08 | 8/1/10 | ||||||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | MSCI All-Country World Index1 | MSCI ACWI Gold Miners IMI Index2 | Lipper Precious Metals Equity Funds Index3 | |||||||||||||||||||||||||
One Year | –18.93 | % | –18.84 | % | –19.08 | % | –23.73 | % | –6.78 | % | –20.26 | % | –18.73 | % | |||||||||||||||||
Five Year | 7.23 | % | 7.50 | % | 7.10 | % | 5.84 | % | 9.00 | % | 8.43 | % | 6.68 | % | |||||||||||||||||
Ten Year | –2.63 | % | –2.37 | % | –2.74 | % | –3.32 | % | 10.25 | % | –2.73 | % | –1.45 | % | |||||||||||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The maximum offering price figures reflect a maximum sales charge of 5.75% for Class A. Net Asset Value does not reflect sales charges.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Precious Metals and Minerals Fund — Growth of $10,000
1The unmanaged MSCI All-Country World Index is a free float-adjusted , market-capitalization-weighted index designed to measure the performance of large- and mid-cap stocks across developed and emerging markets. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The MSCI ACWI Select Gold Miners IMI Index aims to focus on companies in the gold mining industry that are highly sensitive to underlying prices of gold. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
3The unmanaged Lipper Precious Metals Equity Funds Index tracks the total return performance of the 10 largest funds within the Lipper Precious Metals Equity Funds category. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks long-term capital appreciation and to protect the purchasing power of shareholders' capital against inflation.
Top 10 Equity Holdings*:
May 31, 2022
(% of Net Assets)
Newmont Corp. | 16.1 | % | |||||
Barrick Gold Corp. | 10.1 | % | |||||
Aginco Eagle Mines Ltd. | 8.3 | % | |||||
Franco-Nevada Corp. | 6.6 | % | |||||
Wheaton Precious Metals Corp. | 4.3 | % | |||||
B2Gold Corp. | 4.1 | % | |||||
Newcrest Mining Ltd. | 3.9 | % | |||||
SSR Mining, Inc. | 3.1 | % | |||||
Yamana Gold, Inc. | 2.8 | % | |||||
Gold Fields Ltd., ADR | 2.8 | % | |||||
Portfolio Composition*:
May 31, 2022
(% of Net Assets)
* Does not include short-term investments purchased with cash collateral from securities loaned.
** Percentage is less than 0.05%.
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (99.6%) | |||||||||||
Metals & Mining (99.6%): | |||||||||||
Aginco Eagle Mines Ltd. | 915,857 | $ | 48,548 | ||||||||
Alamos Gold, Inc. | 1,064,184 | 7,943 | |||||||||
Aneka Tambang Tbk | 27,567,500 | 4,746 | |||||||||
AngloGold Ashanti Ltd. | 786,708 | 13,792 | |||||||||
B2Gold Corp. (a) | 5,999,753 | 23,815 | |||||||||
Barrick Gold Corp. | 2,880,649 | 59,025 | |||||||||
Centamin PLC | 3,894,110 | 3,941 | |||||||||
Centerra Gold, Inc. (a) | 1,499,019 | 11,699 | |||||||||
Cia de Minas Buenaventura SAA, ADR | 68,157 | 582 | |||||||||
Coeur Mining, Inc. (b) | 370,107 | 1,440 | |||||||||
De Grey Mining, Ltd. (b) | 1,771,859 | 1,437 | |||||||||
Dundee Precious Metals, Inc. | 1,781,264 | 10,549 | |||||||||
Eldorado Gold Corp. (b) | 536,879 | 4,311 | |||||||||
Endeavour Mining PLC (a) | 570,692 | 13,136 | |||||||||
Equinox Gold Corp. (b) | 68,782 | 405 | |||||||||
Evolution Mining Ltd. | 4,391,696 | 12,100 | |||||||||
Franco-Nevada Corp. | 271,530 | 38,416 | |||||||||
Gold Fields Ltd., ADR | 1,724,650 | 16,108 | |||||||||
Gold Road Resources Ltd. | 1,493,113 | 1,457 | |||||||||
Great Basin Gold Ltd. (b) (c) (d) | 8,566,400 | — | (e) | ||||||||
Great Basin Gold Ltd. (b) (c) (d) | 6,500,000 | — | (e) | ||||||||
Harmony Gold Mining Co. Ltd. | 1,463,504 | 5,068 | |||||||||
IAMGOLD Corp. (b) | 411,532 | 911 | |||||||||
IAMGOLD Corp. (a) (b) | 1,265,194 | 2,783 | |||||||||
K92 Mining, Inc. (b) | 483,061 | 3,346 | |||||||||
Karora Resources, Inc. (b) | 419,439 | 1,466 | |||||||||
Kinross Gold Corp. | 2,256,438 | 10,154 | |||||||||
Koza Altin Isletmeleri A/S (a) (b) | 298,319 | 3,591 | |||||||||
Lundin Gold, Inc. (b) | 78,200 | 611 | |||||||||
Nautilus Minerals, Inc. (b) (c) (d) | 5,757,622 | — | (e) | ||||||||
New Gold, Inc. (a) (b) | 1,183,000 | 1,534 | |||||||||
Newcrest Mining Ltd. | 1,259,625 | 22,631 | |||||||||
Newcrest Mining Ltd. | 187,467 | 3,318 | |||||||||
Newmont Corp. | 1,385,967 | 94,038 | |||||||||
Northern Star Mining Corp. (b) (c) (d) | 375,000 | — | |||||||||
Northern Star Resources Ltd. | 1,570,255 | 10,084 | |||||||||
OceanaGold Corp. (b) | 2,084,516 | 4,846 | |||||||||
Osisko Gold Royalties Ltd. (a) | 303,400 | 3,423 | |||||||||
Perseus Mining Ltd. | 4,308,434 | 5,791 | |||||||||
Polymetal International PLC (d) | 757,840 | 2,257 | |||||||||
Polyus PJSC (c) (d) | 62,088 | 161 | |||||||||
Ramelius Resources Ltd. | 4,425,457 | 4,175 | |||||||||
Regis Resources Ltd. | 2,733,555 | 3,962 | |||||||||
Royal Gold, Inc. | 141,793 | 16,034 | |||||||||
Sandstorm Gold Ltd. (a) | 658,794 | 4,355 | |||||||||
Shandong Gold Mining Co. Ltd. Class H (a) (f) | 1,330,950 | 2,368 | |||||||||
Silver Lake Resources Ltd. (b) | 4,268,850 | 4,839 | |||||||||
SSR Mining, Inc. | 914,627 | 17,771 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Torex Gold Resources, Inc. (b) | 946,862 | $ | 9,299 | ||||||||
Victoria Gold Corp. (b) | 112,390 | 1,169 | |||||||||
Wesdome Gold Mines Ltd. (b) | 722,933 | 6,648 | |||||||||
West African Resources, Ltd. (b) | 1,930,796 | 1,801 | |||||||||
Wheaton Precious Metals Corp. | 604,258 | 24,960 | |||||||||
Yamana Gold, Inc. | 745,819 | 4,010 | |||||||||
Yamana Gold, Inc. | 3,023,400 | 16,205 | |||||||||
Zhaojin Mining Industry Co. Ltd. Class H (a) | 2,609,000 | 2,271 | |||||||||
Zijin Mining Group Co. Ltd. Class H | 8,206,000 | 11,148 | |||||||||
580,478 | |||||||||||
Total Common Stocks (Cost $449,732) | 580,478 | ||||||||||
Collateral for Securities Loaned (1.4%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 0.67% (g) | 7,896,616 | 7,896 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (g) | 70,671 | 71 | |||||||||
Total Collateral for Securities Loaned (Cost $7,967) | 7,967 | ||||||||||
Total Investments (Cost $457,699) — 101.0% | 588,445 | ||||||||||
Liabilities in excess of other assets — (1.0)% | (6,066 | ) | |||||||||
NET ASSETS — 100.00% | $ | 582,379 | |||||||||
At May 31, 2022, the Fund's investments in foreign securities were 80.4% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Non-income producing security.
(c) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.05% of net assets as of May 31, 2022. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(d) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. At May 31, 2022, illiquid securities were 0.4% of the Fund's net assets.
(e) Rounds to less than $1 thousand.
(f) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $2,368 thousands and amounted to 0.4% of net assets.
(g) Rate disclosed is the daily yield on May 31, 2022.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
9
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Precious Metals and Minerals Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $457,699) | $ | 588,445 | (a) | ||||
Cash | 2,086 | ||||||
Receivables: | |||||||
Interest and dividends | 1,422 | ||||||
Capital shares issued | 199 | ||||||
Investments sold | 15 | ||||||
From Adviser | 3 | ||||||
Prepaid expenses | 33 | ||||||
Total Assets | 592,203 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 7,967 | ||||||
Capital shares redeemed | 354 | ||||||
Accrued foreign capital gains taxes | 877 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 381 | ||||||
Administration fees | 75 | ||||||
Custodian fees | 16 | ||||||
Transfer agent fees | 101 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | — | (b) | |||||
| 12b-1 fees | 3 | ||||||
Other accrued expenses | 50 | ||||||
Total Liabilities | 9,824 | ||||||
Net Assets: | |||||||
Capital | 1,217,656 | ||||||
Total accumulated earnings/(loss) | (635,277 | ) | |||||
Net Assets | $ | 582,379 | |||||
Net Assets | |||||||
Fund Shares | $ | 533,574 | |||||
Institutional Shares | 20,602 | ||||||
Class A | 28,203 | ||||||
Total | $ | 582,379 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 29,406 | ||||||
Institutional Shares | 1,112 | ||||||
Class A | 1,575 | ||||||
Total | 32,093 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 18.14 | |||||
Institutional Shares | $ | 18.53 | |||||
Class A | $ | 17.91 | |||||
Maximum Sales Charge — Class A | 5.75 | % | |||||
| Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A | $ | 19.00 | |||||
(a) Includes $7,461 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
10
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Precious Metals and Minerals Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 14,526 | |||||
Securities lending (net of fees) | 127 | ||||||
Foreign tax withholding | (1,531 | ) | |||||
Total Income | 13,122 | ||||||
Expenses: | |||||||
Investment advisory fees | 4,545 | ||||||
Administration fees — Fund Shares | 871 | ||||||
Administration fees — Institutional Shares | 22 | ||||||
Administration fees — Class A | 38 | ||||||
Sub-Administration fees | 23 | ||||||
| 12b-1 fees — Class A | 63 | ||||||
Custodian fees | 86 | ||||||
Transfer agent fees — Fund Shares | 1,087 | ||||||
Transfer agent fees — Institutional Shares | 22 | ||||||
Transfer agent fees — Class A | 25 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 4 | ||||||
Legal and audit fees | 72 | ||||||
State registration and filing fees | 50 | ||||||
Other expenses | 113 | ||||||
Total Expenses | 7,069 | ||||||
Expenses waived/reimbursed by Adviser | (22 | ) | |||||
Net Expenses | 7,047 | ||||||
Net Investment Income (Loss) | 6,075 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | 6,161 | ||||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (155,244 | ) | |||||
Net realized/unrealized gains (losses) on investments | (149,083 | ) | |||||
Change in net assets resulting from operations | $ | (143,008 | ) | ||||
See notes to financial statements.
11
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Precious Metals and Minerals Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 6,075 | $ | 3,056 | |||||||
Net realized gains (losses) | 6,161 | 54,050 | |||||||||
Net change in unrealized appreciation/depreciation | (155,244 | ) | 55,454 | ||||||||
Change in net assets resulting from operations | (143,008 | ) | 112,560 | ||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (4,645 | ) | (302 | ) | |||||||
Institutional Shares | (198 | ) | (40 | ) | |||||||
Class A | (166 | ) | — | ||||||||
Change in net assets resulting from distributions to shareholders | (5,009 | ) | (342 | ) | |||||||
Change in net assets resulting from capital transactions | (20,193 | ) | (72,907 | ) | |||||||
Change in net assets | (168,210 | ) | 39,311 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 750,589 | 711,278 | |||||||||
End of period | $ | 582,379 | $ | 750,589 | |||||||
(continues on next page)
See notes to financial statements.
12
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
| USAA Precious Metals and Minerals Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 71,209 | $ | 104,788 | |||||||
Distributions reinvested | 4,526 | 294 | |||||||||
Cost of shares redeemed | (103,473 | ) | (172,453 | ) | |||||||
Total Fund Shares | $ | (27,738 | ) | $ | (67,371 | ) | |||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 1,422 | $ | 4,482 | |||||||
Distributions reinvested | 198 | 37 | |||||||||
Cost of shares redeemed | (2,089 | ) | (3,514 | ) | |||||||
Total Institutional Shares | $ | (469 | ) | $ | 1,005 | ||||||
Class A | |||||||||||
Proceeds from shares issued | $ | 18,346 | $ | 37,689 | |||||||
Distributions reinvested | 166 | — | |||||||||
Cost of shares redeemed | (10,498 | ) | (44,230 | ) | |||||||
Total Class A | $ | 8,014 | $ | (6,541 | ) | ||||||
Change in net assets resulting from capital transactions | $ | (20,193 | ) | $ | (72,907 | ) | |||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 3,591 | 4,879 | |||||||||
Reinvested | 250 | 14 | |||||||||
Redeemed | (5,358 | ) | (8,129 | ) | |||||||
Total Fund Shares | (1,517 | ) | (3,236 | ) | |||||||
Institutional Shares | |||||||||||
Issued | 74 | 194 | |||||||||
Reinvested | 11 | 2 | |||||||||
Redeemed | (115 | ) | (160 | ) | |||||||
Total Institutional Shares | (30 | ) | 36 | ||||||||
Class A | |||||||||||
Issued | 922 | 1,864 | |||||||||
Reinvested | 9 | — | |||||||||
Redeemed | (535 | ) | (2,183 | ) | |||||||
Total Class A | 396 | (319 | ) | ||||||||
Change in Shares | (1,151 | ) | (3,519 | ) | |||||||
See notes to financial statements.
13
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 22.57 | 0.19 | (f) | (4.46 | ) | (4.27 | ) | (0.16 | ) | (0.16 | ) | |||||||||||||||
2021 | $ | 19.34 | 0.09 | (f) | 3.15 | 3.24 | (0.01 | ) | (0.01 | ) | |||||||||||||||||
2020 | $ | 12.16 | (0.04 | )(f) | 7.22 | 7.18 | — | — | |||||||||||||||||||
2019 | $ | 12.87 | (0.03 | )(f) | (0.68 | ) | (0.71 | ) | — | — | |||||||||||||||||
2018 | $ | 12.93 | (0.05 | )(f) | (0.01 | ) | (0.06 | ) | — | — | |||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 23.06 | 0.22 | (f) | (4.56 | ) | (4.34 | ) | (0.19 | ) | (0.19 | ) | |||||||||||||||
2021 | $ | 19.76 | 0.12 | (f) | 3.22 | 3.34 | (0.04 | ) | (0.04 | ) | |||||||||||||||||
2020 | $ | 12.40 | (0.01 | )(f) | 7.37 | 7.36 | — | — | |||||||||||||||||||
2019 | $ | 13.06 | 0.01 | (f) | (0.67 | ) | (0.66 | ) | — | — | |||||||||||||||||
2018 | $ | 13.07 | (0.01 | )(f) | — | (h) | (0.01 | ) | — | — | |||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 22.29 | 0.14 | (f) | (4.39 | ) | (4.25 | ) | (0.13 | ) | (0.13 | ) | |||||||||||||||
2021 | $ | 19.13 | 0.04 | (f) | 3.12 | 3.16 | — | — | |||||||||||||||||||
2020 | $ | 12.04 | (0.05 | )(f) | 7.14 | 7.09 | — | — | |||||||||||||||||||
2019 | $ | 12.74 | (0.03 | )(f) | (0.67 | ) | (0.70 | ) | — | — | |||||||||||||||||
2018 | $ | 12.82 | 0.16 | (0.24 | ) | (0.08 | ) | — | — | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019, and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(c) Does not include acquired fund fees and expenses, if any.
(d) From the period beginning July 1, 2019, the amount of any waivers or reimbursements and the amount of any recoupment are calculated without regard to the impact of any performance adjustment to the Fund's management fee.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(f) Per share net investment income (loss) has been calculated using the average daily shares method.
See notes to financial statements.
14
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(a) | Net Expenses(b)(c)(d) | Net Investment Income (Loss) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover(e) | ||||||||||||||||||||||||||||
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | — | $ | 18.14 | (18.93 | )% | 1.12 | % | 0.97 | % | 1.12 | % | $ | 533,574 | 8 | % | ||||||||||||||||||||
2021 | — | $ | 22.57 | 16.69 | % | 1.12 | % | 0.41 | % | 1.12 | % | $ | 697,969 | 7 | % | ||||||||||||||||||||
2020 | — | $ | 19.34 | 59.13 | % | 1.19 | % | (0.25 | )% | 1.19 | % | $ | 660,770 | 47 | %(g) | ||||||||||||||||||||
2019 | — | $ | 12.16 | (5.52 | )% | 1.31 | % | (0.22 | )% | 1.31 | % | $ | 468,208 | 7 | % | ||||||||||||||||||||
2018 | — | $ | 12.87 | (0.46 | )% | 1.23 | % | (0.36 | )% | 1.23 | % | $ | 540,952 | 13 | % | ||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | — | $ | 18.53 | (18.84 | )% | 0.98 | % | 1.13 | % | 1.05 | % | $ | 20,602 | 8 | % | ||||||||||||||||||||
2021 | — | $ | 23.06 | 16.90 | % | 0.99 | % | 0.55 | % | 1.05 | % | $ | 26,338 | 7 | % | ||||||||||||||||||||
2020 | — | $ | 19.76 | 59.35 | % | 1.00 | % | (0.05 | )% | 1.06 | % | $ | 21,855 | 47 | %(g) | ||||||||||||||||||||
2019 | — | $ | 12.40 | (5.05 | )% | 1.00 | %(h) | 0.12 | % | 1.19 | % | $ | 21,327 | 7 | % | ||||||||||||||||||||
2018 | — | $ | 13.06 | (0.08 | )% | 0.89 | % | (0.07 | )% | 0.89 | % | $ | 3,632 | 13 | % | ||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | — | $ | 17.91 | (19.08 | )% | 1.31 | % | 0.74 | % | 1.34 | % | $ | 28,203 | 8 | % | ||||||||||||||||||||
2021 | — | $ | 22.29 | 16.52 | % | 1.31 | % | 0.21 | % | 1.34 | % | $ | 26,282 | 7 | % | ||||||||||||||||||||
2020 | — | $ | 19.13 | 58.89 | % | 1.27 | % | (0.32 | )% | 1.27 | % | $ | 28,653 | 47 | %(g) | ||||||||||||||||||||
2019 | — | $ | 12.04 | (5.49 | )% | 1.38 | % | (0.27 | )% | 1.38 | % | $ | 17,744 | 7 | % | ||||||||||||||||||||
2018 | — | (i) | $ | 12.74 | (0.62 | )% | 1.30 | % | (0.43 | )% | 1.30 | % | $ | 16,881 | 13 | % | |||||||||||||||||||
(g) Reflects increased trading activity due to current year transition or asset allocation shift.
(h) Effective June 6, 2018, USAA Asset Management Company ("AMCO") (previous Adviser) had voluntarily agreed to limit the annual expenses of the Institutional Shares to 1.00% of the Institutional Shares' average daily net assets.
(i) Amount is less than $0.005 per share.
See notes to financial statements.
15
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Precious Metals and Minerals Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Class A. The Fund is classified as non-diversified under the 1940 Act.
Each class of shares of the Fund has substantially identical rights and privileges, except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, other than ETF's, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
In accordance with procedures adopted by the Board, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time the exchange on which they are traded closes and the time the Fund's NAV is calculated. The Fund uses a systematic valuation model, provided daily by an independent third party to fair value its international equity securities. The valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 580,317 | $ | — | $ | 161 | $ | 580,478 | |||||||||||
Collateral for Securities Loaned | 7,967 | — | — | 7,967 | |||||||||||||||
Total | $ | 588,284 | $ | — | $ | 161 | $ | 588,445 | |||||||||||
For the year ended May 31, 2022, there were no significant changes into/out of Level 3.
Investment Companies:
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2022, the Fund had no open forward foreign exchange currency contracts.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis.
Litigation income received during the year is recorded as realized gains by the Fund when such information becomes known. Gains of this type are infrequent to the Fund are not expected to reoccur on a consistent basis. Class action litigation income received by the Fund for the year ended May 31, 2022, amounted to $753 (amount in thousands) and is reflected on the Statement of Operations within Net realized gains (losses) from investment securities and foreign currency transactions.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 7,461 | $ | — | $ | 7,967 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing fees, and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 47,089 | $ | 59,462 | ||||
4. Affiliated Fund Ownership:
The Fund offers its shares for investment by other USAA Mutual Funds. The fund-of-funds do not invest in the underlying funds for the purpose of exercising management or control, and the affiliated fund-of-funds' annual and semi-annual reports may be viewed at www.vcm.com. As of May 31, 2022, certain fund-of-funds owned total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 0.2 | ||||||
USAA Cornerstone Equity Fund | 0.1 | ||||||
USAA Target Retirement Income Fund | 0.4 | ||||||
USAA Target Retirement 2030 Fund | 0.8 | ||||||
USAA Target Retirement 2040 Fund | 0.9 | ||||||
USAA Target Retirement 2050 Fund | 0.5 | ||||||
USAA Target Retirement 2060 Fund | 0.1 | ||||||
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the prior investment adviser to the Fund, announced that AMCO would be acquired by Victory Capital Holdings Inc. (the "Transaction"). A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and VCM. The Transaction closed on July 1, 2019, and effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and no performance adjustments were made for the period beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter is utilized in calculating future performance adjustments.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Precious Metals Equity Funds Index. The Lipper Precious Metals Equity Funds Index tracks the total return performance of the largest funds within the Lipper Precious Metals Equity Funds category.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points) | ||||||
| +/- 100 to 400 | +/- 4 | ||||||
| +/- 401 to 700 | +/- 5 | ||||||
| +/- 701 and greater | +/- 6 | ||||||
(a) Based on the difference between the average annual performance of the relevant share class of the Fund and its relevant Lipper index, rounded to the nearest basis point.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of the 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 pays a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper Precious Metals Equity Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2021, to May 31, 2022, performance adjustments were $(146), $(5), and $(8) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were (0.03)%, (0.02)%, and (0.03)% for Fund Shares, Institutional Shares, and Class A, respectively. The performance adjustment rate included in the investment advisory fee may differ from the maximum over/under Annual Adjustment Rate due to differences in average net assets for the reporting period and rolling 36 month performance periods.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, 0.10%, and 0.15%, which is based on the Fund's average daily net assets of the Fund Shares, of the Institutional Shares and of the Class A, respectively. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund Shares based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Transfer agent fees for Institutional Shares and Class A are paid monthly based on a fee accrued daily at an annualized rate of 0.10% and 0.10%, respectively, of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust.
Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activity primarily intended to result in the sale of Class A. Amounts incurred and paid to the Distributor for the year ended May 31, 2022, are reflected on the Statement of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the year ended May 31, 2022, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred by certain classes of the Fund in any fiscal year exceed the expense limits for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Performance adjustments, acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limits (excluding voluntary waivers) were 1.27%, 1.00%, and 1.34% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement;
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 12 | $ | 23 | $ | 22 | $ | 57 | ||||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
Equity Risk — The values of the equity securities in which the Fund invests may decline in response to developments affecting individual companies and/or general market, economic and political conditions and other factors. A company's earnings or dividends may not increase as expected due to poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters, military confrontations, war, terrorism, public health crises, or other events, conditions, and factors. Price changes may be temporary or may last for extended periods.
Foreign Securities Risk — Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market.
7. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the six months ended April 30, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
8. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
| Ordinary Income | Total Distributions Paid | Ordinary Income | Total Distributions Paid | ||||||||||||
| $ | 5,009 | $ | 5,009 | $ | 342 | $ | 342 | ||||||||
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Other Earnings (Loss) | Accumulated Earnings | Accumulated Capital and Other Earnings (Loss) | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 4,801 | $ | (878 | ) | $ | 3,923 | $ | (757,613 | ) | $ | 118,413 | $ | (635,277 | ) | |||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, and passive foreign investment company adjustments.
As of May 31, 2022, the Fund had net capital loss carryforwards as shown in the table below (amounts in thousands). It is unlikely that the Board will authorize a distribution of capital gains realized in the future until the capital loss carryforwards have been used.
| Short-Term Amount | Long-Term Amount | Total | |||||||||
| $ | 10,375 | $ | 747,238 | $ | 757,613 | ||||||
During the tax year ended May 31, 2022, the Fund utilized $2,968 thousand of capital loss carryforwards.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 470,033 | $ | 187,406 | $ | (68,993 | ) | $ | 118,413 | |||||||
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Precious Metals and Minerals Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Precious Metals and Minerals Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21- 5/31/22* | Hypothetical Expenses Paid During Period 12/1/21- 5/31/22* | Annualized Expense Ratio During Period 12/1/21- 5/31/22 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 988.00 | $ | 1,019.30 | $ | 5.60 | $ | 5.69 | 1.13 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 988.70 | 1,020.00 | 4.91 | 4.99 | 0.99 | % | ||||||||||||||||||||
Class A | 1,000.00 | 986.80 | 1,018.35 | 6.54 | 6.64 | 1.32 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Foreign Taxes Paid | |||||||||
| 56 | % | 100 | % | $ | 1,417 | ||||||
The Fund intends to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on May 31, 2022, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.34 | $ | 0.04 | ||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Precious Metals & Minerals Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services and the effects of any performance adjustment1, as well as any fee waivers and reimbursements — was above the median of its expense group and below the median of its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were below the medians of its expense group and its expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe and its Lipper index for the one-, three-, five- and ten-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance for the three-year period ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to
1 The Adviser previously agreed that no performance adjustment (positive or negative) would be made to the amount payable to the Adviser from July 1, 2019, through June 30, 2020.
36
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser waived a portion of its management fee and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the change in size, if any, of each of the Fund's classes on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices and the Adviser is appropriately monitoring the Fund's performance; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
37
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
38
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23407-0722
MAY 31, 2022
Annual Report
USAA International Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 29 | ||||||
Statement of Operations | 31 | ||||||
Statements of Changes in Net Assets | 32 | ||||||
Financial Highlights | 34 | ||||||
Notes to Financial Statements | 36 | ||||||
| Report of Independent Registered Public Accounting Firm | 47 | ||||||
Supplemental Information (Unaudited) | 48 | ||||||
Trustee and Officer Information | 48 | ||||||
Proxy Voting and Portfolio Holdings Information | 54 | ||||||
Expense Examples | 54 | ||||||
Additional Federal Income Tax Information | 55 | ||||||
Advisory Contract Renewal | 56 | ||||||
Liquidity Risk Management Program | 60 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
2
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA International Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA International Fund
Managers' Commentary (continued)
The end of the reporting period saw continued pressure on stocks and bonds. The Fed's hawkish pivot, which started in the fourth quarter of 2021, continued to put pressure on equity valuation multiples, especially for long-duration growth stocks. With inflation readings hitting four-decade highs, the Fed now faced an increasingly difficult task of implementing policy strong enough to tame inflation and provide a "soft landing" for the economy, while not being too aggressive and tilting the economy into recession. This risk contributed to the heightened stock market volatility, in addition to mounting COVID-related lockdowns in China, rising oil prices, and the ongoing conflict between Russia and the Ukraine.
• How did the USAA International Fund (the "Fund") perform during the reporting period?
The Fund has four share classes: Fund Shares, Institutional Shares, Class A, and R6 Shares. For the reporting period ended May 31, 2022, the Fund Shares, Institutional Shares, Class A, and R6 Shares had a total return of -10.81%, -10.73%, -10.88%, and -9.78%, respectively. This compares to returns of -12.17% for the Lipper International Funds Index and -10.38% for the MSCI EAFE Index.
Victory Capital Management Inc. ("VCM") is the Fund's investment adviser. As the investment adviser, VCM employs dedicated resources to support the research, selection, and monitoring of the Fund's subadviser. Wellington Management Company is an external subadviser to the Fund, while RS Investments Global, Trivalent Investments, and THB Asset Management are VCM investment franchises that each manage portions of the Fund. Primary responsibility for the day-to-day discretionary management of the Fund lies with the subadviser and the investment franchises.
• What strategies did you employ during the reporting period?
During the one-year period ending on May 31, 2022, the Fund underperformed the benchmark MSCI EAFE Index primarily due to stock selection across various countries and sectors. On a country basis, stock selection in the United Kingdom was a detractor while selection in Japan was a contributor. A small overweight to China relative to the benchmark also hindered results.
Reviewing performance from a sector standpoint, stock selection was a positive contributor in information technology and industrials. The health care sector had a negative stock selection effect. An overweight to the energy sector, the best performing sector, benefited results during the reporting period.
Thank you for allowing us to assist you with your investment needs.
5
USAA International Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | Institutional | Class A | Class R6 | ||||||||||||||||||||||||||||
INCEPTION DATE | 2/1/91 | 8/1/08 | 8/1/10 | 12/1/16 | |||||||||||||||||||||||||||
Net Asset | Net Asset | Net Asset | Maximum | Net Asset | MSCI EAFE | Lipper | |||||||||||||||||||||||||
One Year | –10.81 | % | –10.73 | % | –10.88 | % |
| –16.00 | % | –9.78 | % | –10.38 | % | –12.17 | % | ||||||||||||||||
Five Year | 3.86 | % | 3.94 | % | 3.61 | % |
| 2.40 | % | NA | 4.17 | % | 4.78 | % | |||||||||||||||||
Ten Year | 7.01 | % | 7.13 | % | 6.73 | % |
| 6.11 | % | NA | 7.15 | % | 7.41 | % | |||||||||||||||||
Since Inception | NA | NA | NA |
| NA | 4.18 | % | NA | NA | ||||||||||||||||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The maximum offering price figures reflect a maximum sales charge of 5.75% for Class A. Net Asset Value does not reflect sales charges.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA International Fund — Growth of $10,000
1The unmanaged MSCI EAFE Index reflects the movements of stock markets in Europe, Australasia, and the Far East by representing a broad selection of domestically listed companies within each market. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The unmanaged Lipper International Funds Index tracks the total return performance of funds within the Lipper International Funds category. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA International Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation.
Top 10 Sectors:
May 31, 2022
(% of Net Assets)
Financials | 17.7 | % | |||||
Industrials | 15.0 | % | |||||
Health Care | 11.8 | % | |||||
Consumer Discretionary | 10.8 | % | |||||
Information Technology | 9.8 | % | |||||
Consumer Staples | 7.5 | % | |||||
Energy | 7.1 | % | |||||
Materials | 7.0 | % | |||||
Communication Services | 5.1 | % | |||||
Utilities | 3.0 | % | |||||
Country Allocation:
May 31, 2022
(% of Net Assets)
* Includes countries with less than 3.0% of portfolio and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (97.9%) | |||||||||||
Argentina (0.0%): (a) | |||||||||||
Energy (0.0%): | |||||||||||
YPF SA, ADR (b) | 96,381 | $ | 434 | ||||||||
Australia (5.6%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
Aristocrat Leisure Ltd. | 597,067 | 14,422 | |||||||||
Lovisa Holdings Ltd. | 226,325 | 2,434 | |||||||||
PWR Holdings Ltd. | 632,898 | 3,522 | |||||||||
20,378 | |||||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Select Harvests Ltd. | 302,733 | 1,278 | |||||||||
Energy (0.3%): | |||||||||||
Santos Ltd. | 384,579 | 2,238 | |||||||||
Woodside Energy Group Ltd. | 260,567 | 5,496 | |||||||||
7,734 | |||||||||||
Financials (0.9%): | |||||||||||
Macquarie Group Ltd. | 138,056 | 18,338 | |||||||||
National Australia Bank Ltd. | 199,841 | 4,479 | |||||||||
22,817 | |||||||||||
Health Care (1.1%): | |||||||||||
CSL Ltd. | 120,302 | 23,399 | |||||||||
Nanosonics Ltd. (b) | 435,857 | 1,190 | |||||||||
Sonic Healthcare Ltd. | 97,607 | 2,561 | |||||||||
27,150 | |||||||||||
Industrials (0.3%): | |||||||||||
Austal Ltd. | 1,436,152 | 2,036 | |||||||||
IPH Ltd. | 420,261 | 2,366 | |||||||||
Johns Lyng Group Ltd. | 867,380 | 3,709 | |||||||||
8,111 | |||||||||||
Information Technology (0.0%): (a) | |||||||||||
Bravura Solutions Ltd. | 722,992 | 822 | |||||||||
Materials (1.4%): | |||||||||||
BHP Group Ltd. | 860,723 | 27,018 | |||||||||
Imdex Ltd. | 1,419,819 | 2,525 | |||||||||
Ramelius Resources Ltd. | 3,048,308 | 2,856 | |||||||||
Rio Tinto Ltd. | 34,866 | 2,852 | |||||||||
35,251 | |||||||||||
Real Estate (0.7%): | |||||||||||
Charter Hall Group | 191,652 | 1,822 | |||||||||
Scentre Group | 6,845,355 | 14,072 | |||||||||
Stockland | 712,922 | 2,043 | |||||||||
17,937 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (0.1%): | |||||||||||
Origin Energy Ltd. | 592,129 | $ | 2,900 | ||||||||
144,378 | |||||||||||
Austria (0.2%): | |||||||||||
Financials (0.1%): | |||||||||||
Erste Group Bank AG | 83,890 | 2,619 | |||||||||
Industrials (0.1%): | |||||||||||
ANDRITZ AG | 45,075 | 2,088 | |||||||||
4,707 | |||||||||||
Belgium (0.5%): | |||||||||||
Financials (0.1%): | |||||||||||
Ageas SA | 70,880 | 3,567 | |||||||||
Information Technology (0.4%): | |||||||||||
Melexis NV | 111,060 | 9,634 | |||||||||
13,201 | |||||||||||
Brazil (0.8%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telefonica Brasil SA | 265,513 | 2,852 | |||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Atacadao SA | 188,440 | 767 | |||||||||
Energy (0.2%): | |||||||||||
Petro Rio SA (b) | 665,400 | 3,919 | |||||||||
Ultrapar Participacoes SA | 520,809 | 1,575 | |||||||||
5,494 | |||||||||||
Financials (0.1%): | |||||||||||
Banco do Brasil SA | 368,600 | 2,841 | |||||||||
Materials (0.1%): | |||||||||||
Gerdau SA Preference Shares | 432,700 | 2,656 | |||||||||
Utilities (0.3%): | |||||||||||
Cia de Saneamento Basico do Estado de Sao Paulo | 421,209 | 4,058 | |||||||||
Cia Energetica de Minas Gerais Preference Shares | 951,990 | 2,334 | |||||||||
6,392 | |||||||||||
21,002 | |||||||||||
Canada (2.3%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
BRP, Inc. | 27,542 | 2,141 | |||||||||
Energy (0.6%): | |||||||||||
ARC Resources Ltd. | 169,935 | 2,560 | |||||||||
Cameco Corp. | 85,078 | 2,085 | |||||||||
Headwater Exploration, Inc. (b) | 319,008 | 1,846 | |||||||||
Parex Resources, Inc. | 122,330 | 2,709 | |||||||||
Pason Systems, Inc. | 174,758 | 2,212 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Suncor Energy, Inc. | 68,845 | $ | 2,770 | ||||||||
Trican Well Service Ltd. (b) | 708,675 | 2,595 | |||||||||
16,777 | |||||||||||
Financials (0.6%): | |||||||||||
Element Fleet Management Corp. | 227,306 | 2,532 | |||||||||
Fairfax Financial Holdings Ltd. | 3,534 | 1,962 | |||||||||
Intact Financial Corp. | 24,166 | 3,492 | |||||||||
National Bank of Canada | 53,072 | 4,074 | |||||||||
The Bank of Nova Scotia | 56,481 | 3,831 | |||||||||
15,891 | |||||||||||
Industrials (0.1%): | |||||||||||
Finning International, Inc. | 68,738 | 1,827 | |||||||||
Savaria Corp. (c) | 174,865 | 1,997 | |||||||||
3,824 | |||||||||||
Information Technology (0.1%): | |||||||||||
Quarterhill, Inc. (c) | 855,238 | 1,406 | |||||||||
Materials (0.8%): | |||||||||||
Barrick Gold Corp. | 212,809 | 4,360 | |||||||||
Karora Resources, Inc. (b) | 648,651 | 2,267 | |||||||||
Kinross Gold Corp. | 422,386 | 1,901 | |||||||||
Nutrien Ltd. | 35,533 | 3,473 | |||||||||
Teck Resources Ltd. Class B | 71,061 | 2,946 | |||||||||
Wesdome Gold Mines Ltd. (b) | 288,239 | 2,651 | |||||||||
West Fraser Timber Co. Ltd. | 26,824 | 2,475 | |||||||||
20,073 | |||||||||||
60,112 | |||||||||||
Chile (0.1%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Falabella SA | 630,531 | 1,848 | |||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Cencosud SA | 986,523 | 1,582 | |||||||||
3,430 | |||||||||||
China (1.9%): | |||||||||||
Communication Services (0.6%): | |||||||||||
Tencent Holdings Ltd. | 324,500 | 14,836 | |||||||||
Consumer Discretionary (0.5%): | |||||||||||
Alibaba Group Holding Ltd., ADR (b) | 18,030 | 1,732 | |||||||||
Alibaba Group Holding Ltd. (b) | 71,400 | 857 | |||||||||
BYD Co. Ltd. Class H | 62,500 | 2,221 | |||||||||
Dongfeng Motor Group Co. Ltd. Class H | 3,979,764 | 3,126 | |||||||||
Guangzhou Automobile Group Co. Ltd. Class H | 1,734,000 | 1,640 | |||||||||
JD.com, Inc., ADR | 20,450 | 1,148 | |||||||||
JD.com, Inc. Class A | 5,404 | 152 | |||||||||
Zhongsheng Group Holdings Ltd. | 427,000 | 3,028 | |||||||||
13,904 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.3%): | |||||||||||
Agricultural Bank of China Ltd. Class H | 4,024,000 | $ | 1,532 | ||||||||
Bank of China Ltd. Class H | 5,682,000 | 2,272 | |||||||||
China Construction Bank Corp. Class H | 3,292,000 | 2,441 | |||||||||
Huatai Securities Co. Ltd. Class H (d) | 1,188,400 | 1,663 | |||||||||
7,908 | |||||||||||
Health Care (0.1%): | |||||||||||
Shanghai Fosun Pharmaceutical Group Co. Ltd. Class H | 410,500 | 1,727 | |||||||||
Industrials (0.2%): | |||||||||||
China Railway Group Ltd. Class H | 4,091,000 | 2,828 | |||||||||
COSCO SHIPPING Holdings Co. Ltd. Class H (b) | 1,010,700 | 1,788 | |||||||||
4,616 | |||||||||||
Materials (0.1%): | |||||||||||
Anhui Conch Cement Co. Ltd. Class H | 631,000 | 3,196 | |||||||||
Utilities (0.1%): | |||||||||||
China Longyuan Power Group Corp. Ltd. Class H | 958,000 | 2,040 | |||||||||
48,227 | |||||||||||
Denmark (2.1%): | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
Pandora A/S | 120,965 | 9,774 | |||||||||
TCM Group A/S | 93,642 | 1,314 | |||||||||
11,088 | |||||||||||
Consumer Staples (0.5%): | |||||||||||
Royal Unibrew A/S | 142,790 | 12,531 | |||||||||
Health Care (0.9%): | |||||||||||
Novo Nordisk A/S Class B | 203,426 | 22,594 | |||||||||
Industrials (0.3%): | |||||||||||
AP Moller - Maersk A/S Class B | 1,176 | 3,447 | |||||||||
INVISIO AB (c) | 188,153 | 3,020 | |||||||||
Per Aarsleff Holding A/S | 44,295 | 1,555 | |||||||||
8,022 | |||||||||||
54,235 | |||||||||||
Finland (0.5%): | |||||||||||
Health Care (0.1%): | |||||||||||
Revenio Group Oyj | 64,563 | 3,353 | |||||||||
Industrials (0.1%): | |||||||||||
Metso Outotec Oyj | 213,133 | 1,989 | |||||||||
Wartsila Oyj Abp | 165,782 | 1,406 | |||||||||
3,395 | |||||||||||
Information Technology (0.3%): | |||||||||||
Nokia Oyj | 1,217,342 | 6,117 | |||||||||
12,865 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
France (8.4%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Orange SA | 343,490 | $ | 4,299 | ||||||||
Publicis Groupe SA | 43,773 | 2,398 | |||||||||
Vivendi SE | 133,975 | 1,599 | |||||||||
8,296 | |||||||||||
Consumer Discretionary (2.2%): | |||||||||||
La Francaise des Jeux SAEM (d) | 389,911 | 14,222 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 64,193 | 41,439 | |||||||||
Renault SA (b) | 92,774 | 2,558 | |||||||||
58,219 | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Carrefour SA (c) | 158,520 | 3,251 | |||||||||
Pernod Ricard SA | 17,753 | 3,486 | |||||||||
6,737 | |||||||||||
Energy (0.9%): | |||||||||||
Gaztransport Et Technigaz SA | 86,643 | 11,361 | |||||||||
TotalEnergies SE (c) | 214,617 | 12,700 | |||||||||
24,061 | |||||||||||
Financials (0.9%): | |||||||||||
AXA SA (c) | 304,627 | 7,707 | |||||||||
BNP Paribas SA (c) | 139,818 | 8,001 | |||||||||
SCOR SE (c) | 72,010 | 1,892 | |||||||||
Societe Generale SA (c) | 166,373 | 4,483 | |||||||||
22,083 | |||||||||||
Health Care (0.2%): | |||||||||||
Korian SA | 1 | — | (e) | ||||||||
Pharmagest Interactive | 20,988 | 1,834 | |||||||||
Vetoquinol SA | 20,263 | 2,708 | |||||||||
4,542 | |||||||||||
Industrials (1.3%): | |||||||||||
Cie de Saint-Gobain (c) | 164,864 | 9,771 | |||||||||
Dassault Aviation SA | 13,823 | 2,343 | |||||||||
Eiffage SA | 16,996 | 1,684 | |||||||||
Rexel SA (b) | 191,373 | 4,072 | |||||||||
Safran SA | 107,417 | 11,128 | |||||||||
Teleperformance | 4,847 | 1,609 | |||||||||
Thermador Groupe | 33,378 | 3,328 | |||||||||
33,935 | |||||||||||
Information Technology (1.1%): | |||||||||||
Aubay | 36,883 | 2,194 | |||||||||
Capgemini SE (c) | 88,405 | 17,176 | |||||||||
Edenred | 34,392 | 1,698 | |||||||||
Esker SA | 11,966 | 1,900 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Lectra | 80,344 | $ | 3,151 | ||||||||
MGI Digital Graphic Technology (b) (c) | 34,869 | 1,247 | |||||||||
27,366 | |||||||||||
Materials (0.9%): | |||||||||||
Arkema SA (c) | 195,022 | 23,608 | |||||||||
Real Estate (0.1%): | |||||||||||
Klepierre SA | 71,361 | 1,629 | |||||||||
Utilities (0.2%): | |||||||||||
Engie SA (c) | 450,614 | 6,056 | |||||||||
216,532 | |||||||||||
Germany (6.6%): | |||||||||||
Communication Services (0.2%): | |||||||||||
Deutsche Telekom AG | 234,151 | 4,817 | |||||||||
Consumer Discretionary (0.8%): | |||||||||||
Ceconomy AG | 221,541 | 744 | |||||||||
Continental AG | 36,025 | 2,768 | |||||||||
Mercedes-Benz Group AG | 86,936 | 6,194 | |||||||||
Volkswagen AG Preference Shares | 67,311 | 11,232 | |||||||||
20,938 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Henkel AG And Co. KGaA | 44,755 | 3,064 | |||||||||
Energy (0.2%): | |||||||||||
CropEnergies AG | 180,221 | 1,951 | |||||||||
VERBIO Vereinigte BioEnergie AG | 39,955 | 2,159 | |||||||||
4,110 | |||||||||||
Financials (1.1%): | |||||||||||
Allianz SE Registered Shares | 122,737 | 25,761 | |||||||||
Hannover Rueck SE | 13,592 | 2,081 | |||||||||
27,842 | |||||||||||
Health Care (0.7%): | |||||||||||
Bayer AG Registered Shares | 53,473 | 3,825 | |||||||||
Eckert & Ziegler Strahlen- und Medizintechnik AG | 43,282 | 2,021 | |||||||||
Fresenius SE & Co. KGaA | 146,761 | 5,033 | |||||||||
Merck KGaA | 19,977 | 3,766 | |||||||||
Nexus AG | 66,298 | 3,838 | |||||||||
18,483 | |||||||||||
Industrials (1.9%): | |||||||||||
| 2G Energy AG | 29,918 | 3,460 | |||||||||
Amadeus Fire AG | 21,626 | 3,160 | |||||||||
Cewe Stiftung & Co. KGaA | 22,217 | 2,145 | |||||||||
Daimler Truck Holding AG (b) | 119,751 | 3,748 | |||||||||
Deutsche Post AG Registered Shares | 71,013 | 2,938 | |||||||||
Dr Hoenle AG (c) | 51,056 | 1,328 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
| SFC Energy AG (b) | 73,375 | $ | 1,984 | ||||||||
Siemens AG Registered Shares | 232,340 | 30,665 | |||||||||
49,428 | |||||||||||
Information Technology (1.4%): | |||||||||||
Basler AG | 27,276 | 3,315 | |||||||||
Infineon Technologies AG | 60,159 | 1,875 | |||||||||
PVA TePla AG (b) | 101,779 | 2,668 | |||||||||
SAP SE | 234,776 | 23,532 | |||||||||
Secunet Security Networks AG | 10,116 | 3,612 | |||||||||
35,002 | |||||||||||
Materials (0.2%): | |||||||||||
Covestro AG (d) | 52,822 | 2,421 | |||||||||
HeidelbergCement AG | 55,370 | 3,233 | |||||||||
5,654 | |||||||||||
Real Estate (0.0%): (a) | |||||||||||
LEG Immobilien SE | 13,326 | 1,374 | |||||||||
170,712 | |||||||||||
Hong Kong (2.1%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Chow Tai Fook Jewellery Group Ltd. | 1,114,800 | 1,930 | |||||||||
Consumer Staples (0.0%): (a) | |||||||||||
WH Group Ltd. (d) | 1,676,028 | 1,282 | |||||||||
Financials (0.7%): | |||||||||||
AIA Group Ltd. | 1,827,600 | 18,935 | |||||||||
Information Technology (0.2%): | |||||||||||
Lenovo Group Ltd. | 4,064,000 | 4,004 | |||||||||
Real Estate (1.1%): | |||||||||||
CK Asset Holdings Ltd. | 4,364,957 | 28,461 | |||||||||
54,612 | |||||||||||
India (0.8%): | |||||||||||
Communication Services (0.0%): (a) | |||||||||||
Zee Entertainment Enterprises Ltd. | 170,459 | 551 | |||||||||
Energy (0.2%): | |||||||||||
Oil & Natural Gas Corp. Ltd. | 690,866 | 1,348 | |||||||||
Reliance Industries Ltd. | 109,322 | 3,683 | |||||||||
5,031 | |||||||||||
Financials (0.2%): | |||||||||||
Angel One Ltd. | 63,451 | 1,196 | |||||||||
Canara Bank (b) | 1,611,841 | 4,217 | |||||||||
5,413 | |||||||||||
Health Care (0.1%): | |||||||||||
Sun Pharmaceutical Industries Ltd. | 204,169 | 2,258 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.1%): | |||||||||||
Mindtree Ltd. | 34,213 | $ | 1,338 | ||||||||
Tata Consultancy Services Ltd. | 34,480 | 1,487 | |||||||||
2,825 | |||||||||||
Materials (0.1%): | |||||||||||
UPL Ltd. | 262,682 | 2,631 | |||||||||
Utilities (0.1%): | |||||||||||
Power Grid Corp. of India Ltd. | 809,806 | 2,419 | |||||||||
21,128 | |||||||||||
Indonesia (0.3%): | |||||||||||
Communication Services (0.0%): (a) | |||||||||||
PT Sarana Menara Nusantara Tbk | 25,307,700 | 1,735 | |||||||||
Consumer Staples (0.1%): | |||||||||||
Industri Jamu Dan Farmasi Sido Muncul Tbk PT | 26,955,500 | 1,885 | |||||||||
Financials (0.2%): | |||||||||||
PT Bank Mandiri Persero Tbk | 7,624,203 | 4,449 | |||||||||
8,069 | |||||||||||
Ireland (0.4%): | |||||||||||
Financials (0.2%): | |||||||||||
AIB Group PLC | 807,093 | 2,161 | |||||||||
Bank of Ireland Group PLC | 533,571 | 3,604 | |||||||||
5,765 | |||||||||||
Health Care (0.1%): | |||||||||||
ICON PLC (b) | 12,276 | 2,747 | |||||||||
Industrials (0.1%): | |||||||||||
DCC PLC | 37,334 | 2,640 | |||||||||
11,152 | |||||||||||
Israel (0.3%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Maytronics Ltd. | 134,933 | 2,431 | |||||||||
Financials (0.1%): | |||||||||||
Bank Leumi Le | 175,592 | 1,750 | |||||||||
Information Technology (0.1%): | |||||||||||
Allot Ltd. (b) (c) | 161,674 | 851 | |||||||||
Nice Ltd. (b) | 9,987 | 1,990 | |||||||||
2,841 | |||||||||||
7,022 | |||||||||||
Italy (3.1%): | |||||||||||
Energy (0.3%): | |||||||||||
Eni SpA | 505,190 | 7,650 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.4%): | |||||||||||
Assicurazioni Generali SpA (c) | 209,230 | $ | 3,808 | ||||||||
| BPER Banca | 738,848 | 1,523 | |||||||||
UniCredit SpA | 461,645 | 5,412 | |||||||||
10,743 | |||||||||||
Health Care (0.5%): | |||||||||||
El.En. SpA | 349,648 | 4,741 | |||||||||
Recordati Industria Chimica e Farmaceutica SpA | 226,873 | 10,165 | |||||||||
14,906 | |||||||||||
Industrials (0.1%): | |||||||||||
Leonardo SpA (b) | 197,437 | 2,126 | |||||||||
Information Technology (0.3%): | |||||||||||
Be Shaping The Future SpA (c) | 691,693 | 2,441 | |||||||||
Nexi SpA (b) (c) (d) | 141,531 | 1,443 | |||||||||
Sesa SpA | 25,200 | 3,473 | |||||||||
7,357 | |||||||||||
Utilities (1.5%): | |||||||||||
Enel SpA | 2,990,882 | 19,429 | |||||||||
Iren SpA | 600,983 | 1,566 | |||||||||
Snam SpA | 3,028,504 | 17,615 | |||||||||
38,610 | |||||||||||
81,392 | |||||||||||
Japan (21.4%): | |||||||||||
Communication Services (1.7%): | |||||||||||
Akatsuki, Inc. | 67,700 | 1,513 | |||||||||
Capcom Co. Ltd. | 557,400 | 15,693 | |||||||||
DeNA Co. Ltd. | 110,280 | 1,591 | |||||||||
Fuji Media Holdings, Inc. | 71,148 | 605 | |||||||||
Intage Holdings, Inc. | 196,700 | 2,145 | |||||||||
Kakaku.com, Inc. | 521,000 | 10,269 | |||||||||
Konami Holdings Corp. | 26,000 | 1,760 | |||||||||
MarkLines Co. Ltd. | 133,200 | 2,472 | |||||||||
Nippon Telegraph & Telephone Corp. | 109,000 | 3,331 | |||||||||
Nippon Television Holdings, Inc. | 136,234 | 1,288 | |||||||||
ValueCommerce Co. Ltd. | 100,500 | 2,460 | |||||||||
ZIGExN Co. Ltd. | 394,100 | 1,136 | |||||||||
44,263 | |||||||||||
Consumer Discretionary (3.9%): | |||||||||||
Arcland Service Holdings Co. Ltd. (c) | 120,000 | 1,918 | |||||||||
Benesse Holdings, Inc. | 9,089 | 145 | |||||||||
Honda Motor Co. Ltd. | 290,162 | 7,226 | |||||||||
Isuzu Motors Ltd. | 280,994 | 3,298 | |||||||||
Mitsubishi Motors Corp. (b) | 330,164 | 987 | |||||||||
Nikon Corp. | 223,235 | 2,770 | |||||||||
Nissan Motor Co. Ltd. | 663,213 | 2,578 | |||||||||
Open House Group Co. Ltd. | 40,000 | 1,665 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Shimamura Co. Ltd. | 36,378 | $ | 3,074 | ||||||||
Shoei Co. Ltd. | 93,500 | 3,484 | |||||||||
Sony Group Corp. | 63,800 | 5,985 | |||||||||
Stanley Electric Co. Ltd. | 79,610 | 1,443 | |||||||||
Subaru Corp. | 217,790 | 3,781 | |||||||||
Sumitomo Electric Industries Ltd. | 299,110 | 3,313 | |||||||||
Sumitomo Rubber Industries Ltd. | 138,120 | 1,259 | |||||||||
The Furukawa Battery Co. Ltd. (c) | 188,500 | 1,747 | |||||||||
Toyota Motor Corp. | 2,626,400 | 43,700 | |||||||||
ZOZO, Inc. | 545,400 | 11,578 | |||||||||
99,951 | |||||||||||
Consumer Staples (1.0%): | |||||||||||
Ajinomoto Co., Inc. | 86,900 | 2,107 | |||||||||
Create SD Holdings Co. Ltd. (c) | 85,700 | 1,952 | |||||||||
G-7 Holdings, Inc. | 131,200 | 1,442 | |||||||||
Kirin Holdings Co. Ltd. | 177,440 | 2,745 | |||||||||
Retail Partners Co. Ltd. | 189,300 | 1,644 | |||||||||
Seven & i Holdings Co. Ltd. | 71,300 | 2,985 | |||||||||
Toyo Suisan Kaisha Ltd. | 321,400 | 12,027 | |||||||||
Transaction Co. Ltd. (c) | 274,300 | 2,337 | |||||||||
27,239 | |||||||||||
Energy (0.2%): | |||||||||||
Inpex Corp. | 314,864 | 4,041 | |||||||||
Financials (3.0%): | |||||||||||
Dai-ichi Life Holdings, Inc. | 213,073 | 4,403 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 5,187,892 | 29,517 | |||||||||
Mizuho Financial Group, Inc. | 188,850 | 2,246 | |||||||||
MS&AD Insurance Group Holdings, Inc. | 134,690 | 4,286 | |||||||||
Nomura Holdings, Inc. | 318,544 | 1,252 | |||||||||
ORIX Corp. | 201,400 | 3,829 | |||||||||
Resona Holdings, Inc. | 1,192,156 | 4,482 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 181,104 | 5,555 | |||||||||
Sumitomo Mitsui Trust Holdings, Inc. | 131,027 | 3,964 | |||||||||
T&D Holdings, Inc. | 437,683 | 5,057 | |||||||||
Tokio Marine Holdings, Inc. | 222,300 | 12,936 | |||||||||
77,527 | |||||||||||
Health Care (2.1%): | |||||||||||
Alfresa Holdings Corp. | 115,530 | 1,517 | |||||||||
BML, Inc. | 55,200 | 1,479 | |||||||||
Eisai Co. Ltd. | 22,856 | 941 | |||||||||
Hoya Corp. | 208,900 | 22,237 | |||||||||
Japan Lifeline Co. Ltd. | 180,000 | 1,279 | |||||||||
Japan Medical Dynamic Marketing, Inc. | 131,500 | 1,669 | |||||||||
Ono Pharmaceutical Co. Ltd. | 283,110 | 7,497 | |||||||||
Shionogi & Co. Ltd. | 249,882 | 13,314 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 120,721 | 3,470 | |||||||||
53,403 | |||||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (5.2%): | |||||||||||
AGC, Inc. | 51,700 | $ | 1,945 | ||||||||
Altech Corp. | 120,500 | 1,763 | |||||||||
BeNext-Yumeshin Group Co. | 156,618 | 1,743 | |||||||||
CTI Engineering Co. Ltd. | 97,100 | 1,857 | |||||||||
Dai-Dan Co. Ltd. | 97,800 | 1,555 | |||||||||
Denyo Co. Ltd. | 149,100 | 1,833 | |||||||||
en Japan, Inc. | 160,100 | 2,474 | |||||||||
Fuji Corp./Aichi | 108,100 | 1,852 | |||||||||
Fuji Electric Co. Ltd. | 500,300 | 23,465 | |||||||||
Giken Ltd. | 38,600 | 1,054 | |||||||||
gremz, Inc. | 151,400 | 1,784 | |||||||||
Hino Motors Ltd. | 412,852 | 2,308 | |||||||||
Hitachi Ltd. | 60,400 | 3,134 | |||||||||
Hokuetsu Industries Co. Ltd. (c) | 127,900 | 840 | |||||||||
ITOCHU Corp. | 128,300 | 3,681 | |||||||||
JAC Recruitment Co. Ltd. | 120,200 | 1,685 | |||||||||
Japan Airlines Co. Ltd. Class C (b) | 174,690 | 3,202 | |||||||||
JGC Holdings Corp. | 268,658 | 3,769 | |||||||||
Kamigumi Co. Ltd. | 82,970 | 1,645 | |||||||||
Komatsu Ltd. | 89,500 | 2,225 | |||||||||
METAWATER Co. Ltd. | 102,100 | 1,594 | |||||||||
Mirait Holdings Corp. | 140,300 | 1,762 | |||||||||
Mitsubishi Heavy Industries Ltd. | 54,608 | 2,084 | |||||||||
Mitsui & Co. Ltd. | 110,100 | 2,766 | |||||||||
Nichireki Co. Ltd. | 218,000 | 2,210 | |||||||||
Nihon Flush Co. Ltd. | 169,800 | 1,221 | |||||||||
Nippon Express Holdings, Inc. | �� | 34,900 | 2,027 | ||||||||
Nippon Yusen | 164,100 | 13,567 | |||||||||
NS Tool Co. Ltd. | 189,900 | 1,939 | |||||||||
OKUMA Corp. | 145,900 | 5,868 | |||||||||
Organo Corp. | 45,600 | 3,461 | |||||||||
Sanwa Holdings Corp. | 1,380,100 | 13,224 | |||||||||
Shinwa Co. Ltd. | 122,800 | 2,071 | |||||||||
Sinko Industries Ltd. | 149,800 | 1,831 | |||||||||
S-Pool, Inc. | 380,600 | 3,599 | |||||||||
Sumitomo Heavy Industries Ltd. | 89,990 | 2,122 | |||||||||
THK Co. Ltd. | 119,356 | 2,438 | |||||||||
Tocalo Co. Ltd. | 222,000 | 2,347 | |||||||||
TOPPAN, Inc. | 18,060 | 339 | |||||||||
Weathernews, Inc. | 39,700 | 2,061 | |||||||||
Yamato Holdings Co. Ltd. | 168,950 | 2,922 | |||||||||
135,267 | |||||||||||
Information Technology (3.0%): | |||||||||||
Alps Alpine Co. Ltd. | 145,880 | 1,565 | |||||||||
Comture Corp. | 113,400 | 2,490 | |||||||||
Cresco Ltd. | 110,100 | 1,850 | |||||||||
Digital Arts, Inc. | 41,600 | 2,259 | |||||||||
Double Standard, Inc. | 81,000 | 1,255 | |||||||||
Fujitsu Ltd. | 159,300 | 23,922 | |||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Fukui Computer Holdings, Inc. | 110,600 | $ | 2,824 | ||||||||
Future Corp. | 241,200 | 3,080 | |||||||||
Kanematsu Electronics Ltd. | 56,700 | 1,740 | |||||||||
Murata Manufacturing Co. Ltd. | 31,400 | 2,018 | |||||||||
NTT Data Corp. | 108,900 | 1,704 | |||||||||
Oracle Corp. (c) | 177,600 | 10,753 | |||||||||
Pole To Win Holdings, Inc. | 177,500 | 1,412 | |||||||||
Softcreate Holdings Corp. | 106,400 | 3,423 | |||||||||
TechMatrix Corp. | 128,000 | 1,601 | |||||||||
Tokyo Electron Ltd. | 8,200 | 3,759 | |||||||||
Ulvac, Inc. | 262,000 | 11,039 | |||||||||
V Technology Co. Ltd. | 49,000 | 1,104 | |||||||||
77,798 | |||||||||||
Materials (0.4%): | |||||||||||
JCU Corp. | 106,300 | 3,048 | |||||||||
Maeda Kosen Co. Ltd. | 84,400 | 1,710 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 16,500 | 2,335 | |||||||||
Taiheiyo Cement Corp. | 89,030 | 1,330 | |||||||||
Tosoh Corp. | 148,900 | 2,164 | |||||||||
10,587 | |||||||||||
Real Estate (0.5%): | |||||||||||
Daiwa House Industry Co. Ltd. | 71,700 | 1,727 | |||||||||
Mitsubishi Estate Co. Ltd. | 262,786 | 3,908 | |||||||||
Sumitomo Realty & Development Co. Ltd. | 280,900 | 7,574 | |||||||||
13,209 | |||||||||||
Utilities (0.4%): | |||||||||||
Chubu Electric Power Co., Inc. | 775,300 | 7,802 | |||||||||
Osaka Gas Co. Ltd. | 110,100 | 2,064 | |||||||||
9,866 | |||||||||||
553,151 | |||||||||||
Korea, Republic Of (1.7%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Cheil Worldwide, Inc. | 85,632 | 1,795 | |||||||||
JYP Entertainment Corp. | 45,751 | 2,094 | |||||||||
KT Corp. | 148,256 | 4,528 | |||||||||
8,417 | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
Coway Co. Ltd. | 47,103 | 2,711 | |||||||||
Hankook Tire & Technology Co. Ltd. | 54,403 | 1,561 | |||||||||
Hyundai Mobis Co. Ltd. | 13,779 | 2,421 | |||||||||
Kia Corp. | 33,544 | 2,314 | |||||||||
LG Electronics, Inc. | 20,772 | 1,752 | |||||||||
10,759 | |||||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.5%): | |||||||||||
Hana Financial Group, Inc. | 54,049 | $ | 2,162 | ||||||||
KB Financial Group, Inc. | 104,642 | 5,115 | |||||||||
Shinhan Financial Group Co. Ltd. | 156,956 | 5,465 | |||||||||
12,742 | |||||||||||
Industrials (0.1%): | |||||||||||
Samsung Engineering Co. Ltd. (b) | 122,607 | 2,424 | |||||||||
Information Technology (0.4%): | |||||||||||
LG Innotek Co. Ltd. | 16,534 | 5,111 | |||||||||
Samsung Electronics Co. Ltd. | 79,399 | 4,318 | |||||||||
9,429 | |||||||||||
43,771 | |||||||||||
Luxembourg (0.3%): | |||||||||||
Communication Services (0.1%): | |||||||||||
RTL Group SA | 42,660 | 1,977 | |||||||||
Energy (0.1%): | |||||||||||
Tenaris SA | 144,209 | 2,404 | |||||||||
Materials (0.1%): | |||||||||||
ArcelorMittal SA | 76,524 | 2,450 | |||||||||
6,831 | |||||||||||
Malaysia (0.3%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Kuala Lumpur Kepong Bhd | 278,500 | 1,628 | |||||||||
Financials (0.2%): | |||||||||||
CIMB Group Holdings Bhd | 1,694,368 | 1,990 | |||||||||
RHB Bank Bhd | 2,375,600 | 3,292 | |||||||||
5,282 | |||||||||||
6,910 | |||||||||||
Mexico (0.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
America Movil SAB de CV Class L | 1,650,399 | 1,745 | |||||||||
America Movil SAB de CV, ADR | 62,780 | 1,340 | |||||||||
3,085 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Arca Continental SAB de CV | 296,727 | 2,018 | |||||||||
5,103 | |||||||||||
Netherlands (3.6%): | |||||||||||
Communication Services (0.9%): | |||||||||||
Koninklijke KPN NV | 6,193,555 | 22,541 | |||||||||
VEON Ltd., ADR (b) | 825,596 | 401 | |||||||||
22,942 | |||||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Staples (0.2%): | |||||||||||
Heineken NV | 17,458 | $ | 1,755 | ||||||||
Koninklijke Ahold Delhaize NV | 130,999 | 3,612 | |||||||||
5,367 | |||||||||||
Financials (1.0%): | |||||||||||
ABN AMRO Bank NV (d) | 256,705 | 2,997 | |||||||||
ING Groep NV | 1,897,906 | 21,458 | |||||||||
NN Group NV (c) | 48,324 | 2,395 | |||||||||
26,850 | |||||||||||
Health Care (0.1%): | |||||||||||
QIAGEN NV (b) | 40,789 | 1,877 | |||||||||
Industrials (0.7%): | |||||||||||
PostNL NV (c) | 307,709 | 1,047 | |||||||||
SIF Holding NV (c) | 160,874 | 1,803 | |||||||||
Wolters Kluwer NV | 168,158 | 16,590 | |||||||||
19,440 | |||||||||||
Information Technology (0.7%): | |||||||||||
ASM International NV | 47,056 | 14,588 | |||||||||
STMicroelectronics NV | 86,410 | 3,460 | |||||||||
18,048 | |||||||||||
94,524 | |||||||||||
New Zealand (0.4%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Scales Corp. Ltd. | 534,312 | 1,590 | |||||||||
Health Care (0.2%): | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 475,006 | 6,481 | |||||||||
Information Technology (0.1%): | |||||||||||
Pushpay Holdings Ltd. (b) | 1,502,081 | 1,424 | |||||||||
9,495 | |||||||||||
Norway (1.4%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Mowi ASA | 70,820 | 1,850 | |||||||||
Energy (0.6%): | |||||||||||
Aker BP ASA (c) | 204,950 | 8,835 | |||||||||
Equinor ASA | 48,717 | 1,850 | |||||||||
Magseis Fairfield ASA (b) | 1,817,715 | 1,180 | |||||||||
TGS ASA | 138,285 | 2,283 | |||||||||
Var Energi ASA | 400,946 | 1,911 | |||||||||
16,059 | |||||||||||
Financials (0.5%): | |||||||||||
SpareBank 1 SMN | 999,949 | 13,584 | |||||||||
Health Care (0.1%): | |||||||||||
Medistim ASA | 80,939 | 2,269 | |||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.1%): | |||||||||||
Bouvet ASA | 384,120 | $ | 2,607 | ||||||||
Materials (0.0%): (a) | |||||||||||
Norsk Hydro ASA | 84,642 | 679 | |||||||||
37,048 | |||||||||||
Russian Federation (0.0%): (a) | |||||||||||
Communication Services (0.0%): | |||||||||||
Mobile TeleSystems PJSC, ADR (f) (g) | 177,615 | 14 | |||||||||
Consumer Staples (0.0%): | |||||||||||
Magnit PJSC, GDR (f) (g) | 94,274 | — | (e) | ||||||||
Energy (0.0%): | |||||||||||
Gazprom PJSC, ADR (f) (g) (i) (j) | 153,287 | 12 | |||||||||
LUKOIL PJSC, ADR (f) (g) (i) (j) | 34,917 | 4 | |||||||||
16 | |||||||||||
Financials (0.0%): | |||||||||||
Sberbank of Russia PJSC (b) (f) (g) (i) (j) | 564,350 | 3 | |||||||||
Sberbank of Russia PJSC, ADR (b) (f) (g) (i) (j) | 126,456 | 1 | |||||||||
4 | |||||||||||
34 | |||||||||||
Saudi Arabia (0.2%): | |||||||||||
Energy (0.1%): | |||||||||||
Aldrees Petroleum and Transport Services Co. | 77,006 | 1,571 | |||||||||
Financials (0.1%): | |||||||||||
Alinma Bank | 281,412 | 2,884 | |||||||||
4,455 | |||||||||||
Singapore (0.4%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Wilmar International Ltd. | 1,035,600 | 3,152 | |||||||||
Financials (0.2%): | |||||||||||
DBS Group Holdings Ltd. | 137,200 | 3,094 | |||||||||
iFAST Corp. Ltd. | 543,900 | 1,928 | |||||||||
5,022 | |||||||||||
Utilities (0.1%): | |||||||||||
Sembcorp Industries Ltd. | 859,000 | 1,784 | |||||||||
9,958 | |||||||||||
South Africa (0.2%): | |||||||||||
Communication Services (0.0%): (a) | |||||||||||
MTN Group Ltd. | 75,932 | 819 | |||||||||
Financials (0.1%): | |||||||||||
Absa Group Ltd. | 155,069 | 1,822 | |||||||||
Old Mutual Ltd. | 2,294,681 | 1,875 | |||||||||
3,697 | |||||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.1%): | |||||||||||
Impala Platinum Holdings Ltd. | 115,501 | $ | 1,576 | ||||||||
6,092 | |||||||||||
Spain (1.5%): | |||||||||||
Financials (1.1%): | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 3,597,187 | 19,682 | |||||||||
Banco Santander SA | 807,681 | 2,620 | |||||||||
CaixaBank SA | 1,642,945 | 5,946 | |||||||||
28,248 | |||||||||||
Health Care (0.2%): | |||||||||||
Faes Farma SA | 600,210 | 2,584 | |||||||||
Laboratorios Farmaceuticos Rovi SA | 27,692 | 1,858 | |||||||||
4,442 | |||||||||||
Information Technology (0.1%): | |||||||||||
Global Dominion Access SA (d) | 581,608 | 2,568 | |||||||||
Utilities (0.1%): | |||||||||||
Corp. ACCIONA Energias Renovables SA | 63,847 | 2,497 | |||||||||
37,755 | |||||||||||
Sweden (2.9%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Boozt AB (b) (c) (d) | 114,228 | 1,158 | |||||||||
Lyko Group AB (b) (c) | 60,693 | 1,375 | |||||||||
2,533 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Swedish Match AB | 244,808 | 2,532 | |||||||||
Health Care (0.6%): | |||||||||||
BioGaia AB B Shares | 227,115 | 2,244 | |||||||||
Biotage AB | 182,558 | 3,725 | |||||||||
Cellavision AB | 57,570 | 2,042 | |||||||||
Sectra AB Class B (b) | 147,792 | 2,162 | |||||||||
SwedenCare AB (c) | 257,221 | 2,519 | |||||||||
Xvivo Perfusion AB (b) | 109,195 | 2,747 | |||||||||
15,439 | |||||||||||
Industrials (2.0%): | |||||||||||
Atlas Copco AB Class B | 2,117,832 | 20,518 | |||||||||
Atlas Copco AB (b) | 529,458 | 433 | |||||||||
BTS Group AB B Shares | 108,097 | 4,156 | |||||||||
CTT Systems AB (c) | 50,526 | 1,062 | |||||||||
Eolus Vind AB Class B (c) | 139,230 | 1,385 | |||||||||
GARO AB | 205,986 | 3,069 | |||||||||
Hexatronic Group AB | 68,547 | 3,120 | |||||||||
Nibe Industrier AB Class B | 1,194,081 | 10,430 | |||||||||
Sandvik AB | 106,073 | 2,182 | |||||||||
| SKF AB B Shares | 177,035 | 3,137 | |||||||||
Volvo AB Class B | 95,365 | 1,673 | |||||||||
51,165 | |||||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.1%): | |||||||||||
Boliden AB (b) | 70,417 | $ | 112 | ||||||||
Boliden AB | 70,417 | 2,965 | |||||||||
3,077 | |||||||||||
74,746 | |||||||||||
Switzerland (10.5%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Cie Financiere Richemont SA Registered Shares | 20,046 | 2,231 | |||||||||
The Swatch Group AG (c) | 10,044 | 2,587 | |||||||||
4,818 | |||||||||||
Consumer Staples (2.8%): | |||||||||||
Coca-Cola HBC AG | 484,439 | 10,671 | |||||||||
Nestle SA Registered Shares | 510,132 | 62,411 | |||||||||
73,082 | |||||||||||
Financials (1.9%): | |||||||||||
Julius Baer Group Ltd. | 65,627 | 3,390 | |||||||||
Partners Group Holding AG | 6,912 | 7,439 | |||||||||
Swiss Life Holding AG | 9,679 | 5,489 | |||||||||
UBS Group AG | 1,724,602 | 32,531 | |||||||||
48,849 | |||||||||||
Health Care (4.0%): | |||||||||||
Alcon, Inc. | 24,549 | 1,843 | |||||||||
Coltene Holding AG Registered Shares | 26,804 | 2,627 | |||||||||
Novartis AG Registered Shares | 522,350 | 47,460 | |||||||||
Roche Holding AG | 153,128 | 52,195 | |||||||||
104,125 | |||||||||||
Industrials (0.8%): | |||||||||||
Adecco Group AG | 326,490 | 12,730 | |||||||||
Kardex Holding AG Registered Shares | 18,715 | 3,420 | |||||||||
Schweiter Technologies AG Class BR | 1,498 | 1,515 | |||||||||
Zehnder Group AG Registered Shares | 26,839 | 1,961 | |||||||||
19,626 | |||||||||||
Information Technology (0.3%): | |||||||||||
Landis+Gyr Group AG (c) | 43,425 | 2,536 | |||||||||
u-blox Holding AG (b) | 44,878 | 4,248 | |||||||||
6,784 | |||||||||||
Materials (0.5%): | |||||||||||
Gurit Holding AG (c) | 23,810 | 2,667 | |||||||||
Holcim Ltd. | 173,970 | 8,628 | |||||||||
Vetropack Holding AG | 50,122 | 2,088 | |||||||||
13,383 | |||||||||||
270,667 | |||||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Taiwan (1.0%): | |||||||||||
Financials (0.2%): | |||||||||||
Chailease Holding Co. Ltd. | 239,846 | $ | 1,846 | ||||||||
Fubon Financial Holding Co. Ltd. | 1,016,159 | 2,228 | |||||||||
4,074 | |||||||||||
Information Technology (0.8%): | |||||||||||
Catcher Technology Co. Ltd. | 475,442 | 2,677 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 862,473 | 3,345 | |||||||||
MediaTek, Inc. | 85,000 | 2,629 | |||||||||
Realtek Semiconductor Corp. | 262,000 | 3,977 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 484,000 | 9,154 | |||||||||
21,782 | |||||||||||
25,856 | |||||||||||
Thailand (0.3%): | |||||||||||
Financials (0.2%): | |||||||||||
Kasikornbank PCL | 1,153,203 | 4,947 | |||||||||
Health Care (0.1%): | |||||||||||
Chularat Hospital PCL | 20,950,000 | 2,277 | |||||||||
7,224 | |||||||||||
Turkey (0.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Turk Telekomunikasyon AS (c) | 1,919,927 | 1,147 | |||||||||
Turkcell Iletisim Hizmetleri A/S (c) | 1,064,048 | 1,255 | |||||||||
2,402 | |||||||||||
United Arab Emirates (0.1%): | |||||||||||
Real Estate (0.1%): | |||||||||||
Emaar Development PJSC (b) | 1,646,518 | 1,980 | |||||||||
United Kingdom (15.4%): | |||||||||||
Communication Services (0.7%): | |||||||||||
| 4imprint Group PLC | 60,328 | 2,038 | |||||||||
BT Group PLC | 1,671,264 | 3,939 | |||||||||
Frontier Developments PLC (b) (c) | 53,219 | 841 | |||||||||
ITV PLC | 4,012,051 | 3,555 | |||||||||
Team17 Group PLC (b) | 231,250 | 1,368 | |||||||||
WPP PLC | 589,339 | 6,841 | |||||||||
18,582 | |||||||||||
Consumer Discretionary (1.1%): | |||||||||||
AB Dynamics PLC (c) | 124,343 | 1,699 | |||||||||
Barratt Developments PLC | 225,985 | 1,437 | |||||||||
Focusrite PLC | 262,754 | 3,189 | |||||||||
JD Sports Fashion PLC (b) | 1,515,561 | 2,341 | |||||||||
Kingfisher PLC | 528,529 | 1,755 | |||||||||
Marks & Spencer Group PLC (b) | 314,574 | 592 | |||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Next PLC | 136,688 | $ | 11,173 | ||||||||
Stellantis NV (c) | 331,211 | 4,969 | |||||||||
27,155 | |||||||||||
Consumer Staples (1.9%): | |||||||||||
Diageo PLC | 536,903 | 24,941 | |||||||||
Imperial Brands PLC | 845,788 | 19,095 | |||||||||
J Sainsbury PLC | 910,600 | 2,619 | |||||||||
Tesco PLC | 921,961 | 3,006 | |||||||||
49,661 | |||||||||||
Energy (3.4%): | |||||||||||
| BP PLC | 6,645,887 | 36,112 | |||||||||
Harbour Energy PLC | 372,951 | 1,795 | |||||||||
Shell PLC | 1,645,665 | 48,665 | |||||||||
86,572 | |||||||||||
Financials (2.8%): | |||||||||||
| 3i Group PLC | 223,259 | 3,570 | |||||||||
Barclays PLC | 7,123,893 | 15,183 | |||||||||
CMC Markets PLC (d) | 460,469 | 1,835 | |||||||||
HSBC Holdings PLC | 3,749,987 | 25,107 | |||||||||
Intermediate Capital Group PLC | 283,389 | 5,626 | |||||||||
Legal & General Group PLC | 3,471,606 | 11,364 | |||||||||
Standard Chartered PLC | 1,165,684 | 9,264 | |||||||||
71,949 | |||||||||||
Health Care (0.6%): | |||||||||||
Advanced Medical Solutions Group PLC | 522,004 | 1,981 | |||||||||
AstraZeneca PLC | 20,749 | 2,742 | |||||||||
AstraZeneca PLC | 18,618 | 2,460 | |||||||||
CVS Group PLC | 220,276 | 4,979 | |||||||||
EKF Diagnostics Holdings PLC | 1,989,087 | 877 | |||||||||
Ergomed PLC (b) | 192,616 | 2,676 | |||||||||
Tristel PLC | 222,075 | 1,036 | |||||||||
16,751 | |||||||||||
Industrials (2.0%): | |||||||||||
Ashtead Group PLC | 327,879 | 17,177 | |||||||||
Avon Protection PLC | 93,933 | 1,380 | |||||||||
Babcock International Group PLC (b) | 414,677 | 1,763 | |||||||||
BAE Systems PLC | 381,232 | 3,636 | |||||||||
Bunzl PLC | 51,177 | 1,784 | |||||||||
Concentric AB | 121,948 | 2,525 | |||||||||
easyJet PLC (b) | 428,403 | 2,796 | |||||||||
Ferguson PLC | 18,252 | 2,195 | |||||||||
Judges Scientific PLC | 56,985 | 5,754 | |||||||||
Renew Holdings PLC | 343,697 | 2,999 | |||||||||
Robert Walters PLC | 328,150 | 2,064 | |||||||||
Royal Mail PLC | 379,816 | 1,487 | |||||||||
SThree PLC | 680,692 | 3,330 | |||||||||
Volex PLC | 580,513 | 2,006 | |||||||||
50,896 | |||||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.3%): | |||||||||||
Aptitude Software Group PLC | 350,141 | $ | 1,456 | ||||||||
GB Group PLC | 229,590 | 1,609 | |||||||||
Kainos Group PLC | 245,522 | 3,900 | |||||||||
6,965 | |||||||||||
Materials (2.2%): | |||||||||||
Anglo American PLC | 241,664 | 11,904 | |||||||||
Croda International PLC | 165,232 | 14,385 | |||||||||
Endeavour Mining PLC (c) | 80,558 | 1,854 | |||||||||
Rio Tinto PLC | 352,694 | 25,587 | |||||||||
Treatt PLC | 326,954 | 3,609 | |||||||||
57,339 | |||||||||||
Real Estate (0.3%): | |||||||||||
Land Securities Group PLC | 239,711 | 2,314 | |||||||||
Safestore Holdings PLC | 120,327 | 1,724 | |||||||||
The British Land Co. PLC | 348,992 | 2,310 | |||||||||
Watkin Jones PLC | 592,864 | 1,731 | |||||||||
8,079 | |||||||||||
Utilities (0.1%): | |||||||||||
Centrica PLC (b) | 1,551,756 | 1,548 | |||||||||
Drax Group PLC | 243,731 | 2,068 | |||||||||
3,616 | |||||||||||
397,565 | |||||||||||
Total Common Stocks (Cost $2,270,644) | 2,528,777 | ||||||||||
Exchange-Traded Funds (0.2%) | |||||||||||
United States (0.2%): | |||||||||||
iShares Core MSCI EAFE ETF | 80,677 | 5,317 | |||||||||
iShares Core MSCI Emerging Markets ETF | 5,337 | 280 | |||||||||
5,597 | |||||||||||
Total Exchange-Traded Funds (Cost $5,690) | 5,597 | ||||||||||
Collateral for Securities Loaned (5.2%)^ | |||||||||||
United States (5.2%): | |||||||||||
HSBC US Government Money Market Fund, I Shares, 0.76% (h) | 12,077,234 | 12,077 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (h) | 121,668,113 | 121,668 | |||||||||
Total Collateral for Securities Loaned (Cost $133,745) | 133,745 | ||||||||||
Total Investments (Cost $2,410,079) — 103.3% | 2,668,119 | ||||||||||
Liabilities in excess of other assets — (3.3)% | (86,258 | ) | |||||||||
NET ASSETS — 100.00% | $ | 2,581,861 | |||||||||
^ Purchased with cash collateral from securities on loan.
(a) Amount represents less than 0.05% of net assets.
(b) Non-income producing security.
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(c) All or a portion of this security is on loan.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $29,589 thousand and amounted to 1.1% of net assets.
(e) Rounds to less than $1 thousand.
(f) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.05% of net assets as of May 31, 2022. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(g) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. At May 31, 2022, illiquid securities were less than 0.05% of the Fund's net assets.
(h) Rate disclosed is the daily yield on May 31, 2022.
(i) Restricted security that is not registered under the Securities Act of 1933.
(j) The following table details the acquisition date and cost of the Fund's restricted securities at May 31, 2022 (amount in thousand):
Security Name | Acquisition Date | Cost | |||||||||
Gazprom PJSC | 2/19/2016 | $ | 486 | ||||||||
LUKOIL PJSC, ADR | 12/21/2021 | 2,087 | |||||||||
Sberbank of Russia PJSC | 11/19/2020 | 2,134 | |||||||||
Sberbank of Russia PJSC, ADR | 1/20/2016 | 556 | |||||||||
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
GDR — Global Depositary Receipt
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
28
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA International Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $2,410,079) | $ | 2,668,119 | (a) | ||||
Foreign currency, at value (Cost $613) | 631 | ||||||
Cash | 29,144 | ||||||
Receivables: | |||||||
Interest and dividends | 12,803 | ||||||
Capital shares issued | 158 | ||||||
Investments sold | 218 | ||||||
Reclaims | 8,277 | ||||||
From Adviser | 28 | ||||||
Prepaid expenses | 56 | ||||||
Total Assets | 2,719,434 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 133,745 | ||||||
Investments purchased | 149 | ||||||
Capital shares redeemed | 1,069 | ||||||
Accrued foreign capital gains taxes | 338 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 1,497 | ||||||
Administration fees | 268 | ||||||
Custodian fees | 90 | ||||||
Transfer agent fees | 237 | ||||||
Compliance fees | 2 | ||||||
Trustees' fees | — | (b) | |||||
| 12b-1 fees | — | (b) | |||||
Other accrued expenses | 178 | ||||||
Total Liabilities | 137,573 | ||||||
Net Assets: | |||||||
| Capital | 2,320,243 | ||||||
Total accumulated earnings/(loss) | 261,618 | ||||||
Net Assets | $ | 2,581,861 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,301,727 | |||||
Institutional Shares | 1,278,976 | ||||||
Class A | 931 | ||||||
Class R6 | 227 | ||||||
Total | $ | 2,581,861 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 53,763 | ||||||
Institutional Shares | 53,005 | ||||||
Class A | 38 | ||||||
Class R6 | 9 | ||||||
Total | 106,815 | ||||||
(continues on next page)
See notes to financial statements.
29
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts) (continued)
| USAA International Fund | |||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 24.21 | |||||
Institutional Shares | 24.13 | ||||||
Class A | 24.27 | ||||||
Class R6 | 24.53 | ||||||
Maximum Sales Charge — Class A | 5.75 | % | |||||
| Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A | $ | 25.75 | |||||
(a) Includes $127,219 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
30
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA International Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 104,083 | |||||
Interest | 5 | ||||||
Securities lending (net of fees) | 706 | ||||||
Foreign tax withholding | (10,858 | ) | |||||
Total Income | 93,936 | ||||||
Expenses: | |||||||
Investment advisory fees | 21,078 | ||||||
Administration fees — Fund Shares | 2,258 | ||||||
Administration fees — Institutional Shares | 1,484 | ||||||
Administration fees — Class A | 2 | ||||||
Administration fees — Class R6 | — | (a) | |||||
Sub-Administration fees | 76 | ||||||
| 12b-1 fees — Class A | 3 | ||||||
Custodian fees | 593 | ||||||
Transfer agent fees — Fund Shares | 1,603 | ||||||
Transfer agent fees — Institutional Shares | 1,484 | ||||||
Transfer agent fees — Class A | 1 | ||||||
Transfer agent fees — Class R6 | — | (a) | |||||
Trustees' fees | 50 | ||||||
Compliance fees | 21 | ||||||
Legal and audit fees | 196 | ||||||
State registration and filing fees | 57 | ||||||
Interfund lending fees | — | (a) | |||||
Line of credit fees | 1 | ||||||
Other expenses | 329 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 148 | ||||||
Total Expenses | 29,384 | ||||||
Expenses waived/reimbursed by Adviser | (85 | ) | |||||
Net Expenses | 29,299 | ||||||
Net Investment Income (Loss) | 64,637 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | 95,675 | ||||||
Foreign taxes on realized gains | (547 | ) | |||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (459,118 | ) | |||||
Net change in accrued foreign taxes on unrealized gains | 195 | ||||||
Net realized/unrealized gains (losses) on investments | (363,795 | ) | |||||
Change in net assets resulting from operations | $ | (299,158 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
31
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA International Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 64,637 | $ | 60,275 | |||||||
Net realized gains (losses) | 95,128 | 194,425 | |||||||||
Net change in unrealized appreciation/depreciation | (458,923 | ) | 764,549 | ||||||||
Change in net assets resulting from operations | (299,158 | ) | 1,019,249 | ||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (127,097 | ) | (28,796 | ) | |||||||
Institutional Shares | (122,526 | ) | (31,477 | ) | |||||||
Class A | (79 | ) | (127 | ) | |||||||
Class R6 | (22 | ) | (87 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (249,724 | ) | (60,487 | ) | |||||||
Change in net assets resulting from capital transactions | (123,154 | ) | (537,018 | ) | |||||||
Change in net assets | (672,036 | ) | 421,744 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 3,253,897 | 2,832,153 | |||||||||
End of period | $ | 2,581,861 | $ | 3,253,897 | |||||||
(continues on next page)
See notes to financial statements.
32
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA International Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 75,918 | $ | 80,765 | |||||||
Distributions reinvested | 125,118 | 28,329 | |||||||||
Cost of shares redeemed | (224,413 | ) | (359,583 | ) | |||||||
Total Fund Shares | $ | (23,377 | ) | $ | (250,489 | ) | |||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 179,428 | $ | 78,811 | |||||||
Distributions reinvested | 122,400 | 31,451 | |||||||||
Cost of shares redeemed | (401,879 | ) | (384,872 | ) | |||||||
Total Institutional Shares | $ | (100,051 | ) | $ | (274,610 | ) | |||||
Class A | |||||||||||
Proceeds from shares issued | $ | 106 | $ | 6,788 | |||||||
Distributions reinvested | 60 | 16 | |||||||||
Cost of shares redeemed | (138 | ) | (14,243 | ) | |||||||
Total Class A | $ | 28 | $ | (7,439 | ) | ||||||
Class R6 | |||||||||||
Proceeds from shares issued | $ | 262 | $ | 50 | |||||||
Distributions reinvested | 22 | — | (a) | ||||||||
Cost of shares redeemed | (38 | ) | (4,530 | ) | |||||||
Total Class R6 | $ | 246 | $ | (4,480 | ) | ||||||
Change in net assets resulting from capital transactions | $ | (123,154 | ) | $ | (537,018 | ) | |||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 2,716 | 3,115 | |||||||||
Reinvested | 4,549 | 1,111 | |||||||||
Redeemed | (8,108 | ) | (14,241 | ) | |||||||
Total Fund Shares | (843 | ) | (10,015 | ) | |||||||
Institutional Shares | |||||||||||
Issued | 6,628 | 3,189 | |||||||||
Reinvested | 4,466 | 1,238 | |||||||||
Redeemed | (14,102 | ) | (15,106 | ) | |||||||
Total Institutional Shares | (3,008 | ) | (10,679 | ) | |||||||
Class A | |||||||||||
Issued | 4 | 305 | |||||||||
Reinvested | 2 | 1 | |||||||||
Redeemed | (5 | ) | (568 | ) | |||||||
Total Class A | 1 | (262 | ) | ||||||||
Class R6 | |||||||||||
Issued | 8 | 2 | |||||||||
Reinvested | 1 | — | (b) | ||||||||
Redeemed | (1 | ) | (157 | ) | |||||||
Total Class R6 | 8 | (155 | ) | ||||||||
Change in Shares | (3,842 | ) | (21,111 | ) | |||||||
(a) Rounds to less than $1 thousand.
(b) Rounds to less than 1 thousand shares.
See notes to financial statements.
33
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||
2022 | $ | 29.46 | 0.59 | (i) | (3.43 | ) | (2.84 | ) | (0.51 | ) | (1.90 | ) | |||||||||||||||
2021 | $ | 21.53 | 0.49 | (i) | 7.94 | 8.43 | (0.50 | ) | — | ||||||||||||||||||
2020 | $ | 28.70 | 0.44 | (i) | (1.12 | ) | (0.68 | ) | (0.73 | ) | (5.76 | ) | |||||||||||||||
2019 | $ | 32.82 | 0.53 | (2.41 | ) | (1.88 | ) | (0.44 | ) | (1.80 | ) | ||||||||||||||||
2018 | $ | 31.16 | 0.60 | 2.08 | 2.68 | (0.63 | ) | (0.39 | ) | ||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||
2022 | $ | 29.36 | 0.61 | (i) | (3.41 | ) | (2.80 | ) | (0.53 | ) | (1.90 | ) | |||||||||||||||
2021 | $ | 21.46 | 0.51 | (i) | 7.91 | 8.42 | (0.52 | ) | — | ||||||||||||||||||
2020 | $ | 28.61 | 0.47 | (i) | (1.12 | ) | (0.65 | ) | (0.74 | ) | (5.76 | ) | |||||||||||||||
2019 | $ | 32.72 | 0.56 | (2.41 | ) | (1.85 | ) | (0.46 | ) | (1.80 | ) | ||||||||||||||||
2018 | $ | 31.07 | 0.64 | 2.06 | 2.70 | (0.66 | ) | (0.39 | ) | ||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||
2022 | $ | 29.25 | 0.57 | (i) | (3.44 | ) | (2.87 | ) | (0.21 | ) | (1.90 | ) | |||||||||||||||
2021 | $ | 21.39 | 0.37 | (i) | 7.93 | 8.30 | (0.44 | ) | — | ||||||||||||||||||
2020 | $ | 28.58 | 0.36 | (i) | (1.10 | ) | (0.74 | ) | (0.69 | ) | (5.76 | ) | |||||||||||||||
2019 | $ | 32.67 | 0.47 | (2.41 | ) | (1.94 | ) | (0.35 | ) | (1.80 | ) | ||||||||||||||||
2018 | $ | 31.04 | 0.53 | 2.04 | 2.57 | (0.55 | ) | (0.39 | ) | ||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||
2022 | $ | 29.65 | 0.80 | (i) | (3.36 | ) | (2.56 | ) | (0.66 | ) | (1.90 | ) | |||||||||||||||
2021 | $ | 21.52 | 0.49 | (i) | 8.19 | 8.68 | (0.55 | ) | — | ||||||||||||||||||
2020 | $ | 28.66 | 0.49 | (i) | (1.12 | ) | (0.63 | ) | (0.75 | ) | (5.76 | ) | |||||||||||||||
| August 17, 2018(l) through May 31, 2019 | $ | 32.01 | 0.52 | (i) | (1.54 | ) | (1.02 | ) | (0.53 | ) | (1.80 | ) | |||||||||||||||
(a) 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.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
(d) From the period beginning July 1, 2019, the amount of any waivers or reimbursements and the amount of any recoupment are calculated without regard to the impact of any performance adjustment to the Fund's management fee.
(e) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 for Fund Shares, Institutional Shares, and Class A, and August 17, 2018 for Class R6, and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
See notes to financial statements.
34
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
| Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(a)(b) | Net Expenses(c)(d)(e)(f)(g) | Net Investment Income (Loss)(c) | Gross Expenses(c)(f)(g) | Net Assets, End of Period (000's) | Portfolio Turnover(b)(h) | ||||||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||||||
2022 | (2.41 | ) | $ | 24.21 | (10.51 | )% | 1.02 | % | 2.12 | % | 1.02 | % | $ | 1,301,727 | 34 | % | |||||||||||||||||||
2021 | (0.50 | ) | $ | 29.46 | 39.52 | % | 1.01 | % | 1.94 | % | 1.03 | % | $ | 1,608,436 | 67 | %(j) | |||||||||||||||||||
2020 | (6.49 | ) | $ | 21.53 | (6.13 | )% | 1.06 | % | 1.68 | % | 1.07 | % | $ | 1,391,279 | 119 | %(k) | |||||||||||||||||||
2019 | (2.24 | ) | $ | 28.70 | (5.14 | )% | 1.08 | % | 1.76 | % | 1.08 | % | $ | 1,690,782 | 30 | % | |||||||||||||||||||
2018 | (1.02 | ) | $ | 32.82 | 8.61 | % | 1.08 | % | 1.58 | % | 1.08 | % | $ | 1,876,020 | 36 | % | |||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||||||
2022 | (2.43 | ) | $ | 24.13 | (10.43 | )% | 0.94 | % | 2.20 | % | 0.95 | % | $ | 1,278,976 | 34 | % | |||||||||||||||||||
2021 | (0.52 | ) | $ | 29.36 | 39.61 | % | 0.94 | % | 2.00 | % | 0.95 | % | $ | 1,644,340 | 67 | %(j) | |||||||||||||||||||
2020 | (6.50 | ) | $ | 21.46 | (6.05 | )% | 0.99 | % | 1.77 | % | 0.99 | % | $ | 1,431,107 | 119 | %(k) | |||||||||||||||||||
2019 | (2.26 | ) | $ | 28.61 | (5.06 | )% | 1.00 | % | 1.81 | % | 1.00 | % | $ | 1,979,758 | 30 | % | |||||||||||||||||||
2018 | (1.05 | ) | $ | 32.72 | 8.68 | % | 1.00 | % | 1.62 | % | 1.00 | % | $ | 2,349,281 | 36 | % | |||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||||||
2022 | (2.11 | ) | $ | 24.27 | (10.57 | )% | 1.11 | % | 2.07 | % | 2.17 | % | $ | 931 | 34 | % | |||||||||||||||||||
2021 | (0.44 | ) | $ | 29.25 | 39.11 | % | 1.30 | % | 1.47 | % | 1.56 | % | $ | 1,093 | 67 | %(j) | |||||||||||||||||||
2020 | (6.45 | ) | $ | 21.39 | (6.37 | )% | 1.35 | % | 1.37 | % | 1.39 | % | $ | 6,402 | 119 | %(k) | |||||||||||||||||||
2019 | (2.15 | ) | $ | 28.58 | (5.39 | )% | 1.35 | % | 1.52 | % | 1.41 | % | $ | 7,715 | 30 | % | |||||||||||||||||||
2018 | (0.94 | ) | $ | 32.67 | 8.29 | % | 1.35 | % | 1.29 | % | 1.42 | % | $ | 8,101 | 36 | % | |||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||
Year Ended May 31: | |||||||||||||||||||||||||||||||||||
2022 | (2.56 | ) | $ | 24.53 | (9.53 | )% | 0.31 | % | 2.87 | % | 3.83 | % | $ | 227 | 34 | % | |||||||||||||||||||
2021 | (0.55 | ) | $ | 29.65 | 40.78 | % | 0.80 | % | 1.95 | % | 1.22 | % | $ | 28 | 67 | %(j) | |||||||||||||||||||
2020 | (6.51 | ) | $ | 21.52 | (5.95 | )% | 0.85 | % | 1.83 | % | 1.18 | % | $ | 3,365 | 119 | %(k) | |||||||||||||||||||
| August 17, 2018(l) through May 31, 2019 | (2.33 | ) | $ | 28.66 | (2.55 | )% | 0.85 | % | 2.19 | % | 2.03 | % | $ | 4,477 | 30 | % | |||||||||||||||||||
(f) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2020, 2019, 2018, and 2017. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(g) Does not include acquired fund fees and expenses, if any.
(h) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(i) Per share net investment income (loss) has been calculated using the average daily shares method.
(j) Reflects a return to normal trading levels after a prior year transition.
(k) Reflects increased trading activity due to current year transition or asset allocation shift.
(l) Commencement of operations.
See notes to financial statements.
35
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA International Fund (the "Fund"). The Fund offers four classes of shares: Fund Shares, Institutional Shares, Class A, and Class R6. The Fund is classified as diversified under the 1940 Act.
Each class of shares of the Fund has substantially identical rights and privileges, except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, other than ETF's, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
In accordance with procedures adopted by the Board, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time the exchange on which they are traded closes and the time the Fund's NAV is calculated. The Fund uses a systematic valuation model, provided daily by an independent third party to fair value its international equity securities. The valuations are categorized as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 98,508 | $ | 2,430,235 | $ | 34 | $ | 2,528,777 | |||||||||||
Exchange-Traded Funds | 5,597 | — | — | 5,597 | |||||||||||||||
Collateral for Securities Loaned | 133,745 | — | — | 133,745 | |||||||||||||||
Total | $ | 237,850 | $ | 2,430,235 | $ | 34 | $ | 2,668,119 | |||||||||||
For the year ended May 31, 2022, the Fund had transfers into/out of Level 3 that were under 0.50% of net assets.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2022, the Fund had no open forward foreign exchange currency contracts.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 127,219 | $ | — | $ | 133,745 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
The Fund filed for additional European Union reclaims related to prior years. These reclaims are recorded when the amount is known and there are no significant uncertainties on collectability. For the year ended May 31, 2022, the Fund recognized $112 thousand in reclaims, of which $3 thousand of the amount is related to interest on the filed reclaims. These reclaims and interest are reflected on the Statement of Operations as Dividend Income and Interest Income, respectively. In July 2022, the French Tax Authority issued favorable decisions relating to claims for France and related interest entitlements and acknowledgments of payments in an amount approximating $7 million.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing fees, and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 1,007,060 | $ | 1,317,821 | ||||
4. Affiliated Fund Ownership:
The Fund offers its shares for investment by other USAA Mutual Funds. The fund-of-funds do not invest in the underlying funds for the purpose of exercising management or control, and the affiliated fund-of-funds' annual and semi-annual reports may be viewed at www.vcm.com. As of May 31, 2022, certain fund-of-funds owned total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 0.3 | ||||||
USAA Cornerstone Equity Fund | 1.2 | ||||||
USAA Target Retirement Income Fund | 0.0 | (a) | |||||
USAA Target Retirement 2040 Fund | 0.0 | (a) | |||||
USAA Target Retirement 2050 Fund | 0.0 | (a) | |||||
USAA Target Retirement 2060 Fund | 0.0 | (a) | |||||
(a) Amount is less than 0.05%
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the prior investment adviser to the Fund, announced that AMCO would be acquired by Victory Capital Holdings Inc. (the "Transaction"). A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and VCM. The Transaction closed on July 1, 2019, and effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and no performance adjustments were made for the period beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter is utilized in calculating future performance adjustments.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper International Funds Index. The Lipper International Funds Index tracks the total return performance of the largest funds within the Lipper International Funds category.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points) | ||||||
| +/- 100 to 400 | +/- 4 | ||||||
| +/- 401 to 700 | +/- 5 | ||||||
| +/- 701 and greater | +/- 6 | ||||||
(a) Based on the difference between the average annual performance of the relevant share class of the Fund and its relevant Lipper index, rounded to the nearest basis point.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of the 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 pays a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper International Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2021, to May 31, 2022, performance adjustments were $(663), $(684), $(3), and $(1) for Fund Shares, Institutional Shares, Class A, and Class R6, in thousands, respectively. Performance adjustments were (0.04)%, (0.05)%, (0.24)%, and (0.54)% for Fund Shares, Institutional Shares, Class A, and Class R6, respectively. The performance adjustment rate included in the investment advisory fee may differ from the maximum over/under Annual Adjustment Rate due to differences in average net assets for the reporting period and rolling 36 month performance periods.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets.
VCM entered into an Investment Subadvisory Agreement with Wellington Management Company LLP ("Wellington Management"). Wellington Management directs the investment and reinvestment of a
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
portion of the Fund's assets (as allocated from time to time by VCM). This arrangement provides for monthly fees that are paid by VCM. VCM (not the Fund) pays the subadviser fees.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, 0.10%, 0.15%, and 0.05%, which is based on the Fund's average daily net assets of the Fund Shares, Institutional Shares, Class A, and Class R6, respectively. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund Shares based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Transfer agent fees for Institutional Shares, Class A, and Class R6 are paid monthly based on a fee accrued daily at an annualized rate of 0.10%, 0.10%, and 0.01%, respectively, of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust.
Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activity primarily intended to result in the sale of Class A. Amounts incurred and paid to the Distributor for the year ended May 31, 2022, are reflected on the Statement of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A shares. For the year ended May 31, 2022, the Distributor did not receive any commissions.
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred by certain classes of the Fund in any fiscal year exceed the expense limits for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Performance adjustments, acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limits (excluding voluntary waivers) were 1.06%, 0.99%, 1.35%, and 0.85% for Fund Shares, Institutional Shares, Class A, and Class R6, respectively.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 17 | $ | 372 | $ | 85 | $ | 474 | ||||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Equity Risk — The values of the equity securities in which the Fund invests may decline in response to developments affecting individual companies and/or general market, economic and political conditions and other factors. A company's earnings or dividends may not increase as expected due to poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters, military confrontations, war, terrorism, public health crises, or other events, conditions, and factors. Price changes may be temporary or may last for extended periods.
Foreign Securities Risk — Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market.
7. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the six months ended April 30, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
| Amount Outstanding at May 31, 2022 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||
| $ | — | $ | 7,000 | 10 | 1.21 | % | $ | 8,000 | |||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2022, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at May 31, 2022 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
| Borrower | $ | — | $ | 1,603 | 12 | 0.58 | % | $ | 2,640 | ||||||||||||||
* For the year ended May 31, 2022, based on the number of days borrowings were outstanding.
8. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||
| $ | (8,746 | ) | $ | 8,746 | |||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Total Distributions Paid | |||||||||||||||
$ | 105,145 | $ | 144,579 | $ | 249,724 | $ | 60,487 | $ | 60,487 | ||||||||||
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Other Earnings (Loss) | Accumulated Earnings | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Loss) | |||||||||||||||||||||
| $ | 37,365 | $ | 33,708 | $ | (717 | ) | $ | 70,356 | $ | (9,626 | ) | $ | 200,888 | $ | 261,618 | ||||||||||||
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31 and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31 and specified losses incurred after October 31. These losses are deemed to arise on the first day of the Fund's next taxable year.
** The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, and passive foreign investment company adjustments.
As of May 31, 2022, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 2,467,231 | $ | 480,190 | $ | (279,302 | ) | $ | 200,888 | |||||||
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA International Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA International Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
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Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21- 5/31/22* | Hypothetical Expenses Paid During Period 12/1/21- 5/31/22* | Annualized Expense Ratio During Period 12/1/21- 5/31/22 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 915.10 | $ | 1,019.80 | $ | 4.92 | $ | 5.19 | 1.03 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 915.70 | 1,020.24 | 4.49 | 4.73 | 0.94 | % | ||||||||||||||||||||
Class A | 1,000.00 | 914.90 | 1,019.25 | 5.44 | 5.74 | 1.14 | % | ||||||||||||||||||||
Class R6 | 1,000.00 | 918.30 | 1,022.99 | 1.87 | 1.97 | 0.39 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | Foreign Taxes Paid | |||||||||||||||
| — | %(a) | 81 | % | $ | 49,454 | $ | 151,059 | $ | 9,403 | ||||||||||
(a) Less than 1%.
The Fund intends to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on May 31, 2022, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.84 | $ | 0.09 | ||||
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(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA International Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") and the Subadvisory Agreement between the Adviser and Wellington Management Company LLP (the "Subadviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement and Subadvisory Agreement were approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement and Subadvisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and Subadvisory Agreement and the Adviser and the Subadviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's and the Subadviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement and Subadvisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement and the Subadvisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement and the Subadvisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
The Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Adviser and the Subadviser in providing services to the Fund.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser and the Subadviser. At the meeting at which the renewal of the Advisory Agreement and Subadvisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser and the Subadviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement and Subadvisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser and Subadviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the
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Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The Board considered the Adviser's process for monitoring the performance of the Subadviser and the Adviser's timeliness in responding to performance issues. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services and the effects of any performance adjustment1, as well as any fee waivers and reimbursements — was below the median of its expense group and above the median of its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were below the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund. The Board also took into account that the subadvisory fees under the Subadvisory Agreement are paid by the Adviser. The Board also considered and discussed information about the Subadviser's fees, including the amount of management fees retained by the Adviser after payment of the subadvisory fees.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance
1 The Adviser previously agreed that no performance adjustment (positive or negative) would be made to the amount payable to the Adviser from July 1, 2019, through June 30, 2020.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe and its Lipper index for the one-year period ended December 31, 2021, and was below the average of its performance universe and its Lipper index for the three-, five- and ten-year periods ended September 30, 2021. The Board took into account management's discussion of the Fund's performance, including the Fund's improved more recent performance as well certain changes made to the portfolio management of the Fund during the prior year.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser pays the Fund's subadvisory fees and also noted that the Adviser waived a portion of its management fee and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board considered the fact that the Adviser also pays the Fund's subadvisory fees. The Board also considered the effect of the change in size, if any, of each of the Fund's classes on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
Subadvisory Agreement
In approving the Subadvisory Agreement with respect to the Fund, the Board considered various factors, among them: (i) the nature, extent, and quality of services provided to the Fund by the Subadviser, including the personnel providing services; (ii) the Subadviser's compensation and any other benefits derived from the subadvisory relationships; (iii) comparisons, to the extent applicable, of subadvisory fees and performance to comparable investment companies; and (iv) the terms of the Subadvisory Agreement. A summary of the Board's analysis of these factors is set forth below. After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Subadvisory Agreement. In approving the Subadvisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
58
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Nature, Extent, and Quality of Services Provided; Investment Personnel — The Trustees considered information provided to them regarding the services provided by the Subadviser, including information presented periodically throughout the previous year. The Board considered the Subadviser's level of knowledge and investment style. The Board reviewed the experience and credentials of the investment personnel who are responsible for managing the investment of portfolio securities with respect to the Fund and the Subadviser's levels of staffing. The Trustees considered, based on the materials provided to them by the Subadviser, whether the method of compensating portfolio managers is reasonable and includes mechanisms to prevent a manager with underperformance from taking undue risks. The Trustees also noted the Subadviser's brokerage practices. The Board also considered the Subadviser's regulatory and compliance history. The Board also took into account the Subadviser's risk management processes. The Board noted that the Adviser's monitoring processes of the Subadviser include: (i) regular telephonic meetings to discuss, among other matters, investment strategies, and to review portfolio performance; (ii) quarterly portfolio compliance checklists and quarterly compliance certifications to the Board; and (iii) due diligence visits to the Subadviser.
Subadviser Compensation — The Board also took into consideration the financial condition of the Subadviser. In considering the cost of services to be provided by the Subadviser and the profitability to the Subadviser of its relationship with the Fund, the Trustees noted that the fees under the Subadvisory Agreement were paid by the Adviser. The Trustees also relied on the ability of the Adviser to negotiate the Subadvisory Agreement and the fees thereunder at arm's length. For the above reasons, the Board determined that the profitability of the Subadviser from its relationship with the Fund was not a material factor in its deliberations with respect to the consideration of the approval of the Subadvisory Agreement. For similar reasons, the Board concluded that the potential for economies of scale in the Subadviser's management of the Fund was not a material factor in considering the Subadvisory Agreement.
Subadvisory Fees and Fund Performance — The Board compared the subadvisory fees for the Fund with the fees that the Subadviser charges to comparable clients, as applicable. The Board considered that the Fund pays a management fee to the Adviser and that, in turn, the Adviser pays a subadvisory fee to the Subadviser. As noted above, the Board considered the Fund's performance during the one-, three-, five-, and ten-year periods ended September 30, 2021, as compared to the Fund's peer group and noted that the Board reviews at its regularly scheduled meetings information about the Fund's performance results. The Board also considered the performance of the Subadviser. The Board noted the Adviser's experience and resources in monitoring the performance, investment style, and risk-adjusted performance of the Subadviser. The Board was mindful of the Adviser's focus on the Subadviser's performance. The Board also noted the Subadviser's performance record for similar accounts, as applicable.
Conclusions — The Board reached the following conclusions regarding the Subadvisory Agreement: (i) the Subadviser is qualified to manage the Fund's assets in accordance with its investment objectives and policies; (ii) the Subadviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and relevant indices; and (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser and the Subadviser. Based on its conclusions, the Board determined that approval of the Subadvisory Agreement with respect to the Fund would be in the best interests of the Fund and its shareholders.
59
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
60
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23409-0722
MAY 31, 2022
Annual Report
USAA Sustainable World Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
TABLE OF CONTENTS
USAA Mutual Funds Trust
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 31 | ||||||
Statement of Operations | 32 | ||||||
Statements of Changes in Net Assets | 33 | ||||||
Financial Highlights | 36 | ||||||
Notes to Financial Statements | 38 | ||||||
| Report of Independent Registered Public Accounting Firm | 48 | ||||||
Supplemental Information (Unaudited) | 49 | ||||||
Trustee and Officer Information | 49 | ||||||
Proxy Voting and Portfolio Holdings Information | 55 | ||||||
Expense Examples | 55 | ||||||
Additional Federal Income Tax Information | 56 | ||||||
Advisory Contract Renewal | 57 | ||||||
Liquidity Risk Management Program | 60 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Sustainable World Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
At the start of the reporting period, equity markets consolidated, and interest rates leveled off after large upswings during the second quarter of 2021. With strong first quarter gross domestic product and corporate earnings growth in the rearview mirror, investors seemed to be contemplating their next move. Equity markets rotated from value to growth leadership as U.S. Treasury bond yields retreated from the highs of March 2021. Inflation data increased as the economy reopened more quickly than expected. The U.S. Federal Reserve (the "Fed") maintained that inflationary pressure is transitory but could become more persistent. The inflationary environment would be a key metric moving into the second half of the year.
The financial markets produced broadly flat returns in the third quarter. Conditions were initially supportive in July and August, thanks to positive economic data and continued strength in corporate earnings. The picture changed in September, however, as investors began to focus on risk factors such as supply chain disruptions and rising inflation. In addition, the Fed indicated it may begin tapering its stimulative quantitative easing policy — a development investors took as an indication that the first interest-rate increases may be on the way in 2022. News flow from overseas also took a negative turn in September, with the emergence of energy shortages in Europe and worries that the debt problems of Chinese property developer Evergrande could have a broader, systemic effect on China's economy.
Despite a number of headwinds to sentiment, U.S. equities posted solid gains in the fourth quarter of 2021, as reflected in the 11.03% return for the bellwether S&P 500® Index. The markets faced a shift in Fed policy as persistent inflation, driven by supply chain issues and rising commodity prices, led the central bank to announce, and subsequently accelerate, the tapering of its bond purchases that had helped keep longer-term borrowing costs low. In addition, the Fed began to signal the likelihood of two or more hikes in its benchmark overnight lending rate in 2022, representing a moving forward of the prior timetable. Prolonged negotiations over President Biden's Build Back Better spending bill put into question a source of anticipated fiscal stimulus. Finally, investors had to contend with the rapid emergence and spread of the Omicron variant of COVID-19, which threatened a new wave of lockdowns. Nonetheless, most major U.S. equity indices closed 2021 at or near all-time highs, supported by robust corporate profits and investor inflows given fixed income yields that remained unattractive.
The Russian invasion of Ukraine in February of 2022 added significant volatility to both equity and bond markets that were already concerned with elevated levels of inflation, a hawkish Fed, and rising interest rates. In the first quarter of 2022, the combination of widening credit spreads and rising interest rates led to the worst quarter for the Bloomberg US Aggregate Bond Index in 40 years. Equity markets did not fare any better, as the bellwether S&P 500 also posted a negative return during the quarter. With the Fed now embarking on a tightening cycle, the markets remained focused on the Fed and whether it can engineer a soft landing amidst the highest inflation readings in 40 years.
4
USAA Sustainable World Fund
Managers' Commentary (continued)
The end of the reporting period saw continued pressure on stocks and bonds. The Fed's hawkish pivot, which started in the fourth quarter of 2021, continued to put pressure on equity valuation multiples, especially for long-duration growth stocks. With inflation readings hitting four-decade highs, the Fed now faced an increasingly difficult task of implementing policy strong enough to tame inflation and provide a "soft landing" for the economy, while not being too aggressive and tilting the economy into recession. This risk contributed to the heightened stock market volatility, in addition to mounting COVID-related lockdowns in China, rising oil prices, and the ongoing conflict between Russia and the Ukraine.
• How did the USAA Sustainable World Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the reporting period ended May 31, 2022, the Fund Shares, Institutional Shares, and Class A had a total return of -8.90%, -8.89%, and -9.18% respectively. This compares to returns of -6.78% for the MSCI All Country World Index, and -11.37% for the Lipper Global Funds Index.
Victory Capital Management Inc. ("VCM") is the Fund's investment adviser. RS Investments Global, RS Investments Value, Sophus Capital, Trivalent Investments, NewBridge Asset Management, and THB Asset Management are VCM investment franchises that each manage portions of the Fund. Primary responsibility for the day-to-day discretionary management of the Fund lies with the investment franchises.
• What strategies did you employ during the reporting period?
During the one-year period ending on May 31, 2022, the Fund underperformed the MSCI All Country World Index. On a country basis, the United Kingdom and Switzerland were detractors from overall performance, mainly driven by negative stock selection. This was offset by positive stock selection in Japan and China.
Reviewing performance from a sector standpoint, stock selection was a positive contributor in information technology. The health care and consumer discretionary sectors had a negative stock selection effect. An underweight to the consumer services sector benefited results during the reporting period.
Thank you for allowing us to assist you with your investment needs.
5
USAA Sustainable World Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 10/1/92 | 8/7/15 | 8/1/10 | ||||||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | Maximum | MSCI All-Country | Lipper Global | ||||||||||||||||||||||
One Year | –8.90 | % | –8.89 | % | –9.18 | % |
| –14.39 | % | –6.78 | % | –11.37 | % | ||||||||||||||
Five Year | 8.50 | % | 8.56 | % | 8.21 | % |
| 6.93 | % | 9.00 | % | 7.32 | % | ||||||||||||||
Ten Year | 11.06 | % | NA | 10.77 | % |
| 10.12 | % | 10.25 | % | 9.77 | % | |||||||||||||||
Since Inception | NA | 8.34 | % | NA |
| NA | NA | NA | |||||||||||||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The maximum offering price figures reflect a maximum sales charge of 5.75% for Class A. Net Asset Value does not reflect sales charges.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Sustainable World Fund — Growth of $10,000
1The unmanaged MSCI All-Country World Index is a free float-adjusted, market capitalization-weighted index designed to measure the performance of large- and mid-cap stocks across developed and emerging markets. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
2The unmanaged Lipper Global Funds Index tracks the total return performance of funds within the Lipper Global Funds category. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Sustainable World Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation.
Top 10 Sectors:
May 31, 2022
(% of Net Assets)
Information Technology | 21.2 | % | |||||
Financials | 16.0 | % | |||||
Health Care | 12.8 | % | |||||
Consumer Discretionary | 11.4 | % | |||||
Industrials | 9.1 | % | |||||
Communication Services | 7.1 | % | |||||
Consumer Staples | 7.0 | % | |||||
Energy | 5.2 | % | |||||
Materials | 4.6 | % | |||||
Utilities | 2.5 | % | |||||
Country Allocation:
May 31, 2022
(% of Net Assets)
* Includes countries with less than 3.0% of portfolio and short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.2%) | |||||||||||
Australia (2.2%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Aristocrat Leisure Ltd. | 216,889 | $ | 5,239 | ||||||||
Lovisa Holdings Ltd. | 39,845 | 428 | |||||||||
PWR Holdings Ltd. | 69,861 | 389 | |||||||||
6,056 | |||||||||||
Energy (0.1%): | |||||||||||
Santos Ltd. | 79,586 | 463 | |||||||||
Woodside Energy Group Ltd. | 19,081 | 403 | |||||||||
866 | |||||||||||
Financials (0.7%): | |||||||||||
Macquarie Group Ltd. | 57,380 | 7,622 | |||||||||
National Australia Bank Ltd. | 47,251 | 1,059 | |||||||||
8,681 | |||||||||||
Health Care (0.7%): | |||||||||||
CSL Ltd. | 41,707 | 8,112 | |||||||||
Nanosonics Ltd. (a) | 86,965 | 237 | |||||||||
Sonic Healthcare Ltd. | 21,208 | 557 | |||||||||
8,906 | |||||||||||
Industrials (0.1%): | |||||||||||
Austal Ltd. | 248,175 | 352 | |||||||||
IPH Ltd. | 41,079 | 231 | |||||||||
Johns Lyng Group Ltd. | 97,070 | 415 | |||||||||
998 | |||||||||||
Materials (0.1%): | |||||||||||
Imdex Ltd. | 177,379 | 316 | |||||||||
Ramelius Resources Ltd. | 412,835 | 387 | |||||||||
Rio Tinto Ltd. | 9,635 | 788 | |||||||||
1,491 | |||||||||||
Real Estate (0.0%): (b) | |||||||||||
Charter Hall Group | 37,952 | 361 | |||||||||
Stockland | 137,623 | 394 | |||||||||
755 | |||||||||||
Utilities (0.0%): (b) | |||||||||||
Origin Energy Ltd. | 122,135 | 598 | |||||||||
28,351 | |||||||||||
Austria (0.0%): (b) | |||||||||||
Industrials (0.0%): | |||||||||||
ANDRITZ AG | 9,366 | 434 | |||||||||
Belgium (0.4%): | |||||||||||
Information Technology (0.4%): | |||||||||||
Melexis NV | 54,771 | 4,751 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Bermuda (0.5%): | |||||||||||
Industrials (0.5%): | |||||||||||
Triton International Ltd. | 101,709 | $ | 6,486 | ||||||||
Brazil (0.4%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Vibra Energia SA | 228,956 | 937 | |||||||||
Consumer Staples (0.1%): | |||||||||||
Sao Martinho SA | 67,400 | 715 | |||||||||
Sendas Distribuidora SA | 172,322 | 574 | |||||||||
SLC Agricola SA | 44,860 | 518 | |||||||||
1,807 | |||||||||||
Financials (0.1%): | |||||||||||
Itau Unibanco Holding SA, ADR | 152,421 | 835 | |||||||||
Health Care (0.0%): (b) | |||||||||||
Hypera SA | 72,300 | 590 | |||||||||
Industrials (0.0%): (b) | |||||||||||
Randon SA Implementos e Participacoes Preference Shares | 172,800 | 372 | |||||||||
SIMPAR SA | 156,100 | 392 | |||||||||
764 | |||||||||||
Materials (0.1%): | |||||||||||
Dexco SA | 135,642 | 320 | |||||||||
Gerdau SA Preference Shares | 87,000 | 534 | |||||||||
854 | |||||||||||
5,787 | |||||||||||
Canada (4.3%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Lululemon Athletica, Inc. (a) | 7,579 | 2,218 | |||||||||
Consumer Staples (0.8%): | |||||||||||
Alimentation Couche-Tard, Inc. | 216,877 | 9,855 | |||||||||
Energy (0.6%): | |||||||||||
Parex Resources, Inc. (c) | 319,539 | 7,077 | |||||||||
Pason Systems, Inc. | 15,950 | 202 | |||||||||
Trican Well Service Ltd. (a) | 70,976 | 260 | |||||||||
7,539 | |||||||||||
Financials (0.4%): | |||||||||||
Fairfax Financial Holdings Ltd. | 9,700 | 5,384 | |||||||||
Industrials (0.7%): | |||||||||||
Canadian Pacific Railway Ltd. | 123,386 | 8,805 | |||||||||
Savaria Corp. | 19,253 | 220 | |||||||||
9,025 | |||||||||||
Information Technology (0.9%): | |||||||||||
Constellation Software, Inc. | 7,372 | 11,604 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.7%): | |||||||||||
Aginco Eagle Mines Ltd. | 156,497 | $ | 8,296 | ||||||||
Karora Resources, Inc. (a) | 63,952 | 224 | |||||||||
Wesdome Gold Mines Ltd. (a) | 60,276 | 554 | |||||||||
9,074 | |||||||||||
54,699 | |||||||||||
China (3.6%): | |||||||||||
Communication Services (1.2%): | |||||||||||
Baidu, Inc., ADR (a) | 5,769 | 810 | |||||||||
NetEase, Inc., ADR | 11,111 | 1,152 | |||||||||
Tencent Holdings Ltd. | 307,300 | 14,050 | |||||||||
16,012 | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Alibaba Group Holding Ltd., ADR (a) | 19,097 | 1,834 | |||||||||
BYD Co. Ltd. Class H | 22,000 | 782 | |||||||||
China Meidong Auto Holdings Ltd. | 90,000 | 323 | |||||||||
Fuyao Glass Industry Group Co. Ltd. Class H (d) | 104,400 | 505 | |||||||||
JD.com, Inc. Class A | 11,274 | 317 | |||||||||
JD.com, Inc., ADR | 18,570 | 1,042 | |||||||||
Jiumaojiu International Holdings Ltd. (c) (d) | 194,000 | 455 | |||||||||
Meituan Class B (a) (d) | 26,400 | 619 | |||||||||
5,877 | |||||||||||
Consumer Staples (0.5%): | |||||||||||
Chacha Food Co. Ltd. Class A | 70,000 | 582 | |||||||||
Chenguang Biotech Group Co. Ltd. Class A (a) | 212,300 | 513 | |||||||||
Foshan Haitian Flavouring & Food Co. Ltd. Class A | 400,857 | 4,600 | |||||||||
Inner Mongolia Yili Industrial Group Co. Ltd. Class A | 96,300 | 549 | |||||||||
6,244 | |||||||||||
Energy (0.1%): | |||||||||||
PetroChina Co. Ltd. Class H | 2,188,000 | 1,152 | |||||||||
Financials (0.8%): | |||||||||||
Industrial & Commercial Bank of China Ltd. Class H | 14,701,370 | 8,804 | |||||||||
PICC Property & Casualty Co. Ltd. Class H | 826,000 | 800 | |||||||||
Postal Savings Bank of China Co. Ltd. Class H (d) | 1,712,000 | 1,271 | |||||||||
10,875 | |||||||||||
Health Care (0.1%): | |||||||||||
Hygeia Healthcare Holdings Co. Ltd. (d) | 69,400 | 385 | |||||||||
Pharmaron Beijing Co. Ltd. Class H (d) | 28,800 | 348 | |||||||||
Shenzhen Mindray Bio-Medical Electronics Co. Ltd. Class A | 11,000 | 498 | |||||||||
1,231 | |||||||||||
Industrials (0.1%): | |||||||||||
China Railway Group Ltd. Class H | 1,507,000 | 1,041 | |||||||||
Xinte Energy Co. Ltd. Class H | 218,000 | 512 | |||||||||
1,553 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.1%): | |||||||||||
Luxshare Precision Industry Co. Ltd. Class A | 80,200 | $ | 406 | ||||||||
WUS Printed Circuit Kunshan Co. Ltd. Class A | 300,330 | 709 | |||||||||
Yonyou Network Technology Co. Ltd. Class A | 94,075 | 273 | |||||||||
1,388 | |||||||||||
Materials (0.1%): | |||||||||||
China Hongqiao Group Ltd. | 578,000 | 716 | |||||||||
Shandong Nanshan Aluminum Co. Ltd. Class A | 683,100 | 363 | |||||||||
Wanhua Chemical Group Co. Ltd. Class A | 51,200 | 645 | |||||||||
1,724 | |||||||||||
Utilities (0.1%): | |||||||||||
China Longyuan Power Group Corp. Ltd. Class H | 346,000 | 737 | |||||||||
46,793 | |||||||||||
Denmark (0.8%): | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
Pandora A/S | 46,496 | 3,757 | |||||||||
Consumer Staples (0.3%): | |||||||||||
Royal Unibrew A/S | 53,114 | 4,661 | |||||||||
Health Care (0.1%): | |||||||||||
Novo Nordisk A/S Class B | 12,785 | 1,420 | |||||||||
Industrials (0.1%): | |||||||||||
AP Moller — Maersk A/S Class B | 247 | 724 | |||||||||
INVISIO AB | 15,234 | 244 | |||||||||
968 | |||||||||||
10,806 | |||||||||||
Finland (0.1%): | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Revenio Group Oyj | 5,527 | 287 | |||||||||
Industrials (0.1%): | |||||||||||
Metso Outotec Oyj | 42,735 | 399 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Nokia Oyj | 68,710 | 345 | |||||||||
1,031 | |||||||||||
France (2.7%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Publicis Groupe SA | 8,842 | 484 | |||||||||
Vivendi SE | 25,797 | 308 | |||||||||
792 | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
La Francaise des Jeux SAEM (d) | 140,540 | 5,126 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 2,334 | 1,507 | |||||||||
6,633 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Staples (0.1%): | |||||||||||
Pernod Ricard SA | 3,636 | $ | 714 | ||||||||
Energy (0.6%): | |||||||||||
Gaztransport Et Technigaz SA | 53,956 | 7,075 | |||||||||
Financials (0.1%): | |||||||||||
AXA SA | 23,737 | 600 | |||||||||
BNP Paribas SA (c) | 10,446 | 598 | |||||||||
1,198 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Pharmagest Interactive | 2,628 | 230 | |||||||||
Vetoquinol SA | 2,414 | 322 | |||||||||
552 | |||||||||||
Industrials (0.6%): | |||||||||||
Cie de Saint-Gobain (c) | 10,876 | 645 | |||||||||
Eiffage SA | 3,622 | 359 | |||||||||
Rexel SA (a) | 18,131 | 386 | |||||||||
Safran SA (c) | 57,067 | 5,912 | |||||||||
Teleperformance | 1,164 | 386 | |||||||||
Thermador Groupe | 4,487 | 447 | |||||||||
8,135 | |||||||||||
Information Technology (0.1%): | |||||||||||
Capgemini SE (c) | 3,474 | 675 | |||||||||
Edenred | 7,120 | 352 | |||||||||
Esker SA | 1,123 | 178 | |||||||||
Lectra | 8,890 | 349 | |||||||||
1,554 | |||||||||||
Materials (0.6%): | |||||||||||
Arkema SA | 64,881 | 7,854 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Klepierre SA | 12,829 | 293 | |||||||||
34,800 | |||||||||||
Germany (1.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Deutsche Telekom AG | 51,777 | 1,065 | |||||||||
Consumer Discretionary (0.4%): | |||||||||||
Mercedes-Benz Group AG | 8,461 | 603 | |||||||||
Volkswagen AG Preference Shares | 31,638 | 5,279 | |||||||||
5,882 | |||||||||||
Energy (0.1%): | |||||||||||
CropEnergies AG | 14,189 | 154 | |||||||||
VERBIO Vereinigte BioEnergie AG | 11,272 | 609 | |||||||||
763 | |||||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.1%): | |||||||||||
Allianz SE Registered Shares | 2,770 | $ | 582 | ||||||||
Hannover Rueck SE | 2,659 | 407 | |||||||||
989 | |||||||||||
Health Care (0.2%): | |||||||||||
Bayer AG Registered Shares | 10,835 | 775 | |||||||||
Eckert & Ziegler Strahlen- und Medizintechnik AG | 4,222 | 197 | |||||||||
Merck KGaA | 4,290 | 809 | |||||||||
Nexus AG | 4,466 | 259 | |||||||||
2,040 | |||||||||||
Industrials (0.1%): | |||||||||||
| 2G Energy AG | 2,978 | 344 | |||||||||
Amadeus Fire AG | 1,977 | 289 | |||||||||
Deutsche Post AG Registered Shares | 14,594 | 604 | |||||||||
| SFC Energy AG (a) | 6,098 | 165 | |||||||||
1,402 | |||||||||||
Information Technology (0.2%): | |||||||||||
AIXTRON SE | 13,296 | 393 | |||||||||
Basler AG | 2,473 | 301 | |||||||||
Infineon Technologies AG | 12,177 | 379 | |||||||||
LPKF Laser & Electronics AG (a) (c) | 10,544 | 131 | |||||||||
PVA TePla AG (a) | 12,535 | 329 | |||||||||
SAP SE | 2,896 | 290 | |||||||||
Secunet Security Networks AG | 973 | 348 | |||||||||
2,171 | |||||||||||
Materials (0.0%): (b) | |||||||||||
Covestro AG (d) | 11,044 | 506 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
LEG Immobilien SE | 2,834 | 292 | |||||||||
15,110 | |||||||||||
Greece (0.1%): | |||||||||||
Financials (0.0%): (b) | |||||||||||
National Bank of Greece SA (a) | 122,354 | 466 | |||||||||
Industrials (0.1%): | |||||||||||
Mytilineos SA | 28,809 | 513 | |||||||||
979 | |||||||||||
Hong Kong (0.3%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Bosideng International Holdings Ltd. | 938,000 | 499 | |||||||||
Chow Tai Fook Jewellery Group Ltd. | 207,800 | 360 | |||||||||
859 | |||||||||||
Financials (0.1%): | |||||||||||
BOC Hong Kong Holdings Ltd. | 220,000 | 845 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.0%): (b) | |||||||||||
Pacific Basin Shipping Ltd. | 1,484,000 | $ | 774 | ||||||||
Real Estate (0.1%): | |||||||||||
China Resources Land Ltd. | 170,000 | 757 | |||||||||
CK Asset Holdings Ltd. | 56,817 | 370 | |||||||||
1,127 | |||||||||||
3,605 | |||||||||||
India (0.7%): | |||||||||||
Communication Services (0.0%): (b) | |||||||||||
Sun TV Network Ltd. | 41,666 | 238 | |||||||||
Consumer Discretionary (0.1%): | |||||||||||
Balkrishna Industries Ltd. | 23,998 | 718 | |||||||||
Mahindra & Mahindra Ltd. | 81,748 | 1,082 | |||||||||
1,800 | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Dabur India Ltd. | 53,270 | 356 | |||||||||
Financials (0.2%): | |||||||||||
Cholamandalam Investment & Finance Co. Ltd. | 92,254 | 803 | |||||||||
ICICI Bank Ltd., ADR | 66,070 | 1,272 | |||||||||
UTI Asset Management Co. Ltd. | 22,547 | 198 | |||||||||
2,273 | |||||||||||
Health Care (0.1%): | |||||||||||
Apollo Hospitals Enterprise Ltd. | 12,278 | 627 | |||||||||
Industrials (0.1%): | |||||||||||
Larsen & Toubro Ltd. | 40,435 | 856 | |||||||||
Information Technology (0.1%): | |||||||||||
Infosys Ltd., ADR | 63,586 | 1,199 | |||||||||
WNS Holdings Ltd., ADR (a) | 9,272 | 675 | |||||||||
1,874 | |||||||||||
Materials (0.1%): | |||||||||||
NMDC Ltd. | 201,247 | 327 | |||||||||
Tata Steel Ltd. (e) | 48,849 | 663 | |||||||||
990 | |||||||||||
Utilities (0.0%): (b) | |||||||||||
GAIL India Ltd. | 203,016 | 385 | |||||||||
9,399 | |||||||||||
Indonesia (0.9%): | |||||||||||
Communication Services (0.8%): | |||||||||||
PT Telkom Indonesia Persero Tbk | 36,834,138 | 10,876 | |||||||||
Financials (0.1%): | |||||||||||
PT Bank Mandiri Persero Tbk | 1,133,100 | 661 | |||||||||
11,537 | |||||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Ireland (1.0%): | |||||||||||
Health Care (0.0%): (b) | |||||||||||
ICON PLC (a) | 2,440 | $ | 546 | ||||||||
Industrials (1.0%): | |||||||||||
DCC PLC | 7,728 | 546 | |||||||||
Eaton Corp. PLC | 75,800 | 10,506 | |||||||||
Johnson Controls International PLC | 22,200 | 1,210 | |||||||||
12,262 | |||||||||||
12,808 | |||||||||||
Israel (0.1%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Maytronics Ltd. | 14,458 | 261 | |||||||||
Financials (0.0%): (b) | |||||||||||
Bank Leumi Le | 36,654 | 365 | |||||||||
Information Technology (0.1%): | |||||||||||
Allot Ltd. (a) | 23,173 | 122 | |||||||||
Nice Ltd. (a) | 1,942 | 387 | |||||||||
509 | |||||||||||
1,135 | |||||||||||
Italy (1.4%): | |||||||||||
Health Care (0.5%): | |||||||||||
El.En. SpA | 42,010 | 570 | |||||||||
Recordati Industria Chimica e Farmaceutica SpA | 130,743 | 5,858 | |||||||||
6,428 | |||||||||||
Industrials (0.0%): (b) | |||||||||||
Leonardo SpA (a) | 39,159 | 422 | |||||||||
Information Technology (0.1%): | |||||||||||
Nexi SpA (a) (c) (d) | 30,509 | 311 | |||||||||
Sesa SpA | 3,615 | 498 | |||||||||
809 | |||||||||||
Utilities (0.8%): | |||||||||||
Enel SpA | 791,797 | 5,144 | |||||||||
Iren SpA | 126,720 | 330 | |||||||||
Snam SpA | 855,435 | 4,975 | |||||||||
10,449 | |||||||||||
18,108 | |||||||||||
Japan (5.6%): | |||||||||||
Communication Services (1.1%): | |||||||||||
Capcom Co. Ltd. | 282,408 | 7,950 | |||||||||
Intage Holdings, Inc. | 19,700 | 215 | |||||||||
Kakaku.com, Inc. | 226,191 | 4,458 | |||||||||
Konami Holdings Corp. | 4,800 | 325 | |||||||||
MarkLines Co. Ltd. | 14,700 | 273 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Nippon Telegraph & Telephone Corp. | 28,234 | $ | 863 | ||||||||
ValueCommerce Co. Ltd. | 11,200 | 274 | |||||||||
14,358 | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Open House Group Co. Ltd. | 7,891 | 328 | |||||||||
Shoei Co. Ltd. | 13,100 | 488 | |||||||||
Sony Group Corp. | 14,651 | 1,374 | |||||||||
The Furukawa Battery Co. Ltd. | 18,300 | 170 | |||||||||
Toyota Motor Corp. | 53,600 | 892 | |||||||||
ZOZO, Inc. | 245,500 | 5,212 | |||||||||
8,464 | |||||||||||
Consumer Staples (0.6%): | |||||||||||
Ajinomoto Co., Inc. | 19,200 | 466 | |||||||||
Create SD Holdings Co. Ltd. | 9,100 | 207 | |||||||||
Retail Partners Co. Ltd. | 22,100 | 192 | |||||||||
Seven & i Holdings Co. Ltd. | 15,216 | 637 | |||||||||
Toyo Suisan Kaisha Ltd. | 154,149 | 5,768 | |||||||||
7,270 | |||||||||||
Financials (0.7%): | |||||||||||
Mitsubishi UFJ Financial Group, Inc. | 1,316,312 | 7,489 | |||||||||
Mizuho Financial Group, Inc. | 40,911 | 487 | |||||||||
ORIX Corp. | 47,674 | 906 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 15,275 | 469 | |||||||||
9,351 | |||||||||||
Health Care (0.5%): | |||||||||||
Hoya Corp. | 48,802 | 5,195 | |||||||||
Japan Lifeline Co. Ltd. | 20,600 | 146 | |||||||||
Ono Pharmaceutical Co. Ltd. | 13,200 | 350 | |||||||||
5,691 | |||||||||||
Industrials (1.2%): | |||||||||||
AGC, Inc. | 9,600 | 361 | |||||||||
Altech Corp. | 14,900 | 218 | |||||||||
Denyo Co. Ltd. | 14,700 | 181 | |||||||||
Fuji Electric Co. Ltd. | 72,300 | 3,391 | |||||||||
gremz, Inc. | 15,200 | 179 | |||||||||
Hitachi Ltd. | 12,945 | 672 | |||||||||
ITOCHU Corp. | 29,209 | 838 | |||||||||
JAC Recruitment Co. Ltd. | 15,100 | 212 | |||||||||
Komatsu Ltd. | 17,900 | 445 | |||||||||
METAWATER Co. Ltd. | 10,800 | 169 | |||||||||
Mirait Holdings Corp. | 16,400 | 206 | |||||||||
Mitsui & Co. Ltd. | 25,920 | 651 | |||||||||
Nippon Express Holdings, Inc. | 7,600 | 442 | |||||||||
Nippon Yusen | 76,654 | 6,337 | |||||||||
Organo Corp. | 4,100 | 311 | |||||||||
S-Pool, Inc. | 67,700 | 640 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tocalo Co. Ltd. | 28,100 | $ | 297 | ||||||||
Weathernews, Inc. | 4,400 | 228 | |||||||||
15,778 | |||||||||||
Information Technology (0.7%): | |||||||||||
Comture Corp. | 14,400 | 316 | |||||||||
Digital Arts, Inc. | 3,700 | 201 | |||||||||
Fujitsu Ltd. | 4,059 | 609 | |||||||||
Fukui Computer Holdings, Inc. | 9,600 | 245 | |||||||||
Future Corp. | 29,800 | 381 | |||||||||
Murata Manufacturing Co. Ltd. | 6,741 | 433 | |||||||||
NTT Data Corp. | 23,261 | 364 | |||||||||
Softcreate Holdings Corp. | 11,200 | 360 | |||||||||
TechMatrix Corp. | 15,700 | 196 | |||||||||
Tokyo Electron Ltd. | 1,801 | 826 | |||||||||
Ulvac, Inc. | 106,582 | 4,491 | |||||||||
8,422 | |||||||||||
Materials (0.1%): | |||||||||||
JCU Corp. | 9,300 | 267 | |||||||||
Maeda Kosen Co. Ltd. | 9,100 | 184 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 3,243 | 459 | |||||||||
Tosoh Corp. | 30,082 | 437 | |||||||||
1,347 | |||||||||||
Real Estate (0.0%): (b) | |||||||||||
Daiwa House Industry Co. Ltd. | 14,372 | 346 | |||||||||
Utilities (0.0%): (b) | |||||||||||
Osaka Gas Co. Ltd. | 23,237 | 436 | |||||||||
71,463 | |||||||||||
Korea, Republic Of (1.9%): | |||||||||||
Communication Services (0.1%): | |||||||||||
JYP Entertainment Corp. | 15,232 | 697 | |||||||||
LG Uplus Corp. | 69,614 | 778 | |||||||||
1,475 | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Shinsegae, Inc. | 2,963 | 605 | |||||||||
Financials (0.2%): | |||||||||||
Hana Financial Group, Inc. | 23,404 | 936 | |||||||||
Samsung Securities Co. Ltd. | 16,707 | 534 | |||||||||
Woori Financial Group, Inc. | 72,751 | 876 | |||||||||
2,346 | |||||||||||
Health Care (0.1%): | |||||||||||
InBody Co. Ltd. | 14,096 | 316 | |||||||||
Samsung Biologics Co. Ltd. (a) (d) | 875 | 597 | |||||||||
913 | |||||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.0%): (b) | |||||||||||
CJ Corp. | 5,449 | $ | 375 | ||||||||
Information Technology (1.5%): | |||||||||||
Innox Advanced Materials Co. Ltd. | 14,502 | 512 | |||||||||
Samsung Electro-Mechanics Co. Ltd. | 4,035 | 501 | |||||||||
Samsung Electronics Co. Ltd. | 307,928 | 16,747 | |||||||||
SK Hynix, Inc. | 12,628 | 1,095 | |||||||||
18,855 | |||||||||||
Materials (0.0%): (b) | |||||||||||
PI Advanced Materials Co. Ltd. | 11,946 | 481 | |||||||||
25,050 | |||||||||||
Luxembourg (0.1%): | |||||||||||
Energy (0.1%): | |||||||||||
Tenaris SA | 33,102 | 552 | |||||||||
Materials (0.0%): (b) | |||||||||||
ArcelorMittal SA | 16,261 | 520 | |||||||||
1,072 | |||||||||||
Malaysia (0.1%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
MR DIY Group M Bhd (d) | 431,600 | 320 | |||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Kuala Lumpur Kepong Bhd | 71,400 | 417 | |||||||||
Financials (0.1%): | |||||||||||
Public Bank Bhd | 801,300 | 866 | |||||||||
Materials (0.0%): (b) | |||||||||||
Petronas Chemicals Group Bhd | 183,400 | 430 | |||||||||
2,033 | |||||||||||
Mexico (0.1%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Alsea SAB de CV (a) | 180,386 | 386 | |||||||||
Financials (0.1%): | |||||||||||
Grupo Financiero Banorte SAB de CV Class O | 140,658 | 912 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Corp Inmobiliaria Vesta SAB de CV | 200,600 | 409 | |||||||||
1,707 | |||||||||||
Netherlands (0.7%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Heineken NV | 3,656 | 368 | |||||||||
Koninklijke Ahold Delhaize NV | 27,098 | 747 | |||||||||
1,115 | |||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.1%): | |||||||||||
ING Groep NV | 38,230 | $ | 432 | ||||||||
NN Group NV (c) | 9,661 | 479 | |||||||||
911 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
QIAGEN NV (a) | 8,357 | 384 | |||||||||
Information Technology (0.5%): | |||||||||||
ASM International NV | 17,135 | 5,312 | |||||||||
STMicroelectronics NV | 18,451 | 739 | |||||||||
6,051 | |||||||||||
8,461 | |||||||||||
New Zealand (0.3%): | |||||||||||
Health Care (0.3%): | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 288,197 | 3,932 | |||||||||
Norway (1.1%): | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Mowi ASA | 14,843 | 387 | |||||||||
Energy (0.7%): | |||||||||||
Aker BP ASA (c) | 172,570 | 7,439 | |||||||||
Equinor ASA | 10,659 | 405 | |||||||||
Magseis Fairfield ASA (a) | 531,668 | 345 | |||||||||
TGS ASA | 12,537 | 207 | |||||||||
Var Energi ASA | 93,489 | 446 | |||||||||
8,842 | |||||||||||
Financials (0.4%): | |||||||||||
SpareBank 1 SMN | 341,023 | 4,633 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Bouvet ASA | 31,371 | 213 | |||||||||
14,075 | |||||||||||
Peru (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Credicorp Ltd. | 5,647 | 793 | |||||||||
Philippines (0.0%): (b) | |||||||||||
Financials (0.0%): | |||||||||||
BDO Unibank, Inc. | 237,310 | 604 | |||||||||
Qatar (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Qatar Islamic Bank SAQ | 118,052 | 751 | |||||||||
Industrials (0.0%): (b) | |||||||||||
Industries Qatar QSC | 107,646 | 541 | |||||||||
1,292 | |||||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Russian Federation (0.0%): (b) | |||||||||||
Consumer Staples (0.0%): | |||||||||||
Magnit PJSC (f) (g) | 7,278 | $ | — | (h) | |||||||
Energy (0.0%): | |||||||||||
Gazprom PJSC (f) (g) (j) (k) | 303,950 | 17 | |||||||||
Rosneft Oil Co. PJSC, GDR (f) (g) (j) (k) | 124,892 | 8 | |||||||||
25 | |||||||||||
Financials (0.0%): | |||||||||||
Sberbank of Russia PJSC, ADR (a) (f) (g) (j) (k) | 91,313 | 1 | |||||||||
26 | |||||||||||
Saudi Arabia (0.3%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Leejam Sports Co. JSC | 13,379 | 358 | |||||||||
Financials (0.2%): | |||||||||||
Alinma Bank | 83,352 | 854 | |||||||||
The Saudi National Bank | 62,375 | 1,206 | |||||||||
2,060 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Mouwasat Medical Services Co. | 6,804 | 396 | |||||||||
Materials (0.1%): | |||||||||||
Saudi Arabian Mining Co. (a) | 38,698 | 671 | |||||||||
3,485 | |||||||||||
Singapore (0.5%): | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Wilmar International Ltd. | 218,929 | 666 | |||||||||
Financials (0.5%): | |||||||||||
DBS Group Holdings Ltd. | 30,405 | 686 | |||||||||
iFAST Corp. Ltd. | 64,300 | 228 | |||||||||
Singapore Exchange Ltd. | 741,527 | 5,142 | |||||||||
6,056 | |||||||||||
Utilities (0.0%): (b) | |||||||||||
Sembcorp Industries Ltd. | 172,900 | 359 | |||||||||
7,081 | |||||||||||
South Africa (0.8%): | |||||||||||
Communication Services (0.1%): | |||||||||||
MTN Group Ltd. | 68,918 | 743 | |||||||||
Consumer Discretionary (0.5%): | |||||||||||
Mr Price Group Ltd. | 468,817 | 6,211 | |||||||||
Woolworths Holdings Ltd. | 115,752 | 411 | |||||||||
6,622 | |||||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.1%): | |||||||||||
Absa Group Ltd. | 76,430 | $ | 898 | ||||||||
Capitec Bank Holdings Ltd. | 6,293 | 906 | |||||||||
1,804 | |||||||||||
Materials (0.1%): | |||||||||||
Impala Platinum Holdings Ltd. | 51,630 | 705 | |||||||||
9,874 | |||||||||||
Spain (0.7%): | |||||||||||
Financials (0.6%): | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 1,250,936 | 6,845 | |||||||||
Banco Santander SA (c) | 168,132 | 545 | |||||||||
7,390 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Laboratorios Farmaceuticos Rovi SA | 5,272 | 354 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Global Dominion Access SA (d) | 57,640 | 255 | |||||||||
Utilities (0.1%): | |||||||||||
Corp. ACCIONA Energias Renovables SA | 12,773 | 499 | |||||||||
8,498 | |||||||||||
Sweden (1.2%): | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Swedish Match AB | 53,409 | 552 | |||||||||
Health Care (0.1%): | |||||||||||
BioGaia AB B Shares | 16,875 | 167 | |||||||||
Biotage AB | 15,338 | 313 | |||||||||
Cellavision AB | 5,515 | 196 | |||||||||
SwedenCare AB | 20,387 | 200 | |||||||||
Xvivo Perfusion AB (a) | 9,235 | 232 | |||||||||
1,108 | |||||||||||
Industrials (1.0%): | |||||||||||
Atlas Copco AB Class B | 680,904 | 6,597 | |||||||||
Atlas Copco AB (a) | 170,226 | 139 | |||||||||
CTT Systems AB | 8,920 | 187 | |||||||||
GARO AB | 17,621 | 263 | |||||||||
Hexatronic Group AB | 6,462 | 294 | |||||||||
Nibe Industrier AB Class B | 556,762 | 4,863 | |||||||||
Sandvik AB | 21,814 | 449 | |||||||||
Volvo AB Class B | 18,823 | 330 | |||||||||
13,122 | |||||||||||
Materials (0.1%): | |||||||||||
Boliden AB (a) | 13,695 | 22 | |||||||||
Boliden AB | 13,695 | 576 | |||||||||
598 | |||||||||||
15,380 | |||||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Switzerland (2.5%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Cie Financiere Richemont SA Registered Shares | 4,284 | $ | 477 | ||||||||
Consumer Staples (0.1%): | |||||||||||
Coca-Cola HBC AG | 14,453 | 318 | |||||||||
Nestle SA Registered Shares | 12,367 | 1,513 | |||||||||
1,831 | |||||||||||
Financials (0.5%): | |||||||||||
Julius Baer Group Ltd. | 10,202 | 527 | |||||||||
Partners Group Holding AG | 3,543 | 3,813 | |||||||||
Swiss Life Holding AG | 2,216 | 1,257 | |||||||||
UBS Group AG | 26,949 | 508 | |||||||||
6,105 | |||||||||||
Health Care (1.4%): | |||||||||||
Alcon, Inc. | 4,956 | 372 | |||||||||
Coltene Holding AG Registered Shares | 4,194 | 411 | |||||||||
Novartis AG Registered Shares | 13,477 | 1,225 | |||||||||
Roche Holding AG | 45,374 | 15,466 | |||||||||
17,474 | |||||||||||
Industrials (0.3%): | |||||||||||
Adecco Group AG | 91,671 | 3,574 | |||||||||
Kardex Holding AG Registered Shares | 1,944 | 355 | |||||||||
Zehnder Group AG Registered Shares | 2,706 | 198 | |||||||||
4,127 | |||||||||||
Information Technology (0.1%): | |||||||||||
Landis+Gyr Group AG | 5,534 | 323 | |||||||||
u-blox Holding AG (a) | 3,921 | 371 | |||||||||
694 | |||||||||||
Materials (0.1%): | |||||||||||
Gurit Holding AG (c) | 2,330 | 261 | |||||||||
Holcim Ltd. | 8,902 | 442 | |||||||||
Vetropack Holding AG | 5,570 | 232 | |||||||||
935 | |||||||||||
31,643 | |||||||||||
Taiwan (2.0%): | |||||||||||
Financials (0.7%): | |||||||||||
Cathay Financial Holding Co. Ltd. | 3,993,000 | 7,618 | |||||||||
CTBC Financial Holding Co. Ltd. | 928,000 | 862 | |||||||||
8,480 | |||||||||||
Information Technology (1.3%): | |||||||||||
Gold Circuit Electronics Ltd. | 222,000 | 617 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 212,000 | 822 | |||||||||
Lite-On Technology Corp. | 3,186,000 | 6,894 | |||||||||
MediaTek, Inc. | 41,000 | 1,268 | |||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 335,000 | $ | 6,336 | ||||||||
Unimicron Technology Corp. | 64,000 | 470 | |||||||||
16,407 | |||||||||||
Materials (0.0%): (b) | |||||||||||
Formosa Plastics Corp. | 157,000 | 566 | |||||||||
25,453 | |||||||||||
Thailand (0.3%): | |||||||||||
Energy (0.1%): | |||||||||||
PTT PCL | 637,900 | 711 | |||||||||
Financials (0.1%): | |||||||||||
SCB X PCL (a) | 236,100 | 780 | |||||||||
Health Care (0.0%): (b) | |||||||||||
Mega Lifesciences PCL | 373,100 | 567 | |||||||||
Materials (0.1%): | |||||||||||
Indorama Ventures PCL | 461,500 | 662 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
AP Thailand PCL | 1,836,700 | 601 | |||||||||
3,321 | |||||||||||
United Kingdom (5.3%): | |||||||||||
Communication Services (0.2%): | |||||||||||
| 4imprint Group PLC | 6,897 | 233 | |||||||||
ITV PLC | 2,672,277 | 2,368 | |||||||||
WPP PLC | 26,301 | 305 | |||||||||
2,906 | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Aptiv PLC (a) | 14,623 | 1,553 | |||||||||
Barratt Developments PLC | 47,584 | 303 | |||||||||
Focusrite PLC (c) | 33,624 | 408 | |||||||||
JD Sports Fashion PLC (a) | 326,255 | 504 | |||||||||
Next PLC | 41,094 | 3,359 | |||||||||
Stellantis NV (c) | 69,673 | 1,045 | |||||||||
7,172 | |||||||||||
Consumer Staples (0.5%): | |||||||||||
Imperial Brands PLC | 286,003 | 6,457 | |||||||||
Tesco PLC | 188,957 | 616 | |||||||||
7,073 | |||||||||||
Energy (0.1%): | |||||||||||
| BP PLC | 171,746 | 933 | |||||||||
Harbour Energy PLC | 71,795 | 346 | |||||||||
1,279 | |||||||||||
Financials (1.6%): | |||||||||||
| 3i Group PLC | 46,192 | 739 | |||||||||
Barclays PLC | 2,459,456 | 5,242 | |||||||||
CMC Markets PLC (d) | 45,163 | 180 | |||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
HSBC Holdings PLC | 967,390 | $ | 6,477 | ||||||||
Intermediate Capital Group PLC | 135,315 | 2,686 | |||||||||
Legal & General Group PLC | 109,379 | 358 | |||||||||
Standard Chartered PLC | 77,243 | 614 | |||||||||
Willis Towers Watson PLC | 17,100 | 3,609 | |||||||||
19,905 | |||||||||||
Health Care (0.1%): | |||||||||||
AstraZeneca PLC | 8,237 | 1,089 | |||||||||
Ergomed PLC (a) | 14,702 | 204 | |||||||||
1,293 | |||||||||||
Industrials (0.8%): | |||||||||||
Alpha Financial Markets Consulting PLC | 49,436 | 246 | |||||||||
Ashtead Group PLC | 86,925 | 4,554 | |||||||||
Bunzl PLC | 9,902 | 345 | |||||||||
Concentric AB | 11,502 | 238 | |||||||||
Ferguson PLC | 3,758 | 452 | |||||||||
Judges Scientific PLC | 5,411 | 546 | |||||||||
Renew Holdings PLC | 36,672 | 320 | |||||||||
Robert Walters PLC | 34,399 | 217 | |||||||||
Royal Mail PLC | 79,074 | 310 | |||||||||
Sensata Technologies Holding PLC | 42,200 | 2,027 | |||||||||
SThree PLC | 69,514 | 340 | |||||||||
Volex PLC | 61,981 | 214 | |||||||||
9,809 | |||||||||||
Information Technology (0.0%): (b) | |||||||||||
GB Group PLC | 24,928 | 175 | |||||||||
Kainos Group PLC | 22,249 | 353 | |||||||||
528 | |||||||||||
Materials (1.4%): | |||||||||||
Anglo American PLC | 46,917 | 2,311 | |||||||||
Croda International PLC | 55,033 | 4,791 | |||||||||
Rio Tinto PLC | 145,759 | 10,575 | |||||||||
Treatt PLC | 34,714 | 383 | |||||||||
18,060 | |||||||||||
Real Estate (0.0%): (b) | |||||||||||
Safestore Holdings PLC | 22,791 | 326 | |||||||||
Utilities (0.0%): (b) | |||||||||||
Drax Group PLC | 42,532 | 361 | |||||||||
68,712 | |||||||||||
United States (53.8%): | |||||||||||
Communication Services (3.4%): | |||||||||||
Alphabet, Inc. Class C (a) | 11,437 | 26,085 | |||||||||
Alphabet, Inc. Class A (a) | 400 | 910 | |||||||||
EverQuote, Inc. Class A (a) | 26,284 | 235 | |||||||||
Meta Platforms, Inc. Class A (a) | 83,260 | 16,123 | |||||||||
43,353 | |||||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Discretionary (6.9%): | |||||||||||
Airbnb, Inc. Class A (a) | 14,978 | $ | 1,810 | ||||||||
Amazon.com, Inc. (a) | 7,895 | 18,981 | |||||||||
America's Car-Mart, Inc. (a) | 3,090 | 335 | |||||||||
Bassett Furniture Industries, Inc. | 27,928 | 455 | |||||||||
BJ's Restaurants, Inc. (a) | 11,375 | 299 | |||||||||
Burlington Stores, Inc. (a) | 9,291 | 1,564 | |||||||||
Century Communities, Inc. | 11,691 | 636 | |||||||||
Holley, Inc. (a) | 16,609 | 174 | |||||||||
Lazydays Holdings, Inc. (a) (c) | 17,665 | 274 | |||||||||
LKQ Corp. | 62,000 | 3,186 | |||||||||
M/I Homes, Inc. (a) | 5,919 | 277 | |||||||||
MasterCraft Boat Holdings, Inc. (a) | 9,039 | 212 | |||||||||
McDonald's Corp. | 78,992 | 19,923 | |||||||||
Movado Group, Inc. | 18,444 | 626 | |||||||||
NIKE, Inc. Class B | 18,209 | 2,164 | |||||||||
O'Reilly Automotive, Inc. (a) | 3,919 | 2,497 | |||||||||
PulteGroup, Inc. | 192,934 | 8,732 | |||||||||
Ross Stores, Inc. | 94,800 | 8,060 | |||||||||
Ruth's Hospitality Group, Inc. | 22,647 | 417 | |||||||||
Target Corp. | 41,645 | 6,741 | |||||||||
Tesla, Inc. (a) | 11,378 | 8,627 | |||||||||
Tractor Supply Co. | 6,373 | 1,194 | |||||||||
Universal Technical Institute, Inc. (a) | 47,182 | 428 | |||||||||
Vera Bradley, Inc. (a) | 38,998 | 266 | |||||||||
87,878 | |||||||||||
Consumer Staples (3.9%): | |||||||||||
Colgate-Palmolive Co. | 175,657 | 13,844 | |||||||||
Keurig Dr Pepper, Inc. | 91,300 | 3,172 | |||||||||
Lamb Weston Holdings, Inc. | 22,500 | 1,521 | |||||||||
Mondelez International, Inc. Class A | 31,400 | 1,996 | |||||||||
PepsiCo, Inc. | 100,860 | 16,919 | |||||||||
The Estee Lauder Cos., Inc. | 41,388 | 10,539 | |||||||||
U.S. Foods Holding Corp. (a) | 49,200 | 1,629 | |||||||||
49,620 | |||||||||||
Energy (2.7%): | |||||||||||
Cactus, Inc. Class A | 136,567 | 7,159 | |||||||||
Clean Energy Fuels Corp. (a) | 58,959 | 326 | |||||||||
ConocoPhillips | 120,036 | 13,487 | |||||||||
Enterprise Products Partners LP | 98,500 | 2,701 | |||||||||
Expro Group Holdings NV (a) | 17,243 | 236 | |||||||||
Hess Corp. | 15,600 | 1,920 | |||||||||
Marathon Oil Corp. | 82,400 | 2,590 | |||||||||
Ovintiv, Inc. | 44,800 | 2,508 | |||||||||
Profire Energy, Inc. (a) | 208,057 | 277 | |||||||||
RPC, Inc. (a) | 80,443 | 753 | |||||||||
Select Energy Services, Inc. Class A (a) | 36,482 | 309 | |||||||||
Solaris Oilfield Infrastructure, Inc. Class A | 18,502 | 249 | |||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
TETRA Technologies, Inc. (a) | 180,847 | $ | 908 | ||||||||
Valero Energy Corp. | 9,900 | 1,283 | |||||||||
34,706 | |||||||||||
Financials (7.3%): | |||||||||||
Bank of America Corp. | 359,885 | 13,388 | |||||||||
BayCom Corp. | 14,816 | 343 | |||||||||
Blackstone, Inc. | 19,974 | 2,353 | |||||||||
Cboe Global Markets, Inc. | 28,800 | 3,234 | |||||||||
Coastal Financial Corp. (a) | 4,916 | 194 | |||||||||
Comerica, Inc. | 37,700 | 3,137 | |||||||||
First Busey Corp. | 43,177 | 1,012 | |||||||||
Heritage Financial Corp. | 26,577 | 694 | |||||||||
Interactive Brokers Group, Inc. | 36,400 | 2,240 | |||||||||
JPMorgan Chase & Co. | 96,214 | 12,722 | |||||||||
KeyCorp | 39,900 | 796 | |||||||||
LPL Financial Holdings, Inc. | 46,904 | 9,202 | |||||||||
MSCI, Inc. | 4,709 | 2,083 | |||||||||
Old Second Bancorp, Inc. | 50,492 | 771 | |||||||||
S&P Global, Inc. | 30,027 | 10,494 | |||||||||
State Street Corp. | 13,200 | 957 | |||||||||
Synchrony Financial | 201,400 | 7,460 | |||||||||
The First Bancshares, Inc. | 11,782 | 355 | |||||||||
The PNC Financial Services Group, Inc. | 34,078 | 5,978 | |||||||||
The Progressive Corp. | 45,900 | 5,480 | |||||||||
Unum Group | 278,186 | 10,140 | |||||||||
93,033 | |||||||||||
Health Care (8.6%): | |||||||||||
AbbVie, Inc. | 19,700 | 2,903 | |||||||||
Addus HomeCare Corp. (a) | 3,623 | 303 | |||||||||
Align Technology, Inc. (a) | 5,280 | 1,466 | |||||||||
Amedisys, Inc. (a) | 27,528 | 3,191 | |||||||||
Amgen, Inc. | 51,151 | 13,133 | |||||||||
Amneal Pharmaceuticals, Inc. (a) | 84,524 | 307 | |||||||||
Atrion Corp. | 633 | 398 | |||||||||
BioLife Solutions, Inc. (a) | 16,954 | 233 | |||||||||
Catalyst Pharmaceuticals, Inc. (a) | 38,066 | 274 | |||||||||
Cigna Corp. | 14,500 | 3,890 | |||||||||
CryoLife, Inc. (a) | 13,167 | 258 | |||||||||
CVS Health Corp. | 121,492 | 11,754 | |||||||||
Dexcom, Inc. (a) | 5,821 | 1,734 | |||||||||
Eli Lilly & Co. | 45,873 | 14,378 | |||||||||
Humana, Inc. | 9,800 | 4,451 | |||||||||
IDEXX Laboratories, Inc. (a) | 18,823 | 7,371 | |||||||||
Johnson & Johnson | 124,565 | 22,363 | |||||||||
Lantheus Holdings, Inc. (a) | 5,183 | 355 | |||||||||
LeMaitre Vascular, Inc. | 13,427 | 614 | |||||||||
Medtronic PLC | 31,800 | 3,185 | |||||||||
Merck & Co., Inc. | 31,900 | 2,936 | |||||||||
Meridian Bioscience, Inc. (a) | 14,285 | 393 | |||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
ModivCare, Inc. (a) | 3,043 | $ | 290 | ||||||||
Orthofix Medical, Inc. (a) | 18,589 | 511 | |||||||||
Sotera Health Co. (a) | 118,300 | 2,520 | |||||||||
Thermo Fisher Scientific, Inc. | 5,562 | 3,157 | |||||||||
UnitedHealth Group, Inc. | 5,400 | 2,683 | |||||||||
Veeva Systems, Inc. Class A (a) | 10,328 | 1,758 | |||||||||
Vericel Corp. (a) | 9,233 | 251 | |||||||||
Zoetis, Inc. | 19,191 | 3,280 | |||||||||
110,340 | |||||||||||
Industrials (2.3%): | |||||||||||
Allied Motion Technologies, Inc. | 13,482 | 331 | |||||||||
ARC Document Solutions, Inc. | 89,179 | 267 | |||||||||
CIRCOR International, Inc. (a) | 13,623 | 265 | |||||||||
Concrete Pumping Holdings, Inc. (a) | 33,637 | 182 | |||||||||
CoStar Group, Inc. (a) | 26,770 | 1,631 | |||||||||
Generac Holdings, Inc. (a) | 7,230 | 1,786 | |||||||||
Harsco Corp. (a) | 25,807 | 214 | |||||||||
Honeywell International, Inc. | 60,481 | 11,710 | |||||||||
Hyster-Yale Materials Handling, Inc. | 10,250 | 379 | |||||||||
Insteel Industries, Inc. | 17,424 | 722 | |||||||||
Karat Packaging, Inc. (a) | 11,009 | 216 | |||||||||
L3Harris Technologies, Inc. | 5,600 | 1,349 | |||||||||
Leidos Holdings, Inc. | 22,300 | 2,330 | |||||||||
NN, Inc. (a) | 56,885 | 159 | |||||||||
Northwest Pipe Co. (a) | 10,499 | 351 | |||||||||
NOW, Inc. (a) | 28,356 | 313 | |||||||||
PACCAR, Inc. | 6,600 | 573 | |||||||||
Parker-Hannifin Corp. | 4,500 | 1,225 | |||||||||
Preformed Line Products Co. | 3,890 | 241 | |||||||||
Raytheon Technologies Corp. | 13,800 | 1,313 | |||||||||
The Greenbrier Cos., Inc. | 14,792 | 616 | |||||||||
The Shyft Group, Inc. | 6,099 | 135 | |||||||||
Transcat, Inc. (a) | 9,640 | 611 | |||||||||
Twin Disc, Inc. (a) | 20,108 | 201 | |||||||||
Uber Technologies, Inc. (a) | 76,858 | 1,783 | |||||||||
Union Pacific Corp. | 5,200 | 1,143 | |||||||||
30,046 | |||||||||||
Information Technology (15.1%): | |||||||||||
Adobe, Inc. (a) | 6,564 | 2,734 | |||||||||
Apple, Inc. | 305,488 | 45,469 | |||||||||
Arista Networks, Inc. (a) | 21,921 | 2,242 | |||||||||
Broadcom, Inc. | 3,297 | 1,913 | |||||||||
Cadence Design Systems, Inc. (a) | 21,967 | 3,377 | |||||||||
CDW Corp. | 13,404 | 2,277 | |||||||||
Cisco Systems, Inc. | 210,155 | 9,467 | |||||||||
Crowdstrike Holdings, Inc. Class A (a) | 7,201 | 1,152 | |||||||||
ePlus, Inc. (a) | 13,319 | 756 | |||||||||
Euronet Worldwide, Inc. (a) | 14,800 | 1,793 | |||||||||
Fidelity National Information Services, Inc. | 27,900 | 2,915 | |||||||||
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
FleetCor Technologies, Inc. (a) | 7,000 | $ | 1,742 | ||||||||
Fortinet, Inc. (a) | 34,387 | 10,115 | |||||||||
Global Payments, Inc. | 13,500 | 1,769 | |||||||||
Grid Dynamics Holdings, Inc. (a) | 36,838 | 663 | |||||||||
Ichor Holdings Ltd. (a) | 18,465 | 558 | |||||||||
Luna Innovations, Inc. (a) | 73,822 | 446 | |||||||||
Mastercard, Inc. Class A | 43,265 | 15,483 | |||||||||
Microsoft Corp. | 165,454 | 44,982 | |||||||||
Motorola Solutions, Inc. | 8,272 | 1,818 | |||||||||
Napco Security Technologies, Inc. (a) | 29,048 | 570 | |||||||||
NVIDIA Corp. | 89,994 | 16,804 | |||||||||
Palo Alto Networks, Inc. (a) | 3,285 | 1,652 | |||||||||
PAR Technology Corp. (a) (c) | 10,800 | 406 | |||||||||
Perficient, Inc. (a) | 4,405 | 431 | |||||||||
ServiceNow, Inc. (a) | 7,430 | 3,473 | |||||||||
Texas Instruments, Inc. | 66,426 | 11,741 | |||||||||
The Trade Desk, Inc. Class A (a) | 30,754 | 1,601 | |||||||||
Ultra Clean Holdings, Inc. (a) | 13,455 | 451 | |||||||||
Visa, Inc. Class A | 21,410 | 4,543 | |||||||||
Wayside Technology Group, Inc. | 7,331 | 277 | |||||||||
193,620 | |||||||||||
Materials (0.9%): | |||||||||||
Alcoa Corp. | 59,201 | 3,654 | |||||||||
Freeport-McMoRan, Inc. | 26,000 | 1,016 | |||||||||
Hawkins, Inc. | 6,820 | 247 | |||||||||
Koppers Holdings, Inc. | 17,507 | 474 | |||||||||
Newmont Corp. | 32,500 | 2,205 | |||||||||
PPG Industries, Inc. | 7,500 | 949 | |||||||||
Sealed Air Corp. | 48,000 | 2,985 | |||||||||
UFP Technologies, Inc. (a) | 5,904 | 451 | |||||||||
11,981 | |||||||||||
Real Estate (1.2%): | |||||||||||
Gladstone Land Corp. | 11,050 | 297 | |||||||||
Host Hotels & Resorts, Inc. | 75,900 | 1,517 | |||||||||
Prologis, Inc. | 103,999 | 13,258 | |||||||||
15,072 | |||||||||||
Utilities (1.5%): | |||||||||||
Constellation Energy Corp. | 24,833 | 1,542 | |||||||||
Exelon Corp. | 47,500 | 2,334 | |||||||||
FirstEnergy Corp. | 41,300 | 1,774 | |||||||||
MGE Energy, Inc. | 118,041 | 9,369 | |||||||||
The York Water Co. | 7,161 | 293 | |||||||||
Vistra Corp. | 171,700 | 4,528 | |||||||||
19,840 | |||||||||||
689,489 | |||||||||||
Total Common Stocks (Cost $1,064,302) | 1,260,063 | ||||||||||
See notes to financial statements.
28
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Exchange-Traded Funds (0.1%) | |||||||||||
United States (0.1%): | |||||||||||
iShares Core MSCI EAFE ETF | 114 | $ | 7 | ||||||||
iShares MSCI EAFE Small-Cap ETF (c) | 5,697 | 353 | |||||||||
iShares Russell 2000 ETF (c) | 1,768 | 328 | |||||||||
Total Exchange-Traded Funds (Cost $757) | 688 | ||||||||||
Collateral for Securities Loaned (1.5%)^ | |||||||||||
United States (1.5%): | |||||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 0.67% (i) | 19,138,333 | 19,138 | |||||||||
Total Collateral for Securities Loaned (Cost $19,138) | 19,138 | ||||||||||
Total Investments (Cost $1,084,197) — 99.8% | 1,279,889 | ||||||||||
Other assets in excess of liabilities — 0.2% | 2,581 | ||||||||||
NET ASSETS — 100.00% | $ | 1,282,470 | |||||||||
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) Amount represents less than 0.05% of net assets.
(c) All or a portion of this security is on loan.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $10,878 thousand and amounted to 0.8% of net assets.
(e) Issuer filed for bankruptcy.
(f) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.05% of net assets as of May 31, 2022. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(g) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2022, illiquid securities were less than 0.05% of the Fund's net assets.
(h) Rounds to less than $1 thousand.
(i) Rate disclosed is the daily yield on May 31, 2022.
(j) Restricted security that is not registered under the Securities Act of 1933.
(k) The following table details the acquisition date and cost of the Fund's restricted securities at May 31, 2022 (amount in thousand):
Security Name | Acquisition | Cost | |||||||||
Gazprom PJSC | 9/16/2021 | $ | 1,231 | ||||||||
Rosneft Oil Co. PJSC, GDR | 10/4/2021 |
| 964 | ||||||||
Sberbank of Russia PJSC, ADR | 7/7/2021 |
| 1,405 | ||||||||
See notes to financial statements.
29
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
GDR — Global Depositary Receipt
LP — Limited Partnership
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
30
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Sustainable World Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $1,084,197) | $ | 1,279,889 | (a) | ||||
Foreign currency, at value (Cost $857) | 880 | ||||||
Cash | 16,000 | ||||||
Receivables: | |||||||
Interest and dividends | 2,945 | ||||||
Capital shares issued | 196 | ||||||
Investments sold | 2,904 | ||||||
Reclaims | 2,114 | ||||||
From Adviser | 3 | ||||||
Prepaid expenses | 39 | ||||||
Total Assets | 1,304,970 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 19,138 | ||||||
Investments purchased | 1,572 | ||||||
Capital shares redeemed | 524 | ||||||
Accrued foreign capital gains taxes | 43 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 800 | ||||||
Administration fees | 160 | ||||||
Custodian fees | 45 | ||||||
Transfer agent fees | 115 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | — | (b) | |||||
| 12b-1 fees | — | (b) | |||||
Other accrued expenses | 102 | ||||||
Total Liabilities | 22,500 | ||||||
Net Assets: | |||||||
Capital | 1,084,196 | ||||||
Total accumulated earnings/(loss) | 198,274 | ||||||
Net Assets | $ | 1,282,470 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,272,993 | |||||
Institutional Shares | 5,301 | ||||||
Class A | 4,176 | ||||||
Total | $ | 1,282,470 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 53,718 | ||||||
Institutional Shares | 223 | ||||||
Class A | 176 | ||||||
Total | 54,117 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 23.70 | |||||
Institutional Shares | 23.78 | ||||||
Class A | 23.77 | ||||||
Maximum Sales Charge — Class A | 5.75 | % | |||||
| Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A | $ | 25.22 | |||||
(a) Includes $17,962 thousand of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
31
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Sustainable World Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 30,586 | |||||
Interest | 5 | ||||||
Securities lending (net of fees) | 109 | ||||||
Foreign tax withholding | (2,432 | ) | |||||
Total Income | 28,268 | ||||||
Expenses: | |||||||
Investment advisory fees | 11,033 | ||||||
Administration fees — Fund Shares | 2,197 | ||||||
Administration fees — Institutional Shares | 3 | ||||||
Administration fees — Class A | 5 | ||||||
Sub-Administration fees | 103 | ||||||
| 12b-1 fees — Class A | 8 | ||||||
Custodian fees | 320 | ||||||
Transfer agent fees — Fund Shares | 1,396 | ||||||
Transfer agent fees — Institutional Shares | 3 | ||||||
Transfer agent fees — Class A | 3 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 10 | ||||||
Legal and audit fees | 135 | ||||||
State registration and filing fees | 43 | ||||||
Other expenses | 179 | ||||||
Total Expenses | 15,487 | ||||||
Expenses waived/reimbursed by Adviser | (21 | ) | |||||
Net Expenses | 15,466 | ||||||
Net Investment Income (Loss) | 12,802 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | 48,933 | ||||||
Foreign taxes on realized gains | (32 | ) | |||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (187,082 | ) | |||||
Net change in accrued foreign taxes on unrealized gains | 94 | ||||||
Net realized/unrealized gains (losses) on investments | (138,087 | ) | |||||
Change in net assets resulting from operations | $ | (125,285 | ) | ||||
See notes to financial statements.
32
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Sustainable World Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 12,802 | $ | 11,845 | |||||||
Net realized gains (losses) | 48,901 | 265,661 | |||||||||
Net change in unrealized appreciation/depreciation | (186,988 | ) | 176,212 | ||||||||
Change in net assets resulting from operations | (125,285 | ) | 453,718 | ||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (247,859 | ) | (64,664 | ) | |||||||
Institutional Shares | (505 | ) | (328 | ) | |||||||
Class A | (464 | ) | (321 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (248,828 | ) | (65,313 | ) | |||||||
Change in net assets resulting from capital transactions | 143,070 | (116,446 | ) | ||||||||
Change in net assets | (231,043 | ) | 271,959 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 1,513,513 | 1,241,554 | |||||||||
End of period | $ | 1,282,470 | $ | 1,513,513 | |||||||
(continues on next page)
See notes to financial statements.
33
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Sustainable World Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 72,669 | $ | 72,139 | |||||||
Distributions reinvested | 245,078 | 63,933 | |||||||||
Cost of shares redeemed | (180,222 | ) | (241,694 | ) | |||||||
Total Fund Shares | $ | 137,525 | $ | (105,622 | ) | ||||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 4,067 | $ | 1,307 | |||||||
Distributions reinvested | 496 | 96 | |||||||||
Cost of shares redeemed | (1,169 | ) | (6,761 | ) | |||||||
Total Institutional Shares | $ | 3,394 | $ | (5,358 | ) | ||||||
Class A | |||||||||||
Proceeds from shares issued | $ | 2,341 | $ | 6,709 | |||||||
Distributions reinvested | 253 | 61 | |||||||||
Cost of shares redeemed | (443 | ) | (12,236 | ) | |||||||
Total Class A | $ | 2,151 | $ | (5,466 | ) | ||||||
Change in net assets resulting from capital transactions | $ | 143,070 | $ | (116,446 | ) | ||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 2,521 | 2,582 | |||||||||
Reinvested | 8,958 | 2,305 | |||||||||
Redeemed | (6,358 | ) | (8,859 | ) | |||||||
Total Fund Shares | 5,121 | (3,972 | ) | ||||||||
Institutional Shares | |||||||||||
Issued | 161 | 48 | |||||||||
Reinvested | 18 | 3 | |||||||||
Redeemed | (42 | ) | (227 | ) | |||||||
Total Institutional Shares | 137 | (176 | ) | ||||||||
Class A | |||||||||||
Issued | 89 | 280 | |||||||||
Reinvested | 9 | 2 | |||||||||
Redeemed | (15 | ) | (464 | ) | |||||||
Total Class A | 83 | (182 | ) | ||||||||
Change in Shares | 5,341 | (4,330 | ) | ||||||||
See notes to financial statements.
34
This page is intentionally left blank.
35
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Sustainable World Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 31.03 | 0.25 | (f) | (2.36 | ) | (2.11 | ) | (0.27 | ) | (4.95 | ) | |||||||||||||||
2021 | $ | 23.38 | 0.23 | (f) | 8.74 | 8.97 | (0.18 | ) | (1.14 | ) | |||||||||||||||||
2020 | $ | 30.71 | 0.27 | (f) | 2.87 | 3.14 | (0.32 | ) | (10.15 | ) | |||||||||||||||||
2019 | $ | 31.82 | 0.33 | 0.51 | 0.84 | (0.28 | ) | (1.67 | ) | ||||||||||||||||||
2018 | $ | 31.16 | 0.30 | 1.78 | 2.08 | (0.23 | ) | (1.19 | ) | ||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 31.10 | 0.31 | (f) | (2.41 | ) | (2.10 | ) | (0.27 | ) | (4.95 | ) | |||||||||||||||
2021 | $ | 23.42 | 0.24 | (f) | 8.77 | 9.01 | (0.19 | ) | (1.14 | ) | |||||||||||||||||
2020 | $ | 30.74 | 0.29 | (f) | 2.86 | 3.15 | (0.32 | ) | (10.15 | ) | |||||||||||||||||
2019 | $ | 31.75 | 0.38 | 0.48 | 0.86 | (0.20 | ) | (1.67 | ) | ||||||||||||||||||
2018 | $ | 31.14 | 0.29 | 1.80 | 2.09 | (0.29 | ) | (1.19 | ) | ||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 31.06 | 0.19 | (f) | (2.40 | ) | (2.21 | ) | (0.13 | ) | (4.95 | ) | |||||||||||||||
2021 | $ | 23.40 | 0.15 | (f) | 8.76 | 8.91 | (0.11 | ) | (1.14 | ) | |||||||||||||||||
2020 | $ | 30.77 | 0.19 | (f) | 2.86 | 3.05 | (0.27 | ) | (10.15 | ) | |||||||||||||||||
2019 | $ | 31.86 | 0.24 | (f) | 0.53 | 0.77 | (0.19 | ) | (1.67 | ) | |||||||||||||||||
2018 | $ | 31.07 | 0.18 | (f) | 1.80 | 1.98 | — | (j) | (1.19 | ) | |||||||||||||||||
(a) 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.
(b) From the period beginning July 1, 2019, the amount of any waivers or reimbursements and the amount of any recoupment are calculated without regard to the impact of any performance adjustment to the Fund's management fee.
(c) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(d) Does not include acquired fund fees and expenses, if any.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.
(f) Per share net investment income (loss) has been calculated using the average daily shares method.
(g) Reflects a return to normal trading levels after a prior year subadviser termination.
(h) Reflects increased trading activity due to current year transition or asset allocation shift.
(i) Effective October 1, 2018, USAA Asset Management Company ("AMCO") (previous Adviser) had voluntarily agreed to limit the annual expenses of the Institutional Shares to 1.00% of the Institutional Shares' average daily net assets.
(j) Amount is less than $0.005 per share.
(k) Effective October 1, 2017, AMCO had voluntarily agreed to limit the annual expenses of the Class A shares to 1.35% of the Class A shares' average daily net assets.
See notes to financial statements.
36
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||||||
| Total Distributions | Redemption Fees Added to Beneficiary Interests | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(a) | Net Expenses(b)(c)(d) | Net Investment Income (Loss) | Gross Expenses(d) | Net Assets, End of Period (000's) | Portfolio Turnover(e) | |||||||||||||||||||||||||||||||
USAA Sustainable World Fund | |||||||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (5.22 | ) | — | $ | 23.70 | (8.90 | )% | 1.05 | % | 0.87 | % | 1.05 | % | $ | 1,272,993 | 37 | %(g) | ||||||||||||||||||||||
2021 | (1.32 | ) | — | $ | 31.03 | 39.07 | % | 1.05 | % | 0.86 | % | 1.05 | % | $ | 1,507,963 | 88 | % | ||||||||||||||||||||||
2020 | (10.47 | ) | — | $ | 23.38 | 7.81 | % | 1.07 | % | 0.98 | % | 1.07 | % | $ | 1,228,986 | 103 | %(h) | ||||||||||||||||||||||
2019 | (1.95 | ) | — | $ | 30.71 | 3.23 | % | 1.09 | % | 1.09 | % | 1.09 | % | $ | 1,280,661 | 8 | % | ||||||||||||||||||||||
2018 | (1.42 | ) | — | $ | 31.82 | 6.68 | % | 1.10 | % | 0.98 | % | 1.10 | % | $ | 1,353,880 | 10 | % | ||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (5.22 | ) | — | $ | 23.78 | (8.87 | )% | 1.00 | % | 1.10 | % | 1.29 | % | $ | 5,301 | 37 | %(g) | ||||||||||||||||||||||
2021 | (1.33 | ) | — | $ | 31.10 | 39.17 | % | 0.99 | % | 0.87 | % | 1.27 | % | $ | 2,660 | 88 | % | ||||||||||||||||||||||
2020 | (10.47 | ) | — | $ | 23.42 | 7.85 | % | 1.00 | % | 1.00 | % | 1.13 | % | $ | 6,143 | 103 | %(h) | ||||||||||||||||||||||
2019 | (1.87 | ) | — | $ | 30.74 | 3.29 | % | 1.05 | %(i) | 1.13 | % | 1.11 | % | $ | 12,567 | 8 | % | ||||||||||||||||||||||
2018 | (1.48 | ) | — | $ | 31.75 | 6.70 | % | 1.10 | % | 1.19 | % | 1.10 | % | $ | 30,127 | 10 | % | ||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (5.08 | ) | — | $ | 23.77 | (9.18 | )% | 1.32 | % | 0.67 | % | 1.68 | % | $ | 4,176 | 37 | %(g) | ||||||||||||||||||||||
2021 | (1.25 | ) | — | $ | 31.06 | 38.73 | % | 1.32 | % | 0.53 | % | 1.62 | % | $ | 2,890 | 88 | % | ||||||||||||||||||||||
2020 | (10.42 | ) | — | $ | 23.40 | 7.49 | % | 1.35 | % | 0.68 | % | 1.43 | % | $ | 6,425 | 103 | %(h) | ||||||||||||||||||||||
2019 | (1.86 | ) | — | $ | 30.77 | 2.98 | % | 1.35 | % | 0.76 | % | 1.46 | % | $ | 8,133 | 8 | % | ||||||||||||||||||||||
2018 | (1.19 | ) | — | (j) | $ | 31.86 | 6.36 | % | 1.39 | %(k) | 0.57 | % | 1.43 | % | $ | 10,114 | 10 | % | |||||||||||||||||||||
See notes to financial statements.
37
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Sustainable World Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Class A. The Fund is classified as diversified under the 1940 Act.
Each class of shares of the Fund has substantially identical rights and privileges, except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts ("ADRs"), are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies, other than ETF's, are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
In accordance with procedures adopted by the Board, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time the exchange on which they are traded closes and the time the Fund's NAV is calculated. The Fund uses a systematic valuation model, provided daily by an independent third party to fair value its international equity securities. The valuations are categorized as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 787,337 | $ | 472,700 | $ | 26 | $ | 1,260,063 | |||||||||||
Exchange-Traded Funds | 688 | — | — | 688 | |||||||||||||||
Collateral for Securities Loaned | 19,138 | — | — | 19,138 | |||||||||||||||
Total | $ | 807,163 | $ | 472,700 | $ | 26 | $ | 1,279,889 | |||||||||||
For the year ended May 31, 2022, the Fund had transfers into/out of Level 3 that were under 0.50% of net assets.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs, which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities often designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although the lack of liquidity of
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2022, the Fund had no open forward foreign exchange currency contracts.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis.
Withholding taxes on interest, dividends, and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2022.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 17,962 | $ | — | $ | 19,138 | ||||||
Foreign Currency Translations:
The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities of the Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency transactions on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing fees, and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 534,048 | $ | 632,499 | ||||
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the prior investment adviser to the Fund, announced that AMCO would be acquired by Victory Capital Holdings Inc. (the "Transaction"). A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and VCM. The Transaction closed on July 1, 2019, and effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and no performance adjustments were made for the period beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter is utilized in calculating future performance adjustments.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Global Funds Index. The Lipper Global Funds Index tracks the total return performance of the largest funds within the Lipper Global Funds category.
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points) | ||||||
| +/- 100 to 400 | +/- 4 | ||||||
| +/- 401 to 700 | +/- 5 | ||||||
| +/- 701 and greater | +/- 6 | ||||||
(a) Based on the difference between the average annual performance of the relevant share class of the Fund and its relevant Lipper index, rounded to the nearest basis point.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of the 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 pays a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper Global Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2021, to May 31, 2022, performance adjustments were $0, $0, and $(1) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.00%, 0.00%, and (0.03)% for Fund Shares, Institutional Shares, and Class A, respectively. The performance adjustment rate included in the investment advisory fee may differ from the maximum over/under Annual Adjustment Rate due to differences in average net assets for the reporting period and rolling 36 month performance periods.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisors.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, 0.10% and 0.15%, which is based on the Fund's average daily net assets of the Fund Shares, Institutional Shares, and Class A, respectively. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund Shares based on an annual charge of $23 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Transfer agent fees for Institutional Shares and Class A are paid monthly based on a fee accrued daily at an annualized rate of 0.10% and 0.10%, respectively, of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust.
Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activity primarily intended to result in the sale of Class A. Amounts incurred and paid to the Distributor for the year ended May 31, 2022, are reflected on the Statement of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the year ended May 31, 2022, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred by certain classes of the Fund in any fiscal year exceed the expense limits for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Performance adjustments, acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limits (excluding voluntary waivers) were 1.09%, 1.00%, and 1.35% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement;
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 14 | $ | 37 | $ | 21 | $ | 72 | ||||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2022.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
Equity Risk — The values of the equity securities in which the Fund invests may decline in response to developments affecting individual companies and/or general market, economic and political conditions and other factors. A company's earnings or dividends may not increase as expected due to poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters, military confrontations, war, terrorism, public health crises, or other events, conditions, and factors. Price changes may be temporary or may last for extended periods.
Foreign Securities Risk — Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount.
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the six months ended April 30, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
7. Federal Income Tax Information:
The Fund intends to distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows (amounts in thousands):
| Total Accumulated Earnings/(Loss) | Capital | ||||||
| $ | (1,546 | ) | $ | 1,546 | |||
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 54,516 | $ | 194,312 | $ | 248,828 | $ | 9,425 | $ | 55,888 | $ | 65,313 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Other Earnings (Loss) | Accumulated Earnings | Qualified Late-Year Losses* Deferral | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Loss) | |||||||||||||||||||||
| $ | 4,578 | $ | 27,712 | $ | (122 | ) | $ | 32,168 | $ | (16,017 | ) | $ | 182,123 | $ | 198,274 | ||||||||||||
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31 and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31 and specified losses incurred after October 31. These losses are deemed to arise on the first day of the Fund's next taxable year.
** The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, passive foreign investment company adjustments, partnership, and REITs/return of capital.
As of May 31, 2022, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 1,097,766 | $ | 281,915 | $ | (99,792 | ) | $ | 182,123 | |||||||
47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Sustainable World Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Sustainable World Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21- 5/31/22* | Hypothetical Expenses Paid During Period 12/1/21- 5/31/22* | Annualized Expense Ratio During Period 12/1/21- 5/31/22 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 890.60 | $ | 1,019.65 | $ | 5.00 | $ | 5.34 | 1.06 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 890.70 | 1,019.95 | 4.71 | 5.04 | 1.00 | % | ||||||||||||||||||||
Class A | 1,000.00 | 889.10 | 1,018.20 | 6.36 | 6.79 | 1.35 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 37 | % | 80 | % | $ | 39,594 | $ | 195,567 | ||||||||
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Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Sustainable World Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
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The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services and the effects of any performance adjustment1, as well as any fee waivers and reimbursements — was equal to the median of its expense group and above the median of the expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were equal to the medians of its expense group and its expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe and its Lipper index for the one-, three-, five- and ten-year periods ended September 30, 2021.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to
1 The Adviser previously agreed that no performance adjustment (positive or negative) would be made to the amount payable to the Adviser from July 1, 2019, through June 30, 2020.
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the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser waived a portion of its management fee and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the change in size, if any, of each of the Fund's classes on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
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Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
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Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23411-0722
MAY 31, 2022
Annual Report
USAA Government Securities Fund
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Schedule of Portfolio Investments | 8 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 13 | ||||||
Statement of Operations | 14 | ||||||
Statements of Changes in Net Assets | 15 | ||||||
Financial Highlights | 18 | ||||||
Notes to Financial Statements | 20 | ||||||
| Report of Independent Registered Public Accounting Firm | 31 | ||||||
Supplemental Information (Unaudited) | 32 | ||||||
Trustee and Officer Information | 32 | ||||||
Proxy Voting and Portfolio Holdings Information | 38 | ||||||
Expense Examples | 38 | ||||||
Additional Federal Income Tax Information | 39 | ||||||
Advisory Contract Renewal | 40 | ||||||
Liquidity Risk Management Program | 43 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Government Securities Fund
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
As we began the reporting year in June of 2021, conditions were still dominated by the COVID-19 pandemic. Between various COVID-19 variants, the waves of infection throughout the year caused fears of reinstating lockdowns and potentially another global recession. However, economies remained resilient as they were supported by massive stimulus programs, quantitative easing, interest rates at or near zero, and people adapting to the pandemic. With economies running above long-term growth rates, supply chain disruptions in many industries, and consumers flush with liquidity from multiple stimulus checks, a new threat to the economy emerged: inflation.
In March of 2021, a widely recognized inflation yardstick, the Consumer Price Index ("CPI"), signaled that the economy was finally getting back to normal as CPI increased by 2.6%, exceeding the U.S Federal Reserve's (the "Fed") 2% long-term inflation target for the first time since February 2020. As 2021 progressed, CPI hit an alarming 6.8% in November, which was the largest increase since June 1982. All of 2021, the Fed had been attributing inflationary factors as being largely transitory and vowed to stay the course with current policies in place. However, that strong November inflation print led to a capitulation by the Fed. As late as September 2021, at the Federal Open Market Committee ("FOMC") meeting, Fed Chair Jerome Powell announced that the FOMC had decided to keep the target range for the federal funds rate at 0% to 0.25% and continue the current pace of asset purchases. The November CPI number forced a Fed strategy pivot. At its very next meeting, the FOMC announced that it intended to begin paring back its bond purchases, a process known as tapering. With higher CPI prints in the months following November, the FOMC began raising the federal funds rate, with a 25 basis point increase in March and a subsequent 50 basis point increase in May, to bring the federal funds target rate to between 0.75% and 1.0% on May 31, 2022. (A basis point is 1/100th of a percentage point.) The Fed has stated its intention to try and bring inflation down while not causing a recession, which we believe will not be easy. Current market expectations based on the Fed's guidance is for the federal funds rate to be almost 3% by the end of 2022.
U.S. Treasury yields across the curve ended the reporting period much higher than they started. The short end of the curve rose significantly, with the two-year U.S. Treasury yield up 2.39% from the beginning of the reporting period, to end at 2.53%. The longer end of the curve rose as well, with the 10-year U.S. Treasury yield up 1.27%, to finish the period at 2.85%. Residential mortgage interest rates, which have historically been tied to the 10-year U.S. Treasury yield, rose during the reporting period given the increase in treasury rates. The interest rate on a 15-year residential mortgage started the period at 2.37%, and ended the period at 4.62%. The interest rate on a 30-year residential mortgage increased from 3.08% at the beginning of the period, and ended the period at 5.35%.
4
USAA Government Securities Fund
Managers' Commentary (continued)
• How did the USAA Government Securities Fund (the "Fund") perform during the reporting period?
The Fund has four share classes: Fund Shares, Institutional Shares, Class A, and R6 Shares. For the reporting period ended May 31, 2022, the Fund Shares, Institutional Shares, Class A, and R6 Shares had total returns of -5.71%, -5.64%, -5.70%, and -5.36%, respectively. This compares to a total return of -6.57% for the Bloomberg U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index (the "Index"), and -7.23% for the Lipper Intermediate U.S. Government Funds Index.
• What strategies did you employ during the reporting period?
The Fund outperformed its benchmark index, the Bloomberg U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index, for the year ended May 31, 2022. The largest contributor to outperformance was the Fund's underweight position in agency mortgage-backed securities ("MBS"), as the increase in interest rates during the annual reporting period negatively impacted the prices of these securities. In particular, the MBS extension risk that we have discussed in previous annual reports came to fruition as the duration of the MBS portion of the Index extended during the reporting period. The Fund's slightly shorter duration and an underweight to U.S. Treasuries also benefited performance during the annual reporting period. An overweight to Agency Commercial Mortgage-Backed Securities ("CMBS") and high-quality municipal securities relative to the benchmark detracted from overall performance.
During the reporting period, we purchased floating rate Small Business Administration loan pools and added government guaranteed student loan asset-backed securities in anticipation of short-term rates increasing over the next year. We also purchased Treasuries with proceeds received from the sale of an Agency CMBS, as spreads for Agency CMBS have tightened significantly over the past year. The U.S. Treasuries we purchased primarily had longer maturities and were utilized to increase the duration of the portfolio as the duration of the index increased because of the MBS duration extension. We also increased the Fund's allocation to MBS as prices have fallen on these securities and return opportunities have increased in our view. We have and will continue to manage the Fund to seek to minimize both contraction and extension risk. (Contraction risk is the risk that mortgage prepayments will accelerate, causing the average life of mortgage prepayments to accelerate, causing the average life of a mortgage to shorten, resulting in the reinvestment of proceeds at lower yields. Extension risk is the risk that mortgage prepayments will decelerate, causing the average life of a mortgage to lengthen — or extend — and become more sensitive to upward interest rate movement.)
Thank you for allowing us to assist in your investment needs.
5
USAA Government Securities Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | Institutional Shares | Class A | Class R6 | ||||||||||||||||||||||||||||
INCEPTION DATE | 2/1/91 | 8/10/15 | 8/1/10 | 12/1/16 | |||||||||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Net Asset Value | Bloomberg U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index1 | Lipper Intermediate U.S. Government Funds Index2 | |||||||||||||||||||||||||
One Year | –5.71 | % | –5.64 | % | –5.70 | % | –7.81 | % | –5.36 | % | –6.57 | % | –7.23 | % | |||||||||||||||||
Five Year | 1.06 | % | 1.17 | % | 0.86 | % | 0.40 | % | 1.26 | % | 0.81 | % | 0.71 | % | |||||||||||||||||
Ten Year | 1.23 | % | NA | 0.96 | % | 0.73 | % | NA | 1.18 | % | 0.95 | % | |||||||||||||||||||
Since Inception | NA | 1.31 | % | NA | NA | 1.44 | % | NA | NA | ||||||||||||||||||||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The maximum offering price figures reflect a maximum sales charge of 2.25% for Class A. Net Asset Value does not reflect sales charges.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Government Securities Fund — Growth of $10,000
1The unmanaged Bloomberg U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index consists of intermediate U.S. Treasury and Agency unsecured notes and securities backed by pools of mortgages issued by U.S. Government Agencies, GNMA, Fannie Mae, or Freddie Mac. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index. As of August 24, 2021, Bloomberg rebranded the Bloomberg Barclays fixed income indices as "Bloomberg Indices."
2The unmanaged Lipper Intermediate U.S. Government Funds Index is considered representative of intermediate U.S. government funds. This index does not include the effect of sales charges, commissions, expenses, or taxes, is not representative of the Fund, and it is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
6
| USAA Mutual Funds Trust USAA Government Securities Fund | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides investors a high level of current income consistent with preservation of principal.
Asset Allocation:
May 31, 2022
(% of Net Assets)
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset-Backed Securities (2.9%) | |||||||||||
| CenterPoint Energy Transition Bond Co. IV LLC, Series 2012-1, Class A3, 3.03%, 10/15/25 | $ | 3,468 | $ | 3,462 | |||||||
| Montana Higher Education Student Assistance Corp., Series 2012-1, Class A2, 1.93% (LIBOR01M+100bps), 5/20/30 (a) | 1,916 | 1,915 | |||||||||
| Navient Student Loan Trust, Series 2014-1, Class A3, 1.52% (LIBOR01M+51bps), 6/25/31 (a) | 1,965 | 1,890 | |||||||||
| Nelnet Student Loan Trust, Series 2006-3, Class B, 1.22% (LIBOR03M+25bps), 6/25/41, Callable 9/25/24 @ 100 (a) | 2,303 | 2,110 | |||||||||
| Nelnet Student Loan Trust, Series 2015-3, Class A2, 1.61% (LIBOR01M+60bps), 2/27/51, Callable 2/25/34 @ 100 (a) (b) | 2,952 | 2,897 | |||||||||
| Nelnet Student Loan Trust, Series 2019-5, Class A, 2.53%, 10/25/67, Callable 4/25/35 @ 100 (b) | 7,682 | 7,150 | |||||||||
| SLM Student Loan Trust, Series 2006-4, Class B, 1.38% (LIBOR03M+20bps), 1/25/70, Callable 10/25/32 @ 100 (a) | 3,369 | 3,208 | |||||||||
| SLM Student Loan Trust, Series 2013-6, Class A3, 1.66% (LIBOR01M+65bps), 6/26/28 (a) | 2,647 | 2,584 | |||||||||
| SunTrust Student Loan Trust, Series 2006-1A, Class B, 1.51% (LIBOR03M+27bps), 10/28/37, Callable 4/28/25 @ 100 (a) (b) | 867 | 859 | |||||||||
| Wepco Environmental Trust Finance I LLC, Series 2021-1, Class A, 1.58%, 12/15/35 | 4,344 | 3,907 | |||||||||
Total Asset-Backed Securities (Cost $31,191) | 29,982 | ||||||||||
Municipal Bonds (5.7%) | |||||||||||
Hawaii (0.0%): (c) | |||||||||||
| State of Hawaii Department of Business Economic Development & Tourism Revenue, Series A-2, 3.24%, 1/1/31 | 177 | 178 | |||||||||
Kansas (0.3%): | |||||||||||
Kansas Development Finance Authority Revenue, Series H, 3.94%, 4/15/26 | 3,000 | 3,035 | |||||||||
Louisiana (0.9%): | |||||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue Series A, 4.15%, 2/1/33 | 3,000 | 2,999 | |||||||||
Series A, 4.28%, 2/1/36 | 2,000 | 2,007 | |||||||||
State of Louisiana, GO, Series C-1, 0.84%, 6/1/25 | 5,000 | 4,687 | |||||||||
9,693 | |||||||||||
Michigan (0.2%): | |||||||||||
Michigan State Building Authority Revenue, Series II, 0.46%, 10/15/22 | 1,500 | 1,493 | |||||||||
Mississippi (0.9%): | |||||||||||
State of Mississippi, GO, Series E, 1.67%, 10/1/27 | 10,000 | 9,152 | |||||||||
Ohio (0.2%): | |||||||||||
State of Ohio, GO, Series A, 1.78%, 8/1/32 | 3,000 | 2,489 | |||||||||
Tennessee (0.2%): | |||||||||||
State of Tennessee, GO, Series B, 1.73%, 11/1/32, Continuously Callable @100 | 2,400 | 1,992 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Texas (2.1%): | |||||||||||
Boerne School District, GO, 1.77%, 2/1/32, Continuously Callable @100 | $ | 650 | $ | 537 | |||||||
| City of Abilene, GO 2.41%, 2/15/26 | 1,715 | 1,665 | |||||||||
2.54%, 2/15/27 | 1,195 | 1,151 | |||||||||
2.64%, 2/15/29 | 1,000 | 936 | |||||||||
| City of Houston Texas Combined Utility System Revenue 3.82%, 11/15/29, Continuously Callable @100 | 3,000 | 2,968 | |||||||||
Series E, 3.72%, 11/15/28 | 1,530 | 1,517 | |||||||||
| State of Texas, GO 1.61%, 10/1/22 | 1,585 | 1,587 | |||||||||
2.53%, 10/1/31, Continuously Callable @100 | 3,500 | 3,149 | |||||||||
Texas Public Finance Authority Revenue, 0.93%, 2/1/26 | 2,000 | 1,839 | |||||||||
| Texas Public Finance Authority State of Texas, GO Series C, 2.83%, 10/1/25 | 3,000 | 2,985 | |||||||||
Series C, 3.01%, 10/1/26, Continuously Callable @100 | 4,000 | 3,972 | |||||||||
22,306 | |||||||||||
Virginia (0.8%): | |||||||||||
| Virginia Public Building Authority Revenue Series C, 2.25%, 8/1/26 | 1,370 | 1,324 | |||||||||
Series C, 2.40%, 8/1/27 | 1,475 | 1,414 | |||||||||
Series C, 2.56%, 8/1/29 | 2,700 | 2,544 | |||||||||
Virginia Public School Authority Revenue, Series C, 0.55%, 8/1/23 | 3,000 | 2,924 | |||||||||
8,206 | |||||||||||
Wisconsin (0.1%): | |||||||||||
State of Wisconsin, GO, Series 4, 1.90%, 5/1/33, Continuously Callable @100 | 1,000 | 814 | |||||||||
Total Municipal Bonds (Cost $62,870) | 59,358 | ||||||||||
U.S. Government Agency Mortgages (46.3%) | |||||||||||
| Federal Home Loan Mortgage Corporation Series K022, Class A2, 2.36%, 7/25/22 | 1,847 | 1,844 | |||||||||
Series K026, Class A2, 2.51%, 11/25/22 | 4,865 | 4,857 | |||||||||
Series K027, Class A2, 2.64%, 1/25/23 | 4,992 | 4,985 | |||||||||
Series K029, Class A2, 3.32%, 2/25/23 (d) | 2,878 | 2,887 | |||||||||
Series K725, Class A2, 3.00%, 1/25/24 | 5,000 | 4,998 | |||||||||
Series K037, Class A2, 3.49%, 1/25/24 | 10,030 | 10,095 | |||||||||
Series K038, Class A2, 3.39%, 3/25/24 | 3,000 | 3,015 | |||||||||
Series K727, Class A2, 2.95%, 7/25/24 | 20,000 | 19,949 | |||||||||
Series K052, Class A1, 2.60%, 1/25/25 | 1,646 | 1,639 | |||||||||
Series K730, Class A2, 3.59%, 1/25/25 | 5,000 | 5,056 | |||||||||
Series K056, Class A1, 2.20%, 7/25/25 | 3,309 | 3,245 | |||||||||
Series K049, Class A2, 3.01%, 7/25/25 | 4,000 | 3,987 | |||||||||
Series K051, Class A2, 3.31%, 9/25/25 | 10,000 | 10,049 | |||||||||
Series K733, Class AM, 3.75%, 9/25/25 | 5,000 | 5,083 | |||||||||
Series K045, Class A2, 3.02%, 11/25/25 | 2,770 | 2,765 | |||||||||
Series K056, Class A2, 2.53%, 5/25/26 | 5,000 | 4,889 | |||||||||
Series K057, Class A2, 2.57%, 7/25/26 | 7,000 | 6,853 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series K061, Class A1, 3.01%, 8/25/26 | $ | 1,463 | $ | 1,465 | |||||||
Series 3987, Class A, 2.00%, 9/15/26 | 420 | 417 | |||||||||
Series K059, Class A2, 3.12%, 9/25/26 (d) | 4,500 | 4,493 | |||||||||
Series K061, Class A2, 3.35%, 11/25/26 (d) | 4,000 | 4,029 | |||||||||
Series K066, Class A2, 3.12%, 6/25/27 | 3,000 | 2,997 | |||||||||
Series K067, Class A2, 3.19%, 7/25/27 | 9,274 | 9,278 | |||||||||
Series K069, Class A2, 3.19%, 9/25/27 (d) | 2,879 | 2,878 | |||||||||
Series K071, Class A2, 3.29%, 11/25/27 | 5,000 | 5,022 | |||||||||
Series K078, Class A2, 3.85%, 6/25/28 | 12,500 | 12,898 | |||||||||
Series K080, Class A2, 3.93%, 7/25/28 (d) | 15,000 | 15,550 | |||||||||
3.00%, 3/1/32 – 6/1/42 | 9,160 | 9,101 | |||||||||
3.50%, 10/1/33 – 8/1/48 | 15,598 | 15,608 | |||||||||
4.00%, 10/1/33 – 8/1/48 | 16,995 | 17,395 | |||||||||
5.50%, 12/1/35 | 250 | 272 | |||||||||
Series 3134, Class FA, 1.17% (LIBOR01M+30bps), 3/15/36 (a) | 414 | 412 | |||||||||
Series 4023, Class PF, 1.42% (LIBOR01M+55bps), 10/15/41 (a) | 370 | 371 | |||||||||
4.50%, 9/1/48 | 1,069 | 1,099 | |||||||||
199,481 | |||||||||||
| Federal National Mortgage Association 2.42%, 11/1/22 | 18,731 | 18,731 | |||||||||
Series M1, Class A2, 3.12%, 7/25/23 (d) | 508 | 510 | |||||||||
Series M7, Class AV2, 2.16%, 10/25/23 | 1,858 | 1,852 | |||||||||
Series M13, Class A2, 2.70%, 6/25/25 (d) | 1,919 | 1,895 | |||||||||
3.00%, 2/1/27 – 2/1/52 | 15,110 | 14,673 | |||||||||
Series M8, Class A2, 3.06%, 5/25/27 (d) | 3,854 | 3,835 | |||||||||
Series M12, Class A2, 3.07%, 6/25/27 (d) | 4,990 | 4,974 | |||||||||
Series 73, Class DC, 1.50%, 7/25/27 – 10/25/27 | 2,464 | 2,404 | |||||||||
Series 102, Class GA, 1.38%, 9/25/27 | 569 | 554 | |||||||||
Series M4, Class A2, 3.06%, 3/25/28 (d) | 2,577 | 2,565 | |||||||||
Series M10, Class A2, 3.36%, 7/25/28 (d) | 8,049 | 8,133 | |||||||||
Series 29, Class FY, 1.31% (LIBOR01M+60bps), 4/25/35 – 8/25/37 (a) | 1,357 | 1,350 | |||||||||
5.00%, 12/1/35 | 280 | 297 | |||||||||
5.50%, 11/1/37 | 156 | 170 | |||||||||
6.00%, 5/1/38 | 225 | 244 | |||||||||
4.00%, 8/1/39 – 6/1/52 | 49,569 | 49,667 | |||||||||
3.50%, 1/1/42 – 2/1/50 | 20,258 | 20,143 | |||||||||
2.50%, 11/1/50 | 9,521 | 8,768 | |||||||||
2.00%, 11/1/51 – 12/1/51 | 28,423 | 25,255 | |||||||||
4.50%, 6/1/52 | 25,000 | 25,438 | |||||||||
191,458 | |||||||||||
| Government National Mortgage Association 6.00%, 8/15/22 – 12/15/38 | 5,605 | 6,123 | |||||||||
8.00%, 12/20/22 – 9/15/30 | 211 | 230 | |||||||||
4.50%, 4/20/24 – 3/20/41 | 13,409 | 14,039 | |||||||||
7.00%, 5/15/27 – 7/15/32 | 718 | 777 | |||||||||
7.50%, 2/15/28 – 11/15/31 | 157 | 170 | |||||||||
6.50%, 5/15/28 – 8/20/34 | 1,633 | 1,778 | |||||||||
6.75%, 5/15/28 | 5 | 6 | |||||||||
5.50%, 4/20/33 – 6/15/39 | 8,318 | 9,010 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 5/20/33 – 2/15/39 | $ | 2,414 | $ | 2,558 | |||||||
4.00%, 7/15/40 – 11/20/40 | 2,466 | 2,546 | |||||||||
3.00%, 8/20/51 – 10/20/51 | 21,137 | 20,460 | |||||||||
2.50%, 12/20/51 | 19,475 | 18,291 | |||||||||
75,988 | |||||||||||
| Small Business Administration Pools 0.65% (PRIME-285bps), 9/25/31 (a) | 4,957 | 4,936 | |||||||||
3.13% (PRIME-38bps), 2/25/32 (a) | 4,928 | 5,249 | |||||||||
5.08% (PRIME+158bps), 2/25/32 (a) | 3,864 | 4,324 | |||||||||
1.75% (PRIME-175bps), 10/25/34 (a) | 1,742 | 1,787 | |||||||||
16,296 | |||||||||||
483,223 | |||||||||||
Total U.S. Government Agency Mortgages (Cost $492,526) | 483,223 | ||||||||||
U.S. Treasury Obligations (42.8%) | |||||||||||
| U.S. Treasury Notes 1.88%, 7/31/22 | 10,000 | 10,013 | |||||||||
2.00%, 11/30/22 | 11,000 | 11,022 | |||||||||
1.38%, 6/30/23 | 20,000 | 19,828 | |||||||||
0.13%, 9/15/23 | 6,000 | 5,837 | |||||||||
0.25%, 9/30/23 | 10,000 | 9,738 | |||||||||
0.38%, 10/31/23 | 30,000 | 29,194 | |||||||||
0.25%, 11/15/23 | 5,000 | 4,852 | |||||||||
2.13%, 11/30/23 | 22,000 | 21,927 | |||||||||
2.00%, 6/30/24 | 20,000 | 19,775 | |||||||||
0.38%, 8/15/24 | 5,000 | 4,764 | |||||||||
1.88%, 8/31/24 | 10,000 | 9,840 | |||||||||
2.25%, 11/15/24 | 5,000 | 4,950 | |||||||||
2.13%, 11/30/24 | 4,000 | 3,947 | |||||||||
2.50%, 1/31/25 | 7,000 | 6,964 | |||||||||
2.00%, 2/15/25 | 4,000 | 3,927 | |||||||||
2.13%, 5/15/25 | 4,500 | 4,423 | |||||||||
0.25%, 7/31/25 | 6,000 | 5,545 | |||||||||
0.25%, 8/31/25 | 12,000 | 11,062 | |||||||||
0.25%, 10/31/25 | 20,000 | 18,361 | |||||||||
0.38%, 1/31/26 | 34,000 | 31,131 | |||||||||
1.38%, 8/31/26 | 7,000 | 6,596 | |||||||||
0.88%, 9/30/26 | 25,000 | 23,010 | |||||||||
1.63%, 10/31/26 | 7,000 | 6,650 | |||||||||
1.13%, 2/29/28 | 15,000 | 13,610 | |||||||||
1.25%, 4/30/28 | 5,000 | 4,556 | |||||||||
1.25%, 5/31/28 | 10,000 | 9,100 | |||||||||
1.25%, 6/30/28 | 16,000 | 14,541 | |||||||||
1.00%, 7/31/28 | 3,000 | 2,680 | |||||||||
1.13%, 8/31/28 | 5,000 | 4,497 | |||||||||
1.38%, 10/31/28 | 20,000 | 18,227 | |||||||||
2.38%, 3/31/29 | 30,000 | 29,048 | |||||||||
2.38%, 5/15/29 | 10,000 | 9,684 | |||||||||
1.50%, 2/15/30 | 20,000 | 18,153 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
0.88%, 11/15/30 | $ | 7,000 | $ | 5,971 | |||||||
1.63%, 5/15/31 | 10,000 | 9,034 | |||||||||
1.25%, 8/15/31 | 40,000 | 34,831 | |||||||||
Total U.S. Treasury Obligations (Cost $470,084) | 447,288 | ||||||||||
Investment Companies (0.2%) | |||||||||||
Federated Treasury Obligations Fund Institutional Shares, 0.35% (e) | 1,589,541 | 1,590 | |||||||||
Total Investment Companies (Cost $1,590) | 1,590 | ||||||||||
Repurchase Agreements (1.9%) | |||||||||||
| Credit Agricole CIB NY, 0.76%, 6/1/22, purchased on 5/31/22, with a maturity date of 6/1/22, with a value of $20,000 (collateralized by Government National Mortgage Association, 3.50%, due 10/20/51, with a value of $20,400) | 20,000 | 20,000 | |||||||||
Total Repurchase Agreements (Cost $20,000) | 20,000 | ||||||||||
Total Investments (Cost $1,078,261) — 99.8% | 1,041,441 | ||||||||||
Other assets in excess of liabilities — 0.2% | 2,467 | ||||||||||
NET ASSETS — 100.00% | $ | 1,043,908 | |||||||||
(a) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(b) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid (unless otherwise noted as illiquid) based upon procedures approved by the Board of Trustees. As of May 31, 2022, the fair value of these securities was $10,906 thousand and amounted to 1.0% of net assets.
(c) Amount represents less than 0.05% of net assets.
(d) The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2022.
(e) Rate disclosed is the daily yield on May 31, 2022.
bps — Basis points
Continuously callable — Investment is continuously callable or will be continuously callable on any date after the first call date until its maturity.
GO — General Obligation
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2022, based on the last reset date of the security
LLC — Limited Liability Company
PRIME — US Prime Rate
See notes to financial statements.
12
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Government Securities Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $1,058,261) | $ | 1,021,441 | |||||
Repurchase agreements, at value (Cost $20,000) | 20,000 | ||||||
Receivables: | |||||||
Interest | 2,897 | ||||||
Capital shares issued | 33 | ||||||
From Adviser | 4 | ||||||
Prepaid expenses | 40 | ||||||
Total Assets | 1,044,415 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 22 | ||||||
Capital shares redeemed | 77 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 153 | ||||||
Administration fees | 100 | ||||||
Custodian fees | 7 | ||||||
Transfer agent fees | 94 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | — | (a) | |||||
| 12b-1 fees | — | (a) | |||||
Other accrued expenses | 53 | ||||||
Total Liabilities | 507 | ||||||
Net Assets: | |||||||
Capital | 1,087,070 | ||||||
Total accumulated earnings/(loss) | (43,162 | ) | |||||
Net Assets | $ | 1,043,908 | |||||
Net Assets | |||||||
Fund Shares | $ | 272,233 | |||||
Institutional Shares | 771,104 | ||||||
Class A | 40 | ||||||
Class R6 | 531 | ||||||
Total | $ | 1,043,908 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 29,609 | ||||||
Institutional Shares | 83,839 | ||||||
Class A | 4 | ||||||
Class R6 | 58 | ||||||
Total | 113,510 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 9.19 | |||||
Institutional Shares | 9.20 | ||||||
Class A | 9.19 | ||||||
Class R6 | 9.20 | ||||||
Maximum Sales Charge — Class A | 2.25 | % | |||||
| Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A | $ | 9.40 | |||||
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
13
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Government Securities Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 8 | |||||
Interest | 19,682 | ||||||
Securities lending (net of fees) | 6 | ||||||
Total Income | 19,696 | ||||||
Expenses: | |||||||
Investment advisory fees | 1,209 | ||||||
Administration fees — Fund Shares | 451 | ||||||
Administration fees — Institutional Shares | 697 | ||||||
Administration fees — Class A | 1 | ||||||
Administration fees — Class R6 | — | (a) | |||||
Sub-Administration fees | 23 | ||||||
| 12b-1 fees — Class A | 1 | ||||||
Custodian fees | 41 | ||||||
Transfer agent fees — Fund Shares | 360 | ||||||
Transfer agent fees — Institutional Shares | 697 | ||||||
Transfer agent fees — Class A | — | (a) | |||||
Transfer agent fees — Class R6 | — | (a) | |||||
Trustees' fees | 48 | ||||||
Compliance fees | 7 | ||||||
Legal and audit fees | 70 | ||||||
State registration and filing fees | 49 | ||||||
Other expenses | 106 | ||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | (a) | |||||
Total Expenses | 3,760 | ||||||
Expenses waived/reimbursed by Adviser | (25 | ) | |||||
Net Expenses | 3,735 | ||||||
Net Investment Income (Loss) | 15,961 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities | (3,196 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities | (75,241 | ) | |||||
Net realized/unrealized gains (losses) on investments | (78,437 | ) | |||||
Change in net assets resulting from operations | $ | (62,476 | ) | ||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
14
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Government Securities Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income (Loss) | $ | 15,961 | $ | 19,586 | |||||||
Net realized gains (losses) | (3,196 | ) | 12,560 | ||||||||
Net change in unrealized appreciation/depreciation | (75,241 | ) | (25,484 | ) | |||||||
Change in net assets resulting from operations | (62,476 | ) | 6,662 | ||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (8,608 | ) | (8,877 | ) | |||||||
Institutional Shares | (21,688 | ) | (15,022 | ) | |||||||
Class A | (11 | ) | (110 | ) | |||||||
Class R6 | (13 | ) | (146 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (30,320 | ) | (24,155 | ) | |||||||
Change in net assets resulting from capital transactions | 263,131 | (124,512 | ) | ||||||||
Change in net assets | 170,335 | (142,005 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of period | 873,573 | 1,015,578 | |||||||||
End of period | $ | 1,043,908 | $ | 873,573 | |||||||
(continues on next page)
See notes to financial statements.
15
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
| USAA Government Securities Fund | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 36,461 | $ | 56,454 | |||||||
Distributions reinvested | 8,152 | 8,356 | |||||||||
Cost of shares redeemed | (74,015 | ) | (95,166 | ) | |||||||
Total Fund Shares | $ | (29,402 | ) | $ | (30,356 | ) | |||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 300,038 | $ | 7,535 | |||||||
Distributions reinvested | 21,687 | 15,018 | |||||||||
Cost of shares redeemed | (29,311 | ) | (104,247 | ) | |||||||
Total Institutional Shares | $ | 292,414 | $ | (81,694 | ) | ||||||
Class A | |||||||||||
Proceeds from shares issued | $ | 113 | $ | 5,434 | |||||||
Distributions reinvested | 11 | 20 | |||||||||
Cost of shares redeemed | (413 | ) | (10,287 | ) | |||||||
Total Class A | $ | (289 | ) | $ | (4,833 | ) | |||||
Class R6 | |||||||||||
Proceeds from shares issued | $ | 450 | $ | 186 | |||||||
Distributions reinvested | 13 | 27 | |||||||||
Cost of shares redeemed | (55 | ) | (7,842 | ) | |||||||
Total Class R6 | $ | 408 | $ | (7,629 | ) | ||||||
Change in net assets resulting from capital transactions | $ | 263,131 | $ | (124,512 | ) | ||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 3,749 | 5,550 | |||||||||
Reinvested | 837 | 824 | |||||||||
Redeemed | (7,580 | ) | (9,376 | ) | |||||||
Total Fund Shares | (2,994 | ) | (3,002 | ) | |||||||
Institutional Shares | |||||||||||
Issued | 30,328 | 739 | |||||||||
Reinvested | 2,234 | 1,480 | |||||||||
Redeemed | (3,125 | ) | (10,224 | ) | |||||||
Total Institutional Shares | 29,437 | (8,005 | ) | ||||||||
Class A | |||||||||||
Issued | 12 | 531 | |||||||||
Reinvested | 1 | 2 | |||||||||
Redeemed | (45 | ) | (1,015 | ) | |||||||
Total Class A | (32 | ) | (482 | ) | |||||||
Class R6 | |||||||||||
Issued | 46 | 18 | |||||||||
Reinvested | 1 | 3 | |||||||||
Redeemed | (6 | ) | (777 | ) | |||||||
Total Class R6 | 41 | (756 | ) | ||||||||
Change in Shares | 26,452 | (12,245 | ) | ||||||||
See notes to financial statements.
16
This page is intentionally left blank.
17
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Government Securities Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 10.03 | 0.15 | (f) | (0.71 | ) | (0.56 | ) | (0.17 | ) | (0.11 | ) | |||||||||||||||
2021 | $ | 10.23 | 0.21 | (f) | (0.15 | ) | 0.06 | (0.22 | ) | (0.04 | ) | ||||||||||||||||
2020 | $ | 9.84 | 0.24 | (f) | 0.39 | 0.63 | (0.24 | ) | — | ||||||||||||||||||
2019 | $ | 9.55 | 0.23 | 0.29 | 0.52 | (0.23 | ) | — | |||||||||||||||||||
2018 | $ | 9.86 | 0.20 | (0.31 | ) | (0.11 | ) | (0.20 | ) | — | |||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 10.04 | 0.16 | (f) | (0.71 | ) | (0.55 | ) | (0.18 | ) | (0.11 | ) | |||||||||||||||
2021 | $ | 10.23 | 0.22 | (f) | (0.14 | ) | 0.08 | (0.23 | ) | (0.04 | ) | ||||||||||||||||
2020 | $ | 9.85 | 0.24 | (f) | 0.39 | 0.63 | (0.25 | ) | — | ||||||||||||||||||
2019 | $ | 9.55 | 0.24 | 0.30 | 0.54 | (0.24 | ) | — | |||||||||||||||||||
2018 | $ | 9.86 | 0.21 | (0.31 | ) | (0.10 | ) | (0.21 | ) | — | |||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 10.03 | 0.15 | (f) | (0.71 | ) | (0.56 | ) | (0.17 | ) | (0.11 | ) | |||||||||||||||
2021 | $ | 10.22 | 0.19 | (f) | (0.14 | ) | 0.05 | (0.20 | ) | (0.04 | ) | ||||||||||||||||
2020 | $ | 9.84 | 0.20 | (f) | 0.39 | 0.59 | (0.21 | ) | — | ||||||||||||||||||
2019 | $ | 9.54 | 0.21 | 0.30 | 0.51 | (0.21 | ) | — | |||||||||||||||||||
2018 | $ | 9.85 | 0.18 | (0.31 | ) | (0.13 | ) | (0.18 | ) | — | |||||||||||||||||
Class R6 | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 10.01 | 0.16 | (f) | (0.67 | ) | (0.51 | ) | (0.19 | ) | (0.11 | ) | |||||||||||||||
2021 | $ | 10.22 | 0.23 | (f) | (0.15 | ) | 0.08 | (0.25 | ) | (0.04 | ) | ||||||||||||||||
2020 | $ | 9.84 | 0.24 | (f) | 0.39 | 0.63 | (0.25 | ) | — | ||||||||||||||||||
2019 | $ | 9.55 | 0.24 | 0.29 | 0.53 | (0.24 | ) | — | |||||||||||||||||||
2018 | $ | 9.85 | 0.22 | (0.30 | ) | (0.08 | ) | (0.22 | ) | — | |||||||||||||||||
(a) 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.
(b) From the period beginning July 1, 2019, the amount of any waivers or reimbursements and the amount of any recoupment are calculated without regard to the impact of any performance adjustment to the Fund's management fee.
(c) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(d) Does not include acquired fund fees and expenses, if any.
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||||||
| Total Distributions | Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(a) | Net Expenses(b)(c)(d) | Net Investment Income (Loss) | Gross Expenses(d) | Net Assets, End of Period (000's) | Portfolio Turnover(e) | |||||||||||||||||||||||||||||||
USAA Government Securities Fund | |||||||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (0.28 | ) | — | $ | 9.19 | (5.71 | )% | 0.42 | % | 1.56 | % | 0.42 | % | $ | 272,233 | 34 | % | ||||||||||||||||||||||
2021 | (0.26 | ) | — | $ | 10.03 | 0.56 | % | 0.41 | % | 2.04 | % | 0.41 | % | $ | 327,111 | 15 | % | ||||||||||||||||||||||
2020 | (0.24 | ) | — | $ | 10.23 | 6.49 | % | 0.43 | % | 2.36 | % | 0.43 | % | $ | 364,077 | 11 | % | ||||||||||||||||||||||
2019 | (0.23 | ) | — | $ | 9.84 | 5.56 | % | 0.47 | % | 2.42 | % | 0.47 | % | $ | 328,123 | 9 | % | ||||||||||||||||||||||
2018 | (0.20 | ) | — | $ | 9.55 | (1.09 | )% | 0.48 | % | 2.09 | % | 0.48 | % | $ | 333,464 | 15 | % | ||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (0.29 | ) | — | $ | 9.20 | (5.64 | )% | 0.35 | % | 1.61 | % | 0.35 | % | $ | 771,104 | 34 | % | ||||||||||||||||||||||
2021 | (0.27 | ) | — | $ | 10.04 | 0.75 | % | 0.32 | % | 2.12 | % | 0.32 | % | $ | 545,930 | 15 | % | ||||||||||||||||||||||
2020 | (0.25 | ) | — | $ | 10.23 | 6.45 | % | 0.36 | % | 2.43 | % | 0.36 | % | $ | 638,299 | 11 | % | ||||||||||||||||||||||
2019 | (0.24 | ) | — | $ | 9.85 | 5.76 | % | 0.38 | % | 2.55 | % | 0.38 | % | $ | 742,233 | 9 | % | ||||||||||||||||||||||
2018 | (0.21 | ) | — | $ | 9.55 | (1.01 | )% | 0.39 | % | 2.18 | % | 0.39 | % | $ | 251,297 | 15 | % | ||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (0.28 | ) | — | $ | 9.19 | (5.70 | )% | 0.41 | %(g) | 1.56 | % | 3.28 | % | $ | 40 | 34 | % | ||||||||||||||||||||||
2021 | (0.24 | ) | — | $ | 10.03 | 0.43 | % | 0.70 | % | 1.89 | % | 1.06 | % | $ | 365 | 15 | % | ||||||||||||||||||||||
2020 | (0.21 | ) | — | $ | 10.22 | 6.04 | % | 0.75 | % | 2.03 | % | 0.80 | % | $ | 5,299 | 11 | % | ||||||||||||||||||||||
2019 | (0.21 | ) | — | $ | 9.84 | 5.37 | % | 0.75 | % | 2.14 | % | 0.87 | % | $ | 5,042 | 9 | % | ||||||||||||||||||||||
2018 | (0.18 | ) | — | (h) | $ | 9.54 | (1.36 | )% | 0.75 | % | 1.82 | % | 0.87 | % | $ | 4,804 | 15 | % | |||||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||||||
| Year Ended May 31: 2022 | (0.30 | ) | — | $ | 9.20 | (5.26 | )% | 0.26 | %(g) | 1.65 | % | 3.55 | % | $ | 531 | 34 | % | ||||||||||||||||||||||
2021 | (0.29 | ) | — | $ | 10.01 | 0.75 | % | 0.31 | % | 2.30 | % | 0.46 | % | $ | 167 | 15 | % | ||||||||||||||||||||||
2020 | (0.25 | ) | — | $ | 10.22 | 6.46 | % | 0.35 | % | 2.43 | % | 0.39 | % | $ | 7,903 | 11 | % | ||||||||||||||||||||||
2019 | (0.24 | ) | — | $ | 9.84 | 5.68 | % | 0.35 | % | 2.54 | % | 0.51 | % | $ | 6,425 | 9 | % | ||||||||||||||||||||||
2018 | (0.22 | ) | — | $ | 9.55 | (0.87 | )% | 0.35 | % | 2.22 | % | 0.64 | % | $ | 6,345 | 15 | % | ||||||||||||||||||||||
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(f) Per share net investment income (loss) has been calculated using the average daily shares method.
(g) Includes impact of voluntary waiver. Without this voluntary waiver, the net expense ratio would have been 0.40% and 0.22% higher for Class A and Class R6, respectively.
(h) Amount is less than $0.005 per share.
See notes to financial statements.
19
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Government Securities Fund (the "Fund"). The Fund offers four classes of shares: Fund Shares, Institutional Shares, Class A, and Class R6. The Fund is classified as diversified under the 1940 Act.
Each class of shares of the Fund has substantially identical rights and privileges, except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risks associated with entering into those investments.
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Trust's Board of Trustees' (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Investments in open-end investment companies are valued at their net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities are valued each business day by a pricing service approved by the Board. The approved pricing service uses the evaluated bid or the last sale price to value securities. Debt obligations maturing within 60 days may be valued at amortized cost, provided that the amortized cost represents the fair value of such securities. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Repurchase agreements are valued at cost.
In the event that price quotations or valuations are not readily available, investments are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. 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.
A summary of the valuations as of May 31, 2022, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed on the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 29,982 | $ | — | $ | 29,982 | |||||||||||
Municipal Bonds | — | 59,358 | — | 59,358 | |||||||||||||||
U.S. Government Agency Mortgages | — | 483,223 | — | 483,223 | |||||||||||||||
U.S. Treasury Obligations | — | 447,288 | — | 447,288 | |||||||||||||||
Investment Companies | 1,590 | — | — | 1,590 | |||||||||||||||
Repurchase Agreements | — | 20,000 | — | 20,000 | |||||||||||||||
Total | $ | 1,590 | $ | 1,039,851 | $ | — | $ | 1,041,441 | |||||||||||
For the year ended May 31, 2022, there were no transfers in or out of Level 3 in the fair value hierarchy.
Repurchase Agreements:
The Fund may enter into repurchase agreements with commercial banks or recognized security dealers pursuant to the terms of a Master Repurchase Agreement. A repurchase agreement is an arrangement wherein the Fund purchases securities and the seller agrees to repurchase the securities at an agreed upon time and at an agreed upon price. The purchased securities are marked-to-market daily to ensure their value is equal to at least 102% of principal including accrued interest and are held by the Fund, either through its regular custodian or through a special "tri-party" custodian that maintains separate accounts for both the Fund and its counterparty, until maturity of the repurchase agreement. Master Repurchase Agreements typically contain netting provisions, which provide for the net settlement of all transactions and collateral with the Fund through a single payment in the event of default or termination. Repurchase agreements are subject to credit risk, and the Fund's Manager monitors the creditworthiness of sellers with which the Fund may enter into repurchase agreements.
Investments in repurchase agreements as presented on the Schedule of Portfolio Investments are not net settlement amounts but gross. At May 31, 2022, the value of the related collateral exceeded the value of the repurchase agreements, reducing the net settlement amount to zero. Details on the collateral are included on the Schedule of Portfolio Investments.
Investment Companies:
Open-End Funds:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Securities Purchased on a Delayed-Delivery or When-Issued Basis:
The Fund may purchase securities on a delayed-delivery or when-issued basis. Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis, or for delayed draws on loans can take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payables for Investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
Municipal Obligations:
The values of municipal obligations can fluctuate and may be affected by adverse tax, legislative, or political changes, and by financial developments affecting municipal issuers. Payments of municipal obligations may depend on a relatively limited source of revenue, resulting in greater credit risk. Future changes in federal tax laws or the activity of an issuer may adversely affect the tax-exempt status of municipal obligations.
Mortgage- and Asset-Backed Securities:
The values of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Fund to a lower rate of return upon reinvestment of principal. The values of mortgage- and asset-backed securities depend in part on the credit quality and adequacy of the underlying assets or collateral and may fluctuate in response to the market's perception of these factors as well as current and future repayment rates. Some mortgage-backed securities are backed by the full faith and credit of the U.S. government (e.g., mortgage-backed securities issued by the Government National Mortgage Association, commonly known as "Ginnie Mae"), while other mortgage-backed securities (e.g., mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as "Fannie Mae" and "Freddie Mac," respectively), are backed only by the credit of the government entity issuing them. In addition, some mortgage-backed securities are issued by private entities and, as such, are not guaranteed by the U.S. government or any agency or instrumentality of the U.S. government.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are recorded on the identified cost basis. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest Income on the Statement of Operations.
Securities Lending:
The Fund, through a Securities Lending Agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers and banks, to earn additional income, net of income retained by Citibank. Borrowers are required to initially secure their loans for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are generally cured the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities and other securities as permitted by Securities and Exchange Commission ("SEC") guidelines. The cash collateral is invested in short-term instruments or cash equivalents, primarily open-end investment companies, as noted on the Fund's Schedule of Portfolio Investments. The Fund effectively does not have control of the non-cash collateral and therefore it is not disclosed on the Fund's Schedule of Portfolio Investments. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. In addition, there is a risk that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower.
The Fund's agreement with Citibank does not include master netting provisions. Non-cash collateral received by the Fund may not be sold or repledged, except to satisfy borrower default.
As of May 31, 2022, the Fund did not have any securities on loan.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing fees, and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades, which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2022, the Fund engaged in the following securities transactions with affiliated funds, which resulted in the following net realized gains (losses) (amounts in thousands):
| Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| $ | 10,196 | $ | — | $ | — | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2022, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 44,147 | $ | 9,006 | $ | 544,545 | $ | 317,128 | ||||||||
4. Affiliated Fund Ownership:
The Fund offers its shares for investment by other USAA Mutual Funds. The fund-of-funds do not invest in the underlying funds for the purpose of exercising management or control, and the affiliated fund-of-funds' annual and semi-annual reports may be viewed at www.vcm.com. As of May 31, 2022, certain fund-of-funds owned total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 3.2 | ||||||
USAA Target Retirement Income Fund | 19.7 | ||||||
USAA Target Retirement 2030 Fund | 18.6 | ||||||
USAA Target Retirement 2040 Fund | 9.4 | ||||||
USAA Target Retirement 2050 Fund | 2.0 | ||||||
USAA Target Retirement 2060 Fund | 0.4 | ||||||
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the SEC. The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.125% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment advisory fees.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the prior investment adviser to the Fund, announced that AMCO would be acquired by Victory Capital Holdings Inc. (the "Transaction"). A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and VCM. The Transaction closed on July 1, 2019, and effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and no performance adjustments were made for the period beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019 and thereafter is utilized in calculating future performance adjustments.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Intermediate U.S. Government Funds Index. The Lipper Intermediate U.S. Government Funds Index tracks the total return performance of the largest funds within the Lipper Intermediate U.S. Government Funds category.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points) | ||||||
| +/- 20 to 50 | +/- 4 | ||||||
| +/- 51 to 100 | +/- 5 | ||||||
| +/- 101 and greater | +/- 6 | ||||||
(a) Based on the difference between the average annual performance of the relevant share class of the Fund and its relevant Lipper index, rounded to the nearest basis point.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of the 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 pays a positive performance fee adjustment for a performance period whenever the class outperforms the Lipper Intermediate U.S. Government Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2021, to May 31, 2022, performance adjustments were $(30), $(8), $(1), and less than $1 for Fund Shares, Institutional Shares, Class A, and Class R6, in thousands, respectively. Performance adjustments were (0.01)%, less than (0.01)%, (0.30)%, and 0.07% for Fund Shares, Institutional Shares, Class A, and Class R6, respectively. The performance adjustment rate included in the investment advisory fee may differ from the maximum over/under Annual Adjustment Rate due to differences in average net assets for the reporting period and rolling 36 month performance periods.
The Trust relies on an exemptive order granted to VCM and its affiliated funds by the SEC in March 2019 permitting the use of a "manager-of-managers" structure for certain funds. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2022, the Fund had no subadvisers.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.15%, 0.10%, 0.15% and 0.05%, which is based on the Fund's average daily net assets of the Fund Shares, of the Institutional Shares, of the Class A and of the Class R6, respectively. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. VCTA provides transfer agent services to the Fund Shares based on an annual charge of $25.50 per shareholder account plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Transfer agent fees for Institutional Shares, Class A and Class R6 are paid monthly based on a fee accrued daily at an annualized rate of 0.10%, 0.10% and 0.01%, respectively, of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust.
Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activity primarily intended to result in the sale of Class A. Amounts incurred and paid to the Distributor for the year ended May 31, 2022, are reflected on the Statement of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the year ended May 31, 2022, the Distributor did not receive any commissions.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred by certain classes of the Fund in any fiscal year exceed the expense limits for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Performance adjustments, acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limits. As of May 31, 2022, the expense limits (excluding voluntary waivers) were 0.48%, 0.39%, 0.75%, and 0.35% for Fund Shares, Institutional Shares, Class A, and Class R6, respectively.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 1 | $ | 25 | $ | 23 | $ | 49 | ||||||||
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. For the year ended May 31, 2022, the Adviser voluntarily waived fees of $2 thousand.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Interest Rate Risk — The Fund is subject to the risk that the market value of the bonds in its portfolio will fluctuate because of changes in interest rates, changes in the supply of and demand for debt securities, and other market factors. Bond prices generally are linked to the prevailing market interest rates. In general, when interest rates rise, bond prices fall; conversely, when interest rates fall, bond prices rise. The price volatility of a bond also depends on its duration. Generally, the longer the duration of a bond, the greater is its sensitivity to interest rates. To compensate investors for this higher interest rate risk, bonds with longer durations generally offer higher yields than bonds with shorter durations. The ability of an issuer of a debt security to repay principal prior to a security's maturity can increase the security's sensitivity to interest rate changes.
Decisions by the U.S. Federal Reserve (also known as the "Fed") regarding interest rate and monetary policy, which can be difficult to predict and sometimes change direction suddenly in response to economic and market events, can have a significant effect on the value of fixed-income securities as well as the overall strength of the U.S. economy. Precise interest rate predictions are difficult to make, and interest rates may change unexpectedly and dramatically in response to extreme changes in market or economic conditions. As a result, the value of fixed-income securities may vary widely under certain market conditions.
Prepayment and Extension Risk — Mortgage-backed securities make regularly scheduled payments of principal along with interest payments. In addition, mortgagors generally have the option of paying off their mortgages without penalty at any time. For example, when a mortgaged property is sold, the old mortgage is usually prepaid. Also, when interest rates fall, the mortgagor may refinance the mortgage and prepay the old mortgage. A homeowner's default on the mortgage also may cause a prepayment of the mortgage. This unpredictability of the mortgage's cash flow is called prepayment risk. For the investor, prepayment risk usually means that principal is received at the least opportune time. For example, when interest rates fall, homeowners may find it advantageous to refinance their mortgages and prepay principal. In this case, the investor is forced to reinvest the principal at the current lower rate. On the other hand, when interest rates rise, homeowners generally will not refinance
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
their mortgages and prepayments will fall. This causes the average life of the mortgage to extend and be more sensitive to interest rates, which is called extension risk. In addition, the amount of principal the investor has to invest in these higher interest rates is reduced.
Liquidity Risk — Market developments and other factors, including a general rise in interest rates, have the potential to cause investors to move out of fixed-income securities on a large scale, which may increase redemptions from mutual funds that hold large amounts of fixed-income securities. Such a move, coupled with a reduction in the ability or willingness of dealers and other institutional investors to buy or hold fixed-income securities, may result in decreased liquidity and increased volatility in the fixed-income markets. Heavy redemptions of fixed-income mutual funds and decreased liquidity from fixed-income securities could hurt the Fund's performance. In addition, significant securities market disruptions related to outbreaks of the coronavirus disease ("COVID-19") have led to dislocation in the market for a variety of fixed-income securities (including municipal obligations), which has decreased liquidity and sharply reduced returns.
LIBOR Discontinuation Risk — The London Interbank Offered Rate ("LIBOR") discontinuation may adversely affect the financial markets generally and the Fund's operations, finances and investments specifically. LIBOR has been the principal floating-rate benchmark in the financial markets, and a large portion of the Fund's assets are tied to LIBOR. However, LIBOR has been or will be discontinued as a floating rate benchmark. The date of discontinuation depends on the LIBOR currency and tenor. With limited exceptions, no new LIBOR obligations will be entered into after December 31, 2021. Existing LIBOR obligations have transitioned or will transition to another benchmark, depending on the LIBOR currency and tenor. For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
Non-LIBOR floating-rate obligations, including Secured Overnight Financing Rate ("SOFR")-based obligations, may have returns and values that fluctuate more than those of floating-rate debt obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest-rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Various SOFR-based rates, including SOFR-based term rates, and various non-SOFR-based rates are expected to develop in response to the discontinuation of U.S. dollar LIBOR, which may create various risks for the Funds and the financial markets more generally. There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Such rates include AMERIBOR (American Interbank Offered Rate), BSBY (Bloomberg Short-Term Bank Yield Index) and BYI (Bank Yield Index). Unlike forward-looking SOFR-based term rates, such rates are intended to reflect a bank credit spread component.
It is not clear how replacement rates for LIBOR — including SOFR-based rates and non-SOFR-based rates — will develop and to what extent they will be used. There is no assurance that these replacement rates will be suitable substitutes for LIBOR, and thus the substitution of such rates for LIBOR could have an adverse effect on the Fund and the financial markets more generally. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, which may or may not be similar to the risks relating to SOFR.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
another country or region. The impact of these and other factors may be short-term or may last for extended periods.
7. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the six months ended April 30, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month LIBOR) plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
Interfund Lending:
The Trust and the Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows the Fund to directly lend and borrow money to or from any other fund in the Victory Funds Complex that is permitted to participate in the Facility, relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statement of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
8. Federal Income Tax Information:
Distributions from the Fund's net investment income are accrued daily and distributed on the last business day of each month. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | ||||||||||||||||||
$ | 17,779 | $ | 12,541 | $ | 30,320 | $ | 20,872 | $ | 3,283 | $ | 24,155 | ||||||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Distributions Payable | Accumulated Earnings | Accumulated Capital and Other Earnings (Loss) | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 244 | $ | (1,559 | ) | $ | (1,315 | ) | $ | (5,027 | ) | $ | (36,820 | ) | $ | (43,162 | ) | |||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales.
As of May 31, 2022, the Fund had net capital loss carryforwards as shown in the table below (amounts in thousands). It is unlikely that the Board will authorize a distribution of capital gains realized in the future until the capital loss carryforwards have been used.
| Short-Term Amount | Total | ||||||
| $ | 5,027 | $ | 5,027 | ||||
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 1,078,261 | $ | 3,303 | $ | (40,123 | ) | $ | (36,820 | ) | ||||||
30
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Government Securities Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Government Securities Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
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USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
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(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
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(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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(Unaudited)
Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Form N-PORT is available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21- 5/31/22* | Hypothetical Expenses Paid During Period 12/1/21- 5/31/22* | Annualized Expense Ratio During Period 12/1/21- 5/31/22 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 947.70 | $ | 1,022.74 | $ | 2.14 | $ | 2.22 | 0.44 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 948.10 | 1,023.09 | 1.80 | 1.87 | 0.37 | % | ||||||||||||||||||||
Class A | 1,000.00 | 947.00 | 1,021.99 | 2.86 | 2.97 | 0.59 | % | ||||||||||||||||||||
Class R6 | 1,000.00 | 949.20 | 1,023.29 | 1.60 | 1.66 | 0.33 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2022, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January 2023.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2022 (amounts in thousands):
| Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||
| $ | 1 | $ | 12,541 | ||||
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Government Securities Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services and the effects of any performance adjustment1, as well as any fee waivers and reimbursements — was below the medians of its expense group and its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were below the medians of its expense group and its expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was above the average of its performance universe for the one-, five- and ten-year periods ended September 30, 2021, and was equal to the average of its performance universe for the three-year period ended September 30, 2021, and was above its Lipper index for the one- and five-year periods ended September 30, 2021, and was below its Lipper index for the three- and ten-year periods ended September 30, 2021.
1 The Adviser previously agreed that no performance adjustment (positive or negative) would be made to the amount payable to the Adviser from July 1, 2019, through June 30, 2020.
41
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser waived a portion of its management fee and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the change in size, if any, of each of the Fund's classes on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the overall performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
42
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Liquidity Risk Management Program:
The USAA Mutual Funds have adopted and implemented a written liquidity risk management program (the "LRMP") as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed market conditions; its short- and long-term cash flow projections; and its cash holdings and access to other liquidity management tools such as available funding sources, including the Victory Funds Complex Interfund Lending Facility and Line of Credit (discussed in the Notes to Financial Statements). The USAA Mutual Fund's Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital Management Inc. ("Victory Capital"), as the administrator of the LRMP.
Victory Capital manages liquidity risks associated with the Fund's investments by monitoring, among other things, cash and cash equivalents, any use of derivatives, the concentration of investments, the appropriateness of the Fund's investment strategy, and by classifying every Fund investment as either highly liquid, moderately liquid, less liquid, or illiquid on at least a monthly basis. To assist with the classification of Fund investments, Victory Capital has retained a third-party provider of liquidity evaluation services. This provider determines preliminary liquidity classifications for all portfolio holdings based upon portfolio-level data and certain assumptions provided by Victory Capital. Victory Capital reviews the preliminary liquidity classifications and, when appropriate, considers other information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
At a meeting held on March 11, 2022, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year. The report from Victory Capital concluded that the Fund did not experience any significant liquidity challenges during the covered period, and the Fund's LRMP is reasonably designed to assess and manage its liquidity risk. The report also concluded that the LRMP continues to operate adequately and effectively to enable Victory Capital to oversee and manage liquidity risk and ensure the Fund is able to meet redemption requests without significant dilution to the remaining investors' interest in the Fund. During the review period, the Fund's portfolio consisted primarily of highly liquid investments, which are defined as cash and any investments that the Fund reasonably expects to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a highly liquid investment minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
43
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23413-0722
MAY 31, 2022
Annual Report
USAA Treasury Money Market Trust®
Victory Capital means Victory Capital Management Inc., the investment adviser of the USAA Mutual Funds. USAA Mutual Funds are distributed by Victory Capital Services, Inc., member of FINRA, an affiliate of Victory Capital. Victory Capital and its affiliates are not affiliated with United Services Automobile Association or its affiliates. USAA and the USAA logos are registered trademarks and the USAA Mutual Funds and USAA Investments logos are trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Capital website gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Manager's Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 5 | ||||||
| Investment Objective & Portfolio Holdings (Unaudited) | 6 | ||||||
Schedule of Portfolio Investments | 7 | ||||||
Financial Statements | |||||||
Statement of Assets and Liabilities | 8 | ||||||
Statement of Operations | 9 | ||||||
Statements of Changes in Net Assets | 10 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
| Report of Independent Registered Public Accounting Firm | 20 | ||||||
Supplemental Information (Unaudited) | 21 | ||||||
Trustee and Officer Information | 21 | ||||||
Proxy Voting and Portfolio Holdings Information | 27 | ||||||
Expense Example | 27 | ||||||
Advisory Contract Renewal | 28 | ||||||
Privacy Policy (inside back cover) | |||||||
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 Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
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 tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396, and form W-4P (OMB No. 1545-0074 withholding certificate for pension or annuity payments) will be electronically sent.
If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. 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.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1
(Unaudited)
Dear Shareholder,
Looking back over our most recent annual reporting period offers us a stark reminder that markets go up and down, and that investor sentiment can shift quickly from risk-on to risk-off.
Although most of 2021 was constructive for financial markets, the script flipped as we entered the new calendar year. More recently, investors have been focused on a host of worries. Inflation data has been running hotter than expected; the U.S. Federal Reserve (the "Fed") has embarked on a new rate-hike cycle; and a terrible war is now taking place in Eastern Europe. All these issues, among other factors, have ratcheted up market volatility in both stock and bond markets. Many broad market stock indices have pulled back substantially during the first five months of 2022, while wide swaths of the bond market have struggled in the face of rising interest rates.
Throughout the ups and downs of the past annual reporting period, there have been interesting differences playing out within the broader market. In general, large-cap stocks outperformed smaller capitalization companies for the full annual reporting period. Meanwhile, growth-oriented styles led value-oriented investments during the earlier part of our annual reporting period, while the reverse was true during the latter segment of the reporting period (as measured by the Russell family of indices). Perhaps this reflects investors' realization and expectations for future higher interest rates and corresponding higher borrowing costs.
There were other notable subplots, too during the reporting period. During much of 2021 we watched crypto assets captivate investors, only to see them cycle up and down several times as the market sought to grasp the potential of their emerging blockchain technologies. More recently we've seen a spike in oil prices in 2022, which helped fuel gains across the energy landscape while many other sectors have lagged. Energy (and other commodities) has been one of the bright spots for many investor portfolios, and if anything, this exemplifies the benefits of diversification and investing across asset types, investment styles, and even geographies.
Looking at the numbers, we see that the S&P 500® Index, the bell-weather proxy for our domestic stock market, had an annual total return of -0.30% for the 12-month period ended May 31, 2022. Over this same annual period, the yield on the 10-Year U.S. Treasury jumped 1.27%, thanks largely to the Fed's shift toward a less accommodative monetary policy and the first interest rate hike in three years. At the end of our reporting period, the yield on the 10-Year U.S. Treasury finished at 2.85%.
Given the market environment of the past few months, it's no surprise that investors have become more focused on risk management and downside protection. But remember, our experience managing portfolios through various economic cycles has taught us to remain calm in the face of market turmoil. It is our view that, a long-term perspective, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are some of the key ingredients for staying the course and progressing on investment goals.
Of course, no one knows for certain what the future will bring. The Fed has already announced its intent to continue raising rates until the recent elevated inflation
2
readings decline. Labor shortages, continuing supply chain issues, elevated commodity prices, and the Russia-Ukraine war are among the headwinds investors continue to navigate. It is our view that, there will be other challenges ahead, with some yet to be identified.
Thus, we cannot tell you with any certainty what markets will do in the future, but we can assure you that the investment professionals at all our independent franchises continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring.
On the following pages, you will find information relating to your USAA® Mutual Funds, brought to you by Victory Capital. If you have any questions regarding the current market dynamics or your specific portfolio or investment plan, we encourage you to contact our representatives. Call (800) 235-8396 or visit our website at www.vcm.com.
From all of us here at Victory Capital, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Treasury Money Market Trust
Managers' Commentary
(Unaudited)
• What were the market conditions during the reporting period?
Throughout much of the 12-month reporting period ended May 31, 2022, the target federal funds ("fed funds") rate was held at a range of between 0.00% and 0.25%. Officials at the U.S. Federal Reserve (the "Fed") set the short-term rate to these low levels in order to support the U.S. economy during the country's battle with COVID-19. During March 2022, however, officials at the Fed raised the target range by a quarter of a percentage point to between 0.25% and 0.50%. This marked the first increase since December 2018. Officials at the Fed then increased the target range again in May 2022 to between 0.75% and 1.00%. These increases in the fed funds rate reflect the Fed's desire to control inflation, particularly as the pandemic has subsided. Additional increases are expected later this year.
As a result of the Fed's interest rate target of zero during most of the reporting period, short-term interest rates remained extremely low. This resulted in extremely low yields on U.S. Treasury bills, repurchase agreements, and short-term notes. However, as the Fed has increased the fed funds rate, short-term interest rates have also moved higher. We would expect this trend to continue should the Fed continue to increase the fed funds rate.
• How did the USAA Treasury Money Market Trust (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2022, the Fund had a return of 0.04%, compared to an average of 0.04% for the funds in the Lipper U.S. Treasury Money Market Funds category.
• What strategies did you employ during the period?
In keeping with our investment approach, we continued to invest the Fund's portfolio in securities with maturities of 397 days or less that are backed by the full faith and credit of the U.S. government. During the reporting period, the Fund shortened its weighted average maturity in order to take advantage of rising short-term yields. The Fund also increased its weighting in U.S. Treasury floating-rate notes in anticipation that short-term interest rates would continue to move higher over the near term.
Thank you for allowing us to assist in your investment needs.
4
USAA Treasury Money Market Trust
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2022
Fund Shares | |||||||
INCEPTION DATE | 2/1/91 | ||||||
Net Asset Value | |||||||
One Year | 0.04 | % | |||||
Five Year | 0.81 | % | |||||
Ten Year | 0.41 | % | |||||
The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund's liquidity falls below required minimums because of market conditions or other factors.
An investment in the Fund is not a deposit in a bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. Generally Accepted Accounting Principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The total return figures set forth above include all waivers of fees. Without such fee waivers, the total returns would have been lower.
USAA Treasury Money Market Trust — Growth of $10,000
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.
Past performance is not indicative of future results.
5
| USAA Mutual Funds Trust USAA Treasury Money Market Trust | May 31, 2022 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks to provide investors maximum current income while maintaining the highest degree of safety and liquidity.
Portfolio Mix:
May 31, 2022
(% of Net Assets)
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
6
| USAA Mutual Funds Trust USAA Treasury Money Market Trust | Schedule of Portfolio Investments May 31, 2022 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
U.S. Treasury Obligations (48.1%) | |||||||||||
U.S. Treasury Bills, 0.48%, 6/16/22 (a) | $ | 25,000 | $ | 24,999 | |||||||
| U.S. Treasury Notes 1.18% (USBMMY3M+6bps), 7/31/22 (b) | 50,000 | 50,023 | |||||||||
1.18% (USBMMY3M+6bps), 10/31/22 (b) | 75,000 | 75,068 | |||||||||
1.17% (USBMMY3M+5bps), 1/31/23 (b) | 75,000 | 75,090 | |||||||||
1.16% (USBMMY3M+3bps), 4/30/23 (b) | 25,000 | 25,070 | |||||||||
Total U.S. Treasury Obligations (Cost $250,250) | 250,250 | ||||||||||
Repurchase Agreements (51.0%) | |||||||||||
| Bank of America Corp., 0.77%, 6/1/22, purchased on 5/31/22, with a maturity date of 6/1/22, with a value of $90,000 (collateralized by U.S. Treasury Inflation Note Index (c), 2.84% – 2.96%, due 5/15/29 – 5/15/33, with a value of $91,800) | 90,000 | 90,000 | |||||||||
| Credit Agricole CIB NY, 0.74%, 6/1/22, purchased on 5/31/22, with a maturity date of 6/1/22, with a value of $30,000 (collateralized by U.S. Treasury Bonds, 3.75%, due 11/15/43, with a value of $30,600) | 30,000 | 30,000 | |||||||||
| Fixed Income Clearing Corporation-State Street Bank & Trust Co., 0.74%, 6/1/22, purchased on 5/31/22, with a maturity date of 6/1/22, with a value of $145,000 (collateralized by U.S. Treasury Notes, 0.38%, due 9/30/27, with a value of $147,900) | 145,000 | 145,000 | |||||||||
Total Repurchase Agreements (Cost $265,000) | 265,000 | ||||||||||
Total Investments (Cost $515,250) — 99.1% | 515,250 | ||||||||||
Other assets in excess of liabilities — 0.9% | 4,731 | ||||||||||
NET ASSETS — 100.00% | $ | 519,981 | |||||||||
(a) Rate represents the effective yield at May 31, 2022.
(b) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2022.
(c) U.S. Treasury inflation-indexed notes — designed to provide a real rate of return after being adjusted over time to reflect the impact of inflation. Their principal value periodically adjusts to the rate of inflation. They trade at the prevailing real, or after inflation, interest rates. The U.S. Treasury guarantees repayment of these securities of at least their face value in the event of sustained deflation or a drop in prices.
bps — Basis points
USBMMY3M — 3 Month Treasury Bill Rate
See notes to financial statements.
7
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2022 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Treasury Money Market Trust | |||||||
Assets: | |||||||
Investments, at value (Cost $250,250) | $ | 250,250 | |||||
Repurchase agreements, at value (Cost $265,000) | 265,000 | ||||||
Cash | 4,967 | ||||||
Receivables: | |||||||
Interest | 211 | ||||||
Capital shares issued | 770 | ||||||
From Adviser | 17 | ||||||
Prepaid expenses | 22 | ||||||
Total Assets | 521,237 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | — | (a) | |||||
Capital shares redeemed | 1,069 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 55 | ||||||
Administration fees | 44 | ||||||
Custodian fees | 1 | ||||||
Transfer agent fees | 45 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
Other accrued expenses | 42 | ||||||
Total Liabilities | 1,256 | ||||||
Net Assets: | |||||||
Capital | 519,981 | ||||||
Total accumulated earnings/(loss) | — | (a) | |||||
Net Assets | $ | 519,981 | |||||
Shares (unlimited number of shares authorized with no par value): | 519,982 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 1.00 | |||||
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2022 | ||||||
(Amounts in Thousands)
| USAA Treasury Money Market Trust | |||||||
Investment Income: | |||||||
Interest | $ | 716 | |||||
Total Income | 716 | ||||||
Expenses: | |||||||
Investment advisory fees | 614 | ||||||
Administration fees | 491 | ||||||
Sub-Administration fees | 5 | ||||||
Custodian fees | 13 | ||||||
Transfer agent fees | 491 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 3 | ||||||
Legal and audit fees | 55 | ||||||
State registration and filing fees | 35 | ||||||
Other expenses | 61 | ||||||
Total Expenses | 1,816 | ||||||
Expenses waived/reimbursed by Adviser | (1,298 | ) | |||||
Net Expenses | 518 | ||||||
Net Investment Income | 198 | ||||||
Change in net assets resulting from operations | $ | 198 | |||||
See notes to financial statements.
9
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
| USAA Treasury Money Market Trust | |||||||||||
| Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 198 | $ | 173 | |||||||
Net realized gains (losses) | — | — | (a) | ||||||||
Change in net assets resulting from operations | 198 | 173 | |||||||||
Change in net assets resulting from distributions to shareholders | (198 | ) | (173 | ) | |||||||
Change in net assets resulting from capital transactions | 23,204 | (47,136 | ) | ||||||||
Change in net assets | 23,204 | (47,136 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of period | 496,777 | 543,913 | |||||||||
End of period | $ | 519,981 | $ | 496,777 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 145,813 | $ | 161,288 | |||||||
Distributions reinvested | 197 | 171 | |||||||||
Cost of shares redeemed | (122,806 | ) | (208,595 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 23,204 | $ | (47,136 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 145,813 | 161,289 | |||||||||
Reinvested | 197 | 171 | |||||||||
Redeemed | (122,806 | ) | (208,595 | ) | |||||||
Change in Shares | 23,204 | (47,135 | ) | ||||||||
(a) Rounds to less than $1 thousand.
See notes to financial statements.
10
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11
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
| Net Asset Value, Beginning of Period | Net Investment Income | Net Realized and Unrealized Gains (Losses) | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
USAA Treasury Money Market Trust | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 1.00 | — | (c)(d) | — | — | (c) | — | (c) | — | (c) | ||||||||||||||||
2021 | $ | 1.00 | — | (c)(d) | — | (c) | — | (c) | — | (c) | — | (c) | |||||||||||||||
2020 | $ | 1.00 | 0.01 | (d) | — | 0.01 | (0.01 | ) | (0.01 | ) | |||||||||||||||||
2019 | $ | 1.00 | 0.02 | — | 0.02 | (0.02 | ) | (0.02 | ) | ||||||||||||||||||
2018 | $ | 1.00 | 0.01 | — | 0.01 | (0.01 | ) | (0.01 | ) | ||||||||||||||||||
(a) 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.
(b) The net expense ratio may not correlate to the applicable expense limits in place during the period since the current contractual expense limitation is applied for a period beginning July 1, 2019 and in effect through June 30, 2023, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 3 of the accompanying Notes to Financial Statements.
(c) Amount is less than $0.005 per share.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Prior to August 1, 2017, USAA Asset Management Company ("AMCO") (previous Adviser) voluntarily agreed, on a temporary basis, to reimburse management, administrative, or other fees to limit the Fund's expenses and attempt to prevent a negative yield.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||
| Net Asset Value, End of Period | Total Return(a) | Net Expenses(b) | Net Investment Income | Gross Expenses | Net Assets, End of Period (000's) | ||||||||||||||||||||||
USAA Treasury Money Market Trust | |||||||||||||||||||||||||||
| Year Ended May 31: 2022 | $ | 1.00 | 0.04 | % | 0.11 | % | 0.04 | % | 0.37 | % | $ | 519,981 | |||||||||||||||
2021 | $ | 1.00 | 0.03 | % | 0.12 | % | 0.03 | % | 0.38 | % | $ | 496,777 | |||||||||||||||
2020 | $ | 1.00 | 1.23 | % | 0.33 | % | 1.21 | % | 0.34 | % | $ | 543,913 | |||||||||||||||
2019 | $ | 1.00 | 1.88 | % | 0.35 | % | 1.88 | % | 0.35 | % | $ | 4,858,998 | |||||||||||||||
2018 | $ | 1.00 | 0.89 | %(e) | 0.35 | %(e) | 0.91 | % | 0.35 | % | $ | 3,732,359 | |||||||||||||||
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2022 | ||||||
1. Organization:
USAA Mutual Funds Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. The Trust is comprised of 45 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Treasury Money Market Trust (the "Fund"). The Fund is classified as diversified under the 1940 Act.
The Fund operates as a government money market fund in compliance with the requirements of Rule 2a-7 under the 1940 Act and as a government money market fund, shares of the Fund are available for sale only to accounts that are beneficially owned by natural persons.
The Fund has adopted policies and procedures permitting the Trust's Board of Trustees (the "Board") to impose a liquidity fee or to temporarily suspend redemptions from the Fund (impose a "redemption gate") if the Fund's weekly liquid assets fall below specific thresholds, such as during times of market stress. The imposition of a liquidity fee would reduce the amount you would receive upon redemption of your shares of the Fund. The imposition of a redemption gate would temporarily delay your ability to redeem your investments in the Fund.
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 Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The inputs or methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.
The Fund records investments at fair value. 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 valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Victory Capital Management Inc. ("VCM" or the "Adviser") has established the Pricing and Liquidity Committee (the "Committee"), and subject to the Board's oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Repurchase agreements are valued at cost.
All securities held in the Fund are short-term debt securities, which are valued pursuant to Rule 2a-7 under the 1940 Act. This method values a security at its purchase price, and thereafter, assumes a constant amortization to maturity of any premiums or discounts. Securities for which amortized cost valuations are considered unreliable or whose values have been materially affected by a significant event are valued in good faith, at fair value, using methods determined by the Committee, under procedures to stabilize net assets and valuation procedures approved by the Board.
Repurchase Agreements:
The Fund may enter into repurchase agreements with commercial banks or recognized security dealers pursuant to the terms of a Master Repurchase Agreement. A repurchase agreement is an arrangement wherein the Fund purchases securities and the seller agrees to repurchase the securities at an agreed upon time and at an agreed upon price. The purchased securities are marked-to-market daily to ensure their value is equal to at least 102% of principal including accrued interest and are held by the Fund, either through its regular custodian or through a special "tri-party" custodian that maintains separate accounts for both the Fund and its counterparty, until maturity of the repurchase agreement. Master Repurchase Agreements typically contain netting provisions, which provide for the net settlement of all transactions and collateral with the Fund through a single payment in the event of default or termination. Repurchase agreements are subject to credit risk, and the Fund's Manager monitors the creditworthiness of sellers with which the Fund may enter into repurchase agreements.
Investments in repurchase agreements as presented on the Schedule of Portfolio Investments are not net settlement amounts but gross. At May 31, 2022, the value of the related collateral exceeded the value of the repurchase agreements, reducing the net settlement amount to zero. Details on the collateral are included on the Schedule of Portfolio Investments.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date or the last business day of the reporting period. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Gains or losses realized on sales of securities are recorded on the identified cost basis.
Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund has a tax year end of May 31.
For the year ended May 31, 2022, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax years, which includes the current fiscal tax year end). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Allocations:
Expenses directly attributable to the Fund are charged to the Fund, while expenses that are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or an affiliated trust based upon net assets or another appropriate basis.
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statement of Operations, as applicable, as Custodian fees.
3. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory Fees:
Investment advisory services are provided to the Fund by the Adviser, which is a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is an indirect wholly owned subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly owned direct subsidiary of Victory Capital Operating, LLC.
The Fund's Investment Adviser fee is accrued daily and paid monthly at an annualized rate of 0.125% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the year ended May 31, 2022, are reflected on the Statement of Operations as Investment Advisory fees.
Administration and Servicing Fees:
VCM also serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid an administration and servicing fee that is accrued daily and paid monthly at an annualized rate of 0.10%, which is based on the Fund's average daily net assets. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Administration fees.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, acts as sub-administrator and sub-fund accountant to the Fund pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Fund reimburses VCM and Citi for out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Sub-Administration fees.
The Fund (as part of the Trust) has entered into an agreement with the Adviser to provide compliance services, pursuant to which the Adviser furnishes its compliance personnel, including the services of the Chief Compliance Officer ("CCO"), and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration, and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. The CCO is an employee of the Adviser, which pays the compensation of the CCO and support staff. The funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios, and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensate the Adviser for these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Compliance fees.
Transfer Agency Fees:
Victory Capital Transfer Agency, Inc. ("VCTA"), an affiliate of the Adviser, provides transfer agency services to the Fund. Transfer agent's fees for the Fund are paid monthly based on a fee accrued daily at an annualized rate of 0.10% of average daily net assets, plus out-of-pocket expenses. VCTA pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. Amounts incurred and paid to VCTA for the year ended May 31, 2022, are reflected on the Statement of Operations as Transfer agent fees.
FIS Investor Services LLC serves as sub-transfer agent and dividend disbursing agent for the Fund pursuant to a Sub-Transfer Agent Agreement between VCTA and FIS Investor Services LLC. VCTA provides FIS Investor Services LLC a fee for providing these services.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
Distributor/Underwriting Services:
Victory Capital Services, Inc. (the "Distributor"), an affiliate of the Adviser, serves as Distributor for the continuous offering of the shares of the Fund pursuant to a Distribution Agreement between the Distributor and the Trust, and receives no fee or other compensation for these services.
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the year ended May 31, 2022, are reflected on the Statement of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
The Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2023. Under the terms of the agreement, the Adviser has agreed to waive fees or reimburse certain expenses to the extent that ordinary operating expenses incurred in any fiscal year exceed the expense limits for the Fund. Such excess amounts will be the liability of the Adviser. Acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures, which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the Fund's business are excluded from the expense limit. As of May 31, 2022, the expense limit (excluding voluntary waivers) was 0.35%.
Under the terms of the expense limitation agreement, as amended May 1, 2021, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years (thirty-six (36) months) after the waiver or reimbursement took place, subject to the lesser of any operating expense limits in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount. Prior to May 1, 2021, the Adviser was permitted to recoup fees waived and expenses reimbursed for up to three years after the fiscal year in which the waiver or reimbursement took place, subject to the limitations above. This change did not have any effect on the amounts previously reported for recoupment.
In addition, the Adviser agreed to further reimburse fees in excess of the Fund's expense limit of 0.35%. These voluntary reductions, to the extent necessary, are to maintain a certain minimum net yield of the Fund. Under this agreement to reimburse additional fees, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period of up to three years after the fiscal year in which the waiver or reimbursement took place, to the extent any repayments would not cause the Fund's net yield to fall below the Fund's minimum yield at the time of: (a) the original waiver or expense reimbursement; or (b) the expense limit in effect at the time of the extra waiver.
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands). The Fund has not recorded any amounts available to be repaid as a liability due to an assessment that such repayments are not probable at May 31, 2022.
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 745 | $ | 1,348 | $ | 1,298 | $ | 3,391 | ||||||||
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, administrator, fund accountant, sub-administrator, sub-fund accountant, custodian, and Distributor.
4. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Stable Net Asset Value Risk — You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency. The Fund's sponsor
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Interest Rate Risk — When interest rates rise, debt security prices generally fall. The opposite also generally is true: debt security prices rise when interest rates fall. Interest rate changes are influenced by a number of factors including government policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand of debt securities. The Fund's yield will vary. A sharp and unexpected rise in interest rates could cause the Fund's share price to drop below a dollar. A low interest rate environment may prevent the Fund from providing a positive yield and could also impair the Fund's ability to maintain a stable NAV.
Large-Shareholders Risk — The actions by one shareholder or multiple shareholders may have an impact on the Fund and, therefore, indirectly on other shareholders. Shareholder purchase and redemption activity may affect the per share amount of the Fund's distributions of its net investment income and net realized capital gains, if any, thereby affecting the tax burden on the Fund's shareholders subject to federal income tax. To the extent a larger shareholder (including, for example, an Affiliated Fund that operates as a fund-of-funds or 529 college savings plan) is permitted to invest in the Fund, the Fund may experience large inflows or outflows of cash from time to time. This activity could magnify these adverse effects on the Fund.
Market Risk — Overall market risks may affect the value of the Fund. Domestic and international factors such as political events, war, terrorism, trade disputes, inflation rates, interest rate levels and other fiscal and monetary policy changes, cybersecurity incidents, pandemics and other public health crises, sanctions against a particular foreign country, its nationals, businesses or industries and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods or other catastrophes, may add to instability in global economies and markets generally, and may lead to increased market volatility. Global economies and financial markets are highly interconnected, which increases the possibility that conditions in one country or region might adversely affect issuers in another country or region. The impact of these and other factors may be short-term or may last for extended periods.
5. Borrowing:
Line of Credit:
The Victory Funds Complex participates in a short-term demand note "Line of Credit" agreement with Citibank. The Line of Credit agreement with Citibank was renewed on June 28, 2021, with a termination date of June 27, 2022. Under the agreement with Citibank, the Victory Funds Complex may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with Victory Floating Rate Fund paying the related commitment fees for that amount. The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the six months ended April 30, 2022, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one-month London Interbank Offered Rate ("LIBOR") plus one percent, with LIBOR to be replaced by a different benchmark rate in accordance with the terms of the agreement) on amounts borrowed. Prior to June 28, 2021, the Victory Funds Complex paid an annual commitment fee of 0.15% and an upfront fee of 0.10%. Each fund in the Victory Funds Complex paid a pro-rata portion of the upfront fee. Effective with the June 27, 2022, agreement renewal, the interest rate formal on amounts borrowed based on the published 1-month LIBOR rate plus one percent was changed to an interest rate based on the published 1-month SOFR plus 1.10 percent. Interest charged to each fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The Fund had no borrowings under the Line of Credit agreement during the year ended May 31, 2022.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2022 | ||||||
6. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income monthly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively, distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2022, on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2022 | Year Ended May 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Total Distributions Paid | ||||||||||||
| $ | 198 | $ | 198 | $ | 173 | $ | 173 | ||||||||
As of May 31, 2022, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Distributions Payable | Accumulated Earnings | Accumulated Capital and Other Earnings (Loss) | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 140 | $ | (139 | ) | $ | 1 | $ | (1 | ) | $ | — | ||||||||
* The difference between the book-basis and tax-basis of unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales.
As of May 31, 2022, the Fund had net capital loss carryforwards as shown in the table below (amounts in thousands). It is unlikely that the Board will authorize a distribution of capital gains realized in the future until the capital loss carryforwards have been used.
| Short-Term Amount | Total | ||||||
| $ | 1 | $ | 1 | ||||
As of May 31, 2022, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 515,250 | $ | — | $ | — | $ | — | ||||||||
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Treasury Money Market Trust
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Treasury Money Market Trust (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2022, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 29, 2022
20
USAA Mutual Funds Trust | Supplemental Information May 31, 2022 | ||||||
(Unaudited)
Trustee and Officer Information
Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently eight Trustees, seven of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their dates of birth, their positions with the Trust, their commencement of service, their principal occupations during the past five years, and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 45 portfolios in the Trust. Each Trustee's address is c/o Fund Administration, 15935 La Cantera Pkwy, San Antonio, TX 78256.
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Independent Trustees | |||||||||||||||||||||||
| Jefferson C. Boyce (September 1957) | Independent Chair | Trustee since September 2013, Independent Chair since January 2021 | Retired. | 45 | Westhab, Inc., New York Theological Seminary, American Filtration Corp. | ||||||||||||||||||
| Dawn M. Hawley (February 1954) | Trustee | Trustee since April 2014 | Retired. | 45 | None | ||||||||||||||||||
21
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
| Daniel S. McNamara (June 1966) | Trustee | Trustee since January 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (6/17-6/19); President of Financial Advice & Solutions Group (FASG), USAA (02/13-03/21); Director of USAA Asset Management Company (AMCO), (08/11-06/19); Chairman of Board of AMCO (04/13-06/19); Director of USAA Investment Services Company (ISCO) (formerly USAA Investment Management Company) (09/09-03/21); Chairman of Board of ISCO (04/13-12/20); President and Director of USAA Shareholder Account Services (SAS) (10/09-06/19); Chairman of Board of SAS (04/13-06/19); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (04/11-03/21); Director and Vice Chairman of FPS (12/13-03/21); President and Director of USAA Investment Corporation (ICORP) (03/10-03/21); Chairman of Board of ICORP (12/13-03/21); Director of USAA Financial Advisors, Inc. (FAI) (12/13-03/21); Chairman of Board of FAI (3/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
22
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Richard Y. Newton, III (January 1956) | Trustee | Trustee since March 2017 | Director, Elta North America (01/18-08/19), which is a global leader in the design, manufacture, and support of innovative electronic systems in the ground, maritime, airborne, and security domains for the nation's warfighters, security personnel, and first responders; Managing Partner, Pioneer Partnership Development Group (12/15-present). | 45 | Terran Orbital Corp., American Made Filtration Corp. | ||||||||||||||||||
| Barbara B. Ostdiek, Ph.D. (March 1964) | Trustee | Trustee since January 2008 | Senior Associate Dean of Degree programs at Jesse H. Jones Graduate School of Business at Rice University (07/13-present); Associate Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/01-07/21); Professor of Finance at Jesse H. Jones Graduate School of Business at Rice University (07/21-present). | 45 | None | ||||||||||||||||||
| John C. Walters (February 1962) | Trustee | Trustee since July 2019 | Retired. | 45 | Guardian Variable Products Trust (16 series) | ||||||||||||||||||
Effective at the close of business on December 31, 2021, Robert L. Mason, Ph.D., retired from the Board of Trustees.
23
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2022 | ||||||
(Unaudited)
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held During the Past Five Years | ||||||||||||||||||
Interested Trustee | |||||||||||||||||||||||
| David C. Brown (May 1972) | Trustee | Trustee since July 2019 | Chairman and Chief Executive Officer (2013-present), Victory Capital Management Inc.; Chief Executive Officer and Chairman (2013-present), Victory Capital Holdings, Inc.; Director, Victory Capital Services, Inc. (2013-present); Director, Victory Capital Transfer Agency, Inc. (2019-present). | 45 portfolios within the Trust; 40 portfolios within the Victory Portfolios, 25 series within the Victory Portfolios II, and 6 series within the Victory Variable Insurance Funds | None | ||||||||||||||||||
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
24
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Officers:
The officers of the Trust, their dates of birth, their commencement of service, and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 15935 La Cantera Pkwy, San Antonio, TX 78256. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
Officers of the Trust | |||||||||||||||
| Christopher K. Dyer (February 1962) | President | July 2019 | Director of Mutual Fund Administration, Victory Capital Management Inc. (2004-present). Chief Operating Officer, Victory Capital Services, Inc. (2020-present). Vice President, Victory Capital Transfer Agency, Inc. (2019-present). | ||||||||||||
| Scott Stahorsky (July 1969) | Vice President | July 2019 | Manager, Fund Administration, Victory Capital Management Inc. (2015-present). | ||||||||||||
| Thomas Dusenberry (July 1977) | Secretary | June 2022 | Manager, Fund Administration, Victory Capital Management Inc.; Treasurer and Principal Financial Officer (2020-2022), Assistant Treasurer (2019), Salient MF Trust, Salient Midstream, MLP Fund, and Forward Funds; Principal Financial Officer (2018-2021) and Treasurer (2020-2021), Salient Private Access Funds and Endowment PMF Funds; Senior Vice President of Fund Accounting and Operations, Salient Partners (2020-2022); Director of Fund Operations, Salient Partners (2016-2019). | ||||||||||||
| James K. De Vries (April 1969) | Treasurer | March 2018 | Executive Director, Victory Capital Management Inc. (7/1/19-present); Executive Director, Investment and Financial Administration, USAA (2012-6/30/19); Assistant Treasurer, USAA Mutual Funds Trust (2013-2018). Mr. De Vries also serves as the Funds' Principal Financial Officer. | ||||||||||||
| Allan Shaer (March 1965) | Assistant Treasurer | July 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (2016-present); Vice President, Mutual Fund Administration, JP Morgan Chase Bank (2011-2016). | ||||||||||||
| Carol D. Trevino (October 1965) | Assistant Treasurer | September 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (7/1/19-present); Accounting/ Financial Director, USAA (12/13-6/30/19). | ||||||||||||
| Charles Booth (April 1960) | Anti-Money Laundering Compliance Officer and Identity Theft Officer | July 2019 | Director, Regulatory Administration and CCO Support Services, City Fund Services Ohio, Inc. (2007-present). | ||||||||||||
| *Colin Kinney (October 1973) | Chief Compliance Officer | July 2021 | Chief Compliance Officer, the Adviser (since 2013), Chief Compliance Officer, Victory Funds (since 2017), and Chief Risk Officer, the Adviser (2009-2017). | ||||||||||||
* Effective at the close of business on June 10, 2022, Colin Kinney resigned as the Chief Compliance Officer of the Trust.
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Name and Date of Birth | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) Held During the Past Five Years | ||||||||||||
| Sean Fox (September 1976) | Chief Compliance Officer | June 2022 | Deputy Chief Compliance Officer (July 2021-June 2022), Senior Compliance Officer, the Adviser (2019-2021), Compliance Officer, the Adviser (2015-2019). | ||||||||||||
Effective at the close of business on April 27, 2022, Erin Wagner resigned as the Secretary of the Trust.
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Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 235-8396. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Fund makes available on VCM.com a complete list of portfolio holdings no sooner than 5 business days after the end of each month. Form N-MFP is available on the SEC's website at www.sec.gov.
Expense Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2021, through May 31, 2022.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, 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 in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical expenses in the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value 12/1/21 | Actual Ending Account Value 5/31/22 | Hypothetical Ending Account Value 5/31/22 | Actual Expenses Paid During Period 12/1/21-5/31/22* | Hypothetical Expenses Paid During Period 12/1/21-5/31/22* | Annualized Expense Ratio During Period 12/1/21-5/31/22 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,000.30 | $ | 1,024.03 | $ | 0.90 | $ | 0.91 | 0.18 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 182/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Treasury Money Market Trust (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 9-10, 2021, the Board, including the Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust (the "Independent Trustees"), approved for an annual period the continuance of the Investment Advisory Agreement (the "Advisory Agreement") between the Trust and Victory Capital Management Inc. (the "Adviser") with respect to the Fund. Prior to the December 9-10, 2021 meeting at which the Advisory Agreement was approved, the Independent Trustees also discussed and considered information regarding the proposed continuation of the Advisory Agreement at a meeting held on November 19, 2021.
In advance of the foregoing meetings, the Trustees received and considered a variety of information relating to the Advisory Agreement and the Adviser, and were given the opportunity to ask questions and request additional information from management. The information provided to the Board included, among other things: (i) a separate report prepared by an independent third party of mutual fund data, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable investment companies; (ii) information concerning the services rendered to the Fund, as well as information regarding the Adviser's revenues and costs of providing services to the Fund and compensation paid to affiliates of the Adviser; and (iii) information about the Adviser's operations and personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Advisory Agreement with management and with experienced independent counsel retained by the Independent Trustees ("Independent Counsel") and received materials from such Independent Counsel discussing the legal standards for their consideration of the proposed continuation of the Advisory Agreement with respect to the Fund. The Independent Trustees also reviewed the proposed continuation of the Advisory Agreement with respect to the Fund in private sessions with Independent Counsel at which no representatives of management were present.
At each regularly scheduled meeting of the Board and its committees, the Board receives and reviews, among other things, information concerning the Fund's performance and related services provided by the Adviser. At the meeting at which the renewal of the Advisory Agreement is considered, particular focus is given to information concerning Fund performance, fees and total expenses as compared to comparable investment companies, and the Adviser's profitability with respect to the Fund. However, the Board noted that the evaluation process with respect to the Adviser is an ongoing one. In this regard, the Board's and its committees' consideration of the Advisory Agreement included information previously received at such meetings. The Board also recognized that the contractual arrangements for the Fund have been reviewed by the Board and discussed with the Adviser in prior years and that the Board's conclusions may be based, in part, on its consideration of these same arrangements in prior years.
Advisory Agreement
After full consideration of a variety of factors, the Board, including the Independent Trustees, voted to approve the Advisory Agreement. In approving the Advisory Agreement, the Trustees did not identify any single factor as controlling, and each Trustee may have attributed different weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services — In considering the nature, extent, and quality of the services provided by the Adviser under the Advisory Agreement, the Board reviewed information provided by the Adviser relating to its operations and personnel. The Board also took into account its knowledge of the Adviser's management and the quality of the performance of the Adviser's duties through Board meetings, discussions, and reports during the preceding year. The Board considered the fees paid to the Adviser and the services provided to the Fund by the Adviser under the Advisory Agreement, as well as other services provided by the Adviser and its affiliates under other agreements, and the personnel who provide these services. In addition to the investment advisory services provided to the Fund, the Adviser and its affiliates provide administrative services, shareholder services, oversight of Fund accounting, marketing services, assistance in meeting legal and regulatory requirements, and other services necessary for the operation of the Fund and the Trust.
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The Board considered the scope of services provided by, and the undertakings required of, the Adviser in connection with those services, including, among other things, maintaining (i) its own and the Fund's compliance programs, (ii) risk management programs, (iii) liquidity risk management programs, and (iv) cybersecurity programs, each of which had expanded over time as a result of regulatory, market, and other developments. The Board also considered the significant risks assumed by the Adviser in connection with the services provided to the Fund, including investment, operational, enterprise, litigation, regulatory and compliance risks.
The Board considered the Adviser's management style and the performance of the Adviser's duties under the Advisory Agreement. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of its senior and investment personnel, as well as current staffing levels. The allocation of the Fund's brokerage, including the Adviser's process for monitoring "best execution," also was considered. The Adviser's role in coordinating the activities of the Fund's other service providers was also considered. The Board also considered the Adviser's risk management processes. The Board considered the Adviser's financial condition and that it had the financial wherewithal to continue to provide the same scope and high quality of services under the Advisory Agreement. In reviewing the Advisory Agreement, the Board focused on the experience, resources, and strengths of the Adviser and its affiliates in managing the Fund, as well as the other funds in the Trust.
The Board also reviewed the compliance and administrative services provided to the Fund by the Adviser and its affiliates, including the Adviser's oversight of the Fund's day-to-day operations and oversight of Fund accounting. The Trustees, guided also by information obtained from their experiences as Trustees of the Trust, also focused on the quality of the Adviser's compliance and administrative staff.
Expenses and Performance — In connection with its consideration of the Advisory Agreement, the Board evaluated the Fund's advisory fees and total expense ratio as compared to other open-end investment companies deemed to be comparable to the Fund as determined by the independent third party in its report. The Fund's expenses were compared to (i) a group of investment companies chosen by the independent third party to be comparable to the Fund based upon certain factors, including fund type, comparability of investment objective and classification, sales load type, asset size, and expense components (the "expense group") and (ii) a larger group of investment companies with the same investment classification/objective as the Fund regardless of asset size, excluding outliers (the "expense universe"). Among other data, the Board noted that the Fund's net management fee rate — which includes advisory and administrative services, as well as any fee waivers and reimbursements — was below the medians of its expense group and expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were below the medians of its expense group and expense universe. The Board also took into account the Adviser's current undertakings to maintain expense limitations for the Fund, which included voluntary waiver support to preserve a minimum daily yield. The Board took into account the various other services provided to the Fund by the Adviser and its affiliates and noted the high quality of services received by the Fund.
In considering the Fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund's performance results. The Trustees also reviewed various comparative data provided to them in connection with their consideration of the renewal of the Advisory Agreement, including, among other information, a comparison of the Fund's average annual total returns relative to its Lipper index and other mutual funds deemed to be in its peer group by the independent third party in its report (the "performance universe"). The Fund's performance universe consisted of the Fund and all retail open-end investment companies with the same classification/objective as the Fund regardless of asset size or primary channel of distribution. This comparison indicated that, among other data, the Fund's performance was below the average of its performance universe for the one-year period ended September 30, 2021, and was above the average of its performance universe for the three-, five- and ten-year periods ended September 30, 2021, and was below its Lipper index for the one-, three-, five- and ten-year periods ended September 30, 2021. The Board noted the relatively narrow range of returns of the funds in the Fund's peer group.
Compensation and Profitability — The Board took into consideration the level and method of computing the management fee. The information considered by the Board included operating profit margin information for the Adviser's business as a whole. The Board also received and considered profitability information related to the management revenues from the Fund. This information included a review of the methodology used in the allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees
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noted that the Adviser waived a portion of its management fees and/or reimbursed certain expenses with respect to the Fund. The Trustees reviewed the profitability of the Adviser's relationship with the Fund before tax expenses. The Board was also provided with a profitability analysis of other publicly traded asset managers prepared by an independent information service. In reviewing the overall profitability of the management fee to the Adviser, the Board also considered the fact that the Adviser and its affiliates provide shareholder servicing and administrative services to the Fund for which they receive compensation. The Board also considered the possible direct and indirect benefits to the Adviser from its relationship with the Trust, including that the Adviser may derive reputational and other benefits from its association with the Fund. The Trustees recognized that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial and other risks that it assumes as Adviser.
Economies of Scale — The Board considered whether there should be changes in the management fee rate or structure in order to enable the Fund to participate in any economies of scale. The Board also considered the fee waiver and expense reimbursement arrangements by the Adviser. The Board also considered the effect of the Fund's change in size, if any, on its performance and fees, noting that the Fund may realize other economies of scale if assets increase proportionally more than expenses. The Board determined that the current investment management fee structure was reasonable.
Conclusions — The Board reached the following conclusions regarding the Fund's Advisory Agreement with the Adviser: (i) the Adviser has demonstrated that it possesses the capability and resources to perform the duties required of it under the Advisory Agreement; (ii) the Adviser maintains an appropriate compliance program; (iii) the performance of the Fund is reasonable in relation to the performance of funds with similar investment objectives and to relevant indices in view of the Fund's investment approach; (iv) the Fund's advisory expenses are reasonable in relation to those of similar funds and to the services to be provided by the Adviser; and (v) the Adviser's and its affiliates' level of profitability from their relationship with the Fund is reasonable in light of the nature and high quality of services provided by the Adviser and its affiliates and the type of fund. Based on its conclusions, the Board determined that continuation of the Advisory Agreement would be in the best interests of the Fund and its shareholders.
30
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic, and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
www.vcm.com | (800) 235-8396 | ||||||
23415-0722
Item 2. Code of Ethics.
| (a) | The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics in included as an Exhibit. |
| (b) | During the period covered by the report, with respect to the registrant’s code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; on July 1, 2019, the Board of Trustees of USAA Mutual Funds Trust approved a Code of Ethics ("Sarbanes Code") applicable solely to its senior financial officers, including its principal executive officer (President), as defined under the Sarbanes-Oxley Act of 2002 and implementing regulations of the Securities and Exchange Commission. A copy of the Sarbanes Code is attached as an Exhibit to this Form N-CSR. |
No waivers (explicit or implicit) have been granted from a provision of the Sarbanes Code.
Item 3. Audit Committee Financial Expert.
(a)(1) The registrant’s board of trustees has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
(a)(2) The audit committee financial experts are Dr. Barbara B. Ostdiek, Ph.D. and Dawn M. Hawley, who are “independent” for purposes of this Item 3 of Form N-CSR.
Dr. Ostdiek has served as an Associate Professor of Management at Rice University since 2001. Dr. Ostdiek also has served as an Academic Director at El Paso Corporation Finance Center since 2002. Ms. Hawley was Chief Financial Officer, Director of Financial Planning and Analysis for AIM Management Group Inc. from October 1987 through January 2006 and was Manager of Finance at Menil Foundation, Inc. from May 2007 through June 2011. Each of Dr. Ostdiek and Ms. Hawley is an independent trustee who serves as a member of the Audit and Compliance Committee, Investments Committee, Product Management and Distribution Committee, and the Corporate Governance Committee of the Board of Trustees of USAA Mutual Funds Trust.
Item 4. Principal Accountant Fees and Services.
| 2022 | 2021 | |||||||
| (a) Audit Fees (1) | $ | 334,134 | $ | 329,388 | ||||
| (b) Audit-Related Fees (2) | - | - | ||||||
| (c) Tax Fees (3) | 31,534 | 46,446 | ||||||
| (d) All Other Fees (4) | - | - | ||||||
(1) Audit fees include amounts related to the audit of the Registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit fees billed were for professional services provided by Ernst & Young LLP for statutory and regulatory filings.
(2) For the fiscal years ended May 31, 2022 and May 31, 2021, there were no audit-related fees billed by Ernst & Young LLP to the Registrant.
(3) Represents the aggregate tax fee billed for professional services rendered by Ernst & Young LLP for assistance with foreign tax compliance services and tax consulting services.
(4) For the fiscal years ended May 31, 2022 and May 31, 2021, there were no other fees billed by Ernst & Young LLP to the Registrant.
(e)(1) All audit and non-audit services to be performed for the Registrant by Ernst & Young LLP must be pre-approved by the Audit and Compliance Committee. The Audit and Compliance Committee Charter also permits the Chair of the Audit and Compliance Committee to pre-approve any permissible non-audit service that must be commenced prior to a scheduled meeting of the Audit and Compliance Committee. All non-audit services were pre-approved by the Audit and Compliance Committee or its Chair, consistent with the Audit and Compliance Committee's preapproval procedures.
(e)(2) There were no services performed under Rule 2.01 (c)(7)(i)(C).
(f) Not applicable.
(g) Aggregate non-audit fees for services rendered to the:
| Registrant | Adviser | |||||||
| 2022 | $ | 31,534 | $ | 132,342 | ||||
| 2021 | $ | 46,446 | $ | 123,184 | ||||
(h) The aggregate non-audit fees related to fees billed by Ernst & Young LLP for services rendered to the Registrant; the investment adviser, and the Funds' transfer agent, Victory Capital Transfer Agency Inc., which includes aggregate fees accrued or paid to Ernst & Young LLP for professional services rendered related to the annual study of internal controls of the transfer agent for fiscal years listed above. All services were preapproved by the Audit Committee.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The Corporate Governance Committee selects and nominates candidates for membership on the Board as independent trustees. The Corporate Governance Committee has adopted procedures to consider Board candidates suggested by shareholders. The procedures are initiated by the receipt of nominations submitted by a fund shareholder sent to Board member(s) at the address specified in fund disclosure documents or as received by the Adviser or a fund officer. Any recommendations for a nomination by a shareholder, to be considered by the Board, must include at least the following information: name; date of birth; contact information; education; business profession and other expertise; affiliations; experience relating to serving on the Board; and references. The Corporate Governance Committee gives shareholder recommendations the same consideration as any other candidate.
Item 11. Controls and Procedures.
(a)The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a)(1) Not applicable.
(a)(2) Not applicable.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Not applicable.
Item 13. Exhibits.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | USAA Mutual Funds Trust |
| By (Signature and Title)* | /s/ James De Vries | |
| James K. De Vries, Principal Financial Officer |
| Date | July 29, 2022 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ Christopher K. Dyer | |
| Christopher K. Dyer, Principal Executive Officer |
| Date | July 29, 2022 |
| By (Signature and Title)* | /s/ James De Vries | |
| James K. De Vries, Principal Financial Officer |
| Date | July 29, 2022 |